MIC Reports Second Quarter 2017 Financial Results, Announces Acquisition and Investment, Increases Quarterly Cash Dividend

- Authorizes cash dividend of $1.38 per share, up 10.4%

- Reiterates guidance for growth in Free Cash Flow, Dividends

- Raises 2017 growth capex deployment target to between $600.0 million and $650.0 million

- IMTT to acquire Epic Midstream liquids terminalling business

NEW YORK, Aug. 2, 2017 /PRNewswire/ -- Macquarie Infrastructure Corporation MIC today reported financial results for the second quarter of 2017.

"MIC's performance overall continued to be at levels consistent with our expectations for the full year and we have been able to improve our prospects with the attractive transactions announced today," said James Hooke, chief executive officer of MIC. "The improved cash generation by our existing operations supported an increase in MIC's quarterly cash distribution of 10.4%, consistent with our expectations and guidance. We continue to expect to increase cash generation in 2017 by between 10% and 15%, per share, and to grow our cash dividend by 10%."

MIC reported a 23.5% increase in net income compared with the second quarter of 2016. The Company reported net income of $26.0 million for the quarter ended June 30, 2017. For the first six months of the year, MIC's net income increased 42.2% to $58.7 million.

The Company reported cash generated by operating activities of $120.6 million and $249.2 million in the quarter and six months ended June 30, 2017, respectively, compared with $129.4 million and $277.9 million reported in the prior comparable periods. The decrease in cash from operations reflects primarily the absence of insurance proceeds, higher state taxes and changes in working capital related to higher inventory costs and the timing of payments in 2017 compared with 2016. The impact of these was partially offset by improved operating results and contributions from acquired businesses.

MIC's businesses produced an aggregate $141.1 million and $288.0 million of Adjusted Free Cash Flow in the second quarter and year to date periods ended June 30, 2017, respectively, up 11.7% and 10.9% from the amounts generated in the prior corresponding periods. The Company defines Adjusted Free Cash Flow as cash from operating activities (including from its proportionate interest in businesses in which it has a less than 100% equity interest), less maintenance capital expenditures, less changes in working capital, adjusted for certain one-time items. (See Summary Financial Information below)

The implementation of MIC's previously announced shared services initiative resulted in a reduction in the rate of increase in general and administrative expenses. As anticipated, the savings were offset by expenses including primarily severance payments and consulting fees totaling $3.1 million and $5.4 million in the June quarter and year to date periods, respectively, and incremental expenses associated with acquisitions completed in 2016. The Company does not expect to incur shared services implementation costs in 2018 and has excluded those incurred in 2017 from its presentation of both Adjusted EBITDA excluding non-cash items and Adjusted Free Cash Flow in an effort to provide clarity with respect to the recurring cash flows being generated by its businesses.

MIC expects to realize annual general and administrative and procurement cost savings of between $12.0 million and $15.0 million in 2018, compared with its 2016 baseline, as a result of the shared services initiative. The expected savings will not be spread evenly, or even proportionately, across MIC's businesses and some businesses may simply benefit from an improvement in service levels. Shared services provides business support functions including Accounting, Human Resource, Tax, Information Technology and Risk Management support to each of MIC's operating entities.

As a result of a heightened level of activity associated with the evaluation of various investment and acquisition opportunities, MIC incurred approximately $4.9 million of transaction related expenses during the second quarter. These costs have been recorded as an expense in the Corporate and Other segment of its financial statements and have been excluded from the Company's presentation of both Adjusted EBITDA excluding non-cash items and Adjusted Free Cash Flow in an effort to provide clarity with respect to the recurring cash flows being generated by its businesses.

The MIC board of directors authorized a cash dividend of $1.38 per share, or $5.52 annualized, for the second quarter of 2017. The dividend will be payable August 17, 2017 to shareholders of record on August 14, 2017. The payment represents a 10.4% increase over the dividend paid for the second quarter of 2016 and is consistent with MIC's guidance for a 10% increase in its annual dividend in 2017 over 2016.

In June, MIC increased its guidance with respect to growth capital deployment in 2017 to approximately $500.0 million from $400.0 million. Assuming the transactions announced today are successfully concluded, MIC will have deployed more than $450.0 million of growth capital in 2017 and has increased its full-year capital deployment target to between $600.0 million and $650.0 million.

"Earlier in the year we highlighted an increase in the number and size of investment opportunities that we were reviewing and a further increase in our growth capital deployment target for this year reflects our capitalizing on those opportunities," said Hooke. "In addition to increasing planned growth investments within our four existing segments, we continue to pursue opportunities outside of these, some of which could be transformative for the Company."

Acquisition and Investment Announced
On July 28, 2017, IMTT entered into an agreement to acquire Epic Midstream (Epic) from affiliates of White Deer Energy and Blue Water Energy for $171.5 million, not including working capital adjustments. The transaction is expected to close in the third quarter of 2017 and be accretive to MIC's Free Cash Flow in 2018. Closing is subject to customary regulatory approvals and satisfaction of other conditions precedent.

The purchase price reflects a multiple of Epic's full year 2018 Pro-Forma EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) of approximately 11.0x. MIC expects to fund the acquisition with the issuance of $125.0 million in new MIC shares to the sellers and $46.5 million in cash, including with drawings on IMTT's revolving credit facility. The new shares will be issued at a 1.5% discount to the 30-day volume weighted average price of MIC's shares, as reported by the New York Stock Exchange, at the end of the second day prior to closing of the transaction.

Epic will continue to operate a portfolio of seven bulk liquid terminals in the U.S. Southeast and Southwest, with principal operations in the Port of Savannah, Georgia. Its facilities comprise more than 3.1 million barrels of storage capacity, a significant portion of which is in service for jet fuel. Revenue produced by the Epic business is generated pursuant to take-or-pay contracts similar to those at MIC's IMTT business. Customers include an affiliate of the U.S. Department of Defense that has been an Epic customer for more than 20 years.

"The addition of the Epic terminals will expand IMTT's operations into important new markets, including Savannah, and materially expand its jet fuel handling capability — something we had been seeking to do for some time," noted Hooke.

On July 10, 2017, MIC formed a new joint venture with Intersect Power, a developer of renewable power generation and storage projects across the U.S., to fund and potentially acquire Intersect projects. Founded in 2016, Intersect Power is in the early stages of development of approximately 700MW of power in California and Texas and anticipates pursuing projects in Hawaii as well. MIC expects to invest up to $135.0 million of equity, contingent equity, and credit facilities that will be used to fund Intersect Power's operations and project development pipeline.

"The arrangement we have with Intersect Power is expected to provide MIC with access to a flow of high quality renewable energy projects beginning in 2019," said Hooke. "Including Intersect, we now expect to have access to opportunities in both wind and solar generation and power storage and are even better positioned to grow the size of our existing portfolio of approximately 350MW of generation without having to compete in costly auction processes."

Quarterly Segment Highlights
Utilization rates at IMTT decreased to historically normal levels of 94.0% and 95.2% in the quarter and six month periods ended June 30, 2017, respectively, from what had been elevated rates in the mid-96% range. An improved top line result that included deferred revenue resulting from termination of a construction project by a biodiesel customer was partially offset by higher repair and maintenance expenses in the quarter. Near term, the focus for the business remains on effective deployment of growth capital.

Continued strong growth in general aviation flight activity supported improvement in the financial performance of Atlantic Aviation. General aviation flight activity increased by approximately 3.7% in the second quarter, based on data reported by the Federal Aviation Administration. Activity levels across the Atlantic network, along with effective upselling of fuel, effective margin management and the operational leverage inherent in the business, resulted in growth in EBITDA and Free Cash Flow at multiples of the rate of increase in flight activity. Completing attractive bolt-on acquisition opportunities remains a priority for the business.

