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, 2015

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 79,338,386 LLC interests, or shares, without par value outstanding at May 1, 2015.

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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 Disclosure About Market Risk			25
Controls and Procedures			26
Consolidated Condensed Balance Sheets as of March 31, 2015 (Unaudited) and December 31, 2014			27
Consolidated Condensed Statements of Operations for the Quarters Ended March 31, 2015 and 2014 (Unaudited)			28
Consolidated Condensed Statements of Comprehensive (Loss) Income for the Quarters Ended March 31, 2015 and 2014 (Unaudited)			29
Consolidated Condensed Statements of Cash Flows for the Quarters ended March 31, 2015 and 2014 (Unaudited)			30
Notes to Consolidated Condensed Financial Statements (Unaudited)			32
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			49
Item 1A. Risk Factors			49
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			50
Item 3. Defaults Upon Senior Securities			50
Item 4. Mine Safety Disclosures			50
Item 5. Other Information			50
Item 6. Exhibits			50

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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Cautionary Note Regarding Forward-Looking Statements

In addition to historical information, this quarterly report on Form 10-Q (the “Quarterly Report”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. Forward-looking statements may appear throughout this Quarterly Report, including without limitation, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section. We use words such as “believe,” “intend,” “expect,” “anticipate,” “plan,” “may,” “will,” “should,” “estimate,” “potential,” “project” and similar expressions to identify forward-looking statements. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements. Such risks and uncertainties include, but are not limited to the risks identified in our Annual Report on the Form 10-K for the year ended December 31, 2014, and in other reports we file from time to time with the Securities and Exchange Commission (the “SEC”).

Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. Many of these factors are beyond our ability to control or predict. Our forward-looking statements speak only as of the date of this Quarterly Report. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

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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.

Except as otherwise specified, “Macquarie Infrastructure Company,” “MIC,” “we,” “us,” and “our” refer to 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 services to businesses and individuals primarily in the U.S. The businesses we own and operate include:

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

Our board of directors has approved a plan of conversion providing for the conversion of the Company from a Delaware limited liability company to Macquarie Infrastructure Corporation, a Delaware corporation (“MIC Corp.”), pursuant to which each of our outstanding LLC interests, or shares, will convert into one share of common stock of MIC Corp. (the “Conversion”). Our business, management and financial condition will be the same before and after the Conversion. Our board of directors has also approved a proposal to authorize 100,000,000 shares of preferred stock that may be issued from time to time, conditioned on consummation of the Conversion (the “Preferred Stock Proposal”). The Conversion and the Preferred Stock Proposal each require the approval of the holders of our shares, and there can be no assurance that the Conversion or the Preferred Stock Proposal will be consummated.

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 sold or services provided and the margin earned on those transactions. Offsetting that cash generation capability are required payments on debt facilities, taxes, capital expenditures necessary to maintain the productivity of the fixed assets of the businesses and pension contributions, among other items.

At IMTT, we focus on attracting third party storage from customers who place a premium on ease of access and operational flexibility, and on efficiently maintaining fixed assets. The substantial majority of IMTT’s revenue is generated pursuant to contracts with an average duration of approximately three years.

At Atlantic Aviation, our focus is on attracting and maintaining relationships with GA aircraft owners and pilots and encouraging them to purchase refueling and other services from our FBOs. Atlantic Aviation’s

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revenue is correlated with the number of GA flight movements in the U.S. and the business’ ability to service a portion of the aircraft involved in those operations.

The businesses that comprise our CP&E segment generate revenue pursuant to long-dated power purchase agreements (“PPAs”) and tolling agreements with creditworthy off-takers.

At Hawaii Gas, we seek to grow by increasing the number of customers served, the volume of gas sold and the margins achieved on gas sales. Hawaii Gas actively markets its products and services in an effort to develop new customers throughout Hawaii.

Dividends

Since January 1, 2014, MIC has paid or declared the following dividends:

Declared

Period Covered

$ per Share

Record Date

Payable Date

April 30, 2015

First quarter 2015

$

1.07

May 14, 2015

May 19, 2015

February 17, 2015

Fourth quarter 2014

$

1.02

March 2, 2015

March 5, 2015

October 27, 2014

Third quarter 2014

$

0.98

November 10, 2014

November 13, 2014

July 3, 2014

Second quarter 2014

$

0.95

August 11, 2014

August 14, 2014

April 28, 2014

First quarter 2014

$

0.9375

May 12, 2014

May 15, 2014

February 18, 2014

Fourth quarter 2013

$

0.9125

March 3, 2014

March 6, 2014

We currently intend to maintain a payout ratio between 80% to 85% of the Free Cash Flow generated by our businesses in the form of a quarterly cash dividend to our shareholders. We define Free Cash Flow as cash from operating activities, which reflects cash paid for interest, taxes and pension contributions, less maintenance capital expenditures, which includes principal repayments on capital lease obligations used to fund maintenance capital expenditures, and excludes changes in working capital.

The payment of a quarterly cash dividend of $1.07 per share for the quarter ended March 31, 2015 is being paid out of Free Cash Flow generated by our operating entities. In determining whether to adjust the amount of our quarterly dividend, our 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, capital opportunities 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, subject to maintaining a prudent level of reserves and without creating undue volatility in the amount of such dividends where possible. Moreover, the Company’s senior secured credit facility and the debt commitments at our businesses contain restrictions that may limit the Company’s ability to pay dividends. Although historically we have declared cash dividends on our shares, any one of these factors could result in the modification of our dividend policy, or the reduction, modification or elimination of our dividend in the future.

We believe our current policy with respect to paying a cash dividend supports our view of the Company as a potentially attractive total return investment opportunity. From 2007 through 2014, our underlying proportionately combined Free Cash Flow per share grew at a compound annual rate of 13.1%. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — 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 information on our calculation of Free Cash Flow and our proportionately combined financial measures in Part I of this Form 10-Q.

Recent Development

CP&E — Bayonne Energy Center (“BEC”) Acquisition

On April 1, 2015, we completed the acquisition of a 100% interest in BEC for a purchase price of $724.3 million (subject to post-closing working capital adjustments), which consists of $215.2 million in cash and the assumption of $509.1 million of debt, excluding transaction costs. We funded the cash consideration for the acquisition by drawing on the MIC Corporate senior secured revolving credit facility and using cash on hand from the March 2015 equity offering. BEC is a 512 megawatt natural gas-fired power generating

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facility located in Bayonne, New Jersey, adjacent to IMTT’s Bayonne facility. BEC has tolling agreements with a creditworthy off-taker for 62.5% of its energy generating capacity to the New York City power market via a dedicated transmission cable under New York Harbor. The tolling agreements have a weighted average remaining life of approximately 13 years.

Results of Operations

Consolidated

Key Factors Affecting Operating Results:

Our consolidated results of operations are as follows:

		Quarter Ended March 31,								Change Favorable/(Unfavorable)
		2015				2014				$				%
		($ In Thousands) (Unaudited)
Revenue
Service revenue		$	326,002			$	202,439				123,563				61.0
Product revenue			72,496				73,009				(513	)			(0.7	)
Financing and equipment lease income			—				747				(747	)			(100.0	)
Total revenue			398,498				276,195				122,303				44.3
Costs and expenses
Cost of services			133,417				112,954				(20,463	)			(18.1	)
Cost of product sales			39,127				50,239				11,112				22.1
Gross profit			225,954				113,002				112,952				100.0
Selling, general and administrative			70,653				55,464				(15,189	)			(27.4	)
Fees to manager-related party			165,273				8,994				(156,279	)			NM
Depreciation			57,422				12,154				(45,268	)			NM
Amortization of intangibles			47,971				8,765				(39,206	)			NM
Loss on disposal of assets			545				—				(545	)			NM
Total operating expenses			341,864				85,377				(256,487	)			NM
Operating (loss) income			(115,910	)			27,625				(143,535	)			NM
Other income (expense)
Dividend income			531				—				531				NM
Interest income			6				64				(58	)			(90.6	)
Interest expense(1)			(31,521	)			(14,011	)			(17,510	)			(125.0	)
Equity in earnings and amortization charges of investee			—				14,287				(14,287	)			(100.0	)
Other income, net			1,046				681				365				53.6
Net (loss) income before income taxes			(145,848	)			28,646				(174,494	)			NM
Benefit (provision) for income taxes			55,333				(8,486	)			63,819				NM
Net (loss) income		$	(90,515	)		$	20,160				(110,675	)			NM
Less: net loss attributable to noncontrolling interests			(1,513	)			(206	)			1,307				NM
Net (loss) income attributable to MIC LLC		$	(89,002	)		$	20,366				(109,368	)			NM

NM — Not meaningful

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Results of Operations: Consolidated – (continued)

Gross Profit

Consolidated gross profit increased for the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 primarily reflecting the consolidation of IMTT’s results, improved results at Atlantic Aviation primarily due to contributions from acquired FBOs and improved results at Hawaii Gas primarily due to increase in volume of gas sold and margin per therm.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased for the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 primarily as a result of the consolidation of IMTT’s results and the contributions from the 2014 acquisitions at Atlantic Aviation and CP&E.

