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

 

FORM 10-Q

 

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

For the Quarterly Period Ended March 31, 2013

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 55^th 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 x No o

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

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

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

There were 48,434,327 limited liability company interests without par value outstanding at April 26, 2013.

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MACQUARIE INFRASTRUCTURE COMPANY LLC

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		Page
PART I. FINANCIAL INFORMATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations			1
Quantitative and Qualitative Disclosures About Market Risk			34
Controls and Procedures			35
Consolidated Condensed Balance Sheets as of March 31, 2013 (Unaudited) and December 31, 2012			36
Consolidated Condensed Statements of Operations for the Quarters Ended March 31, 2013 and 2012 (Unaudited)			37
Consolidated Condensed Statements of Comprehensive Income for the Quarters Ended March 31, 2013 and 2012 (Unaudited)			38
Consolidated Condensed Statements of Cash Flows for the Quarters Ended March 31, 2013 and 2012 (Unaudited)			39
Notes to Consolidated Condensed Financial Statements (Unaudited)			41
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			57
Item 1A. Risk Factors			57
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			57
Item 3. Defaults Upon Senior Securities			57
Item 4. Mine Safety Disclosures			57
Item 5. Other Information			57
Item 6. Exhibits			57

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

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PART I
  
FINANCIAL INFORMATION

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

The following discussion of the financial condition and results of operations of Macquarie Infrastructure Company LLC should be read in conjunction with the consolidated condensed financial statements and the notes to those statements included elsewhere herein. This discussion contains forward-looking statements that involve risks and uncertainties and are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and similar expressions identify such forward-looking statements. Our actual results and timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012. Unless required by law, we can undertake no obligation to update forward-looking statements. Readers should also carefully review the risk factors set forth in other reports and documents filed from time to time with the SEC.

Except as otherwise specified, “Macquarie Infrastructure Company,” “MIC,” “we,” “us,” and “our” refer to the Company and its subsidiaries together from June 25, 2007 and, prior to that date, to the Trust, the Company and its subsidiaries. Macquarie Infrastructure Management (USA) Inc., which we refer to as our Manager, is part of the Macquarie Group, comprised of Macquarie Group Limited and its subsidiaries and affiliates worldwide.

We own, operate and invest in a diversified group of infrastructure businesses that provide basic services, such as gas utility services to businesses and individuals primarily in the U.S. The businesses we own and operate include:

Our infrastructure businesses generally operate in sectors with limited direct competition and significant 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.

Overview

In analyzing the financial condition and results of operations of our businesses, we focus primarily on cash generation, and our ability to distribute cash to shareholders in particular. The ability of our businesses to generate cash, broadly, is tied to their ability to effectively manage the volume of products/services sold and the margin earned on those sales. Offsetting these are required payments on debt facilities, taxes and capital expenditures necessary to maintain the productivity of the fixed assets of the businesses, among others.

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At IMTT, we focus on the amount of storage under contract and the rates at which that storage is leased to third parties and on making appropriate expenditures in maintaining fixed assets of the business. We believe that the average rates on all storage contracts will increase by between 5% and 7% in 2013. Capacity utilization is expected to decrease modestly during 2013 as a result of certain large storage tanks being taken out of service for cleaning and inspection. The decrease associated with this activity is expected to be partially offset by the commissioning of new storage capacity currently or soon to be under construction.

At Hawaii Gas, our focus is on the number of customers served by each of the utility and non-utility portions of the business, and in the case of the non-utility portion, the margins achieved on gas sales as well. Hawaii Gas has an active marketing program that seeks to develop new customers throughout Hawaii. We periodically pursue rate cases that allow for adjustment of the rates in the utility portion of the business, although we do not intend to pursue any significant rate case in 2013. The pricing of non-utility gas is adjusted to reflect changes in the cost of the product and costs associated with delivering it to customers. In addition to the existing utility and non-utility operations, Hawaii Gas is advancing initiatives related to the distribution of Liquefied Natural Gas, or LNG. Small-scale deliveries of LNG to Hawaii from the U.S. mainland are expected to begin in 2013. Variation in the volume of gas sold by Hawaii Gas is a function of tourism and economic activity in Hawaii generally. We expect the volume of gas sold in 2013 to increase compared with 2012 despite the increase in conservation and substitution.

At District Energy, we focus on attracting and maintaining relationships with building owners and managers such that they choose to install or continue to use the business’ cooling services. Financial results are subject to slight variation based on the extent to which the temperatures and humidity in Chicago are above or below historic norms.

We believe that our recent investment in MIC Solar will generate a predictable and stable level of distributable cash. MIC Solar constitutes a business segment that does not meet the threshold of a reportable segment. Accordingly, the results of operations of MIC Solar are aggregated with our Corporate and Other results. We are reviewing similar investment opportunities and believe that we could potentially deploy additional capital in this segment over the medium term.

IMTT, Hawaii Gas, District Energy and MIC Solar are largely resistant to economic downturns, primarily due to the contracted or utility-like nature of their revenues. The results for these businesses also reflect the essential services they provide and the contractual or regulatory ability to pass most cost increases through to customers. We believe these businesses are characteristically able to generate consistent cash flows throughout the business cycle.

At Atlantic Aviation, our focus is on attracting and maintaining relationships with general aviation aircraft owners and pilots such that they are incentivized to use our FBOs. General aviation activity has improved since the quarter ended March 31, 2009, although forecasting flight activity levels remains a challenge. We believe that flight activity levels will continue to increase in 2013, subject to continued economic growth in the United States.

Improvement in general aviation flight activity levels has resulted in improvement in the operating performance of Atlantic Aviation for the quarter ended March 31, 2013 compared with the prior comparable quarter. Atlantic Aviation is generating a substantial amount of cash; however, through the end of the first quarter, the cash is being used to reduce Atlantic Aviation’s indebtedness. Those repayments are expected to enhance the terms on which we may be able to refinance this debt. We have previously indicated that we expect to refinance all of the long-term debt of Atlantic Aviation prior to the end of the second quarter of 2013.

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Dividends

Since January 1, 2012, MIC has paid or declared the following dividends:

Declared

Period Covered

$ per LLC Interest

Record Date

Payable Date

April 26, 2013

First quarter 2013

$

0.6875

May 13, 2013

May 16, 2013

December 12, 2012

Fourth quarter 2012

$

0.6875

December 24, 2012

December 28, 2012

October 29, 2012

Third quarter 2012

$

0.6875

November 12, 2012

November 15, 2012

July 30, 2012

Second quarter 2012

$

0.625

August 13, 2012

August 16, 2012

April 30, 2012

First quarter 2012

$

0.20

May 14, 2012

May 17, 2012

February 1, 2012

Fourth quarter 2011

$

0.20

March 5, 2012

March 8, 2012

Our Board has previously expressed its intent to distribute a significant portion of the cash generated by our businesses to our shareholders in the form of a quarterly cash dividend. Not all of the cash flow generated by our businesses is currently available for distribution. The payment of a quarterly cash dividend of $0.6875 per share for the quarter ended March 31, 2013 is being paid out of cash generated by certain of our operating entities, supplemented by cash on hand at the MIC holding company. Following the anticipated refinancing of Atlantic Aviation’s long-term debt in the second quarter of 2013, if consummated, and contingent upon the continued stable performance of MIC’s businesses and acceptable economic conditions, our Board will consider increasing the amount of the quarterly cash dividend to $0.875 per share.

In determining whether to change the dividend, the Board will take into account such matters as the state of the capital markets and general business conditions, the Company’s financial condition, results of operations, capital requirements and any contractual, legal and regulatory restrictions on the payment of dividends by the Company to its shareholders or by its subsidiaries to the Company, and any other factors that it deems relevant. In particular, each of the Company’s businesses and investments have substantial debt commitments and restrictive covenants, which must be satisfied before any of them can make distributions to the Company. Any or all of these factors could affect both the timing and amount, if any, of future dividends.

We view MIC as a total return investment opportunity. Consistent with that view, we intend to distribute a significant portion of the cash flow generated by our businesses, after providing for taxes, debt service and maintenance capital expenditure of these businesses, in the form of a quarterly cash dividend. We believe that over time we will distribute approximately 80% to 85% of the free cash flow (in proportion to our equity interest) generated by our businesses, subject to their continued stable performance and prevailing economic conditions. See “Results of Operations — Consolidated: Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow” and “Summary of Our Proportionately Combined Results” for further discussions on free cash flow and our proportionately combined financial measures in Part I of this Form 10-Q.

We further believe that the growth characteristics of our businesses will permit our distributable cash flow per share to grow at a high single-digit rate annually over the medium term, again subject to the continued stable performance of our businesses. From 2007 to 2012, our distributable cash flow per share has increased by 12.5% per year. We believe that our cash dividend, combined with the potential for capital appreciation stemming from the growth drivers in each of our businesses, supports our view of the Company as a total return investment opportunity.

MIC has announced a proposed equity offering and a debt financing commitment letter to refinance Atlantic Aviation’s existing credit facility. The equity offering, if completed, is expected to impact the amount of our quarterly cash dividend. The capital we propose to raise, along with the proceeds of the proposed New Atlantic Aviation Credit Facility and cash on hand, will be used to refinance the long-term debt of our Atlantic Aviation business. If the proposed refinancing is completed on the terms described, Atlantic Aviation will no longer be required by the terms of Atlantic Aviation’s debt to use the cash generated by it to reduce its debt (except in limited circumstances) and, assuming no material change in the performance of our businesses and subject to prevailing economic conditions, we expect to have access to a larger amount of free cash flow generated by our businesses.

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We intend to use a portion of the expected increase in available free cash flow to fund an increase in our quarterly cash dividend. We anticipate, subject to the completion of the refinancing, the continued stable performance of our businesses and investments and prevailing economic conditions, that we will increase our quarterly cash dividend to $3.50 per share, annualized, from $2.75 per share, annualized, effective with the dividend expected to be authorized for the second quarter of 2013.

Shelf Registration Statement and MIC Direct

On April 8, 2013, the Company filed an automatic shelf registration statement on Form S-3 (“shelf”) with the Securities and Exchange Commission to issue and sell an indeterminate amount of its LLC interests and debt securities in one or more future offerings. Along with the shelf registration statement, the Company filed a prospectus supplement with respect to a dividend reinvestment/direct stock purchase program named “MIC Direct”. The prospectus supplement relates to the issuance of up to 1.0 million additional LLC interests of MIC to participants in MIC Direct. The Company may also choose to fill requests for reinvestment of dividends or share purchases through MIC Direct via open market purchases.