The renewable facilities in MIC's Contracted Power (CP) segment enjoyed improved wind and solar resources in the second quarter. Resources were at or slightly above long-term average levels. Contributions from facilities acquired in 2016 added to segment results. The formation of a new joint venture with a developer of renewable projects positions the segment for continued growth.

The Bayonne Energy Center (BEC), the thermal power generation facility in MIC's CP segment, underperformed as a result of previously announced lower capacity prices in NYISO Zone J and a reduction in utilization. The completion of construction projects, including a recent interconnection with a second pipeline serving BEC, is expected to improve utilization of the facility beginning in the third quarter.

Hawaii Gas, the largest component of the MIC Hawaii segment, benefitted from increased gas sales versus the same period last year. A portion of the increased contribution was offset at the segment level by costs associated with acquisitions completed in 2016. Following the quarter end, Hawaii Gas filed a general rate case seeking a $15.0 million annual increase in regulated utility revenue. To the extent new rates are approved by regulators, the Company expects that an interim increase, if any, could take effect in mid-2018.

Summary Financial Information



Quarter Ended
June 30,


Change
Favorable/(Unfavorable)


Six Months Ended
June 30,


Change
Favorable/(Unfavorable)



2017


2016


$


%


2017


2016


$


%



($ In Thousands, Except Share and Per Share Data) (Unaudited)

GAAP Metrics
































Net income


$

26,025



$

21,081




4,944




23.5



$

58,663



$

41,257




17,406




42.2

Weighted average number of shares outstanding: basic



82,430,324




80,369,575




2,060,749




2.6




82,285,053




80,241,293




2,043,760




2.5

Net income per share attributable to MIC


$

0.32



$

0.24




0.08




33.3



$

0.75



$

0.52




0.23




44.2

Cash provided by operating activities



120,636




129,352




(8,716)




(6.7)




249,204




277,918




(28,714)




(10.3)

MIC Non-GAAP Metrics
































EBITDA excluding non-cash items(1)


$

170,924



$

166,784




4,140




2.5



$

351,239



$

342,759




8,480




2.5

Shared service implementation costs



3,091







3,091




NM




5,445







5,445




NM

Investment and acquisition
costs



4,850







4,850




NM




4,850







4,850




NM

Adjusted EBITDA excluding
non-cash items


$

178,865



$

166,784




12,081




7.2



$

361,534



$

342,759




18,775




5.5

Cash interest(2)


$

(26,410)



$

(27,241)




831




3.1



$

(52,284)



$

(54,619)




2,335




4.3

Cash taxes



(2,618)




(1,662)




(956)




(57.5)




(6,339)




(4,168)




(2,171)




(52.1)

Maintenance capital
expenditures



(6,480)




(9,840)




3,360




34.1




(10,956)




(20,253)




9,297




45.9

Noncontrolling interest(3)



(2,244)




(1,724)




(520)




(30.2)




(3,915)




(4,007)




92




2.3

Adjusted Free Cash
Flow


$

141,113



$

126,317




14,796




11.7



$

288,040



$

259,712




28,328




10.9

 

NM — Not meaningful





(1)

EBITDA excluding non-cash items is calculated as net income before interest expense, taxes, depreciation and amortization expense, management fees, pension expense and other non-cash (income) expense recorded in the consolidated statement of operations. See below for reconciliation of net income (loss) to EBITDA excluding non-cash items.

 


(2)

Cash interest is calculated as interest expense excluding the impact of non-cash adjustments for unrealized (gains) losses from derivative instruments, amortization of deferred financing costs and the amortization of debt discount recorded in the consolidated statement of operations.

 


(3)

Noncontrolling interest adjustment represents the portion of Free Cash Flow not attributable to MIC's ownership interest.

Conference Call and Webcast
When:  MIC has scheduled a conference call for 8:00 a.m. Eastern Time on Thursday, August 3, 2017 during which management will review and comment on the second quarter 2017 results.

How:  To listen to the conference call dial +1(650) 521-5252 or +1(877) 852-2928 at least 10 minutes prior to the scheduled start time. A webcast of the call will be accessible via the Company's website at www.macquarie.com/mic. Allow extra time prior to the call to visit the site and download the software needed to listen to the webcast.

Slides:  MIC will prepare materials in support of its conference call. The materials will be available for downloading from the Company's website prior to the call.

Replay:  For interested individuals unable to participate in the live conference call, a replay will be available after 2:00 p.m. on August 3, 2017 through midnight on August 10, 2017, at +1(404) 537-3406 or +1(855) 859-2056, Passcode: 48792183. An online archive of the webcast will be available on the Company's website for one year following the call.

About MIC
MIC owns and operates a diversified group of businesses providing basic services to customers primarily in the United States. Its businesses consist of a bulk liquid terminals business, International-Matex Tank Terminals; an airport services business, Atlantic Aviation; entities comprising an energy services, production and distribution segment, MIC Hawaii; and entities comprising a Contracted Power segment. For additional information, please visit the MIC website at www.macquarie.com/mic. MIC-G

Use of Non-GAAP Measures
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items, Free Cash Flow and Proportionately Combined Metrics

In addition to MIC's results under U.S. GAAP, the Company uses certain non-GAAP measures to assess the performance and prospects of its businesses. In particular, MIC uses EBITDA excluding non-cash items, Free Cash Flow and certain proportionately combined financial metrics. Proportionately combined financial metrics, including Free Cash Flow, reflect MIC Corporate and the Company's ownership interest in each of its businesses.

MIC measures EBITDA excluding non-cash items as a reflection of its businesses' ability to effectively manage the volume of products sold or services provided, the operating margin earned on those transactions and the management of operating expenses independent of the capitalization and tax attributes of those businesses. The Company believes investors use EBITDA excluding non-cash items primarily as a measure to assess the operating performance of its businesses and to make comparisons with the operating performance of other businesses whose depreciation and amortization expense may vary widely from MIC's, particularly where acquisitions and other non-operating factors are involved. MIC defines EBITDA excluding non-cash items as net income (loss) or earnings — the most comparable GAAP measure — before interest, taxes, depreciation and amortization and non-cash items including impairments, unrealized derivative gains and losses, adjustments for other non-cash items and pension expenses reflected in the statements of operations. EBITDA excluding non-cash items also excludes base management fees and performance fees, if any, whether paid in cash or stock.

Given MIC's varied ownership levels in its CP and MIC Hawaii segments, together with obligations to report the results of these businesses on a consolidated basis, GAAP measures such as net income (loss) do not fully reflect all of the items management considers in assessing the amount of cash generated based on its ownership interest in its businesses. The Company notes that the proportionately combined metrics used may be calculated in a different manner by other companies and may limit their usefulness as a comparative measure. Therefore, proportionately combined metrics should be used as a supplemental measure and not in lieu of its financial results reported under GAAP.

The Company's businesses are characteristically owners of high-value, long-lived assets capable of generating substantial Free Cash Flow. MIC defines Free Cash Flow as cash from operating activities — the most comparable GAAP measure — which includes cash paid for interest, taxes and pension contributions, less maintenance capital expenditures, which includes principal repayments on capital lease obligations used to fund maintenance capital expenditures, and excludes changes in working capital.