Fees to Manager

Our Manager is entitled to a monthly base management fee based primarily on our market capitalization, and potentially a quarterly performance fee, based on the performance of our stock relative to a U.S. utilities index. For the quarters ended March 31, 2015 and 2014, we incurred base management fees of $16.5 million and $9.0 million, respectively. For the quarter ended March 31, 2015, we also incurred a performance fee of $148.7 million as compared with no performance fee for the quarter ended March 31, 2014.

The unpaid portion of the base management fees and performance fees, if any, 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 base management fees and performance fees, if any, in additional shares, except as noted:

Period		Base Management Fee Amount ($ in thousands)				Performance Fee Amount ($ in thousands)				Shares Issued
2015 Activities:
First quarter 2015		$	16,545			$	148,728				2,068,038	(1)
2014 Activities:
Fourth quarter 2014		$	14,192			$	—				208,122
Third quarter 2014			13,915				116,586				947,583	(2)
Second quarter 2014			9,535				4,960				243,329
First quarter 2014			8,994				—				164,546

Depreciation

Depreciation expense increased for the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 primarily as a result of fixed assets acquired in conjunction with the IMTT Acquisition and the depreciation associated with other businesses acquired during 2014.

Atlantic Aviation’s depreciation expense increased during the first quarter of 2015 due to the reassessment of the useful lives for its leasehold and land improvements related to leases at certain airports to generally match these useful lives with the remaining lease terms plus extensions under Atlantic Aviation’s control. This change will generally accelerate depreciation expense at the affected sites. As a result of this reassessment, the business recorded an impairment of $2.8 million. The change in useful life also resulted in increased depreciation expense of $1.1 million during the quarter. In addition, during the first quarter of 2015, an impairment charge of $4.2 million was recorded due to a change in the current lease contract at one of the sites.

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Results of Operations: Consolidated – (continued)

Amortization of Intangibles

Amortization of intangibles increased for the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 primarily at Atlantic Aviation and from the intangibles acquired in conjunction with the IMTT Acquisition.

The increase in Atlantic Aviation is attributable to the reassessment of the useful lives for its contractual arrangements related to leases at certain airports to generally match these useful lives with the remaining lease terms plus extensions under Atlantic Aviation’s control. This change will generally accelerate amortization expense at the affected sites. As a result of this reassessment, the business recorded an impairment of $13.5 million. The change in useful life also resulted in increased amortization expense of $4.3 million. In addition, during the first quarter of 2015, an impairment charge of $17.8 million was recorded due to a change in the current lease contract at one of the sites.

Interest Expense and Loss on Derivative Instruments

Interest expense includes losses on derivative instruments of $12.9 million and $5.3 million for the quarters ended March 31, 2015 and 2014, respectively. Losses on derivatives recorded in interest expense are attributable to the change in fair value of interest rate hedging instruments. For the quarter ended March 31, 2014, losses on derivatives also included the reclassification of amounts from accumulated other comprehensive loss into earnings. Excluding the derivative adjustments, interest expense for quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 increased primarily due to the consolidation of IMTT, higher average debt balance at Atlantic Aviation and interest expense associated with the convertible senior notes that were issued in July 2014.

Equity in Earnings and Amortization Charges of Investee

The decrease in equity in earnings for the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 is primarily due to the consolidation of IMTT’s results from July 16, 2014 and thereafter compared with the equity method of accounting for IMTT’s results prior to the acquisition date.

Income Taxes

For 2015, we will file a consolidated federal income tax return that includes the financial results for IMTT, Atlantic Aviation, BEC, Hawaii Gas and our allocable share of the taxable income (loss) from our solar and wind power generation facilities which are treated as partnerships for tax purposes. Pursuant to the tax sharing agreement, 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 if they were not part of the MIC consolidated federal income tax return.

The change from income tax expense for the quarter ended March 31, 2014 to income tax benefit for the quarter ended March 31, 2015 is primarily due to the performance fee incurred during the first quarter of 2015.

For 2015, we expect any federal income taxes for our consolidated entities to be fully offset by our net operating loss (“NOL”) carryforwards. We believe that we will be able to utilize all of our federal prior year NOLs, which will begin to expire after 2021 and completely expire after 2034. Our federal NOL balance at December 31, 2014 was revised from $250.7 million to $286.7 million, which is available to offset future taxable income, if any. The revision relates to approximately $36.0 million for the election of bonus deprecation at IMTT for 2014. See Results of Operations — IMTT —  Income Taxes below for further discussions. As a result of having federal NOL carryforwards, we do not expect to make regular federal tax payments until late 2018. For the year ending December 31, 2015, we expect to pay $915,000 in Alternative Minimum Tax.

Absent acquisitions and/or divestitures, we expect that our effective tax rate would be higher than the U.S. federal statutory rate of 35% primarily because of state and local income taxes. For 2015, we expect to pay state income taxes of approximately $4.0 million. 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 more likely than not.

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Results of Operations: Consolidated – (continued)

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, base management and performance fees, if any, 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 to similar businesses without regard to their capital structure, and to 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, taxes and pension contributions, less maintenance capital expenditures, which includes principal repayments on capital lease obligations used to fund maintenance capital expenditures, and excludes changes in working capital.

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

We note that Free Cash Flow does not fully reflect our ability to freely deploy generated cash, as it does not reflect required payments to be made on our indebtedness 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.

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Results of Operations: Consolidated – (continued)

A reconciliation of net (loss) 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)
		2015				2014				$				%
		($ in Thousands) (Unaudited)
Net (loss) income attributable to MIC LLC(1)		$	(89,002	)		$	20,366
Interest expense, net(2)			31,515				13,947
(Benefit) provision for income taxes			(55,333	)			8,486
Depreciation(3)			57,422				12,154
Depreciation – cost of services(3)			—				1,704
Amortization of intangibles(4)			47,971				8,765
Loss on disposal of assets			453				—
Equity in earnings and amortization charges of investee			—				(14,287	)
Equity distributions from investee(5)			—				8,127
Base management fees to be settled/settled in shares			16,545				8,994
Performance fees to be settled in shares			148,728				—
Other non-cash (income) expense, net			(3,055	)			536
EBITDA excluding non-cash items		$	155,244			$	68,792				86,452				125.7
EBITDA excluding non-cash items		$	155,244			$	68,792
Interest expense, net(2)			(31,515	)			(13,947	)
Adjustments to derivative instruments recorded in interest expense(2)			5,353				1,094
Amortization of debt financing costs(2)			1,615				1,041
Equipment lease receivable, net			—				996
Benefit/provision for income taxes, net of changes in deferred taxes			(805	)			(2,047	)
Pension contribution			—				(310	)
Changes in working capital			(12,876	)			3,458
Cash provided by operating activities			117,016				59,077
Changes in working capital			12,876				(3,458	)
Maintenance capital expenditures			(6,115	)			(2,825	)
Free cash flow		$	123,777			$	52,794				70,983				134.5

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Reconciliation from Consolidated Free Cash Flow to Proportionately Combined Free Cash Flow

The following table is a reconciliation from Free Cash Flow on a consolidated basis to Free Cash Flow on a proportionately combined basis (in proportion to our interests). See “Results of Operations —  Consolidated” above for a reconciliation of Free Cash Flow — Consolidated basis to cash provided by operating activities, the most comparable GAAP measure. See “Results of Operations” below for each of our segments for a reconciliation of Free Cash Flow for each segment to cash provided by (used in) operating activities for such segment. See “Results of Operations — 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.

		Quarter Ended March 31,								Change Favorable/ (Unfavorable)
		2015				2014				$				%
		($ In Thousands) (Unaudited)
Free Cash Flow – Consolidated basis		$	123,777			$	52,794				70,983				134.5
Equity distributions from investee(1)			—				(8,127	)
100% of CP&E Free Cash Flow included in consolidated Free Cash Flow			(2,689	)			(2,775	)
MIC's share of IMTT Free Cash Flow(2)			—				21,416
MIC's share of CP&E Free Cash Flow			1,593				1,612
Free Cash Flow – Proportionately Combined basis		$	122,681			$	64,920				57,761				89.0

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Results of Operations: IMTT

Prior to July 16, 2014, we accounted for our 50% interest in IMTT using the equity method of accounting. As of July 16, 2014, we have consolidated IMTT on 100% basis. 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 for the first quarter of 2014.