Income Taxes

We file a consolidated federal income tax return that includes the taxable income of Hawaii Gas and Atlantic Aviation. IMTT and District Energy file separate federal income tax returns.

As a result of having federal net operating loss, or NOL, carryforwards, we do not expect to make regular federal tax payments until 2016. However, we expect to pay an Alternative Minimum Tax of approximately $1.3 million for 2013. In addition, we expect District Energy to pay an Alternative Minimum Tax of approximately $91,000. We expect that the Alternative Minimum Tax paid for 2013 will be available as a credit against regular federal income taxes in the future. The cash state and local taxes paid by our individual businesses are discussed in the sections entitled “Income Taxes” for each of these businesses.

Pursuant to tax sharing agreements, the individual businesses included in our consolidated federal income tax return pay MIC an amount equal to the federal income taxes each would have paid on a standalone basis as if they were not part of the MIC consolidated federal income tax return.

American Taxpayer Relief Act of 2012

In January of 2013, the American Taxpayer Relief Act of 2012 (the “2012 Tax Act”) was signed. The 2012 Act extends the period over which the 50% bonus depreciation provided for in the Tax Relief, Unemployment Insurance Reauthorization Act of 2010 (the “2010 Tax Act”) applies to include 2013. The Company expects to take the bonus depreciation provision into consideration when evaluating its maintenance and growth capital expenditure plans for 2013.

Results of Operations

Consolidated

Key Factors Affecting Operating Results:

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Results of Operations: Consolidated – (continued)

Our consolidated results of operations are as follows:

		Quarter Ended March 31,								Change Favorable/(Unfavorable)
		2013				2012				$				%
		($ In Thousands) (Unaudited)
Revenue
Revenue from product sales		$	174,115			$	172,954				1,161				0.7
Revenue from product sales – utility			36,921				38,314				(1,393	)			(3.6	)
Service revenue			52,115				52,409				(294	)			(0.6	)
Financing and equipment lease income			1,055				1,179				(124	)			(10.5	)
Total revenue			264,206				264,856				(650	)			(0.2	)
Costs and expenses
Cost of product sales			116,993				119,381				2,388				2.0
Cost of product sales – utility			31,489				32,172				683				2.1
Cost of services			10,934				12,661				1,727				13.6
Gross profit			104,790				100,642				4,148				4.1
Selling, general and administrative			49,209				55,263				6,054				11.0
Fees to manager-related party			29,177				4,995				(24,182	)			NM
Depreciation			9,255				7,551				(1,704	)			(22.6	)
Amortization of intangibles			8,628				8,546				(82	)			(1.0	)
Loss on disposal of assets			173				—				(173	)			NM
Total operating expenses			96,442				76,355				(20,087	)			(26.3	)
Operating income			8,348				24,287				(15,939	)			(65.6	)
Other income (expense)
Interest income			94				2				92				NM
Interest expense(1)			(7,686	)			(13,007	)			5,321				40.9
Equity in earnings and amortization charges of investee			10,462				9,501				961				10.1
Other expense, net			(2	)			(52	)			50				96.2
Net income before income taxes			11,216				20,731				(9,515	)			(45.9	)
Provision for income taxes			(4,502	)			(6,521	)			2,019				31.0
Net income		$	6,714			$	14,210				(7,496	)			(52.8	)
Less: net income attributable to noncontrolling interests			843				118				(725	)			NM
Net income attributable to MIC LLC		$	5,871			$	14,092				(8,221	)			(58.3	)

NM — Not meaningful

Gross Profit

Consolidated gross profit increased for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 reflecting improved results in the non-utility business at Hawaii Gas and an increase in non-fuel gross profit at Atlantic Aviation. The increase in gross profit also reflects the contracted revenues generated by MIC Solar. The increase was partially offset by the decrease in cooling consumption revenue at District Energy.

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Results of Operations: Consolidated – (continued)

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 primarily as a result of lower legal costs at the MIC holding company level, most significantly those incurred in connection with the arbitration and related matters involving MIC and its IMTT co-investor incurred during the quarter ended March 31, 2012. The decrease in selling, general and administrative expenses also reflects divestures at Atlantic Aviation.

Fees to Manager

Our Manager is entitled to a quarterly base management fee based primarily on our market capitalization, and potentially a performance fee, based on the performance of our stock relative to a U.S. utilities index. For the quarter ended March 31, 2013, we incurred base management fees of $7.1 million and performance fees of $22.0 million payable to our Manager. Our Manager elected to reinvest the base management fees and performance fees in additional LLC interests. Our Manager did not earn a performance fee for the quarter ended March 31, 2012.

The unpaid portion of the base management fees and performance fees at the end of each reporting period is included in due to manager-related party in the consolidated condensed balance sheets. The following table shows our Manager’s election to reinvest its quarterly base management fees and performance fees, if any, in additional LLC interests:

Period		Base Management Fee Amount ($ in thousands)				Performance Fee Amount ($ in thousands)				LLC Interests Issued				Issue Date
2013 Activities:
First quarter 2013		$	7,135			$	22,042				(1)				(1)
2012 Activities:
Fourth quarter 2012		$	6,299			$	43,820				980,384				March 20, 2013
Third quarter 2012			5,844				23,509				695,068				December 05, 2012
Second quarter 2012			4,760				—				113,847				August 30, 2012
First quarter 2012			4,995				—				147,682				May 31, 2012

Depreciation

Depreciation expense increased for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 primarily as a result of projects undertaken by MIC Solar.

Interest Expense and Loss on Derivative Instruments

Interest expense includes non-cash losses on derivative instruments of $1.1 million and $6.3 million for the quarters ended March 31, 2013 and 2012, respectively. Non-cash losses on derivatives recorded in interest expense are attributable to the change in fair value of interest rate instruments and include the reclassification of amounts from accumulated other comprehensive loss into earnings. Excluding the portion related to adjustments to derivative instruments and interest rate swap breakage fees at Atlantic Aviation, interest expense decreased primarily due to the expiration of interest rate swaps at Atlantic Aviation in October of 2012 and lower principal balance on the term loan debt.

Equity in Earnings and Amortization Charges of Investees

The increase in equity in the earnings for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 primarily reflects our share of the improved operating results and our share of the non-cash derivative gains for the quarter ended March 31, 2013 compared with our share of the non-cash derivative losses for the quarter ended March 31, 2012 from IMTT.

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Results of Operations: Consolidated – (continued)

Income Taxes

We file a consolidated federal income tax return that includes the taxable income of Hawaii Gas and Atlantic Aviation. IMTT and District Energy file separate federal income tax returns. We own less than 80% of IMTT and District Energy. These businesses are not included in our consolidated federal tax return. These businesses file separate federal income tax returns.

For 2013, we expect any consolidated taxable income to be fully offset by our NOL carryforwards. At December 31, 2012, our federal NOL balance was $192.2 million. This balance excludes the NOL carryforwards of District Energy (see District Energy — Income Taxes below), which was $9.8 million at December 31, 2012. We expect to pay a federal Alternative Minimum Tax of approximately $1.3 million and District Energy to pay a Federal Alternative Minimum Tax of approximately $91,000 for 2013.

For 2013, our federal and state income taxes will be approximately $35.8 million, or 40.14% of net income before taxes, of which $7.4 million relates to state and local income taxes. As discussed below, the provision for state and local income taxes includes a valuation allowance of approximately $1.6 million for the use of certain state NOL carryforwards. The difference between our effective tax rate and the U.S. federal statutory rate of 35% is primarily attributable to state and local income taxes and adjustments for our less than 80% owned businesses.

In calculating our consolidated state income tax provision, we have provided a valuation allowance for certain state income tax NOL carryforwards, the utilization of which is not assured beyond a reasonable doubt. In addition, we expect to incur certain expenses that will not be deductible in determining state taxable income. Accordingly, these expenses have also been excluded in determining our state income tax expense.

We expect our valuation allowance to increase by approximately $1.6 million in 2013. The increase in valuation allowance in 2012 for state NOLs was $3.0 million.

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

We have disclosed EBITDA excluding non-cash items for our Company and each of our operating segments in Note 10, “Reportable Segments”, in our consolidated condensed financial statements, as a key performance metric relied on by management in evaluating our performance. EBITDA excluding non-cash items is defined as earnings before interest, taxes, depreciation and amortization and non-cash items, which includes impairments, derivative gains and losses and adjustments for other non-cash items reflected in the statements of operations. We believe EBITDA excluding non-cash items provides additional insight into the performance of our operating businesses relative to each other and similar businesses without regard to their capital structure, and their ability to service or reduce debt, fund capital expenditures and/or support distributions to the holding company.

We also disclose Free Cash Flow, as defined by us, as a means of assessing the amount of cash generated by our businesses and supplementing other information provided in accordance with GAAP. We define Free Cash Flow as cash from operating activities, which includes cash paid for interest and taxes, less maintenance capital expenditures and changes in working capital, except for MIC Solar, for which we define Free Cash Flow as distributions received or receivable from this business. Determining our proportionate share of free cash flow from MIC Solar, as defined by us historically, is difficult due to the variable ownership interests and different treatment of tax attributes and actual cash flows between the MIC Solar members over time. Therefore, we believe the most appropriate measure of our proportionate share of free cash flow from MIC Solar is the actual cash distributions allocated during the applicable period.

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

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Results of Operations: Consolidated – (continued)

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

A reconciliation of net income attributable to MIC LLC to EBITDA excluding non-cash items and EBITDA excluding non-cash items to Free Cash Flow, on a consolidated basis, is provided below:

		Quarter Ended March 31,								Change Favorable/(Unfavorable)
		2013				2012				$				%
		($ In Thousands) (Unaudited)
Net income attributable to MIC LLC(1)		$	5,871			$	14,092
Interest expense, net(2)			7,592				13,005
Provision for income taxes			4,502				6,521
Depreciation(3)			9,255				7,551
Depreciation – cost of services(3)			1,698				1,674
Amortization of intangibles(4)			8,628				8,546
Loss on disposal of assets			106				—
Equity in earnings and amortization charges of investee(5)			(10,462	)			(9,501	)
Base management fees settled/to be settled in LLC interests			7,135				4,995
Performance fees settled/to be settled in LLC interests			22,042				—
Other non-cash (income) expense, net			(1,006	)			751
EBITDA excluding non-cash items		$	55,361			$	47,634				7,727				16.2
EBITDA excluding non-cash items		$	55,361			$	47,634
Interest expense, net(2)			(7,592	)			(13,005	)
Interest rate swap breakage fees(2)			—				(248	)
Adjustment to derivative instruments recorded in interest expense(2)			(1,339	)			(5,382	)
Amortization of debt financing costs(2)			947				978
Equipment lease receivables, net			967				838
Provision for income taxes, net of changes in deferred taxes			(1,432	)			(753	)
Changes in working capital			(13,243	)			(6,332	)
Cash provided by operating activities			33,669				23,730
Changes in working capital			13,243				6,332
Adjustment to free cash flow for MIC Solar(6)			(276	)			—
Maintenance capital expenditures			(2,617	)			(3,727	)
Free cash flow		$	44,019			$	26,335				17,684				67.2

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Results of Operations: Consolidated – (continued)

IMTT

We account for our 50% interest in IMTT under the equity method. To enable meaningful analysis of IMTT’s performance across periods, IMTT’s overall performance is discussed below, rather than IMTT’s contribution to our consolidated results.