Management uses Free Cash Flow as a measure of its ability to provide investors with an attractive risk-adjusted return by sustaining and potentially increasing MIC's quarterly cash dividend and funding a portion of the Company's growth. GAAP metrics such as net income (loss) do not provide MIC management with the same level of visibility into the performance and prospects of the business as a result of: (i) the capital intensive nature of MIC's businesses and the generation of non-cash depreciation and amortization; (ii) shares issued to the Company's external manager under the Management Services Agreement; (iii) the Company's ability to defer all or a portion of current federal income taxes; (iv) non-cash unrealized gains or losses on derivative instruments; (v) amortization of tolling liabilities; (vi) gains (losses) on disposal of assets; and (vii) pension expenses. Pension expenses primarily consist of interest expense, expected return on plan assets and amortization of actuarial and performance gains and losses. Any cash contributions to pension plans are reflected as a reduction to Free Cash Flow. Management believes that external consumers of its financial statements, including investors and research analysts, use Free Cash Flow both to assess the Company's performance and as an indicator of its success in generating an attractive risk-adjusted return.

In its Quarterly Report on Form 10-Q, the Company has disclosed Free Cash Flow on a consolidated basis and for each of its operating segments and MIC Corporate. Management believes that both EBITDA excluding non-cash items and Free Cash Flow support a more complete and accurate understanding of the financial and operating performance of its businesses than would otherwise be achieved using GAAP results alone.

Free Cash Flow does not take into consideration required payments on indebtedness and other fixed obligations or other cash items that are excluded from MIC's definition of Free Cash Flow. Management notes that Free Cash Flow may be calculated differently by other companies thereby limiting its usefulness as a comparative measure. Free Cash Flow should be used as a supplemental measure and not in lieu of its financial results reported under GAAP.

See also "Reconciliation of Consolidated Net Income (Loss) to EBITDA Excluding Non-Cash Items and a Reconciliation from Cash Provided by Operating Activities to Free Cash Flow" below.

Classification of Maintenance Capital Expenditures and Growth Capital Expenditures
MIC categorizes capital expenditures as either maintenance capital expenditures or growth capital expenditures. As neither maintenance capital expenditure nor growth capital expenditure is a GAAP term, the Company has adopted a framework to categorize specific capital expenditures. In broad terms, maintenance capital expenditures primarily maintain MIC's businesses at current levels of operations, capability, profitability or cash flow, while growth capital expenditures primarily provide new or enhanced levels of operations, capability, profitability or cash flow. Management considers a number of factors in determining whether a specific capital expenditure will be classified as maintenance or growth.

In some cases, specific capital expenditures contain characteristics of both maintenance and growth capital expenditures. MIC does not bifurcate specific capital expenditures into maintenance and growth components. Each discrete capital expenditure is considered within the above framework and the entire capital expenditure is classified as either maintenance or growth.

Forward-Looking Statements
This press release contains forward-looking statements. MIC may, in some cases, use words such as "project", "believe", "anticipate", "plan", "expect", "estimate", "intend", "should", "would", "could", "potentially", or "may" or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements in this release are subject to a number of risks and uncertainties, some of which are beyond MIC's control including, among other things: changes in general economic or business conditions; its ability to service, comply with the terms of and refinance debt, successfully integrate and manage acquired businesses, retain or replace qualified employees, manage growth, make and finance future acquisitions, and implement its strategy; risks associated with development, investment and expansion in the power industry; its regulatory environment establishing rate structures and monitoring quality of service; demographic trends, the political environment, the economy, tourism, construction and transportation costs, air travel, environmental costs and risks; fuel and gas and other commodity costs; its ability to recover increases in costs from customers, cybersecurity risks, work interruptions or other labor stoppages; risks related to its shared services initiative; reliance on sole or limited source suppliers, risks or conflicts of interests involving its relationship with the Macquarie Group and changes in U.S. federal tax law.

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

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

MACQUARIE INFRASTRUCTURE CORPORATION


CONSOLIDATED CONDENSED BALANCE SHEETS

($ in Thousands, Except Share Data)




June 30,
2017


December 31,
2016



(Unaudited)



ASSETS








Current assets:








Cash and cash equivalents


$

28,873



$

44,767

Restricted cash



23,368




16,420

Accounts receivable, less allowance for doubtful accounts of $871 and $1,434, respectively



133,562




124,846

Inventories



35,474




31,461

Prepaid expenses



16,406




14,561

Fair value of derivative instruments



4,902




5,514

Other current assets



9,433




7,099

Total current assets



252,018




244,668

Property, equipment, land and leasehold improvements, net



4,408,254




4,346,536

Investment in unconsolidated business



9,192




8,835

Goodwill



2,031,720




2,024,409

Intangible assets, net



884,112




888,971

Fair value of derivative instruments



19,432




30,781

Other noncurrent assets



30,183




15,053

Total assets


$

7,634,911



$

7,559,253

LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities:








Due to Manager – related party


$

6,200



$

6,594

Accounts payable



60,200




69,566

Accrued expenses



91,390




83,734

Current portion of long-term debt



45,544




40,016

Fair value of derivative instruments



5,527




9,297

Other current liabilities



39,783




41,802

Total current liabilities



248,644




251,009

Long-term debt, net of current portion



3,205,733




3,039,966

Deferred income taxes



930,565




896,116

Fair value of derivative instruments



6,157




5,966

Tolling agreements – noncurrent



56,484




60,373

Other noncurrent liabilities



155,812




158,289

Total liabilities



4,603,395




4,411,719

Commitments and contingencies






Stockholders' equity(1):








Common stock ($0.001 par value; 500,000,000 authorized; 82,589,776 shares issued and outstanding at June 30, 2017 and 82,047,526 shares issued and outstanding at December 31, 2016)


$

83



$

82

Additional paid in capital



1,915,626




2,089,407

Accumulated other comprehensive loss



(27,863)




(28,960)

Retained earnings



954,400




892,365

Total stockholders' equity



2,842,246




2,952,894

Noncontrolling interests



189,270




194,640

Total equity



3,031,516




3,147,534

Total liabilities and equity


$

7,634,911



$

7,559,253

(1)

The Company is authorized to issue 100,000,000 shares of preferred stock, par value $0.001 per share. At June 30, 2017 and December 31, 2016, no preferred stock were issued or outstanding. The Company has 100 shares of special stock issued and outstanding to its Manager at June 30, 2017 and December 31, 2016.

 


  


MACQUARIE INFRASTRUCTURE CORPORATION


CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

($ in Thousands, Except Share and Per Share Data)




Quarter Ended June 30,


Six Months Ended June 30,



2017


2016


2017


2016

Revenue
















Service revenue


$

345,045



$

306,221



$

708,849



$

618,462

Product revenue



93,945




91,358




181,598




175,504

Total revenue



438,990




397,579




890,447




793,966

Costs and expenses
















Cost of services



147,114




120,857




301,820




237,320

Cost of product sales



40,249




35,018




87,474




68,078

Selling, general and administrative



82,967




72,430




159,919




144,714

Fees to Manager – related party



18,433




16,392




36,656




31,188

Depreciation



57,063




59,662




114,744




112,883

Amortization of intangibles



15,898




16,713




33,591




34,500

Total operating expenses



361,724




321,072




734,204




628,683

Operating income



77,266




76,507




156,243




165,283

Other income (expense)
















Interest income



41




25




75




58

Interest expense(1)



(35,356)




(39,502)




(60,838)




(96,397)

Other income, net



1,738




271




2,920




3,700

Net income before income taxes



43,689




37,301




98,400




72,644

Provision for income taxes



(17,664)




(16,220)




(39,737)




(31,387)

Net income


$

26,025



$

21,081



$

58,663



$

41,257

Less: net income (loss) attributable to noncontrolling interests



5




1,889




(3,372)




(290)

Net income attributable to MIC


$

26,020



$

19,192



$

62,035



$

41,547

Basic income per share attributable to MIC


$

0.32



$

0.24



$

0.75



$

0.52

Weighted average number of shares outstanding: basic



82,430,324




80,369,575




82,285,053




80,241,293

Diluted income per share attributable to MIC


$

0.32



$

0.24



$

0.75



$

0.51

Weighted average number of shares outstanding: diluted



82,439,840




81,323,294




82,294,608




81,194,505

Cash dividends declared per share


$

1.38



$

1.25



$

2.70



$

2.45

(1)

Interest expense includes losses on derivative instruments of $7.7 million and $6.8 million for the quarter and six months ended June 30, 2017, respectively. For the quarter and six months ended June 30, 2016, interest expense includes losses on derivative instruments of $14.9 million and $46.7 million, respectively.

