CONSOLIDATED
FINANCIAL STATEMENTS
 AND
SUPPLEMENTARY CONSOLIDATING INFORMATION
 
 IMTT
Holdings Inc. and Subsidiaries
 Years
Ended December 31, 2009 and December 31, 2008
  
  Independent
Auditors' Report
  The Board
of Directors
 IMTT
Holdings Inc. and Subsidiaries:
  We have
audited the accompanying consolidated balance sheets of IMTT Holdings Inc. and
subsidiaries as of December 31, 2009 and 2008, and the related consolidated
statements of income, shareholders' equity, comprehensive income, and cash flows
for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
option on these consolidated financial statements based on our
audits.
  We
conducted our audits in accordance with auditing standards generally accepted in
the United States of America. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes consideration of internal
control over financing reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of IMTT Holdings Inc. and
subsidiaries as of December 31, 2009 and 2008, and the results of its operations
and its cash flows for the years then ended in conformity with U.S. generally
accepted accounting principles.
  As
discussed in note 2 to the consolidated financial statements, the Company has
changed its method of accounting for noncontrolling interests in 2009 and 2008
due to the adoption of ASC 810-10 Consolidation(formerly
Statement on Financial Accounting Standards No. 160, Noncontrolling Interests in
ConsolidatedFinancial
Statements, an amendment of ARB No. 51).
    /s/ KPMG
LLP
 New
Orleans, Louisiana
 February
22, 2010
   KPMG LLP. a U.S limited liability
partnership, is the U.S
 member firm of KPMG International, a
Swiss cooperative.
  
  IMTT
HOLDINGS INC. AND SUBSIDIARIES
 
 CONSOLIDATED
BALANCE SHEETS
 DECEMBER
31, 2009 AND 2008
 ASSETS
 2009
                                      
                                      
                                      2008CURRENT
      ASSETS:Cash
                                      
                                      $
                                      3,257,000
                                      
                                      
                                      $
                                      4,602,000Accounts
      and accrued interest receivable, net ofallowance
      of $4,916,000 ($3,072,000 in 2008)
                                      
                                      
                                      28,569,000
                                      
                                      
                                      
                                      42,952,000Inventories
      (Note 2)
                                      
                                      
                                      6,086,000
                                      
                                      
                                      
                                      6,764,000Prepaid
      expenses and deposits (Notes 7 and 14)
                                      
                                      
                                      19,473,000
                                      
                                      
                                      
                                      21,738,000Other
                                      
                                      
                                      -
                                      
                                      
                                      
                                      888,000Total
      current assets
                                      
                                      $
                                      57,385,000
                                      
                                      
                                      $
                                      76,944,000PROPERTY,
      PLANT AND EQUIPMENT (Notes 2 and 6):Land
                                      
                                      $
                                      30,366,000
                                      
                                      
                                      $
                                      30,161,000Terminal
      and other facilities
                                      
                                      
                                      1,427,348,000
                                      
                                      
                                      
                                      1,301,407,000$
                                      1,457,714,000
                                      
                                      
                                      $
                                      1,331,568,000Less
      - Accumulated depreciation
                                      
                                      
                                      (470,639,000
                                      )
                                      
                                      
                                      (418,681,000
                                      )$
                                      987,075,000
                                      
                                      
                                      $
                                      912,887,000OTHER
      ASSETS:Debt
      issue costs, net  (Note 2)
                                      
                                      $
                                      3,322,000
                                      
                                      
                                      $
                                      3,048,000Receivable
      from related parties (Note 3)
                                      
                                      
                                      28,000
                                      
                                      
                                      
                                      20,000Investment
      in NTL venture (Note 2)
                                      
                                      
                                      10,587,000
                                      
                                      
                                      
                                      9,138,000Other
      (Notes 2, 5, and 14)
                                      
                                      
                                      6,452,000
                                      
                                      
                                      
                                      4,252,000$
                                      20,389,000
                                      
                                      
                                      $
                                      16,458,000TOTAL
      ASSETS
                                      
                                      $
                                      1,064,849,000
                                      
                                      
                                      $
                                      1,006,289,000
  LIABILITIES
AND SHAREHOLDERS' EQUITY
 2009
                          
                          
                          2008CURRENT
      LIABILITIES:Accounts
      payable
                          
                          $
                          15,998,000
                          
                          
                          $
                          33,892,000Accrued
      liabilities (Note 14)
                          
                          
                          36,450,000
                          
                          
                          
                          33,716,000Dividends
      payable
                          
                          
                          -
                          
                          
                          
                          14,000,000Current
      portion of swap fair market value (Notes 2 and 4)
                          
                          
                          17,246,000
                          
                          
                          
                          15,733,000Current
      portion of long-term debt (Note 4)
                          
                          
                          15,829,000
                          
                          
                          
                          2,808,000Total
      current liabilities
                          
                          $
                          85,523,000
                          
                          
                          $
                          100,149,000OTHER
      LONG-TERM LIABILITIES (Notes 2, 4, 5, and 14)
                          
                          $
                          81,099,000
                          
                          
                          $
                          117,130,000LONG-TERM
      DEBT (Notes 3, 4 and 8)
                          
                          $
                          616,399,000
                          
                          
                          $
                          604,892,000DEFERRED
      INCOME TAXES (Notes 2 and 7)
                          
                          $
                          141,475,000
                          
                          
                          $
                          103,077,000COMMITMENTS
      AND CONTINGENCIES (Note 6)SHAREHOLDERS'
      EQUITY  (Notes 9, 10 and 11):IMTT
      HOLDINGS INC.
                          
                          $
                          138,586,000
                          
                          
                          $
                          79,792,000NONCONTROLLING
      INTEREST
                          
                          
                          1,767,000
                          
                          
                          
                          1,249,000Total
      shareholders' equity
                          
                          $
                          140,353,000
                          
                          
                          $
                          81,041,000TOTAL
      LIABILITIES AND SHAREHOLDERS' EQUITY
                          
                          $
                          1,064,849,000
                          
                          
                          $
                          1,006,289,000
 
 The
accompanying notes are an integral part of these balance
sheets.
  2
 
 IMTT
HOLDINGS INC. AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF INCOME
 FOR
THE YEARS ENDED DECEMBER 31, 2009 and 2008
 
 2009
                  
                  
                  2008REVENUES:Tank
      storage and terminal charges (Note 12)
                  
                  $
                  326,289,000
                  
                  
                  $
                  302,331,000Other
      rental income
                  
                  
                  2,436,000
                  
                  
                  
                  1,986,000Railroad
      operations
                  
                  
                  1,655,000
                  
                  
                  
                  1,786,000Other
      income (Notes 2, 3, and 6)
                  
                  
                  522,000
                  
                  
                  
                  2,141,000Environmental
      response services
                  
                  
                  15,795,000
                  
                  
                  
                  46,480,000Total
      revenues
                  
                  $
                  346,697,000
                  
                  
                  $
                  354,724,000EXPENSES:Terminals
      -Labor
      costs (Note 5)
                  
                  $
                  75,933,000
                  
                  
                  $
                  66,277,000Repairs
      and maintenance (Note 6)
                  
                  
                  28,227,000
                  
                  
                  
                  26,449,000Real
      and personal property taxes
                  
                  
                  10,497,000
                  
                  
                  
                  10,392,000Other
      operating
                  
                  
                  41,895,000
                  
                  
                  
                  51,882,000Total
      terminal operating expenses
                  
                  $
                  156,552,000
                  
                  
                  $
                  155,000,000Environmental
      response affiliate expenses
                  
                  
                  14,792,000
                  
                  
                  
                  34,658,000General
      and administrative (Notes 3 and 5)
                  
                  
                  27,437,000
                  
                  
                  
                  30,076,000Interest
      expense (Notes 2, 3 and 4)
                  
                  
                  29,510,000
                  
                  
                  
                  23,540,000Depreciation
      and amortization (Notes 2 and 9)
                  
                  
                  55,998,000
                  
                  
                  
                  44,615,000Mark-to-market
      loss (gain) of non-hedging derivatives (Notes 2 and 4)
                  
                  
                  (30,686,000
                  )
                  
                  
                  46,277,000$
                  253,603,000
                  
                  
                  $
                  334,166,000INCOME
      BEFORE INCOME TAXES
                  
                  $
                  93,094,000
                  
                  
                  $
                  20,558,000(PROVISION)
      CREDIT FOR INCOME TAXES (Notes 2 and 7):Current
                  
                  $
                  (1,593,000
                  )
                  
                  $
                  (4,053,000
                  )Deferred
                  
                  
                  (37,249,000
                  )
                  
                  
                  (5,399,000
                  )$
                  (38,842,000
                  )
                  
                  $
                  (9,452,000
                  )NET
      INCOME
                  
                  $
                  54,252,000
                  
                  
                  $
                  11,106,000LESS:  Net
      (Income)/Loss attributable to noncontrolling interest (Note
    1)
                  
                  
                  332,000
                  
                  
                  
                  1,003,000NET
      INCOME ATTRIBUTABLE TO IMTT HOLDINGS INC.
                  
                  $
                  54,584,000
                  
                  
                  $
                  12,109,000
 
 The
accompanying notes are an integral part of these
statements.
  3
 
 IMTT
HOLDINGS INC. AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 
 2009
                    
                    
                    2008NET
      INCOME
                    
                    $
                    54,252,000
                    
                    
                    $
                    11,106,000LESS:  NET
      (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST (Note
    1)
                    
                    
                    332,000
                    
                    
                    
                    1,003,000NET
      INCOME ATTRIBUTABLE TO IMTT HOLDINGS INC.
                    
                    
                    54,584,000
                    
                    
                    
                    12,109,000OTHER
      COMPREHENSIVE INCOME (LOSS):DERIVATIVES
      (Notes 2 and 4):Change
      in fair market value of hedging interest rate swap
    agreements
                    
                    
                    3,594,000
                    
                    
                    
                    (10,577,000
                    )Amortization
      of accumulated other comprehensive loss for swap agreements no longer
      accounted for as hedges
                    
                    
                    1,605,000
                    
                    
                    
                    -5,199,000
                    
                    
                    
                    (10,577,000
                    )PENSION
      AND POST-RETIREMENT BENEFIT PLANS
                    
                    
                    (2,166,000
                    )
                    
                    
                    (10,798,000
                    )FOREIGN
      CURRENCY TRANSLATION ADJUSTMENT
                    
                    
                    3,671,000
                    
                    
                    
                    (4,212,000
                    )TAX
      EFFECTS OF ITEMS INCLUDED IN OTHER COMPREHENSIVE INCOME
                    
                    
                    (1,644,000
                    )
                    
                    
                    9,503,000OTHER
      COMPREHENSIVE INCOME (LOSS) (Note 10)
                    
                    
                    5,060,000
                    
                    
                    
                    (16,084,000
                    )LESS:  OTHER
      COMPREHENSIVE (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST (Note
      1)
                    
                    
                    (850,000
                    )
                    
                    
                    338,000OTHER
      COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO IMTT HOLDINGS
    INC.
                    
                    
                    4,210,000
                    
                    
                    
                    (15,746,000
                    )COMPREHENSIVE
      INCOME (LOSS)
                    
                    
                    59,312,000
                    
                    
                    
                    (4,978,000
                    )LESS:  COMPREHENSIVE
      (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST (Note
    1)
                    
                    
                    (518,000
                    )
                    
                    
                    1,341,000COMPREHENSIVE
      INCOME (LOSS) ATTRIBUTABLE TO IMTT HOLDINGS INC.
                    