Key Factors Affecting Operating Results:

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Results of Operations: IMTT – (continued)

		Quarter Ended March 31,
		2013				2012				Change Favorable/(Unfavorable)
		$				$				$				%
		($ In Thousands) (Unaudited)
Revenue
Terminal revenue			121,332				111,617				9,715				8.7
Environmental response revenue			10,153				6,387				3,766				59.0
Total revenue			131,485				118,004				13,481				11.4
Costs and expenses
Terminal operating costs			50,304				46,472				(3,832	)			(8.2	)
Environmental response operating costs			7,887				5,156				(2,731	)			(53.0	)
Total operating costs			58,191				51,628				(6,563	)			(12.7	)
Terminal gross profit			71,028				65,145				5,883				9.0
Environmental response gross profit			2,266				1,231				1,035				84.1
Gross profit			73,294				66,376				6,918				10.4
General and administrative expenses			8,482				7,459				(1,023	)			(13.7	)
Depreciation and amortization			18,422				16,907				(1,515	)			(9.0	)
Operating income			46,390				42,010				4,380				10.4
Interest expense, net(1)			(6,606	)			(6,591	)			(15	)			(0.2	)
Other income			742				456				286				62.7
Provision for income taxes			(17,121	)			(14,367	)			(2,754	)			(19.2	)
Noncontrolling interest			(75	)			(99	)			24				24.2
Net income			23,330				21,409				1,921				9.0
Reconciliation of net income to EBITDA excluding non-cash items:
Net income			23,330				21,409
Interest expense, net(1)			6,606				6,591
Provision for income taxes			17,121				14,367
Depreciation and amortization			18,422				16,907
Other non-cash expenses			75				188
EBITDA excluding non-cash items			65,554				59,462				6,092				10.2
EBITDA excluding non-cash items			65,554				59,462
Interest expense, net(1)			(6,606	)			(6,591	)
Adjustments to derivative instruments recorded in interest expense(1)			(4,409	)			(2,679	)
Amortization of debt financing costs(1)			666				805
Provision for income taxes, net of changes in deferred taxes			(1,685	)			(4,834	)
Changes in working capital			(17,387	)			7,615
Cash provided by operating activities			36,133				53,778
Changes in working capital			17,387				(7,615	)
Maintenance capital expenditures			(19,121	)			(8,118	)
Free cash flow			34,399				38,045				(3,646	)			(9.6	)

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Results of Operations: IMTT – (continued)

Revenue and Gross Profit

The increase in terminal revenue primarily reflects growth in storage revenue and revenue from ancillary services. Storage revenue grew due to an increase in average rental rates of 6.8% for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 and an increase in average storage capacity of 1.3 million barrels as a result of the completion of various growth capital projects. MIC believes that full year average storage rates in 2013 will increase between 5% and 7%.

As planned, capacity utilization declined to 92.7% for the quarter ended March 31, 2013 from 95.9% for the quarter ended March 31, 2012 due to the timing and increased size of tanks currently out of service for cleaning and inspection.

Terminal operating costs were higher for the quarter ended March 31, 2013 as compared with the quarter ended March 31, 2012 primarily due to Hurricane Sandy and healthcare costs.

Gross profit from environmental response services increased due to a higher level of spill response activity during the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012.

General and Administrative Expense

General and administrative expenses increased for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 primarily due to an increase in costs as a result of the increased spill response activity.

Depreciation and Amortization

Depreciation and amortization expense increased for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 as IMTT placed capital assets in service, resulting in higher asset balances.

Interest Expense, Net

Interest expense, net, includes non-cash gains on derivative instruments of $31,000 and non-cash losses on derivative instruments of $2.0 million for the quarters ended March 31, 2013 and 2012, respectively. Excluding the portion related to adjustments to derivative instruments, interest expense increased primarily due to an increase in debt balance for the period. Cash interest paid was $8.8 million and $8.3 million for the quarters ended March 31, 2013 and 2012, respectively.

Income Taxes

The business files a consolidated federal income tax return and state income tax returns in the states in which IMTT operates.

For the year ending December 31, 2013, IMTT expects to pay $3.9 million of federal income taxes and $4.0 million of state income taxes. IMTT’s actual federal tax liability could be higher or lower depending on the cost of the capital assets placed in service during the year, the ultimate amount of Hurricane Sandy repairs and the extent to which IMTT is able to realize the benefits of bonus depreciation on those assets. The “Provision for income taxes, net of changes in deferred taxes” of $1.7 million for the quarter ended March 31, 2013 in the table above, includes $692,000 of federal income taxes and $1.0 million of state income taxes.

TABLE OF CONTENTS

Results of Operations: IMTT – (continued)

For the full year 2012, IMTT recorded $40.8 million of federal income tax expense and $10.5 million of state income tax expense. This includes $13.4 million and $4.5 million of current federal and state income taxes, respectively. The federal income tax expense exceeded the cash taxes primarily due to the benefit of accelerated tax depreciation, which is discussed below.

A significant difference between IMTT’s book and federal taxable income relates to depreciation of terminalling fixed assets. For book purposes, these fixed assets are depreciated primarily over 15 to 30 years using the straight-line method of depreciation. For federal income tax purposes, these fixed assets are depreciated primarily over 5 to 15 years using accelerated methods. Most terminalling fixed assets placed in service in 2010, 2011, 2012 and 2013 did or should qualify for the federal 50% or 100% bonus tax depreciation, except assets placed in service in Louisiana and financed with Gulf Opportunity Zone Bonds (“GO Zone Bonds”). A significant portion of Louisiana terminalling fixed assets constructed since Hurricane Katrina were financed with GO Zone Bonds. GO Zone Bond financed assets are depreciated, for tax purposes, primarily over 9 to 20 years using the straight-line depreciation method. Most of the states in which the business operates do not allow the use of the federal tax depreciation calculation methods.

Hawaii Gas

Management believes that the presentation and analysis of contribution margin, a non-GAAP performance measure, is meaningful to understanding the business’ performance under both a utility rate structure and a non-utility unregulated pricing structure. Regulation of the utility portion of Hawaii Gas’s operations provides for the pass through of increases or decreases in feedstock costs to customers. Changes in the cost of Liquefied Petroleum Gas, or LPG, distributed to non-utility customers can be recovered in pricing, subject to competitive conditions.

Contribution margin should not be considered an alternative to revenue, gross profit, operating income, or net income, determined in accordance with U.S. GAAP. A reconciliation of contribution margin to gross profit is presented in the below table. The business calculates contribution margin as revenue less direct costs of revenue other than production and transmission and distribution costs. Other companies may calculate contribution margin differently or may use different metrics and, therefore, the contribution margin presented for Hawaii Gas is not necessarily comparable with metrics of other companies.

Key Factors Affecting Operating Results:

TABLE OF CONTENTS

Results of Operations: Hawaii Gas – (continued)

		Quarter Ended March 31,
		2013				2012				Change Favorable/(Unfavorable)
		$				$				$				%
		($ In Thousands) (Unaudited)
Contribution margin
Revenue – non-utility			32,085				31,629				456				1.4
Cost of revenue – non-utility			13,354				15,573				2,219				14.2
Contribution margin – non-utility			18,731				16,056				2,675				16.7
Revenue – utility			36,921				38,314				(1,393	)			(3.6	)
Cost of revenue – utility			26,654				28,217				1,563				5.5
Contribution margin – utility			10,267				10,097				170				1.7
Total contribution margin			28,998				26,153				2,845				10.9
Production			2,715				2,006				(709	)			(35.3	)
Transmission and distribution			5,866				5,448				(418	)			(7.7	)
Gross profit			20,417				18,699				1,718				9.2
Selling, general and administrative expenses			5,332				5,257				(75	)			(1.4	)
Depreciation and amortization			2,158				1,941				(217	)			(11.2	)
Operating income			12,927				11,501				1,426				12.4
Interest expense, net(1)			(1,705	)			(1,891	)			186				9.8
Other expense			(32	)			(69	)			37				53.6
Provision for income taxes			(4,483	)			(3,799	)			(684	)			(18.0	)
Net income(2)			6,707				5,742				965				16.8
Reconciliation of net income to EBITDA excluding non-cash items:
Net income(2)			6,707				5,742
Interest expense, net(1)			1,705				1,891
Provision for income taxes			4,483				3,799
Depreciation and amortization			2,158				1,941
Other non-cash expenses			662				807
EBITDA excluding non-cash items			15,715				14,180				1,535				10.8
EBITDA excluding non-cash items			15,715				14,180
Interest expense, net(1)			(1,705	)			(1,891	)
Adjustments to derivative instruments recorded in interest expense(1)			(78	)			(465	)
Amortization of debt financing costs(1)			106				120
Provision for income taxes, net of changes in deferred taxes			(3,092	)			(2,170	)
Changes in working capital			(10,567	)			(2,858	)
Cash provided by operating activities			379				6,916
Changes in working capital			10,567				2,858
Maintenance capital expenditures			(1,006	)			(1,764	)
Free cash flow			9,940				8,010				1,930				24.1

TABLE OF CONTENTS

Results of Operations: Hawaii Gas – (continued)

Contribution Margin and Operating Income

Non-utility contribution margin improved for the quarter ended March 31, 2013 as the result of an increase in the volume of gas sold and margin management. The volume of gas sold by the non-utility business increased by 2.2% for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012.

Utility contribution margin improved for the quarter ended March 31, 2013 as the result of an increase in the volume of gas sold. The volume of gas sold by the utility business increased by 1.7% compared with the prior comparable quarter.

