Macquarie Infrastructure Company Reports First Quarter 2009 Financial Results

Macquarie Infrastructure Company (NYSE: MIC), reported its first quarter 2009 financial results including performance by its airport services business that was consistent with the fourth quarter of 2008. Airport services is the largest of MIC’s five businesses. The Company believes that efforts to reduce operating expenses, along with a leveling off of the decline in demand for general aviation services, is stabilizing the business’ contribution to the Company’s overall results. MIC also reported better than expected results from its gas production and distribution business.

MIC recorded consolidated revenue for the first quarter of 2009 of $184.1 million compared with $278.7 million in 2008. The decrease reflects primarily the lower cost of jet fuel this year versus 2008. Fuel price fluctuations are passed through to customers and the recovery of the cost is reflected in revenue.

The Company reports gross profit, or revenue less costs of goods sold/sales, as it believes that this improves transparency regarding its ability to maintain margins. Gross profit decreased 21% to $88.6 million from $112.6 million in 2008. Excluding $6.4 million of non-cash impairment charges in direct expenses of the airport parking business, consolidated gross profit for the period would have decreased 16%. The decline was driven primarily by reduced demand for general aviation and airport parking services.

The Company reported a net loss of $53.0 million for the quarter, including the impact of $50.1 million of pre-tax non-cash impairments and $32.2 million of non-cash losses on derivatives. The impairments comprise a $32.1 million pre-tax non-cash impairment of the value of certain intangible and long-lived assets of its airport services and airport parking businesses in the quarter and an $18.0 million pre-tax impairment of goodwill relating solely to its airport services business. The charges reflect primarily the reduced value of operations at certain airports due to lower levels of business activity at those locations.

As discussed in its fourth quarter 2008 earnings release, the Company has decided to provide its investors with information relating to "cash available before debt reduction”, or "CADR”, rather than "cash available for distribution”, or "CAD”. The disclosure of CADR is intended to provide insight into the amount of cash generated by the Company’s businesses during the period and available to reduce debt and to fund committed growth capital expenditures without incremental borrowing.

Estimated CADR generated by MIC’s businesses in the first quarter totaled $24.9 million compared with CAD of $30.8 million in the first quarter of 2008. Both CADR and CAD exclude the negative contribution from the airport parking business in both periods because, as previously disclosed, the Company does not intend to support that business with additional capital. The decline in CADR was attributed to a reduced amount of cash generated by the airport services business partially offset by improved performance at the Company’s bulk liquid storage business.

The Company reported negative consolidated EBITDA of $6.0 million in the first quarter of 2009, reflecting the non-cash impairments and losses on derivatives noted above. Excluding these items, consolidated EBITDA would have decreased by approximately 21% versus the prior comparable period.

MIC believes that EBITDA and CADR, both non-GAAP measures, provide additional insight into the performance of its businesses and their generation of cash available to reduce debt at an operating company level, make committed growth capital expenditures or pay dividends up to the MIC holding company. CADR includes cash retained by the bulk liquid storage terminal business to fund existing committed growth projects that would otherwise require debt funding.

"Our businesses collectively continued to generate attractive amounts of cash that we used to strengthen our financial position and fund previously committed growth projects”, said Peter Stokes, Chief Executive Officer of MIC. "In particular, the airport services business produced a level of excess cash that allowed us to further reduce credit market risk faced by the business by reducing the principal balance of its debt facility”, he added.

MIC’s airport services business generated $75.0 million of gross profit and $9.0 million in CADR in the first quarter. On May 5^th approximately $8.0 million of cash, net of interest rate swap breakage fees, was used to reduce debt principal in the business. The airport services business generated average daily gross profit that was essentially flat with the fourth quarter of 2008.

The Company’s bulk liquid storage business generated a 27% increase in terminal gross profit year over year. Tank construction projects completed in the second half of 2008 as well as continued strong demand for storage contributed to the favorable result. As anticipated, the bulk liquid storage terminal business did not pay a dividend up to MIC for the first quarter but instead retained cash to fund existing, committed growth capital expenditures.

The Company’s gas production and distribution business generated a better than expected level of cash on lower liquefied petroleum gas prices in the unregulated portion of the business which positively affected contribution margins. The improvement was partially offset by reductions in prices to consumers.