 

MACQUARIE INFRASTRUCTURE CORPORATION


CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

($ in Thousands)




Six Months Ended
June 30,



2017


2016

Operating activities









Net income


$

58,663



$

41,257


Adjustments to reconcile net income to net cash provided by operating activities:









Depreciation and amortization of property and equipment



114,744




112,883


Amortization of intangible assets



33,591




34,500


Amortization of debt financing costs



4,301




5,249


Amortization of debt discount



1,495





Adjustments to derivative instruments



8,382




29,030


Fees to Manager-related party



36,656




31,188


Deferred taxes



33,398




27,219


Pension expense



4,321




4,395


Other non-cash income, net



(2,935)




(1,749)


Changes in other assets and liabilities, net of acquisitions:









Restricted cash



567




2,368


Accounts receivable



(7,871)




(1,788)


Inventories



(4,256)




(2,104)


Prepaid expenses and other current assets



(2,529)




9,498


Due to Manager – related party



(122)




90


Accounts payable and accrued expenses



(15,782)




(13,789)


Income taxes payable



(1,506)




1,393


Other, net



(11,913)




(1,722)


Net cash provided by operating activities



249,204




277,918


Investing activities









Acquisitions of businesses and investments, net of cash acquired



(66,321)




(16,613)


Purchases of property and equipment



(130,351)




(118,734)


Proceeds from insurance claim






7,235


Loan to project developer



(14,675)





Loan repayment from project developer



1,396





Change in restricted cash



(8,001)





Other, net



60




513


Net cash used in investing activities



(217,892)




(127,599)


 

MACQUARIE INFRASTRUCTURE CORPORATION


CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS – (continued)

(Unaudited)

($ in Thousands)




Six Months Ended
June 30,



2017


2016

Financing activities








Proceeds from long-term debt


$

264,500



$

251,000

Payment of long-term debt



(98,542)




(216,581)

Proceeds from the issuance of shares



5,321




1,323

Dividends paid to common stockholders



(216,508)




(188,608)

Contributions received from noncontrolling interests






15,431

Purchase of noncontrolling interest






(9,909)

Distributions paid to noncontrolling interests



(2,040)




(2,505)

Offering and equity raise costs paid



(182)




(149)

Debt financing costs paid



(447)




(1,203)

Change in restricted cash



557




2,096

Payment of capital lease obligations



(53)




(789)

Net cash used in financing activities



(47,394)




(149,894)

Effect of exchange rate changes on cash and cash equivalents



188




442

Net change in cash and cash equivalents



(15,894)




867

Cash and cash equivalents, beginning of period



44,767




22,394

Cash and cash equivalents, end of period


$

28,873



$

23,261

Supplemental disclosures of cash flow information








Non-cash investing and financing activities:








Accrued equity offering costs


$

44



$

260

Accrued financing costs


$



$

443

Accrued purchases of property and equipment


$

41,354



$

20,794

Issuance of shares to Manager


$

36,927



$

30,977

Issuance of shares to independent directors


$

681



$

750

Conversion of convertible senior notes to shares


$

17



$

4

Taxes paid, net


$

7,845



$

2,766

Interest paid


$

54,601



$

55,956

 

MACQUARIE INFRASTRUCTURE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS – MD&A




Quarter Ended
June 30,


Change
Favorable/
(Unfavorable)


Six Months Ended
June 30,


Change
Favorable/
(Unfavorable)



2017


2016


$


%


2017


2016


$


%



($ In Thousands, Except Share and Per Share Data) (Unaudited)




Revenue
































Service revenue


$

345,045



$

306,221




38,824




12.7



$

708,849



$

618,462




90,387




14.6

Product revenue



93,945




91,358




2,587




2.8




181,598




175,504




6,094




3.5

Total revenue



438,990




397,579




41,411




10.4




890,447




793,966




96,481




12.2

Costs and expenses
































Cost of services



147,114




120,857




(26,257)




(21.7)




301,820




237,320




(64,500)




(27.2)

Cost of product sales



40,249




35,018




(5,231)




(14.9)




87,474




68,078




(19,396)




(28.5)

Selling, general and administrative



82,967




72,430




(10,537)




(14.5)




159,919




144,714




(15,205)




(10.5)

Fees to Manager – related party



18,433




16,392




(2,041)




(12.5)




36,656




31,188




(5,468)




(17.5)

Depreciation



57,063




59,662




2,599




4.4




114,744




112,883




(1,861)




(1.6)

Amortization of
intangibles



15,898




16,713




815




4.9




33,591




34,500




909




2.6

Total operating expenses



361,724




321,072




(40,652)




(12.7)




734,204




628,683




(105,521)




(16.8)

Operating income



77,266




76,507




759




1.0




156,243




165,283




(9,040)




(5.5)

Other income (expense)
































Interest income



41




25




16




64.0




75




58




17




29.3

Interest expense(1)



(35,356)




(39,502)




4,146




10.5




(60,838)




(96,397)




35,559




36.9

Other income, net



1,738




271




1,467




NM




2,920




3,700




(780)




(21.1)

Net income before income taxes



43,689




37,301




6,388




17.1




98,400




72,644




25,756




35.5

Provision for income taxes



(17,664)




(16,220)




(1,444)




(8.9)




(39,737)




(31,387)




(8,350)




(26.6)

Net income


$

26,025



$

21,081




4,944




23.5



$

58,663



$

41,257




17,406




42.2

Less: net income (loss) attributable to noncontrolling interests



5




1,889




1,884




99.7




(3,372)




(290)




3,082




NM

Net income attributable to MIC


$

26,020



$

19,192




6,828




35.6



$

62,035



$

41,547




20,488




49.3

Basic income per share attributable to MIC


$

0.32



$

0.24




0.08




33.3



$

0.75



$

0.52




0.23




44.2

Weighted average number of shares outstanding:
basic



82,430,324




80,369,575




2,060,749




2.6




82,285,053




80,241,293




2,043,760




2.5

 

NM — Not meaningful


(1)

Interest expense includes losses on derivative instruments of $7.7 million and $6.8 million for the quarter and six months ended June 30, 2017, respectively. For the quarter and six months ended June 30, 2016, interest expense includes losses on derivative instruments of $14.9 million and $46.7 million, respectively.

