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, 2010

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 Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes 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 o		Accelerated Filer x		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 45,431,868 limited liability company interests without par value outstanding at May 4, 2010.

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC
  
TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements			1
Consolidated Condensed Balance Sheets as of March 31, 2010 (Unaudited) and December 31, 2009			1
Consolidated Condensed Statements of Operations for the Quarters Ended March 31, 2010 and 2009 (Unaudited)			2
Consolidated Condensed Statements of Cash Flows for the Quarters Ended March 31, 2010 and 2009 (Unaudited)			3
Notes to Consolidated Condensed Financial Statements (Unaudited)			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3. Quantitative and Qualitative Disclosure About Market Risk			50
Item 4. Controls and Procedures			50
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			51
Item 1A. Risk Factors			51
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			51
Item 3. Defaults Upon Senior Securities			51
Item 4. Submission of Matters to a Vote of Security Holders			51
Item 5. Other Information			51
Item 6. Exhibits			51

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, 2010				December 31, 2009
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	29,277			$	27,455
Accounts receivable, less allowance for doubtful accounts of $1,591 and $1,629, respectively			45,383				47,256
Inventories			15,081				14,305
Prepaid expenses			7,360				6,688
Deferred income taxes			21,300				23,323
Other			8,541				10,839
Assets of discontinued operations held for sale			88,788				86,695
Total current assets			215,730				216,561
Property, equipment, land and leasehold improvements, net			574,884				580,087
Restricted cash			13,780				16,016
Equipment lease receivables			35,402				33,266
Investment in unconsolidated business			208,084				207,491
Goodwill			516,182				516,182
Intangible assets, net			742,410				751,081
Deferred financing costs, net of accumulated amortization			14,174				17,088
Other			1,608				1,449
Total assets		$	2,322,254			$	2,339,221
LIABILITIES AND MEMBERS’ EQUITY
Current liabilities:
Due to manager – related party		$	2,279			$	1,977
Accounts payable			45,746				44,575
Accrued expenses			17,945				17,432
Current portion of notes payable and capital leases			232				235
Current portion of long-term debt			50,233				45,900
Fair value of derivative instruments			44,560				49,573
Customer deposits			4,283				5,617
Other			9,130				9,338
Liabilities of discontinued operations held for sale			225,782				220,549
Total current liabilities			400,190				395,196
Notes payable and capital leases, net of current portion			1,438				1,498
Long-term debt, net of current portion			1,137,311				1,166,379
Deferred income taxes			108,767				107,840
Fair value of derivative instruments			61,125				54,794
Other			40,396				38,746
Total liabilities			1,749,227				1,764,453
Commitments and contingencies			—				—
Members’ equity:
LLC interests, no par value; 500,000,000 authorized; 45,431,868 LLC interests issued and outstanding at March 31, 2010 and 45,292,913 LLC interests issued and outstanding at December 31, 2009			961,791				959,897
Additional paid in capital			21,763				21,956
Accumulated other comprehensive loss			(37,884	)			(43,232	)
Accumulated deficit			(368,460	)			(360,095	)
Total members’ equity			577,210				578,526
Noncontrolling interests			(4,183	)			(3,758	)
Total equity			573,027				574,768
Total liabilities and equity		$	2,322,254			$	2,339,221

 
 
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, 2010				Quarter Ended March 31, 2009(1)
Revenue
Revenue from product sales		$	120,018			$	89,192
Revenue from product sales – utility			26,835				20,167
Service revenue			53,206				56,945
Financing and equipment lease income			1,245				1,192
Total revenue			201,304				167,496
Costs and expenses
Cost of product sales			77,054				49,766
Cost of product sales – utility			21,313				15,387
Cost of services			11,145				11,071
Selling, general and administrative			50,734				56,143
Fees to manager – related party			2,189				462
Goodwill impairment			—				18,000
Depreciation			7,722				13,150
Amortization of intangibles			8,671				30,265
Total operating expenses			178,828				194,244
Operating income (loss)			22,476				(26,748	)
Other income (expense)
Interest income			16				67
Interest expense(2)			(34,687	)			(33,566	)
Equity in earnings and amortization charges of investees			5,593				5,449
Loss on derivative instruments			—				(25,238	)
Other income, net			48				1,036
Net loss from continuing operations before income taxes			(6,554	)			(79,000	)
Benefit for income taxes			1,089				32,565
Net loss from continuing operations		$	(5,465	)		$	(46,435	)
Net loss from discontinued operations, net of taxes			(4,013	)			(6,424	)
Net loss		$	(9,478	)		$	(52,859	)
Less: net (loss) income attributable to noncontrolling interests			(1,113	)			167
Net loss attributable to MIC LLC		$	(8,365	)		$	(53,026	)
Basic and diluted loss per share from continuing operations attributable to MIC LLC interest holders		$	(0.10	)		$	(1.04	)
Basic and diluted loss per share from discontinued operations attributable to MIC LLC interest holders			(0.08	)			(0.14	)
Basic and diluted loss per share attributable to MIC LLC interest holders:		$	(0.18	)		$	(1.18	)
Weighted average number of shares outstanding: basic and diluted			45,294,457				44,948,694

 
 
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, 2010				Quarter Ended March 31, 2009(1)
Operating activities
Net loss		$	(9,478	)		$	(52,859	)
Adjustments to reconcile net loss to net cash provided by operating activities from continuing operations:
Net loss from discontinued operations before noncontrolling interests			4,013				6,424
Non-cash goodwill impairment			—				18,000
Depreciation and amortization of property and equipment			9,357				14,613
Amortization of intangible assets			8,671				30,265
Equity in earnings and amortization charges of investees			(5,593	)			(5,449	)
Equity distributions from investees			5,000				5,449
Amortization of debt financing costs			2,914				1,167
Non-cash derivative loss			11,126				32,225
Base management fees settled/to be settled in LLC interests			2,189				—
Equipment lease receivable, net			712				766
Deferred rent			72				44
Deferred taxes			(1,967	)			(33,090	)
Other non-cash expenses, net			703				(553	)
Changes in other assets and liabilities, net of acquisitions:
Restricted cash			50				—
Accounts receivable			504				6,606
Inventories			(776	)			453
Prepaid expenses and other current assets			1,927				3,212
Due to manager – related party			7				(2,950	)
Accounts payable and accrued expenses			1,759				(5,494	)
Income taxes payable			11				633
Other, net			(395	)			(1,351	)
Net cash provided by operating activities from continuing operations			30,806				18,111
Investing activities
Purchases of property and equipment			(4,013	)			(6,729	)
Investment in capital leased assets			(2,400	)			—
Return of investment in unconsolidated business			—				1,551
Other			6				(40	)
Net cash used in investing activities from continuing operations			(6,407	)			(5,218	)