Key Factors Affecting Operating Results:

		Quarter Ended March 31,								Change Favorable/ (Unfavorable)
		2015				2014
		$				$				$				%
		($ In Thousands) (Unaudited)
Revenues			138,061				148,078				(10,017	)			(6.8	)
Cost of services			53,591				63,087				9,496				15.1
Gross Profit			84,470				84,991				(521	)			(0.6	)
General and administrative expenses			7,704				7,866				162				2.1
Depreciation and amortization			35,879				18,274				(17,605	)			(96.3	)
Operating income			40,887				58,851				(17,964	)			(30.5	)
Interest expense, net(1)			(6,906	)			(7,133	)			227				3.2
Other income, net			632				494				138				27.9
Provision for income taxes			(14,089	)			(21,102	)			7,013				33.2
Noncontrolling interest			(250	)			(129	)			(121	)			(93.8	)
Net income(2)			20,274				30,981				(10,707	)			(34.6	)
Reconciliation of net income to EBITDA excluding non-cash items and cash provided by operating activities to Free Cash Flow:
Net income(2)			20,274				30,981
Interest expense, net(1)			6,906				7,133
Provision for income taxes			14,089				21,102
Depreciation and amortization			35,879				18,274
Other non-cash expenses			1,256				1,983
EBITDA excluding non-cash items			78,404				79,473				(1,069	)			(1.3	)
EBITDA excluding non-cash items			78,404				79,473
Interest expense, net(1)			(6,906	)			(7,133	)
Adjustments to derivative instruments recorded in interest expense(1)			(2,379	)			(4,136	)
Amortization of debt financing costs(1)			113				844
Provision for income taxes, net of changes in deferred taxes			(577	)			(15,109	)
Changes in working capital			(11,612	)			5,248
Cash provided by operating activities			57,043				59,187
Changes in working capital			11,612				(5,248	)
Maintenance capital expenditures			(2,471	)			(11,107	)
Free cash flow			66,184				42,832				23,352				54.5

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Results of Operations: IMTT – (continued)

Revenue

For the quarter ended March 31, 2015, revenue decreased as a result of reduced spill response activity and heating revenues compared with the prior comparable period, partially offset by increased firm commitments attributable to higher utilization rates and storage prices. OMI Environmental Solutions was involved in fewer emergency response operations in the first quarter of 2015 compared with the first quarter of 2014 resulting in a reduction in revenue of approximately $7.5 million. Heating revenue and gross profit was $5.1 million and $3.9 million lower, respectively, versus the prior comparable period, which benefited from the extreme weather conditions in 2014, commonly known as the Polar Vortex.

IMTT generates the majority of its revenue from contracts that typically comprise a fixed monthly charge (that escalates with inflation) for access to or use of IMTT’s infrastructure. We refer to revenues generated from such charges as firm commitments.

Capacity utilization increased to 95.1% in the first quarter of 2015 compared with 92.7% in the first quarter of 2014 and 93.2% in the fourth quarter of 2014 as tanks came back into service following scheduled cleaning and inspection.

Over the past six months, there was a marked increase in price volatility in petroleum markets associated with a sudden decline in crude oil prices. The decline contributed to a contango (a situation where the futures price of a commodity is above the current spot price) in petroleum prices, primarily crude oil, and resulted in an increase in demand for storage in certain geographies.

The impact of the contango in crude prices had minimal impact on IMTT’s performance as less than 2% of IMTT’s storage is in service for crude oil. The contango in some other products and inflation saw IMTT’s overall pricing continue to increase, however, the speed and extent of the commodity price changes caused customers to continue to seek shorter-term contracts than historical norm.

Costs

Costs were 13.6% lower in the first quarter of 2015 compared with the first quarter of 2014 primarily as a result of reduced spill response activity, enhanced cost controls and the realization of efficiencies following the IMTT Acquisition, and lower costs associated with heating. The reduced level of spill response activity contributed $4.2 million to the cost improvement while heating costs were down $1.2 million versus the prior comparable period.

Depreciation and amortization

Depreciation and amortization expense increased for the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 primarily due to remeasuring the fixed assets and intangible assets to fair value in connection with the IMTT Acquisition.

Interest Expense, Net

Interest expense includes losses on derivative instruments of $2.1 million and $378,000 for the quarters ended March 31, 2015 and 2014, respectively. Cash interest paid totaled $9.2 million and $10.2 million for the quarters ended March 31, 2015 and 2014, respectively. Excluding the derivative adjustments, interest expense and cash interest paid decreased during the first quarter of 2015 compared with the first quarter of 2014 due to lower average debt balances. MIC used excess cash on hand to reduce IMTT’s revolving credit balance during the quarter ended March 31, 2015.

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Results of Operations: IMTT – (continued)

Income Taxes

Subsequent to July 16, 2014, IMTT became part of the MIC consolidated federal taxpayer group, and will continue to file state income tax returns in the states in which it operates. For the quarter ended March 31, 2015, the tax provision in the table above includes both state taxes and the portion of the consolidated federal tax liability attributable to the business. For the year ending December 31, 2015, the business expects to pay $2.3 million in state income taxes. The “Provision for income taxes, net of changes in deferred taxes” of $577,000 for the quarter ended March 31, 2015 in the table above, relates entirely to state income taxes. Future federal taxable income attributable to IMTT is eligible to be offset in consolidation by MIC’s NOLs; however, the business does not anticipate it will have any federal tax liability in 2015.

In December 2014, the Tax Increase Prevention Act of 2014 (the “2014 Tax Act”) was signed and became a law. The 2014 Tax Act retroactively extends several tax provisions applicable to corporations, including the extension of 50% bonus depreciation for certain assets placed in service in 2014. During the quarter ended March 31, 2015, IMTT determined that it will elect 50% bonus depreciation for the calendar year 2014. The business expects this will increase the IMTT federal NOL available to the MIC consolidated federal taxpayer group by approximately $36.0 million.

Maintenance Capital Expenditures

For the quarter ended March 31, 2015, IMTT incurred maintenance capital expenditures of $2.5 million and $5.0 million on an accrual basis and cash basis, respectively. This is compared to $11.1 million and $16.8 million on an accrual basis and cash basis, respectively, for the quarter ended March 31, 2014. The decrease in the accrued basis from the quarter ended March 31, 2014 to the quarter ended March 31, 2015 primarily reflects improved controls and processes and the timing of projects. Notwithstanding the reduced expenditure in the first quarter, IMTT is still expected to deploy approximately $45.0 million during 2015 on maintenance projects.

Results of Operations: Atlantic Aviation

Key Factors Affecting Operating Results:

TABLE OF CONTENTS

Results of Operations: Atlantic Aviation – (continued)

		Quarter Ended March 31,								Change Favorable/ (Unfavorable)
		2015				2014
		$				$				$				%
		($ In Thousands) (Unaudited)
Revenues			187,941				193,961				(6,020	)			(3.1	)
Cost of services			79,826				106,752				26,926				25.2
Gross Profit			108,115				87,209				20,906				24.0
Selling, general and administrative expenses			52,009				47,243				(4,766	)			(10.1	)
Depreciation and amortization			59,715				14,933				(44,782	)			NM
Loss on disposal of assets			545				—				(545	)			NM
Operating (loss) income			(4,154	)			25,033				(29,187	)			(116.6	)
Interest expense, net(1)			(13,085	)			(9,565	)			(3,520	)			(36.8	)
Other (expense) income			(27	)			2				(29	)			NM
Benefit (provision) for income taxes			15,639				(4,915	)			20,554				NM
Net (loss) income(2)			(1,627	)			10,555				(12,182	)			(115.4	)
Reconciliation of net (loss) income to EBITDA excluding non-cash items and cash provided by operating activities to Free Cash Flow:
Net (loss) income(2)			(1,627	)			10,555
Interest expense, net(1)			13,085				9,565
(Benefit) provision for income taxes			(15,639	)			4,915
Depreciation and amortization			59,715				14,933
Loss on disposal of assets			453				—
Other non-cash expenses			272				68
EBITDA excluding non-cash items			56,259				40,036				16,223				40.5
EBITDA excluding non-cash items			56,259				40,036
Interest expense, net(1)			(13,085	)			(9,565	)
Adjustments to derivative instruments recorded in interest expense(1)			5,066				2,626
Amortization of debt financing costs(1)			808				731
Benefit/provision for income taxes, net of changes in deferred taxes			(355	)			(1,244	)
Changes in working capital			(4,206	)			(971	)
Cash provided by operating activities			44,487				31,613
Changes in working capital			4,206				971
Maintenance capital expenditures			(2,623	)			(817	)
Free cash flow			46,070				31,767				14,303				45.0

NM — Not meaningful

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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 69 U.S. airports at which Atlantic Aviation operates. 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. Revenue and gross profit are driven by the volume of fuel sold and the dollar-based margin/fee per gallon on those sales.