                    $
                    58,794,000
                    
                    
                    $
                    (3,637,000
                    )
 
 The
accompanying notes are an integral part of these
statements.
  4
 
 IMTT
HOLDINGS INC. AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 
 IMTT HOLDINGS INC.
                                          
                                          
                                          NONCONTROLLING INTERESTAccumulated
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          AccumulatedOther
                                          
                                          
                                          Other
                                          
                                          
                                          
                                          
                                          
                                          Other
                                          
                                          
                                          OtherShareholders'
                                          
                                          
                                          Comprehensive
                                          
                                          
                                          
                                          
                                          
                                          Shareholders'
                                          
                                          
                                          ComprehensiveTotal
                                          
                                          
                                          Equity
                                          
                                          
                                          Income
                                          
                                          
                                          Total
                                          
                                          
                                          Equity
                                          
                                          
                                          Income
                                          
                                          
                                          TotalBalance,
      12/31/2007
                                          
                                          $
                                          139,240,000
                                          
                                          
                                          $
                                          141,028,000
                                          
                                          
                                          $
                                          (4,378,000
                                          )
                                          
                                          $
                                          136,650,000
                                          
                                          
                                          $
                                          2,590,000
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          2,590,000Adjustment
      to Retained Earnings on Change in Measurement Date of Pension Plans in
      Accordance with ASC 715-20-65-1 (Note 5)
                                          
                                          
                                          (615,000
                                          )
                                          
                                          
                                          (615,000
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (615,000
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Income
      taxes
                                          
                                          
                                          252,000
                                          
                                          
                                          
                                          252,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          252,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Net
                                          
                                          
                                          (363,000
                                          )
                                          
                                          
                                          (363,000
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (363,000
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Adjustment
      to Accumulated OCI on Change in Measurement Date of Pension Plans in
      Accordance with ASC 715-20-65-1 (Note 5)
                                          
                                          
                                          5,242,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          5,242,000
                                          
                                          
                                          
                                          5,242,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Income
      taxes
                                          
                                          
                                          (2,100,000
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (2,100,000
                                          )
                                          
                                          
                                          (2,100,000
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Net
                                          
                                          
                                          3,142,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          3,142,000
                                          
                                          
                                          
                                          3,142,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Balance,
      12/31/2007 as adjusted
                                          
                                          
                                          142,019,000
                                          
                                          
                                          
                                          140,665,000
                                          
                                          
                                          
                                          (1,236,000
                                          )
                                          
                                          
                                          139,429,000
                                          
                                          
                                          
                                          2,590,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          2,590,000Comprehensive
      income:Net
      income (loss)
                                          
                                          
                                          11,106,000
                                          
                                          
                                          
                                          12,109,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          12,109,000
                                          
                                          
                                          
                                          (1,003,000
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (1,003,000
                                          )Other
      comprehensive income (loss), net of tax
                                          
                                          
                                          (16,084,000
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (15,746,000
                                          )
                                          
                                          
                                          (15,746,000
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (338,000
                                          )
                                          
                                          
                                          (338,000
                                          )(4,978,000
                                          )
                                          
                                          
                                          12,109,000
                                          
                                          
                                          
                                          (15,746,000
                                          )
                                          
                                          
                                          (3,637,000
                                          )
                                          
                                          
                                          (1,003,000
                                          )
                                          
                                          
                                          (338,000
                                          )
                                          
                                          
                                          (1,341,000
                                          )Distributions
                                          
                                          
                                          (56,000,000
                                          )
                                          
                                          
                                          (56,000,000
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (56,000,000
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Contributions
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Balance,
      12/31/2008
                                          
                                          
                                          81,041,000
                                          
                                          
                                          
                                          96,774,000
                                          
                                          
                                          
                                          (16,982,000
                                          )
                                          
                                          
                                          79,792,000
                                          
                                          
                                          
                                          1,587,000
                                          
                                          
                                          
                                          (338,000
                                          )
                                          
                                          
                                          1,249,000Comprehensive
      income:Net
      income (loss)
                                          
                                          
                                          54,252,000
                                          
                                          
                                          
                                          54,584,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          54,584,000
                                          
                                          
                                          
                                          (332,000
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (332,000
                                          )Other
      comprehensive income (loss), net of tax
                                          
                                          
                                          5,060,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          4,210,000
                                          
                                          
                                          
                                          4,210,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          850,000
                                          
                                          
                                          
                                          850,00059,312,000
                                          
                                          
                                          
                                          54,584,000
                                          
                                          
                                          
                                          4,210,000
                                          
                                          
                                          
                                          58,794,000
                                          
                                          
                                          
                                          (332,000
                                          )
                                          
                                          
                                          850,000
                                          
                                          
                                          
                                          518,000Distributions
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Balance,
      12/31/2009
                                          
                                          $
                                          140,353,000
                                          
                                          
                                          $
                                          151,358,000
                                          
                                          
                                          $
                                          (12,772,000
                                          )
                                          
                                          $
                                          138,586,000
                                          
                                          
                                          $
                                          1,255,000
                                          
                                          
                                          $
                                          512,000
                                          
                                          
                                          $
                                          1,767,000
 The
accompanying notes are an integral part of these
statements.
  5
 
 IMTT
HOLDINGS INC. AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 
 2009
                      
                      
                      2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
                      
                      $
                      54,252,000
                      
                      
                      $
                      11,106,000Adjustments
      to reconcile net cashprovided
      by operating activitiesDepreciation
      and amortization
                      
                      
                      55,998,000
                      
                      
                      
                      44,615,000Bad
      debt expense (credit)
                      
                      
                      (282,000
                      )
                      
                      
                      1,500,000Debt
      cost amortization
                      
                      
                      543,000
                      
                      
                      
                      473,000Decrease
      (Increase) in accounts andaccrued
      interest receivable
                      
                      
                      15,093,000
                      
                      
                      
                      (5,511,000
                      )Decrease
      (Increase) in inventories
                      
                      
                      682,000
                      
                      
                      
                      (1,029,000
                      )Decrease
      (Increase) in prepaid expenses and deposits
                      
                      
                      1,078,000
                      
                      
                      
                      (1,357,000
                      )Decrease
      (Increase) in other assets
                      
                      
                      1,338,000
                      
                      
                      
                      (1,213,000
                      )(Decrease)
      Increase in accounts payable
                      
                      
                      (3,707,000
                      )
                      
                      
                      885,000Increase
      in accrued liabilities
                      
                      
                      3,557,000
                      
                      
                      
                      1,247,000Increase
      in deferred income taxes
                      
                      
                      37,249,000
                      
                      
                      
                      5,399,000(Decrease)
      Increase in other long-term liabilities
                      
                      
                      (32,443,000
                      )
                      
                      
                      37,868,000Loss
      on sale/retirement of assets
                      
                      
                      24,000
                      
                      
                      
                      104,000Net
      operating cash flows
                      
                      $
                      133,382,000
                      
                      
                      $
                      94,087,000CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of plant assets
                      
                      $
                      (137,008,000
                      )
                      
                      $
                      (221,700,000
                      )Increase
      in other assets
                      
                      
                      (4,281,000
                      )
                      
                      
                      (702,000
                      )Decrease
      in tax-exempt bond escrow investments
                      
                      
                      -
                      
                      
                      
                      55,525,000Proceeds
      from sale of fixed assets
                      
                      
                      73,000
                      
                      
                      
                      237,000Net
      investing cash flows
                      
                      $
                      (141,216,000
                      )
                      
                      $
                      (166,640,000
                      )CASH
      FLOWS FROM FINANCING ACTIVITIESNet
      borrowings under bank revolving credit facilities
                      
                      $
                      6,475,000
                      
                      
                      $
                      138,072,000Proceeds
      of unsecured term loan
                      
                      
                      30,000,000
                      
                      
                      
                      -Net
      other debt (payments)
                      
                      
                      (13,201,000
                      )
                      
                      
                      (13,211,000
                      )Distributions
      to shareholders
                      
                      
                      (14,000,000
                      )
                      
                      
                      (56,000,000
                      )Net
      receipts (payments) of receivables/payables with related
      parties
                      
                      
                      (8,000
                      )
                      
                      
                      (6,000
                      )Loans
      from shareholders, net of repayments
                      
                      
                      (1,955,000
                      )
                      
                      
                      2,979,000Debt
      issue cost incurred
                      
                      
                      (1,049,000
                      )
                      
                      
                      (19,000
                      )Net
      financing cash flows
                      
                      $
                      6,262,000
                      
                      
                      $
                      71,815,000Net
      (decrease) in cash
                      
                      
                      (1,572,000
                      )
                      
                      
                      (738,000
                      )Net
      increase (decrease) in cash due to currency translation
                      
                      
                      227,000
                      
                      
                      
                      389,000Cash
      at beginning of year
                      
                      
                      4,602,000
                      
                      
                      
                      4,951,000Cash
      at end of year
                      
                      $
                      3,257,000
                      
                      
                      $
                      4,602,000SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONCash
      paid during the year for:Interest
      (net of amount capitalized)
                      
                      $
                      28,954,000
                      
                      
                      $
                      25,713,000Income
      taxes
                      
                      
                      346,000
                      
                      
                      
                      4,802,000
 
 The
accompanying notes are an integral part of these
statements.
  6
 
 IMTT HOLDINGS INC. AND
SUBSIDIARIES
  NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
  DECEMBER 31, 2009 AND
2008
  (1) Nature of operations and
organization
  IMTT
Holdings Inc. (“IHI”) formerly Loving Enterprises Inc., owns 100% of various
corporations and limited liability companies (International Tank Terminals,
L.L.C. and Affiliates, “ITT and Affiliates”) who in turn own 100% of various
operating entities, primarily partnerships (“IMTT
Combined”).   The following chart summarizes the relationship of
the various ITT and Affiliates and IMTT Combined entities.
 
 Parent Entities (ITT and Affiliates)
                                  
                                  
                                  
                                  Subsidiary/Operating99% Ownership *
                                  
                                  1% Ownership *
                                  
                                  Entities (IMTT Combined)International
      Tank Terminals, L.L.C.
                                  
                                  ITT-Storage,
      Inc.
                                  
                                  International-Matex
      Tank TerminalsInternational
      Tank Bayonne, Inc. (100%)
                                  
                                  -
                                  
                                  Bayonne
      Industries, Inc.International
      Tank Bayonne, Inc.
                                  
                                  ITT-Bayonne
      Storage, Inc.
                                  
                                  IMTT-BayonneITT-BX,
      Inc.
                                  
                                  ITT-BX
      Storage, Inc.
                                  
                                  IMTT-BXITT-Pipeline,
      Inc.
                                  
                                  ITT-Pipeline
      Partner, Inc.
                                  
                                  IMTT-PipelineITT-BC,
      Inc. (50%)
                                  
                                  ITT-Interterminal
      Pipeline, Inc. (50%)
                                  
                                  IMTT-BCITT-Gretna,
      L.L.C.
                                  
                                  ITT-Gretna
      Storage, Inc.
                                  
                                  IMTT-GretnaITT-Virginia,
      Inc.
                                  
                                  ITT-Virginia
      Storage, Inc.
                                  
                                  IMTT-VirginiaITT-Richmond-CA,
      Inc.
                                  
                                  ITT-Richmond-CA
      Storage, Inc.
                                  
                                  IMTT-Richmond-CAITT-Illinois,
      Inc.
                                  
                                  ITT-Illinois
      Storage, Inc.
                                  
                                  IMTT-IllinoisITT-Petroleum
      Management, Inc.
                                  
                                  ITT-SPR
      Partner, Inc.
                                  
                                  IMTT-Petroleum
      ManagementITT-Geismar,
      L.L.C.
                                  
                                  ITT-Geismar
      Storage, Inc
                                  
                                  IMTT-GeismarInternational
      Environmental Services, Inc.
                                  
                                  ITT-IEP
      Partner, Inc.
                                  
                                  International
      Environmental PartnersITT-NTL,
      Inc. (100%)
                                  
                                  -
                                  
                                  IMTT-NTL,
      Ltd.
 