 
 
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, 2010				Quarter Ended March 31, 2009(1)
Financing activities
Net proceeds on line of credit facilities			—				400
Contributions received from noncontrolling interests			300				—
Distributions paid to noncontrolling interests			(342	)			(148	)
Payment of long-term debt			(24,736	)			(44,621	)
Change in restricted cash			2,236				(29	)
Payment of notes and capital lease obligations			(33	)			(52	)
Net cash used in financing activities from continuing operations			(22,575	)			(44,450	)
Net change in cash and cash equivalents from continuing operations			1,824				(31,557	)
Cash flows provided by (used in) discontinued operations:
Net cash provided by (used in) operating activities			3,343				(1,252	)
Net cash used in investing activities			(106	)			(203	)
Net cash (used in) provided by financing activities			(151	)			2,121
Cash provided by discontinued operations(2)			3,086				666
Change in cash of discontinued operations held for sale(2)			(3,088	)			(699	)
Net change in cash and cash equivalents			1,822				(31,590	)
Cash and cash equivalents, beginning of period			27,455				66,054
Cash and cash equivalents, end of period – continuing operations		$	29,277			$	34,464
Supplemental disclosures of cash flow information for continuing operations:
Non-cash investing and financing activities:
Accrued purchases of property and equipment		$	1,172			$	808
Issuance of LLC interests to manager for base management fees		$	1,894			$	—
Taxes paid		$	808			$	3
Interest paid		$	20,628			$	25,837

 
 
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.

The Company is 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 consist of the following:

The Energy-Related Businesses:

Atlantic Aviation — an airport services business providing products and services including fuel and aircraft hangaring/parking to owners and operators of private jets at 68 airports and one heliport in the U.S. Atlantic Aviation continues as the only aviation-related business of the Company.

2. Basis of Presentation

The unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The preparation of consolidated condensed financial statements in conformity with GAAP requires estimates and assumptions. Management evaluates these estimates and 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, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

The consolidated balance sheet at December 31, 2009 has been derived from audited financial statements but does not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. Certain reclassifications were made to the financial statements for the prior period to conform to current period presentation.

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

2. Basis of Presentation  – (continued)

The interim financial information contained herein should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2009 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on February 25, 2010.

3. New Accounting Pronouncements

In April 2009, the Financial Accounting Standards Board, or FASB, issued ASC 825-10-65 Financial Instruments, which is effective for interim reporting periods ending after June 15, 2009. This guidance requires disclosures about the fair value of financial instruments for interim reporting periods in addition to the current requirement to make disclosure in annual financial statements. This guidance also requires disclosure of the methods and significant assumptions used to estimate the fair value of financial instruments and description of changes in the method and significant assumptions. The Company adopted this guidance during the second quarter of 2009. Since this guidance requires only additional disclosures, the adoption did not have a material impact on the Company’s financial results of operations and financial condition.

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

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,
		2010				2009
Weighted average number of shares outstanding:
basic			45,294,457				44,948,694
Dilutive effect of restricted stock unit grants			—				—
Weighted average number of shares outstanding:
diluted			45,294,457				44,948,694

The 128,205 and 14,115 restricted stock unit grants provided to the Company’s independent directors on June 4, 2009 and May 27, 2008, respectively, were anti-dilutive for the quarters ended March 31, 2010 and 2009 due to the Company’s net loss for those periods.

5. Discontinued Operations

Parking Company of America Airports, or PCAA, operates 31 airport parking facilities comprising over 40,000 parking spaces near 20 major airports across the United States. PCAA provides customers with 24-hour secure parking close to airport terminals, as well as transportation via shuttle bus to and from their vehicles and the terminal. Operations are carried out on either owned or leased land at locations near the airports.

On January 28, 2010, the Company announced that PCAA entered into an asset purchase agreement with Bainbridge ZKS — Corinthian Holdings, LLC and simultaneously commenced a voluntary Chapter 11 case with the bankruptcy court. On April 27, 2010, an auction for the assets of PCAA was held where Commercial

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

5. Discontinued Operations  – (continued)

Finance Services 2907 Inc. was declared the winning bidder with a purchase price of $141.0 million, subject to certain adjustments. This purchase price, which is subject to approval by the bankruptcy court, will result in:

As a part of the bankruptcy sale process, substantially all of the cash proceeds will be paid to creditors of the business and not to the Company. If approved, the Company expects to complete the sale of the business in the second quarter of 2010.

As part of the bankruptcy filing, the Company has no obligation to, and has no intention of, committing additional capital to this business and the Company’s ongoing liabilities are expected to be no more than $5.4 million in a guarantee of a single parking facility lease. Creditors of this business do not have recourse to any assets of the holding company or any assets of the Company’s other businesses, other than the aforementioned lease guarantee.

Results for PCAA are reported separately as discontinued operations for all periods presenzted. The assets and liabilities of the business being sold are included in assets of discontinued operations held for sale and liabilities of discontinued operations held for sale on the Company’s consolidated condensed balance sheets.

The following is a summary of the assets and liabilities of discontinued operations held for sale related to PCAA as of March 31, 2010 and December 31, 2009:

		March 31, 2010				December 31, 2009
		($ in Thousands)
Assets
Total current assets		$	10,304			$	7,676
Property, equipment, land and leasehold improvements, net			76,856				77,524
Other non-current assets			1,628				1,495
Total assets		$	88,788			$	86,695
Liabilities
Current portion of long-term debt		$	200,973			$	200,999
Other current liabilities			15,959				10,761
Total current liabilities			216,932				211,760
Other non-current liabilities			8,850				8,789
Total liabilities			225,782				220,549
Noncontrolling interests			(2,029	)			(1,863	)
Total liabilities and noncontrolling interests		$	223,753			$	218,686

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

5. Discontinued Operations  – (continued)

Summarized financial information for discontinued operations related to PCAA for the quarters ended March 31, 2010 and 2009 are as follows:

		For the Quarter Ended March 31,
		2010				2009
		($ in Thousands, Except Share Data)
Service revenue		$	16,507			$	16,607
Net loss from discontinued operations before income taxes		$	(3,017	)		$	(9,518	)
(Provision) benefit for income taxes			(996	)			3,094
Net loss from discontinued operations			(4,013	)			(6,424	)
Less: net loss attributable to noncontrolling interests			(166	)			—
Net loss from discontinued operations attributable to MIC LLC		$	(3,847	)		$	(6,424	)
Basic and diluted loss per share from discontinued operations attributable to MIC LLC interest holders		$	(0.08	)		$	(0.14	)
Weighted average number of shares outstanding at the Company level: basic and diluted			45,294,457				44,948,694

6. Property, Equipment, Land and Leasehold Improvements

Property, equipment, land and leasehold improvements at March 31, 2010 and December 31, 2009 consist of the following ($ in thousands):

		March 31, 2010				December 31, 2009
Land		$	4,618			$	4,618
Easements			5,624				5,624
Buildings			24,796				24,789
Leasehold and land improvements			317,152				312,881
Machinery and equipment			331,347				330,226
Furniture and fixtures			9,484				9,395
Construction in progress			14,894				16,519
Property held for future use			1,561				1,561
			709,476				705,613
Less: accumulated depreciation			(134,592	)			(125,526	)
Property, equipment, land and leasehold improvements, net(1)		$	574,884			$	580,087

During the first quarter of 2009, the Company recognized non-cash impairment charges of $5.3 million primarily relating to leasehold and land improvements; buildings; machinery and equipment; and furniture and fixtures at Atlantic Aviation. These charges are recorded in depreciation expense in the consolidated condensed statements of operations. There was no impairment charge in the first quarter of 2010.

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

7. Intangible Assets

Intangible assets at March 31, 2010 and December 31, 2009 consist of the following ($ in thousands):

		Weighted Average Life (Years)				March 31, 2010				December 31, 2009
Contractual arrangements			31.1			$	774,309			$	774,309
Non-compete agreements			2.5				9,515				9,515
Customer relationships			10.7				78,596				78,596
Leasehold rights			12.5				3,331				3,331
Trade names			Indefinite				15,401				15,401
Technology			5.0				460				460
							881,612				881,612
Less: accumulated amortization							(139,202	)			(130,531	)
Intangible assets, net						$	742,410			$	751,081

As a result of a decline in the performance of certain asset groups during the first quarter of 2009, the Company evaluated such asset groups for impairment and determined that the asset groups were impaired. The Company estimated the fair value of each of the impaired asset groups using the discounted cash flow model. Accordingly, the Company recognized a non-cash impairment charge of $20.4 million related to contractual arrangements at Atlantic Aviation during the first quarter of 2009. These charges are recorded in amortization of intangibles in the consolidated condensed statement of operations. There was no impairment charge in the first quarter of 2010.

The goodwill balance as of March 31, 2010 and December 31, 2009 comprises the following ($ in thousands):

Goodwill acquired in business combinations, net of disposals		$	639,382
Less: accumulated impairment charges			(123,200	)
Balance at March 31, 2010 and December 31, 2009		$	516,182

The Company tests for goodwill impairment at the reporting unit level on an annual basis and between annual tests if a triggering event indicates impairment. The decline in the Company’s stock price over the latter part of 2008 and the first half of 2009 caused the book value of the Company to exceed its market capitalization. In addition to its annual goodwill impairment testing conducted routinely on October 1st of each year, the Company performed goodwill impairment testing during the first quarter of 2009 due to the triggering event of the Company’s stock price decline. Based on the testing performed, the Company recorded a goodwill impairment charge of $18.0 million at Atlantic Aviation during the first quarter of 2009, which is included in the accumulated impairment charges in the above table. There was no goodwill impairment charge in the first quarter of 2010.

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

8. Nonfinancial Assets Measured at Fair Value

The following major categories of nonfinancial assets at the impaired asset groups were written down to fair value during the quarter ended March 31, 2009 for Atlantic Aviation ($ in thousands):

		Fair Value Measurements Using												Total Losses
Description		Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Quarter Ended March 31, 2009
Property, Equipment, Land and Leasehold Improvements, net		$	—			$	—			$	2,909			$	5,321
Intangible Assets			—				—				11,451				20,364
Goodwill			—				—				430,543				18,000
Total		$	—			$	—			$	444,903			$	43,685

The Company estimated the fair value of each of the impaired asset groups using discounted cash flows. Property, equipment, land and leasehold improvements for Atlantic Aviation with a carrying amount of $8.2 million were written down to fair value of $2.9 million during the quarter ended March 31, 2009. The non-cash impairment charge of $5.3 million was recorded in depreciation expense in the consolidated condensed statement of operations for the quarter ended March 31, 2009. There was no impairment charge in the first quarter of 2010.

Additionally, intangible assets at Atlantic Aviation with carrying amounts of $31.8 million were written down to their fair value of $11.4 million during the quarter ended March 31, 2009. The non-cash impairment charge of $20.4 million was recorded in amortization of intangibles expense in the consolidated condensed statement of operations. There was no impairment charge in the first quarter of 2010.

As discussed in Note 7, “Intangible Assets”, the Company performed goodwill impairment analyses during the quarter ended March 31, 2009. As a result of these analyses, goodwill at Atlantic Aviation 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. This non-cash impairment charge was included in goodwill impairment in the consolidated condensed statement of operations. There was no goodwill impairment charge in the first quarter of 2010.

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

Model inputs included:

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

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

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

9. Long-Term Debt

At March 31, 2010 and December 31, 2009, the Company’s consolidated long-term debt consisted of the following ($ in thousands):

		March 31, 2010				December 31, 2009
The Gas Company		$	179,000			$	179,000
District Energy			170,000				170,000
Atlantic Aviation			838,544				863,279
Total			1,187,544				1,212,279
Less: current portion			(50,233	)			(45,900	)
Long-term portion		$	1,137,311			$	1,166,379

Until March 31, 2010, MIC Inc. had a revolving credit facility with various financial institutions. The facility was repaid in full in December 2009 and no amounts were outstanding under the revolving credit facility as of December 31, 2009 or at the facility’s maturity on March 31, 2010.

