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 June 30, 2010

OR

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

For the Transition Period from  to 

Commission File Number: 001-32384



 

MACQUARIE INFRASTRUCTURE COMPANY LLC

(Exact Name of Registrant as Specified in Its Charter)

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

125 West 55th Street
New York, New York 10019

(Address of Principal Executive Offices) (Zip Code)

(212) 231-1000

(Registrant’s Telephone Number, Including Area Code)

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



 

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

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

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

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

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

There were 45,715,448 limited liability company interests without par value outstanding at August 3, 2010.

 

 


 
 

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC
  
TABLE OF CONTENTS

 
  Page
PART I. FINANCIAL INFORMATION
 

Item 1.

Financial Statements

    1  
Consolidated Condensed Balance Sheets as of June 30, 2010 (Unaudited) and
December 31, 2009
    1  
Consolidated Condensed Statements of Operations for the Quarters and Six Months Ended June 30, 2010 and 2009 (Unaudited)     2  
Consolidated Condensed Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009 (Unaudited)     3  
Notes to Consolidated Condensed Financial Statements (Unaudited)     5  

Item 2.

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

    24  

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

    54  

Item 4.

Controls and Procedures

    55  
PART II. OTHER INFORMATION
 

Item 1.

Legal Proceedings

    56  

Item 1A.

Risk Factors

    56  

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

    56  

Item 3.

Defaults Upon Senior Securities

    56  

Item 4.

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

    56  

Item 5.

Other Information

    56  

Item 6.

Exhibits

    56  

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

i


 
 

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

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

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

 
 
See accompanying notes to the consolidated condensed financial statements.

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TABLE OF CONTENTS

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

       
  Quarter Ended   Six Months Ended
     June 30, 2010   June 30, 2009(1)   June 30, 2010   June 30, 2009(1)
Revenue
                                   
Revenue from product sales   $ 125,177     $ 89,430     $ 245,195     $ 178,622  
Revenue from product sales –  utility     28,450       21,414       55,285       41,581  
Service revenue     49,794       51,359       103,000       108,304  
Financing and equipment lease income     1,271       1,205       2,516       2,397  
Total revenue     204,692       163,408       405,996       330,904  
Costs and expenses
                                   
Cost of product sales     79,887       50,645       156,941       100,411  
Cost of product sales – utility     23,151       16,549       44,464       31,936  
Cost of services     13,318       11,069       24,463       22,140  
Selling, general and administrative     49,522       48,725       100,256       104,868  
Fees to manager – related party     2,268       851       4,457       1,313  
Goodwill impairment           53,200             71,200  
Depreciation     7,202       9,270       14,924       22,420  
Amortization of intangibles     8,740       12,532       17,411       42,797  
Total operating expenses     184,088       202,841       362,916       397,085  
Operating income (loss)     20,604       (39,433 )      43,080       (66,181 ) 
Other income (expense)
                                   
Interest income     4       34       20       101  
Interest expense(2)     (38,974 )      (2,103 )      (73,661 )      (35,669 ) 
Equity in earnings and amortization charges of investee     5,774       10,028       11,367       15,477  
Loss on derivative instruments                       (25,238 ) 
Other (expense) income, net     (496 )      (186 )      (448 )      850  
Net loss from continuing operations before income taxes     (13,088 )      (31,660 )      (19,642 )      (110,660 ) 
Benefit for income taxes     13,488       4,822       14,577       37,387  
Net income (loss) from continuing operations   $ 400     $ (26,838 )    $ (5,065 )    $ (73,273 ) 
Net income (loss) from discontinued operations, net of taxes     85,212       (3,159 )      81,199       (9,583 ) 
Net income (loss)   $ 85,612     $ (29,997 )    $ 76,134     $ (82,856 ) 
Less: net loss attributable to noncontrolling interests     (238 )      (1,039 )      (1,351 )      (872 ) 
Net income (loss) attributable to MIC LLC   $ 85,850     $ (28,958 )    $ 77,485     $ (81,984 ) 
Basic income (loss) per share from continuing operations attributable to MIC LLC interest holders   $ 0.02     $ (0.60 )    $ (0.08 )    $ (1.64 ) 
Basic income (loss) per share from discontinued operations attributable to MIC LLC interest holders     1.87       (0.04 )      1.79       (0.18 ) 
Basic income (loss) per share attributable to MIC LLC interest holders   $ 1.89     $ (0.64 )    $ 1.71     $ (1.82 ) 
Weighted average number of shares outstanding: basic     45,467,413       44,951,176       45,381,413       44,949,942  
Diluted income (loss) per share from continuing operations attributable to MIC LLC interest holders   $ 0.02     $ (0.60 )    $ (0.08 )    $ (1.64 ) 
Diluted income (loss) per share from discontinued operations attributable to MIC LLC interest holders     1.86       (0.04 )      1.78       (0.18 ) 
Diluted income (loss) per share attributable to MIC LLC interest holders   $ 1.88     $ (0.64 )    $ 1.70     $ (1.82 ) 
Weighted average number of shares outstanding: diluted     45,604,064       44,951,176       45,513,864       44,949,942  

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

 
 
See accompanying notes to the consolidated condensed financial statements.