Impairment of Certain Intangible and Long-Lived Assets

MIC recorded a non-cash pre-tax impairment charge in the first quarter of 2009 of $32.1 million to write down the carrying value of certain intangible and long-lived assets and a writedown of $18.0 million of goodwill related to its airport services business in accordance with Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets” ("SFAS No. 142”) and Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets” ("SFAS No. 144”). These standards require the Company to evaluate intangible assets and long-lived assets for impairment whenever a triggering event exists.

Per SFAS No. 142 and SFAS No. 144, the Company is required to consider the fair value of its reporting units in its evaluation of impairment. Factors considered in determining fair value for purposes of SFAS 142 include, among other things, the Company’s market capitalization as determined by quoted market prices for its common stock, market values of the Company’s reporting units based on common market multiples for comparable companies, and discount rates that appropriately reflect not only the Company’s businesses, but also the current overall macroeconomic environment. The extended decline in the Company’s share price and the uncertainties and deterioration in overall macroeconomic conditions through the current date have had a material impact on the impairment test for goodwill and other intangible assets.

The Company will continue to monitor the valuation of goodwill, intangibles and other long-lived assets on a quarterly basis in light of prevailing market conditions.

Cash Generation

The table below summarizes MIC’s estimated cash available before debt reduction, by segment, beginning with cash from operations and adjusting for working capital, certain operating items and maintenance capital expenditures for the quarter ended March 31, 2009.

The calculation of CADR with respect to the Company’s consolidated businesses is unchanged from the calculation of CAD reported in periods prior to the fourth quarter of 2008. However, the calculation of CADR encompasses the impact of cash sweeps at the airport services business and the redirection of cash to prepayment of debt principal generally.

The calculation of CADR also encompasses the cash generated and retained by the bulk liquid storage business for funding of existing committed growth capital expenditures. In the first quarter of 2009, the bulk liquid storage business generated $20.2 million of CADR, all of which was retained. MIC’s 50% interest in this CADR is shown in the "MIC LLC” column below as a $5.4 million component of cash from operations (through its equity pick-up) and as a $4.7 million component of cash from investing and financing adjustments.

MIC reported consolidated cash from operating activities of $16.9 million for the quarter, including the operating loss at its airport parking business. As previously reported, the Company has chosen not to support the airport parking business with additional capital. The impact of the performance of the airport parking business going forward is limited primarily by the non-recourse nature of its debt facility.

On May 5^th, the $9.0 million in CADR generated by the airport services business during the first quarter, less $789,000 of interest rate swap breakage fees, was used to make a pre-payment on the outstanding debt of that business as required under the revisions to the debt facility implemented on February 25^th.

A total of $8.9 million, or $0.20 per share, of CADR was generated by the district energy and gas production and distribution businesses. This cash is being retained and would be available for further reduction of debt, including amounts outstanding under MIC’s revolving credit facility balance.

CADR is also adjusted for changes in working capital since these effects are believed to be temporary. For the quarter these adjustments reduced CADR by approximately $1.1 million.

Cash from investing and financing adjustments include $5.2 million of equity contributions to the airport services business used to pay swap breakage fees, a net $2.1 million in cash capital expenditures and the $4.7 million portion of the CADR generated by the bulk liquid storage business not included in cash from operations.

Operating Businesses

MIC discloses EBITDA and contribution margin, both non-GAAP financial measures, as it considers them to be important indicators of the overall performance of both its operating businesses individually and in consolidation. The Company believes that EBITDA, excluding non-cash items, also provides insight into the performance of its operating companies and their ability to generate cash. The reporting of contribution margin by the gas production and distribution business provides additional insight into the performance of that business excluding changes in fuel prices that typically are recovered in revenue.

Gross profit for the first quarter declined 21% versus the prior comparable period. The decline reflects the ongoing impact of the reduced level of economic activity versus 2008 on the airport services business. The average daily gross profit generated by the business in the first quarter was essentially flat with the fourth quarter of 2008.

The decline in gross profit was partially offset by a 9% reduction in selling, general and administrative (SG&A) expenses. SG&A expenses for the quarter include $1.2 million of fees incurred in connection with the restructuring of the business’ primary debt facility and a $2.4 million bad debt expense. The business has increased previously announced cost savings to an annualized $24.0 million from $22.0 million.

Industry-wide, general aviation flight movements declined by nearly 30% during the first quarter of 2009 compared with the first quarter of 2008, according to data compiled by the Federal Aviation Administration. General aviation jet aircraft flight movements at the 68 airports at which the airport services business operates decreased by approximately 26%. The relatively stronger performance by the Company reflects the ongoing interest in business and recreation near the destinations at which the business operates.