On February 25, 2009, Atlantic Aviation amended its credit facility to provide the business additional financial flexibility over the near and medium term. Under the amended terms, the business will apply all excess cash flow from the business to prepay additional debt whenever the leverage ratio (debt to adjusted EBITDA) is equal to or greater than 6.0x to 1.0 for the trailing twelve months and will use 50% of excess cash flow to prepay debt whenever the leverage ratio is equal to or greater than 5.5x to 1.0 and below 6.0x to 1.0. For the quarter ended March 31, 2010, Atlantic Aviation used $27.2 million of excess cash flow to prepay $24.7 million of the outstanding principal balance of the term loan debt under the facility and $2.5 million in interest rate swap breakage fees.

In May 2010, Atlantic Aviation used $3.3 million of excess cash flow from the first quarter of 2010 to prepay $3.0 million of the outstanding principal balance of the term loan debt under this facility and incurred $296,000 in interest rate swap breakage fees.

10. Derivative Instruments and Hedging Activities

The Company and its businesses have in place variable-rate debt. Management believes that it is prudent to limit the variability of a portion of 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.

At March 31, 2010, the Company had $1.2 billion of current and long-term debt, $1.1 billion of which was economically hedged with interest rate swaps and $83.9 million of which was unhedged.

As discussed in Note 9, “Long-Term Debt”, Atlantic Aviation applies its excess cash flow to prepay debt. As a result, $6.2 million of accumulated other comprehensive loss in the consolidated condensed balance sheet related to Atlantic Aviation’s derivative instruments were reclassified to interest expense in the consolidated condensed statement of operations for the quarter ended March 31, 2010. Atlantic Aviation expects to record further reclassifications from accumulated other comprehensive loss to interest expense as the business continues to pay down its debt.

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(Unaudited)

10. Derivative Instruments and Hedging Activities  – (continued)

In March 2009, Atlantic Aviation, The Gas Company and District Energy entered into interest rate basis swap contracts with their existing counterparties that expired on March 31, 2010. These contracts effectively changed the interest rate index on the Company’s existing swap contracts from the 90-day LIBOR rate to the 30-day LIBOR rate plus a margin of 19.50 basis points for Atlantic Aviation and 24.75 basis points for The Gas Company and District Energy. This transaction, adjusted for the prepayments of outstanding principal on the term loan debt at Atlantic Aviation, resulted in $580,000 and $1.8 million lower interest expense for these businesses for the quarter ended March 31, 2010 and the year ended December 31, 2009, respectively.

Effective February 25, 2009 for Atlantic Aviation and effective April 1, 2009 for the Company’s other businesses, the Company elected to discontinue hedge accounting. In prior periods, when the Company applied hedge accounting, changes in the fair value of derivatives that effectively offset the variability of cash flows on the Company’s debt interest obligations were recorded in other comprehensive income or loss. From the dates that hedge accounting was discontinued, all movements in the fair value of the interest rate swaps are recorded directly through earnings. As interest payments are made, a portion of the other comprehensive loss recorded under hedge accounting is also reclassified into earnings. The Company will reclassify into earnings the $64.2 million of net derivative losses included in accumulated other comprehensive loss as of March 31, 2010 over the remaining life of the existing interest rate swaps of which approximately $26.1 million that will be reclassified over the next 12 months.

The Company measures derivative instruments at fair value using the income approach which discounts the future net cash settlements expected under the derivative contracts to a present value. These valuations primarily utilize observable (“level 2”) inputs, including contractual terms, interest rates and yield curves observable at commonly quoted intervals.

The Company’s fair value measurements of its derivative instruments and the related location of the liabilities associated with the hedging instruments within the consolidated condensed balance sheets at March 31, 2010 and December 31, 2009 were as follows:

		Liabilities at Fair Value(1)
		Interest Rate Swap Contracts Not Designated as Hedging Instruments
Balance Sheet Location		March 31, 2010				December 31, 2009
		($ In Thousands)
Fair value of derivative instruments – current liabilities		$	(44,560	)		$	(49,573	)
Fair value of derivative instruments – non-current liabilities			(61,125	)			(54,794	)
Total interest rate derivative contracts		$	(105,685	)		$	(104,367	)

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(Unaudited)

10. Derivative Instruments and Hedging Activities  – (continued)

The Company’s hedging activities for the quarters ended March 31, 2010 and 2009 and the related location within the consolidated condensed financial statements were as follows:

		Derivatives Designated as Hedging Instruments(1)																								Derivatives Not Designated as Hedging Instruments(1)
		Amount of Gain Recognized in OCI on Derivatives (Effective Portion) for the Quarter Ended March 31,								Amount of Loss Reclassified from OCI into Income (Effective Portion) for the Quarter Ended March 31,								Amount of Loss Recognized in Loss on Derivative Instruments (Ineffective Portion) for the Quarter Ended March 31,								Amount of Loss Recognized in Interest Expense for the Quarter Ended March 31,
Financial Statement Account		2010				2009				2010				2009(2)				2010				2009				2010(3)				2009(3)
		($ In Thousands)
Interest Expense		$	—			$	—			$	—			$	(15,691	)		$	—			$	—			$	(27,134	)		$	(6,987	)
Loss on Derivative Instruments(2)			—				—				—				(25,154	)			—				(84	)			—				—
Accumulated Other Comprehensive Gain			—				2,848				—				—				—				—				—				—
Total		$	—			$	2,848			$	—			$	(40,845	)		$	—			$	(84	)		$	(27,134	)		$	(6,987	)

Loss recognized in interest expense for the quarter ended March 31, 2009 includes $7.0 million in unrealized derivative losses.

All of the Company’s derivative instruments are collateralized by all of the assets of the respective businesses.

11. Comprehensive Loss

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

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(Unaudited)

11. Comprehensive Loss  – (continued)

The difference between net loss and comprehensive loss for the quarters ended March 31, 2010 and 2009 was as follows ($ in thousands):

		Quarter Ended March 31,
		2010				2009
Net loss attributable to MIC LLC		$	(8,365	)		$	(53,026	)
Unrealized gain in fair value of derivatives, net of taxes			—				1,498
Reclassification of realized losses into earnings, net of taxes			5,348				25,990
Comprehensive loss		$	(3,017	)		$	(25,538	)

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

12. Members’ 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.

13. Reportable Segments

The Company’s operations are broadly classified into the energy-related businesses and Atlantic Aviation. Atlantic Aviation continues as the only aviation-related business of the Company.

