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, 2008

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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

   
Large Accelerated Filer x   Accelerated Filer o   Non-accelerated Filer o

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

There were 44,938,380 limited liability company interests without par value outstanding at May 7, 2008.

 

 


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, 2008 (Unaudited) and
December 31, 2007
    1  
Consolidated Condensed Statements of Operations for the Quarters Ended March 31, 2008 and 2007 (Unaudited)     2  
Consolidated Condensed Statements of Cash Flows for the Quarters Ended March 31, 2008 and 2007 (Unaudited)     4  
Notes to Consolidated Condensed Financial Statements (Unaudited)     5  

Item 2.

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

    17  

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

    41  

Item 4.

Controls and Procedures

    41  
PART II. OTHER INFORMATION
        

Item 1.

Legal Proceedings

    42  

Item 1A.

Risk Factors

    42  

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

    42  

Item 3.

Defaults Upon Senior Securities

    42  

Item 4.

Submission of Matters to a Vote of Security Holders

    42  

Item 5.

Other Information

    42  

Item 6.

Exhibits

    42  

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
As of March 31, 2008 and December 31, 2007
($ In Thousands, Except Share Data)

   
  March 31,
2008
  December 31,
2007
     (Unaudited)     
ASSETS
                 
Current assets:
                 
Cash and cash equivalents   $ 61,304     $ 57,473  
Restricted cash     1,312       1,335  
Accounts receivable, less allowance for doubtful accounts of $2,103 and $2,380,
respectively
    107,067       94,541  
Dividends receivable     7,000       7,000  
Other receivables     75       445  
Inventories     19,470       18,219  
Prepaid expenses     10,180       10,418  
Deferred income taxes     9,330       9,330  
Other     12,364       11,706  
Total current assets     228,102       210,467  
Property, equipment, land and leasehold improvements, net     690,221       674,952  
Restricted cash     19,786       19,363  
Equipment lease receivables     38,176       38,834  
Investment in unconsolidated business     202,518       211,606  
Goodwill     775,565       770,108  
Intangible assets, net     873,716       857,345  
Deferred costs on acquisitions           278  
Deferred financing costs, net of accumulated amortization     28,067       28,040  
Other     2,042       2,036  
Total assets   $ 2,858,193     $ 2,813,029  
LIABILITIES AND MEMBERS’ EQUITY
                 
Current liabilities:
                 
Due to manager – related party   $ 4,704     $ 5,737  
Accounts payable     68,933       59,303  
Accrued expenses     25,934       31,184  
Current portion of notes payable and capital leases     6,461       5,094  
Current portion of long-term debt     4,394       162  
Fair value of derivative instruments     38,153       14,224  
Customer deposits     8,983       9,481  
Other     9,248       8,330  
Total current liabilities     166,810       133,515  
Notes payable and capital leases, net of current portion     3,013       2,964  
Long-term debt, net of current portion     1,490,821       1,426,494  
Deferred income taxes     182,476       202,683  
Fair value of derivative instruments     71,121       42,832  
Other     32,521       30,817  
Total liabilities     1,946,762       1,839,305  
Minority interests     6,726       7,172  
Commitments and contingencies            
Members’ equity:
                 
LLC interests, no par value; 500,000,000 authorized; 44,938,380 LLC interests issued and outstanding at March 31, 2008 and December 31, 2007     1,023,480       1,052,062  
Accumulated other comprehensive loss     (64,330 )      (33,055 ) 
Accumulated deficit     (54,445 )      (52,455 ) 
Total members’ equity     904,705       966,552  
Total liabilities and members’ equity   $ 2,858,193     $ 2,813,029  

 
 
See accompanying notes to the consolidated condensed financial statements.

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MACQUARIE INFRASTRUCTURE COMPANY LLC
  
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the Quarters Ended March 31, 2008 and 2007
(Unaudited)
($ In Thousands, Except Share and per Share Data)

   
  Quarter Ended
March 31, 2008
  Quarter Ended
March 31, 2007
Revenue
                 
Revenue from product sales   $ 159,325     $ 88,357  
Revenue from product sales – utility     29,399       22,291  
Service revenue     88,785       57,086  
Financing and equipment lease income     1,194       1,248  
Total revenue     278,703       168,982  
Costs and expenses
                 
Cost of product sales     108,517       53,706  
Cost of product sales – utility     24,335       16,778  
Cost of services     33,256       23,342  
Selling, general and administrative     63,857       38,978  
Fees to manager – related party     4,626       5,561  
Depreciation     6,723       3,891  
Amortization of intangibles     10,739       6,928  
Total operating expenses     252,053       149,184  
Operating income     26,650       19,798  
Other income (expense)
                 
Interest income     473       1,459  
Interest expense     (25,826 )      (17,566 ) 
Equity in (losses) earnings and amortization charges of investees     (2,089 )      3,465  
Loss on derivative instruments     (305 )      (477 ) 
Other income (expense), net     192       (916 ) 
Net (loss) income before income taxes and minority interests     (905 )      5,763  
(Provision) benefit for income taxes     (1,364 )      2,045  
Net (loss) income before minority interests     (2,269 )      7,808  
Minority interests     (279 )      (69 ) 
Net (loss) income   $ (1,990 )    $ 7,877  
Basic (loss) earnings per share:   $ (0.04 )    $ 0.21  
Weighted average number of shares outstanding: basic     44,938,380       37,562,165  
Diluted (loss) earnings per share:   $ (0.04 )    $ 0.21  
Weighted average number of shares outstanding: diluted     44,938,380       37,579,034  
Cash distributions declared per share   $ 0.635     $ 0.57  

 
 
See accompanying notes to the consolidated condensed financial statements.

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MACQUARIE INFRASTRUCTURE COMPANY LLC
  
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the Quarters Ended March 31, 2008 and 2007
(Unaudited)
($ In Thousands)

   
  Quarter Ended
March 31, 2008
  Quarter Ended
March 31, 2007
Operating Activities
                 
Net (loss) income   $ (1,990 )    $ 7,877  
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
                 
Depreciation and amortization of property and equipment     9,469       6,357  
Amortization of intangible assets     10,739       6,928  
Equity in losses (earnings) and amortization charges of investees     2,089       (3,465 ) 
Equity distributions from investees           3,465  
Amortization of debt financing costs     1,760       1,451  
Non-cash derivative loss (gain), net of non-cash interest expense     382       (1,093 ) 
Performance fees settled in LLC interests           957  
Equipment lease receivable, net     508       708  
Deferred rent     572       640  
Deferred taxes     (2,590 )      (3,020 ) 
Other non-cash expenses, net     73       424  
Non-operating losses relating to foreign investments           2,465  
Changes in other assets and liabilities, net of acquisitions:
                 
Restricted cash     23       259  
Accounts receivable     (12,191 )      (4,015 ) 
Inventories     (800 )      (841 ) 
Prepaid expenses and other current assets     1,272       1,371  
Due to manager – related party     (1,033 )      181  
Accounts payable and accrued expenses     2,444       3,355  
Income taxes payable     3,577       2,838  
Other, net     (207 )      729  
Net cash provided by operating activities     14,097       27,571  
Investing Activities
                 
Acquisitions of businesses and investments, net of cash acquired     (41,864 )      (143 ) 
Costs of dispositions           (322 ) 
Proceeds from sale of equity investment           84,977  
Settlements of non-hedging derivative instruments           (1,631 ) 
Purchases of property and equipment     (13,708 )      (7,558 ) 
Return of investment in unconsolidated business     7,000       3,535  
Other     137        
Net cash (used in) provided by investing activities     (48,435 )      78,858  
Financing activities
                 
Proceeds from long-term debt     2,000       1,000  
Proceeds from line of credit facilities     67,850       1,750  
Offering and equity raise costs paid     (65 )       
Distributions paid to holders of LLC interests     (28,536 )       
Distributions paid to minority shareholders     (167 )      (224 ) 
Payment of long-term debt     (40 )      (39 ) 
Debt financing costs paid     (1,788 )      (54 ) 
Change in restricted cash     (617 )      751  
Payment of notes and capital lease obligations     (468 )      (596 ) 
Net cash provided by financing activities     38,169       2,588  
Effect of exchange rate changes on cash           (1 ) 
Net change in cash and cash equivalents     3,831       109,016  
Cash and cash equivalents, beginning of period     57,473       37,388  
Cash and cash equivalents, end of period   $ 61,304     $ 146,404  

 
 
See accompanying notes to the consolidated condensed financial statements.