 *Unless
noted otherwise below
  The IMTT
Combined entities primarily provide bulk liquid storage and handling services in
North America through terminals located on the East, West and Gulf Coasts as
well as the Great Lakes region of the United States and in Quebec and
Newfoundland, Canada, with the predominant terminals located in New York harbor
and on the Mississippi River near the Gulf of Mexico. Petroleum products,
vegetable and tropical oils, renewable fuels, and various chemicals are stored
and handled.
  7
  International-Matex
Tank Terminals (IMTT) is a partnership formed in 1975 to own and operate bulk
liquid storage terminal facilities in St. Rose and Avondale, Louisiana. Bayonne
Industries, Inc. (BII) is a New Jersey corporation which owns terminal
facilities in Bayonne, New Jersey and was purchased in
1983.  IMTT-Bayonne is a partnership formed in 1983 to operate New
Jersey terminal assets.  The IMTT-BX partnership was formed in 1993 to
acquire the terminal facility adjacent to Bll's tank terminal on April 1, 1993.
IMTT-BC is a partnership organized in 1996 to purchase certain terminal assets
in 1997, 2003, and 2004 that are contiguous to the existing Bayonne
terminal.  IMTT-Pipeline is a partnership formed in 1996 to own a
pipeline utilized in the transfer of products by IMTT-Bayonne and other third
parties.  IMTT-Bayonne leases and operates tank terminal and warehouse
facilities owned by BII, IMTT-BX and IMTT-BC in Bayonne, New Jersey/ New York
Harbor.  IMTT-Gretna is a partnership formed in 1990 to purchase and
operate a bulk liquid storage terminal in Gretna,
Louisiana.  IMTT-Virginia, formerly IMTT-Chesapeake and IMTT-Richmond,
is a partnership formed in 1991 to purchase and operate bulk liquid storage
terminals in Chesapeake and Richmond, Virginia.  IMTT-Petroleum
Management is a partnership formed in 1992 to own an interest in a joint venture
operating the United States Strategic Petroleum Reserve. IMTT-Richmond-CA is a
partnership formed in 1995 to purchase and operate a bulk liquid storage
terminal in Richmond, California. IMTT-Illinois (formerly IMTT-Lemont) is a
partnership formed in 1997 to purchase and operate terminal facilities in Lemont
and Joliet, Illinois.  IMTT-NTL, Ltd. is a Canadian corporation formed
in 1997 to own an interest in and manage a terminal in Newfoundland,
Canada.  IMTT-Quebec Inc., a 662/3% owned subsidiary of IMTT, operates
a bulk liquid storage terminal located in Quebec,
Canada.  IMTT-Geismar is a partnership formed in 2006 to construct and
operate a chemical logistics facility in Geismar,
Louisiana.  International Environmental Partners is a partnership
formed in 1999 to own an entity that provides environmental response and other
services to the IMTT terminals and third parties.
  (2) Summary of significant
accounting policies
  Consolidation:
  The
accompanying consolidated financial statements consist of the accounts of IHI
which have been consolidated with those of ITT and Affiliates as well as those
of IMTT Combined after eliminating all intercompany account balances and
transactions (IHI Consolidated).  IMTT Combined consists of the
operating entities, primarily partnerships, previously described, consolidated
with their wholly-owned subsidiary, IMTT-Finco (The Partnerships) further
combined with the Canadian corporation, IMTT-NTL, Ltd. (IMTT
Combined).
  8
  Revenue
recognition:
  Contracts
for the use of storage capacity at the various terminals predominantly have
non-cancelable terms of one to five years.  These contracts generally
provide for payments for providing storage capacity throughout their term based
on a fixed rate per barrel of capacity leased, as adjusted annually for
inflation indices.  Contracts are classified and accounted for as
operating leases in accordance with generally accepted accounting principles and
revenue is recognized over their term based on the rate specified in the
contract.  Revenue from the rendering of ancillary services (e.g.
product movement (thruput), heating, mixing, etc.) is recognized as the related
services are performed based on contract rates. Thruput revenues are not
recognized until the thruput quantity specified in the contract for the
applicable period is exceeded.  Payments received prior to the related
services being performed or as a reimbursement for specific fixed asset
additions or improvements related to a customer’s contract are recorded as
deferred revenue and ratably recognized as storage revenues over the contract
term; the non-current portion is included in other long-term liabilities in the
accompanying balance sheet.  Environmental response services revenues
are recognized as services are rendered.
  Accounts receivable and
allowance for doubtful accounts:
  Accounts
receivable are stated at the historical carrying amount net of an allowance for
doubtful accounts.  An allowance for doubtful accounts receivable is
established based on specific customer collection issues that have been
identified.  Accounts receivable are charged against the allowance for
doubtful accounts when it has been determined the balance will not be
collected.
  Inventories:
  Inventories
which consist primarily of back-up fuel supplies, chemicals and supplies used in
packaging anti-freeze for customers, spare parts used in maintenance activities,
and spill response materials are carried at cost which is equal to or less than
their fair market value.
  Property, plant and
equipment:
  Property,
plant and equipment is carried at cost including applicable construction period
interest. Construction period interest (including related letter of credit fees)
of $1,842,000 and $4,872,000 was capitalized in 2009 and 2008, respectively.
Depreciation is provided using the straight-line method over lives which range
from 15 to 30 years for the terminal facility and 3 to 8 years for furniture,
fixtures and equipment. Costs which are associated with capital additions and
improvements or that extend the useful lives or increase service capacity of
assets are capitalized; costs of maintenance and repairs are
expensed.  Terminal fixed assets with a net book value of $981,540,000
at December 31, 2009 are utilized to provide storage capacity and related
services to customers/ lessees.  The balance of assets not placed in
service and recorded in construction in progress was $39,934,000 and $95,168,000
at December 31, 2009 and 2008, respectively.
  9
  Debt issue
costs:
  Costs
incurred related to issuing and reissuing and extending the term of tax-exempt
bonds and entering into bank lines of credit and the unsecured term loan (See
Note 4) are capitalized as debt issue costs in the accompanying balance sheet
and amortized over the term of the related debt as additional interest
expense.
  Other
assets:
  Costs
incurred to deepen vessel draft at the Partnerships' docks as well as those
incurred periodically to maintain draft depths for more than one year are
capitalized and amortized over their estimated useful lives (3 to 20 years) as a
planned major maintenance activity.  $4,281,000 and $702,000 of such
costs were capitalized in 2009 and 2008, respectively.  Amortization
of such costs was $1,817,000 and $1,524,000 in 2009 and 2008,
respectively.
  Investment in NTL
venture:
  On July 21, 1997 IMTT-NTL, Ltd.
acquired a 20% interest in Newfoundland Transshipment Limited (NTL), a Canadian
corporation which owns and operates a storage and transshipment terminal located
in Newfoundland. The investment is shown in the accompanying balance sheet at
cost ($10,587,000 at December 31, 2009). NTL guarantees its shareholders a
minimum 12% return on investment. This return on investment ($1,471,000 and
$1,311,000 for 2009 and 2008, respectively) has been recorded as other income in
the accompanying income statements as its ultimate realization is reasonably
assured based on the nature of its operations and the involvement of major oil
companies as customers and shareholders.
  Income
taxes:
  Income
taxes are accounted for in accordance with the asset and liability
method.  Income tax expense includes federal and state taxes currently
payable as well as deferred taxes arising from temporary differences between
income for financial reporting and income tax reporting
purposes.  Operating loss and tax credit carryforwards are recognized
as reductions to net deferred income tax liabilities if it is likely that their
benefit will be realized.  Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled.  The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.  Beginning with the adoption of Accounting for Uncertainty in Income
Taxes, ASC 740-10 –Income Taxes – Overall, as of January 1,
2009, IHI Consolidated recognizes the effect income tax positions only if those
positions are more likely than not of being sustained.  Recognized
income tax positions are measured at the largest amount that is greater than 50%
likely of being realized.  Changes in recognition or measurement are
reflected in the period in which the change in judgment occurs.  Prior
to January 1, 2009, IHI Consolidated recognized the effect of income tax
positions only if such positions were probable of being
sustained.
  10
  Fair value
measurements:
  IHI Consolidated has adopted the
provisions of ASC 820, Fair
Value Measurements and Disclosures, for fair value measurements of
financial assets and financial liabilities and for fair value measurements of
nonfinancial items that are recognized or disclosed at fair value in the
financial statements on a recurring basis.  ASC 820 defines fair value
as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date and also establishes a framework for measuring fair value and
expands disclosures about fair value measurements.
  Derivatives:
  IHI
Consolidated has entered into interest rate-related derivative instruments to
manage its interest rate exposure on certain debt instruments.  See
Note 4. IHI Consolidated does not enter into derivative instruments for any
purpose other than economic interest rate hedging.  That is, IHI
Consolidated does not speculate using derivative instruments.
  By using
derivative financial instruments to hedge exposures to changing interest rates,
IHI Consolidated exposes itself to credit risk and market
risk.  Credit risk is the failure of the counterparty to perform under
the terms of the derivative contract.  When the fair value of a
derivative contract is positive, the counterparty owes IHI Consolidated, which
creates credit risk for IHI Consolidated.  When the fair value of a
derivative contract is negative, IHI Consolidated owes the counterparty and,
therefore, it does not possess credit risk, as was the case at December 31, 2009
and 2008.  IHI Consolidated minimizes the credit risk in the
derivative instruments by entering into transactions with high quality
counterparties.  Market risk is the adverse effect on the value of a
financial instrument that results from a change in interest rates.
  IHI
Consolidated has in place variable-rate debt.  These debt obligations
expose IHI Consolidated to variability in interest payments due to changes in
interest rates.  IHI Consolidated believes that it is prudent to limit
the variability of a large portion of its interest payments.  To meet
this objective, IHI Consolidated enters into interest rate swap agreements to
manage fluctuations in cash flows resulting from interest rate risk on a
majority of its variable-rate debt.  These swaps change the
variable-rate cash flow exposure on the debt obligations to fixed cash
flows.  Under the terms of the interest rate swaps, IHI Consolidated
receives variable interest rate payments and makes fixed interest rate payments,
thereby creating the equivalent of fixed-rate debt for the portion of the debt
that is swapped.
  11
  In
accordance with ASC 815-10-05-4, IHI Consolidated had concluded that all of its
interest rate swaps qualify as cash flow hedges and IHI Consolidated applied
hedge accounting for these instruments until March 31, 2009.  Changes
in the fair value of interest rate derivatives designated as hedging instruments
that effectively offset the variability of cash flows associated with
variable-rate debt obligations up to that time were reported in other
comprehensive income or loss.  Any ineffective portion of the change
in valuation of derivatives was recorded through earnings, and reported in the
mark-to-market loss (gain) of non-hedging derivatives line in the consolidated
statements of income.  Effective April 1, 2009, IHI Consolidated
elected to discontinue the application of hedge accounting to its interest rate
swap agreements.  The amount recorded in accumulated other
comprehensive income at that time ($6,984,000 loss) will be amortized to
mark-to-market loss (gain) in the statement of income over the remaining term of
the swap agreements.  $1,605,000 was amortized to mark-to-market loss
(gain) in the statement of income in 2009.  Subsequent to March 31,
2009, all changes in the fair value of interest rate swap agreements is recorded
through earnings.  The long-term portion of these fair market values
are recorded in other long-term liabilities in the accompanying balance
sheets.  The term over which IHI Consolidated is currently partially
hedging exposures relating to debt is through June, 2017.  (See Note
4)
  At
December 31, 2009, IHI Consolidated had $632,228,000 of outstanding debt,
$431,300,000 of which was hedged with interest rate swaps.  At
December 31, 2008, IHI Consolidated had $607,700,000 of outstanding debt,
$379,300,000 of which was hedged with interest rate swaps.
  For the
years ended December 31, 2009 and 2008, IHI Consolidated recorded the following
changes in the value of its derivative instruments.
  December 31, 2009
                          Interest Rate Swaps
                        
                        
                        December 31, 2008
                          Interest Rate SwapsOpening
      balance (liability)/asset (includes current and non-current
      portions)
                        
                        $
                        (83,536,000
                        )
                        
                        $
                        (26,682,000
                        )Unrealized
      gain (loss) on derivative instruments in other comprehensive income (loss)
      for the year
                        
                        
                        3,594,000
                        
                        
                        
                        (10,577,000
                        )Ineffective
      portion of the changes in the valuation of the derivatives instruments,
      representing unrealized gains (losses) included in loss on derivative
      instruments for the year
                        
                        
                        3,306,000
                        
                        
                        
                        (54,174,000
                        )Change
      in fair value of derivative instruments after March 31, 2009 included in
      gain (loss) on derivative instruments in the accompanying income
      statement
                        
                        
                        11,518,000
                        
                        
                        
                        -Reclassification
      of realized losses (gains) on derivative instruments into interest expense
      for the year
                        
                        
                        17,467,000
                        
                        
                        
                        7,897,000Closing
      balance (liability)/asset (includes current and non-current
      portions)
                        
                        $
                        (47,651,000
                        )
                        