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

		Quarter Ended, and as at, March 31,
		2010				2009
Revenue		$	107,038			$	86,803
Net income		$	13,243			$	13,263
Interest expense, net			12,125				7,061
Provision for income taxes			9,606				8,939
Depreciation and amortization expense			14,618				12,824
Unrealized gains on derivative instruments			—				(3,306	)
Other non-cash income (expenses)			233				(826	)
EBITDA excluding non-cash items(1)		$	49,825			$	37,955
Capital expenditures paid		$	19,430			$	39,942
Property, equipment, land and leasehold improvements, net			987,800				935,348
Total assets balance			1,067,019				1,020,564

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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(Unaudited)

13. Reportable Segments  – (continued)

Energy-Related Businesses:

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

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

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

Atlantic Aviation:

The Atlantic Aviation segment derives the majority of its revenues from fuel sales and from other airport services, including de-icing, aircraft hangarage and other aviation services. All of the revenue of Atlantic Aviation is generated in the United States at 68 airports and one heliport at March 31, 2010.

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

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

		Quarter Ended March 31, 2010
		Energy-related Businesses								Atlantic Aviation				Total
		The Gas Company				District Energy
Revenue from Product Sales
Product sales		$	25,310			$	—			$	94,708			$	120,018
Product sales – utility			26,835				—				—				26,835
			52,145				—				94,708				146,853
Service Revenue
Other services			—				864				45,341				46,205
Cooling capacity revenue			—				5,238				—				5,238
Cooling consumption revenue			—				1,763				—				1,763
			—				7,865				45,341				53,206
Financing and Lease Income
Financing and equipment lease			—				1,245				—				1,245
			—				1,245				—				1,245
Total Revenue		$	52,145			$	9,110			$	140,049			$	201,304

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(Unaudited)

13. Reportable Segments  – (continued)

		Quarter Ended March 31, 2009
		Energy-related Businesses								Atlantic Aviation				Total
		The Gas Company				District Energy
Revenue from Product Sales
Product sales		$	21,075			$	—			$	68,117				89,192
Product sales – utility			20,167				—				—				20,167
			41,242				—				68,117				109,359
Service Revenue
Other services			—				756				49,064				49,820
Cooling capacity revenue			—				4,897				—				4,897
Cooling consumption revenue			—				2,228				—				2,228
			—				7,881				49,064				56,945
Financing and Lease Income
Financing and equipment lease			—				1,192				—				1,192
			—				1,192				—				1,192
Total Revenue		$	41,242			$	9,073			$	117,181				167,496

In accordance with FASB ASC 280 Segment Reporting, the Company has disclosed earnings before interest, taxes, depreciation and amortization (EBITDA) excluding non-cash items as a key performance metric relied on by management in evaluation the Company’s performance. Non-cash items includes impairments, derivative gains and losses and adjustments for other non-cash items reflected in the statements of operations. The Company believes EBITDA excluding non-cash items provides additional insight into the performance of the operating businesses relative to each other and similar businesses without regard to their capital structure, and their ability to service or reduce debt, fund capital expenditures and/or support distributions to the holding company. EBITDA excluding non-cash items is reconciled to net income or loss.

During the quarter ended March 31, 2009, the Company disclosed EBITDA only. The following tables, reflecting results of operations for the consolidated group and for each of the businesses for the quarter ended March 31, 2009 have been conformed to current periods’ presentation reflecting EBITDA excluding non-cash items.

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

		Quarter Ended March 31, 2010
		Energy-related Businesses								Atlantic Aviation				Total Reportable Segments
		The Gas Company				District Energy
Net income (loss)		$	2,254			$	(2,631	)		$	(4,352	)		$	(4,729	)
Interest expense, net			4,807				6,028				23,599				34,434
Benefit (provision) for income taxes			1,451				(1,720	)			(2,937	)			(3,206	)
Depreciation			1,512				1,635				6,210				9,357
Amortization of intangibles			206				337				8,128				8,671
Other non-cash expense			534				155				47				736
EBITDA excluding non-cash items		$	10,764			$	3,804			$	30,695			$	45,263

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

13. Reportable Segments  – (continued)

		Quarter Ended March 31, 2009
		Energy-related Businesses								Atlantic Aviation(1)				Total Reportable Segments
		The Gas Company				District Energy
Net income (loss)		$	3,115			$	(1,646	)		$	(49,606	)		$	(48,137	)
Interest expense, net			2,617				2,955				26,504				32,076
Benefit (provision) for income taxes			2,005				(1,075	)			(33,486	)			(32,556	)
Depreciation			1,476				1,463				11,674				14,613
Amortization of intangibles			214				337				29,714				30,265
Goodwill impairment			—				—				18,000				18,000
Loss on derivative instruments			327				1,378				23,331				25,036
Other non-cash expense			451				104				63				618
EBITDA excluding non-cash items		$	10,205			$	3,516			$	26,194			$	39,915

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

		Quarter Ended March 31,
		2010				2009
Total reportable segments EBITDA excluding non-cash items		$	45,263			$	39,915
Interest income			16				67
Interest expense			(34,687	)			(33,566	)
Depreciation(1)			(9,357	)			(14,613	)
Amortization of intangibles(2)			(8,671	)			(30,265	)
Selling, general and administrative – corporate			(1,980	)			(2,931	)
Fees to manager			(2,189	)			(462	)
Equity in earnings and amortization charges of investees			5,593				5,449
Goodwill impairment			—				(18,000	)
Loss on derivative instruments			—				(25,238	)
Other (expense) income, net			(542	)			644
Total consolidated net loss from continuing operations before income taxes		$	(6,554	)		$	(79,000	)

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

13. Reportable Segments  – (continued)

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

		Quarter Ended March 31,
		2010				2009
The Gas Company		$	2,331			$	1,865
District Energy			346				1,619
Atlantic Aviation			1,336				3,245
Total		$	4,013			$	6,729

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
		2010				2009(1)				2010(2)				2009(2)				2010				2009
The Gas Company		$	143,784			$	143,233			$	120,193			$	120,193			$	351,703			$	333,105
District Energy			150,170				146,656				18,647				18,647				230,329				226,088
Atlantic Aviation			280,930				295,166				377,342				430,542				1,464,161				1,590,116
Total		$	574,884			$	585,055			$	516,182			$	569,382			$	2,046,193			$	2,149,309

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

		As of March 31,
		2010				2009
Total assets of reportable segments		$	2,046,193			$	2,149,309
Investment in IMTT			208,084				190,379
Assets of discontinued operations held for sale			88,788				97,455
Corporate and other			(20,811	)			(11,631	)
Total consolidated assets		$	2,322,254			$	2,425,512

14. Related Party Transactions

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

As of March 31, 2010, the Manager held 3,642,182 LLC interests of the Company, which were acquired concurrently with the closing of the initial public offering in December 2004 and by reinvesting base management and performance fees in the Company. In addition, the Macquarie Group held LLC interests acquired in open market purchases.

