Macquarie Infrastructure Company Reports Second Quarter 2008 Financial Results
Macquarie Infrastructure Company (NYSE: MIC), a market leader in the ownership and operation of U.S. infrastructure businesses, today reported its second quarter and year to date financial results.
Results included steady performance by MIC’s airport services business, driven by successful acquisitions completed in 2007 and 2008, partially offset by a same-store decline in the volume of jet fuel sold and interest on higher debt balances. The Company’s investment in a bulk liquid storage terminal business, as well as owned gas production and distribution and district energy businesses, performed as expected. MIC’s smallest business, airport parking, continued to underperform in the wake of slowing commercial air travel in the U.S.
Consolidated gross profit increased 43% to $108.1 million in the second quarter from $75.8 million in the second quarter of 2007. Gross profit, or revenue less costs of goods sold/sales, removes the volatility in revenue associated with expenses that are typically passed through to customers by infrastructure businesses.
MIC’s estimated Cash Available for Distribution (“CAD”) for the second quarter increased to $29.3 million, or $0.65 per share, from the $24.3 million, or $0.56 per share, generated in the comparable quarter in 2007. For the six month period, CAD increased 15% to $60.1 million from $52.4 million in the first half of 2007. The Company uses CAD, a non-GAAP measure, to estimate its ability to sustain and increase its quarterly dividend.
“With half the year behind us and reasonable visibility into the performance of our businesses for the balance of the year, we are able to refine our guidance for CAD for the full year,” said Peter Stokes, Chief Executive Officer of Macquarie Infrastructure Company. “We now expect that our businesses will generate a full year increase in CAD in a range of between 10% and 15% higher than 2007, or $116.0 to $121.0 million.” The Company had previously said that it expected full-year CAD to be in a range of between $114.0 and $128.0 million.
MIC will pay a cash dividend of $0.645 per share for the second quarter of 2008. The payment represents a 6.6% increase over the dividend paid in the second quarter of 2007 and is the same per share amount as paid in the first quarter of 2008. Shareholders of record on September 4, 2008 will receive the payment on September 11, 2008.
ESTIMATED CASH AVAILABLE FOR DISTRIBUTION
The Company believes that it can provide better insight into its ability to support its distributions by making certain adjustments to its “as reported” results. Financial results under Generally Accepted Accounting Principles (“GAAP”) alone do not reflect all of the items that management considers in estimating distributable cash.
The table below summarizes MIC’s estimated cash available for distribution, beginning with cash from operations and adjusted for certain dividend income and cash expenditures for the quarter and year to date ended June 30.
Year to Date Quarter Ended ($ Millions) 30-Jun-08 30-Jun-08 Cash from operations $ 48.6 $ 34.5 Working capital $ 4.4 $ (2.4) Cash from operations adjustments $ 3.2 $ (2.0) Cash from investing and financing activities $ 3.9 $ (0.8) ————— ————– Estimated Cash Available for Distribution $ 60.1 $ 29.3 =============== ==============
MIC’s consolidated cash from operations increased to $34.5 million in the second quarter of 2008 from $24.9 million in the second quarter of 2007. Year to date, cash from operating activities decreased to $48.6 million, or by 7%, from $52.5 million generated in the first half of 2007. Cash from operating activities is the starting point for the calculation of estimated CAD.
The primary drivers of the year over year decrease in cash from operating activities were a $4.4 million increase in working capital balances along with increased interest payments on higher debt balances. Working capital balances increased primarily as a result of higher accounts receivable stemming from higher fuel prices, not an aging of receivables. CAD is increased by the $4.4 million change in working capital since working capital effects are deemed temporary.
The decrease in cash from operations was partially offset by a larger portion of the $7.0 million quarterly dividend from the bulk liquid storage terminal business being recorded in cash from operations in 2008 compared to cash from investing in 2007.
Year to date cash from operations is increased by adjustments including the addition of $1.9 million of pre-funded (equity) integration expenses incurred in connection with acquisitions concluded in 2007 and $1.3 million of cash recoveries from an escrow related to the acquisition of the gas production and distribution business in 2006.
Estimated CAD for the half year includes a net $3.9 million in cash from investing and financing activities. The addition includes the $7.5 million portion of the dividend from the bulk liquid storage terminal business that is recorded in cash from investing activities, and subtracts primarily net cash capital expenditures of $3.4 million.
Estimated CAD exceeded the $29.0 million value of the dividend declared for the quarter by $0.3 million.
OPERATING BUSINESSES
MIC reports EBITDA and contribution margin, both non-GAAP financial measures, as it considers them to be important indicators of overall performance. The Company believes that EBITDA, net of non-cash and non-recurring items, also provides insight into the performance of its operating companies and their ability to generate distributable cash. The reporting of contribution margin by the gas production and distribution business provides additional insight into the performance of that business excluding changes in fuel prices that typically are recovered in revenue. The attached tables provide a reconciliation of EBITDA to net income, and contribution margin to revenue.
Airport Services
— Performance Highlights
— Gross profit generated by the Company’s airport services business was $88.0 million for the quarter. The 59% increase over the second quarter in 2007 was driven by acquisitions completed in 2007 and 2008. Gross profit excluding the acquisitions concluded in the prior 12 months decreased 1%.
— At existing sites, the volume of jet fuel sold during the quarter declined 4% compared to the prior comparable quarter. The decline reverses volume growth in the first quarter and was partially offset in gross profit by flat average fuel margins and growth in non-fuel revenue including office and hangar rental income and ramp fees. Year to date the volume of jet fuel sold declined by 2% compared to the first half of 2007. Management attributes the decrease in the volume of fuel sold to a reduction in the level of business activity related to an overall slowing of the economy.
— EBITDA for the quarter grew to $35.6 million; a 31% increase over the second quarter in 2007. Excluding acquisitions concluded in the prior 12 months, EBITDA decreased 9%. Excluding non-cash changes in the value of derivative instruments in the second quarters of 2007 and 2008, EBITDA would have increased by 37% for all locations and decreased by 5% at existing locations.
— For the six month period ended June 30, 2008, the airport services business generated gross profit of $183.2 million and EBITDA of $76.0 million including all locations. Excluding non-cash losses on derivatives in both 2007 and 2008, EBITDA for the six months would have increased by 45%.