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MACQUARIE INFRASTRUCTURE COMPANY LLC
  
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS – (continued)
For the Quarters Ended March 31, 2008 and 2007
(Unaudited)
($ In Thousands)

   
  Quarter Ended
March 31, 2008
  Quarter Ended
March 31, 2007
Supplemental disclosures of cash flow information:
                 
Non-cash investing and financing activities:
                 
Accrued acquisition and equity offering costs   $ 343     $ 1,078  
Accrued purchases of property and equipment   $ 742     $ 2,393  
Acquisition of equipment through capital leases   $     $ 30  
Taxes paid   $ 489     $ 960  
Interest paid   $ 23,859     $ 16,131  

 
 
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 wholly-owned 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, 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:

(i) an airport services business — operates the largest network of fixed base operations, or FBOs, in the U.S. FBOs provide products and services like fuel and aircraft parking for owners and operators of private jets;
(ii) a 50% interest in a bulk liquid storage terminal business — provides bulk liquid storage and handling services in North America and is one of the largest participants in this industry in the U.S., based on capacity;
(iii) a gas production and distribution business — a full-service gas energy company, making gas products and services available in Hawaii;
(iv) a district energy business — operates the largest district cooling system in the U.S. and serves various customers in Chicago, Illinois and Las Vegas, Nevada; and
(v) an airport parking business — the largest provider of off-airport parking services in the U.S., with 30 facilities in 20 major airport markets.

During the year ended December 31, 2007, the Company completed the following acquisitions:

On May 30, 2007, the Company completed the acquisition of 100% of the interests in entities that own and operate two FBOs at Stewart International Airport in New York and Santa Monica Municipal Airport in California, together referred to as “Supermarine”.
On August 9, 2007, the Company completed the acquisition of approximately 89% of the equity of Mercury Air Center, Inc., or Mercury, which owns and operates 24 FBOs in the United States. On October 2, 2007, the Company acquired the remaining 11% of equity.
On August 17, 2007, the Company completed the acquisition of 100% of the membership interests in SJJC Aviation Services, LLC, or San Jose, which owns and operates the two FBOs at San Jose Mineta International Airport, located in San Jose, California.
On November 30, 2007, the Company completed the acquisition of 100% of the membership interests in Rifle Jet Center, LLC and Rifle Jet Center Maintenance, LLC, which own and operate an FBO at Garfield County Regional Airport in Rifle, Colorado.

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

1. Organization and Description of Business  – (continued)

During the quarter ended March 31, 2008, the Company completed the following acquisition:

On March 4, 2008, the Company completed the acquisition of 100% of the equity in entities that own and operate three FBOs in Farmington and Albuquerque, New Mexico and Sun Valley, Idaho, collectively referred to as “Seven Bar”.

2. Basis of Presentation

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The preparation of consolidated financial statements in conformity with GAAP requires estimates and assumptions. Management evaluates these estimates and judgments on an ongoing basis. Actual results may differ from the estimates and assumptions used in the financial statements and notes. Operating results for the quarter ended March 31, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.

The consolidated balance sheet at December 31, 2007 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 year presentation.

The interim financial information contained herein should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2007 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on February 28, 2008.

3. Adoption of New Accounting Pronouncement

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements”, or FASB No. 157, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FASB No. 157 applies under other accounting pronouncements that require or permit fair value measurements. Accordingly, FASB No. 157 does not require any new fair value measurements. FASB No. 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 inputs), second priority to other observable information such as quoted prices in markets that are not active or other directly or indirectly observable inputs (level 2 inputs) and the lowest priority to unobservable data (level 3 inputs). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The provisions of FASB No. 157 were effective as of the beginning of the Company’s 2008 fiscal year. The Company adopted FASB No. 157 on January 1, 2008 and the required disclosures are included in these financial statements, except as noted below. The impact of the adoption did not have a material impact on the Company’s financial results of operations and financial condition. In accordance with FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157”, which was issued in February 2008, the Company has deferred the adoption of FASB No. 157 for all non-financial assets and liabilities. Major categories of non-financial assets and liabilities to which this deferral applies include, but is not limited to, the Company’s property, equipment, land and leasehold improvements; intangible assets; and goodwill.

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

4. (Loss) Earnings Per Share

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

   
  Quarter Ended
March 31, 2008
  Quarter Ended
March 31, 2007
Weighted average number of shares outstanding: basic     44,938,380       37,562,165  
Dilutive effect of restricted stock unit grants           16,869  
Weighted average number of shares outstanding: diluted     44,938,380       37,579,034  

The effect of potentially dilutive shares for the quarter ended March 31, 2007 is calculated by assuming that the 16,869 restricted stock unit grants issued to the independent directors on May 25, 2006 had been fully converted to shares on that date. The 10,314 restricted stock unit grants provided to the independent directors on May 24, 2007 were anti-dilutive for the quarter ended March 31, 2008 due to the Company’s net loss for that period.

5. Acquisitions

Seven Bar FBOs

On March 4, 2008, the Company’s airport services business completed the acquisition of 100% of the interests in Sun Valley Aviation, Inc., SB Aviation Group, Inc. and Seven Bar Aviation Inc. (collectively referred to as “Seven Bar”). Seven Bar owns and operates three FBOs located in Farmington and Albuquerque, New Mexico and Sun Valley, Idaho.

The cost of the acquisition, including transaction costs, was $41.8 million and the Company has pre-funded integration costs of $300,000. The Company financed the acquisition with part of the $56.0 million of borrowings under the MIC Inc. revolving acquisition credit facility.

For description of related party transactions associated with the Company’s acquisition, see Note 13, Related Party Transactions.

The acquisition has been accounted for under the purchase method of accounting. Accordingly, the results of operations of Seven Bar are included in the consolidated statements of operations and as a component of the Company’s airport services business segment since March 4, 2008.

The preliminary allocation of the purchase price, including transaction costs, was as follows ($ in thousands):

 
Current assets   $ 1,147  
Property, equipment and leasehold improvements     10,244  
Intangible assets:
        
Customer relationships     690  
Contract rights     26,370  
Non-compete agreements     50  
Goodwill     4,930  
Total assets acquired     43,431  
Current liabilities     1,296  
Other liabilities     370  
Net assets acquired   $ 41,765  

The Company paid more than the fair value of the underlying net assets as a result of the expectation of its ability to earn a higher rate of return from the acquired business than would be expected if those net assets had to be acquired or developed separately. The value of the acquired intangible assets was determined by

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

5. Acquisitions  – (continued)

taking into account risks related to the characteristics and applications of the assets, existing and future markets and analysis of expected future cash flows to be generated by the business.

The Company allocated $690,000 of the purchase price to customer relationships in accordance with EITF 02-17, “Recognition of Customer Relationship Intangible Assets Acquired in a Business Combination.” The Company will amortize the amount allocated to customer relationships over a nine-year period.