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

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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14. Related Party Transactions  – (continued)

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

In accordance with the Management Agreement, the Manager is entitled to a quarterly base management fee based primarily on the Company’s market capitalization, and a performance fee, based on the performance of the Company’s stock relative to a U.S. utilities index. For the quarters ended March 31, 2010 and 2009, the Company incurred base management fees of $2.2 million and $462,000, respectively. The unpaid portion of the fees at the end of each reporting period is included in due to manager-related party in the consolidated condensed balance sheets. The base management fee for the first quarter of 2010 will be reinvested in LLC interests during the second quarter of 2010.

The Manager is not entitled to any other compensation and all costs incurred by the Manager, including compensation of seconded staff, are paid by the Manager out of its management fee. However, the Company is responsible for other direct costs including, but not limited to, expenses incurred in the administration or management of the Company and its subsidiaries and investments, income taxes, audit and legal fees, acquisitions and dispositions and its compliance with applicable laws and regulations. During the quarters ended March 31, 2010 and 2009, the Manager charged the Company $90,000 and $109,000, 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, have provided various advisory and other services and incurred expenses in connection with the Company’s equity raising activities, acquisitions and debt structuring for the Company and its businesses. Underwriting fees are recorded in members’ equity as a direct cost of equity offerings. Advisory fees and out-of-pocket expenses relating to acquisitions are expensed as incurred. Debt arranging fees are deferred and amortized over the term of the credit facility. Amounts relating to these transactions comprise the following ($ in thousands):

Quarter Ended March 31, 2010

Strategic review of alternatives available to the Company  – advisory services from MCUSA		$	500

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14. Related Party Transactions  – (continued)

Long-Term Debt

Until March 31, 2010, the Company had a revolving credit facility provided by various financial institutions, including entities within the Macquarie Group. The facility was repaid in full during 2009 and no amounts were outstanding under the revolving credit facility as of December 31, 2009 or at the facility’s maturity on March 31, 2010. Amounts relating to the portion of this revolving credit facility from the Macquarie Group comprise the following ($ in thousands):

2010 (as of March 31)

Revolving credit facility commitment provided by Macquarie Group during January 1, 2010 through March 30, 2010(1)		$	4,444
Revolving credit facility commitment provided by Macquarie Group at March 31, 2010(2)			—
Portion of revolving credit facility commitment from Macquarie Group drawn down, as of March 31, 2010(2)(3)			—
Interest expense on Macquarie Group portion of the drawn down commitment, for the quarter ended March 31, 2010			—
Commitment fees to the Macquarie Group, for quarter ended March 31, 2010			5

Derivative Instruments and Hedging Activities

The Company has derivative instruments in place to fix the interest rate on certain outstanding variable-rate term loan facilities. MBL has provided interest rate swaps for Atlantic Aviation and The Gas Company. At March 31, 2010, Atlantic Aviation had $793.6 million of its variable-rate term loans hedged, of which MBL provided the interest rate swaps for a notional amount of $278.8 million. The remainder of the swaps are from an unrelated third party. During the quarter ended March 31, 2010, Atlantic Aviation made net payments to MBL of $3.5 million in relation to these swaps.

As discussed in Note 9, “Long-Term Debt”, for the quarter ended March 31, 2010, Atlantic Aviation paid $2.5 million in interest rate swap breakage fees, of which $320,000 was paid to MBL.

In May 2010, Atlantic Aviation used $3.3 million of excess cash flow to prepay $3.0 million of the outstanding principal balance of the term loan debt and incurred $296,000 in interest rate swap breakage fees, of which $34,000 was paid to MBL.

At March 31, 2010, The Gas Company had $160.0 million of its term loans hedged, of which MBL provided the interest rate swaps for a notional amount of $48.0 million. The remainder of the swaps are from an unrelated third party. During the quarter ended March 31, 2010, The Gas Company made net payments to MBL of $523,000 in relation to these swaps.

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14. Related Party Transactions  – (continued)

Other Transactions

On March 30, 2009, The Gas Company entered into licensing agreements with Utility Service Partners, Inc. and America’s Water Heater Rentals, LLC, both indirect subsidiaries of Macquarie Group Limited, to enable these entities to offer products and services to The Gas Company’s customer base. No payments were made under these arrangements during the quarter ended March 31, 2010.

On August 29, 2008, Macquarie Global Opportunities Partners, or MGOP, a private equity fund managed by the Macquarie Group, completed the acquisition of the jet membership, retail charter and fuel management business units previously owned by Sentient Jet Holdings, LLC. The new company is called Sentient Flight Group (referred to hereafter as “Sentient”). Sentient was an existing customer of Atlantic Aviation. For the quarter ended March 31, 2010, Atlantic Aviation recorded $4.2 million in revenue from Sentient. As of March 31, 2010, Atlantic Aviation had $217,000 in receivables from Sentient, which is included in accounts receivable in the consolidated condensed balance sheets.

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.

15. Income Taxes

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

In the first quarter of 2010, the Company revised the valuation allowance to approximately $18.0 million, a decrease of approximately $2.6 million from December 31, 2009. This decrease was recorded as a benefit in the tax provision for the first quarter of 2010.

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

Uncertain Tax Positions

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

16. Legal Proceedings and Contingencies

There are no material legal proceedings other than as disclosed in Part I, Item 3 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, filed with the SEC on February 25, 2010.

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

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

General

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

On January 28, 2010, an airport parking business owned by us (“Parking Company of America Airports” or “PCAA”) entered into an asset purchase agreement and simultaneously filed for bankruptcy. The sale is expected to close in the second quarter of 2010. This business is now a discontinued operation for the Company and is therefore separately reported in the Company’s consolidated financial statements and is no longer a reportable segment.