Atlantic Aviation completed the acquisition of six FBOs on April 30, 2014 and an additional FBO on January 26, 2015. These acquisitions have performed in-line with expectations and increased gross profit and costs in the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014. On a same store basis, gross profit increased 9.4% in the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014, driven by increases in fuel gross profit and rental revenue.

Atlantic Aviation seeks to extend FBO leases prior to their maturity and to increase the portfolio’s weighted average lease life. The weighted average lease life decreased to 18.7 years at March 31, 2015 from 19.2 years at March 31, 2014, notwithstanding the passage of one year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased in the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 primarily due to incremental selling, general and administrative expenses associated with acquired FBOs.

On a same store basis, costs were 2.7% higher in the quarter ended March 31, 2015 primarily due to increased salaries and benefit costs, rent and utility expenses.

Depreciation and Amortization

During the first quarter of 2015, Atlantic Aviation reassessed the useful lives for its contractual arrangements and leasehold and land improvements related to leases at certain airports to generally match these useful lives with the remaining lease terms plus extensions under Atlantic Aviation’s control. This change will generally accelerate depreciation and amortization expense at the affected sites. As a result of this reassessment, the business performed an impairment analysis related to its contractual arrangements and leasehold and land improvements and recorded an impairment of $16.3 million, which is included in depreciation and amortization expense. In addition, the change in useful life resulted in increased depreciation and amortization expense of $5.4 million during the quarter.

In addition, during the first quarter of 2015, an impairment charge of $22.0 million was recorded due to a change in the current lease contract at one of the bases. This amount is included in depreciation and amortization expense.

Interest Expense, Net

Interest expense includes losses on derivative instruments of $7.2 million and $4.5 million for the quarters ended March 31, 2015 and 2014, respectively. Excluding the derivative adjustments, interest expense increased due to higher average debt levels in the quarter ended March 31, 2015. The weighted average interest rate of all outstanding debt facilities, including any interest rate swaps, was 4.63% for the quarter ended March 31, 2015. Cash interest paid was $7.3 million and $6.2 million for the quarters ended March 31, 2015 and 2014, respectively.

Income Taxes

Income generated by Atlantic Aviation is included in our consolidated federal income tax return. The business files state income tax returns in the 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.

For 2015, the business expects to pay state income taxes of approximately $905,000. The “Benefit/provision for income taxes, net of changes in deferred taxes” of $355,000 for the quarter ended March 31, 2015 in the above table, includes $130,000 of federal income taxes payable to MIC and $225,000 of state income taxes.

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Results of Operations: Atlantic Aviation – (continued)

Maintenance Capital Expenditures

For the quarter ended March 31, 2015, Atlantic Aviation incurred maintenance capital expenditures of $2.6 million and $2.9 million on an accrual basis and cash basis, respectively. This is compared to $817,000 and $994,000 on an accrual basis and cash basis, respectively, for the quarter ended March 31, 2014. Maintenance capital expenditures for the periods presented were primarily to fund replacement of equipment at existing locations.

Results of Operations: Contracted Power and Energy

Key Factors Affecting Operating Results:

		Quarter Ended March 31,								Change Favorable/ (Unfavorable)
		2015				2014
		$				$				$				%
		($ In Thousands) (Unaudited)
Service revenues			—				8,478				(8,478	)			(100.0	)
Product revenues			11,832				3,658				8,174				NM
Finance lease revenues			—				747				(747	)			(100.0	)
Total revenues			11,832				12,883				(1,051	)			(8.2	)
Cost of revenue – service(1)			—				6,202				6,202				100.0
Cost of revenue – product			2,647				860				(1,787	)			NM
Cost of revenue – total			2,647				7,062				4,415				62.5
Gross profit			9,185				5,821				3,364				57.8
Selling, general and administrative expenses			2,638				1,552				(1,086	)			(70.0	)
Depreciation and amortization			7,445				3,728				(3,717	)			(99.7	)
Operating (loss) income			(898	)			541				(1,439	)			NM
Interest expense, net(2)			(6,338	)			(2,645	)			(3,693	)			(139.6	)
Other income			1,116				761				355				46.6
Benefit (provision) for income taxes			818				(599	)			1,417				NM
Noncontrolling interest			1,763				527				1,236				NM
Net loss			(3,539	)			(1,415	)			(2,124	)			(150.1	)
Reconciliation of net loss to EBITDA excluding non-cash items and cash provided by operating activities to Free Cash Flow:
Net loss			(3,539	)			(1,415	)
Interest expense, net(2)			6,338				2,645
(Benefit) provision for income taxes			(818	)			599
Depreciation and amortization(1)			7,445				5,432
Other non-cash income			(2,941	)			(765	)
EBITDA excluding non-cash items			6,485				6,496				(11	)			(0.2	)
EBITDA excluding non-cash items			6,485				6,496
Interest expense, net(2)			(6,338	)			(2,645	)
Adjustments to derivative instruments recorded in interest expense(2)			2,527				(1,525	)
Amortization of debt financing costs(2)			17				192
Equipment lease receivable, net			—				996
Benefit/provision for income taxes, net of changes in deferred taxes			(2	)			(389	)
Changes in working capital			1,743				12,423
Cash provided by operating activities			4,432				15,548
Changes in working capital			(1,743	)			(12,423	)
Maintenance capital expenditures			—				(350	)
Free cash flow			2,689				2,775				(86	)			(3.1	)

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Results of Operations: Contracted Power and Energy – (continued)

NM — Not meaningful

Revenue and Gross Profit

Total revenue decreased in the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 due to the sale of the district energy business on August 21, 2014, partially offset by the results contributed from the wind power generation facilities acquired during the second half of 2014.

Total gross profit increased in the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 due to contributions from the wind power generation facilities acquired during the second half of 2014, partially offset by the sale of the district energy business.

Selling, General and Administrative Expense

Selling, general and administrative expenses are comprised primarily of transaction-related fees, legal and other professional fees and management and incentive costs. The increase in selling, general and administrative expenses in the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 was primarily driven by costs contributed by the wind power generation facilities acquired during the second half of 2014. In addition, the business incurred transaction-related fees (primarily the BEC acquisition), legal and incentive costs during the quarter ended March 31, 2015. These increases were partially offset by the sale of the district energy business on August 21, 2014.

Depreciation and Amortization

Depreciation and amortization expense increased for the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 primarily as a result of depreciation associated with the wind power generation facilities acquired during the second half of 2014.

Interest Expense, Net

Interest expense includes losses on derivative instruments of $2.9 million and $287,000 for the quarters ended March 31, 2015 and 2014, respectively. Excluding the derivative adjustments, interest expense decreased for the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 due to the absence of the outstanding debt balance at the district energy business during the quarter ended March 31, 2014. This decrease is offset by higher debt balance at the solar and wind power generation facilities for the quarter ended March 31, 2015. Cash interest paid totaled $2.3 million and $2.4 million in the quarters ended March 31, 2015 and 2014, respectively.

Income Taxes

At March 31, 2015, CP&E is comprised of solar and wind power generation facilities that are held in LLCs and treated as partnerships for tax purposes. As such, these facilities do not pay federal or state income taxes on a standalone basis, but each partner pays federal and state income taxes based on their allocated taxable income. For 2015, MIC expects its allocated share of the taxable income from these facilities to be a loss of approximately $1.9 million. For 2014, MIC’s allocated share of the taxable income from the solar and wind power generation facilities was a loss of $1.5 million.

Maintenance Capital Expenditures

For the quarter ended March 31, 2014, the district energy business incurred maintenance capital expenditures of $350,000 and $138,000 on an accrual basis and cash basis, respectively. The district energy business was sold on August 21, 2014.

After construction is completed on our solar and wind power generation facilities, the business does not expect to incur substantial capital expenditures at its sites as most upgrades, replenishments and repairs are covered under the respective O&M contract for each site.