The volume of general aviation jet fuel sold by the business declined slightly more than 23% in the first quarter of 2009 compared with the first quarter of 2008. The decrease in the volume of fuel sold year over year is attributable to the reduced number of transient flight movements primarily resulting from the softer economy compared to first quarter of 2008.

Total average margins including into-plane sales decreased 5.4%. The decline reflects, in part, an increase in the proportion of fuel sales to base tenants who typically have agreements to buy fuel at a discount compared with transient aircraft.

The debt to EBITDA (leverage) ratio of the airport services business was 7.29 times at the end of the first quarter compared with a maximum allowable under its debt facility of 8.25 times.

Terminal revenue and terminal gross profit increased as a result of higher average storage rates and increases in rented storage capacity resulting from tank construction projects completed in the second half of 2008.

EBITDA in 2009 includes a non-cash gain of $3.3 million related to interest rate hedges compared with a $17.7 million loss in 2008. Excluding the impact of non-cash gains and losses on derivatives in the first quarters of 2009 and 2008, EBITDA would have increased by approximately 29%.

Cash flow from operating activities in the first quarter increased to $28.7 million from $24.8 million in 2008. Higher gross profit in 2009 was partially offset by a decrease in deferred revenue receipts.

As provided for in the shareholder agreement between MIC and the other shareholders, the business may pay MIC a variable dividend each quarter beginning with the first quarter in 2009. Excess cash flows generated in the first quarter were retained for reinvestment in existing committed growth projects rather than paid out as a dividend.

Maintenance and environmental capital expenditures totaled $8.3 million for the quarter. The business continues to expect that maintenance capital expenditures for the full-year 2009 will be in a range of between $65.0 million and $67.0 million.

The Company’s gas production and distribution business generated an increase in total contribution margin (revenue less cost of revenue, excluding production and transmission / distribution) of slightly more than 20% compared with the prior comparable period. The increase was driven by improvement in non-utility contribution margin stemming from lower product costs partially offset by lower prices charged to non-utility customers and reduced gas sales in the utility portion of the business.

Continued declines in tourism levels could cause further deterioration in the level of economic activity in Hawaii. The Company believes, however, that the relatively consistent volume of gas products sold as a result of essential services nature and market leading position of this business will enable it to continue to generate stable cash flows.

Revenue generated by the district energy business is a combination of capacity revenue based on the number of tons of cooling under contract, and consumption revenue based on demand for cooling. Capacity revenue for the first quarter increased with the step-up in inflation-linked rate escalators over the prior comparable period. A warmer first quarter this year compared with 2008 resulted in an increase in consumption revenue and contributed to an increase in total revenue for the quarter.

The Company expects continued stable performance from its district energy business, assuming a historically normal level of demand for cooling in Chicago in 2009.

The airport parking business generated a gross loss of $3.8 million in the first quarter primarily as a result of the inclusion of a non-cash impairment charge of $6.4 million in direct expenses. The year over year decline in gross profit was partially offset by decreased rent expense resulting from the purchase in the first quarter of 2008 of a previously leased property.

Lot utilization, as measured by the number of cars exiting the airport parking business’ facilities, declined 20% compared with the first quarter in 2008. The decline in volume was partially offset by an approximately 4% increase in average revenue per car. Despite the decline in activity, the airport parking business met all of its recurring obligations, including payment of interest expense, during the quarter.

The airport parking business does not have sufficient liquidity or capital resources to pay the aggregate principal amount of its maturing debt obligations and, based on current results and market conditions, is not expected to be able to refinance its primary debt facility when it matures in September, 2009. MIC does not intend to contribute any further capital to this business other than potentially obligations that it has guaranteed. Without substantial concessions from its lenders it is likely that this business will default on its obligations and there is doubt regarding the business’ ability to continue as a going concern.

MIC’s maximum exposure under guarantees of liabilities of its airport parking business decreased to an estimated $9.0 million at May 7^th.

Conference Call and WEBCAST

When: Management has scheduled a conference call for 11:00 a.m. Eastern Time on Thursday, May 7, 2009 to review the Company’s results.

How: To listen to the conference call please dial +1(877) 874-1589 (domestic) or +1(719) 325-4748 (international) at least 10 minutes prior to the scheduled start time. Interested parties can also listen to a live webcast of the call. The webcast will be accessible via the Company’s website at www.macquarie.com/mic. Please allow extra time prior to the call to visit the site and download the necessary software to listen to the webcast.