Tesoro has indicated that it will close its Hawaii refinery at the end of April of 2013. Tesoro has issued termination notices to Hawaii Gas with respect to the supply of naphtha feedstock and LPG when the refinery closes. Post the refinery closure, Tesoro has agreed to supply Hawaii Gas with naphtha feedstock through mid-July based on the same pricing as the existing supply agreement. Hawaii Gas is currently in discussions to secure naphtha and terminalling arrangements on a longer-term basis and expects to have agreements in place during the second quarter of 2013. Subject to the receipt of any applicable HPUC approvals, Hawaii Gas intends to recover any increases in the costs of such feedstock via its fuel adjustment mechanism.

Hawaii Gas has also secured additional supplies of LPG from its foreign supplier and has signed a three year supply agreement. Hawaii Gas expects that it will maintain its contribution margin in the near term.

Tesoro has indicated that it intends to convert the refinery to an import, storage and distribution terminal. If Tesoro is unsuccessful or does not receive the appropriate authorizations to convert the refinery to an import, storage and distribution terminal, Hawaii Gas may have to construct storage capacity and supporting infrastructure sufficient to ensure its supply of feedstock.

Hawaii Gas is moving forward with the initiative that will allow it to use LNG as a back-up fuel to serve its customers. This initiative to use LNG on at least a small scale is expected to begin in 2013, subject to the receipt of any applicable HPUC approvals.

Production, transmission and distribution and selling, general and administrative expenses are composed primarily of labor related expenses and professional fees. On a combined basis, these costs were higher for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 primarily due to an increase in marketing and advertising, salaries and wages and costs associated with the LNG initiative.

Interest Expense, Net

Interest expense, net, includes non-cash losses on derivative instruments of $529,000 and $1.2 million for the quarters ended March 31, 2013 and 2012, respectively. Excluding the portion related to adjustments to derivative instruments, interest expense decreased for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 due to lower interest rates from the refinancings that occurred in August of 2012. Cash interest paid was $1.7 million and $2.2 million for the quarters ended March 31, 2013 and 2012, respectively.

Income Taxes

Income from Hawaii Gas is included in our consolidated federal income tax return, and is subject to Hawaii state income taxes. The tax expense in the table above includes both state taxes and the portion of the consolidated federal tax liability attributable to the business. For the year ended December 31, 2013, the business expects to pay state income taxes of approximately $1.9 million. The “Provision for income taxes, net of changes in deferred taxes” of $3.1 million for the quarter ended March 31, 2013 in the above table, includes $2.6 million of federal income taxes payable to MIC and $498,000 of state income taxes. Any current federal income tax liability is expected to be offset in consolidation by the application of NOLs.

The business’ federal taxable income differs from book income primarily as a result of differences in the depreciation of fixed assets. The state of Hawaii does not allow the federal bonus depreciation deduction of 50% for 2012 and 2013 in determining state taxable income.

TABLE OF CONTENTS

Results of Operations: District Energy

District Energy

Customers of District Energy pay two charges to receive chilled water services: a fixed charge based on contracted capacity and a variable charge based on the consumption of chilled water. Capacity charges are typically adjusted annually at a fixed rate or are based on the Consumer Price Index (CPI). The terms of the business’ customer contracts provide for the pass through of increases or decreases in electricity costs, the largest component of the business’ direct expenses.

The financial results discussed below reflect 100% of District Energy’s performance during the periods presented below.

Key Factors Affecting Operating Results:

TABLE OF CONTENTS

Results of Operations: District Energy – (continued)

		Quarter Ended March 31,
		2013				2012				Change Favorable/(Unfavorable)
		$				$				$				%
		($ In Thousands) (Unaudited)
Cooling capacity revenue			5,660				5,495				165				3.0
Cooling consumption revenue			1,961				3,473				(1,512	)			(43.5	)
Other revenue			698				639				59				9.2
Finance lease revenue			1,055				1,179				(124	)			(10.5	)
Total revenue			9,374				10,786				(1,412	)			(13.1	)
Direct expenses – electricity			1,396				2,538				1,142				45.0
Direct expenses – other(1)			4,816				4,557				(259	)			(5.7	)
Direct expenses – total			6,212				7,095				883				12.4
Gross profit			3,162				3,691				(529	)			(14.3	)
Selling, general and administrative expenses			889				891				2				0.2
Amortization of intangibles			337				341				4				1.2
Operating income			1,936				2,459				(523	)			(21.3	)
Interest expense, net(2)			(1,285	)			(2,329	)			1,044				44.8
Other income			59				57				2				3.5
(Provision) benefit for income taxes			(214	)			10				(224	)			NM
Noncontrolling interest			(189	)			(211	)			22				10.4
Net income (loss)			307				(14	)			321				NM
Reconciliation of net income (loss) to EBITDA excluding non- cash items:
Net income (loss)			307				(14	)
Interest expense, net(2)			1,285				2,329
Provision (benefit) for income taxes			214				(10	)
Depreciation(1)			1,698				1,674
Amortization of intangibles			337				341
Other non-cash expenses			11				29
EBITDA excluding non-cash items			3,852				4,349				(497	)			(11.4	)
EBITDA excluding non-cash items			3,852				4,349
Interest expense, net(2)			(1,285	)			(2,329	)
Adjustments to derivative instruments recorded in interest expense(2)			(1,286	)			(303	)
Amortization of debt financing costs(2)			177				170
Equipment lease receivable, net			967				838
Provision/benefit for income taxes, net of changes in deferred taxes			(203	)			47
Changes in working capital			(416	)			(1,825	)
Cash provided by operating activities			1,806				947
Changes in working capital			416				1,825
Maintenance capital expenditures			(146	)			(87	)
Free cash flow			2,076				2,685				(609	)			(22.7	)

NM — Not meaningful

TABLE OF CONTENTS

Results of Operations: District Energy – (continued)

Gross Profit

Gross profit decreased primarily as a result of cooler average temperatures during the quarter ended March 31, 2013 compared with quarter ended March 31, 2012 resulting in lower consumption revenue, net of electricity costs. As previously disclosed, the quarter ended March 31, 2012 was abnormally warm. Other direct expenses increased due to the timing of off-season maintenance expense for system reliability. A greater percentage of the business’ off-season maintenance was conducted during the quarter ended March 31, 2013 compared to the quarter ended March 31, 2012. Conversely, cooling capacity revenue increased with new customers and annual inflation-related increases in contract capacity rates in accordance with customer contract terms.

Interest Expense, Net

Interest expense, net, includes non-cash losses on derivative instruments of $505,000 and $1.4 million for the quarters ended March 31, 2013 and 2012, respectively. Excluding the portion related to adjustments to derivative instruments, interest was lower for the quarter ended March 31, 2013 primarily due to the lower debt balance. Cash interest paid was $2.4 million for each of the quarters ended March 31, 2013 and 2012.

Income Taxes

District Energy files a separate federal income tax return and a separate Illinois state income tax return. As of December 31, 2012, the business had approximately $9.8 million in federal NOL carryforwards available to offset positive taxable income and $23.3 million in Illinois state NOL carryforwards, for which utilization is deferred until 2015. For 2013, District Energy expects to pay a federal Alternative Minimum Tax of approximately $91,000 and state income taxes of approximately $478,000. The “Provision/benefit for income taxes, net of changes in deferred taxes” of $203,000 for the quarter ended March 31, 2013 in the above table, includes $33,000 of federal income taxes and $170,000 of state income taxes. The business does not expect to pay regular federal income taxes in 2013 due to the utilization of NOL carryforwards.

The business’ federal taxable income differs from book income primarily as a result of differences in the depreciation of fixed assets. The state of Illinois does not allow the federal bonus depreciation deduction of 50% for 2012 and 2013 in determining state taxable income.

Atlantic Aviation

Key Factors Affecting Operating Results:

TABLE OF CONTENTS

Results of Operations: Atlantic Aviation – (continued)

		Quarter Ended March 31,
		2013				2012				Change Favorable/(Unfavorable)
		$				$				$				%
		($ In Thousands) (Unaudited)
Revenue
Fuel revenue			140,344				141,325				(981	)			(0.7	)
Non-fuel revenue			43,796				42,802				994				2.3
Total revenue			184,140				184,127				13				0.0
Cost of revenue
Cost of revenue-fuel			99,785				100,308				523				0.5
Cost of revenue-non-fuel			4,721				5,567				846				15.2
Total cost of revenue			104,506				105,875				1,369				1.3
Fuel gross profit			40,559				41,017				(458	)			(1.1	)
Non-fuel gross profit			39,075				37,235				1,840				4.9
Gross profit			79,634				78,252				1,382				1.8
Selling, general and administrative expenses			43,477				43,944				467				1.1
Depreciation and amortization			13,871				13,815				(56	)			(0.4	)
Loss on disposal of assets			173				—				(173	)			NM
Operating income			22,113				20,493				1,620				7.9
Interest expense, net(1)			(4,099	)			(8,785	)			4,686				53.3
Other expense			(4	)			(16	)			12				75.0
Provision for income taxes			(7,398	)			(4,710	)			(2,688	)			(57.1	)
Net income(2)			10,612				6,982				3,630				52.0
Reconciliation of net income to EBITDA excluding non-cash items:
Net income(2)			10,612				6,982
Interest expense, net(1)			4,099				8,785
Provision for income taxes			7,398				4,710
Depreciation and amortization			13,871				13,815
Loss on disposal of assets			106				—
Other non-cash income			(68	)			(141	)
EBITDA excluding non-cash items			36,018				34,151				1,867				5.5
EBITDA excluding non-cash items			36,018				34,151
Interest expense, net(1)			(4,099	)			(8,785	)
Interest rate swap breakage fees(1)			—				(248	)
Adjustments to derivative instruments recorded in interest expense(1)			25				(4,614	)
Amortization of debt financing costs(1)			661				688
Provision for income taxes, net of changes in deferred taxes			(4,048	)			(207	)
Changes in working capital			3,158				340
Cash provided by operating activities			31,715				21,325
Changes in working capital			(3,158	)			(340	)
Maintenance capital expenditures			(1,465	)			(1,876	)
Free cash flow			27,092				19,109				7,983				41.8

NM — Not meaningful

TABLE OF CONTENTS

Results of Operations: Atlantic Aviation – (continued)

Revenue and Gross Profit

The majority of the revenue and gross profit earned by Atlantic Aviation is generated through fueling GA aircraft at facilities located at 62 U.S. airports at which Atlantic Aviation operates. Revenue is categorized according to who owns the fuel used to service these aircraft. If Atlantic Aviation owns the fuel, it records the cost to purchase that fuel as cost of revenue-fuel. The business’ corresponding fuel revenue is its cost to purchase that fuel plus a margin. The business generally pursues a strategy of maintaining, and where appropriate increasing, dollar-based margins. Generally, fluctuations in the cost of fuel are passed through to the customer.