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TABLE OF CONTENTS

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

   
  Six Months Ended
     June 30, 2010   June 30, 2009(1)
Operating activities
                 
Net income (loss) before noncontrolling interests   $ 76,134     $ (82,856 ) 
Adjustments to reconcile net income (loss) to net cash provided by operating activities from continuing operations:
                 
Net (income) loss from discontinued operations before noncontrolling interests     (81,199 )      9,583  
Non-cash goodwill impairment           71,200  
Depreciation and amortization of property and equipment     18,195       25,385  
Amortization of intangible assets     17,411       42,797  
Equity in earnings and amortization charges of investees     (11,367 )      (15,477 ) 
Equity distributions from investees     5,000       7,000  
Amortization of debt financing costs     2,256       2,514  
Non-cash derivative loss     31,674       12,173  
Base management fees settled in LLC interests     2,189       851  
Equipment lease receivable, net     1,451       1,407  
Deferred rent     145       87  
Deferred taxes     (16,046 )      (38,131 ) 
Other non-cash expenses (income), net     2,112       (350 ) 
Changes in other assets and liabilities, net of acquisitions:
                 
Restricted cash     50        
Accounts receivable     (4,718 )      6,881  
Inventories     (2,376 )      1,598  
Prepaid expenses and other current assets     1,299       5,394  
Due to manager – related party     2,263       (3,493 ) 
Accounts payable and accrued expenses     (1,281 )      (5,213 ) 
Income taxes payable     (406 )      40  
Other, net     (1,140 )      (1,628 ) 
Net cash provided by operating activities from continuing operations     41,646       39,762  
Investing activities
                 
Purchases of property and equipment     (7,315 )      (11,864 ) 
Investment in capital leased assets     (2,400 )       
Other     658       92  
Net cash used in investing activities from continuing operations     (9,057 )      (11,772 ) 

 
 
See accompanying notes to the consolidated condensed financial statements.

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TABLE OF CONTENTS

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

   
  Six Months Ended
     June 30, 2010   June 30, 2009
Financing activities
                 
Net proceeds on line of credit facilities   $     $ 3,600  
Contributions received from noncontrolling interests     300        
Distributions paid to noncontrolling interests     (1,261 )      (314 ) 
Payment of long-term debt     (31,736 )      (60,620 ) 
Change in restricted cash     2,236       (33 ) 
Payment of notes and capital lease obligations     (164 )      (94 ) 
Net cash used in financing activities from continuing operations     (30,625 )      (57,461 ) 
Net change in cash and cash equivalents from continuing operations     1,964       (29,471 ) 
Cash flows provided by (used in) discontinued operations:
                 
Net cash used in operating activities     (12,703 )      (2,909 ) 
Net cash provided by (used in) in investing activities     134,356       (312 ) 
Net cash (used in) provided by financing activities     (124,183 )      2,513  
Cash used in discontinued operations(2)     (2,530 )      (708 ) 
Change in cash of discontinued operations held for sale(2)     2,385       (945 ) 
Net change in cash and cash equivalents     1,819       (31,124 ) 
Cash and cash equivalents, beginning of period     27,455       66,054  
Cash and cash equivalents, end of period – continuing operations   $ 29,274     $ 34,930  
Supplemental disclosures of cash flow information for continuing operations:
                 
Non-cash investing and financing activities:
                 
Accrued purchases of property and equipment   $ 1,092     $ 1,238  
Issuance of LLC interests to manager for base management fees   $ 4,083     $ 851  
Issuance of LLC interests to independent directors   $ 446     $ 450  
Taxes paid   $ 1,508     $ 508  
Interest paid   $ 40,015     $ 46,946  

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

 
 
See accompanying notes to the consolidated condensed financial statements.

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TABLE OF CONTENTS

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

1. Organization and Description of Business

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

The Company is an operating entity with a Board of Directors and other corporate governance responsibilities generally consistent with those of a Delaware corporation.

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

The Energy-Related Businesses:

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

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

2. Basis of Presentation

The unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The preparation of consolidated condensed financial statements in conformity with GAAP requires estimates and assumptions. Management evaluates these estimates and assumptions on an ongoing basis. Actual results may differ from the estimates and assumptions used in the financial statements and notes. Operating results for the quarter and six months ended June 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

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

2. Basis of Presentation  – (continued)

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

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

3. New Accounting Pronouncements

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

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

4. Income (Loss) Per Share

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

       
  Quarter Ended June 30,   Six Months Ended June 30,
     2010   2009   2010   2009
Weighted average number of shares outstanding: basic     45,467,413       44,951,176       45,381,413       44,949,942  
Dilutive effect of restricted stock unit grants     136,651             132,451        
Weighted average number of shares outstanding: diluted     45,604,064       44,951,176       45,513,864       44,949,942  

The effect of potentially dilutive shares for the quarter and six months ended June 30, 2010 is calculated assuming that the 31,989 restricted stock unit grants provided to the independent directors on June 3, 2010 and the 128,205 restricted stock unit grants provided to the independent directors on June 4, 2009 had been fully converted to shares on those dates. However, the restricted stock unit grants were anti-dilutive for the quarter and six months ended June 30, 2009, due to the Company’s net loss for those periods.