                        $
                        (83,536,000
                        )
  12
  IHI
Consolidated will amortize losses of approximately $1,892,000 (pretax) from
accumulated other comprehensive (loss) into mark-to-market loss (gain) in the
statement of income over the next twelve months.
  In
accordance with ASC 815-10-10-1, IHI Consolidated’s derivative instruments are
recorded on the balance sheet at fair value.  IHI Consolidated
measures derivative instruments at fair value using the income approach which
converts future amounts (being the future net cash settlements expected under
the derivative contracts) to a discounted present value.  These
valuations primarily utilize observable (“level 2”) inputs including contractual
terms, interest rates and yield curves observable at commonly quoted
intervals.
  IHI
Consolidated’s fair value measurements of its derivative instruments at December
31, 2009 and 2008, were as follows:
 
 Fair Value Measurements at Reporting Date UsingDescription
                          
                          Total at December
                            31, 2009
                          
                          
                          Quoted Prices
                            in Active
                            Markets for
                            Identical
                            Assets
                            (Level 1)
                          
                          
                          Significant
                            Other
                            Observable
                            Inputs
                            (Level 2)
                          
                          
                          Significant
                            Unobservable
                            Inputs
                            (Level 3)Derivative
      Instruments:Current
      liabilities
                          
                          $
                          (17,246,000
                          )
                          
                          $
                          -
                          
                          
                          $
                          (17,246,000
                          )
                          
                          $
                          -Non-current
      liabilities
                          
                          
                          (30,405,000
                          )
                          
                          
                          -
                          
                          
                          
                          (30,405,000
                          )
                          
                          
                          -Total
                          
                          $
                          (47,651,000
                          )
                          
                          $
                          -
                          
                          
                          $
                          (47,651,000
                          )
                          
                          $
                          -
  13




Description
                              
                              Total at December
                                31, 2008
                              
                              
                              Quoted Prices
                                in Active
                                Markets for
                                Identical
                                Assets
                                (Level 1)
                              
                              
                              Significant
                                Other
                                Observable
                                Inputs
                                (Level 2)
                              
                              
                              Significant
                                Unobservable
                                Inputs
                                (Level 3)Derivative
      Instruments:Current
      liabilities
                              
                              $
                              (15,733,000
                              )
                              
                              $
                              -
                              
                              
                              $
                              (15,733,000
                              )
                              
                              $
                              -Non-current
      liabilities
                              
                              
                              (67,803,000
                              )
                              
                              
                              -
                              
                              
                              
                              (67,803,000
                              )
                              
                              
                              -Total
                              
                              $
                              (83,536,000
                              )
                              
                              $
                              -
                              
                              
                              $
                              (83,536,000
                              )
                              
                              $
                              -





Pension and other
postretirement plans:




IMTT
Combined records annual amounts relating to its pension and postretirement plans
based on calculations that incorporate various actuarial and other assumptions,
including discount rates, mortality, assumed rates of return, compensation
increases, turnover rates and healthcare cost trend rates.  IMTT
Combined reviews its assumptions on an annual basis and makes modifications to
the assumptions based on current rates and trends when it is appropriate to do
so.  The effect of modifications to those assumptions is recorded in
other comprehensive income and amortized to net periodic cost over future
periods using the corridor method.  IMTT Combined believes that the
assumptions utilized in recording its obligations under its plans are reasonable
based on its experience and market conditions.  Net periodic costs are
recognized as employees render the services necessary to earn the postretirement
benefits.





Estimates:




The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts and disclosures.  Some of the more important
estimates and assumptions concern depreciation methods and lives, future
environmental remediation costs and pension plan discount rates and rates of
return on plan assets.  Actual results may differ from those estimates
and assumptions.


14




Impairment of long-lived
assets:




Long-lived
assets, such as property, plant, and equipment are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.  Recoverability of assets is assessed
by a comparison of the carrying amount of an asset to estimated undiscounted
future cash flows expected to be generated by the asset.  If the
carrying amount of an asset exceeds its estimated future cash flows, an
impairment charge is recognized for the amount by which the carrying amount of
the asset exceeds the fair value of the asset.  Certain nursery assets
involved in plant growing operations (greenhouses and related equipment) as well
as a small amount of equipment used in packaging liquids are no longer in use
due to unfavorable prospects for future profitable operations.  The
estimated remaining useful life of these assets was adjusted in 2009 to reduce
their net book value to zero (estimated fair value).  Additional
depreciation expense of $1,458,000 was recorded in the accompanying 2009 income
statement as a result of this change in the remaining useful life.




Foreign currency
translation:




The
assets and liabilities of IMTT-NTL, Ltd. and IMTT-Quebec Inc. are translated
from their foreign currency (Canadian dollars) to U.S. dollars at exchange rates
in effect at the end of the year and income statement accounts are translated at
average exchange rates for the year.  Translation gains or losses as a
result of changes in the exchange rate are recorded as a component of other
comprehensive income.




Noncontrolling
interest:




In
conformity with FASB guidance concerning noncontrolling interests in
consolidated financial statements, IHI Consolidated has changed the presentation
thereof related to IMTT-Quebec Inc. in the accompanying financial statements for
2009 and 2008.  Noncontrolling interests (previously referred to as
“minority interest”) are now classified as a part of net income and the
accumulated amount thereof is classified as a part of shareholders’ equity, and
changes therein are separately displayed in the statement of shareholders’
equity.




Commitments and
contingencies:




Liabilities
for loss contingencies arising from claims, assessments, litigation, fines,
penalties and other sources, are recorded when it is probable that a liability
has been incurred and the amount can be reasonably estimated.  Legal
costs incurred in connection with loss contingencies are expensed as
incurred.


15




Accounting
standards:




In 2009,
the FASB issued SFAS 168, “The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles”, which establishes the
Codification as the source of authoritative generally accepted accounting
principles (GAAP) in the United States for companies to use in the preparation
of their financial statements.  All guidance contained in the
Codification carries the same level of authority and supersedes all existing
non-SEC accounting and reporting standards.  Disclosure references
were changed herein to reflect the Codification.  The adoption does
not affect IHI Consolidated’s accounting practices or financial statement
presentation.




(3) Related party
transactions




During
2009 and 2008, IHI Consolidated paid or accrued $2,300,000 and $2,266,000,
respectively, to entities related to a group of shareholders for legal services
and office rent which are recorded as general and administrative expense in the
accompanying income statement.  Receivables from affiliates of $28,000
at December 31, 2009 and $20,000 at December 31, 2008 consists of receivables
from entities affiliated with a group of shareholders.  In accordance
with the terms of the shareholders’ agreement, IHI has loans outstanding to a
group of shareholders at December 31, 2009 and 2008 of $34,540,000 and
$36,495,000, respectively.  Interest accrued on these loans for 2009
and 2008 was $1,980,000 and $2,108,000, respectively.


16


(4) Long-term debt and
related derivatives





Long-term
debt consists of the following:




2009
                
                
                2008Tax-exempt
      N.J.E.D.A. bonds, .29% at December 31, 2009 (.80% at December 31,
      2008)
                
                $
                30,000,000
                
                
                $
                30,000,000Tax-exempt
      N.J.E.D.A. bonds of terminated El Dorado joint venture, .29% at December
      31, 2009 (.80% at December 31, 2008)
                
                
                6,300,000
                
                
                
                6,300,000Tax-exempt
      Ascension Parish bonds, .26% at December 31, 2009 (.85% at December 31,
      2008)
                
                
                165,000,000
                
                
                
                165,000,000Tax-exempt
      L.P.F.A. bonds, .26% at December 31, 2009 (.85% at December 31,
      2008)
                
                
                50,000,000
                
                
                
                50,000,000Unsecured
      notes payable under U.S. revolving bank credit facility averaging 1.30% at
      December 31, 2009  (2.39% at December 31, 2008)
                
                
                230,100,000
                
                
                
                221,000,000Notes
      payable under revolving credit facility with a Canadian bank, averaging
      1.40% at December 31, 2009 (3.52% at December 31, 2008)
                
                
                20,827,000
                
                
                
                20,243,000Unsecured
      term loan payable to a bank, 4.24% at December 31, 2009
                
                
                30,000,000
                
                
                
                -Capitalized
      land sublease due in monthly installments through October, 2011 with
      interest at 7%
                
                
                425,000
                
                
                
                626,000Loans
      from shareholders, 5.50%, due in quarterly installments over a 15 year
      period beginning March 31, 2008
                
                
                34,540,000
                
                
                
                36,495,000Notes
      payable to a bank, 1.231% at December 31, 2009 (1.461% at December 31,
      2008)
                
                
                65,000,000
                
                
                
                78,000,000Other
                
                
                36,000
                
                
                
                36,000$
                632,228,000
                
                
                $
                607,700,000Less
      – Current maturities
                
                
                (15,829,000
                )
                
                
                (2,808,000
                )$
                616,399,000
                
                
                $
                604,892,000


17




In 1993,
BII and IMTT-Bayonne received the proceeds of and became obligated for
$30,000,000 of tax-exempt New Jersey Economic Development Authority (N.J.E.D.A.)
Dock Facility Revenue Refunding Bonds (the Bonds) to refinance and retire
previously issued tax-exempt industrial development revenue bonds.




In
accordance with the terms of the Bond indenture, BII and IMTT-Bayonne select
from four interest rate-setting frequency modes; daily, weekly, commercial paper
(CP) (from 30 to 269 days) and adjustable rate mode (at least six months). The
interest rates for these various alternatives are determined by the remarketing
agent as the lowest rate that will allow the Bonds to be sold at par based on
the current market conditions. For all of 2009 and 2008, the Bond interest rate
was set under the daily rate mode.




The Bonds
are secured by $30,473,000 of irrevocable letters of credit, which expire June,
2012 (if not extended), issued by the banks under the credit facility discussed
below.




The Bonds
mature on December 1, 2027 but are subject to optional and mandatory tender, as
well as various redemption provisions, at 100% of principal and accrued interest
(plus applicable premium if the Bonds are in the adjustable rate mode). When in
the daily or weekly rate mode, bond owners may, at their option, tender the
Bonds to the remarketing agent for payment of principal and accrued
interest.




The Bonds
are also subject to mandatory tender provisions in the following cases: 1) each
time the interest rate mode is converted, 2) if the related letters of credit
are released or allowed to terminate or expire without replacement or extension,
3) substitution of an alternate credit facility for an existing letter of
credit, if certain conditions are not met and 4) on each CP rate reset date.
After tender, if sufficient funds are not available from remarketing the Bonds,
the bond owners could be paid from the proceeds of a draw on the related letters
of credit, or, should sufficient funds not be available from letters of credit,
the Bonds could be purchased by BII and IMTT-Bayonne. The Bonds may be redeemed
at various times at the direction of BII and IMTT-Bayonne while in any rate mode
and are also subject to mandatory redemption if the Bonds are determined to be
taxable.




IMTT-BC
is responsible for the payment of principal (due December 1, 2021) and related
interest of a $6,300,000 New Jersey Economic Development Authority tax-exempt
bond issue of a terminated joint venture.  Interest terms on these
bonds are similar to those issued by BII and IMTT-Bayonne discussed previously.
These bonds are secured by a $6,404,000 irrevocable letter of credit issued by
the banks under the credit facility discussed below.


18




In July,
2007, IMTT-Geismar received the proceeds of and became obligated for
$165,000,000 of tax-exempt Industrial Development Board of the Parish of
Ascension, Louisiana, Inc. revenue bonds to finance construction of a chemical
liquid logistics facility in Geismar, Louisiana.   At the same
time, IMTT received the proceeds of and became obligated for $50,000,000 of
tax-exempt Louisiana Public Facilities Authority (L.P.F.A.) revenue bonds to
finance the expansion of liquid terminal facilities at its St. Rose, Louisiana
terminal.  Both of these tax-exempt financings mature on June 1, 2043
and are secured by irrevocable letters of credit ($167,170,000 and $50,658,000,
respectively) issued by the banks under the credit facility discussed below as
well as confirming irrevocable letters of credit ($167,332,000 and $50,707,000,
respectively) issued by the Federal Home Loan Bank of Atlanta which expire June
5, 2012.  These two tax-exempt financings have interest rate setting
modes, optional and mandatory tender and redemption provisions similar to the
NJEDA tax-exempt bonds.  For all of 2009 and 2008 the rate on these
bonds was set under the weekly rate mode.