Atlantic Aviation also has into-plane arrangements whereby it fuels aircraft with fuel owned by another party. It collects a fee for this service that is recorded as non-fuel revenue. Non-fuel revenue also includes various services such as hangar rentals, de-icing, landing fees, tie-down fees and miscellaneous services.

The business’ fuel-related revenue and gross profit are driven by the volume of fuel sold and dollar-based margin/fee per gallon. This applies to both fuel and into-plane revenue. Customers will sometimes move from one category to the other.

Management believes discussing total fuel-related revenue and gross profit, including both fuel sales and into-plane arrangements (as recorded in the non-fuel revenue line) and related key metrics on an aggregate basis, provides a more meaningful analysis of Atlantic Aviation’s gross profit than a discussion of each item. For the quarter ended March 31, 2013, the business derived 62.4% of total gross profit from fuel and fuel-related services compared with 64.2% for the quarter ended March 31, 2012.

The increase in gross profit for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 was the result of increased rental revenue and de-icing gross profit, partially offset by lower fuel gross profit. Rental revenue increased by 6.1% and de-icing gross profit increased by 84.3% for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012. GA related-fuel gross profit decreased by 0.9% over the same comparable period.

On a same store basis, total gross profit increased by 4.1% for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012. On a same store basis, the volume of GA fuel sold increased by 3.2% for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 and GA average fuel margin was flat for the same period.

Atlantic Aviation continues to seek lease extensions prior to maturity and to increase the portfolio’s weighted average lease life. The weighted average lease life was 18.8 years at March 31, 2013 as compared with 17.7 years at March 31, 2012.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were lower by 1.1% for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 due primarily to divestures.

Interest Expense, Net

Interest expense, net, includes non-cash losses on derivative instruments of $26,000 and $3.7 million for the quarters ended March 31, 2013 and 2012, respectively. In connection with the debt payments, Atlantic Aviation incurred interest rate swap breakage fees prior to its maturity in October of 2012. Cash paid for interest rate swap breakage fees was $248,000 for the quarter ended March 31, 2012. Excluding the portion related to adjustments to derivative instruments and interest rate swap breakage fees, interest expense decreased from the quarter ended March 31, 2012 to the quarter ended March 31, 2013 primarily due to the expiration of interest rate swaps in October of 2012 and lower principal balance on the term loan debt.

Excluding interest rate swap breakage fees, cash interest paid was $3.3 million and $12.6 million for the quarters ended March 31, 2013 and 2012, respectively.

TABLE OF CONTENTS

Results of Operations: Atlantic Aviation – (continued)

Income Taxes

Income generated by Atlantic Aviation is included in our consolidated federal income tax return. The business files state income tax returns in more than 30 states in which it operates. The tax expense in the table above includes both state taxes and the portion of the consolidated federal tax liability attributable to the business.

At December 31, 2012, Atlantic Aviation had $37.0 million of state NOL carryforwards. State NOL carryforwards are specific to the state in which the NOL was generated and various states impose limitations on the utilization of NOL carryforwards. Therefore, the business may incur state income tax liabilities in the future, even if its consolidated state taxable income is less than $37.0 million.

For 2013, the business expects to pay state income taxes of approximately $3.3 million. The “Provision for income taxes, net of changes in deferred taxes” of $4.1 million for the quarter ended March 31, 2013 in the above table, includes $3.2 million of federal income taxes payable to MIC and $868,000 of state income taxes. Any current federal income tax liability is expected to be offset in consolidation by the application of NOLs.

TABLE OF CONTENTS

Results of Operations: Corporate & Other

Corporate & Other

The financial results below reflect Corporate and Other’s performance during the periods below. Corporate and Other includes MIC Solar as MIC Solar does not meet the threshold of a reportable segment.

		Quarter Ended March 31,
		2013				2012				Change Favorable/(Unfavorable)
		$				$				$				%
		($ In Thousands) (Unaudited)
Contracted revenue			1,686				—				1,686				NM
Cost of revenue			109				—				(109	)			NM
Gross profit			1,577				—				1,577				NM
Base management fees			7,135				4,995				(2,140	)			(42.8	)
Performance fees			22,042				—				(22,042	)			NM
Selling, general and administrative expenses			1,942				5,171				3,229				62.4
Depreciation			1,517				—				(1,517	)			NM
Operating loss			(31,059	)			(10,166	)			(20,893	)			NM
Interest expense, net(1)			(503	)			—				(503	)			NM
Other income (expense), net			2,406				(24	)			2,430				NM
Benefit for income taxes			7,593				1,978				5,615				NM
Noncontrolling interest			(654	)			93				(747	)			NM
Net loss(2)			(22,217	)			(8,119	)			(14,098	)			(173.6	)
Reconciliation of net loss to EBITDA excluding non-cash items:
Net loss(2)			(22,217	)			(8,119	)
Interest expense, net(1)			503				—
Benefit for income taxes			(7,593	)			(1,978	)
Depreciation			1,517				—
Base management to be settled/settled in LLC interests			7,135				4,995
Performance fees to be settled in LLC interests			22,042				—
Other non-cash (income) expense			(1,611	)			56
EBITDA excluding non-cash items			(224	)			(5,046	)			4,822				95.6
EBITDA excluding non-cash items			(224	)			(5,046	)
Interest expense, net(1)			(503	)			—
Amortization of debt financing costs(1)			3				—
Benefit for income taxes, net of changes in deferred taxes			5,911				1,577
Changes in working capital			(5,418	)			(1,989	)
Cash used in operating activities			(231	)			(5,458	)
Changes in working capital			5,418				1,989
Adjustment to free cash flow for MIC Solar(3)			(276	)			—
Free cash flow			4,911				(3,469	)			8,380				NM

NM — Not meaningful

TABLE OF CONTENTS

Summary of Our Proportionately Combined Results

We believe that our proportionately combined metrics, including proportionately combined gross profit, proportionately combined EBITDA excluding non-cash, proportionately combined cash interest, proportionately combined cash taxes, proportionately combined maintenance capital expenditures, proportionately combined free cash flow, proportionately combined free cash flow per share, proportionately combined growth capital expenditures, and proportionately combined net debt, provide our investors and management with additional insight into the financial results and cash generated by our combined ownership interest in our businesses and investments for the reporting period. Given the nature of the businesses we own and our different ownership level in these businesses, management believes that GAAP measures such as net income and cash from operating activities do not fully reflect all of the items that our management considers in assessing the amount of cash generated by our ownership interest in our businesses and investments.

We note that proportionately combined metrics used by us may be calculated in a different manner by other companies, which may limit their usefulness as a comparative measure. Therefore, our proportionately combined metrics should be used as a supplement to, and not in lieu of, of our financial results reported under GAAP.

Our “proportionately combined” financial measures are those attributable to MIC’s ownership interest in each of our operating businesses and MIC Corporate. The following tables represent our proportionately combined share of gross profit, EBITDA excluding non-cash items and free cash flow. The gross profit, EBITDA excluding non-cash items and free cash flows are derived from the “Results of Operations” of our investments and businesses described above.

See “Results of Operations” for each of our businesses and Corporate and Other to see a reconciliation of EBITDA excluding non-cash to net income (loss), its closest comparable GAAP measure and see reconciliation of free cash flow to cash provided by (used in) operating activities, its closest comparable GAAP measure.

		For the Quarter Ended March 31, 2013
($ in Thousands) (Unaudited)		IMTT 50%				Hawaii Gas				District Energy 50.01%				Atlantic Aviation				MIC Corporate				Proportionately Combined(1)				IMTT 100%				District Energy 100%
Gross profit			36,647				20,417				1,581				79,634				1,577				139,856				73,294				3,162
EBITDA excluding non-cash items			32,777				15,715				1,926				36,018				(224	)			86,212				65,554				3,852
Free cash flow			17,200				9,940				1,038				27,092				4,911				60,181				34,399				2,076

		For the Quarter Ended March 31, 2012
($ in Thousands) (Unaudited)		IMTT 50%				Hawaii Gas				District Energy 50.01%				Atlantic Aviation				MIC Corporate				Proportionately Combined(1)				IMTT 100%				District Energy 100%
Gross profit			33,188				18,699				1,846				78,252				—				131,985				66,376				3,691
EBITDA excluding non-cash items			29,731				14,180				2,175				34,151				(5,046	)			75,191				59,462				4,349
Free cash flow			19,023				8,010				1,343				19,109				(3,469	)			44,015				38,045				2,685
Gross profit variance			10.4	%			9.2	%			(14.3	)%			1.8	%			NM				6.0%				10.4	%			(14.3	)%
EBITDA excluding non-cash items variance			10.2	%			10.8	%			(11.4	)%			5.5	%			95.6	%			14.7%				10.2	%			(11.4	)%
Free cash flow variance			(9.6	)%			24.1	%			(22.7	)%			41.8	%			NM				36.7%				(9.6	)%			(22.7	)%

NM — Not meaningful

TABLE OF CONTENTS

Liquidity and Capital Resources

Consolidated

Our primary cash requirements include normal operating expenses, debt service, debt principal payments, payments of dividends and capital expenditures. Our primary source of cash is operating activities, although we may borrow against credit facilities for capital expenditures, issue additional LLC interests or sell assets to generate cash.

We believe that our operating businesses will have sufficient liquidity and capital resources to meet future requirements, including servicing long-term debt obligations and making distributions to MIC. We base our assessment of the sufficiency of the liquidity and capital resources on the assumptions that:

Historically we have capitalized our businesses in large part using project-finance style debt. Project-finance style debt is generally limited-recourse, floating rate, non-amortizing bank debt with a medium term maturity of between five and seven years. Typically, we have sought to ensure that the debt at each business was non-recourse to MIC and that there was no cross-collateralization or cross-guarantees of any debt between our businesses.

More recently, given the openness of the debt markets generally, we have also used slightly longer dated private placement debt as a component of the capital structure of our businesses. For example, in August of 2012, we included $100.0 million of 10-year non-amortizing senior secured notes in the capital structure of Hawaii Gas in connection with the refinancing of its long-term debt.

We may in the future consider other forms of capital, including bank, bond or hybrid debt instruments as a means of financing our businesses.