Slides: The Company will prepare slides in support of its conference call presentation. The slides will be available for downloading from the Company website the morning of May 7, 2009 prior to the conference call. A link to the slides will be located on the homepage of the MIC website.

Replay: For interested individuals unable to participate in the conference call, a replay will be available after 2:00 p.m. on May 7, 2009 through May 21, 2009, at +1(888) 203-1112 (domestic) or +1(719) 457-0820 (international), Passcode: 8748435. An online archive of the webcast will be available on the Company’s website for one year following the call.

About Macquarie Infrastructure Company

Macquarie Infrastructure Company owns, operates and invests in a diversified group of infrastructure businesses providing basic, everyday services, to customers in the United States. Its businesses consist of an airport services business, a 50% indirect interest in a bulk liquid storage terminal business, a gas production and distribution business, a district energy business, and an airport parking business. The Company is managed by a wholly-owned subsidiary of the Macquarie Group. For additional information, please visit the Macquarie Infrastructure Company website at www.macquarie.com/mic.

Forward Looking Statements

This filing contains forward-looking statements. We may, in some cases, use words such as "project”, "believe”, "anticipate”, "plan”, "expect”, "estimate”, "intend”, "should”, "would”, "could”, "potentially”, or "may” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements in this report are subject to a number of risks and uncertainties, some of which are beyond our control including, among other things: changes in general economic or business conditions, our ability to service, comply with the terms of and refinance debt, successfully integrate and manage acquired businesses, retain or replace qualified employees, manage growth, make and finance future acquisitions, and implement our strategy, our shared decision-making with co-investors over investments including the distribution of dividends, our regulatory environment establishing rate structures and monitoring quality of service, demographic trends, the political environment, the economy, tourism, construction and transportation costs, air travel, environmental costs and risks, fuel and gas costs, our ability to recover increases in costs from customers, reliance on sole or limited source suppliers, foreign exchange fluctuations, risks or conflicts of interests involving our relationship with the Macquarie Group and changes in U.S. federal tax law.

Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. Additional risks of which we are not currently aware could also cause our actual results to differ. In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements. The forward-looking events discussed in this release may not occur. These forward-looking statements are made as of the date of this release. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

"Macquarie Group” refers to the Macquarie Group of companies, which comprises Macquarie Group Limited and its worldwide subsidiaries and affiliates. Macquarie Infrastructure Company LLC is not an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) and its obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of Macquarie Infrastructure Company LLC. MIC-G

(1) Depreciation - cost of services includes depreciation expense for our district energy business and airport parking business, which are reported in cost of services in our consolidated condensed statements of operations. Depreciation and Depreciation - cost of services do not include step-up depreciation expense of $1.7 million for each quarter in connection with our investment in IMTT, which is reported in equity in earnings (losses) and amortization charges of investees in our consolidated condensed statements of operations. For the quarter ended March 31, 2009, depreciation and depreciation -cost of services include $5.3 million and $6.4 million of non-cash impairment charges recorded in accordance with SFAS No. 144 at our airport services and airport parking business, respectively.

(2) Includes a non-cash impairment charge of $18.0 million for our airport services business recorded in accordance with SFAS No. 142.

(3) Amortization does not include step-up amortization expense of $283,000 for each quarter related to intangible assets in connection with our investment in IMTT, which is reported in equity in earnings (losses) and amortization charges of investees in our consolidated condensed statements of operations. For the quarter ended March 31, 2009, amortization expense includes $20.4 million of non-cash impairment charges recorded in accordance with SFAS No. 144 at our airport services business.

(1) Includes $2.4 million increase in bad debt expense and $1.2 million in debt advisory fees and other amendment costs paid in connection with the amendment to the debt agreement in February 2009.

(2) Includes a non-cash impairment charge of $25.7 million, consisting of $20.4 million related to contractual arrangements and $5.3 million related to property, equipment, land and leasehold improvements, recorded during the first quarter of 2009.

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

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

(1) Includes depreciation expense of $1.5 million each for the quarters ended March 31, 2009 and 2008.

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

(1) Includes depreciation expense of $7.3 million and $1.3 million for the quarters ended March 31, 2009 and 2008, respectively. Depreciation expense for 2009 includes a non-cash impairment charge of $6.4 million.

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