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Results of Operations: Hawaii Gas

Key Factors Affecting Operating Results:

		Quarter Ended March 31,								Change Favorable/ (Unfavorable)
		2015				2014
		$				$				$				%
		($ In Thousands) (Unaudited)
Revenues			60,664				69,351				(8,687	)			(12.5	)
Cost of product sales			36,480				49,379				12,899				26.1
Gross profit			24,184				19,972				4,212				21.1
Selling, general and administrative expenses			5,356				5,623				267				4.7
Depreciation and amortization			2,354				2,258				(96	)			(4.3	)
Operating income			16,474				12,091				4,383				36.3
Interest expense, net(1)			(1,943	)			(1,787	)			(156	)			(8.7	)
Other expense			(144	)			(82	)			(62	)			(75.6	)
Provision for income taxes			(5,532	)			(4,027	)			(1,505	)			(37.4	)
Net income(2)			8,855				6,195				2,660				42.9
Reconciliation of net income to EBITDA excluding non-cash items and cash provided by operating activities to Free Cash Flow:
Net income(2)			8,855				6,195
Interest expense, net(1)			1,943				1,787
Provision for income taxes			5,532				4,027
Depreciation and amortization			2,354				2,258
Other non-cash (income) expenses			(1,830	)			724
EBITDA excluding non-cash items			16,854				14,991				1,863				12.4
EBITDA excluding non-cash items			16,854				14,991
Interest expense, net(1)			(1,943	)			(1,787	)
Adjustments to derivative instruments recorded in interest expense(1)			139				(7	)
Amortization of debt financing costs(1)			121				118
Provision for income taxes, net of changes in deferred taxes			—				(2,711	)
Pension contribution			—				(310	)
Changes in working capital			2,523				(5,488	)
Cash provided by operating activities			17,694				4,806
Changes in working capital			(2,523	)			5,488
Maintenance capital expenditures			(1,021	)			(1,658	)
Free cash flow			14,150				8,636				5,514				63.8

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Results of Operations: Hawaii Gas – (continued)

Gross Profit and Operating Income

Volume increased by 3.6% in the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014, with increases across all the larger islands. On an underlying basis, adjusting for changes in customer inventory related to the timing of foreign shipments, volume increased by 2.8%. Gross profit per therm increased in the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 as a result of lower commodity cost including the effect of hedging, partially offset by customer price decreases midway through the quarter. During the quarter ended March 31, 2015, the business significantly increased its supply of propane from off-island sources while decreasing its supply from Hawaii Independent Energy.

Selling, general and administrative expenses in the quarter ended March 31, 2015 decreased as compared with the quarter ended March 31, 2014 driven by lower sales and promotion costs.

In October 2014, the business filed an application with the Hawaii Public Utilities Commission, (“HPUC”) seeking approval to invest $12.8 million in its utility business for a smaller-scale containerized liquefied natural gas (“LNG”) import project to provide natural gas as a replacement of up to 30% of synthetic natural gas demand. In the first quarter of 2015, the HPUC issued an Interim Decision and Order, and consistent with this ruling, the business will continue to work with the parties to obtain final approval for the project. Hawaii Gas also continues to work with stakeholders throughout the state to pursue a larger-scale bulk LNG import, storage and distribution program to supply multiple end markets including power generation and ground and marine transportation. In November 2014, Hawaii Gas launched its Invitation to Bid to more than 55 companies with relevant experience in larger-scale bulk LNG. During the first quarter of 2015, the business evaluated responses from more than 20 qualified respondents and has commenced further discussions with a subset of these parties.

Interest Expense, Net

Interest expense includes losses on derivative instruments of $720,000 and $588,000 for the quarters ended March 31, 2015 and 2014, respectively. Excluding the derivative adjustments, interest expense remained flat during the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014. Cash interest paid totaled $2.7 million and $2.8 million for the quarters ended March 31, 2015 and 2014, 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 ending December 31, 2015, the business expects to pay state income taxes of approximately $766,000. The business did not incur any current federal and state income taxes for the quarter ended March 31, 2015. Any current federal income tax liability is expected to be offset in consolidation by the application of NOLs.

Maintenance Capital Expenditures

For the quarter ended March 31, 2015, Hawaii Gas incurred maintenance capital expenditures of $1.0 million and $3.4 million on an accrual basis and cash basis, respectively. This is compared to $1.7 million and $1.9 million on an accrual basis and cash basis, respectively, for the quarter ended March 31, 2014. Maintenance capital expenditures for the periods presented were primarily for transmission line modifications.

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Results of Operations: Corporate and Other

The financial results below reflect Corporate and Other’s performance during the periods below.

		Quarter Ended March 31,								Change Favorable/ (Unfavorable)
		2015				2014
		$				$				$				%
		($ In Thousands) (Unaudited)
Base management fees			16,545				8,994				(7,551	)			(84.0	)
Performance fees			148,728				—				(148,728	)			NM
Selling, general and administrative expenses			2,946				1,046				(1,900	)			(181.6	)
Operating loss			(168,219	)			(10,040	)			(158,179	)			NM
Interest (expense) income, net(1)			(3,243	)			50				(3,293	)			NM
Benefit for income taxes			58,497				1,055				57,442				NM
Noncontrolling interest			—				(321	)			321				100.0
Net loss(2)			(112,965	)			(9,256	)			(103,709	)			NM
Reconciliation of net loss to EBITDA excluding non-cash items and cash used in operating activities to Free Cash Flow:
Net loss(2)			(112,965	)			(9,256	)
Interest expense (income), net(1)			3,243				(50	)
Benefit for income taxes			(58,497	)			(1,055	)
Base management fees to be settled/settled in shares			16,545				8,994
Performance fee to be settled in shares			148,728				—
Other non-cash expense			188				509
EBITDA excluding non-cash items			(2,758	)			(858	)			(1,900	)			NM
EBITDA excluding non-cash items			(2,758	)			(858	)
Interest (expense) income, net(1)			(3,243	)			50
Amortization of debt financing costs(1)			556				—
Benefit for income taxes, net of changes in deferred taxes			129				2,297
Changes in working capital			(1,324	)			(2,506	)
Cash used in operating activities			(6,640	)			(1,017	)
Changes in working capital			1,324				2,506
Free cash flow			(5,316	)			1,489				(6,805	)			NM

NM — Not meaningful

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Summary of Our Proportionately Combined Results

The proportionately combined financial measures below are those attributable to MIC’s ownership interest in each of our operating businesses and MIC Corporate. Given the nature of the businesses we own and our varied ownership levels of 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. 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, our financial results reported under GAAP. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a reconciliation of EBITDA excluding non-cash items to net income, and a reconciliation of Free Cash Flow to cash provided by (used in) operating activities for each of our operating businesses and MIC Corporate ($ in thousands) (unaudited).

		For the Quarter Ended March 31, 2015																								Contracted Power and Energy 100%
		IMTT 100%(1)				Atlantic Aviation				Contracted Power and Energy(2)				Hawaii Gas				MIC Corporate				Proportionately Combined(3)
Gross profit			84,470				108,115				6,820				24,184				N/A				223,589				9,185
EBITDA excluding non-cash items			78,404				56,259				4,451				16,854				(2,758	)			153,210				6,485
Free cash flow			66,184				46,070				1,593				14,150				(5,316	)			122,681				2,689

		For the Quarter Ended March 31, 2014																												Contracted Power and Energy 100%
		IMTT 50%(4)				Atlantic Aviation				Contracted Power and Energy(2)				Hawaii Gas				MIC Corporate				Proportionately Combined(3)				IMTT 100%(5)
Gross profit			42,496				87,209				3,567				19,972				N/A				153,243				84,991				5,821
EBITDA excluding non-cash items			39,737				40,036				3,878				14,991				(858	)			97,783				79,473				6,496
Free cash flow			21,416				31,767				1,612				8,636				1,489				64,920				42,832				2,775

N/A — Not applicable.

Liquidity and Capital Resources

General

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 draw on credit facilities for capital expenditures, issue additional shares or sell assets to generate cash.

At March 31, 2015, our consolidated debt outstanding totaled $1,968.6 million, our consolidated cash balances totaled $101.3 million and total available capacity under our revolving credit facilities totaled $1,379.0 million. On April 1, 2015, we drew $155.0 million on the MIC revolving credit facility to partially fund the BEC acquisition.

TABLE OF CONTENTS

Liquidity and Capital Resources – (continued)

We have adopted a cash management policy whereby we will, in general, apply available cash to the repayment of revolving debt balances as a means of minimizing interest expense and draw on those facilities to fund growth projects and for general corporate purposes. For example, a portion of the proceeds of the equity raise completed in March 2015 were used to repay balances outstanding on IMTT’s U.S. revolving credit facility.