In June,
2007 IMTT Combined replaced and increased its existing U.S. bank credit facility
with a new bank credit facility.  This $600,000,000 unsecured
revolving U.S. credit facility is with an eighteen bank syndicate and expires in
June, 2012.  IMTT and IMTT-Bayonne are the borrowers under this
agreement which is guaranteed by all the remaining entities comprising IMTT
Combined except IMTT-NTL, Ltd. and IMTT-Quebec Inc.  Also, a majority
of the outstanding stock of IMTT-NTL, Ltd. and IMTT-Quebec Inc. is pledged in
repayment of this debt.




IMTT and
IMTT-Bayonne can borrow, at their option, for various periods under the
agreement at LIBOR plus .55% to 1.50%, with the percentage added to LIBOR
dependent upon the ratio of debt to earnings before interest, taxes and
depreciation and amortization, as defined.  Loans are also available
at the banks’ base rate.




The U.S.
bank credit facility includes the availability for the issuance of letters of
credit. Letters of credit outstanding under this facility at December 31, 2009
($264,871,000) primarily secure obligations under certain tax-exempt bonds
referred to previously. Loans of $230,100,000 were outstanding under this
facility at December 31, 2009, thus leaving $105,029,000 available under this
credit facility at December 31, 2009.




IMTT
Combined is subject to various covenants under this credit facility. The primary
covenants require the maintenance of certain ratios, as defined, of combined 1)
debt to earnings before interest, income taxes and depreciation and
amortization, and 2) earnings before interest, income taxes and depreciation and
amortization to interest expense.  The loan agreement also restricts
liens on assets, additional investments and loans, sales or dispositions of
assets and change of control, as defined, among other requirements.




In 2007,
IMTT-NTL, Ltd. and IMTT-Quebec Inc. entered into a $25,000,000 (U.S. equivalent)
revolving credit facility with a Canadian bank. Loans under this facility are
available in Canadian dollars at bankers' acceptances rates plus spreads based
on the ratio of debt to earnings before interest, income taxes and depreciation
and amortization identical to those under the $600,000,000 U.S. bank syndicate
credit facility or at prime rates. This facility which terminates June, 2012 has
covenants, guarantees and stock pledges identical to the $600,000,000 U.S. bank
syndicate credit facility.


19




IMTT and
IMTT-Bayonne entered into a $30 million unsecured term loan with a bank on
August 28, 2009.  This loan has the same maturity date, guarantees,
covenants, and other terms and conditions as the U.S. and Canadian revolving
bank credit facilities except the margin applied to LIBOR loans for each of the
various term options varies from 3.0% to 5.0% dependent upon the ratio of debt
to earnings before interest, taxes, and depreciation and amortization, as
defined.  Also, this loan is subject to mandatory prepayment if
commitments under the revolving bank credit facilities or any replacement
facilities exceeds $625 million.




Scheduled
maturities of debt balances outstanding as of December 31, 2009 are as follows
for the ensuing five years.




Year
                                    
                                    Amounts2010
                                    
                                    $
                                    15,829,0002011
                                    
                                    
                                    2,810,0002012
                                    
                                    
                                    335,534,000
                                    *2013
                                    
                                    
                                    2,607,0002014
                                    
                                    
                                    2,607,000





*In
addition, $251,300,000 of tax-exempt bonds are secured by letters of credit
issued under the bank credit facility which expires in 2012.





As
discussed in Note 9, on January 1, 2000 ITT and Affiliates purchased the
interest of a former partner in IMTT Combined.  The consideration for
the purchase was in the form of notes payable to the former partner totaling
$130,000,000.




In
December, 2005, these notes were refinanced with a bank.  Principal
payments were revised to $13,000,000 annually from December 31, 2005 to December
31, 2010 with the remaining $52,000,000 due December 23, 2012 and interest is
LIBOR plus one percent.  IMTT Combined has guaranteed principal
payments for the following amounts of this debt:





Effective
      Date  – December 30, 2006
                  
                  $
                  13,000,000December
      31, 2006 – December 30, 2007
                  
                  
                  26,000,000December
      31, 2007 – December 30, 2008
                  
                  
                  39,000,000December
      31, 2008 – December 30, 2009
                  
                  
                  52,000,000December
      31, 2009 – December 30, 2010
                  
                  
                  65,000,000December
      31, 2010 – December 23, 2012
                  
                  
                  52,000,000


20




The
refinanced debt retains the clause in the original note that it is subordinate
to any current or future debt of IMTT Combined.  Additionally, after
December 31, 2009, if the ratio of debt to earnings before interest, taxes,
depreciation and amortization of IMTT Combined exceeds a prescribed ratio, the
outstanding debt balance is assumed by IMTT Combined from ITT and
Affiliates.  Further, the loan agreement restricts IMTT Combined and
ITT and Affiliates from pledging assets unless the bank receives an equal
security interest in such assets, consolidating or merging with another entity,
or incurring a change of control, as defined.  The guaranty of IMTT
Combined could be accelerated if IMTT Combined defaults under any of its debt
obligations.  Additionally, IHI is prohibited from selling or pledging
its ownership interests in ITT and Affiliates and IMTT Combined.




The
interest rate on the borrowings under the tax-exempt bonds, the revolving bank
credit facilities, the unsecured term loan and the notes payable to a bank
(refinanced notes payable to a former partner) discussed previously adjusts
periodically depending on their individual terms as previously described. In an
effort to achieve a more stable interest cost and reduce the risk of rising
interest rates and expense, four interest rate swap agreements with three large
banks were entered into whereby floating rates were swapped for fixed rates. The
primary terms and the accounting treatment of these financial instruments are
described below.


21





Swap 1
                      
                      
                      Swap 2
                      
                      
                      Swap 3
                      
                      
                      Swap 4
                      
                      
                      TotalRelated debt
                      
                      N.J.E.D.A. Bonds
                      
                      
                      Tax-Exempt Bonds
                      
                      
                      Bank Line
                      
                      
                      Bank Note PayableNotional
      amount
                      
                      $
                      36,300,000
                      
                      
                      $
                      215,000,000
                      *
                      
                      $
                      115,000,000
                      **
                      
                      $
                      65,000,000
                      ***Term
                      
                      10/07-10/12
                      
                      
                      7/07-6/17
                      
                      
                      10/07-3/17
                      
                      
                      5/06-12/12Fixed
      rate paid
                      
                      
                      3.410
                      %
                      
                      
                      3.662
                      %
                      
                      
                      5.507
                      %
                      
                      
                      6.290
                      %Floating
      rate received
                      
                      67%
      of monthly Libor
                      
                      
                      67%
      of monthly Libor
                      
                      
                      Quarterly
      Libor
                      
                      
                      Monthly
      Libor





2009
                          
                          
                          2008
                          
                          
                          2009
                          
                          
                          2008
                          
                          
                          2009
                          
                          
                          2008
                          
                          
                          2009
                          
                          
                          2008
                          
                          
                          2009
                          
                          
                          2008Floating
      rate at year end
                          
                          
                          0.156
                          %
                          
                          
                          0.765
                          %
                          
                          
                          0.156
                          %
                          
                          
                          0.758
                          %
                          
                          
                          0.251
                          %
                          
                          
                          1.459
                          %
                          
                          
                          0.23094
                          %
                          
                          
                          0.46125
                          %Net
      interest expense (income) for year
                          
                          $
                          1,156,000
                          
                          
                          $
                          579,000
                          
                          
                          $
                          7,390,000
                          
                          
                          $
                          3,240,000
                          
                          
                          $
                          4,224,000
                          
                          
                          $
                          1,422,000
                          
                          
                          $
                          4,697,000
                          
                          
                          $
                          3,150,000
                          
                          
                          $
                          17,467,000
                          
                          
                          $
                          8,391,000Fair
      market value at year end (liability)****
                          
                          $
                          (2,153,000
                          )
                          
                          $
                          (2,950,000
                          )
                          
                          $
                          (18,563,000
                          )
                          
                          $
                          (33,996,000
                          )
                          
                          $
                          (19,474,000
                          )
                          
                          $
                          (35,479,000
                          )
                          
                          $
                          (7,461,000
                          )
                          
                          $
                          (11,111,000
                          )
                          
                          $
                          (47,651,000
                          )
                          
                          $
                          (83,536,000
                          )Change
      in fair market value for yeargain/(loss)
                          
                          $
                          797,000
                          
                          
                          $
                          (1,846,000
                          )
                          
                          $
                          15,433,000
                          
                          
                          $
                          (23,967,000
                          )
                          
                          $
                          16,005,000
                          
                          
                          $
                          (27,080,000
                          )
                          
                          $
                          3,650,000
                          
                          
                          $
                          (3,961,000
                          )
                          
                          $
                          35,885,000
                          
                          
                          $
                          (56,854,000
                          )Change
      in fmv value recorded in -Other comprehensive
      income/(loss)
                          
                          $
                          (130,000
                          )
                          
                          $
                          (1,576,000
                          )
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          3,157,000
                          
                          
                          $
                          (4,585,000
                          )
                          
                          $
                          566,000
                          
                          
                          $
                          (4,416,000
                          )
                          
                          $
                          3,594,000
                          
                          
                          $
                          (10,577,000
                          )Net
      income/(loss)
                          
                          $
                          927,000
                          
                          
                          $
                          (270,000
                          )
                          
                          $
                          15,433,000
                          
                          
                          $
                          (23,967,000
                          )
                          
                          $
                          12,848,000
                          
                          
                          $
                          (22,495,000
                          )
                          
                          $
                          3,084,000
                          
                          
                          $
                          455,000
                          
                          
                          $
                          32,291,000
                          
                          
                          $
                          (46,277,000
                          )Total
      gain/(loss)
                          
                          $
                          797,000
                          
                          
                          $
                          (1,846,000
                          )
                          
                          $
                          15,433,000
                          
                          
                          $
                          (23,967,000
                          )
                          
                          $
                          16,005,000
                          
                          
                          $
                          (27,080,000
                          )
                          
                          $
                          3,650,000
                          
                          
                          $
                          (3,961,000
                          )
                          
                          $
                          35,885,000
                          
                          
                          $
                          (56,854,000
                          )





*
              Increased
      to $215 million at 1/1/09; was $175 million at
  1/1/08.


**
            Increases
      annually to $200 million at 12/31/12.  At 1/1/09 was $90
      million.


***
            Decreases
      identically to outstanding principal balance of notes payable to a bank
      (refinanced note of a former partner).  Payments guaranteed by
      IMTT.


****
            Included
      in current and other long-term liabilities in the accompanying balance
      sheets.


22




(5) Employee
benefits




Except
for a plan covering certain employees covered by a collective bargaining
agreement at the Lemont and Joliet, Illinois terminals, substantially all
employees of IMTT Combined are eligible to participate in a defined benefit
pension plan (the Plan). Benefits under the Plan are based on years of service
and the employees' highest average compensation for a consecutive five year
period. Coincident with the acquisition of terminal facilities in 1997 and 2007
by IMTT-Illinois, it became the sponsor of a defined benefit plan covering union
employees at these terminals (Union Plan). Monthly benefits under this plan are
computed based on a benefit rate in effect at the date of the participant's
termination ($49.50 at November 1, 2009) multiplied by the number of years of
service. The Partnerships' contributions to both plans are based on the
recommendations of its consulting actuary.


23




The
following table sets forth the obligations and assets (as well as changes
therein) of both plans, the resulting funded status and amounts recognized in
the accompanying financial statements.