 

 

MACQUARIE INFRASTRUCTURE CORPORATION

RECONCILIATION OF CONSOLIDATED NET INCOME TO EBITDA EXCLUDING NON-CASH ITEMS AND A

RECONCILIATION FROM CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW




Quarter Ended
June 30,


Change
Favorable/
(Unfavorable)


Six Months Ended
June 30,


Change
Favorable/
(Unfavorable)



2017


2016


$


%


2017


2016


$


%



($ In Thousands) (Unaudited)

Net income


$

26,025



$

21,081











$

58,663



$

41,257









Interest expense, net(1)



35,315




39,477












60,763




96,339









Provision for income taxes



17,664




16,220












39,737




31,387









Depreciation



57,063




59,662












114,744




112,883









Amortization of intangibles



15,898




16,713












33,591




34,500









Fees to Manager-related
party



18,433




16,392












36,656




31,188









Pension expense(2)



1,627




2,197












4,321




4,395









Other non-cash (income) expense, net(3)



(1,101)




(4,958)












2,764




(9,190)









EBITDA excluding non-cash items


$

170,924



$

166,784




4,140




2.5



$

351,239



$

342,759




8,480




2.5

EBITDA excluding non-cash items


$

170,924



$

166,784











$

351,239



$

342,759









Interest expense, net(1)



(35,315)




(39,477)












(60,763)




(96,339)









Adjustments to derivative instruments recorded in interest expense(1)



5,930




9,866












2,683




36,471









Amortization of debt financing costs(1)



2,099




2,370












4,301




5,249









Amortization of debt
discount(1)



876















1,495












Provision for income taxes, net of changes in deferred taxes



(2,618)




(1,662)












(6,339)




(4,168)









Changes in working capital



(21,260)




(8,529)












(43,412)




(6,054)









Cash provided by operating activities



120,636




129,352












249,204




277,918









Changes in working capital



21,260




8,529












43,412




6,054









Maintenance capital expenditures



(6,480)




(9,840)












(10,956)




(20,253)









Free cash flow


$

135,416



$

128,041




7,375




5.8



$

281,660



$

263,719




17,941




6.8

(1)

Interest expense, net, includes adjustments to derivative instruments, non-cash amortization of deferred financing fees and non-cash amortization of debt discount related to the 2.00% Convertible Senior Notes due October 2023. For the six months ended June 30, 2016, interest expense also included a non-cash write-off of deferred financing fees related to the February 2016 refinancing at Hawaii Gas.

 

(2)

Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses.

 

(3)

Other non-cash (income) expense, net, primarily includes non-cash amortization of tolling liabilities, unrealized gains (losses) on commodity hedges and non-cash gains (losses) related to disposal of assets. See "Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items, Free Cash Flow and Proportionately Combined Metrics" above for further discussion.

 

MACQUARIE INFRASTRUCTURE CORPORATION

RECONCILIATION FROM CONSOLIDATED FREE CASH FLOW TO PROPORTIONATELY COMBINED FREE CASH

FLOW




Quarter Ended
June 30,


Change
Favorable/
(Unfavorable)


Six Months Ended
June 30,


Change
Favorable/
(Unfavorable)



2017


2016


$


%


2017


2016


$


%



($ In Thousands) (Unaudited)

Free Cash Flow – Consolidated basis


$

135,416



$

128,041




7,375




5.8



$

281,660



$

263,719




17,941




6.8


100% of CP Free Cash Flow included in consolidated Free Cash Flow



(20,704)




(17,871)












(30,543)




(29,814)










MIC's share of CP Free Cash Flow



18,462




16,147












26,633




25,807










100% of MIC Hawaii Free Cash Flow included in consolidated Free Cash Flow



(9,295)




(10,874)












(24,231)




(21,736)










MIC's share of MIC Hawaii Free Cash Flow



9,293




10,874












24,226




21,736










Free Cash Flow – Proportionately Combined basis


$

133,172



$

126,317




6,855




5.4



$

277,745



$

259,712




18,033




6.9


 

MACQUARIE INFRASTRUCTURE CORPORATION
RECONCILIATION OF SEGMENT NET INCOME (LOSS) TO EBITDA EXCLUDING NON-CASH ITEMS AND A
RECONCILIATION FROM CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES TO FREE CASH FLOW

IMTT





Quarter Ended
June 30,


Change
Favorable/
(Unfavorable)


Six Months Ended
June 30,


Change
Favorable/
(Unfavorable)



2017


2016


2017


2016



$


$


$


%


$


$


$


%



($ In Thousands) (Unaudited)

Revenue



137,144




128,218




8,926




7.0




275,961




263,643




12,318




4.7


Cost of services



49,224




46,459




(2,765)




(6.0)




99,070




96,760




(2,310)




(2.4)


Selling, general and administrative expenses



7,485




7,790




305




3.9




16,523




15,964




(559)




(3.5)


Depreciation and amortization



30,795




35,282




4,487




12.7




62,315




67,903




5,588




8.2


Operating income



49,640




38,687




10,953




28.3




98,053




83,016




15,037




18.1


Interest expense, net(1)



(11,763)




(13,764)




2,001




14.5




(20,520)




(33,635)




13,115




39.0


Other income, net



452




464




(12)




(2.6)




1,160




3,452




(2,292)




(66.4)


Provision for income taxes



(15,716)




(10,409)




(5,307)




(51.0)




(32,264)




(21,638)




(10,626)




(49.1)


Net income(2)



22,613




14,978




7,635




51.0




46,429




31,195




15,234




48.8


Less: net income attributable to noncontrolling interests


















59




59




100.0


Net income attributable to MIC(2)



22,613




14,978




7,635




51.0




46,429




31,136




15,293




49.1


Reconciliation of net income to EBITDA excluding non-cash items and a reconciliation of cash provided by operating activities to Free Cash Flow:

































Net income(2)



22,613




14,978












46,429




31,195










Interest expense, net(1)



11,763




13,764












20,520




33,635










Provision for income taxes



15,716




10,409












32,264




21,638










Depreciation and amortization



30,795




35,282












62,315




67,903










Pension expense(3)



1,350




1,831












3,766




3,662










Other non-cash expense, net



69




115












137




558










EBITDA excluding non-cash items



82,306




76,379




5,927




7.8




165,431




158,591




6,840




4.3


EBITDA excluding non-cash items



82,306




76,379












165,431




158,591










Interest expense, net(1)



(11,763)




(13,764)












(20,520)




(33,635)










Adjustments to derivative instruments recorded in interest expense(1)



1,587




3,546












267




13,156










Amortization of debt financing costs(1)



412




411












823




831










Provision for income taxes, net of changes in deferred taxes



(1,155)




(937)












(3,413)




(2,167)










Changes in working capital



(16,881)




(7,676)












(16,145)




(10,483)










Cash provided by operating activities



54,506




57,959












126,443




126,293










Changes in working capital



16,881




7,676












16,145




10,483










Maintenance capital expenditures



(2,987)




(6,942)












(5,447)




(13,239)










Free cash flow



68,400




58,693




9,707




16.5




137,141




123,537




13,604




11.0


 

(1)

Interest expense, net, includes adjustments to derivative instruments and non-cash amortization of deferred financing fees.

 

(2)

Corporate allocation expense, intercompany fees and the tax effect have been excluded from the above table as they are eliminated on consolidation.

 

(3)

Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses.