— Update and Outlook
— General aviation activity in the U.S. has slowed with the overall decline in economic activity. In addition, some competitors appear to be pursuing pricing strategies that may result in increased margin pressure. However, management of the airport services business believes that businesses and individuals using general aviation remain relatively insensitive to the price of jet fuel to this point, despite substantial year on year increases in the average price of jet fuel.
— Management of the airport services business also believes that improved access to general aviation and the challenges facing commercial aviation have dampened the impact of the slowdown in the broader economy on the business.
— General aviation aircraft manufacturers continue to report strong demand for new planes. New aircraft deliveries in the U.S. are expected to top 650 planes for the year and increase the size of the domestic fleet by about 3%.
— Airport services negotiated renewals and/or extensions of leases at three locations including Charleston, SC, where the lease had been scheduled to expire later this year. The lease renewal and extensions increased the EBITDA-weighted average lease life across the portfolio by approximately six months to 18.3 years and obligated the business to invest an additional $3.5 million in facilities upgrades over the next several years.
Bulk Liquid Storage Terminal Business
— Performance Highlights
— The Company’s bulk liquid storage terminal business declared a dividend of $14.0 million, $7.0 million of which was payable to MIC, for the second quarter. MIC accrued the dividend at quarter-end and received the cash on July 25. As an owner of 50% of the business, MIC does not consolidate the financial results of the bulk liquid storage terminal business with those of its other businesses. MIC expects to receive a fixed dividend of $7.0 million each quarter through the end of 2008.
— Terminal revenue increased to $72.9 million, or by 24%, in the second quarter of 2008 from $59.0 million in 2007. The increase was the result of higher average storage rates, an increase in rented storage capacity resulting from completion of tank construction projects and an acquisition completed in the fourth quarter of 2007 as well as higher throughput revenue. Terminal gross profit increased 31% over the second quarter in 2007.
— The business recorded a non-cash gain of $18.0 million in the quarter on changes in the value of derivative instruments (interest rate hedges). The gain was the result of rising long-term interest rates in the second quarter and reversed a non-cash loss of $17.7 million incurred in the first quarter of 2008.
— Cash flow from operations for the first half of 2008 decreased to $41.6 million from $43.8 million in the first half of 2007. The decrease was primarily the result of the timing of contributions to the business’ pension plan and a change in timing of accounts payable as well as higher interest expense associated with higher debt levels in 2008 compared to 2007.
— Reported EBITDA for the second quarter increased to $47.6 million from $13.4 million in 2007. The second quarter of 2007 included a $12.6 million expense related to the refinancing of the business’ primary debt facility.
— Through six months the bulk liquid storage terminal business generated gross profit and EBITDA of $70.7 million and $59.8 million, respectively, which were 24% and 45% higher than in the first six months of 2007. Excluding the unrealized gains on derivatives in both years, EBITDA would have increased by 62%.
— Update and Outlook
— The performance of the bulk liquid storage terminal business is expected to continue to improve as inflation escalators generate revenue growth from existing contracts and storage tanks and new facilities currently under construction become operational.
— Approximately $478.4 million of growth capital expenditure commitments have been made by the business since the beginning of 2006 excluding $8.0 million of projects initiated prior to MIC’s investment. The capital projects are expected to generate an incremental increase in annual gross profit and EBITDA of $63.7 million when complete at the end of 2009. Projects initiated during the quarter include 1.8 million barrels of storage and related infrastructure that will be constructed at the business’ St. Rose, LA site at a cost of approximately $87.4 million.
— The business expects to incur increased maintenance capital expenditures related to a mandated program of tank cleaning and inspections. Maintenance and environmental capital expenditures are expected to be approximately $50.0 million in 2008. The rate at which tanks are being cleaned and inspected has accelerated slightly compared to the first quarter. The expenditures are expected to decline as the number of tanks to be cleaned and inspected declines.
— Beginning with the first quarter of 2009 and for all quarters thereafter, MIC will receive a dividend based on the cash flow generated by the bulk liquid storage terminal business rather than a fixed $7.0 million per quarter.
Gas Production and Distribution Business
— Performance Highlights
— The Company’s gas production and distribution business grew total contribution margin (revenue less cost of revenue) to $16.2 million, a 7% increase over the second quarter of 2007. The total amount of gas sold (utility and non-utility) during the second quarter declined by a volume weighted average of 3% versus the prior year driven in part by a lower level of economic activity related to a decline in tourism.
— Revenue increases in both utility and non-utility operations were partially offset by higher product costs (feedstock and LPG) and higher operating expenses.
— The business generated EBITDA of $6.9 million for the second quarter. Excluding non-cash gains and losses on derivative instruments in the current and prior comparable periods, EBITDA would have increased by approximately 11%.
— For the first half of 2008 the gas production and distribution business generated growth in contribution margin of $1.9 million, or 6%, over the first half of 2007. Reported EBITDA increased by $1.0 million over 2007 to $13.9 million. Excluding non-cash losses on derivative instruments in both periods, EBITDA would have increased by 7%.
— Update and Outlook
— The fundamental drivers of continued growth in the gas production and distribution business are the rate of population increase and tourism in Hawaii. The state forecasts population growth of about 1% over the medium term. Tourist landings (arrivals by plane and ship) historically have tracked GDP growth (other than 2001- 2003 in the wake of the terrorist attacks of 9/11).
— Management believes that rising energy costs and a downturn in the level of tourism have contributed to the decline in the volume of gas products consumed. The business is focused on offsetting some or all of the declines through effective marketing of its synthetic natural gas and liquefied petroleum gas products as efficient and cost effective relative to other fuel/power sources.
— On August 4 the business filed a rate case with the Hawaii Public Utilities Commission seeking to increase regulated (utility) gas rates. This is the first rate increase request in nearly eight years. Overall, the business is seeking an increase of 8.4 percent, or $12.5 million per year. Any increase approved by the PUC is not expected to appear on bills until mid-2009.