Pro Forma Information

The following unaudited pro forma information summarizes the results of operations for the quarters ended March 31, 2008 and 2007 as if the acquisition of Seven Bar had been completed at the beginning of the prior comparative period, January 1, 2007. The pro forma data combines the Company’s consolidated results with those of the acquired entities (prior to acquisition) for the periods shown. The results are adjusted for amortization, depreciation and income taxes relating to the acquisitions. No effect has been given to cost reductions or operating synergies in this presentation. These pro forma amounts do not purport to be indicative of the results that would have actually been achieved if the acquisitions had occurred as of the beginning of the periods presented or that may be achieved in the future. The pro forma amounts are as follows ($ in thousands, except per share data):

   
  Quarter Ended March 31,
     2008   2007
Pro forma consolidated revenue   $ 281,810     $ 173,102  
Pro forma consolidated net (loss) income   $ (2,166 )    $ 7,702  
Basic (loss) earnings per share   $ (0.05 )    $ 0.21  
Diluted (loss) earnings per share   $ (0.05 )    $ 0.20  

6. Property, Equipment, Land and Leasehold Improvements

Property, equipment, land and leasehold improvements consist of the following ($ in thousands):

   
  March 31, 2008   December 31, 2007
Land   $ 63,051     $ 63,275  
Easements     5,624       5,624  
Buildings     36,202       36,202  
Leasehold and land improvements     282,020       270,662  
Machinery and equipment     306,732       302,408  
Furniture and fixtures     9,447       9,006  
Construction in progress     67,789       59,292  
Property held for future use     1,528       1,503  
       772,393       747,972  
Less: accumulated depreciation     (82,172 )      (73,020 ) 
Property, equipment, land and leasehold improvements, net(1)   $ 690,221     $ 674,952  

(1) Includes $267,000 of capitalized interest for the quarter ended March 31, 2008 and $1.5 million for the year ended December 31, 2007.

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

7. Intangible Assets

Intangible assets consist of the following ($ in thousands):

     
  Weighted
Average Life
(Years)
  March 31,
2008
  December 31,
2007
Contractual arrangements     30.4     $ 828,642     $ 802,272  
Non-compete agreements     2.5       9,515       9,465  
Customer relationships     10.1       85,990       85,300  
Leasehold rights     14.5       8,359       8,359  
Trade names     Indefinite (1)      17,497       17,497  
Domain names     Indefinite (2)      2,108       2,108  
Technology     5.0       460       460  
                952,571       925,461  
Less: Accumulated amortization     (78,855 )      (68,116 ) 
Intangible assets, net   $ 873,716     $ 857,345  

(1) Trade names of $2.1 million are being amortized over a period within 1.5 years.
(2) Domain names of $334,000 and $440,000 are being amortized over a period within 4 years and 1.5 years, respectively.

8. Long-Term Debt

Long-term debt consists of the following ($ in thousands):

   
  March 31, 2008   December 31, 2007
MIC Inc. acquisition facility   $ 56,000     $  
Airport services     921,750       911,150  
Gas production and distribution     166,000       164,000  
District energy     150,000       150,000  
Airport parking     201,465       201,506  
       1,495,215       1,426,656  
Less current portion     (4,394 )      (162 ) 
Long-term portion   $ 1,490,821     $ 1,426,494  

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, management enters into interest rate swap and cap agreements to manage fluctuations in cash flows resulting from interest rate risk on a majority of its variable-rate debt.

In accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments”, or FASB No. 133, the Company has concluded that all of its interest rate swaps and caps qualify as cash flow hedges, and the Company applies hedge accounting for these instruments. Changes in the fair value of interest rate derivatives designated as hedging instruments that effectively offset the variability of cash flows associated with variable-rate, long-term debt obligations are reported in other comprehensive income or loss. Any ineffective portion on the change in the valuation of derivatives is taken through earnings, and reported in the gain or loss on derivative instruments line.

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

9. Derivative Instruments  – (continued)

At March 31, 2008, the Company had $1.5 billion of long-term debt, $1.3 billion of which was hedged with interest rate swaps, $58.7 million of which was hedged with interest rate caps, $83.8 million of which was unhedged and $6.5 million of which incurred interest at fixed rates. For the quarter ended March 31, 2008, the Company recorded a $52.3 million decrease ($32.5 million, net of taxes) in the value of its interest rate derivative instruments on its balance sheet. Of this amount, $52.1 million was recorded into other comprehensive loss, $73,000 (representing the ineffective portion of changes in the valuation of interest rate derivatives) was recorded in loss on derivative instruments and $77,000 was recorded in interest expense. Also included within loss on derivative instruments and interest expense are a $232,000 loss and $1.7 million loss, respectively, representing a reclassification of realized losses from other comprehensive loss into earnings.

In accordance with FASB 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. The Company’s fair value measurements of its derivative instruments are as follows ($ in thousands):

       
    Fair Value Measurements at Reporting Date Using:
Description   Total at
March 31, 2008
  Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
  Significant Other
Observable
Inputs (Level 2)
  Significant
Unobservable
Inputs (Level 3)
Derivative Instruments:
                                   
Current liabilities   $ 38,153     $     $ 38,153     $  
Non-current liabilities     71,121             71,121        
Total, net   $ 109,274     $     $ 109,274     $  

10. Comprehensive Loss

Total comprehensive (loss) income for the quarters ended March 31, 2008 and March 31, 2007 comprised a $33.3 million loss and $6.2 million of income, respectively. These amounts are included in the accumulated other comprehensive loss on the Company’s consolidated condensed balance sheet. The difference between net loss of $2.0 million for the quarter ended March 31, 2008 and comprehensive loss is primarily attributable to an unrealized loss on derivative instruments of $32.5 million (net of taxes), offset by a $1.2 million (net of taxes) reclassification of realized losses into earnings. The difference between net income of $7.9 million for the quarter ended March 31, 2007 and comprehensive income is primarily attributable to an unrealized loss on derivative instruments of $1.7 million (net of taxes).

11. 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.

12. Reportable Segments

The Company’s consolidated businesses are classified into the following 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.

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

12. Reportable Segments  – (continued)

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

   
  Quarter Ended,
and as of, March 31,
     2008   2007
Revenue   $ 78,394     $ 70,416  
EBITDA     12,285       27,875  
Interest expense, net     4,719       3,407  
Depreciation and amortization expense     10,334       8,522  
Capital expenditures paid     58,506       33,923  
Property, plant and equipment balance     776,886       569,187  
Total assets balance     890,707       657,284  

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 and managed six airports under management contracts as of March 31, 2008. In January 2008, the Company entered an agreement to sell its airport management business, and expects to complete the sale in the second quarter of 2008.

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 Company’s various customers. The Company provides such 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 30 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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MACQUARIE INFRASTRUCTURE COMPANY LLC
  
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

12. Reportable Segments  – (continued)

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

         
  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  

         
  Quarter Ended March 31, 2007
     Airport
Services
  Gas Production
and Distribution
  District
Energy
  Airport
Parking
  Total
Revenue from Product Sales
                                            
Product sales   $ 69,847     $ 18,510     $     $     $ 88,357  
Product sales — utility           22,291                   22,291  
       69,847       40,801                   110,648  
Service Revenue
                                            
Other services     31,213             649             31,862  
Cooling capacity revenue                 4,551             4,551  
Cooling consumption revenue                 1,862             1,862  
Parking services                       18,811       18,811  
       31,213             7,062       18,811       57,086  
Financing and Lease Income
                                            
Financing and equipment lease                 1,248             1,248  
                   1,248             1,248  
Total Revenue   $ 101,060     $ 40,801     $ 8,310     $ 18,811     $ 168,982  

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

12. Reportable Segments  – (continued)

Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the Company’s reportable segments is shown in the below tables ($ in thousands). Allocation of corporate expenses, and the federal tax effect, have been excluded from the tables as they are eliminated on consolidation:

         
  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  
Provision (benefit) for income taxes     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  

         
  Quarter Ended March 31, 2007
     Airport
Services
  Gas Production
and Distribution
  District
Energy
  Airport
Parking
  Total Reportable
Segments
Net income (loss)   $ 5,631     $ 1,533     $ (359 )    $ (961 )    $ 5,844  
Interest income     (313 )      (37 )      (93 )      (79 )      (522 ) 
Interest expense     8,574       2,282       2,180       4,045       17,081  
Provision (benefit) for income taxes     3,699       986       (213 )      (763 )      3,709  
Depreciation     2,374       1,517       1,431       1,035       6,357  
Amortization of intangibles     5,589       214       337       788       6,928  
EBITDA   $ 25,554     $ 6,495     $ 3,283     $ 4,065     $ 39,397  