2009
                    
                    
                    2008The Plan
                    
                    
                    Union Plan
                    
                    
                    The Plan
                    
                    
                    Union PlanChanges
      in benefit obligation:Benefit
      obligation at beginning of year
                    
                    $
                    53,261,000
                    
                    
                    $
                    3,333,000
                    
                    
                    $
                    54,355,000
                    
                    
                    $
                    3,053,000FAS
      No. 158 measurement date change
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (5,443,000
                    )
                    
                    
                    (12,000
                    )Service
      cost
                    
                    
                    3,314,000
                    
                    
                    
                    174,000
                    
                    
                    
                    2,558,000
                    
                    
                    
                    166,000Interest
      cost
                    
                    
                    3,414,000
                    
                    
                    
                    221,000
                    
                    
                    
                    3,071,000
                    
                    
                    
                    194,000Assumption
      changes (gain) loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Actuarial
      loss (gain)
                    
                    
                    5,337,000
                    
                    
                    
                    396,000
                    
                    
                    
                    65,000
                    
                    
                    
                    1,000Benefits
      paid
                    
                    
                    (2,283,000
                    )
                    
                    
                    (72,000
                    )
                    
                    
                    (1,345,000
                    )
                    
                    
                    (69,000
                    )Benefit
      obligation at end of year
                    
                    $
                    63,043,000
                    
                    
                    $
                    4,052,000
                    
                    
                    $
                    53,261,000
                    
                    
                    $
                    3,333,000Changes
      in plan assets:Fair
      value of plan assets atbeginning of year
                    
                    $
                    32,049,000
                    
                    
                    $
                    2,848,000
                    
                    
                    $
                    35,772,000
                    
                    
                    $
                    2,941,000FAS
      No. 158 measurement date change
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (763,000
                    )
                    
                    
                    (66,000
                    )Actual
      return on plan assets
                    
                    
                    5,676,000
                    
                    
                    
                    498,000
                    
                    
                    
                    (6,982,000
                    )
                    
                    
                    (586,000
                    )Employer
      contribution
                    
                    
                    3,832,000
                    
                    
                    
                    218,000
                    
                    
                    
                    5,367,000
                    
                    
                    
                    628,000Benefits
      paid
                    
                    
                    (2,283,000
                    )
                    
                    
                    (72,000
                    )
                    
                    
                    (1,345,000
                    )
                    
                    
                    (69,000
                    )Fair
      value of plan assets at end of year
                    
                    $
                    39,274,000
                    
                    
                    $
                    3,492,000
                    
                    
                    $
                    32,049,000
                    
                    
                    $
                    2,848,000Funded
      status – Pension (liability) recognized in balance sheet in other
      long-term liabilities
                    
                    $
                    (23,769,000
                    )
                    
                    $
                    (560,000
                    )
                    
                    $
                    (21,212,000
                    )
                    
                    $
                    (485,000
                    )Amounts
      recognized in accumulated other comprehensive income consist
      of:Net
      actuarial loss
                    
                    $
                    12,214,000
                    
                    
                    $
                    1,081,000
                    
                    
                    $
                    10,441,000
                    
                    
                    $
                    997,000Prior
      service cost
                    
                    
                    915,000
                    
                    
                    
                    316,000
                    
                    
                    
                    1,085,000
                    
                    
                    
                    349,000Total
                    
                    $
                    13,129,000
                    
                    
                    $
                    1,397,000
                    
                    
                    $
                    11,526,000
                    
                    
                    $
                    1,346,000Accumulated
      benefit obligation at December 31:
                    
                    $
                    46,346,000
                    
                    
                    $
                    4,052,000
                    
                    
                    $
                    40,374,000
                    
                    
                    $
                    3,333,000Components
      of net periodic benefit cost:Service
      cost
                    
                    $
                    3,314,000
                    
                    
                    $
                    174,000
                    
                    
                    $
                    2,558,000
                    
                    
                    $
                    166,000Interest
      cost
                    
                    
                    3,414,000
                    
                    
                    
                    221,000
                    
                    
                    
                    3,071,000
                    
                    
                    
                    194,000Expected
      return on plan assets
                    
                    
                    (2,696,000
                    )
                    
                    
                    (244,000
                    )
                    
                    
                    (2,835,000
                    )
                    
                    
                    (240,000
                    )Amortization
      of prior service cost
                    
                    
                    170,000
                    
                    
                    
                    33,000
                    
                    
                    
                    170,000
                    
                    
                    
                    33,000Recognized
      net actuarial loss (gain)
                    
                    
                    583,000
                    
                    
                    
                    58,000
                    
                    
                    
                    -
                    
                    
                    
                    -Net
      periodic benefit cost recognized in statement of income
                    
                    $
                    4,785,000
                    
                    
                    $
                    242,000
                    
                    
                    $
                    2,964,000
                    
                    
                    $
                    153,000


24





2009
                
                
                2008The Plan
                
                
                Union Plan
                
                
                The Plan
                
                
                Union PlanOther
      changes in plan assets and benefit obligation recognized in other
      comprehensive income:Net
      actuarial (gain)/loss
                
                $
                2,357,000
                
                
                $
                142,000
                
                
                $
                9,882,000
                
                
                $
                828,000Prior
      service cost/(credit)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Amortization
      of prior service cost/credit
                
                
                (170,000
                )
                
                
                (33,000
                )
                
                
                (170,000
                )
                
                
                (33,000
                )Amortization
      of actuarial loss
                
                
                (583,000
                )
                
                
                (58,000
                )
                
                
                -
                
                
                
                -Total
      recognized in other comprehensive income
                
                $
                1,604,000
                
                
                $
                51,000
                
                
                $
                9,712,000
                
                
                $
                795,000Total
      recognized in net periodic benefit cost andother
      comprehensive income
                
                $
                6,389,000
                
                
                $
                293,000
                
                
                $
                12,676,000
                
                
                $
                948,000Weighted
      average assumptions used to determine benefit obligations as of December
      31:Discount
      rate
                
                
                6.00
                %
                
                
                6.00
                %
                
                
                6.50
                %
                
                
                6.50
                %Rate
      of compensation increase
                
                
                5.47
                %
                
                
                -
                
                
                
                5.47
                %
                
                
                -Weighted
      average assumptions used to determine net benefit cost:Discount
      rate
                
                
                6.50
                %
                
                
                6.50
                %
                
                
                6.50
                %
                
                
                6.50
                %Expected
      return on plan assets
                
                
                8.50
                %
                
                
                8.50
                %
                
                
                8.50
                %
                
                
                8.50
                %Rate
      of compensation increase
                
                
                5.47
                %
                
                
                -
                
                
                
                5.47
                %
                
                
                -





As of
December 31, 2009, the discount rate assumption used in the computation of
benefit obligations was changed to 6.00% to better approximate returns available
on high quality fixed income investments.  The long-term rate of
return of pension assets is based on historical results adjusted as necessary
for future expectations.





The
allocation of pension plan assets as of December 31, 2009 and 2008 is shown
below based on quoted prices in active markets for identical assets (Level 1
fair value measurements).


2009
                
                
                2008The Plan
                
                
                Union Plan
                
                
                The Plan
                
                
                Union PlanWeighted
      average asset allocation:Domestic
      equity funds
                
                
                12.3
                %
                
                
                12.2
                %
                
                
                10.4
                %
                
                
                10.5
                %International
      equity fund
                
                
                7.4
                %
                
                
                7.4
                %
                
                
                4.8
                %
                
                
                4.8
                %Domestic
      fixed income fund
                
                
                78.1
                %
                
                
                76.3
                %
                
                
                77.5
                %
                
                
                77.2
                %Other
                
                
                2.2
                %
                
                
                4.1
                %
                
                
                7.3
                %
                
                
                7.5
                %Total
                
                
                100.0
                %
                
                
                100.0
                %
                
                
                100.0
                %
                
                
                100.0
                %





Pension
asset investment decisions are made with assistance of an outside paid advisor
to achieve the multiple goals of high rate of return, diversification and
safety.





Beginning
in late 2008, the concentration of plan assets were shifted to a preponderance
in one domestic fixed income fund, as opposed to a more traditional 60% equity
and 40% fixed income allocation, in light of adverse economic conditions and
declining equity valuations.


25


Expected
benefit payments as of December 31, 2009 are as follows:





The Plan
                        
                        
                        Union PlanYear
      2010
                        
                        $
                        2,372,000
                        
                        
                        $
                        132,000Year
      2011
                        
                        
                        3,010,000
                        
                        
                        
                        141,000Year
      2012
                        
                        
                        3,270,000
                        
                        
                        
                        155,000Year
      2013
                        
                        
                        3,347,000
                        
                        
                        
                        169,000Year
      2014
                        
                        
                        3,588,000
                        
                        
                        
                        184,000Years
      2015 - 2019
                        
                        
                        23,582,000
                        
                        
                        
                        1,366,000Anticipated
      contributions for 2010
                        
                        $
                        4,446,000
                        
                        
                        $
                        280,000




The
Partnerships provide post-retirement life insurance (coverage equal to 25% of
final year compensation not to exceed $25,000) and health benefits (coverage for
early retirees at least 62 years old on early retirement to age 65,
reimbursement of Medicare premiums for the Bayonne terminal employees and some
smaller health benefits no longer offered) to retired employees.  The
Partnerships adopted the accounting treatment for post-retirement benefits other
than pensions as prescribed by ASC 715-60-05 in 2006.  As allowed by
that accounting standard, the Partnerships elected to defer and amortize the
January 1, 2006 transition obligation over ten years.





The
following table sets forth the obligation and assets (as well as changes
therein) of these plans, the resulting funded status and amounts recognized in
the accompanying financial statements.


26





2009
                  
                  
                  2008Changes
      in benefit obligation:Benefit
      obligation at beginning of year
                  
                  $
                  3,501,000
                  
                  
                  $
                  3,071,000Service
      cost
                  
                  
                  104,000
                  
                  
                  
                  114,000Interest
      cost
                  
                  
                  216,000
                  
                  
                  
                  175,000Actuarial
      (gain) loss
                  
                  
                  863,000
                  
                  
                  
                  626,000Benefits
      paid
                  
                  
                  (338,000
                  )
                  
                  
                  (485,000
                  )Benefit
      obligation at end of year
                  
                  $
                  4,346,000
                  
                  
                  $
                  3,501,000Changes
      in plan assets:Fair
      value of plan assets at beginning of year
                  
                  $
                  -
                  
                  
                  $
                  -Employee
      contribution
                  
                  
                  338,000
                  
                  
                  
                  485,000Benefits
      paid
                  
                  
                  (338,000
                  )
                  
                  
                  (485,000
                  )Fair
      value of plan assets at end of year
                  
                  $
                  -
                  
                  
                  $
                  -Funded
      status
                  
                  $
                  (4,346,000
                  )
                  
                  $
                  (3,501,000
                  )Amounts
      recognized in combined balance sheets consist of:Current
      liabilities
                  
                  $
                  (320,000
                  )
                  
                  $
                  (250,000
                  )Other
      long-term liabilities
                  
                  
                  (4,026,000
                  )
                  
                  
                  (3,251,000
                  )$
                  (4,346,000
                  )
                  
                  $
                  (3,501,000
                  )Amounts
      recognized in accumulated other comprehensive income consist
      of:Transition
      obligation
                  
                  $
                  2,108,000
                  
                  
                  $
                  2,459,000Net
      (gain) loss
                  
                  
                  1,044,000
                  
                  
                  
                  168,000Total
                  
                  $
                  3,152,000
                  
                  
                  $
                  2,627,000Components
      of net periodic benefit cost:Service
      cost
                  
                  $
                  104,000
                  
                  
                  $
                  114,000Interest
      cost
                  
                  
                  216,000
                  
                  
                  
                  175,000Amortization
      of transition obligation
                  
                  
                  351,000
                  
                  
                  
                  351,000Experience
      (gain)
                  
                  
                  -
                  
                  
                  
                  (17,000
                  )Net
      periodic benefit cost of the plan
                  
                  $
                  671,000
                  
                  
                  $
                  623,000Other
      changes in plan assets and benefit obligation recognized in other
      comprehensive income:Net
      actuarial loss
                  
                  $
                  862,000
                  
                  
                  $
                  642,000Amortization
      of transition obligation
                  
                  
                  (351,000
                  )
                  
                  
                  (351,000
                  )Total
      recognized in other comprehensive income
                  
                  $
                  511,000
                  
                  
                  $
                  291,000Total
      recognized in net periodic benefit cost and other comprehensive
      income
                  
                  $
                  1,182,000
                  
                  
                  $
                  914,000


27





Weighted
      average assumptions used to determine benefit obligations as of December
      31:
                      
                      2009
                      
                      
                      2008Discount
      rate
                      
                      
                      6.00
                      %
                      
                      
                      6.50
                      %Rate
      of compensation increase
                      
                      
                      3.00
                      %
                      
                      
                      3.00
                      %Weighted
      average assumptions used to determine net benefit cost:Discount
      rate
                      
                      
                      6.50
                      %
                      
                      
                      6.25
                      %Rate
      of compensation increase
                      
                      
                      3.00
                      %
                      
                      
                      3.00
                      %





An 8.0%
and 8.5% annual rate of increase in health care costs for the years 2009 and
2008, respectively, was assumed decreasing by .75% annually to a 5% annual
level.