 

Atlantic Aviation




Quarter Ended
June 30,


Change
Favorable/
(Unfavorable)


Six Months Ended
June 30,


Change
Favorable/
(Unfavorable)



2017


2016


2017


2016



$


$


$


%


$


$


$


%



($ In Thousands) (Unaudited)

Revenue



196,939




179,218




17,721




9.9




409,692




357,206




52,486




14.7

Cost of services (exclusive of depreciation and amortization of intangibles shown separately below)



86,957




74,440




(12,517)




(16.8)




180,879




140,602




(40,277)




(28.6)

Gross margin



109,982




104,778




5,204




5.0




228,813




216,604




12,209




5.6

Selling, general and administrative expenses



52,596




51,381




(1,215)




(2.4)




106,486




103,992




(2,494)




(2.4

Depreciation and amortization



23,575




24,702




1,127




4.6




48,608




46,893




(1,715)




(3.7)

Operating income



33,811




28,695




5,116




17.8




73,719




65,719




8,000




12.2

Interest expense, net(1)



(5,907)




(8,924)




3,017




33.8




(9,353)




(22,238)




12,885




57.9

Other (expense) income, net



(19)




(49)




30




61.2




(105)




341




(446)




(130.8

Provision for income taxes



(11,077)




(7,973)




(3,104)




(38.9)




(25,627)




(17,715)




(7,912)




(44.7)

Net income(2)



16,808




11,749




5,059




43.1




38,634




26,107




12,527




48.0

Reconciliation of net income to EBITDA excluding non-cash items and a reconciliation of cash provided by operating activities to Free Cash Flow:
































Net income(2)



16,808




11,749












38,634




26,107









Interest expense, net(1)



5,907




8,924












9,353




22,238









Provision for income taxes



11,077




7,973












25,627




17,715









Depreciation and amortization



23,575




24,702












48,608




46,893









Pension expense(3)



5




17












10




34









Other non-cash (income) expense, net



(22)




339












40




248









EBITDA excluding non-cash items



57,350




53,704




3,646




6.8




122,272




113,235




9,037




8.0

EBITDA excluding non-cash items



57,350




53,704












122,272




113,235









Interest expense, net(1)



(5,907)




(8,924)












(9,353)




(22,238)









Convertible senior notes interest(4)



(2,013)















(3,757)












Adjustments to derivative instruments recorded in interest expense(1)



2,553




1,179












2,686




6,787









Amortization of debt financing costs(1)



221




905












535




1,705









Provision for income taxes, net of changes in deferred taxes



(1,730)




(910)












(4,602)




(2,362)









Changes in working capital



784




226












(5,332)




6,270









Cash provided by operating activities



51,258




46,180












102,449




103,397









Changes in working capital



(784)




(226)












5,332




(6,270)









Maintenance capital expenditures



(1,981)




(1,457)












(2,906)




(3,741)









Free cash flow



48,493




44,497




3,996




9.0




104,875




93,386




11,489




12.3

(1)

Interest expense, net, includes adjustments to derivative instruments and non-cash amortization of deferred financing fees.

 

(2)

Corporate allocation expense, intercompany fees and the tax effect have been excluded from the above table as they are eliminated on consolidation.

 

(3)

Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses.

 

(4)

Represents the cash interest expense reclassified from MIC Corporate related to the 2.00% Convertible Senior Notes due October 2023, proceeds of which were used to pay down a portion of Atlantic Aviation's credit facility in October 2016.

 

Contracted Power




Quarter Ended
June 30,


Change
Favorable/
(Unfavorable)


Six Months Ended
June 30,


Change
Favorable/
(Unfavorable)



2017


2016


2017


2016



$


$


$


%


$


$


$


%



($ In Thousands) (Unaudited)

Product revenue



40,166




38,300




1,866




4.9




68,236




68,479




(243)




(0.4)


Cost of product sales



5,498




5,794




296




5.1




10,357




10,151




(206)




(2.0)


Selling, general and administrative expenses



6,244




6,547




303




4.6




11,409




12,507




1,098




8.8


Depreciation and amortization



14,861




13,847




(1,014)




(7.3)




30,201




27,693




(2,508)




(9.1)


Operating income



13,563




12,112




1,451




12.0




16,269




18,128




(1,859)




(10.3)


Interest expense, net(1)



(8,767)




(11,002)




2,235




20.3




(14,150)




(28,850)




14,700




51.0


Other income, net



1,341




3




1,338




NM




2,106




308




1,798




NM


(Provision) benefit for income taxes



(1,845)




(1,917)




72




3.8




(1,872)




387




(2,259)




NM


Net income (loss)(2)



4,292




(804)




5,096




NM




2,353




(10,027)




12,380




123.5


Less: net income (loss) attributable to noncontrolling interest



16




1,889




1,873




99.2




(3,333)




(349)




2,984




NM


Net income (loss) attributable to MIC(2)



4,276




(2,693)




6,969




NM




5,686




(9,678)




15,364




158.8


Reconciliation of net income (loss) to EBITDA excluding non-cash items and a reconciliation of cash provided by operating activities to Free Cash Flow:

































Net income (loss)(2)



4,292




(804)












2,353




(10,027)










Interest expense, net(1)



8,767




11,002












14,150




28,850










Provision (benefit) for income taxes



1,845




1,917












1,872




(387)










Depreciation and amortization



14,861




13,847












30,201




27,693










Other non-cash income, net (3)



(2,232)




(1,945)












(4,256)




(3,965)










EBITDA excluding non-cash items



27,533




24,017




3,516




14.6




44,320




42,164




2,156




5.1


EBITDA excluding non-cash items



27,533




24,017












44,320




42,164










Interest expense, net(1)



(8,767)




(11,002)












(14,150)




(28,850)










Adjustments to derivative instruments recorded in interest expense(1)



1,474




4,504












(360)




15,772










Amortization of debt financing costs(1)



379




354












758




737










Provision/benefit for income taxes, net of changes in deferred taxes



85




(2)












(3)




(9)










Changes in working capital



(8,003)




(5,470)












(7,861)




(2,858)










Cash provided by operating activities



12,701




12,401












22,704




26,956










Changes in working capital



8,003




5,470












7,861




2,858










Maintenance capital expenditures

















(22)













Free cash flow



20,704




17,871




2,833




15.9




30,543




29,814




729




2.4


NM — Not meaningful



(1)

Interest expense, net, includes adjustments to derivative instruments and non-cash amortization of deferred financing fees.

 

(2)

Corporate allocation expense, intercompany fees and the tax effect have been excluded from the above table as they are eliminated on consolidation.

 

(3)

Other non-cash income, net, primarily includes amortization of tolling liabilities. See "Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items, Free Cash Flow and Proportionately Combined Metrics" above for further discussion.

 

MIC Hawaii




Quarter Ended
June 30,


Change
Favorable/
(Unfavorable)


Six Months Ended
June 30,


Change
Favorable/
(Unfavorable)



2017


2016


2017


2016



$


$


$


%


$


$


$


%



($ In Thousands) (Unaudited)

Product revenue



53,779




53,058




721




1.4




113,362




107,025




6,337




5.9


Service revenue



12,193







12,193




NM




25,650







25,650




NM


Total revenue



65,972




53,058




12,914




24.3




139,012




107,025




31,987




29.9


Cost of product sales (exclusive of depreciation and amortization of intangibles shown separately below)



34,751




29,224




(5,527)




(18.9)




77,117




57,927




(19,190)




(33.1)


Cost of services (exclusive of depreciation and amortization of intangibles shown separately below)



10,944







(10,944)




NM




21,884







(21,884)




NM


Cost of revenue – total



45,695




29,224




(16,471)




(56.4)




99,001




57,927




(41,074)




(70.9)


Gross margin



20,277




23,834




(3,557)




(14.9)




40,011




49,098




(9,087)




(18.5)


Selling, general and administrative expenses



6,770




4,434




(2,336)




(52.7)




12,855




9,690




(3,165)




(32.7)


Depreciation and amortization



3,730




2,544




(1,186)




(46.6)




7,211




4,894




(2,317)




(47.3)


Operating income



9,777




16,856




(7,079)




(42.0)




19,945




34,514




(14,569)




(42.2)


Interest expense, net(1)



(2,207)




(2,229)




22




1.0




(3,918)




(4,653)




735




15.8


Other expense, net



(36)




(147)




111




75.5




(241)




(401)




160




39.9


Provision for income taxes



(2,563)