We use revolving credit facilities at each of our operating companies and the holding company as a means of maintaining access to sufficient liquidity to meet future requirements, including servicing long-term debt obligations and funding growth projects. We base our assessment of the sufficiency of our liquidity and capital resources on the assumptions that:

We are capitalized in large part using floating rate bank debt with a medium-term maturity of between five and seven years. We hedge a portion of the floating rate exposure for the majority of the term of these facilities using interest rate derivative instruments.

We also use longer dated private placement debt and other forms of capital, including bank, bond or hybrid debt instruments. In general, the debt facilities at our businesses are non-recourse to MIC and there are no cross-collateralization or cross-guarantee provisions in these facilities.

Recent Transactions Affecting Liquidity

On May 1, 2015, we increased the size of our revolving credit facility from $250.0 million to $360.0 million with all terms remaining the same. The facility had $155.0 million drawn to fund a portion of the BEC acquisition on April 1, 2015 and $205.0 million undrawn at May 4, 2015.

On March 2, 2015, we completed an underwritten public offering of 5,312,500 shares pursuant to our shelf registration statement dated April 8, 2013. On March 12, 2015, an additional 796,875 shares were issued pursuant to the exercise of the underwriters’ over-allotment option. The net proceeds from the offering of $471.6 million were used, in part, to fund the acquisition of BEC on April 1, 2015 and for general corporate purposes.

The following section discusses our sources and uses of cash on a consolidated basis. All intercompany activities such as corporate allocations, capital contributions to our businesses and distributions from our businesses have been excluded from the tables as these transactions are eliminated on consolidation.

Analysis of Consolidated Historical Cash Flows from Operations

		Quarter Ended March 31,								Change Favorable/ (Unfavorable)
		2015				2014
($ In Thousands)		$				$				$				%
Cash provided by operating activities			117,016				59,077				57,939				98.1
Cash used in investing activities			(43,074	)			(22,613	)			(20,461	)			(90.5	)
Cash used in financing activities			(20,346	)			(61,268	)			40,922				66.8

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Liquidity and Capital Resources – (continued)

Operating Activities

Cash provided by (used in) operating activities is generally comprised of EBITDA excluding non-cash items (as defined by us), less cash interest, tax and pension payments, and changes in working capital. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” for discussions around the components of EBITDA excluding non-cash items on a consolidated basis and for each of our businesses.

The increase in consolidated cash provided by operating activities for the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 was primarily due to:

Through July 15, 2014, results for IMTT were accounted for using the equity method of accounting and distributions from IMTT were reflected in our consolidated cash provided by operating activities up to our cumulative 50% share of IMTT’s earnings recorded since the date of our investment in IMTT. Distributions from IMTT in excess of this were reflected in our consolidated cash from investing activities as a return of investment in unconsolidated business. From July 16, 2014, results for IMTT have been consolidated with those of our other businesses and distributions from IMTT are eliminated on consolidation.

Investing Activities

The drivers of cash provided by investing activities primarily include proceeds from divestitures of businesses and fixed assets. The drivers of cash used in investing activities primarily include acquisitions of businesses in new and existing segments and capital expenditures. Acquisitions of businesses are generally funded by raising additional equity and/or drawings on credit facilities.

Maintenance capital expenditures are generally funded by cash from operating activities and growth capital expenditures are generally funded by drawing on our available credit facilities or with equity capital. We may fund maintenance capital expenditures from credit facilities or equity capital and growth capital expenditures from operating activities from time to time. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” for maintenance capital expenditures for each of our businesses.

The increase in consolidated cash used in investing activities for the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 was primarily due to:

Growth Capital Expenditures

We invested $14.4 million and $18.6 million of growth capital expenditures in our existing businesses during the quarter ended March 31, 2015 and 2014, respectively.

We also evaluate opportunities to acquire additional businesses or assets that we believe could enhance our existing businesses. These opportunities may be significant, such as our acquisition of the remaining 50% interest of IMTT, or they may be incremental and not individually significant to our businesses, such as our 2014 investments in the wind power generation facility in Idaho or our 2015 investment in an FBO in Orlando. We deployed approximately $100.0 million in incremental acquisitions in 2014 and we anticipate deploying approximately that amount again in 2015. Additionally, we evaluate opportunities to acquire businesses or assets that would comprise a new line of business for us.

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Liquidity and Capital Resources – (continued)

In addition to various incremental acquisitions, we also have a backlog of growth capital projects that we are completing and/or intend to complete. We consider growth capital projects to be part of our backlog when we have committed to the deployment of capital for the underlying project, and have, where relevant, received all requisite approvals/authorizations for the deployment of such capital. The inclusion of a project in our backlog of growth capital projects does not guarantee that the project will commence, be completed or ultimately generate revenues. Our backlog as of March 31, 2015, consists of projects requiring the deployment of approximately $177.0 million and we anticipate deploying approximately $150.0 million of this amount in 2015. We would therefore anticipate deploying approximately $250.0 million in 2015 including both our growth capital project backlog and incremental opportunities.

Financing Activities

The drivers of cash provided by financing activities primarily include debt financing of acquisitions and capital expenditures, debt refinancing and equity offerings. The drivers of cash used in financing activities primarily include repayment of debt principal balances on maturing debt and dividends to our shareholders.

The decrease in cash used in financing activities for the quarter ended March 31, 2015 compared with the quarter ended March 31, 2014 was primarily due to:

IMTT

At March 31, 2015, the drawn balance on IMTT’s debt facilities was $533.1 million consisting of $336.3 million in letter of credit backed tax-exempt bonds, $173.4 million in bank owned tax-exempt bonds, $3.2 million drawn on revolving credit facility (Canadian) and $20.2 million in loans from prior owners. The weighted average interest rate on the outstanding debt facilities, including any interest rate swaps and fees associated with outstanding letters of credit was 5.23%. Cash interest paid during the quarters ended March 31, 2015 and 2014 was $9.2 million and $10.2 million, respectively.

Excess cash at MIC has been used to pay down IMTT’s revolving credit facility. At March 31, 2015, IMTT’s leverage ratio, as defined by the IMTT revolving credit agreement, was below 2.0x resulting in the applicable margin on IMTT’s revolving debt interest declining to 1.25%. This reduced margin will not take effect until after March 31, 2015 and will be reviewed again at the end of the quarter ending June 30, 2015.

At March 31, 2015, IMTT’s leverage ratio (< 5.00x (default threshold)) was 1.82x and backward interest coverage ratio (> 3.00x (default threshold)) was 7.32x.

Atlantic Aviation

At March 31, 2015, Atlantic Aviation had total debt outstanding of $609.7 million comprised of $605.1 million of senior secured, first lien term loan facilities and $4.6 million of stand-alone debt facilities used to fund construction of certain FBOs. Atlantic Aviation also has access to a $70.0 million senior secured, first lien revolving credit facility which is currently undrawn. The weighted average interest rate on all outstanding debt facilities, including interest rate swaps, was 4.63%. Cash interest paid during the quarters ended March 31, 2015 and 2014 was $7.3 million and $6.2 million, respectively.

At March 31, 2015, Atlantic Aviation’s leverage ratio (< 4.75x (default threshold)) was 3.21x.

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Liquidity and Capital Resources – (continued)

CP&E

At March 31, 2015, the CP&E segment had $295.8 million in term loan debt. The weighted average interest rate on the term loan debt was 5.29%. Cash interest paid was $2.3 million and $2.4 million for the quarters ended March 31, 2015 and 2014, respectively. At March 31, 2015, all of the CP&E credit facilities were compliant with their respective financial covenants.

Hawaii Gas

At March 31, 2015, Hawaii Gas had total debt outstanding of $180.0 million in term loan and senior secured note borrowings and a revolving credit facility of $60.0 million that remains undrawn. The weighted average interest rate on the outstanding debt facilities, including the interest rate swap, was 3.63%. Cash interest paid was $2.7 million and $2.8 million for the quarters ended March 31, 2015 and 2014, respectively.

At March 31, 2015, the 12 month backward interest coverage ratio (> 3.00x (default threshold)) was 8.88x at HGC Holdings LLC (“HGC”) and 13.23x at the operating company. The leverage ratio (total indebtedness to capitalization ratio < 65% (default threshold)) at March 31, 2015 was 62.18% at HGC and 34.62% at the operating company.