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

   
  Quarter Ended March 31,
     2008   2007
Total reportable segments EBITDA   $ 52,914     $ 39,397  
Interest income     473       1,459  
Interest expense     (25,826 )      (17,566 ) 
Depreciation     (9,469 )      (6,357 ) 
Amortization of intangibles     (10,739 )      (6,928 ) 
Selling, general and administrative – corporate     (1,133 )      (1,981 ) 
Fees to manager     (4,626 )      (5,561 ) 
Equity in (losses) earnings and amortization charges of investees     (2,089 )      3,465  
Other expense, net     (410 )      (165 ) 
Total consolidated net (loss) income before taxes and minority
interests
  $ (905 )    $ 5,763  

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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 and total assets for the Company’s reportable segments as of March 31 were as follows ($ in thousands):

       
  Property, Equipment, Land
and Leasehold Improvements
  Total Assets
     2008   2007   2008   2007
Airport services   $ 310,245     $ 149,455     $ 1,810,925     $ 935,597  
Gas production and distribution     137,724       133,096       319,581       309,321  
District energy     145,766       145,461       229,823       236,921  
Airport parking     96,486       98,250       279,223       283,200  
Total   $ 690,221     $ 526,262     $ 2,639,552     $ 1,765,039  

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

   
  Quarter Ended March 31,
     2008   2007
Airport services   $ 10,201     $ 1,702  
Gas production and distribution     1,754       1,956  
District energy     1,516       2,315  
Airport parking     237       1,585  
Total   $ 13,708     $ 7,558  

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

   
  As of March 31,
     2008   2007
Total assets of reportable segments   $ 2,639,552     $ 1,765,039  
Investment in IMTT     202,518       236,103  
Corporate and other     16,123       110,747  
Total consolidated assets   $ 2,858,193     $ 2,111,889  

13. Related Party Transactions

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

As of March 31, 2008, 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. The Macquarie Group held an additional 19,124 shares acquired in open market purchases.

The Company entered into a management services agreement, or Management Agreement, with the Manager pursuant to which the Manager manages the Company’s day-to-day operations and oversees the management teams of the Company’s operating businesses. In addition, the Manager has the right to appoint the Chairman of the Board of the Company, and an alternate, subject to minimum equity ownership, and to assign, or second, to the Company, on a permanent and wholly-dedicated basis, employees to assume the role of Chief Executive Officer and Chief Financial Officer and second or make other personnel available as required.

In accordance with the Management Agreement, the Manager is entitled to a quarterly base management fee based primarily on the Company’s market capitalization and a performance fee, based on the performance of the Company’s stock relative to the U.S. utilities index. For each of the quarters ended March 31, 2008 and March 31, 2007, the Company accrued base management fees of $4.6 million and also a performance fee of $957,000 in 2007. The unpaid portion of the fees at the end of the reporting period are included in due to manager in the accompanying consolidated condensed balance sheets. The base management fees were paid

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

13. Related Party Transactions  – (continued)

after the period end. The Manager elected to reinvest the $957,000 performance fee in 21,972 shares of LLC interests which were issued on July 13, 2007.

The Manager is not entitled to any other compensation and all costs incurred by the Manager including compensation of seconded staff, are paid out of its management fee. However, the Company is responsible for other direct costs including, but not limited to, expenses incurred in the administration or management of the Company and its subsidiaries and investments, income taxes, audit and legal fees, and acquisitions and dispositions and its compliance with applicable laws and regulations. During the quarters ended March 31, 2008 and March 31, 2007, the Manager charged the Company $78,000 and $57,000, respectively, for reimbursement of out-of-pocket expenses. The unpaid portion of the out-of-pocket expenses at the end of the reporting period are included in due to manager in the accompanying consolidated condensed balance sheets.

Advisory and Other Services from the Macquarie Group

The Macquarie Group, and wholly-owned subsidiaries within the Macquarie Group, including Macquarie Capital (USA) Inc., or MCUSA (formerly Macquarie Securities (USA) Inc.), provide various advisory and other services and incur 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 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 for the first quarter of 2008 comprise the following ($ in thousands):

Quarter Ended March 31, 2008

 
Acquisition of Seven Bar FBOs
        
 – advisory services from MCUSA   $ 819  
 – reimbursement of out-of-pocket expenses to MCUSA     3  

The Company also reimbursed affiliates of the Macquarie Group for nominal amounts in relation to professional services and rent expense for premises used in Luxembourg by one of its wholly-owned subsidiaries.

Long-term Debt

MIC Inc. has a $300.0 million revolving credit facility with various financial institutions, including Macquarie Finance Americas Inc., or MFA, a member of the Macquarie Group. Amounts relating to this facility comprise the following ($ in thousands):

Quarter Ended March 31, 2008

 
Portion of loan outstanding from MFA, as at March 31, 2008   $ 12,444  
Portion of revolving credit facility commitment provided by MFA, as at March 31, 2008     66,667  
Interest expense on MFA portion of loan, quarter ended March 31, 2008     80  
Commitment fee to MFA, quarter ended March 31, 2008     37  
Commitment fee to MBL, quarter ended March 31, 2008(1)     15  
Upfront fee to MFA, quarter ended March 31, 2008     333  

(1) The $15,000 commitment fee to Macquarie Bank Limited, or MBL, a member of the Macquarie Group, relates to the period January 1, 2008 through February 13, 2008, before the facility was renewed with MFA and various other parties.

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

13. Related Party Transactions  – (continued)

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, 2008, the airport services business had $900.0 million of its term loans hedged, of which MBL was providing the interest rate swaps for a notional amount of $343.3 million. The remainder of the swaps are from external parties. During the quarter ended March 31, 2008, the airport services business made payments to MBL of $324,000 in relation to these swaps.

At March 31, 2008, 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 external parties. During the quarter ended March 31, 2008, MBL made payments to the gas production and distribution business of $25,000 in relation to these swaps.

14. Income Taxes

For the year ended December 31, 2008, the Company expects to have consolidated taxable income for both federal and state income tax purposes, allowing it to utilize a portion of its federal net operating loss carryforward.

In calculating its consolidated projected state income tax expense for 2008, the Company expects to provide a valuation allowance for losses, the utilization of which is not assured beyond any reasonable doubt. In addition, the Company and its subsidiaries expect to incur certain expenses that will not be deductible in determining state taxable income, and has excluded those expenses in estimating its state income tax expense for 2008.

Uncertain Tax Positions

At December 31, 2007, the Company and its subsidiaries had a reserve of approximately $1.0 million for benefits taken during 2007 and prior tax periods attributable to tax positions for which the probability of recognition is considered less than more likely than not. There was no material change in that reserve during the quarter ended March 31, 2008.

15. Legal Proceedings and Contingencies

There are no material legal proceedings other than as disclosed in Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed with the SEC on February 28, 2008.

16. Distributions

On February 25, 2008, the board of directors declared a distribution of $0.635 per share for the quarter ended December 31, 2007, which was paid on March 10, 2008 to holders of record on March 5, 2008.

This distribution was recorded as a reduction to LLC interests in the members’ equity section of the accompanying consolidated condensed balance sheet.

17. Subsequent Events

Distributions

On May 5, 2008, the board of directors declared a distribution of $0.645 per share for the quarter ended March 31, 2008, payable on June 10, 2008 to holders of record on June 4, 2008.

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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, every day services, such as utilities, parking and water, through long-life physical assets. 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 high 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 that we provide. As a result, 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 fee expenses and to pay distributions. Distributions received from our businesses, net of taxes, are available first to meet management fees and corporate overhead expenses, 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.

