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Non-Tech : Macquarie Infrastructure Company (MIC)
MIC 3.720+0.5%Oct 18 4:00 PM EDT

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From: JakeStraw5/8/2007 8:08:58 AM
   of 10
 
Macquarie Infrastructure Company Reports First Quarter 2007 Financial Results
biz.yahoo.com
Tuesday May 8, 7:30 am ET

Increased First Quarter Distribution of $0.59 Per Share Declared

NEW YORK, May 8 /PRNewswire-FirstCall/ -- Macquarie Infrastructure Company (NYSE: MIC), a leader in the ownership and operation of U.S. infrastructure businesses, reported consolidated revenue and operating income for the first quarter of 2007 of $169.0 million and $19.8 million, respectively. Revenue increased 96% and operating income increased 359% over first quarter of 2006.

Reported gross profit was $75.2 million for the quarter versus $39.9 million in the first quarter of 2006. Gross profit, or revenues less costs of goods sold/sales, removes the volatility in revenue associated with costs that are typically passed through to customers by infrastructure businesses and provides additional insight into the performance of the Company.

MIC also reported a year over year increase in estimated cash available for distribution ("CAD"). CAD is a measure used by the Company to assess its ability to sustain and increase quarterly distributions to shareholders. CAD for the quarter increased to $28.0 million, or $0.75 per share, from $11.5 million, or $0.42 per share, in the first quarter of 2006. The increase in CAD was attributable in part to successful acquisitions during 2006 and continued strong performance on the part of the Company's airport services business. CAD also includes a $2.6 million (net) federal income tax refund resulting from an overpayment of estimated taxes by the airport services and district energy businesses in 2004. Excluding the tax refund, CAD would have been $25.4 million or $0.68 per share.

The Company's board of directors has approved a distribution to shareholders of $0.59 per share for the first quarter of 2007. This is the fourth consecutive quarter for which the board has increased the distribution. The $0.59 per share is an 18% increase over the $0.50 per share paid for the first quarter of 2006. The distribution will be made on June 8, 2007 to shareholders of record on June 5, 2007. MIC anticipates declaring and paying a quarterly distribution for the quarter ending June 30, 2007 of $0.59 per share.

"Once again our businesses generated strong cash flows that we were able to use to support an above average return to our investors" said Peter Stokes, Chief Executive Officer of Macquarie Infrastructure Company. "The performance of our businesses in the first quarter was consistent with the guidance that we have provided to the markets for the full year."

OPERATING BUSINESSES PERFORMANCE HIGHLIGHTS

MIC reports EBITDA and contribution margin, both non-GAAP financial measures as it considers them to be an important indicator of overall performance. See the attached tables for a reconciliation of EBITDA to net income and contribution margin to revenue. The Company believes that EBITDA provides additional insight into the performance of its operating companies and their ability to generate dividends that allow it to service its debt and support its ongoing distribution policy. The reporting of contribution margin by the gas production and distribution business provides additional insight into the performance of that business net of changes in fuel prices that are typically passed through to customers.

The Company has implemented systems and procedures that will help ensure that its interest rate swaps achieve hedge accounting treatment in 2007. However, portions of certain economically effective swaps that qualify for hedge accounting will continue to be "ineffective" from an accounting standpoint. As a result, the changes in the fair value of the ineffective portion of these instruments will continue to flow through the income statement of the business that entered into the swap.

-- Gross profit in the Company's airport services business was $57.1
million for the quarter, an increase of 75.2% over the first quarter in
2006. Gross profit at comparable locations (excluding the acquisition
of the Trajen sites in July 2006) increased 18.4%.

- EBITDA increased to $25.6 million or 20.8% over the first quarter in
2006. EBITDA was reduced by a $0.95 million non-cash loss on the
ineffective portion of certain interest rates hedges compared to a
$7.3 million non-cash gain in the prior comparable period. Reported
EBITDA at existing locations decreased 15.6%, however, EBITDA at
existing locations would have increased by 36% excluding both the
non-cash derivatives gain in the first quarter of 2006 and the non-
cash derivatives loss in the first quarter of 2007.