Additionally, the HPUC requires the consolidated debt to total capital for the HGC to be less than 65% and that $20.0 million in cash resources be readily available at Hawaii Gas, HGC or MIC. At March 31, 2015, the debt to total capital ratio was 62.18% and $20.0 million in cash resources was readily available.

MIC Corporate

At March 31, 2015, MIC had $350.0 million in convertible senior notes outstanding that bear interest at 2.875% and a $250.0 million senior secured revolving credit facility that was undrawn. The revolving credit facility bears interest at LIBOR plus 1.75%. As of May 4, 2015, MIC had $155.0 million drawn on its revolving credit facility, which was used to fund, in part, the acquisition of BEC.

For a description of the material terms and debt covenants of MIC and its businesses, see Note 8 “Long-Term Debt” in Part II, Item 8, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Commitments and Contingencies

On January 28, 2015, the Company signed a Purchase and Sale Agreement for the purchase of 100% of BEC for a purchase price of $724.3 million (subject to post-closing working capital adjustments), consisting of $215.2 million in cash and the assumption of $509.1 million of debt, excluding transaction costs. On April 1, 2015, we completed this acquisition funded partially from the MIC revolving credit facility and cash from the completed March 2015 equity offering.

In March 2015, using the remaining proceeds from the March 2015 equity offering, we fully paid down the IMTT U.S. revolving credit facility.

Except as noted above, at March 31, 2015, there had been no material changes in our commitments and contingencies compared with our commitments and contingencies at December 31, 2014. At March 31, 2015, 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, 2014, filed with the SEC on February 18, 2015.

At March 31, 2015, 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.

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Commitments and Contingencies – (continued)

Our sources of cash to meet these obligations include:

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, 2014. Our critical accounting policies and estimates have not changed materially from the description contained in our Annual Report, except for the reassessment of the useful lives for its contractual arrangements and leasehold and land improvements related to leases at certain airports to generally match these useful lives with the remaining lease terms plus extensions under Atlantic Aviation’s control. This change will generally accelerate depreciation and amortization expense at the affected sites.

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 businesses 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 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.

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Critical Accounting Policies and Estimates – (continued)

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 includes 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. IMTT, Atlantic Aviation, CP&E and Hawaii Gas 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 is 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 contractual rights at Atlantic Aviation, the useful lives will generally match the remaining lease terms plus extensions under the business’ control.

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 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, 2014. Our exposure to market risk has not changed materially since February 18, 2015, the filing date for our Annual Report on Form 10-K.

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Controls and Procedures

Evaluation of Disclosure 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) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. The purpose of disclosure controls is to ensure that information required to be disclosed in our reports filed with or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2015.

Changes in Internal Control Over Financial Reporting

On July 16, 2014, we completed the acquisition of the remaining 50% interest in IMTT that we did not previously own and consolidated the financial results of IMTT effective as of such date. Prior to the acquisition, we had a 50% investment in IMTT, which was accounted for under the equity method, and we did not directly manage the day to day operations of IMTT. The Company is evaluating changes to processes, information technology systems and other components of internal controls over financial reporting as part of its ongoing integration activities, and as a result, controls will be periodically changed. See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 4 “Acquisitions and Disposition,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. There have not been any other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended March 31, 2015 that have materially affected, or are 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, 2015				December 31, 2014
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	101,312			$	48,014
Restricted cash			9,565				21,282
Accounts receivable, less allowance for doubtful accounts of $1,328 and $771, respectively			96,928				96,885
Inventories			26,114				28,080
Prepaid expenses			14,642				14,276
Deferred income taxes			25,412				25,412
Other			18,355				22,941
Total current assets			292,328				256,890
Property, equipment, land and leasehold improvements, net			3,331,537				3,362,585
Investment in unconsolidated business			9,166				9,773
Goodwill			1,992,742				1,996,259
Intangible assets, net			916,515				959,634
Deferred financing costs, net of accumulated amortization			30,548				32,037
Other			11,936				8,010
Total assets		$	6,584,772			$	6,625,188
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Due to manager-related party		$	154,822			$	4,858
Accounts payable			42,119				49,733
Accrued expenses			62,152				77,248
Current portion of long-term debt			28,187				27,655
Fair value of derivative instruments			29,499				32,111
Other			25,820				32,727
Total current liabilities			342,599				224,332
Long-term debt, net of current portion			1,940,406				2,364,866
Deferred income taxes			845,486				904,108
Fair value of derivative instruments			32,620				27,724
Other			139,828				133,990
Total liabilities			3,300,939				3,655,020
Commitments and contingencies			—				—
Members’ equity:
LLC interests, or shares, no par value; 500,000,000 authorized; 77,412,136 shares issued and outstanding at March 31, 2015 and 71,089,590 shares issued and outstanding at December 31, 2014			2,351,612				1,942,745
Additional paid in capital			21,447				21,447
Accumulated other comprehensive loss			(23,975	)			(21,550	)
Retained earnings			755,519				844,521
Total members’ equity			3,104,603				2,787,163
Noncontrolling interests			179,230				183,005
Total equity			3,283,833				2,970,168
Total liabilities and equity		$	6,584,772			$	6,625,188

 
 
See accompanying notes to the consolidated condensed financial statements.

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

		Quarter Ended March 31, 2015				Quarter Ended March 31, 2014
Revenue
Service revenue		$	326,002			$	202,439
Product revenue			72,496				73,009
Financing and equipment lease income			—				747
Total revenue			398,498				276,195
Costs and expenses
Cost of services			133,417				112,954
Cost of product sales			39,127				50,239
Selling, general and administrative			70,653				55,464
Fees to manager-related party			165,273				8,994
Depreciation			57,422				12,154
Amortization of intangibles			47,971				8,765
Loss on disposal of assets			545				—
Total operating expenses			514,408				248,570
Operating (loss) income			(115,910	)			27,625
Other income (expense)
Dividend income			531				—
Interest income			6				64
Interest expense(1)			(31,521	)			(14,011	)
Equity in earnings and amortization charges of investee			—				14,287
Other income, net			1,046				681
Net (loss) income before income taxes			(145,848	)			28,646
Benefit (provision) for income taxes(2)			55,333				(8,486	)
Net (loss) income		$	(90,515	)		$	20,160
Less: net loss attributable to noncontrolling interests			(1,513	)			(206	)
Net (loss) income attributable to MIC LLC		$	(89,002	)		$	20,366
Basic (loss) income per share attributable to MIC LLC		$	(1.22	)		$	0.36
Weighted average number of shares outstanding: basic			73,150,111				56,369,295
Diluted (loss) income per share attributable to MIC LLC		$	(1.22	)		$	0.36
Weighted average number of shares outstanding: diluted			73,150,111				56,382,205
Cash dividends declared per share		$	1.07			$	0.9375

 
 
See accompanying notes to the consolidated condensed financial statements.

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MACQUARIE INFRASTRUCTURE COMPANY LLC
 
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
($ in Thousands)

		Quarter Ended March 31, 2015				Quarter Ended March 31, 2014
Net (loss) income		$	(90,515	)		$	20,160
Other comprehensive loss, net of taxes:
Reclassification of realized losses of derivatives into earnings(1)			—				150
Translation adjustment(2)			(4,051	)			(285	)
Other comprehensive loss			(4,051	)			(135	)
Comprehensive (loss) income		$	(94,566	)		$	20,025
Less: comprehensive loss attributable to noncontrolling interests			(3,139	)			(134	)
Comprehensive (loss) income attributable to MIC LLC		$	(91,427	)		$	20,159

 
 
See accompanying notes to the consolidated condensed financial statements.

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

		Quarter Ended March 31, 2015				Quarter Ended March 31, 2014
Operating activities
Net (loss) income		$	(90,515	)		$	20,160
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization of property and equipment			57,422				13,858
Amortization of intangible assets			47,971				8,765
Loss on disposal of assets			453				—
Equity in earnings and amortization charges of investee			—				(14,287	)
Equity distributions from investee			—				8,127
Amortization of debt financing costs			1,615				1,041
Adjustments to derivative instruments			2,833				1,094
Base management fees to be settled/settled in shares			16,545				8,994
Performance fees to be settled in shares			148,728				—
Equipment lease receivable, net			—				996
Deferred rent			233				50
Deferred taxes			(56,138	)			6,439
Other non-cash expenses, net			745				692
Changes in other assets and liabilities, net of acquisitions:
Restricted cash			669				14,643
Accounts receivable			222				(6,431	)
Inventories			2,087				1,973
Prepaid expenses and other current assets			5,901				(492	)
Due to manager – related party			(88	)			(116	)
Accounts payable and accrued expenses			(18,153	)			(4,166	)
Income taxes payable			(853	)			(69	)
Pension contribution			—				(310	)
Other, net			(2,661	)			(1,884	)
Net cash provided by operating activities			117,016				59,077
Investing activities
Acquisitions of businesses and investments, net of cash acquired			(18,137	)			(1,052	)
Purchases of property and equipment			(25,481	)			(21,613	)
Other, net			544				52
Net cash used in investing activities			(43,074	)			(22,613	)

 
 
See accompanying notes to the consolidated condensed financial statements.