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

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

The results of Atlantic Aviation have been negatively affected since mid-2008 by the slower economy and declining general aviation activity levels through mid-2009. However, general aviation activity levels stabilized in the second half of 2009 and showed year on year growth in December 2009 and through the quarter ended March 31, 2010. This stabilization and growth in general aviation activity levels, combined with expense reduction efforts, results in an improving outlook for the business.

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

Despite the improvement in the credit markets, we expect to continue to strengthen our consolidated balance sheet and those of our operating entities through prudent reductions in the amount of long-term debt outstanding, further increasing the likelihood that we will be able to successfully refinance this debt as it matures over approximately the next four years. In 2009, we accomplished a portion of this objective by repaying in full our holding company debt, reducing the indebtedness of Atlantic Aviation and through PCAA having entered into an asset purchase agreement, as discussed below.

PCAA Asset Purchase Agreement

On January 28, 2010, we announced that PCAA entered into an asset purchase agreement with Bainbridge ZKS — Corinthian Holdings, LLC and simultaneously commenced a voluntary Chapter 11 case with the bankruptcy court. On April 27, 2010, an auction for the assets of PCAA was held where Commercial Finance Services 2907 Inc. was declared the winning bidder with a purchase price of $141.0 million, subject to certain adjustments. This purchase price, which is subject to approval by the bankruptcy court, will result in the elimination of $201.0 million of current debt from liabilities from the Company’s consolidated condensed balance sheet. The cancelled debt in excess of the sale proceeds used to repay such debt will result in cancellation of debt income. As a part of the bankruptcy sale process, substantially all of the cash proceeds

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will be paid to creditors of the business and not to us. If approved, we expect to complete the sale of the business in the second quarter of 2010.

As part of the bankruptcy filing, we have no obligation to, and have no intention of, committing additional capital to this business and our ongoing liabilities are expected to be no more than $5.4 million in a guarantee of a single parking facility lease. Creditors of this business do not have recourse to any assets of our holding company or any assets of our other businesses, other than the aforementioned lease guarantee.

MIC Inc. Revolving Credit Facility

Until March 31, 2010, the Company had a revolving credit facility with various financial institutions, including entities within the Macquarie Group. The facility was repaid in full in December 2009 and no amounts were outstanding under the revolving credit facility as of December 31, 2009 or at the facility’s maturity on March 31, 2010.

Income Taxes

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

As a result of available federal net operating loss carryforwards, we do not expect to have consolidated regular federal taxable income or regular federal tax payments at least through the 2012 tax year. The cash state and local taxes paid by our individual businesses are discussed in the sections entitled “Income Taxes” for each of our individual businesses.

Distributions

In February 2009, we suspended payment of quarterly cash distributions to shareholders in favor of applying the cash generated by our operating businesses to the reduction of holding company debt and operating company debt, principally at Atlantic Aviation. This policy is likely to remain in effect until such time as, a) we have achieved a prudent level of cash reserves at both our holding company and operating companies, and b) the credit markets and customer spending patterns at the “user-pay” businesses regain a level of stability and predictability that enables us to confidently estimate refinancing terms relating to our long-term debt.

Results of Operations

Consolidated

Key Factors Affecting Operating Results

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Results of Operations: Consolidated – (continued)

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

		Quarter ended March 31,								Change (from 2009 to 2010) Favorable/(Unfavorable)
		2010				2009(1)				$				%
		($ in Thousands)
Revenue
Revenue from product sales		$	120,018			$	89,192				30,826				34.6
Revenue from product sales – utility			26,835				20,167				6,668				33.1
Service revenue			53,206				56,945				(3,739	)			(6.6	)
Financing and equipment lease income			1,245				1,192				53				4.4
Total revenue			201,304				167,496				33,808				20.2
Costs and expenses
Cost of product sales			77,054				49,766				(27,288	)			(54.8	)
Cost of product sales – utility			21,313				15,387				(5,926	)			(38.5	)
Cost of services			11,145				11,071				(74	)			(0.7	)
Gross profit			91,792				91,272				520				0.6
Selling, general and administrative			50,734				56,143				5,409				9.6
Fees to manager-related party			2,189				462				(1,727	)			NM
Goodwill impairment			—				18,000				18,000				NM
Depreciation			7,722				13,150				5,428				41.3
Amortization of intangibles			8,671				30,265				21,594				71.3
Total operating expenses			69,316				118,020				48,704				41.3
Operating income (loss)			22,476				(26,748	)			49,224				184.0
Other income (expense)
Interest income			16				67				(51	)			(76.1	)
Interest expense(2)			(34,687	)			(33,566	)			(1,121	)			(3.3	)
Equity in earnings and amortization charges of investees			5,593				5,449				144				2.6
Loss on derivative instruments			—				(25,238	)			25,238				NM
Other income, net			48				1,036				(988	)			(95.4	)
Net loss from continuing operations before income taxes			(6,554	)			(79,000	)			72,446				91.7
Benefit for income taxes			1,089				32,565				(31,476	)			(96.7	)
Net loss from continuing operations		$	(5,465	)		$	(46,435	)			40,970				88.2
Net loss from discontinued operations, net of taxes			(4,013	)			(6,424	)			2,411				37.5
Net loss		$	(9,478	)		$	(52,859	)			43,381				82.1
Less: net (loss) income attributable to noncontrolling interests			(1,113	)			167				1,280				NM
Net loss attributable to MIC LLC		$	(8,365	)		$	(53,026	)			44,661				84.2

NM — Not meaningful

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Results of Operations: Consolidated – (continued)

Gross Profit

Consolidated gross profit was relatively flat as compared to the first quarter of 2009, reflecting improved results at our consolidated energy-related businesses and fuel-related services at Atlantic Aviation, offset by a decrease in gross profit from other services at Atlantic Aviation.

Selling, General and Administrative Expenses

The decrease in selling, general and administrative expenses was primarily a result of cost reduction efforts at Atlantic Aviation.

Fees to Manager

Base fees to our Manager increased due to higher market capitalization. Our Manager elected to reinvest the first quarter 2010 base management fees in additional LLC interests.

Goodwill Impairment

Goodwill is considered impaired when the carrying amount of a reporting unit’s goodwill exceeds its implied fair value. During the first quarter of 2009, we recognized a goodwill impairment charge of $18.0 million at Atlantic Aviation. There was no impairment charge in the first quarter of 2010.