- The business benefited from increased de-icing revenue, an increased
average dollar-based margin per gallon of fuel sold and a higher
volume of fuel sold during the first quarter in 2007 over the first
quarter in 2006.

-- The Company's bulk liquid storage terminal business declared a dividend
of $7.0 million to MIC for the first quarter of 2007. The
dividend payment was accrued at quarter-end and cash was received on
April 25, 2007. As an owner of 50% of this business, MIC does not
consolidate the financial results of the bulk liquid storage terminal
business with those of its controlled businesses.

- MIC expects to receive a dividend of $7.0 million each quarter
through the end of 2008. Beginning with the first quarter in 2009,
the Company expects to receive a dividend equal to 50% of the
cash from operations, less maintenance and environmental remediation
capital expenditures, generated by this business, subject to
satisfaction of certain conditions.

- Terminal revenue increased to $54.8 million in the first quarter of
2007 from $46.4 million in the first quarter of 2006. The increase
was primarily the result of a $5.1 million increase in storage
revenue ($1.6 million of which related to the consolidation of the
results of operations at Quebec), a $935,000 increase in throughput
revenue and a $2.0 million increase in revenue from other terminal
services.

- Cash flow from operations in the bulk liquid storage business
increased to $31.0 million from $20.5 million or 51.1% over the first
quarter of 2006.

- Operating income in the bulk liquid storage business for the first
quarter of 2007 was $16.8 million, an increase of 46.4% over the
first quarter of 2006.

-- The Company's gas production and distribution business generated a
total contribution margin of $15.4 million or 3.8% less than in the
first quarter of 2007.

- Utility revenue does not include $766,000 of Fuel Adjustment Charges
that were recovered from an escrow established for that purpose at
closing of the acquisition. Revenue in the first quarter of 2006
included an accrual for unbilled revenue that was $1.1 million higher
than the accrual in the first quarter of 2007.

- EBITDA of $6.5 million was 14.8% lower than in the first quarter of
2006. The lower amount reflects the reduction in revenue from the
Fuel Adjustment Charges, a larger accrual for unbilled revenue of
$1.1 million in 2006 and the impact of a $267,000 non-cash loss
on the ineffective portion of certain interest rates hedges.

- The total volume of gas sold increased slightly over the prior
comparable period.

-- District energy business gross profit and EBITDA increased to $2.7
million and $3.3 million, respectively, or 5.4% and 11.0% over the
first quarter in 2006.

- Capacity revenue increased with the conversion of four interruptible
customers to continuous service during June through September, 2006.

- Higher electricity costs resulting from deregulation of the Illinois
electricity generation market resulted in higher consumption revenue,
as they were effectively passed through to customers.

-- Gross profit at the Company's airport parking business declined 5.4% to
$4.5 million in the first quarter of 2007 versus the same period in
2006. EBITDA for the period declined 12.5% to $4.1 million.

- Average revenue per car out increased 7.5%, however the number of
cars out declined 4.4%.

- Excluding non-cash gains and losses pertaining to derivatives in use
in the business, EBITDA would have increased by 3.9% relative to the
first quarter in 2006.

ESTIMATED CASH AVAILABLE FOR DISTRIBUTION

The Company believes that its results under GAAP, after certain adjustments, provide better insights into its ability to support ongoing distributions. GAAP results alone do not reflect all of the items that management considers in estimating distributable cash, such as the cash received in excess of the equity in earnings on its investment in the bulk liquid storage terminal business. The table below summarizes MIC's cash receipts and payments, adjusted for certain dividend income and cash expenditures, for the first quarter.