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

5. Discontinued Operations

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

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

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

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

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

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

5. Discontinued Operations  – (continued)

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

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

6. Property, Equipment, Land and Leasehold Improvements

Property, equipment, land and leasehold improvements at June 30, 2010 and December 31, 2009 consist of the following ($ in thousands):

   
  June 30,
2010
  December 31, 2009
Land   $ 4,618     $ 4,618  
Easements     5,624       5,624  
Buildings     24,796       24,789  
Leasehold and land improvements     317,512       312,881  
Machinery and equipment     332,064       330,226  
Furniture and fixtures     9,441       9,395  
Construction in progress     16,394       16,519  
Property held for future use     1,561       1,561  
       712,010       705,613  
Less: accumulated depreciation     (142,817 )      (125,526 ) 
Property, equipment, land and leasehold improvements, net(1)   $ 569,193     $ 580,087  

(1) Includes $302,000 of capitalized interest for the six months ended June 30, 2010 and $1.3 million for the year ended December 31, 2009.

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

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

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

7. Intangible Assets

Intangible assets at June 30, 2010 and December 31, 2009 consist of the following ($ in thousands):

     
  Weighted
Average
Life
(Years)
  June 30,
2010
  December 31,
2009
Contractual arrangements     31.1     $ 774,309     $ 774,309  
Non-compete agreements     2.5       9,515       9,515  
Customer relationships     10.6       78,596       78,596  
Leasehold rights     12.5       3,331       3,331  
Trade names     Indefinite       15,401       15,401  
Technology     5.0       460       460  
             881,612       881,612  
Less: accumulated amortization           (147,942 )      (130,531 ) 
Intangible assets, net         $ 733,670     $ 751,081  

As a result of a decline in the performance of certain asset groups during the quarter and six months ended June 30, 2009, the Company evaluated such asset groups for impairment and determined that the asset groups were impaired. The Company estimated the fair value of each of the impaired asset groups using the discounted cash flow model. Accordingly, the Company recognized non-cash impairment charges of $2.9 million and $23.3 million related to contractual arrangements at Atlantic Aviation during the quarter and six months ended June 30, 2009, respectively. These charges are recorded in amortization of intangibles in the consolidated condensed statement of operations. There was no impairment charge in the first six months of 2010.

The goodwill balance as of June 30, 2010 and December 31, 2009 is comprised of the following ($ in thousands):

 
Goodwill acquired in business combinations, net of disposals   $ 639,382  
Less: accumulated impairment charges     (123,200 ) 
Balance at June 30, 2010 and December 31, 2009   $ 516,182  

The Company tests for goodwill impairment at the reporting unit level on an annual basis and between annual tests if a triggering event indicates impairment. The decline in the Company’s stock price over the latter part of 2008 and the first half of 2009 caused the book value of the Company to exceed its market capitalization. In addition to its annual goodwill impairment testing conducted routinely on October 1st of each year, the Company performed goodwill impairment testing during the quarter and six months ended June 30, 2009 due to the triggering event of the Company’s stock price decline. Based on the testing performed, the Company recorded goodwill impairment charges of $53.2 million and $71.2 million at Atlantic Aviation during the quarter and six months ended June 30, 2009, respectively, which is included in the accumulated impairment charges in the above table. There was no goodwill impairment charge in the first six months of 2010.

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

8. Nonfinancial Assets Measured at Fair Value

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

     
    Total Losses
     Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)(1)
  Quarter Ended June 30,
2009
  Six Months Ended
June 30,
2009
 
Property, equipment, land and leasehold
improvements, net
  $ 5,122     $ 2,200     $ 7,521  
Intangible assets     14,430       2,962       23,326  
Goodwill     377,343       53,200       71,200  
Total   $ 396,895     $ 58,362     $ 102,047  

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

The Company estimated the fair value of each of the impaired asset groups using discounted cash flows. Property, equipment, land and leasehold improvements for Atlantic Aviation with a carrying value of $12.6 million were written down to fair value of $5.1 million during the six months ended June 30, 2009. The non-cash impairment charge of $7.5 million was recorded in depreciation expense in the consolidated condensed statement of operations for the six months ended June 30, 2009. There was no impairment charge in the first six months of 2010.

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

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

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

Model inputs included:

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

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

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

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

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

9. Long-Term Debt

At June 30, 2010 and December 31, 2009, the Company’s consolidated long-term debt consisted of the following ($ in thousands):

   
  June 30,
2010
  December 31, 2009
The Gas Company   $ 179,000     $ 179,000  
District Energy     170,000       170,000  
Atlantic Aviation     831,544       863,279  
Total
    1,180,544       1,212,279  
Less: current portion     (53,153 )      (45,900 ) 
Long-term portion   $ 1,127,391     $ 1,166,379  

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

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

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

10. Derivative Instruments and Hedging Activities

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

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

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

10. Derivative Instruments and Hedging Activities  – (continued)

As discussed in Note 9, “Long-Term Debt”, Atlantic Aviation applies its excess cash flow to prepay debt. As a result, $4.9 million and $11.1 million of accumulated other comprehensive loss in the consolidated condensed balance sheet related to Atlantic Aviation’s derivative instruments were reclassified to interest expense in the consolidated condensed statement of operations for the quarter and six months ended June 30, 2010, respectively. Atlantic Aviation expects to record further reclassifications from accumulated other comprehensive loss to interest expense as the business continues to pay down its debt.