District Energy Business
— Performance Highlights
— Gross profit in the Company’s district energy business increased to $4.7 million for the second quarter, or by 5% over the same period in 2007. EBITDA for the quarter also increased by 5% to $5.4 million.
— Capacity revenue grew with the step-up in inflation-linked rate escalators. A cooler second quarter compared to the second quarter of 2007 resulted in a decrease in consumption revenue.
— Interest expense increased relative to the second quarter of 2007 with the refinancing and increase in the size of the business’ debt facility in September 2007.
— Year to date, the business generated an increase in gross profit of approximately 2%. EBITDA was relatively unchanged, year over year.
— Update and Outlook
— The Company expects continued stable performance from its district energy business, assuming a historically normal level of demand for cooling during the summer of 2008.
— The business signed a contract with an additional customer during the quarter and will provide approximately 700 tons of cooling to that customer beginning in 2009.
— The City Council in Chicago approved an extension of the business’ Use Agreement from 2020 through 2040. The Use Agreement gives the district energy business the authority to install and operate its pipe network beneath the streets of Chicago.
Airport Parking Business
— Performance Highlights
— Gross profit at the Company’s airport parking business, its smallest business, decreased 25% to $4.1 million in the second quarter of 2008 compared with second quarter in 2007. EBITDA decreased by $1.4 million to $2.8 million.
— An increase in average overnight occupancy was offset by a decrease in average ticket size and the total number of vehicles exiting. The decline in parking activity is consistent with the overall decline in enplanements stemming from reductions in airline capacity and carrier bankruptcies in the commercial airport markets in which we operate.
— Interest expense in the second quarter declined year over year as lower interest rates brought costs down on the $58.7 million of debt with a rate cap of 4.48%.
— Selling, general and administrative costs were higher primarily due to an accrued $583,000 expense for a state sales tax assessment. The matter was settled in July.
— For the six months ended June 30, EBITDA decreased to $5.3 million from $8.3 million in 2007. Excluding unrealized gains on derivative instruments in both years, EBITDA would have declined by 38%.
— Update and Outlook
— Revenue generated in the airport parking business is closely correlated with the rate of commercial airline enplanements. Higher fuel prices and ticket costs, as well as a reduction in the number of commercial flights in the second quarter, have caused enplanement numbers to decline during 2008 versus 2007. As a result, revenue generated by the airport parking business declined in the second quarter, reversing the positive trend reported in the first quarter.
— Revised expectations of enplanement growth and the subsequent revision of cashflow projections triggered an impairment analysis during the quarter. The analysis concluded that no impairment of goodwill or other intangibles existed. Should conditions in the air travel industry and therefore the airport parking business continue or worsen, writedowns of goodwill or other intangibles may be required.
— Heightened price sensitivity among airline passengers has led to an increase in the percentage of customers using the business’ self-park option. In general this trend will have a negative impact on margin. To offset the lower margins, management is implementing price increases for self-parking in those markets where demand has been strongest.
— In July, the business acquired a self-park facility in Newark, NJ adjacent to the Newark International Airport. The acquisition strengthens the business’ position in what historically has been a strong market overall.
CONFERENCE CALL AND WEBCAST
When: Management has scheduled a conference call for 11:00 a.m. Eastern Daylight Time on Thursday, August 7, 2008 to review the Company’s results.
How: To listen to the conference call please dial +1(877) 627-6565 (domestic) or +1(719) 325-4867 (international) at least 10 minutes prior to the scheduled start time. Interested parties can also listen to a live webcast of the call. The webcast will be accessible via the Company’s website at www.macquarie.com/mic. Please allow extra time prior to the call to visit the site and download the necessary software to listen to the webcast.
Slides: The Company will prepare slides in support of its conference call presentation. The slides will be available for downloading from the Company website the morning of August 7, 2008 prior to the conference call. A link to the slides will be located in the “Events” section of the MIC homepage.
Replay: For interested individuals unable to participate in the conference call, a replay will be available after 2:00 p.m. on August 7, 2008 through August 21, 2008, at +1(888) 203-1112 (domestic) or +1(719) 457-0820 (international), Passcode: 1440560. An online archive of the webcast will be available on the Company’s website for one year following the call.
ABOUT MACQUARIE INFRASTRUCTURE COMPANY
Macquarie Infrastructure Company owns, operates and invests in a diversified group of infrastructure businesses, which provide basic, everyday services, to customers in the United States. Its businesses consist of an airport services business, a 50% indirect interest in a bulk liquid storage terminal business, a gas production and distribution business, a district energy business, and an airport parking business. The Company is managed by a wholly-owned subsidiary of the Macquarie Group. For additional information, please visit the Macquarie Infrastructure Company website at WWW.MACQUARIE.COM/MIC.
FORWARD LOOKING STATEMENTS
This filing contains forward-looking statements. We may, in some cases, use words such as “project”, “believe”, “anticipate”, “plan”, “expect”, “estimate”, “intend”, “should”, “would”, “could”, “potentially”, or “may” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements in this report are subject to a number of risks and uncertainties, some of which are beyond our control including, among other things: our ability to successfully integrate and manage acquired businesses, retain or replace qualified employees, manage growth, make and finance future acquisitions, service, comply with the terms of and refinance debt, and implement our strategy, our shared decision-making with co-investors over investments including the distribution of dividends, our regulatory environment establishing rate structures and monitoring quality of service, changes in general economic or business conditions, demographic trends, the political environment, the economy, tourism, construction and transportation costs, air travel, automobile usage, fuel and gas costs, our ability to recover increases in costs from customers, reliance on sole or limited source suppliers, foreign exchange fluctuations, risks or conflicts of interests involving our relationship with the Macquarie Group, environmental risks and changes in U.S. federal tax law.
Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. Additional risks of which we are not currently aware could also cause our actual results to differ. In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements. The forward-looking events discussed in this release may not occur. These forward-looking statements are made as of the date of this release. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
“Macquarie Group” refers to the Macquarie Group of companies, which comprises Macquarie Group Limited and its worldwide subsidiaries and affiliates. 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. MIC-G
MACQUARIE INFRASTRUCTURE COMPANY LLC CONSOLIDATED BALANCE SHEETS ($ in thousands, except share data) June 30, December 2008 31, 2007 ———— ———- (Unaudited) Assets Current assets: Cash and cash equivalents $ 46,460 $ 57,473 Restricted cash 1,601 1,335 Accounts receivable, less allowance for doubtful accounts of $1,919 and $2,380, respectively 104,329 94,541 Dividends receivable 7,000 7,000 Other receivables 42 445 Inventories 21,888 18,219 Prepaid expenses 6,209 10,418 Deferred income taxes 9,330 9,330 Land – available for sale 5,965 – Other 14,061 11,706 ———— ———- Total current assets 216,885 210,467 Property, equipment, land and leasehold improvements, net 699,822 674,952 Restricted cash 19,717 19,363 Equipment lease receivables 37,511 38,834 Investment in unconsolidated business 204,159 211,606 Goodwill 775,684 770,108 Intangible assets, net 864,312 857,345 Deferred costs on acquisitions – 278 Deferred financing costs, net of accumulated amortization 26,532 28,040 Other 2,261 2,036 ———— ———- Total assets $ 2,846,883 $2,813,029 ============ ========== Liabilities and members’ equity Current liabilities: Due to manager – related party $ 4,575 $ 5,737 Accounts payable 70,753 59,303 Accrued expenses 29,096 31,184 Current portion of notes payable and capital leases 3,437 5,094 Current portion of long-term debt 6,426 162 Fair value of derivative instruments 27,095 14,224 Customer deposits 9,248 9,481 Other 8,370 8,330 ———— ———- Total current liabilities 159,000 133,515 Notes payable and capital leases, net of current portion 2,923 2,964 Long-term debt, net of current portion 1,497,550 1,426,494 Deferred income taxes 204,832 202,683 Fair value of derivative instruments 25,263 42,832 Other 31,926 30,817 ———— ———- Total liabilities 1,921,494 1,839,305 ———— ———- Minority interests 6,473 7,172 ———— ———- Commitments and contingencies – – Members’ equity: LLC interests, no par value; 500,000,000 authorized; 44,948,694 LLC interests issued and outstanding at June 30, 2008 and 44,938,380 LLC interests issued and outstanding at December 31, 2007 994,938 1,052,062 Accumulated other comprehensive loss (29,913) (33,055) Accumulated deficit (46,109) (52,455) ———— ———- Total members’ equity 918,916 966,552 ———— ———- Total liabilities and members’ equity $ 2,846,883 $2,813,029 ============ ==========
MACQUARIE INFRASTRUCTURE COMPANY LLC CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) ($ in thousands, except per share data) Quarter Ended Six Months Ended ———————- ———————- June 30, June 30, June 30, June 30, 2008 2007 2008 2007 ———– ———– ———– ———- Revenue Revenue from product sales $ 166,834 $ 91,989 $ 326,159 $ 180,346 Revenue from product sales – utility 31,858 22,820 61,257 45,111 Service revenue 86,672 61,161 175,457 118,247 Financing and equipment lease income 1,179 1,235 2,373 2,483 ———– ———– ———- ———– Total revenue 286,543 177,205 565,246 346,187 ———– ———– ———- ———– Costs and expenses Cost of product sales 119,501 57,692 228,018 111,374 Cost of product sales – utility 26,679 17,429 51,014 34,231 Cost of services 32,289 26,323 65,545 49,665 Selling, general and administrative 61,645 38,564 125,502 77,542 Fees to manager – related party 4,509 48,964 9,135 54,525 Depreciation 6,315 4,162 13,038 8,053 Amortization of intangibles 10,904 7,004 21,643 13,932 ———– ———– ———- ———– Total operating expenses 261,842 200,138 513,895 349,322 ———– ———– ———- ———– Operating income (loss) 24,701 (22,933) 51,351 (3,135) Other income (expense) Interest income 297 1,465 770 2,924 Interest expense (25,676) (17,705) (51,502) (35,271) Equity in earnings (losses) and amortization charges of investee 8,641 (1,145) 6,552 2,320 (Loss) gain on derivative instruments (581) 1,138 (886) 661 Other income (expense), net 463 272 655 (644) ———– ———– ———- ———– Net income (loss) before income taxes and minority interests 7,845 (38,908) 6,940 (33,145) (Provision) benefit for income taxes 364 13,833 (1,000) 15,878 ———– ———– ———- ———– Net income (loss) before minority interests 8,209 (25,075) 5,940 (17,267) Minority interests (129) (28) (408) (97) ———– ———– ———- ———– Net income (loss) $ 8,338 $ (25,047) $ 6,348 $ (17,170) =========== =========== =========== =========== Basic earnings (loss) per share: $ 0.19 $ (0.67) $ 0.14 $ (0.46) ———– ———– ———– ———– Weighted average number of shares outstanding: basic 44,941,440 37,562,165 44,939,910 37,562,165 Diluted earnings (loss) per share: $ 0.19 $ (0.67) $ 0.14 $ (0.46) ———– ———– ———– ———– Weighted average number of shares outstanding: diluted 44,954,123 37,562,165 44,951,408 37,562,165 Cash distributions declared per share $ 0.645 $ 0.59 $ 1.28 $ 1.16 ———– ———– ———– ———–
MACQUARIE INFRASTRUCTURE COMPANY LLC CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) ($ in thousands) Six Months Ended —————— June 30, June 30, 2008 2007 ——— ——— Operating activities Net income (loss) $ 6,348 $(17,170) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization of property and equipment 18,549 13,029 Amortization of intangible assets 21,643 13,932 Equity in earnings and amortization charges of investee (6,552) (2,320) Equity distributions from investee 6,552 2,320 Amortization of debt financing costs 3,350 2,883 Non-cash derivative loss (gain), net of non- cash interest expense 1,045 (2,500) Performance fees settled in LLC interests – 43,962 Equipment lease receivable, net 1,113 1,381 Deferred rent 1,071 1,264 Deferred taxes (278) (16,858) Other non-cash expenses, net 179 1,118 Non-operating losses relating to foreign investments – 2,799 Changes in other assets and liabilities, net of acquisitions: Restricted cash (266) (74) Accounts receivable (9,661) (7,013) Inventories (3,222) 409 Prepaid expenses and other current assets 3,320 3,963 Due to manager – related party (1,161) 1,624 Accounts payable and accrued expenses 7,057 6,486 Income taxes payable (850) 1,977 Other, net 353 1,326 ——— ——— Net cash provided by operating activities 48,590 52,538 Investing activities Acquisitions of businesses and investments, net of cash acquired (41,914) (86,900) Costs of dispositions – (322) Proceeds from sale of equity investment – 84,977 Settlements of non-hedging derivative instruments – (1,965) Purchases of property, equipment, land and leasehold improvements (39,975) (18,246) Return of investment in unconsolidated business 7,447 11,680 Other 229 – ——— ——— Net cash used in investing activities (74,213) (10,776) Financing activities Proceeds from long-term debt 5,000 34,500 Proceeds from line of credit facilities 70,650 7,130 Offering and equity raise costs paid (65) – Distributions paid to holders of LLC interests (57,528) (43,572) Distributions paid to minority shareholders (292) (408) Payment of long-term debt (80) (77) Debt financing costs paid (1,846) (687) Change in restricted cash (354) (1,886) Payment of notes and capital lease obligations (875) (1,149) ——– ——– Net cash provided by (used in) financing activities 14,610 (6,149) Effect of exchange rate changes on cash – (1) ——— ——— Net change in cash and cash equivalents (11,013) 35,612 Cash and cash equivalents, beginning of period 57,473 37,388 ——— ——— Cash and cash equivalents, end of period $ 46,460 $ 73,000 ========= ========= Supplemental disclosures of cash flow information: Non-cash investing and financing activities: Accrued acquisition and equity offering costs $ – $ 2,757 ========= ========= Accrued purchases of property and equipment $ 872 $ 2,620 ========= ========= Acquisition of equipment through capital leases $ 490 $ 30 ========= ========= Issuance of LLC interests to independent directors $ 450 $ – ========= ========= Taxes paid $ 2,237 $ 1,886 ========= ========= Interest paid $ 48,572 $ 33,016 ========= =========
MACQUARIE INFRASTRUCTURE COMPANY LLC RECONCILIATION OF NET INCOME (LOSS) TO EBITDA ($ in thousands) Change Quarter Ended June Favorable/ 30, (Unfavorable) ———————- 2008 2007 $ % ——- ———– —————— — Net income (loss) $ 8,338 $ (25,047) Interest expense, net 25,379 16,240 Provision (benefit) for income taxes (364) (13,833) Depreciation (1) 6,315 4,162 Depreciation – cost of services (1) 2,765 2,510 Amortization (2) 10,904 7,004 ——- ———– —————— EBITDA $53,337 $ (8,964) 62,301 NM ======= =========== ================== ————————— NM – Not meaningful MACQUARIE INFRASTRUCTURE COMPANY LLC RECONCILIATION OF NET INCOME (LOSS) TO EBITDA ($ in thousands) Change Six Months Ended Favorable/ June 30, (Unfavorable) ——————- ——————— 2008 2007 $ % ——- ———– —————— — Net income (loss) $ 6,348 $ (17,170) Interest expense, net 50,732 32,347 Provision (benefit) for income taxes 1,000 (15,878) Depreciation (1) 13,038 8,053 Depreciation – cost of services (1) 5,511 4,976 Amortization (2) 21,643 13,932 ——- ———– —————— EBITDA $98,272 $ 26,260 72,012 NM ======= =========== ================== ————————— NM – Not meaningful
(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 earnings (losses) and amortization charges of investee in our statements of operations.
(2) Amortization does not include step-up amortization expense of $283,000 for each quarter related to intangible assets in connection with our investment in IMTT, which is reported in equity in earnings (losses) and amortization charges of investee in our statements of operations.
MACQUARIE INFRASTRUCTURE COMPANY LLC RECONCILIATION OF SEGMENT NET INCOME (LOSS) TO EBITDA AND SEGMENT REVENUE TO CONTRIBUTION MARGIN Airport Services – Existing Locations ($ in thousands) (unaudited) QTD Change Q2 2008 Q2 2007 Favorable/(Unfavorable) ——- ——- ———————— $ $ $ % ——- ——- ———– ———— Revenue Fuel revenue 91,314 73,689 17,625 23.9 Non-fuel revenue 31,063 28,787 2,276 7.9 ——- ——- ———– Total revenue 122,377 102,476 19,901 19.4 Cost of revenue Cost of revenue — fuel 65,104 44,338 (20,766) (46.8) Cost of revenue — non-fuel 2,565 2,672 107 4.0 ——- ——- ———– Total cost of revenue 67,669 47,010 (20,659) (43.9) Fuel gross profit 26,210 29,351 (3,141) (10.7) Non-fuel gross profit 28,498 26,115 2,383 9.1 ——- ——- ———– Gross profit 54,708 55,466 (758) (1.4) ======= ======= =========== Selling, general and administrative expenses 30,004 29,195 (809) (2.8) Depreciation and amortization 8,288 8,454 166 2.0 ——- ——- ———– Operating income 16,416 17,817 (1,401) (7.9) Interest expense, net (8,409) (8,268) (141) 1.7 Other income (expense) 283 (37) 320 NM Unrealized (losses) gains on derivative instruments (237) 872 (1,109) (127.2) Income tax provision (3,245) (4,116) 871 21.2 ——- ——- ———– Net income (1) 4,808 6,268 (1,460) (23.3) ======= ======= =========== Reconciliation of net income to EBITDA: Net income (1) 4,808 6,268 Interest expense, net 8,409 8,268 Income tax provision 3,245 4,116 Depreciation and amortization 8,288 8,454 ——- ——- ———– EBITDA 24,750 27,106 (2,356) (8.7) ======= ======= =========== —————————– NM – Not meaningful MACQUARIE INFRASTRUCTURE COMPANY LLC RECONCILIATION OF SEGMENT NET INCOME (LOSS) TO EBITDA AND SEGMENT REVENUE TO CONTRIBUTION MARGIN Airport Services – Existing Locations ($ in thousands) (unaudited) YTD Change YTD 2008 YTD 2007 Favorable/(Unfavorable) – ——– ——– ———————– $ $ $ % ——– ——– ———– ———– Revenue Fuel revenue 176,300 143,536 32,764 22.8 Non-fuel revenue 66,628 60,000 6,628 11.0 ——– ——– ———– Total revenue 242,928 203,536 39,392 19.4 Cost of revenue Cost of revenue — fuel 121,885 84,916 (36,969) (43.5) Cost of revenue — non-fuel 7,168 6,093 (1,075) (17.6) ——– ——– ———– Total cost of revenue 129,053 91,009 (38,044) (41.8) Fuel gross profit 54,415 58,620 (4,205) (7.2) Non-fuel gross profit 59,460 53,907 5,553 10.3 ——– ——————– Gross profit 113,875 112,527 1,348 1.2 ======== ==================== Selling, general and administrative expenses 61,341 59,730 (1,611) (2.7) Depreciation and amortization 16,276 16,417 141 0.9 ——– ——————– Operating income 36,258 36,380 (122) (0.3) Interest expense, net (17,004) (16,529) (475) (2.9) Other income (expense) 254 (60) 314 NM Unrealized (losses) gains on derivative instruments (469) (77) (392) NM Income tax provision (7,672) (7,815) 143 1.8 ——– ——————– Net income (1) 11,367 11,899 (532) (4.5) ======== ==================== Reconciliation of net income to EBITDA: Net income (1) 11,367 11,899 Interest expense, net 17,004 16,529 Income tax provision 7,672 7,815 Depreciation and amortization 16,276 16,417 ——– ——————– EBITDA 52,319 52,660 (341) (0.6) ======== ==================== ————————— 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.