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

		Quarter Ended March 31, 2015				Quarter Ended March 31, 2014
Financing activities
Proceeds from long-term debt		$	29,000			$	4,884
Payment of long-term debt			(452,628	)			(11,084	)
Proceeds from the issuance of shares			487,937				—
Dividends paid to shareholders			(78,075	)			(51,469	)
Distributions paid to noncontrolling interests			(1,000	)			(656	)
Offering and equity raise costs paid			(15,964	)			(5	)
Debt financing costs paid			—				(1,050	)
Proceeds from the issuance of shares pursuant to MIC Direct			95				72
Change in restricted cash			11,047				(1,506	)
Payment of capital lease obligations			(758	)			(454	)
Net cash used in financing activities			(20,346	)			(61,268	)
Effect of exchange rate changes on cash and cash equivalents			(298	)			—
Net change in cash and cash equivalents			53,298				(24,804	)
Cash and cash equivalents, beginning of period			48,014				233,373
Cash and cash equivalents, end of period		$	101,312			$	208,569
Supplemental disclosures of cash flow information
Non-cash investing and financing activities:
Accrued equity offering costs		$	349			$	1
Accrued financing costs		$	126			$	—
Accrued purchases of property and equipment		$	5,239			$	1,797
Acquisition of equipment through capital leases		$	398			$	—
Issuance of shares to manager for base management fees		$	15,221			$	8,777
Conversion of convertible senior notes to shares		$	2			$	—
Conversion of construction loan to term loan		$	—			$	60,360
Distributions payable to noncontrolling interests		$	75			$	128
Taxes paid		$	1,657			$	2,116
Interest paid		$	26,887			$	11,351

 
 
See accompanying notes to the consolidated condensed financial statements.

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

1. Organization and Description of Business

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

MIC is a non-operating holding company with a Board of Directors and other corporate governance responsibilities generally consistent with those of a Delaware corporation. MIC has made an election to be treated as a corporation for tax purposes.

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

2. Basis of Presentation

The unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

The consolidated balance sheet at December 31, 2014 has been derived from audited financial statements but does not include all of the information and notes required by GAAP for complete financial statements. Certain reclassifications were made to the financial statements for the prior period to conform to current period presentation.

The interim financial information contained herein should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2014 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on February 18, 2015. Operating results for the quarter ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015 or for any future interim periods.

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

2. Basis of Presentation  – (continued)

Use of Estimates

The preparation of unaudited consolidated condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure related thereto at the date of the unaudited consolidated condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Management evaluates these estimates and assumptions on an ongoing basis.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited interim consolidated condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.

Recently Issued Accounting Standards

On April 7, 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-03, Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments. The guidance in the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is allowed. The standard must be applied retrospectively to all prior periods presented. The Company will include appropriate disclosures related to debt issuance costs in accordance with the standard when it adopts the provisions of this ASU.

On February 18, 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable interest entity (“VIE”), and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. The ASU significantly changes how to evaluate voting rights for entities that are not similar to limited partnerships when determining whether the entity is a VIE, which may affect entities for which the decision making rights are conveyed through a contractual arrangement. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2015. Early adoption is allowed, including early adoption in an interim period. A reporting enterprise may apply a modified retrospective approach or full retrospective application. The Company has not yet determined the effect of the standard on its ongoing financial reporting.

On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

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

3. (Loss) Income per Share

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

		Quarter Ended March 31,
		2015				2014
Weighted average number of shares outstanding: basic			73,150,111				56,369,295
Dilutive effect of restricted stock unit grants and convertible senior notes			—				12,910
Weighted average number of shares outstanding: diluted			73,150,111				56,382,205

Restricted stock unit grants totaling 12,525 provided to the independent directors on May 21, 2014, which will vest during the second quarter of 2015, and 4,127,970 shares related to the convertible senior notes that were issued on July 15, 2014 would have been anti-dilutive due to the Company’s net loss for the quarter ended March 31, 2015.

The effect of potentially dilutive shares for the quarter ended March 31, 2014 is calculated assuming that the 12,910 restricted stock unit grants provided to the independent directors on May 20, 2013, which vested during the second quarter of 2014, had been fully converted to shares on the grant date.

4. Acquisitions

In 2014, the Company acquired controlling interests in wind power generation facilities, consisting of Brahms Wind, LLC, Exergy Idaho Holdings, LLC and Idaho Wind Partners 1, LLC (collectively the “2014 wind power generation facilities”), for a combined purchase price of $103.3 million. These wind farms have a total of 134 turbines located in New Mexico and Idaho and have a total wind power generation capacity of 203 megawatts of electricity. The Company entered into LLC agreements with the noncontrolling interest co-investors whose interests in these projects are reflected in noncontrolling interests in the consolidated condensed financial statements.

During the first quarter of 2015, the Company completed the purchase price allocation associated with the acquisitions. Substantially all of the purchase price has been allocated to the wind turbines, which have a fair value of $313.4 million, and is primarily offset by $163.9 million of amortizing term loan debt and noncontrolling interests. The fair value was determined using various valuation techniques, including the market approach, income approach and/or cost approach.

For the year ended December 31, 2014, the Company recorded transaction related costs of $2.0 million in selling, general and administrative expenses for these investments. Had the acquisitions occurred as of January 1, 2014, the consolidated results of operations would not have been materially different.

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

5. Property, Equipment, Land and Leasehold Improvements

Property, equipment, land and leasehold improvements at March 31, 2015 and December 31, 2014 consist of the following ($ in thousands):

		March 31, 2015				December 31, 2014
Land		$	271,890			$	272,110
Easements			131				131
Buildings			40,921				40,730
Leasehold and land improvements			431,597				439,962
Machinery and equipment			2,819,393				2,810,531
Furniture and fixtures			28,828				28,664
Construction in progress			81,904				72,241
			3,674,664				3,664,369
Less: accumulated depreciation			(343,127	)			(301,784	)
Property, equipment, land and leasehold improvements, net		$	3,331,537			$	3,362,585

During the quarter ended March 31, 2015, Atlantic Aviation reassessed the useful lives for its leasehold and land improvements related to leases at certain airports to generally match these useful lives with the remaining lease terms plus extensions under Atlantic Aviation’s control. This change will generally accelerate depreciation expense at the affected sites. As a result of this reassessment, the business performed an impairment analysis related to its leasehold and land improvements and recorded an impairment of $2.8 million, which is included in depreciation expense. In addition, the change in useful life resulted in increased depreciation expense of $1.1 million during the quarter.

In addition, during the quarter ended March 31, 2015, an impairment charge of $4.2 million was recorded due to a change in the current lease contract at one of the bases. This amount is included in depreciation expense.

6. Intangible Assets

Intangible assets at March 31, 2015 and December 31, 2014 consist of the following ($ in thousands):

		March 31, 2015				December 31, 2014
Contractual arrangements		$	830,525			$	873,406
Non-compete agreements			9,665				9,665
Customer relationships			341,457				342,232
Leasehold rights			350				350
Trade names			16,091				16,091
Technology			8,760				8,760
			1,206,848				1,250,504
Less: accumulated amortization			(290,333	)			(290,870	)
Intangible assets, net		$	916,515			$	959,634

During the quarter ended March 31, 2015, Atlantic Aviation reassessed the useful lives for its contractual arrangements related to leases at certain airports to generally match these useful lives with the remaining lease terms plus extensions under Atlantic Aviation’s control. This change will generally accelerate amortization expense at the affected sites. As a result of this reassessment, the business performed an impairment analysis related to its contractual arrangements and recorded an impairment of $13.5 million, which is included in amortization expense. In addition, the change in useful life resulted in increased amortization expense of $4.3 million during the quarter.

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

6. Intangible Assets  – (continued)

In addition, during the quarter ended March 31, 2015, an impairment charge of $17.8 million was recorded due to a change in the current lease contract at one of the bases. This amount is included in amortization expense.

The goodwill balance as of March 31, 2015 is comprised of the following ($ in thousands):