During 2007, we paid distributions of $0.57 per share in April 2007, $0.59 per share in June 2007, $0.605 per share in September 2007 and $0.62 per share in December 2007. During 2008, we paid a distribution of $0.635 per share in March 2008. On May 5, 2008, the board of directors declared a distribution of $0.645 per share for the quarter ended March 31, 2008, payable on June 10, 2008 to holders of record on June 4, 2008.

During 2007, we acquired 29 fixed base operations, or FBOs, and in the first quarter of 2008 we acquired an additional three 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. Results of operations for acquisitions are included in our consolidated results from the respective dates of each acquisition.

Refer to “Other Matters” at the end of this Item 2 for discussion of forward looking statements and certain defined terms.

Tax Treatment of Distributions

For tax year 2008, shareholders will need to include in taxable income the portion of our distributions that are characterized as a dividend. The portion of our distributions that will be treated as dividends for U.S. federal income tax purposes is subject to a number of uncertainties. It is likely that a substantial portion of our distributions will be characterized as return of capital for tax purposes and will result in an adjustment to the shareholders’ basis rather than taxable income.

We currently anticipate that all of our regular distributions that are treated as dividends for U.S. federal income tax purposes will be eligible for treatment as qualified dividend income, subject to the shareholder having met the holding period requirements as defined by the Internal Revenue Service.

Adoption of New Accounting Pronouncement — FASB 157, “Fair Value Measurements”

On January 1, 2008, we partially adopted Statement of Financial Accounting Standards No. 157, “Fair Value Measurements”, or FASB No. 157. See Note 3, Adoption of New Accounting Pronouncement, to our consolidated condensed financial statements in Part I, Item 1 of this Form 10-Q, which is incorporated herein by reference, for more details about FASB No. 157.

We measure our derivative instruments at fair value on a recurring (quarterly) basis, utilizing mostly level 2 inputs such as contractual terms, market prices, interest rates (for example, LIBOR) and yield curves observable at commonly quoted intervals. Recent market conditions, including interest rate decreases, have increased the fair value of our derivative-related liabilities. We do not believe the increase in these liabilities will have an adverse impact on our ability to meet our ongoing cash flow requirements, including the funding

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of our distribution policy. We base our assessment on our business’ demonstrated ability to generate, and continue to generate, significant operating cash flow and the availability of our various debt and revolving credit facilities.

Results of Operations

Key Factors Affecting Operating Results

positive contributions to our results arising from the acquisitions of 29 FBOs during 2007 and three FBOs in the first quarter of 2008, partially offset by higher interest expense from the debt funding some of these acquisitions;
increased consolidated gross profit driven by improved performance at our existing businesses, particularly our airport services business, partially offset by underperformance at our airport parking business;
increased interest expense due to higher levels of debt from refinancings in the second half of 2007; and
lower equity in earnings (losses) from our 50% interest in IMTT, mainly as a result of non-cash losses on derivative instruments of $17.7 million in that business.

Our consolidated results of operations are summarized below ($ in thousands):

       
  Quarter Ended March 31,   Change
Favorable/(Unfavorable)
     2008   2007   $   %
Revenues
                                   
Revenue from product sales   $ 159,325     $ 88,357       70,968       80.3  
Revenue from product sales — utility     29,399       22,291       7,108       31.9  
Service revenue     88,785       57,086       31,699       55.5  
Financing and equipment lease income     1,194       1,248       (54 )      (4.3 ) 
Total revenue     278,703       168,982       109,721       64.9  
Costs and expenses
                                   
Cost of product sales     108,517       53,706       (54,811 )      (102.1 ) 
Cost of product sales — utility     24,335       16,778       (7,557 )      (45.0 ) 
Cost of services     33,256       23,342       (9,914 )      (42.5 ) 
Gross profit     112,595       75,156       37,439       49.8  
Selling, general and administrative     63,857       38,978       (24,879 )      (63.8 ) 
Fees to manager — related party     4,626       5,561       935       16.8  
Depreciation     6,723       3,891       (2,832 )      (72.8 ) 
Amortization of intangibles     10,739       6,928       (3,811 )      (55.0 ) 
Total operating expenses     85,945       55,358       (30,587 )      (55.3 ) 
Operating income     26,650       19,798       6,852       34.6  
Other income (expense)
                                   
Interest income     473       1,459       (986 )      (67.6 ) 
Interest expense     (25,826 )      (17,566 )      (8,260 )      (47.0 ) 
Equity in (losses) earnings and
amortization charges of investees
    (2,089 )      3,465       (5,554 )      (160.3 ) 
Loss on derivative instruments     (305 )      (477 )      172       36.1  
Other income (expense), net     192       (916 )      1,108       121.0  
Net (loss) income before income taxes and minority interests     (905 )      5,763       (6,668 )      (115.7 ) 
(Provision) benefit for income taxes     (1,364 )      2,045       (3,409 )      (166.7 ) 
Net (loss) income before minority
interests
    (2,269 )      7,808       (10,077 )      (129.1 ) 
Minority interests     (279 )      (69 )      (210 )      NM  
Net (loss) income   $ (1,990 )    $ 7,877       (9,867 )      (125.3 ) 

NM — Not meaningful

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Gross Profit

The increase in our consolidated gross profit was due primarily to the acquisitions within our airport services business in 2007 and the first quarter of 2008. Growth in the gross profit of existing businesses, particularly our airport services business, was partially offset by underperformance in our airport parking business. Further details are contained in each of the business segment discussions below.

Selling, General and Administrative Expenses

The increase in selling, general and administrative expenses was mainly due to additional costs from the acquisitions in our airport services business since the date of each acquisition.

Fees to Manager

The fees to manager for the first quarter of 2007 were higher than 2008 due to a $957,000 performance fee in 2007. Macquarie Infrastructure Management (USA) Inc., our Manager, elected to reinvest these performance fees in shares of LLC interests.

Depreciation and Amortization of Intangibles

The increase in depreciation expense and amortization of intangibles is due to the acquisitions in our airport services business. Depreciation expense also increased due to capital expenditures in existing businesses.

Interest Expense

Interest expense increased due to a higher average level of debt from re-financings in the second half of 2007, including the additional debt drawn to fund our FBO acquisitions.

Equity in (Losses) Earnings and Amortization Charges of Investees

Our equity in the earnings of IMTT decreased despite improved operating results from that business due to non-cash derivative-related losses of $17.7 million for the quarter. IMTT has elected not to apply hedge accounting, so changes in the fair value of the derivative instruments are recorded in IMTT’s earnings. This large derivative loss was a result of the substantial decline in interest rates over the quarter. Since we equity account our investment in IMTT, our 50% share of the $17.7 million derivative loss was approximately $6.0 million, net of taxes.

We have received $7.0 million in cash dividends from IMTT each quarter since completing our investment in May 2006. These dividends are not recorded in earnings, but are recorded against our investment in the business on our balance sheet and are shown as cash provided by operating activities in our statements of cash flows for the portion up to our 50% share of IMTT’s positive earnings. Distributions when IMTT records a net loss, or the amount of the distribution in excess of our share of its earnings, are reflected in our consolidated cash flow from investing activities. In the first quarter of 2008, the $7.0 million dividend was included in cash from investing activities. In the first quarter of 2007, $3.5 million was included in cash from operating activities and $3.5 million was included in cash from investing activities.

Income Taxes

For the 2007 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.

For the year ending December 31, 2008, we expect to have consolidated taxable income for both federal and state income tax purposes, allowing us to utilize a portion of our federal net operating loss carryforward.

In calculating our consolidated projected state income tax expense for 2008, we expect to provide a valuation allowance for current year losses at our airport parking business, the utilization of which is not assured beyond any reasonable doubt. In addition, we expect to incur certain expenses that will not be deductible in determining state taxable income, and have excluded those expenses in estimating our state income tax expense for 2008.