(5,706)




3,143




55.1




(5,942)




(11,617)




5,675




48.9


Net income(2)



4,971




8,774




(3,803)




(43.3)




9,844




17,843




(7,999)




(44.8)


Less: net loss attributable to noncontrolling interests



(11)







11




NM




(39)







39




NM


Net income attributable to MIC(2)



4,982




8,774




(3,792)




(43.2)




9,883




17,843




(7,960)




(44.6)


Reconciliation of net income to EBITDA excluding non-cash items and a reconciliation of cash provided by operating activities to Free Cash Flow:

































Net income(2)



4,971




8,774












9,844




17,843










Interest expense, net(1)



2,207




2,229












3,918




4,653










Provision for income taxes



2,563




5,706












5,942




11,617










Depreciation and amortization



3,730




2,544












7,211




4,894










Pension expense(3)



272




349












545




699










Other non-cash expense (income),
net(4)



897




(3,654)












6,468




(6,406)










EBITDA excluding non-cash items



14,640




15,948




(1,308)




(8.2)




33,928




33,300




628




1.9


EBITDA excluding non-cash items



14,640




15,948












33,928




33,300










Interest expense, net(1)



(2,207)




(2,229)












(3,918)




(4,653)










Adjustments to derivative instruments recorded in interest expense(1)



316




637












90




756










Amortization of debt financing
costs(1)



99




88












204




752










Provision for income taxes, net of changes in deferred taxes



(2,041)




(2,129)












(3,492)




(5,146)










Changes in working capital



(1,837)




4,011












(10,317)




6,948










Cash provided by operating activities



8,970




16,326












16,495




31,957










Changes in working capital



1,837




(4,011)












10,317




(6,948)










Maintenance capital expenditures



(1,512)




(1,441)












(2,581)




(3,273)










Free cash flow



9,295




10,874




(1,579)




(14.5)




24,231




21,736




2,495




11.5


 

NM — Not meaningful



(1)

Interest expense, net, includes adjustments to derivative instruments related to interest rate swaps and non-cash amortization of deferred financing fees. For the six months ended June 30, 2016, interest expense also included a non-cash write-off of deferred financing fees related to the February 2016 refinancing at Hawaii Gas.

 

(2)

Corporate allocation expense, intercompany fees and the tax effect have been excluded from the above table as they are eliminated on consideration.

 

(3)

Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses.

 

(4)

Other non-cash expense (income), net, primarily includes non-cash adjustments related to unrealized gains (losses) on commodity hedges. See "Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items, Free Cash Flow and Proportionately Combined Metrics" above for further discussion.

 

 

Corporate and Other




Quarter Ended
June 30,


Change
Favorable/
(Unfavorable)


Six Months Ended
June 30,


Change
Favorable/
(Unfavorable)



2017


2016


2017


2016



$


$


$


%


$


$


$


%



($ In Thousands) (Unaudited)

Fees to Manager-related party



18,433




16,392




(2,041)




(12.5)




36,656




31,188




(5,468)




(17.5)


Selling, general and administrative expenses(1)



11,092




3,451




(7,641)




NM




15,087




4,906




(10,181)




NM


Operating loss



(29,525)




(19,843)




(9,682)




(48.8)




(51,743)




(36,094)




(15,649)




(43.4)


Interest expense, net(2)



(6,671)




(3,558)




(3,113)




(87.5)




(12,822)




(6,963)




(5,859)




(84.1)


Benefit for income taxes



13,537




9,785




3,752




38.3




25,968




19,196




6,772




35.3


Net loss(3)



(22,659)




(13,616)




(9,043)




(66.4)




(38,597)




(23,861)




(14,736)




(61.8)


Reconciliation of net loss to EBITDA excluding non-cash items and a reconciliation of cash used in operating activities to Free Cash Flow:

































Net loss(3)



(22,659)




(13,616)












(38,597)




(23,861)










Interest expense, net(2)



6,671




3,558












12,822




6,963










Benefit for income taxes



(13,537)




(9,785)












(25,968)




(19,196)










Fees to Manager-related party



18,433




16,392












36,656




31,188










Other non-cash expense



187




187












375




375










EBITDA excluding non-cash items



(10,905)




(3,264)




(7,641)




NM




(14,712)




(4,531)




(10,181)




NM


EBITDA excluding non-cash items



(10,905)




(3,264)












(14,712)




(4,531)










Interest expense, net(2)



(6,671)




(3,558)












(12,822)




(6,963)










Convertible senior notes interest(4)



2,013















3,757













Amortization of debt financing
costs(2)



988




612












1,981




1,224










Amortization of debt discount(2)



876















1,495













Benefit for income taxes, net of changes in deferred taxes



2,223




2,316












5,171




5,516










Changes in working capital



4,677




380












(3,757)




(5,931)










Cash used in operating activities



(6,799)




(3,514)












(18,887)




(10,685)










Changes in working capital



(4,677)




(380)












3,757




5,931










Free cash flow



(11,476)




(3,894)




(7,582)




(194.7)




(15,130)




(4,754)




(10,376)




NM


 

NM — Not meaningful



(1)

For the quarter and six months ended June 30, 2017, selling, general and administrative expenses included $3.1 million and $5.4 million, respectively, of costs related to the implementation of a shared service initiative. Selling, general and administrative expenses for the quarter and six months ended June 30, 2017 also includes $4.9 million of costs incurred in connection with the evaluation of various investment and acquisition opportunities.

 

(2)

Interest expense, net, included non-cash amortization of deferred financing fees and amortization of debt discount related to the 2.00% Convertible Senior Notes due October 2023.

 

(3)

Corporate allocation expense, intercompany fees and the tax effect have been excluded from the above table as they are eliminated on consolidation.

 

(4)

Represents the cash interest expense reclassified to Atlantic Aviation related to the 2.00% Convertible Senior Notes due October 2023, proceeds of which were used to pay down a portion of Atlantic Aviation's credit facility in October 2016.


 

MACQUARIE INFRASTRUCTURE CORPORATION

RECONCILIATION OF NET INCOME (LOSS) TO EBITDA

EXCLUDING NON-CASH ITEMS AND A RECONCILIATION FROM CASH PROVIDED BY/(USED

IN) OPERATING ACTIVITIES TO PROPORTIONATELY COMBINED FREE CASH FLOW




For the Quarter Ended June 30, 2017









IMTT


Atlantic
Aviation


Contracted
Power(1)


MIC
Hawaii(1)


MIC
Corporate


Proportionately
Combined(2)




Contracted Power
100%


MIC
Hawaii
100%



($ in Thousands) (Unaudited)







Net income (loss)



22,613




16,808




4,107




4,973




(22,659)




25,842








4,292




4,971

Interest expense, net(3)



11,763




5,907




7,789




2,204




6,671




34,334








8,767




2,207

Provision (benefit) for income
taxes



15,716




11,077




1,845




2,563




(13,537)




17,664








1,845




2,563

Depreciation and amortization of intangibles



30,795




23,575




12,980




3,726







71,076








14,861




3,730

Fees to Manager-related party















18,433




18,433











Pension expense(4)



1,350




5







272







1,627











272

Other non-cash expense (income), net(5)



69




(22)




(2,232)




898




187




(1,100)








(2,232)




897

EBITDA excluding non-cash
items



82,306




57,350




24,489




14,636




(10,905)




167,876








27,533




14,640

EBITDA excluding non-cash
items



82,306




57,350




24,489




14,636




(10,905)




167,876








27,533




14,640

Interest expense, net(3)



(11,763)




(5,907)




(7,789)




(2,204)




(6,671)