MIC's consolidated cash from operations increased to $27.6 million in the first quarter of 2007 from $11.8 million in the first quarter of 2006. Adjustments to cash from operations include a net $2.6 million tax refund resulting from overpayment of estimated taxes by the Company's airport services and district energy businesses in 2004. Adjustments also include a $766,000 recovery from an escrow account by the gas production and distribution business.

Estimated CAD is reduced by a net $5.2 million in cash from investing activities that includes the $3.5 million portion of the dividend from the Company's bulk liquid storage business that does not flow through earnings offset by $8.7 million of capital expenditures paid in cash or accrued.

Estimated CAD includes a net $5.9 million in cash from financing activities that is the portion of the capital expenditures in the period that was primarily growth related and therefore debt funded.

Estimated CAD excludes $3.9 million of cash generated by working capital reductions.

Net of all adjustments, MIC estimates cash available for distribution in the first quarter of 2007 increased to $28.0 million versus $11.4 million in the prior comparable period.

($ Millions)
Cash from operations 27.6

Cash from operations adjustments 3.6

CAD from investing activities (5.2)

CAD from financing activities 5.9

Working capital (3.9)

Estimated Cash Available for Distribution 28.0

BUSINESS UPDATE AND OUTLOOK

MIC's Manager earned a performance fee of $957,148 for the first quarter of 2007 and has elected to receive payment of the fee in shares of trust stock. The number and price of the additional shares will be determined based on the volume-weighted average price of MIC's currently outstanding shares over a fifteen day trading period that is expected to begin in the first week of June 2007.

Airport services business - On April 23, 2007 the Company announced its intention to acquire a portfolio of 24 FBOs collectively known as Mercury Air Centers for $456.2 million. The price includes $29.2 million of pre-funded capital expenditures, debt services reserves and transaction related expenses. MIC expects to close the transaction in the third quarter of 2007 subject to satisfaction of usual and customary conditions precedent for transactions of this size and type including the receipt of the consent of the airport authorities at each of the locations.

MIC expects continued strong performance from the airport services segment to be supported by a full-year contribution from sites acquired in 2006 as well as continued increases in the number of general aviation aircraft in service and the number of hours those aircraft are being flown.

Bulk liquid storage terminal business - The performance of the bulk liquid storage business is expected to continue to improve as inflation escalators generate revenue growth from existing contracts and storage tanks currently under construction become operational. Of 25 new tanks under construction, 10 have been completed. Approximately $232.2 million of growth capital expenditure commitments have been made in the bulk liquid storage terminal business since the beginning of 2006. The Company expects that the capital projects will generate an incremental increase in annual gross profit and EBITDA of $31.1 million when complete.

MIC believes that the bulk liquid storage terminal business will continue to generate a quarterly dividend of $14.0 million, 50% of which is payable to the Company, through the end of 2008.

Gas production and distribution business - The fundamental driver of continued growth in the gas production and distribution business will be population growth in Hawaii. Beyond this, MIC believes that it can effectively market its synthetic natural gas and liquid petroleum gas products as an efficient, environmentally friendly fuel source, thereby increasing its market share relative to other fuel/power sources.

MIC believes that its gas production and distribution business will continue to be a stable source of distributable cash.

District energy business - The Company expects continued stable performance from its district energy business based on an assumption of a historically normal level of demand for cooling during the upcoming summer. Expansion of the current system, in conjunction with operational strategies and efficiencies, will increase saleable capacity by approximately 9,300 tons. Approximately 90% of the new capacity has been sold to five new customers, one of which came on-line in late 2006. The remaining newly contracted customers will come on-line in 2007 through 2009.

Airport parking business - The re-branding of the Company's airport parking business as FastTrack Airport Parking is proceeding as expected. Eight facilities have been re-branded to date. The re-branding will encompass both facilities and the business' web presence. Marketing and promotional efforts will focus on building brand awareness which is expected to help grow the customer base.

Relative underperformance in the business has been linked to a small number of sites. Remedial actions up to and including changes in the management at those sites have been implemented.
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