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 consolidated businesses as we consider it to be an important measure of our overall performance. We

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believe EBITDA provides additional insight into the performance of our operating companies and our ability to service our obligations and support our ongoing distribution policy.

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

       
  Quarter Ended March 31,   Change
Favorable/(Unfavorable)
     2008   2007   $   %
Net (loss) income   $ (1,990 )    $ 7,877                    
Interest expense, net     25,353       16,107                    
Provision (benefit) for income taxes     1,364       (2,045 )                   
Depreciation(1)     6,723       3,891                    
Depreciation – cost of services(1)     2,746       2,466                    
Amortization(2)     10,739       6,928              
EBITDA   $ 44,935     $ 35,224       9,711       27.6  

(1) Depreciation – cost of services includes depreciation expense for our district energy business and airport parking business, which are reported in cost of services in our consolidated statements of operations. Depreciation and Depreciation – cost of services does not include step-up depreciation expense of $1.7 million for each quarter in connection with our investment in IMTT, which is reported in equity in (losses) earnings and amortization charges of investees in our statements of operations.
(2) Amortization does not include step-up amortization expense of $283,000 for each quarter related to intangible assets in connection with our investment in IMTT, which is reported in equity in (losses) earnings and amortization charges of investees in our statements of operations.

Net (loss) income includes the following items totaling $9.2 million net expense in 2008 and $75,000 net income in 2007, which have not been reversed in calculating EBITDA above:

performance fees to our Manager of $957,000 in 2007, which our Manager elected to reinvest in LLC interests;
non-cash losses on derivative instruments of $305,000 in 2008 and non-cash gains on derivative instruments of $1.2 million in 2007; and
lower equity in (losses) earnings from our 50% interest in IMTT as a result of $17.7 million and $242,000 in non-cash derivative-related losses recorded by IMTT for 2008 and 2007, respectively.

Excluding the above non-cash items, EBITDA for 2008 would have increased by approximately 53.9%.

Business Segment Operations

Airport Services Business

The following section summarizes the historical consolidated financial performance of our airport services business. The acquisitions column and the total 2008 quarter results in the table below include the operating results for Supermarine, Mercury, San Jose and Rifle for the period January 1, 2008 to March 31, 2008 and Seven Bar for the period March 4, 2008 (our acquisition date) to March 31, 2008.

Key Factors Affecting Operating Results

contribution of positive operating results from acquisitions completed in 2007 and 2008, partially offset by interest expense from the additional debt to fund some of these acquisitions;
higher fuel volumes at existing locations with relatively flat weighted average fuel margin;
increased de-icing revenue in the first quarter of 2008 as a result of weather conditions in the Northeast region of the country and higher hangar and office rent revenue; and
higher interest expense related to increased borrowings associated with the new debt facility established in October 2007.

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Quarter Ended March 31, 2008 Compared to Quarter Ended March 31, 2007

                 
  Existing Locations     Total
     2008   2007   Change
Favorable/(Unfavorable)
  Acquisitions(3)   2008   2007   Change
Favorable/(Unfavorable)
     $   $   $   %   $   $   $   $   %
     ($ In Thousands) (Unaudited)
Revenue
                                                                                
Fuel revenue     84,986       69,847       15,139       21.7       51,380       136,366       69,847       66,519       95.2  
Non-fuel revenue     35,565       31,213       4,352       13.9       27,019       62,584       31,213       31,371       100.5  
Total revenue     120,551       101,060       19,491       19.3       78,399       198,950       101,060       97,890       96.9  
Cost of revenue
                                                                                
Cost of revenue-fuel     56,781       40,578       (16,203 )      (39.9 )      35,101       91,882       40,578       (51,304 )      (126.4 ) 
Cost of revenue-non-fuel
    4,603       3,421       (1,182 )      (34.6 )      7,197       11,800       3,421       (8,379 )      NM  
Total cost of revenue
    61,384       43,999       (17,385 )      (39.5 )      42,298       103,682       43,999       (59,683 )      (135.6 ) 
Fuel gross profit     28,205       29,269       (1,064 )      (3.6 )      16,279       44,484       29,269       15,215       52.0  
Non-fuel gross profit(1)     30,962       27,792       3,170       11.4       19,822       50,784       27,792       22,992       82.7  
Gross profit     59,167       57,061       2,106       3.7       36,101       95,268       57,061       38,207       67.0  
Selling, general and
administrative expenses
    31,337       30,535       (802 )      (2.6 )      23,288       54,625       30,535       (24,090 )      (78.9 ) 
Depreciation and
amortization
    7,988       7,963       (25 )      (0.3 )      6,649       14,637       7,963       (6,674 )      (83.8 ) 
Operating income     19,842       18,563       1,279       6.9       6,164       26,006       18,563       7,443       40.1  
Interest expense, net     (8,595 )      (8,261 )      (334 )      (4.0 )      (7,243 )      (15,838 )      (8,261 )      (7,577 )      (91.7 ) 
Other (expense) income, net     (29 )      (23 )      (6 )      (26.1 )      13       (16 )      (23 )      7       30.4  
Unrealized (losses) gains on derivative
instruments
    (232 )      (949 )      717       75.6       33       (199 )      (949 )      750       79.0  
(Provision) benefit for income taxes     (4,427 )      (3,699 )      (728 )      (19.7 )      416       (4,011 )      (3,699 )      (312 )      (8.4 ) 
Net income (loss)(2)     6,559       5,631       928       16.5       (617 )      5,942       5,631       311       5.5  
Reconciliation of net income (loss) to EBITDA:
                                                                                
Net income (loss)(2)     6,559       5,631                         (617 )      5,942       5,631                    
Interest expense, net     8,595       8,261                         7,243       15,838       8,261                    
Provision (benefit) for income taxes     4,427       3,699                         (416 )      4,011       3,699                    
Depreciation and
amortization
    7,988       7,963                      6,649       14,637       7,963                 
EBITDA     27,569       25,554       2,015       7.9       12,859       40,428       25,554       14,874       58.2  

NM — Not meaningful

(1) Non-fuel gross profit includes fuel-related services like into-plane services. See discussion under Gross Profit.
(2) Corporate allocation expense, and the federal tax effect, have been excluded from the above table as they are eliminated on consolidation at the MIC Inc. level.
(3) Acquisitions include the results of Supermarine FBOs (acquired May 30, 2007), Mercury FBOs (acquired August 9, 2007), San Jose FBOs (acquired August 17, 2007) and Rifle FBO (acquired November 30, 2007) for the quarter ended March 31, 2008 and Seven Bar FBOs (acquired March 4, 2008) for the period March 4 to March 31, 2008.

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Gross Profit

Most of the gross profit in our airport services business is generated through fueling general aviation aircraft at our 72 FBOs around the United States. Revenue is categorized according to who owns the fuel we use to service these aircraft. If we own the fuel, we record our cost to purchase that fuel as cost of revenue-fuel. Our corresponding fuel revenue is our cost to purchase that fuel plus a margin. We generally pursue a strategy of maintaining, and where appropriate increasing, dollar margins, thereby passing on 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. Other non-fuel revenue includes various services such as hangar rentals, de-icing and other airport services. Cost of revenue-non-fuel includes our cost, if any, to provide these services.

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

Our total gross profit growth was due to several factors:

inclusion of the results of the new sites since the date of each acquisition;
higher revenue from other services, including de-icing activity, hangar rent and office rent;
higher total fuel volumes at existing locations driven by the general growth of the general aviation industry; and
relatively flat average weighted fuel margins at our existing locations resulting primarily from a higher contribution of base customer volumes, which have a lower margin than transient customers.

While we generally seek to maintain or increase weighted average fuel margins, recent increases in fuel prices has led to increased focus on cost amongst our customers, which may result in tightening margins.

Selling, General and Administrative Expenses

Selling, general and administrative expenses as a percentage of gross profit at our existing locations improved from 53.5% to 53.0% primarily driven by cost efficiencies achieved on acquisitions completed prior to 2007.