Airport Services – All Locations ($ in thousands) (unaudited) QTD Change Q2 2008 Q2 2007 Favorable/(Unfavorable) ——– ——- ———————— $ $ $ % ——– ——- ———– ———— Revenue Fuel revenue 143,111 73,689 69,422 94.2 Non-fuel revenue 55,634 28,787 26,847 93.3 ——– ——- ———– Total revenue 198,745 102,476 96,269 93.9 Cost of revenue Cost of revenue — fuel 101,914 44,338 (57,576) (129.9) Cost of revenue — non-fuel 8,868 2,672 (6,196) NM ——– ——- ———– Total cost of revenue 110,782 47,010 (63,772) (135.7) Fuel gross profit 41,197 29,351 11,846 40.4 Non-fuel gross profit 46,766 26,115 20,651 79.1 ——– ——- ———– Gross profit 87,963 55,466 32,497 58.6 ======== ======= =========== Selling, general and administrative expenses 52,308 29,195 (23,113) (79.2) Depreciation and amortization 14,487 8,454 (6,033) (71.4) ——– ——- ———– Operating income 21,168 17,817 3,351 18.8 Interest expense, net (15,443) (8,268) (7,175) (86.8) Other income (expense) 326 (37) 363 NM Unrealized (losses) gains on derivative instruments (356) 872 (1,228) (140.8) Income tax provision (2,295) (4,116) 1,821 44.2 ——– ——- ———– Net income (1) 3,400 6,268 (2,868) (45.8) ======== ======= =========== Reconciliation of net income to EBITDA: Net income (1) 3,400 6,268 Interest expense, net 15,443 8,268 Income tax provision 2,295 4,116 Depreciation and amortization 14,487 8,454 ——– ——- ———– EBITDA 35,625 27,106 8,519 31.4 ======== ======= =========== —————————- NM – Not meaningful Airport Services – All Locations ($ in thousands) (unaudited) YTD Change YTD 2008 YTD 2007 Favorable/(Unfavorable) – ——– ——– ———————– $ $ $ % ——– ——– ———– ———– Revenue Fuel revenue 279,477 143,536 135,941 94.7 Non-fuel revenue 118,218 60,000 58,218 97.0 ——– ——– ———– Total revenue 397,695 203,536 194,159 95.4 Cost of revenue Cost of revenue — fuel 193,796 84,916 (108,880) (128.2) Cost of revenue — non-fuel 20,668 6,093 (14,575) NM ——– ——– ———– Total cost of revenue 214,464 91,009 (123,455) (135.7) Fuel gross profit 85,681 58,620 27,061 46.2 Non-fuel gross profit 97,550 53,907 43,643 81.0 ——– ——– ———– Gross profit 183,231 112,527 70,704 62.8 ======== ======== =========== Selling, general and administrative expenses 106,933 59,730 (47,203) (79.0) Depreciation and amortization 29,124 16,417 (12,707) (77.4) ——– ——– ———– Operating income 47,174 36,380 10,794 29.7 Interest expense, net (31,281) (16,529) (14,752) (89.2) Other income (expense) 310 (60) 370 NM Unrealized (losses) gains on derivative instruments (555) (77) (478) NM Income tax provision (6,306) (7,815) 1,509 19.3 ——– ——– ———– Net income (1) 9,342 11,899 (2,557) (21.5) ======== ======== =========== Reconciliation of net income to EBITDA: Net income (1) 9,342 11,899 Interest expense, net 31,281 16,529 Income tax provision 6,306 7,815 Depreciation and amortization 29,124 16,417 ——– ——– ———– EBITDA 76,053 52,660 23,393 44.4 ======== ======== =========== ————————— 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.