Expected
benefit payments and contributions as of December 31, 2009 are as
follows:





Year
      2010
                    
                    $
                    320,000Year
      2011
                    
                    
                    280,000Year
      2012
                    
                    
                    220,000Year
      2013
                    
                    
                    200,000Year
      2014
                    
                    
                    200,000Year
      2015 – 2019
                    
                    
                    1,230,000





Assumptions
concerning health care cost trend rates can have a significant impact on plan
costs and liabilities, as shown below as of year-end and for the year
2009.





Using stated
                      
                      
                      One percentage pointassumptions
                      
                      
                      Decrease
                      
                      
                      IncreaseService
      cost
                      
                      $
                      104,000
                      
                      
                      $
                      99,000
                      
                      
                      $
                      111,000Interest
      cost
                      
                      
                      216,000
                      
                      
                      
                      206,000
                      
                      
                      
                      226,000Accumulated
      post retirement benefit obligation
                      
                      
                      4,346,000
                      
                      
                      
                      4,193,000
                      
                      
                      
                      4,516,000





Accumulated
other comprehensive income at December 31, 2009 contains $655,000 of net
actuarial losses, $203,000 of prior service cost and $351,000 of net transition
obligation for the foregoing defined benefit pension and post retirement
health/life plans expected to be recognized as components of net periodic
benefit cost in 2010.





IHI
Consolidated adopted the measurement date provisions of ASC 715-20-65-1 in 2008
(measurement date was changed from October 31, to December 31, 2007) for both
defined benefit pension plans.  This change resulted in a $4,627,000
decrease in pension liability composed of a $5,242,000 increase in accumulated
other comprehensive income ($3,142,000 after income tax effect) and a $615,000
reduction in retained earnings ($363,000 after income tax
effect).


28





The
Partnerships have established a supplementary, non-qualified benefit plan for
certain management employees whose compensation exceeds the maximum eligible for
inclusion in the qualified defined benefit plan.  Under this plan, the
Partnerships fund additional compensation to the affected employees on a pre-tax
basis that will allow them to make a contribution to a separate investment
account which the employees own that will provide the actuarial equivalent of
the benefits available as if all of the employees’ compensation had been
included in the qualified defined benefit plan.  Expense related to
this plan is recorded as additional compensation and primarily included in
general and administrative expense in the accompanying financial statements
($687,000 in 2009 and $825,000 in 2008).





The
Partnerships have established defined contribution Section 401 (k) employee
benefit plans. Under the primary plan, employees who are eighteen years old and
have six months of service are eligible to participate. Employees may contribute
up to the maximum allowable for Federal income tax purposes and the
Partnerships' matching contribution is determined each year by management. In
both 2009 and 2008, the Partnerships elected to match 5% of employee
contributions. Total expense for the 401 (k) plans recognized for 2009 and 2008
was $188,000 and $186,000, respectively.





The
Partnerships purchase life insurance for certain management employees and
provide for the repayment of premiums paid through deferred compensation
arrangements.  Under this program, various amounts of life insurance
are purchased and paid for by the Partnerships and receivables are recorded from
each management employee, along with accrued interest.  At retirement
or termination of service, funds are provided to the plan participants under
deferred compensation agreements to provide for the repayment of premiums paid
and ownership of the policies is transferred at that time.  Expense
related to the deferred compensation arrangements is recorded annually as
employee service is rendered to the Partnerships.  Expense associated
with providing this benefit of $62,000 and $390,000 for 2009 and 2008,
respectively, is recorded in general and administrative expense in the
accompanying financial statements.




(6) Commitments and
contingencies




IMTT
Combined is involved in various lawsuits, claims and inquiries (including
environmental matters) which are routine to the nature of its
business.  Management believes that resolution of these matters will
not result in any material adverse effect on the financial
statements.




Many of
the entities comprising IMTT Combined are subject to compliance with federal and
state environmental regulations, some of which require environmental remediation
and ongoing monitoring activities.  Depending upon the nature and
circumstances of such activities, certain of the expenditures related thereto
have been recorded as operating expenses in the accompanying income statements
and others are capitalized as such expenditures are incurred.


29




A summary
of these environmental remediation matters follows.




The
Lemont terminal entered into a consent order with the state of Illinois to
remediate a contamination problem which existed at the time of the purchase of
this facility from its former owners.  Remediation is also required as
a result of the renewal of a lease with a government agency for a portion of the
terminal.  This remediation effort, consisting of among other things,
the implementation of extraction and monitoring wells and soil treatment, is
estimated to span a period of ten to twenty years or more at a cost of
$10,000,000 to $15,000,000.




The
Bayonne, New Jersey terminal which has been acquired and aggregated over a 26
year period, contains pervasive remediation requirements that were assumed at
the time of purchase from the various former owners.  One former owner
retained environmental remediation responsibilities for a purchased site as well
as sharing other remediation costs.  These remediation requirements
are documented in two memoranda of agreement and an administrative consent order
with the state of New Jersey.  Remediation efforts entail removal of
free product, soil treatment, repair/replacement of sewer systems, and the
implementation of containment and monitoring systems.  These
remediation activities are estimated to span a period of ten to twenty or more
years at a cost ranging from $40,650,000 to $61,100,000.




The
remediation activities described previously at the two terminals as well as some
other minor requirements at another terminal are estimated based on currently
available information, in undiscounted U.S. dollars and are inherently subject
to relatively large fluctuation.  Management believes that the cost of
the foregoing remediation activities ($50,750,000 to $76,600,000 in total) is
capitalizable in accordance with generally accepted accounting principles (ASC
410-30-25-18) as such costs are recoverable and improve the property as compared
with its condition when acquired and either 1) extend the life, increase the
capacity or improve the safety and/or efficiency of the property or 2) mitigate
or prevent environmental contamination that has yet to occur that may result
from future operations or activities.  During 2009 and 2008
approximately $3,890,000 and $7,200,000, respectively, of such expenditures were
incurred and capitalized within property, plant and equipment.  For
the years ended December 31, 2009 and 2008 approximately $2,040,000 and
$2,300,000, respectively, of environmental related cost that did not meet the
capitalization criteria were charged to operations.




The New Jersey Department of
Environmental Protection (DEP) promulgated a pending new regulation that will
require vapor control (collection and destruction) on some tanks during roof
landings and tank cleanings when degassing is required.  These new
requirements will apply to refineries and independent
terminals.  Emissions during these times are currently permitted by
IMTT-Bayonne with some restrictions on frequency and timing but no required
collection and destruction of the emissions.  As requested by an
industry coalition, DEP phased in the required controls beginning in 2010 for
degassing through 2020 on the roof landing emissions reducing the amount of
emissions allowed from landings from five tons per tank to two tons per
tank.  The potential cost to IMTT-Bayonne of complying with this new
regulation is estimated at $3,500,000 to $5,000,000 over the next two years
after December 31, 2009.  In accordance with the terms of their
contracts, these costs could be recouped through additional charges to
customers.  IMTT-Bayonne will continue working to mitigate impacts on
New Jersey operations with customers and the DEP, as well as designing the most
cost effective means of control as the phases take effect.


30




IMTT Combined is in the process of
expanding storage capacity and other customer service capabilities at its St.
Rose and Bayonne facilities to satisfy new customer contract
requirements.  Approximately $29,740,000 of additional capital
expenditures will be necessary in 2010 to complete these projects.




An
additional requirement associated with the $30 million unsecured term loan
discussed in Note 4 is the maintenance of a $1.5 million compensating balance
with the bank or the payment of interest equal to 4% of such balance annually if
it is not maintained.




IMTT-Quebec
Inc. has operating lease commitments primarily for the land on which the
terminal is located and related terminal assets.  Minimum lease
payments required in the future are as follows at December 31,
2009.







Year
                  
                  Amounts2010
                  
                  $
                  794,0002011
                  
                  
                  811,0002012
                  
                  
                  822,0002013
                  
                  
                  836,0002014
                  
                  
                  845,000




In
connection with the leases described above, IMTT-Quebec has the responsibility
to remove any contaminants from the leased premises at the end of their
term.  The total amount of undiscounted estimated future cash flows
through December 31, 2028 lease termination required to satisfy this obligation
is $3,653,000.  These cash flows were discounted using a
credit-adjusted risk free interest rate of 7.5% and capitalized in property,
plant and equipment and are being depreciated over the term of the
leases.  The changes to the asset retirement obligation recorded are
as follows for 2009 and 2008.





2009
                    
                    
                    2008Balance,
      January 1,
                    
                    $
                    924,000
                    
                    
                    $
                    521,000Accretion
      (interest) expense
                    
                    
                    70,000
                    
                    
                    
                    149,000Increase
      in obligation
                    
                    
                    -
                    
                    
                    
                    254,000Balance,
      December 31,
                    
                    $
                    994,000
                    
                    
                    $
                    924,000




This obligation is recorded in other
long-term liabilities in the accompanying balance sheets.


31




(7) Income
taxes




IHI
Consolidated provides for income taxes in accordance with the asset and
liability method as prescribed by ASC 740-10-25-2.  The components of
the income tax expense shown in the accompanying statements are as
follows:





2009
                  
                  
                  2008Current
                  
                  
                  Deferred
                  
                  
                  Total
                  
                  
                  Current
                  
                  
                  Deferred
                  
                  
                  TotalU.S.
      federal
                  
                  $
                  210,000
                  
                  
                  $
                  30,541,000
                  
                  
                  $
                  30,751,000
                  
                  
                  $
                  963,000
                  
                  
                  $
                  5,366,000
                  
                  
                  $
                  6,329,000State
      and local
                  
                  
                  1,383,000
                  
                  
                  
                  6,725,000
                  
                  
                  
                  8,108,000
                  
                  
                  
                  3,240,000
                  
                  
                  
                  1,189,000
                  
                  
                  
                  4,429,000Foreign
                  
                  
                  -
                  
                  
                  
                  (17,000
                  )
                  
                  
                  (17,000
                  )
                  
                  
                  (150,000
                  )
                  
                  
                  (1,156,000
                  )
                  
                  
                  (1,306,000
                  )Total
      income tax expense
                  
                  $
                  1,593,000
                  
                  
                  $
                  37,249,000
                  
                  
                  $
                  38,842,000
                  
                  
                  $
                  4,053,000
                  
                  
                  $
                  5,399,000
                  
                  
                  $
                  9,452,000




Income
tax expense differs from income tax computed at the U.S. federal statutory rate
of 35% of income before income taxes as shown in the accompanying financial
statements, as follows:





2009
                    
                    
                    2008Income
      tax expense based on U.S. federal statutory rate
                    
                    $
                    32,583,000
                    
                    
                    $
                    7,195,000State
      income tax provisions, net of federal income tax benefit
                    
                    
                    5,270,000
                    
                    
                    
                    2,879,000Non-deductible
      expenses
                    
                    
                    134,000
                    
                    
                    
                    756,000Adjustments
      to actual tax returns
                    
                    
                    374,000
                    
                    
                    
                    (1,168,000
                    )Foreign
      income tax differences
                    
                    
                    (2,000
                    )
                    
                    
                    (545,000
                    )Others,
      net
                    
                    
                    483,000
                    
                    
                    
                    335,000Total
      income tax expense recorded in accompanying financial
      statements
                    
                    $
                    38,842,000
                    
                    
                    $
                    9,452,000




Deferred
income taxes have been recorded in the accompanying balance sheets for the tax
effects of temporary differences that impact the financial statements and income
tax returns in different periods, offset partially by carryforwards for federal
and state income tax purposes of unused net operating losses and tax
credits.   These temporary differences consist primarily of fixed
asset basis differences as well as various expenses which affect the financial
statements and tax returns in different periods.  Differences in the
basis of the fixed assets for accounting and income tax reporting purposes exist
primarily as a result of different depreciation methods and lives used for
financial and income tax reporting purposes, involuntary conversion treatment,
for income tax purposes, of proceeds received from asset expropriations and
settlement of insurance coverage for property damage. The primary components of
deferred income tax liabilities (assets) are as follows:


32





2009
                  
                  
                  2008Deferred
      tax liabilities:Fixed
      asset basis differences
                  
                  $
                  192,852,000
                  
                  
                  $
                  154,054,000Currency
      translation gain (loss)
                  
                  
                  848,000
                  
                  
                  
                  (502,000
                  )Others,
      net
                  
                  
                  2,395,000
                  
                  
                  
                  443,000Total
      deferred tax liabilities
                  
                  $
                  196,095,000
                  
                  
                  $
                  153,995,000Deferred
      tax assets:Interest
      rate swap agreement differences
                  
                  $
                  (19,335,000
                  )
                  
                  $
                  (33,880,000
                  )Net
      operating loss and tax credit carryforwards
                  
                  
                  (29,224,000
                  )
                  
                  
                  (9,264,000
                  )Expense
      accruals
                  
                  
                  (7,043,000
                  )
                  
                  
                  (8,258,000
                  )Deferred
      revenue items
                  
                  
                  (5,878,000
                  )
                  
                  
                  (6,058,000
                  )Pension
      expense in excess of contributions
                  
                  
                  (7,944,000
                  )
                  
                  
                  (7,602,000
                  )Total
      deferred tax assets prior to valuation allowance
                  
                  
                  (69,424,000
                  )
                  
                  
                  (65,062,000
                  )Valuation
      allowance
                  
                  
                  2,104,000
                  
                  
                  
                  -Net
      deferred tax assets
                  
                  
                  (67,320,000
                  )
                  
                  
                  (65,062,000
                  )Net
      deferred taxes as shown in accompanying balance sheets
                  
                  $
                  128,775,000
                  
                  
                  $
                  88,933,000




Management
believes that it is more likely than not that the net deferred tax assets will
be realized through future operations and the reversal of other temporary
differences.  The valuation allowance at December 31, 2009 was
primarily related to state net operating loss carryforwards that, in the
judgment of management, are not more likely than not to be
realized.  The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which temporary differences become deductible and prior to the expiration of the
net operating loss carryforwards.