Typically, the selling, general and administrative expenses-to-gross profit ratio of our acquisitions is initially higher than the ratio at the existing locations as we temporarily maintain the pre-acquisition cost structure during a transition period. As the acquired businesses become fully integrated, we expect the selling, general and administrative expenses-to-gross profit ratio to improve.

Interest Expense, Net

The increase in total interest expense is due to the increased debt level for borrowings to finance some of our acquisitions, as well as our new debt facility established in October 2007 which refinanced all existing borrowings outstanding at the time.

EBITDA

Excluding the non-cash gains and losses from derivative instruments, EBITDA at existing locations and total EBITDA would have increased by approximately 4.9% and 53.3%, respectively.

Bulk Liquid Storage Terminal Business

We account for our 50% investment in the bulk liquid storage terminal business (also referred to as IMTT) under the equity method. We recognized a $2.1 million loss in our consolidated results for the quarter ended March 31, 2008. This includes $906,000, our 50% share of IMTT’s net loss for the quarter that includes IMTT’s $17.7 million non-cash loss on derivatives, which offset a strong increase in operating income. The $2.1 million loss also reflects our share of additional depreciation and amortization expense (net of taxes) of $1.2 million. For the quarter ended March 31, 2007, we recognized income of $3.5 million in our consolidated results. In addition to our 50% share of IMTT’s income for the quarter of $4.7 million, which

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included minor losses on derivative instruments, we recorded additional depreciation and amortization expense (net of taxes) of $1.2 million for the same period.

We have received $7.0 million in cash dividends from IMTT each quarter since completing our investment in May 2006. These dividends qualify for the federal dividends received deduction, therefore, 80% of this amount is excluded in calculating our consolidated federal taxable income.

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

terminal revenue and terminal gross profit increased principally due to:
increases in average tank rental rates;
increases in storage capacity rented to customers, primarily due to the acquisition of the Joliet, IL site;
increases in throughput revenue; and
increases in the provision of other services; and
environmental revenue and gross profit decreased principally due to decreased spill and other emergency response activities.

Quarter Ended March 31, 2008 Compared to Quarter Ended March 31, 2007

       
  Quarter Ended March 31,   Change
Favorable/(Unfavorable)
     2008   2007
     $   $   $   %
     ($ In Thousands) (Unaudited)
Revenue
                                   
Terminal revenue     74,224       61,876       12,348       20.0  
Environmental response revenue     4,170       8,540       (4,370 )      (51.2 ) 
Total revenue     78,394       70,416       7,978       11.3  
Costs and expenses
                                   
Terminal operating costs     38,542       32,990       (5,552 )      (16.8 ) 
Environmental response operating costs     3,729       6,886       3,157       45.8  
Total operating costs     42,271       39,876       (2,395 )      (6.0 ) 
Terminal gross profit     35,682       28,886       6,796       23.5  
Environmental response gross profit     441       1,654       (1,213 )      (73.3 ) 
Gross profit     36,123       30,540       5,583       18.3  
General and administrative expenses     6,830       5,569       (1,261 )      (22.6 ) 
Depreciation and amortization     10,334       8,522       (1,812 )      (21.3 ) 
Operating income     18,959       16,449       2,510       15.3  
Interest expense, net     (4,719 )      (3,407 )      (1,312 )      (38.5 ) 
Other income     557       3,173       (2,616 )      (82.4 ) 
Unrealized losses on derivative instruments     (17,720 )      (242 )      (17,478 )      NM  
Benefit (provision) for income taxes     956       (6,423 )      7,379       114.9  
Minority interest     155       (27 )      182       NM  
Net (loss) income     (1,812 )      9,523       (11,335 )      (119.0 ) 
Reconciliation of net (loss) income to EBITDA:
                                   
Net (loss) income     (1,812 )      9,523                    
Interest expense, net     4,719       3,407                    
(Benefit) provision for income taxes     (956 )      6,423                    
Depreciation and amortization     10,334       8,522                 
EBITDA     12,285       27,875       (15,590 )      (55.9 ) 

NM — Not meaningful

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Revenue and Gross Profit

The increase in terminal revenue reflects growth in almost all major service segments, including storage revenue, throughput revenue and other services and fees. Storage revenue increased $8.3 million during the quarter as the average rental rates charged to customers increased substantially. This increase in storage revenue also reflected an increase of 2.8% in rented capacity, reflecting the acquisition of the Joliet facility and the completion of certain expansion projects. Storage capacity utilization was 94% for the quarter, compared to 97% during the first quarter of 2007, due to an increase in the number of tanks temporarily out of service for regulatory inspections as well as unanticipated repairs. For the balance of 2008, increased activity related to the mandated Spill Prevention, Control, and Countermeasure, or SPCC, program at the Louisiana sites could continue to reduce capacity utilization by 1–2% from its historically high levels. Based on the condition of tanks being inspected, the SPCC program could have a similar impact on capacity utilization through 2012.

The increase in gross profit from terminal services reflects the dollar increase in terminal revenues partially offset by increased operating costs. Direct labor expenses increased as a result of higher customer demand for throughput and other ancillary services. Higher repair and maintenance costs compared to the first quarter of last year primarily reflect increased tank and infrastructure repairs at Bayonne. Higher operating costs reflect greater activity and an unfavorable movement in exchange rates at Quebec.

The decrease in gross profit from environmental response services reflects a substantial decrease in spill response activities compared to a normal level of that activity in the first quarter of 2007, plus a significant emergency response project in first quarter of 2007.

General and Administrative Expenses

General and administrative expenses increased due to higher wage and benefit costs as well as increased information technology expenses and legal fees related to a short-term project.

Depreciation and Amortization

Depreciation and amortization expense increased due to continuing high levels of growth capital additions.

Interest Expense, Net

Interest expense increased due to higher debt balances which resulted from funding requirements for capital expenditures. The increase in interest expense was partially offset by lower interest rates on debt outstanding and greater amounts of capitalized interest related to expansion projects.

Other Income

Other income for the first quarter of 2007 included gains on insurance settlements received for claims related to Hurricane Katrina and other matters as well as a gain on the sale of assets.

Unrealized Losses on Derivative Instruments

As part of the refinancing in the second quarter of 2007, we entered into additional interest rate swap arrangements to fix the effective interest rate on the new debt facilities. IMTT has elected not to apply hedge accounting. As a result, movements in the fair value of IMTT’s interest rate derivatives are taken through earnings and reported in the unrealized losses on derivative instruments line in IMTT’s financial statements. The $17.7 million unrealized loss on derivative instruments for the first quarter of 2008 is a result of the substantial decline in interest rates during the quarter.

EBITDA

Excluding unrealized losses from interest rate swap agreements, EBITDA for the quarter would have increased by 6.7%.

Gas Production and Distribution Business

Key Factors Affecting Operating Results

increased non-utility contribution margin primarily due to price increases since March 2007, partially offset by higher cost of fuel and increased costs to deliver liquefied petroleum gas, or LPG, to Oahu’s neighboring islands;

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higher transmission and distribution costs due to higher personnel costs and earlier timing of costs associated with government-required pipeline inspections and remediation; and
higher administrative costs due to an increase in bad debt reserves for an airline customer and higher personnel costs.