We are currently paying the principal balance on the long-term debt of our businesses in the following two circumstances:

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Liquidity and Capital Resources: Consolidated – (continued)

At present, we have no debt at the MIC holding company level. Rather, we had $143.0 million in readily available cash and cash equivalents at March 31, 2013. A portion of our holding company cash is likely to be used to repay debt principal at Atlantic Aviation in an effort to accelerate the achievement of target leverage levels. Any such repayment is expected to facilitate the refinancing of Atlantic Aviation’s long term debt and the elimination of the cash sweep noted above. The deployment of capital in this manner and the subsequent refinancing of Atlantic Aviation, if successful, are expected to increase our distributable free cash flow and may result in an increase in our quarterly cash dividend.

We may in the future consider borrowing money at the MIC holding company level in circumstances where the cost of capitalizing our businesses, collectively, or the terms and covenants available could be improved as a result. Our use of debt instruments at the holding company level or otherwise depends on multiple factors including but not limited to: the condition of the debt capital markets; the operating performance of our businesses and investments; the near and long term capital needs of our businesses; our ability to stagger debt maturities across our portfolio; and, where applicable, our express or implied debt ratings.

Our financing strategy involves ensuring that we and our businesses maintain appropriate liquidity and access to capital markets, managing our net exposure to floating interest rate volatility, and maintaining a balanced spectrum of debt maturities. Within these parameters, we seek to optimize our borrowing costs and the terms and covenants of our debt facilities.

Analysis of Consolidated Historical Cash Flows from Operations

		Quarter Ended March 31,								Change Favorable/(Unfavorable)
		2013				2012
($ In Thousands)		$				$				$				%
Cash provided by operating activities			33,669				23,730				9,939				41.9
Cash used in investing activities			(14,875	)			(6,653	)			(8,222	)			(123.6	)
Cash used in financing activities			(5,723	)			(7,473	)			1,750				23.4

Operating Activities

Consolidated cash provided by operating activities comprises primarily the cash from operations of the businesses we own, as described in each of the business discussions below. The cash flow from our consolidated business’ operations is partially offset by expenses paid by the holding company, including base management fees and performance fees to the extent paid in cash, professional fees and cost associated with being a public company.

The increase in consolidated cash provided by operating activities for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 was primarily due to:

Distributions from IMTT are reflected in our consolidated cash provided by operating activities only up to our cumulative 50% share of IMTT’s earnings recorded since our investment in IMTT. Cumulative distributions in excess of this are reflected in our consolidated cash from investing activities as a return of investment in unconsolidated business.

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Liquidity and Capital Resources: Consolidated – (continued)

Investing Activities

The increase in consolidated cash used in investing activities for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 was primarily due to capital expenditures made by MIC Solar during the quarter ended March 31, 2013. Capital expenditures also increased at Atlantic Aviation and District Energy during the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012. The increase was partially offset by lower capital expenditures at Hawaii Gas.

Financing Activities

The decrease in consolidated cash used in financing activities for quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 was primarily due to:

See below for further description of the cash flows related to our businesses.

IMTT

The following analysis represents 100% of the cash flows of IMTT, rather than just the composition of cash flows that are included in our consolidated cash flows. We believe this is the most appropriate and meaningful approach to discussion of the historical cash flow trends of IMTT. We account for our 50% ownership of this business using the equity method.

		Quarter Ended March 31,								Change Favorable/(Unfavorable)
		2013				2012
($ In Thousands)		$				$				$				%
Cash provided by operating activities			36,133				53,778				(17,645	)			(32.8	)
Cash used in investing activities			(50,928	)			(36,861	)			(14,067	)			(38.2	)
Cash provided by (used in) financing activities			13,580				(1,741	)			15,321				NM

NM — Not meaningful

Operating Activities

Cash provided by operating activities at IMTT is generated primarily from storage rentals and ancillary services that are billed monthly, primarily in advance. Cash used in operating activities is mainly for payroll and benefits costs, maintenance and repair of fixed assets, utilities and professional services, interest payments and payments to tax jurisdictions.

Cash provided by operating activities decreased for the quarter ended March 31, 2013 as compared to the quarter ended March 31, 2012, primarily as a result of:

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Liquidity and Capital Resources: IMTT – (continued)

Investing Activities

Cash used in investing activities primarily relates to capital expenditures which were higher for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012. Total cash capital expenditures increased from $37.1 million for the quarter ended March 31, 2012 to $50.8 million for the quarter ended March 31, 2013, primarily due to the increase in maintenance capital expenditures. Total capital expenditures, on an accrual basis, increased from $28.5 million for the quarter ended March 31, 2012 to $34.2 million for the quarter ended March 31, 2013.

The 2010 Tax Act provides for 100% bonus tax depreciation for certain fixed assets placed in service after September 8, 2010 and before January 1, 2012, and 50% bonus tax depreciation for certain fixed assets placed in service during 2012 for federal income tax purposes. The 2012 Tax Act extended the qualifying period for 50% bonus tax depreciation to include 2013. Generally, states do not allow this bonus tax depreciation deduction in determining state taxable income. Importantly, Louisiana, in which IMTT has significant operations, does permit the use of federal tax depreciation in calculating state taxable income.

Maintenance and Environmental Capital Expenditure

IMTT incurs maintenance capital expenditures to prolong the useful lives of existing revenue-producing assets and environmental capital expenditures to comply with regulatory requirements. Maintenance and environmental capital expenditures include the refurbishment of storage tanks, piping, dock facilities and environmental capital expenditures, principally in relation to improvements in containment measures and remediation.

During the quarters ended March 31, 2013 and 2012, IMTT incurred $19.1 million and $8.1 million, respectively, on maintenance and environmental capital expenditures, of which $5.9 million in 2013 was associated with repairs to the Bayonne terminal as a result of damage from Hurricane Sandy. The balance of the increase is primarily related to the increased size of tanks currently out of service and undergoing planned cleaning and inspection and a number of projects that could not be completed in 2012 due to Hurricane Sandy.

For the full-year 2013, MIC believes IMTT will spend approximately $60.0 million on maintenance capital expenditures. IMTT anticipates that maintenance capital expenditures will remain at elevated levels through 2014 due to required tank cleaning, inspections and regulatory compliance.

Growth Capital Expenditure

IMTT incurred growth capital expenditures of $15.1 million and $20.4 million for the quarters ended March 31, 2013 and 2012, respectively.

In the quarter ended March 31, 2013, IMTT brought into service projects which are estimated to have a total cost of $11.4 million. Together with the $124.0 million of projects completed in 2012, the combined completed projects will contribute $23.0 million of annualized gross profit and EBITDA as outlined in the table below. Notwithstanding that these assets have been placed in service, as at March 31, 2013, an additional $8.8 million is anticipated to be spent on these projects.

		Anticipated Incremental Gross Profit/EBITDA				Anticipated Cumulative Gross Profit/EBITDA
2012		$	3.8 million			$	3.8 million
2013			19.2 million				23.0 million

At March 31, 2013, IMTT had growth projects with an estimated total cost of $35.3 million underway, including $11.4 million of support infrastructure projects. The projects are expected to generate an additional $9.6 million of annualized gross profit and EBITDA as outlined in the table below. To date, $6.8 million has been spent on these projects.

		Anticipated Incremental Gross Profit/EBITDA				Anticipated Cumulative Gross Profit/EBITDA
2013		$	3.6 million			$	3.6 million
2014			6.0 million				9.6 million

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Liquidity and Capital Resources: IMTT – (continued)

The company is currently evaluating projects with estimated capital expenditures between $100.0 million and $220.0 million, of which $55.0 million has already been approved. Returns on these projects are anticipated to be in line with historical levels.

Support infrastructure is growth capital expenditure that does not directly generate incremental gross profit or EBITDA as it has no contractual revenue stream associated with it. However, it does facilitate the ongoing growth of IMTT. Examples of such projects include new docks and berths, new truck racks and other inter-modal transport facilities and new or improved pumps and piping.

Financing Activities

Cash provided by financing activities for the quarter ended March 31, 2013 compared with cash used in financing activities for the quarter ended March 31, 2012 reflects a higher level of net borrowings, partially offset by debt issuance costs for the current period.

At March 31, 2013, the balance on IMTT’s total debt facilities was $951.1 million. This consisted of $336.3 million in letter of credit backed tax-exempt bonds, $174.8 million in bank owned tax-exempt bonds, $414.6 million in revolving credit facilities and $25.4 million in shareholder loans. The weighted average interest rate of the outstanding debt facilities, including any interest rate swaps and fees associated with outstanding letters of credit was 4.46%. Cash interest paid was $8.8 million and $8.3 million for the quarters ended March 31, 2013 and 2012, respectively.

On February 15, 2013, IMTT refinanced its revolving credit facility. Among other changes, the refinancing increased the size of the facility from $1,025.0 million to $1,040.0 million. The maturity was extended to February of 2018. The covenant limiting the Debt to EBITDA ratio was increased to 5.00x from 4.75x and the interest rate margins were reduced between 0.25% and 0.50%. A restriction on payments of distributions was added that mirrors the dividend policy of the amended Shareholders’ Agreement.

On February 15, 2013, IMTT also reissued its GO Zone Bonds III and IV in order to extend the mandatory tender date from December of 2015 to February of 2018, as well as to mirror the amended covenant provisions of the revolving credit facility. Only one lender from the existing issuance did not participate in the reissuance. The departing lender’s allocation has since been taken up by other lenders.

Subsequent to the financial close of the revolving credit facility, IMTT has added additional lenders to the syndicate and increased the capacity of the facility from $1,040.0 million to $1,205.0 million. IMTT is in discussion with additional institutions and anticipates further increasing the capacity. The undrawn balance of the revolving credit facility as of March 31, 2013, including these additional lenders on a proforma basis, was $447.2 million.

The financial covenant requirements under IMTT's revolving credit facility, and the calculation of these measures at March 31, 2013, were as follows:

For a description of the material terms of IMTT’s credit facilities, see “Liquidity and Capital Resources” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

Hawaii Gas

		Quarter Ended March 31,								Change Favorable/(Unfavorable)
		2013				2012
($ In Thousands)		$				$				$				%
Cash provided by operating activities			379				6,916				(6,537	)			(94.5	)
Cash used in investing activities			(3,506	)			(4,186	)			680				16.2
Cash provided by financing activities			20,000				10,000				10,000				100.0

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Liquidity and Capital Resources: Hawaii Gas – (continued)

Operating Activities

The principal source of cash provided by operating activities is customer receipts. The business incurs payments for fuel, materials, pipeline repairs, vendor services and supplies, payroll and benefit costs, revenue based taxes and payment of administrative costs. Customers are generally billed monthly and make payments on account. Vendors and suppliers generally bill the business when services are rendered or when products are shipped.