Deferred
income taxes are classified as follows in the accompanying balance
sheets.





2009
                  
                  
                  2008Current
      tax (asset)
                  
                  $
                  (12,700,000
                  )
                  
                  $
                  (14,144,000
                  )Deferred
      tax liability
                  
                  
                  141,475,000
                  
                  
                  
                  103,077,000Net
      deferred tax liability
                  
                  $
                  128,775,000
                  
                  
                  $
                  88,933,000




33




Net
operating loss (N.O.L.) and tax credit carryforwards outstanding as of December
31, 2009 expire as follows:


Year of Expiration
                  
                  Federal N.O.L.
                  
                  
                  State N.O.L.
                  
                  
                  Foreign N.O.L.2010
                  
                  $
                  -
                  
                  
                  $
                  2,318,000
                  
                  
                  $
                  252,0002011
                  
                  
                  -
                  
                  
                  
                  6,904,000
                  
                  
                  
                  -2012
                  
                  
                  -
                  
                  
                  
                  8,499,000
                  
                  
                  
                  -2013
                  
                  
                  -
                  
                  
                  
                  5,496,000
                  
                  
                  
                  -2014
                  
                  
                  -
                  
                  
                  
                  3,299,000
                  
                  
                  
                  410,0002015
                  
                  
                  -
                  
                  
                  
                  2,165,000
                  
                  
                  
                  705,0002016
                  
                  
                  -
                  
                  
                  
                  2,855,000
                  
                  
                  
                  -2017
                  
                  
                  -
                  
                  
                  
                  899,000
                  
                  
                  
                  -2018
                  
                  
                  -
                  
                  
                  
                  6,741,000
                  
                  
                  
                  -2019
                  
                  
                  -
                  
                  
                  
                  8,022,000
                  
                  
                  
                  -2020
                  
                  
                  -
                  
                  
                  
                  2,180,000
                  
                  
                  
                  -2021
                  
                  
                  -
                  
                  
                  
                  3,230,000
                  
                  
                  
                  -2022
                  
                  
                  -
                  
                  
                  
                  6,642,000
                  
                  
                  
                  -2023
                  
                  
                  -
                  
                  
                  
                  19,704,000
                  
                  
                  
                  -2024
                  
                  
                  -
                  
                  
                  
                  42,806,000
                  
                  
                  
                  -2025
                  
                  
                  -
                  
                  
                  
                  8,000
                  
                  
                  
                  -2026
                  
                  
                  -
                  
                  
                  
                  7,000
                  
                  
                  
                  895,0002027
                  
                  
                  316,000
                  
                  
                  
                  108,000
                  
                  
                  
                  542,0002028
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  4,501,0002029
                  
                  
                  44,349,000
                  
                  
                  
                  -
                  
                  
                  
                  2,532,000$
                  44,665,000
                  
                  
                  $
                  121,883,000
                  
                  
                  $
                  9,837,000




$5,595,000
of federal alternative minimum tax credits have unlimited carryforward
periods.




IHI Consolidated adopted the provisions
of ASC 740-10 on January 1, 2009.




IHI Consolidated has not recorded any
increase in income tax liabilities attributable to unrecognized income tax
benefits in its consolidated statement of income for the year
2009.  Accordingly, no related expense or liability for interest or
penalties has been accrued at December 31, 2009.




As of December 31, 2009, tax
authorities have proposed no adjustments to IHI Consolidated’s income tax
positions.  There are no income tax positions for which it is
reasonably possible that the amounts of unrecognized tax benefits will
materially increase or decrease in the next 12 months.




IHI Consolidated and its subsidiaries
file U.S. federal and state income tax returns.  Two subsidiaries file
Canadian federal and provincial income tax returns.  There are no
on-going examinations of income tax returns filed by IHI Consolidated or any of
its subsidiaries.  U.S. federal income tax returns for tax years
ending after 2005 (after 2000 to the extent of federal net operating loss
carryforward deductions) are subject to examination by the Internal Revenue
Service.  State income tax returns for tax years ending after 2003
(after 1999 to the extent of state net operating loss carryforward deductions)
are subject to examination by state tax authorities.  Canadian tax
returns for tax years after 2004 are subject to examination by Revenue Canada
and provincial tax authorities.


34




(8) Fair value of financial
instruments




The fair
value of financial instruments (as defined by ASC 825-10-50) contained in the
accompanying balance sheets approximates the carrying amount for all assets and
liabilities.




(9) Changes in
ownership




In
January, 2000 International Tank Terminals, L.L.C. and its affiliates acquired
the 50% interest of their former partner in each of the entities comprising IMTT
Combined. The consideration for the purchase was in the form of $130,000,000 of
notes payable.  As described more fully in Note 6, these notes were
refinanced with a bank in December, 2005.




On May 1,
2006, Loving Enterprises, Inc. (Loving) which was the 100% owner of
International Tank Terminals, L.L.C. and its affiliates (owners of 100% of IMTT
Combined), transferred a 50% interest to Macquarie Infrastructure Company Trust
for $250,000,000 and Loving changed its name to IMTT Holdings
Inc.


35




(10) Accumulated other
comprehensive income




Shareholders’ equity includes
accumulated other comprehensive income.  Changes in the components of
accumulated other comprehensive income for 2009 and 2008 are as
follows:




Derivatives
                    
                    
                    Foreign
                      Currency
                      Translation
                    
                    
                    Pension and
                      Post
                      Retirement
                      Plans
                    
                    
                    Accumulated
                      Other
                      Comprehensive
                      Income/ (Loss)Balance,December
      31,2007
                    
                    $
                    —
                    
                    
                    $
                    1,835,000
                    
                    
                    $
                    (6,213,000
                    )
                    
                    $
                    (4,378,000
                    )Adjustment
      of Accumulated OCI , net of tax effects on adoption of ASC 715-20-65-1
      (Note 5)
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    3,142,000
                    
                    
                    
                    3,142,000Other
      comprehensive income (loss) for the year, net of tax
    effects
                    
                    
                    (6,596,000
                    )
                    
                    
                    (2,754,000
                    )
                    
                    
                    (6,734,000
                    )
                    
                    
                    (16,084,000
                    )Balance,  December
      31, 2008
                    
                    $
                    (6,596,000
                    )
                    
                    $
                    (919,000
                    )
                    
                    $
                    (9,805,000
                    )
                    
                    $
                    (17,320,000
                    )Other
      comprehensive income (loss) for the year, net of tax
    effects
                    
                    
                    3,396,000
                    
                    
                    
                    2,369,000
                    
                    
                    
                    (705,000
                    )
                    
                    
                    5,060,000Balance,  December
      31, 2009
                    
                    $
                    (3,200,000
                    )
                    
                    $
                    1,450,000
                    
                    
                    $
                    (10,510,000
                    )
                    
                    $
                    (12,260,000
                    )


36




(11) Future minimum rental
revenue




Future
minimum rental revenues for terminal storage capacity for the remaining
unexpired term of lease agreements in existence at December 31, 2009 are as
follows.





Year
                    
                    Amounts2010
                    
                    $
                    245,102,0002011
                    
                    
                    213,383,0002012
                    
                    
                    168,753,0002013
                    
                    
                    118,666,0002014
                    
                    
                    93,210,0002015
      and thereafter
                    
                    
                    151,444,000Total
                    
                    $
                    990,558,000




(12) Additional balance
sheet detail




Additional detail of the components of
certain balance sheet captions follows.





2009
                  
                  
                  2008Prepaid expenses and
    deposits:Prepaid
      insurance
                  
                  $
                  3,868,000
                  
                  
                  $
                  3,706,000Deferred
      income tax asset
                  
                  
                  12,700,000
                  
                  
                  
                  14,144,000Prepaid
      income taxes
                  
                  
                  1,787,000
                  
                  
                  
                  2,992,000Other
                  
                  
                  1,118,000
                  
                  
                  
                  896,000Total
                  
                  $
                  19,473,000
                  
                  
                  $
                  21,738,000Other assets:Deferred
      dredging costs
                  
                  $
                  4,139,000
                  
                  
                  $
                  1,674,000Deposits
                  
                  
                  1,346,000
                  
                  
                  
                  1,422,000Other
                  
                  
                  967,000
                  
                  
                  
                  1,156,000Total
                  
                  $
                  6,452,000
                  
                  
                  $
                  4,252,000Accrued liabilities:Utilities
                  
                  $
                  1,478,000
                  
                  
                  $
                  1,480,000Damage
      claim settlement/ fine accruals
                  
                  
                  6,235,000
                  
                  
                  
                  3,675,000Deferred
      compensation
                  
                  
                  -
                  
                  
                  
                  5,966,000Accrued
      payables
                  
                  
                  11,660,000
                  
                  
                  
                  7,526,000Health
      claims
                  
                  
                  1,052,000
                  
                  
                  
                  711,000Vacation
      pay
                  
                  
                  2,244,000
                  
                  
                  
                  2,056,000Workmen’s
      compensation claims
                  
                  
                  1,648,000
                  
                  
                  
                  2,248,000Deferred
      revenue – current portion
                  
                  
                  2,676,000
                  
                  
                  
                  2,894,000Interest
                  
                  
                  2,059,000
                  
                  
                  
                  2,846,000Other
                  
                  
                  7,398,000
                  
                  
                  
                  4,314,000Total
                  
                  $
                  36,450,000
                  
                  
                  $
                  33,716,000




Other
      long-term liabilities:Swap
      mark-to-market liabilities
                            
                            $
                            30,405,000
                            
                            
                            $
                            67,803,000Deferred
      revenue
                            
                            
                            20,805,000
                            
                            
                            
                            23,189,000Pension
      benefits
                            
                            
                            24,329,000
                            
                            
                            
                            21,697,000Deferred
      compensation
                            
                            
                            588,000
                            
                            
                            
                            526,000Retiree
      health/life benefits
                            
                            
                            4,026,000
                            
                            
                            
                            3,251,000Other
                            
                            
                            946,000
                            
                            
                            
                            664,000Total
                            
                            $
                            81,099,000
                            
                            
                            $
                            117,130,000


37




(13) Accounting
pronouncements




IHI Consolidated is not aware of any
issued accounting standards whose implementation date is subsequent to December
31, 2009, that would have a material impact on its future results of operations
or financial position.




(14) Subsequent
events




Subsequent
to December 31, 2009, IHI Consolidated declared and paid a distribution to its
shareholders of $10,000,000.  Subsequent events were evaluated through
February 22, 2010 for their impact on the accompanying financial statements,
which is the date the statements were available to be issued.


38