Depreciation

The decrease in depreciation reflects non-cash asset impairment charges of $5.3 million recorded during the first quarter of 2009 at Atlantic Aviation.

Amortization of Intangibles

The decrease in amortization of intangibles expense reflects non-cash asset impairment charges of $20.4 million recorded by Atlantic Aviation during the first quarter of 2009. The impairments reduced the amortizable balance and the amount of amortization expense in 2010.

Interest Expense and Loss on Derivative Instruments

Interest expense includes non-cash losses on derivative instruments of $11.1 million and $7.0 million for the quarters ended March 31, 2010 and 2009, respectively. These items are recorded in interest expense from the dates that hedge accounting was discontinued.

The decrease in the non-cash losses on derivatives recorded both in interest expense and in loss on derivative instruments is attributable to a decrease in principal paydown on the term loan debt at Atlantic Aviation; the change in fair value of interest rate swaps from the dates that hedge accounting was discontinued; and includes the reclassification of amounts from accumulated other comprehensive loss into earnings, as Atlantic Aviation pays down its debt more quickly than anticipated.

Excluding the portion related to non-cash losses on derivatives, interest expense decreased due to a $106.4 million reduction of term loan debt at Atlantic Aviation, the paydown of the full outstanding balance of $66.4 million of holding company debt during December 2009 and a decrease in interest rate swap break fees associated with the debt prepayments at Atlantic Aviation.

Equity in Earnings and Amortization Charges of Investees

Our equity in the earnings of IMTT was relatively flat year-over-year, reflecting improved operating results of the business, offset by our share of the non-cash derivative losses of $2.3 million in 2010 compared with our share of non-cash derivative gains of $1.7 million in 2009.

Income Taxes

For 2010, we expect to report a consolidated federal net operating loss, for which we will record a deferred tax benefit, and we do not expect to pay a federal Alternative Minimum Tax for 2010.

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Results of Operations: Consolidated – (continued)

As we own less than 80% of IMTT and District Energy, those businesses are not included in our consolidated tax return. Those businesses file their own separate consolidated income tax returns.

We include dividends received from IMTT and District Energy in our consolidated income tax return. We expect that all of those distributions from IMTT and District Energy in 2010 will be treated as taxable dividends, which will qualify for the 80% Dividends Received Deduction.

As discussed in Note 18, “Income Taxes” in our consolidated financial statements, in Part II, Item 8 of Form 10-K for 2009, from the date of sale of the noncontrolling interest in District Energy and onwards, we evaluate the need for a valuation allowance against our deferred tax assets without taking into consideration the deferred tax liabilities of District Energy. As of December 31, 2009, we concluded that the scheduled reversal of deferred tax liabilities will more likely than not result in the realization of all our federal deferred tax assets, except for approximately $15.3 million. Accordingly, we provided a valuation allowance against our deferred tax assets for this amount. Of this valuation allowance, $5.9 million is recorded on the books of PCAA, which is reported in discontinued operations.

In the first quarter of 2010, we revised the valuation allowance to approximately $18.0 million, a decrease of approximately $2.6 million from December 31, 2009. This decrease was recorded as a benefit in the tax provision for the first quarter of 2010.

In calculating our consolidated state income tax provision, we have provided a valuation allowance for certain state income tax NOL 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 determining our state income tax expense.

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.

Discontinued Operations

On January 28, 2010, PCAA entered into an asset purchase agreement and simultaneously filed for bankruptcy. In April 2010, an auction for the sale of the assets was held, and subject to approval by the bankruptcy court, is expected to close in the second quarter of 2010. The results of this business have been reported as a discontinued operation in the consolidated condensed financial statements and prior comparable periods have been restated to conform to the current period presentation. See Note 5, “Discontinued Operations”, in our consolidated condensed financial statements in Part I, Item 1 of this Form 10-Q for financial information and further discussions.

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

In accordance with GAAP, we have disclosed EBITDA excluding non-cash items for our Company and each of our operating segments in Note 13, “Reportable Segments” in our consolidated condensed financial statements, as a key performance metric relied on by management in evaluating our performance. EBITDA excluding non-cash items is defined as earnings before interest, taxes, depreciation and amortization and non-cash items, which includes impairments, derivative gains and losses and adjustments for other non-cash items reflected in the statements of operations. We believe EBITDA excluding non-cash items provides additional insight into the performance of our operating businesses relative to each other and similar businesses without regard to their capital structure, and their ability to service or reduce debt, fund capital expenditures and/or support distributions to the holding company.

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

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Results of Operations: Consolidated – (continued)

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

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

In the quarter ended March 31, 2009, we disclosed EBITDA only. The following tables, reflecting results of operations for the consolidated group and for our businesses for the quarter ended March 31, 2009, have been conformed to current periods’ presentation reflecting EBITDA excluding non-cash items and Free Cash Flow.

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

		Quarter ended March 31,								Change (from 2009 to 2010) Favorable/(Unfavorable)
		2010				2009(1)				$				%
		($ in Thousands)
Net loss attributable to MIC LLC from continuing operations(2)		$	(4,518	)		$	(46,602	)
Interest expense, net(3)			34,671				33,499
Benefit for income taxes			(1,089	)			(32,565	)
Depreciation(4)			7,722				13,150
Depreciation – cost of services(4)			1,635				1,463
Amortization of intangibles(5)			8,671				30,265
Goodwill impairment			—				18,000
Loss on derivative instruments			—				25,238
Equity in earnings and amortization charges of investees(6)			(593	)			—
Base management fees settled/to be settled in LLC interests			2,189				—
Other non-cash income			(172	)			(342	)
EBITDA excluding non-cash items from continuing operations		$	48,516			$	42,106				6,410				15.2
EBITDA excluding non-cash items from continuing operations		$	48,516			$	42,106
Interest expense, net(3)			(34,671	)			(33,499	)
Non-cash derivative losses recorded in interest expense(3)			11,126				6,987
Amortization of debt financing costs			2,914				1,167
Equipment lease receivables, net			712				766
Benefit for income taxes, net of changes in deferred taxes			(878	)			(525	)
Changes in working capital			3,087				1,109
Cash provided by operating activities			30,806				18,111
Changes in working capital			(3,087	)			(1,109	)
Maintenance capital expenditures			(1,747	)			(1,542	)
Free cash flow from continuing operations		$	25,972			$	15,460				10,512				68.0

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Results of Operations: Consolidated – (continued)