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

Effective February 25, 2009 for Atlantic Aviation and effective April 1, 2009 for the Company’s other businesses, the Company elected to discontinue hedge accounting. In prior periods, when the Company applied hedge accounting, changes in the fair value of derivatives that effectively offset the variability of cash flows on the Company’s debt interest obligations were recorded in other comprehensive income or loss. From the dates that hedge accounting was discontinued, all movements in the fair value of the interest rate swaps are recorded directly through earnings. As interest payments are made, a portion of the other comprehensive loss recorded under hedge accounting is also reclassified into earnings. The Company will reclassify into earnings $56.9 million of net derivative losses, included in accumulated other comprehensive loss as of June 30, 2010 over the remaining life of the existing interest rate swaps, of which approximately $24.1 million will be reclassified over the next 12 months.

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

The Company’s fair value measurements of its derivative instruments and the related location of the liabilities associated with the hedging instruments within the consolidated condensed balance sheets at June 30, 2010 and December 31, 2009 were as follows:

   
  Liabilities at Fair Value(1)
     Interest Rate Swap Contracts Not
Designated as Hedging Instruments
Balance Sheet Location   June 30, 2010   December 31, 2009
     ($ In Thousands)
Fair value of derivative instruments – current liabilities   $ (45,792 )    $ (49,573 ) 
Fair value of derivative instruments – non-current liabilities     (72,268 )      (54,794 ) 
Total interest rate derivative contracts   $ (118,060 )    $ (104,367 ) 

(1) Fair value measurements at reporting date were made using significant other observable inputs (“level 2”).

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

10. Derivative Instruments and Hedging Activities  – (continued)

The Company’s hedging activities for the quarter and six months ended June 30, 2010 and 2009 and the related location within the consolidated condensed financial statements were as follows:

   
  Derivatives Not Designated as Hedging Instruments(1)
     Amount of (Loss) Gain Recognized in Interest Expense for the Quarter Ended June 30,
Financial Statement Account   2010(2)   2009(3)
     ($ In Thousands)
Interest expense   $ (36,008 )    $ 5,395  
Total   $ (36,008 )    $ 5,395  

(1) All derivatives are interest rate swap contracts.
(2) Loss recognized in interest expense for the quarter ended June 30, 2010 includes $14.7 million in interest rate swap payments, $695,000 in interest rate swap breakage fees and $20.6 million in unrealized derivative losses arising from:
the change in fair value of interest rate swaps from the discontinuation of hedge accounting; and
the reclassification of amounts from accumulated other comprehensive loss into earnings, as Atlantic Aviation pays down its debt more quickly than anticipated.
(3) Gain recognized in interest expense for the quarter ended June 30, 2009 includes $20.1 million in unrealized derivative gains, offset by $13.1 million in interest rate swap payments and $1.6 million in interest rate swap breakage fees.

               
  Derivatives Designated as Hedging Instruments(1)   Derivatives Not Designated as Hedging Instruments(1)
     Amount of Gain
Recognized in OCI on
Derivatives (Effective
Portion) for the
Six Months Ended
June 30,
  Amount of Loss
Reclassified from OCI
into Income (Effective
Portion) for the
Six Months Ended
June 30,
  Amount of Loss
Recognized in Loss on
Derivative Instruments
(Ineffective Portion)
for the Six
Months Ended
June 30,
  Amount of Loss
Recognized in Interest Expense for the Six Months Ended
June 30,
Financial Statement Account   2010   2009   2010   2009(2)   2010   2009   2010(3)   2009(4)
     ($ In Thousands)
Interest expense   $     $     $     $ (15,691 )    $     $     $ (63,142 )    $ (1,592 ) 
Loss on derivative instruments                       (25,154 )            (84 )             
Accumulated other comprehensive loss           2,848                                      
Total   $     $ 2,848     $     $ (40,845 )    $     $ (84 )    $ (63,142 )    $ (1,592 ) 

(1) All derivatives are interest rate swap contracts.
(2) Includes $22.7 million of accumulated other comprehensive losses reclassified into earnings (loss on derivative instruments) resulting from the $44.6 million repayment of debt principal at Atlantic Aviation in the first quarter of 2009. Interest expense represents cash interest paid on derivative instruments, of which $5.2 million is related to the payment of interest rate swap breakage fees in the first quarter of 2009.

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

10. Derivative Instruments and Hedging Activities  – (continued)

(3) Loss recognized in interest expense for the six months ended June 30, 2010 includes $28.2 million in interest rate swap payments, $3.2 million in interest rate swap breakage fees and $31.7 million in unrealized derivative losses arising from:
the change in fair value of interest rate swaps from the discontinuation of hedge accounting; and
the reclassification of amounts from accumulated other comprehensive loss into earnings, as Atlantic Aviation pays down its debt more quickly than anticipated.
(4) Loss recognized in interest expense for the six months ended June 30, 2009 includes $13.1 million in interest rate swap payments and $1.6 million in interest swap breakage fees, offset by $13.1 million in unrealized derivative gains.