Bulk Liquid Storage Terminals ($ in thousands) (unaudited) QTD Change Q2 2008 Q2 2007 Favorable/(Unfavorable) ——– ——– ———————— $ $ $ % ——– ——– ———– ———— Revenue Terminal revenue 72,899 59,026 13,873 23.5 Environmental response revenue 5,331 4,165 1,166 28.0 —————– ———– Total revenue 78,230 63,191 15,039 23.8 Costs and expenses Terminal operating costs 39,443 33,425 (6,018) (18.0) Environmental response operating costs 4,166 3,193 (973) (30.5) —————– ———– Total operating costs 43,609 36,618 (6,991) (19.1) Terminal gross profit 33,456 25,601 7,855 30.7 Environmental response gross profit 1,165 972 193 19.9 —————– ———– Gross profit 34,621 26,573 8,048 30.3 General and administrative expenses 6,365 6,098 (267) (4.4) Depreciation and amortization 10,323 9,040 (1,283) (14.2) —————– ———– Operating income 17,933 11,435 6,498 56.8 Interest expense, net (5,173) (3,961) (1,212) (30.6) Loss on extinguishment of debt – (12,569) 12,569 NM Other income 1,194 755 439 58.1 Unrealized gains on derivative instruments 18,010 4,669 13,341 NM Provision for income taxes (12,418) (305) (12,113) NM Minority interest 102 52 50 96.2 ——– ——– ———– Net income 19,648 76 19,572 NM ======== ======== =========== Reconciliation of net income to EBITDA: Net income 19,648 76 Interest expense, net 5,173 3,961 Provision for income taxes 12,418 305 Depreciation and amortization 10,323 9,040 ——– ——– ———– EBITDA 47,562 13,382 34,180 NM ======== ======== =========== ————————— NM – Not meaningful Bulk Liquid Storage Terminals ($ in thousands) (unaudited) YTD Change YTD 2008 YTD 2007 Favorable/(Unfavorable) – ——– ——– ———————– $ $ $ % ——– ——– ———– ———– Revenue Terminal revenue 147,123 120,902 26,221 21.7 Environmental response revenue 9,501 12,705 (3,204) (25.2) —————– ———– Total revenue 156,624 133,607 23,017 17.2 Costs and expenses Terminal operating costs 77,985 66,415 (11,570) (17.4) Environmental response operating costs 7,895 10,079 2,184 21.7 —————– ———– Total operating costs 85,880 76,494 (9,386) (12.3) Terminal gross profit 69,138 54,487 14,651 26.9 Environmental response gross profit 1,606 2,626 (1,020) (38.8) —————– ———– Gross profit 70,744 57,113 13,631 23.9 General and administrative expenses 13,195 11,667 (1,528) (13.1) Depreciation and amortization 20,657 17,562 (3,095) (17.6) ——– ——– ———– Operating income 36,892 27,884 9,008 32.3 Interest expense, net (9,892) (7,368) (2,524) (34.3) Loss on extinguishment of debt – (12,569) 12,569 NM Other income 1,751 3,928 (2,177) (55.4) Unrealized gains on derivative instruments 290 4,427 (4,137) (93.4) Provision for income taxes (11,462) (6,728) (4,734) (70.4) Minority interest 257 25 232 NM ——– ——– ———– Net income 17,836 9,599 8,237 85.8 ======== ======== =========== Reconciliation of net income to EBITDA: Net income 17,836 9,599 Interest expense, net 9,892 7,368 Provision for income taxes 11,462 6,728 Depreciation and amortization 20,657 17,562 ——– ——– ———– EBITDA 59,847 41,257 18,590 45.1 ======== ======== =========== ————————— NM – Not meaningful
Gas Production and Distribution ($ in thousands) (unaudited) QTD Change Q2 2008 Q2 2007 Favorable/(Unfavorable) ——- ——- ———————– $ $ $ % ——- ——- ———— ———– Contribution margin Revenue — utility 31,858 22,820 9,038 39.6 Cost of revenue — utility 24,078 15,008 (9,070) (60.4) ——- ——- ———— Contribution margin — utility 7,780 7,812 (32) (0.4) Revenue — non-utility 23,723 18,300 5,423 29.6 Cost of revenue — non- utility 15,344 10,994 (4,350) (39.6) ——- ——- ———— Contribution margin — non-utility 8,379 7,306 1,073 14.7 Total contribution margin 16,159 15,118 1,041 6.9 Production 1,295 1,211 (84) (6.9) Transmission and distribution 3,548 3,570 22 0.6 Selling, general and administrative expenses 4,423 4,030 (393) (9.8) Depreciation and amortization 1,664 1,666 2 0.1 ——- ——- ———— Operating income 5,229 4,641 588 12.7 Interest expense, net (2,360) (2,287) (73) (3.2) Other income (expense) 101 19 82 NM Unrealized (losses) gains on derivative instruments (129) 68 (197) NM Income tax provision (1,113) (956) (157) (16.4) ——- ——- ———— Net income (1) 1,728 1,485 243 16.4 ======= ======= ============ Reconciliation of net income to EBITDA: Net income (1) 1,728 1,485 Interest expense, net 2,360 2,287 Income tax provision 1,113 956 Depreciation and amortization 1,664 1,666 ——- ——- ———— EBITDA 6,865 6,394 471 7.4 ======= ======= ============ —————————– NM – Not meaningful Gas Production and Distribution ($ in thousands) (unaudited) YTD YTD YTD Change 2008 2007 Favorable/(Unfavorable) – ——- ——- ———————– $ $ $ % ——- ——- ———— ———- Contribution margin Revenue — utility 61,257 45,111 16,146 35.8 Cost of revenue — utility 45,802 29,599 (16,203) (54.7) ——- ——- ———— Contribution margin — utility 15,455 15,512 (57) (0.4) Revenue — non-utility 46,682 36,810 9,872 26.8 Cost of revenue — non- utility 29,768 21,805 (7,963) (36.5) ——- ——- ———— Contribution margin — non-utility 16,914 15,005 1,909 12.7 Total contribution margin 32,369 30,517 1,852 6.1 Production 2,512 2,332 (180) (7.7) Transmission and distribution 7,153 6,953 (200) (2.9) Selling, general and administrative expenses 8,836 8,110 (726) (9.0) Depreciation and amortization 3,332 3,397 65 1.9 ——- ——- ———— Operating income 10,536 9,725 811 8.3 Interest expense, net (4,671) (4,532) (139) (3.1) Other income (expense) 172 (34) 206 NM Unrealized (losses) gains on derivative instruments (150) (199) 49 24.6 Income tax provision (2,305) (1,942) (363) (18.7) ——- ——- ———— Net income (1) 3,582 3,018 564 18.7 ======= ======= ============ Reconciliation of net income to EBITDA: Net income (1) 3,582 3,018 Interest expense, net 4,671 4,532 Income tax provision 2,305 1,942 Depreciation and amortization 3,332 3,397 ——- ——- ———— EBITDA 13,890 12,889 1,001 7.8 ======= ======= ============ —————————– 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.