The decrease in cash provided by operating activities for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 was driven primarily by higher working capital due to increased foreign LPG cargos. This was partially offset by higher contribution margin.

Investing Activities

Cash used in investing activities is composed primarily of capital expenditures. Capital expenditures are funded by drawing on credit facilities as well as cash from operating activities.

The following table sets forth information about capital expenditures at Hawaii Gas ($ in thousands):

		Maintenance				Growth
Quarter ended March 31, 2013, accrual basis		$	1,006			$	1,129
Change in accrued capital expenditure balance from December 31, 2012			748				580
Quarter ended March 31, 2013, cash basis		$	1,754			$	1,709
Quarter ended March 31, 2012, accrual basis		$	1,764			$	958
Change in accrued capital expenditure balance from December 31, 2011			824				676
Quarter ended March 31, 2012, cash basis		$	2,588			$	1,634
2013 full year projected		$	8.3 million			$	9.8 million

Maintenance Capital Expenditure

Maintenance capital expenditures include replacement of pipeline sections, improvements to the business’ transmission system and SNG plant, improvements to buildings and other property and the purchase of equipment.

Maintenance capital expenditures for the quarter ended March 31, 2013 were lower compared with the quarter ended March 31, 2012 as a result of spending related to the required pipeline maintenance and inspection projects which were completed in 2012.

Growth Capital Expenditure

Growth capital expenditures include the purchase of meters, regulators and propane tanks for new customers, the cost of installing pipelines for new residential and commercial construction, new product initiatives, the renewable natural gas plant and the expansion of gas storage facilities.

Growth capital expenditures for the quarter ended March 31, 2013 were higher compared with the quarter ended March 31, 2012 driven mainly by new customer installations, and timing of meter and regulator purchases.

The 2010 Tax Act provides for 100% tax depreciation for certain fixed assets placed in service after September 8, 2010 and before January 1, 2012, and 50% tax depreciation for certain fixed assets placed in service during 2012 for federal income tax purposes. The 2012 Tax Act extended the qualifying period for 50% tax depreciation to include 2013. Generally, states do not allow this tax depreciation deduction in determining state taxable income.

Financing Activities

The main drivers of cash provided by financing activities are drawings on facilities for capital expenditures and working capital needs. At March 31, 2013, the balance on the business’ debt facilities consisted of $180.0 million in term loan and senior secured note borrowings and $20.0 million in revolving credit facility borrowings. The $20.0 million revolving credit facility borrowings consist of: (i) $10.0 million for working capital related to imports of foreign LPG cargos and (ii) $10.0 million to fund a portion of capital expenditures made through March 31, 2013.

TABLE OF CONTENTS

Liquidity and Capital Resources: Hawaii Gas – (continued)

The operating company has issued $100.0 million of 10-year, non-amortizing senior secured notes. The notes bear interest at a fixed rate of 4.22%. The operating company has also entered into a $60.0 million, 5-year senior secured revolving credit facility. This facility bears interest at LIBOR + 1.50%. The holding company has entered into an $80.0 million, 5-year, non-amortizing senior secured term loan agreement. The interest rate floats at LIBOR + 2.25%. The floating rate has effectively been fixed for 4 years at 0.64% using an interest rate swap, resulting in a fixed all in rate of 2.89%. The weighted average interest rate of the outstanding debt facilities, including the interest rate swap at March 31, 2013, was 3.44%. Cash interest paid was $1.7 million and $2.2 million for the quarters ended March 31, 2013 and 2012, respectively.

The financial covenants precluding distributions under each of the business’ credit facilities discussed above are as follows:

At March 31, 2013, the 12 month backward interest coverage ratio was 9.02x at the holding company and 17.56x at the operating company. The leverage ratio at March 31, 2013 was 63.37% at the holding company and 38.05% at the operating company.

Additionally, the HPUC requires the consolidated debt to total capital for the holding company to be less than 65% and that $20.0 million in cash resources be readily available at Hawaii Gas or MIC. At March 31, 2013, the debt to total capital ratio was 63.37% and $20.0 million in cash resources was readily available.

For a description of the material terms of Hawaii Gas’ credit facilities, see Note 10 “Long-Term Debt” in Part II, Item 8, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

District Energy

The following analysis represents 100% of the cash flows of District Energy.

		Quarter Ended March 31,								Change Favorable/(Unfavorable)
		2013				2012
($ In Thousands)		$				$				$				%
Cash provided by operating activities			1,806				947				859				90.7
Cash used in investing activities			(358	)			(235	)			(123	)			(52.3	)
Cash used in financing activities			(3,686	)			(1,525	)			(2,161	)			(141.7	)

Operating Activities

Cash provided by operating activities is driven primarily by customer receipts for services provided and leased equipment payments received (including non-revenue lease principal). Cash used in operating activities is driven by the timing of payments for electricity, vendor services or supplies and the payment of payroll and benefit costs. Cash provided by operating activities was higher as a result of favorable working capital movements for the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012. The favorable movement for the quarter ended March 31, 2013 resulted from the timing of customer payments received, lower payments to vendors from timing of operations and maintenance spending and timing of equipment lease payments received.

Non-revenue lease principal is the principal portion of lease payments received from equipment leases with various customers. This cash inflow is not included in EBITDA excluding non-cash items, as there is no impact on net income, but as a cash inflow to calculate cash from operating activities. Non-revenue lease principal was $967,000 and $838,000 for the quarters ended March 31, 2013 and 2012, respectively. Effective April 30, 2013, the business will no longer provide site specific cooling and heating services to a customer outside downtown Chicago for which fees and lease payments were being received. The business is seeking to recover the unamortized lease principal of approximately $8.6 million. The loss of this customer will reduce the business’ cash from operations.

TABLE OF CONTENTS

Liquidity and Capital Resources: District Energy – (continued)

Investing Activities

Cash used in investing activities mainly comprises capital expenditures, which are generally funded by drawing on available facilities and cash from operations. Cash used in investing activities for the quarters ended March 31, 2013 and 2012 primarily funded system maintenance and growth capital expenditures for new customer connections.

The following table sets forth information about District Energy’s capital expenditures ($ in thousands):

		Maintenance				Growth
Quarter ended March 31, 2013, accrual basis		$	146			$	—
Change in accrued capital expenditure balance from December 31, 2012			112				100
Quarter ended March 31, 2013, cash basis		$	258			$	100
Quarter ended March 31, 2012, accrual basis		$	87			$	214
Change in accrued capital expenditure balance from December 31, 2011			18				(85	)
Quarter ended March 31, 2012, cash basis		$	105			$	129
2013 full year projected		$	1.0 million			$	890,000

Maintenance Capital Expenditure

The business expects to spend approximately $1.0 million per year on capital expenditures relating to the replacement of parts, system reliability, customer service improvements and minor system modifications. Maintenance capital expenditures will be funded from available facilities and cash from operating activities. These expenditures were higher during the quarter ended March 31, 2013 due to the timing of spend on ordinary course maintenance projects.

Growth Capital Expenditure

Growth capital expenditures were lower during the quarter ended March 31, 2013 due to the timing of spend related to connecting new customers. New customers will typically reimburse the business for a substantial portion of expenditures related to connecting them to the business’ system, thereby reducing the impact of this element of capital expenditure.

Financing Activities

At March 31, 2013, the balance on the business’ debt facilities consisted of a $150.0 million term loan facility and a $10.9 million capital expenditure facility. The weighted average interest rate on the debt facilities, including the interest rate swaps and fees associated with outstanding letters of credit at March 31, 2013, was 5.92%. Cash interest paid was $2.4 million for each of the quarters ended March 31, 2013 and 2012.

The increase in cash used in financing activities was primarily due to the mandatory debt principal payments that commenced during the third quarter of 2012 and increased distributions paid to the noncontrolling interest shareholders.

In accordance with the terms of its loan agreement, District Energy will be applying 100% of its excess cash flow generated during the third quarter of 2012 and thereafter to pay a portion of its debt facilities through the loan maturity in September of 2014. These principal payments are applied to the capital expenditure facility followed by the term loan facility. The business paid $1.8 million and $3.4 million to its lenders in April of 2013 and during the quarter ended March 31, 2013, respectively.

The financial covenants triggering distribution lock-up or default under the business’ credit facility are as follows:

For a description of the material terms of District Energy’s credit facilities, see Note 10 “Long-Term Debt” in Part II, Item 8, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

TABLE OF CONTENTS

Liquidity and Capital Resources: Atlantic Aviation

Atlantic Aviation

		Quarter Ended March 31,								Change Favorable/(Unfavorable)
		2013				2012
($ In Thousands)		$				$				$				%
Cash provided by operating activities			31,715				21,325				10,390				48.7
Cash used in investing activities			(3,672	)			(2,232	)			(1,440	)			(64.5	)
Cash used in financing activities			(25,095	)			(6,680	)			(18,415	)			NM

NM — Not meaningful

Operating Activities

Cash provided by operating activities at Atlantic Aviation is generated from sales transactions primarily paid by credit cards. Some customers are provided extended payment terms and are billed accordingly. Cash used in operating activities is mainly for payments to vendors of fuel and professional services, as well as payroll costs and payments to tax jurisdictions.

Cash provided by operating activities increased during the quarter ended March 31, 2013 compared with the quarter ended March 31, 2012 primarily due to:

Investing Activities

Cash used in investing activities relates primarily to cash used for acquisitions and capital expenditures. Cash provided by investing activities relates primarily to proceeds from the sale of FBOs. Cash used in investing activities increased during the quarter ended March 31, 2013 compared to quarter ended March 31, 2012 primarily due to an increase in growth capital expenditures.

The following table sets forth information about capital expenditures at Atlantic Aviation ($ in thousands):

		Maintenance				Growth
Quarter ended March 31, 2013, accrual basis		$	1,465			$	1,846
Change in accrued capital expenditure balance from December 31, 2012			173				190
Quarter ended March 31, 2013, cash basis		$	1,638			$	2,036
Quarter ended March 31, 2012, accrual basis		$	1,876			$	552
Change in accrued capital expenditure balance from December 31, 2011			(112	)			297
Quarter ended March 31, 2012, cash basis		$	1,764			$	849
2013 full year projected		$	11.4 million			$	18.4 million

Maintenance Capital Expenditure

Maintenance capital expenditures include repainting, replacing equipment as necessary and any ongoing environmental or required regulatory expenditure, such as installing safety equipment. These expenditures are generally funded from cash flow from operating activities.