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

11. Comprehensive Income (Loss)

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

The difference between net income (loss) and comprehensive income (loss) for the quarter and six months ended June 30, 2010 and 2009 was as follows ($ in thousands):

       
  Quarter Ended June 30,   Six Months Ended June 30,
     2010   2009   2010   2009
 
Net income (loss) attributable to MIC LLC   $ 85,850     $ (28,958 )    $ 77,485     $ (81,984 ) 
Unrealized gain in fair value of derivatives, net of taxes                       1,498  
Reclassification of realized losses into earnings, net of taxes     4,390       8,673       9,738       34,663  
Comprehensive income (loss)   $ 90,240     $ (20,285 )    $ 87,223     $ (45,823 ) 

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

12. Members’ Equity

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

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

13. Reportable Segments

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

       
  Quarter Ended, and as of, June 30,   Six Months Ended, and as of, June 30,
     2010   2009   2010   2009
Revenue   $ 158,235     $ 81,974     $ 265,273     $ 168,777  
Net income   $ 14,222     $ 22,423     $ 27,465     $ 35,686  
Interest expense (income), net     25,774       (17,671 )      37,899       (10,610 ) 
Provision for income taxes     10,750       14,959       20,356       23,898  
Depreciation and amortization expense     14,916       13,454       29,534       26,278  
Unrealized gains on derivative instruments                       (3,306 ) 
Other non-cash expense (income)     12       157       245       (669 ) 
EBITDA excluding non-cash items (1)   $ 65,674     $ 33,322     $ 115,499     $ 71,277  
 
Capital expenditures paid   $ 17,741     $ 41,482     $ 37,171     $ 81,424  
Property, equipment, land and leasehold improvements, net     993,427       953,907       993,427       953,907  
Total assets balance     1,127,169       1,041,219       1,127,169       1,041,219  

(1) EBITDA consists of earnings before interest, taxes, depreciation and amortization. Non-cash items that are excluded consist of impairments, derivative gains and losses and all other non-cash income and expense items.

All of the business segments are managed separately and management has chosen to organize the Company around the distinct products and services offered.

Energy-Related Businesses

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

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

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

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

13. Reportable Segments  – (continued)

Atlantic Aviation

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

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

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

       
  Quarter Ended June 30, 2010
     Energy-related Businesses
     The Gas Company   District Energy   Atlantic
Aviation
  Total
Revenue from Product Sales
                                   
Product sales   $ 24,236     $     $ 100,941     $ 125,177  
Product sales – utility     28,450                   28,450  
       52,686             100,941       153,627  
Service Revenue
                                   
Other services           803       36,552       37,355  
Cooling capacity revenue           5,295             5,295  
Cooling consumption revenue           7,144             7,144  
             13,242       36,552       49,794  
Financing and Lease Income
                                   
Financing and equipment lease           1,271             1,271  
             1,271             1,271  
Total Revenue   $ 52,686     $ 14,513     $ 137,493     $ 204,692  

       
  Quarter Ended June 30, 2009
     Energy-related Businesses
     The Gas Company   District Energy   Atlantic
Aviation
  Total
Revenue from Product Sales
                                   
Product sales   $ 18,390     $     $ 71,040     $ 89,430  
Product sales – utility     21,414                   21,414  
       39,804             71,040       110,844  
Service Revenue
                                   
Other services           743       40,004       40,747  
Cooling capacity revenue           5,110             5,110  
Cooling consumption revenue           5,502             5,502  
             11,355       40,004       51,359  
Financing and Lease Income
                                   
Financing and equipment lease           1,205             1,205  
             1,205             1,205  
Total Revenue   $ 39,804     $ 12,560     $ 111,044     $ 163,408  

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

13. Reportable Segments  – (continued)

       
  Six Months Ended June 30, 2010
     Energy-related Businesses
     The Gas Company   District Energy   Atlantic
Aviation
  Total
Revenue from Product Sales
                                   
Product sales   $ 49,546     $     $ 195,649     $ 245,195  
Product sales – utility     55,285                   55,285  
       104,831             195,649       300,480  
Service Revenue
                                   
Other services           1,667       81,893       83,560  
Cooling capacity revenue           10,533             10,533  
Cooling consumption revenue           8,907             8,907  
             21,107       81,893       103,000  
Financing and Lease Income
                                   
Financing and equipment lease           2,516             2,516  
             2,516             2,516  
Total Revenue   $ 104,831     $ 23,623     $ 277,542     $ 405,996  

       
  Six Months Ended June 30, 2009
     Energy-related Businesses
     The Gas Company   District Energy   Atlantic
Aviation
  Total
Revenue from Product Sales
                                   
Product sales   $ 39,465     $     $ 139,157     $ 178,622  
Product sales – utility     41,581                   41,581  
       81,046             139,157       220,203  
Service Revenue
                                   