District Energy ($ in thousands) (unaudited) QTD Change Q2 2008 Q2 2007 Favorable/(Unfavorable) ——- ——- ———————— $ $ $ % ——- ——- ———– ———— Cooling capacity revenue 4,828 4,738 90 1.9 Cooling consumption revenue 6,073 6,800 (727) (10.7) Other revenue 717 768 (51) (6.6) Finance lease revenue 1,179 1,235 (56) (4.5) ——- ——- ———– Total revenue 12,797 13,541 (744) (5.5) Direct expenses — electricity 3,826 4,301 475 11.0 Direct expenses — other (1) 4,250 4,727 477 10.1 ——- ——- ———– Direct expenses — total 8,076 9,028 952 10.5 Gross profit 4,721 4,513 208 4.6 Selling, general and administrative expenses 766 822 56 6.8 Amortization of intangibles 341 341 – – ——- ——- ———– Operating income 3,614 3,350 264 7.9 Interest expense, net (2,608) (2,172) (436) (20.1) Other income 46 120 (74) (61.7) Unrealized gains on derivative instruments 48 – 48 NM Income tax (provision) benefit (247) (431) 184 42.7 Minority interest (145) (140) (5) (3.6) ——- ——- ———– Net income (loss) (2) 708 727 (19) (2.6) ======= ======= =========== Reconciliation of net income (loss) to EBITDA: Net income (loss) (2) 708 727 Interest expense, net 2,608 2,172 Income tax provision (benefit) 247 431 Depreciation 1,476 1,440 Amortization of intangibles 341 341 ——- ——- ———– EBITDA 5,380 5,111 269 5.3 ======= ======= =========== —————————– NM – Not meaningful District Energy ($ in thousands) (unaudited) YTD YTD YTD Change 2008 2007 Favorable/(Unfavorable) ——- ——- ———————– $ $ $ % ——- ——- ———– ———– Cooling capacity revenue 9,634 9,289 345 3.7 Cooling consumption revenue 7,841 8,662 (821) (9.5) Other revenue 1,449 1,417 32 2.3 Finance lease revenue 2,373 2,483 (110) (4.4) ——- ——- ———– Total revenue 21,297 21,851 (554) (2.5) Direct expenses — electricity 5,002 5,784 782 13.5 Direct expenses — other (1) 8,953 8,876 (77) (0.9) ——- ——- ———– Direct expenses — total 13,955 14,660 705 4.8 Gross profit 7,342 7,191 151 2.1 Selling, general and administrative expenses 1,758 1,590 (168) (10.6) Amortization of intangibles 682 678 (4) (0.6) ——- ——- ———– Operating income 4,902 4,923 (21) (0.4) Interest expense, net (5,152) (4,259) (893) (21.0) Other income 110 194 (84) (43.3) Unrealized gains on derivative instruments 18 – 18 NM Income tax (provision) benefit 107 (218) 325 149.1 Minority interest (290) (272) (18) (6.6) ——- ——- ———– Net income (loss) (2) (305) 368 (673) (182.9) ======= ======= =========== Reconciliation of net income (loss) to EBITDA: Net income (loss) (2) (305) 368 Interest expense, net 5,152 4,259 Income tax provision (benefit) (107) 218 Depreciation 2,952 2,871 Amortization of intangibles 682 678 ——- ——- ———– EBITDA 8,374 8,394 (20) (0.2) ======= ======= =========== —————————– NM – Not meaningful
(1) Includes depreciation expense.
(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.
Airport Parking ($ in thousands) (unaudited) QTD Change Q2 2008 Q2 2007 Favorable/(Unfavorable) ——- ——- ———————— $ $ $ % ——- ——- ———– ———— Revenue 19,420 20,068 (648) (3.2) Direct expenses (1) 15,344 14,623 (721) (4.9) ——- ——- ———– Gross profit 4,076 5,445 (1,369) (25.1) Selling, general and administrative expenses 2,912 2,780 (132) (4.7) Amortization of intangibles 727 705 (22) (3.1) ——- ——- ———– Operating income 437 1,960 (1,523) (77.7) Interest expense, net (3,749) (4,021) 272 6.8 Other (expense) income (11) 158 (169) (107.0) Unrealized gains on derivative instruments 81 179 (98) (54.7) Income tax benefit 1,270 689 581 84.3 Minority interest 273 168 105 62.5 ——- ——- ———– Net loss (2) (1,699) (867) (832) (96.0) ======= ======= =========== Reconciliation of net loss to EBITDA: Net loss (2) (1,699) (867) Interest expense, net 3,749 4,021 Income tax benefit (1,270) (689) Depreciation 1,289 1,070 Amortization of intangibles 727 705 ——- ——- ———– EBITDA 2,796 4,240 (1,444) (34.1) ======= ======= =========== Airport Parking ($ in thousands) (unaudited) YTD YTD YTD Change 2008 2007 Favorable/(Unfavorable) ——- ——- ———————– $ $ $ % ——- ——- ———– ———– Revenue 38,315 38,879 (564) (1.5) Direct expenses (1) 30,921 28,912 (2,009) (6.9) ——- ——- ———– Gross profit 7,394 9,967 (2,573) (25.8) Selling, general and administrative expenses 5,606 4,393 (1,213) (27.6) Amortization of intangibles 1,543 1,493 (50) (3.3) ——- ——- ———– Operating income 245 4,081 (3,836) (94.0) Interest expense, net (7,636) (7,987) 351 4.4 Other (expense) income 61 148 (87) (58.8) Unrealized gains on derivative instruments 158 109 49 45.0 Income tax benefit 2,771 1,452 1,319 90.8 Minority interest 697 369 328 88.9 ——- ——- ———– Net loss (2) (3,704) (1,828) (1,876) (102.6) ======= ======= =========== Reconciliation of net loss to EBITDA: Net loss (2) (3,704) (1,828) Interest expense, net 7,636 7,987 Income tax benefit (2,771) (1,452) Depreciation 2,559 2,105 Amortization of intangibles 1,543 1,493 ——- ——- ———– EBITDA 5,263 8,305 (3,042) (36.6) ======= =====