Management analyzes contribution margin for the gas production and distribution business (also referred to as TGC) because it believes that contribution margin, although a non-GAAP measure, is useful and meaningful to understanding the performance of TGC utility operations under its regulated rate structure and of its non-utility operations under a competitive pricing structure. Both structures provide the business with an ability to change rates when underlying feedstock costs change. Contribution margin should not be considered an alternative to 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, 2008 Compared to Quarter Ended March 31, 2007

       
  Quarter Ended March 31,   Change
Favorable/(Unfavorable)
     2008   2007
     $   $   $   %
     ($ In Thousands) (Unaudited)
Contribution margin
                                   
Revenue — utility     29,399       22,291       7,108       31.9  
Cost of revenue — utility     21,724       14,591       (7,133 )      (48.9 ) 
Contribution margin — utility     7,675       7,700       (25 )      (0.3 ) 
Revenue — non-utility     22,959       18,510       4,449       24.0  
Cost of revenue — non-utility     14,424       10,811       (3,613 )      (33.4 ) 
Contribution margin — non-utility     8,535       7,699       836       10.9  
Total contribution margin     16,210       15,399       811       5.3  
Production     1,217       1,121       (96 )      (8.6 ) 
Transmission and distribution     3,605       3,383       (222 )      (6.6 ) 
Selling, general and administrative expenses     4,413       4,080       (333 )      (8.2 ) 
Depreciation and amortization     1,668       1,731       63       3.6  
Operating income     5,307       5,084       223       4.4  
Interest expense, net     (2,311 )      (2,245 )      (66 )      (2.9 ) 
Other income (expense), net     71       (53 )      124       NM  
Unrealized losses on derivative instruments     (21 )      (267 )      246       92.1  
Provision for income taxes     (1,192 )      (986 )      (206 )      (20.9 ) 
Net income(1)     1,854       1,533       321       20.9  
Reconciliation of net income to EBITDA:
                                   
Net income(1)     1,854       1,533                    
Interest expense, net     2,311       2,245                    
Provision for income taxes     1,192       986                    
Depreciation and amortization     1,668       1,731                 
EBITDA     7,025       6,495       530       8.2  

NM — Not meaningful

(1) Corporate allocation expense, and the federal tax effect, have been excluded from the above table as they are eliminated on consolidation at the MIC Inc. level.

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Contribution Margin and Operating Income

The utility contribution margin was relatively unchanged with higher costs of fuel and related revenue taxes passed through to its customers. Sales volume in the first quarter of 2008 was approximately the same as the first quarter of 2007. Additionally, the cash effect of lower fuel cost adjustments included in customer billings was offset by withdrawals of $1.0 million and $766,000 for the first quarter of 2008 and 2007, respectively, from an escrow account that was established and funded at acquisition by the seller. TGC believes that the remaining escrowed funds will be fully utilized by mid-2008 and thereafter escrowed funds would not be available. The cash reimbursements of the customer rebate and any fuel cost adjustment amounts are not reflected in revenue, but rather are reflected as releases of restricted cash and other assets.

The non-utility contribution margin increased due to customer price increases, partially offset by higher costs of LPG and increases in the cost to transport LPG between islands. Sales volume for the quarter was approximately the same as the first quarter of 2007.

Production costs were higher due primarily to higher electricity and personnel costs. Transmission and distribution costs were higher due principally to higher personnel costs and to a greater amount of government required pipeline inspection and remediation work conducted in the first quarter of 2008 than was conducted in the first quarter of 2007. Selling, general and administrative costs were higher due to an increase in bad debt reserves for an airline customer that declared bankruptcy in 2008 and higher personnel, employee benefit and consultant costs. Depreciation and amortization decreased as there were several assets that were fully depreciated in 2007.

We have signed a supply agreement for feedstock used in our synthetic natural gas, or SNG, plant. Although generally indexed to gas prices, we believe our feedstock costs will only slightly increase and that we will be able to pass through this increase to utility customers. The contract’s term is one year, with automatic renewals unless terminated. If terminated, we believe that we will have access to available supply alternatives, although likely at a higher cost. TGC’s supply agreements for LPG also expire in 2008. We believe that, due to higher petroleum prices, the cost of LPG will likely be higher under new agreements. To the extent that TGC is unable to recover all of these higher prices through customer price increases or that the higher prices reduce TGC’s competitive position vis-à-vis other energy sources, TGC’s sales volumes and margins could be adversely affected.

TGC’s collective bargaining agreement expired on April 30, 2008. We have agreed on a new five year contract with the union on comparable terms to the prior contract.

EBITDA

EBITDA was higher in 2008 compared with 2007 primarily due to improvements in non-utility operations.

District Energy Business

Key Factors Affecting Operating Results

increased capacity revenue due to a net increase in contracted capacity and annual inflation-related increases in contract capacity rates;
decreased cooling consumption revenue and overall electricity costs due to lower ton-hour sales from cooler average temperatures;
increased other direct expenses due to earlier timing in 2008 of pre-season maintenance expense for system reliability; and
increased interest expense due to higher borrowings associated with the new debt facility established in September 2007.

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Quarter Ended March 31, 2008 Compared to Quarter Ended March 31, 2007

       
  Quarter Ended March 31,   Change
Favorable/(Unfavorable)
     2008   2007
     $   $   $   %
     ($ In Thousands) (Unaudited)
Cooling capacity revenue     4,806       4,551       255       5.6  
Cooling consumption revenue     1,768       1,862       (94 )      (5.0 ) 
Other revenue     732       649       83       12.8  
Finance lease revenue     1,194       1,248       (54 )      (4.3 ) 
Total revenue     8,500       8,310       190       2.3  
Direct expenses — electricity     1,176       1,483       307       20.7  
Direct expenses — other(1)     4,703       4,149       (554 )      (13.4 ) 
Direct expenses — total     5,879       5,632       (247 )      (4.4 ) 
Gross profit     2,621       2,678       (57 )      (2.1 ) 
Selling, general and administrative expenses     992       768       (224 )      (29.2 ) 
Amortization of intangibles     341       337       (4 )      (1.2 ) 
Operating income     1,288       1,573       (285 )      (18.1 ) 
Interest expense, net     (2,544 )      (2,087 )      (457 )      (21.9 ) 
Other income     64       74       (10 )      (13.5 ) 
Unrealized losses on derivative instruments     (30 )            (30 )      NM  
Benefit for income taxes     354       213       141       66.2  
Minority interest     (145 )      (132 )      (13 )      (9.8 ) 
Net loss(2)     (1,013 )      (359 )      (654 )      (182.2 ) 
Reconciliation of net loss to EBITDA:
                                   
Net loss(2)     (1,013 )      (359 )                   
Interest expense, net     2,544       2,087                    
Benefit for income taxes     (354 )      (213 )                   
Depreciation     1,476       1,431                    
Amortization of intangibles     341       337                 
EBITDA     2,994       3,283       (289 )      (8.8 ) 

NM — Not meaningful

(1) Includes depreciation expense of $1.5 million and $1.4 million for the quarters ended March 31, 2008 and 2007, respectively.
(2) Corporate allocation expense, and the federal tax effect, have been excluded from the above table as they are eliminated on consolidation at the MIC Inc. level.

Gross Profit

Gross profit decreased primarily due to the timing of earlier pre-season maintenance expense for system reliability. A higher percentage of our pre-season maintenance was conducted in the first quarter of 2008 than was conducted in the first quarter of 2007. As a result, we expect to incur lower maintenance expenditures in the second quarter of 2008. Cooling capacity revenue increased due to a net increase in contracted capacity and annual inflation-related increases of contract capacity rates in accordance with customer contract terms. Cooling consumption revenue and overall electricity costs decreased due to lower ton-hour sales resulting from cooler than average temperatures during the period. Lower cooling consumption revenue was partially offset by recovery of electricity costs passed through to customers. Other revenue increased due to our pass-through to customers of the higher cost of natural gas consumables, which is offset in other direct expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased primarily due to the earlier timing of audit expenses and the accrual of additional performance-linked management incentives granted in 2007. Also, the quarter ended March 31, 2007 included a partial reversal of accrued management incentives that did not re-occur in 2008.

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TABLE OF CONTENTS

Interest Expense, Net

Interest expense increased as a result of higher debt levels associated with the 2007 refinancing and higher non-cash amortization of deferred financing costs.

EBITDA

EBITDA decreased due to the earlier timing of pre-season maintenance expense for system reliability and the increase in selling, general and administrative expenses, offset by the net increase in capacity revenue and savings from lower electricity costs.

Airport Parking Business

Key Factors Affecting Operating Results