Other services           1,499       89,068       90,567  
Cooling capacity revenue           10,007             10,007  
Cooling consumption revenue           7,730             7,730  
             19,236       89,068       108,304  
Financing and Lease Income
                                   
Financing and equipment lease           2,397             2,397  
             2,397             2,397  
Total Revenue   $ 81,046     $ 21,633     $ 228,225     $ 330,904  

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

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

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

13. Reportable Segments  – (continued)

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

       
  Quarter Ended June 30, 2010
     Energy-related Businesses   Atlantic
Aviation
  Total
Reportable
Segments
     The Gas
Company
  District
Energy
Net income (loss)   $ 1,212     $ (2,705 )    $ (8,538 )    $ (10,031 ) 
Interest expense, net     5,926       7,976       26,688       40,590  
Benefit (provision) for income taxes     780       (1,767 )      (5,764 )      (6,751 ) 
Depreciation     1,511       1,636       5,691       8,838  
Amortization of intangibles     205       341       8,194       8,740  
Other non-cash expense     531       232       558       1,321  
EBITDA excluding non-cash items   $ 10,165     $ 5,713     $ 26,829     $ 42,707  

       
  Quarter Ended June 30, 2009
     Energy-related Businesses   Atlantic
Aviation(1)
  Total
Reportable
Segments
     The Gas
Company
  District
Energy
Net income (loss)   $ 4,518     $ 3,514     $ (30,876 )    $ (22,844 ) 
Interest (income) expense, net     (1,249 )      (2,728 )      4,936       959  
Benefit (provision) for income taxes     2,908       2,296       (20,844 )      (15,640 ) 
Depreciation     1,520       1,502       7,750       10,772  
Amortization of intangibles     212       341       11,979       12,532  
Goodwill impairment                 53,200       53,200  
Other non-cash expense (income)     564       172       (430 )      306  
EBITDA excluding non-cash items   $ 8,473     $ 5,097     $ 25,715     $ 39,285  

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

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

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

13. Reportable Segments  – (continued)

       
  Six Months Ended June 30, 2009
     Energy-related Businesses   Atlantic
Aviation(1)
  Total
Reportable
Segments
     The Gas
Company
  District
Energy
Net income (loss)   $ 7,633     $ 1,868     $ (80,482 )    $ (70,981 ) 
Interest expense, net     1,368       227       31,440       33,035  
Benefit (provision) for income taxes     4,913       1,221       (54,330 )      (48,196 ) 
Depreciation     2,996       2,965       19,424       25,385  
Amortization of intangibles     426       678       41,693       42,797  
Goodwill impairment                 71,200       71,200  
Loss on derivative instruments     327       1,378       23,331       25,036  
Other non-cash expense (income)     1,015       276       (367 )      924  
EBITDA excluding non-cash items   $ 18,678     $ 8,613     $ 51,909     $ 79,200  

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

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

       
  Quarter Ended June 30,   Six Months Ended June 30,
     2010   2009   2010   2009
Total reportable segments EBITDA excluding non-cash items   $ 42,707     $ 39,285     $ 87,970     $ 79,200  
Interest income     4       34       20       101  
Interest expense     (38,974 )      (2,103 )      (73,661 )      (35,669 ) 
Depreciation(1)     (8,838 )      (10,772 )      (18,195 )      (25,385 ) 
Amortization of intangibles(2)     (8,740 )      (12,532 )      (17,411 )      (42,797 ) 
Selling, general and administrative –  corporate     (1,628 )      (1,417 )      (3,608 )      (4,348 ) 
Fees to manager     (2,268 )      (851 )      (4,457 )      (1,313 ) 
Equity in earnings and amortization charges of investees     5,774       10,028       11,367       15,477  
Goodwill impairment           (53,200 )            (71,200 ) 
Loss on derivative instruments                       (25,238 ) 
Other (expense) income, net     (1,125 )      (132 )      (1,667 )      512  
Total consolidated net loss from continuing operations before income taxes   $ (13,088 )    $ (31,660 )    $ (19,642 )    $ (110,660 ) 

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

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

13. Reportable Segments  – (continued)

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

       
  Quarter Ended June 30,   Six Months Ended June 30,
     2010   2009   2010   2009
The Gas Company   $ 1,555     $ 1,716     $ 3,886     $ 3,581  
District Energy     500       1,784       846       3,403  
Atlantic Aviation     1,247       1,635       2,583       4,880  
Total   $ 3,302     $ 5,135     $ 7,315     $ 11,864  

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

           
  Property, Equipment, Land and Leasehold Improvements   Goodwill   Total Assets
     2010   2009(1)   2010(2)   2009(2)   2010   2009
The Gas Company   $ 143,641     $ 143,251     $ 120,193     $ 120,193     $ 352,623     $ 336,565  
District Energy     148,882       146,837       18,646       18,646       231,081       228,510  
Atlantic Aviation     276,670       289,275       377,343       377,343       1,452,519       1,505,430  
Total   $ 569,193     $ 579,363     $ 516,182     $ 516,182     $ 2,036,223     $ 2,070,505  

(1) Includes a non-cash impairment charge of $7.5 million recorded during the six months ended June 30, 2009 at Atlantic Aviation.
(2) Non-cash goodwill impairment charges of $71.2 million recorded during the six months ended June 30, 2009 at Atlantic Aviation.