TABLE OF CONTENTS

Liquidity and Capital Resources: Atlantic Aviation – (continued)

Growth Capital Expenditure

Growth capital expenditures are incurred primarily where the business expects to receive an appropriate return relative to its cost of capital. Historically, these expenditures have included development of hangars, terminal buildings and ramp upgrades. The business has generally funded these projects through debt facilities or capital contributions from MIC.

Growth capital expenditures during the quarter ended March 31, 2013 related primarily to significant upgrades at certain facilities. Atlantic Aviation expects an increase in growth capital expenditures in 2013 primarily due to remodels of certain facilities to upgrade their capabilities.

The 2010 Tax Act provides for 100% tax depreciation for certain fixed assets placed in service after September 8, 2010 and before January 1, 2012, and 50% tax depreciation for certain fixed assets placed in service during 2012 for federal income tax purposes. The 2012 Tax Act extended the qualifying period for 50% tax depreciation to include 2013. Generally, states do not allow this tax depreciation deduction in determining state taxable income.

Financing Activities

At March 31, 2013, the balance on Atlantic Aviation’s debt facilities includes $651.3 million drawn on a term loan facility and $50.0 million drawn on a capital expenditure facility. The interest rate applicable on these facilities is LIBOR plus a margin of 1.725% through the maturity of the loan in October of 2014.

Atlantic Aviation had interest rate swaps that hedged 100% of the term loan debt by swapping three-month U.S. LIBOR for a fixed rate of 5.1925%. These swaps expired on October 16, 2012 which lowered the all-in rate on the term loan from 6.7925% to floating rate LIBOR + 1.725% through maturity. In order to limit Atlantic Aviation’ exposure to potential increases in LIBOR, Atlantic Aviation has an interest rate cap at 2.25% on three-month U.S. LIBOR for a notional amount of $550.0 million through maturity of the term loan.

Atlantic Aviation also has stand-alone debt facilities used to fund construction of certain FBOs. At March 31, 2013, the balances on the stand-alone facilities totaled $5.6 million. The interest rates on these stand-alone facilities are fixed at 4.75%.

The weighted average interest rate of all outstanding debt facilities, including any interest rate swaps, at March 31, 2013, was 1.95%. Cash interest paid was $3.3 million and $12.6 million for the quarters ended March 31, 2013 and 2012, respectively, excluding interest rate swap breakage fees.

The increase in cash used in financing activities is primarily due to a larger payment on the principal balance of the term loan debt during the quarter ended March 31, 2013 of $24.5 million compared with $6.5 million for the quarter ended March 31, 2012. Per the terms of Atlantic Aviation’s amended credit agreement, starting in the fourth quarter of 2012 through to the maturity or refinancing of the facility, 100% of the excess cash generated by the business will be used to pay principal on the term loan.

On April 25, 2013, the business paid $7.0 million of term loan principal. As a result of this payment, the proforma leverage ratio would decrease to 5.25x based on the EBITDA generated by the business over the twelve months ended March 31, 2013, as calculated under the facility.

The financial covenant requirements under Atlantic Aviation’s credit facility, and the calculation of these measures at March 31, 2013, were as follows:

For a description of the material terms of Atlantic Aviation’s credit facilities, see Note 10 “Long-Term Debt” in Part II, Item 8, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

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Commitments and Contingencies

At March 31, 2013, there were no material changes in our commitments and contingencies compared with December 31, 2012, except for the mandatory payment we expect to make under the terms of cash sweep of Atlantic Aviation’s and District Energy’s credit facilities as discussed above. See Note 7, “Long-Term Debt”, to our consolidated condensed financial statements in Part I of this Form 10-Q for further discussion.

At March 31, 2013, we did not have any material purchase obligations. For a discussion of our other future obligations, due by period, under the various contractual obligations, off-balance sheet arrangements and commitments, please see “Liquidity and Capital Resources — Commitments and Contingencies” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed with the SEC on February 20, 2013.

At March 31, 2013, we did not have any material reserves for contingencies. We have other contingencies occurring in the normal course of business, including pending legal and administrative proceedings that are not reflected at this time as they are not ascertainable.

Our sources of cash to meet these obligations are as follows:

Critical Accounting Policies and Estimates

For critical accounting policies and estimates, see “Critical Accounting Policies and Estimates” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012. Our critical accounting policies and estimates have not changed materially from the description contained in that Annual Report.

Business Combinations

Our acquisitions of businesses that we control are accounted for under the purchase method of accounting. The amounts assigned to the identifiable assets acquired and liabilities assumed in connection with acquisitions are based on estimated fair values as of the date of the acquisition, with the remainder, if any, recorded as goodwill. The fair values are determined by our management, taking into consideration information supplied by the management of acquired entities and other relevant information. Such information includes valuations supplied by independent appraisal experts for significant business combinations. The valuations are generally based upon future cash flow projections for the acquired assets, discounted to present value. The determination of fair values require significant judgment both by management and outside experts engaged to assist in this process.

Goodwill, Intangible Assets and Property, Plant and Equipment

Significant assets acquired in connection with our acquisition of Hawaii Gas, District Energy and Atlantic Aviation include contract rights, customer relationships, non-compete agreements, trademarks, property and equipment and goodwill.

Trademarks are generally considered to be indefinite life intangibles. Trademarks and goodwill are not amortized in most circumstances. It may be appropriate to amortize some trademarks. However, for unamortized intangible assets, we are required to perform annual impairment reviews and more frequently in certain circumstances.

ASU No. 2011-08, Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment, permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test, as discussed

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below. If an entity concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not perform the two-step impairment test.

If an entity concludes that it is more likely than not that the fair value of reporting unit is less than its carrying amount, it needs to perform the two-step impairment test. This requires management to make judgments in determining what assumptions to use in the calculation. The first step of the process consists of estimating the fair value of each reporting unit based on a discounted cash flow model using revenue and profit forecasts and comparing those estimated fair values with the carrying values, which included the allocated goodwill. If the estimated fair value is less than the carrying value, a second step is performed to compute the amount of the impairment by determining an “implied fair value” of goodwill. The determination of a reporting unit’s “implied fair value” of goodwill requires the allocation of the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit. Any unallocated fair value represents the “implied fair value” of goodwill, which is compared with its corresponding carrying value. Hawaii Gas, District Energy and Atlantic Aviation are separate reporting units for purposes of this analysis. The impairment test for trademarks, which are not amortized, requires the determination of the fair value of such assets. If the fair value of the trademarks are less than their carrying value, an impairment loss is recognized in an amount equal to the difference. We cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill and/or intangible assets. Such events include, but are not limited to, strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on our customer base, or material negative change in relationship with significant customers.

Property and equipment is initially stated at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the property and equipment after consideration of historical results and anticipated results based on our current plans. Our estimated useful lives represent the period the asset remains in service assuming normal routine maintenance. We review the estimated useful lives assigned to property and equipment when our business experience suggests that they do not properly reflect the consumption of economic benefits embodied in the property and equipment nor result in the appropriate matching of cost against revenue. Factors that lead to such a conclusion may include physical observation of asset usage, examination of realized gains and losses on asset disposals and consideration of market trends such as technological obsolescence or change in market demand.

Significant intangibles, including contract rights, customer relationships, non-compete agreements and technology are amortized using the straight-line method over the estimated useful lives of the intangible asset after consideration of historical results and anticipated results based on our current plans. With respect to contract rights in our Atlantic Aviation business, we take into consideration the history of contract right renewals in determining our assessment of useful life and the corresponding amortization period.

We perform impairment reviews of property and equipment and intangibles subject to amortization, when events or circumstances indicate that assets are less than their carrying amount and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. In this circumstance, the impairment charge is determined based upon the amount by which the net book value of the assets exceeds their fair market value. Any impairment is measured by comparing the fair value of the asset to its carrying value.

The “implied fair value” of reporting units and fair value of property and equipment and intangible assets is determined by our management and is generally based upon future cash flow projections for the acquired assets, discounted to present value. We use outside valuation experts when management considers that it is appropriate to do so.

We test for impairment of goodwill and indefinite-lived intangible assets annually as of October 1^st or when there is an indicator of impairment.

Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk, see Part II, Item 7A “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012. Our exposure to market risk has not changed materially since February 20, 2013, our 10-K filing date.

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Controls and Procedures

Under the direction and with the participation of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures (as such term is defined under Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2013. There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended March 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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MACQUARIE INFRASTRUCTURE COMPANY LLC

CONSOLIDATED CONDENSED BALANCE SHEETS
($ in Thousands, Except Share Data)

		March 31, 2013				December 31, 2012
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	154,447			$	141,376
Accounts receivable, less allowance for doubtful accounts of $716 and $875, respectively			62,861				56,553
Inventories			23,091				20,617
Prepaid expenses			7,829				8,908
Deferred income taxes			6,450				6,803
Other			22,009				19,653
Total current assets			276,687				253,910
Property, equipment, land and leasehold improvements, net			718,631				708,031
Equipment lease receivables			27,090				28,177
Investment in unconsolidated business			85,682				75,205
Goodwill			514,640				514,640
Intangible assets, net			618,274				626,902
Other			16,730				16,829
Total assets		$	2,257,734			$	2,223,694
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Due to manager – related party		$	29,301			$	50,253
Accounts payable			29,513				26,499
Accrued expenses			35,636				35,499
Current portion of long-term debt			109,353				106,580
Fair value of derivative instruments			7,439				7,450
Other			17,886				19,049
Total current liabilities			229,128				245,330
Long-term debt, net of current portion			1,042,954				1,052,584
Deferred income taxes			172,273				169,392
Fair value of derivative instruments			3,608				5,360
Other			53,912				53,463
Total liabilities			1,501,875				1,526,129
Commitments and contingencies			—				—
Members’ equity:
LLC interests, no par value; 500,000,000 authorized; 48,434,327 LLC interests issued and outstanding at March 31, 2013 and 47,453,943 LLC interests issued and outstanding at December 31, 2012			932,934				883,143
Additional paid in capital			21,447				21,447
Accumulated other comprehensive loss			(20,671	)			(20,801	)
Accumulated deficit			(222,890	)			(228,761	)
Total members’ equity			710,820				655,028
Noncontrolling interests			45,039				42,537
Total equity			755,859				697,565
Total liabilities and equity		$	2,257,734			$	2,223,694

 
 
See accompanying notes to the consolidated condensed financial statements.