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

   
  As of June 30,
     2010   2009
 
Total assets of reportable segments   $ 2,036,223     $ 2,070,505  
Investment in IMTT     213,858       200,408  
Assets of discontinued operations held for sale           95,148  
Corporate and other     (17,905 )      (8,699 ) 
Total consolidated assets   $ 2,232,176     $ 2,357,362  

14. Related Party Transactions

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

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

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

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

14. Related Party Transactions  – (continued)

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

In accordance with the Management Agreement, the Manager is entitled to a quarterly base management fee based primarily on the Company’s market capitalization, and a performance fee, based on the performance of the Company’s stock relative to a U.S. utilities index. For the six months ended June 30, 2010 and 2009, the Company incurred base management fees of $4.5 million and $1.3 million, respectively. The unpaid portion of the fees at the end of each reporting period is included in due to manager-related party in the consolidated condensed balance sheets. The Manager elected to reinvest the base management fee of $2.2 million for the first quarter of 2010 in LLC interests and the Company issued 155,375 LLC interests to the Manager during the second quarter of 2010. The base management fee of $2.3 million for the second quarter of 2010 will be paid in cash during the third quarter of 2010.

The Manager is not entitled to any other compensation and all costs incurred by the Manager, including compensation of seconded staff, are paid by the Manager out of its management fee. However, the Company is responsible for other direct costs including, but not limited to, expenses incurred in the administration or management of the Company and its subsidiaries and investments, income taxes, audit and legal fees, acquisitions and dispositions and its compliance with applicable laws and regulations. During the six months ended June 30, 2010 and 2009, the Manager charged the Company $169,000 and $136,000, respectively, for reimbursement of out-of-pocket expenses. The unpaid portion of the out-of-pocket expenses at the end of the reporting period is included in due to manager-related party in the consolidated condensed balance sheet.

Advisory and Other Services from the Macquarie Group

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

Six Months Ended June 30, 2010

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

Long-Term Debt

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

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

14. Related Party Transactions  – (continued)

maturity on March 31, 2010. Amounts relating to the Macquarie Group’s portion of this revolving credit facility comprised of the following ($ in thousands):

Six Months Ended June 30, 2010

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

(1) On December 31, 2009, the Company elected to reduce the available principal on its revolving credit facility from $97.0 million to $20.0 million. This resulted in a decrease in the Macquarie Group’s total commitment under its revolving credit facility from $21.6 million to $4.4 million.
(2) The holding company’s revolving credit facility matured on March 31, 2010.
(3) On December 28, 2009, the Company repaid the entire outstanding principal balance on its revolving credit facility.

Derivative Instruments and Hedging Activities

The Company has derivative instruments in place to fix the interest rate on certain outstanding variable-rate term loan facilities. MBL has provided interest rate swaps for Atlantic Aviation and The Gas Company. At June 30, 2010, Atlantic Aviation had $786.6 million of its variable-rate term loans hedged, of which MBL provided the interest rate swaps for a notional amount of $278.8 million. The remainder of the swaps are from an unrelated third party. During the six months ended June 30, 2010, Atlantic Aviation made net payments to MBL of $7.0 million in relation to these swaps.

As discussed in Note 9, “Long-Term Debt”, for the six months ended June 30, 2010, Atlantic Aviation paid $3.2 million in interest rate swap breakage fees, of which $383,000 was paid to MBL.

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

At June 30, 2010, The Gas Company had $160.0 million of its term loans hedged, of which MBL provided the interest rate swaps for a notional amount of $48.0 million. The remainder of the swaps are from an unrelated third party. During the six months ended June 30, 2010, The Gas Company made net payments to MBL of $1.1 million in relation to these swaps.

Other Transactions

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

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

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

14. Related Party Transactions  – (continued)

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

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

15. Income Taxes

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

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

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

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

Uncertain Tax Positions

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

16. Legal Proceedings and Contingencies

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

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

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

General

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

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

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

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

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

We will continue to apply excess cash flow generated by Atlantic Aviation to the reduction of that business’ term loan principal, consistent with the amendments to the debt facility that we agreed to in February 2009. In addition to maintaining compliance with agreed upon covenants, such repayments further enables us to be able to successfully refinance this debt when it matures in 2014. We expect that we will have further excess cash of $30.0 million to $40.0 million prior to the end of 2010. We intend to pursue a two-part strategy over the next several months with respect to deployment of the potentially excess cash. First, we will engage with lenders with the objective of pre-paying a portion of our long-term debt on favorable terms. Second, we will explore alternatives to return the excess cash to shareholders, including an undertaking analysis of an appropriate share repurchase program. We are neutral as to whether the cash is used to pre-pay debt or repurchase shares, assuming the benefit to shareholders is comparable.

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MIC Inc. Revolving Credit Facility

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

Income Taxes

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

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

Results of Operations

Consolidated

Key Factors Affecting Operating Results

strong performance in our energy-related businesses reflecting:
increases in average storage rates, storage capacity and utilization at IMTT;
increase in revenue and gross profit from IMTT spill response activity in the Gulf Coast;
rate and price increases, offset by a decline in volumes at The Gas Company; and
at District Energy, an increase in capacity revenue and consumption revenue driven by a greater number of customers and higher average temperatures, respectively.
contribution from Atlantic Aviation reflecting:
higher general aviation fuel volumes, partially offset by lower weighted average fuel margins;
cost reductions; and
lower interest expense as a result of the early repayment of the outstanding term loan debt; partially offset by
a decrease in non-fuel revenue, primarily service fees.

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Results of Operations: Consolidated – (continued)

Our consolidated results of operations are as follows:

               
  Quarter Ended June 30,   Change
(from 2009 to 2010) Favorable/(Unfavorable)
  Six Months Ended June 30,   Change
(from 2009 to 2010) Favorable/(Unfavorable)
     2010   2009 (1)   $   %   2010   2009 (1)   $   %
     ($ in Thousands) (Unaudited)
Revenue
                                                                       
Revenue from product sales   $ 125,177     $ 89,430       35,747       40.0     $ 245,195     $ 178,622       66,573       37.3  
Revenue from product sales – utility     28,450       21,414       7,036       32.9       55,285       41,581       13,704       33.0  
Service revenue     49,794       51,359       (1,565 )      (3.0 )      103,000       108,304       (5,304 )      (4.9 ) 
Financing and equipment lease income     1,271       1,205       66       5.5       2,516       2,397       119       5.0  
Total revenue     204,692       163,408       41,284       25.3       405,996       330,904       75,092       22.7  
Costs and expenses
                                                                       
Cost of product sales     79,887       50,645       (29,242 )      (57.7 )      156,941       100,411       (56,530 )      (56.3 ) 
Cost of product sales – utility     23,151       16,549       (6,602 )      (39.9 )      44,464       31,936       (12,528 )      (39.2 ) 
Cost of services     13,318       11,069       (2,249 )      (20.3 )      24,463       22,140       (2,323 )      (10.5 ) 
Gross profit     88,336       85,145       3,191       3.7       180,128       176,417       3,711       2.1  
Selling, general and administrative     49,522       48,725       (797 )      (1.6 )      100,256       104,868       4,612       4.4  
Fees to manager – related party     2,268       851       (1,417 )      (166.5 )      4,457       1,313       (3,144 )      NM  
Goodwill impairment           53,200       53,200       NM             71,200       71,200       NM  
Depreciation     7,202       9,270       2,068       22.3       14,924       22,420       7,496       33.4  
Amortization of intangibles     8,740       12,532       3,792       30.3       17,411       42,797       25,386       59.3  
Total operating expenses     67,732       124,578       56,846       45.6       137,048       242,598       105,550       43.5  
Operating income (loss)     20,604       (39,433 )      60,037       152.3       43,080       (66,181 )      109,261       165.1  
Other income (expense)
                                                                       
Interest income     4       34       (30 )      (88.2 )      20       101       (81 )      (80.2 ) 
Interest expense(2)     (38,974 )      (2,103 )      (36,871 )      NM       (73,661 )      (35,669 )      (37,992 )      (106.5 ) 
Equity in earnings and amortization charges of investees     5,774       10,028       (4,254 )      (42.4 )      11,367       15,477       (4,110 )      (26.6 ) 
Loss on derivative instruments                                   (25,238 )      25,238       NM  
Other (expense) income, net     (496 )      (186 )      (310 )      (166.7 )      (448 )      850       (1,298 )      (152.7 ) 
Net loss from continuing operations before income taxes     (13,088 )      (31,660 )      18,572       58.7       (19,642 )      (110,660 )      91,018       82.3  
Benefit for income taxes     13,488       4,822       8,666       179.7       14,577       37,387       (22,810 )      (61.0 ) 
Net income (loss) from continuing operations   $ 400     $ (26,838 )      27,238       101.5     $ (5,065 )    $ (73,273 )      68,208       93.1  
Net income (loss) from discontinued operations, net of taxes     85,212       (3,159 )      88,371       NM       81,199       (9,583 )      90,782       NM  
Net income (loss)   $ 85,612     $ (29,997 )      115,609       NM     $ 76,134     $ (82,856 )      158,990       191.9  
Less: net loss attributable to noncontrolling interests     (238 )      (1,039 )      (801 )      (77.1 )      (1,351 )      (872 )      479       54.9  
Net income (loss) attributable to MIC LLC   $ 85,850     $ (28,958 )      114,808       NM     $ 77,485     $ (81,984 )      159,469       194.5  

NM — Not meaningful

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

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TABLE OF CONTENTS

Results of Operations: Consolidated – (continued)

Gross Profit

Consolidated gross profit increased reflecting improved results at our energy-related businesses and fuel-related services at Atlantic Aviation, offset by a decrease in non-fuel gross profit from Atlantic Aviation.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the six months ended June 30, 2010 decreased primarily as result of cost reduction efforts at Atlantic Aviation, offset by increases for the quarter and six months ended June 30, 2010 at our consolidated energy-related businesses.