(34,334)








(8,767)




(2,207)

Convertible senior notes
interest(6)






(2,013)










2,013














Adjustments to derivative instruments recorded in interest expense, net(3)



1,587




2,553




1,312




315







5,767








1,474




316

Amortization of debt financing charges(3)



412




221




365




99




988




2,085








379




99

Amortization of debt
discount(3)















876




876











Provision/benefit for income taxes, net of changes in deferred taxes



(1,155)




(1,730)




85




(2,041)




2,223




(2,618)








85




(2,041)

Changes in working capital



(16,881)




784




(7,392)




(1,817)




4,677




(20,629)








(8,003)




(1,837)

Cash provided by (used in) operating activities



54,506




51,258




11,070




8,988




(6,799)




119,023








12,701




8,970

Changes in working capital



16,881




(784)




7,392




1,817




(4,677)




20,629








8,003




1,837

Maintenance capital expenditures



(2,987)




(1,981)







(1,512)







(6,480)











(1,512)

Proportionately Combined Free Cash Flow



68,400




48,493




18,462




9,293




(11,476)




133,172








20,704




9,295

 



For the Quarter Ended June 30, 2016







IMTT


Atlantic
Aviation


Contracted
Power(1)


MIC
Hawaii


MIC
Corporate


Proportionately
Combined(2)




Contracted
Power
100%



($ in Thousands) (Unaudited)





Net income (loss)



14,978




11,749




(153)




8,774




(13,616)




21,732








(804)

Interest expense, net(3)



13,764




8,924




9,661




2,229




3,558




38,136








11,002

Provision (benefit) for income taxes



10,409




7,973




1,915




5,706




(9,785)




16,218








1,917

Depreciation and amortization of intangibles



35,282




24,702




11,973




2,544







74,501








13,847

Fees to Manager-related party















16,392




16,392








Pension expense(4)



1,831




17







349







2,197








Other non-cash expense (income), net(5)



115




339




(1,945)




(3,654)




187




(4,958)








(1,945)

EBITDA excluding non-cash items



76,379




53,704




21,451




15,948




(3,264)




164,218








24,017

EBITDA excluding non-cash items



76,379




53,704




21,451




15,948




(3,264)




164,218








24,017

Interest expense, net(3)



(13,764)




(8,924)




(9,661)




(2,229)




(3,558)




(38,136)








(11,002)

Adjustments to derivative instruments recorded in interest expense, net(3)



3,546




1,179




4,019




637







9,381








4,504

Amortization of debt financing charges(3)



411




905




340




88




612




2,356








354

Provision/benefit for income taxes, net of changes in deferred taxes



(937)




(910)




(2)




(2,129)




2,316




(1,662)








(2)

Changes in working capital



(7,676)




226




(5,446)




4,011




380




(8,505)








(5,470)

Cash provided by (used in) operating activities



57,959




46,180




10,701




16,326




(3,514)




127,652








12,401

Changes in working capital



7,676




(226)




5,446




(4,011)




(380)




8,505








5,470

Maintenance capital
expenditures



(6,942)




(1,457)







(1,441)







(9,840)








Proportionately Combined Free
Cash Flow



58,693




44,497




16,147




10,874




(3,894)




126,317








17,871

 



For the Six Months Ended June 30, 2017









IMTT


Atlantic
Aviation


Contracted
Power(1)


MIC
Hawaii(1)


MIC
Corporate


Proportionately
Combined(2)




Contracted
Power
100%


MIC
Hawaii
100%



($ in Thousands) (Unaudited)







Net income (loss)



46,429




38,634




2,153




9,848




(38,597)




58,467








2,353




9,844

Interest expense, net(3)



20,520




9,353




12,579




3,914




12,822




59,188








14,150




3,918

Provision (benefit) for income
taxes



32,264




25,627




1,872




5,942




(25,968)




39,737








1,872




5,942

Depreciation and amortization of intangibles



62,315




48,608




26,441




7,202







144,566








30,201




7,211

Fees to Manager-related party















36,656




36,656











Pension expense(4)



3,766




10







545







4,321











545

Other non-cash expense (income), net(5)



137




40




(4,235)




6,469




375




2,786








(4,256)




6,468

EBITDA excluding non-cash
items



165,431




122,272




38,810




33,920




(14,712)




345,721








44,320




33,928

EBITDA excluding non-cash
items



165,431




122,272




38,810




33,920




(14,712)




345,721








44,320




33,928

Interest expense, net(3)



(20,520)




(9,353)




(12,579)




(3,914)




(12,822)




(59,188)








(14,150)




(3,918)

Convertible senior notes
interest(6)






(3,757)










3,757














Adjustments to derivative instruments recorded in interest expense, net(3)



267




2,686




(302)




89







2,740








(360)




90

Amortization of debt financing charges(3)



823




535




729




204




1,981




4,272








758




204

Amortization of debt discount(3)















1,495




1,495











Provision/benefit for income taxes, net of changes in deferred taxes



(3,413)




(4,602)




(3)




(3,492)




5,171




(6,339)








(3)




(3,492)

Changes in working capital



(16,145)




(5,332)




(7,540)




(10,299)




(3,757)




(43,073)








(7,861)




(10,317)

Cash provided by (used in) operating activities



126,443




102,449




19,115




16,508




(18,887)




245,628








22,704




16,495

Changes in working capital



16,145




5,332




7,540




10,299




3,757




43,073








7,861




10,317

Maintenance capital expenditures



(5,447)




(2,906)




(22)




(2,581)







(10,956)








(22)




(2,581)

Proportionately Combined Free Cash Flow



137,141




104,875




26,633




24,226




(15,130)




277,745








30,543




24,231

 



For the Six Months Ended June 30, 2016







IMTT(7)


Atlantic
Aviation


Contracted
Power(1)


MIC
Hawaii


MIC
Corporate


Proportionately Combined(2)




Contracted
Power
100%



($ in Thousands) (Unaudited)





Net income (loss)



31,195




26,107




(8,593)




17,843




(23,861)




42,691








(10,027)


Interest expense, net(3)



33,635




22,238




25,449




4,653




6,963




92,938








28,850


Provision (benefit) for income taxes



21,638




17,715




(389)




11,617




(19,196)




31,385








(387)


Depreciation and amortization of intangibles



67,903




46,893




23,945




4,894







143,635








27,693


Fees to Manager-related party









 

 







31,188




31,188









Pension expense(4)



3,662




34







699







4,395









Other non-cash expense (income), net(5)



558




248




(3,946)




(6,406)




375




(9,171)








(3,965)


EBITDA excluding non-cash items



158,591




113,235




36,466




33,300




(4,531)




337,061








42,164


EBITDA excluding non-cash items



158,591




113,235




36,466




33,300




(4,531)




337,061








42,164


Interest expense, net(3)



(33,635)




(22,238)




(25,449)




(4,653)




(6,963)




(92,938)








(28,850)


Adjustments to derivative instruments recorded in interest expense, net(3)



13,156




6,787




14,090




756







34,789








15,772


Amortization of debt financing charges(3)



831




1,705




709




752




1,224




5,221








737


Provision/benefit for income taxes, net of changes in deferred taxes



(2,167)




(2,362)




(9)




(5,146)




5,516




(4,168)








(9)


Changes in working capital



(10,483)




6,270




(3,062)




6,948




(5,931)




(6,258)








(2,858)


Cash provided by (used in) operating activities



126,293




103,397




22,745




31,957




(10,685)




273,707








26,956


Changes in working capital



10,483




(6,270)




3,062




(6,948)




5,931




6,258








2,858


Maintenance capital
expenditures



(13,239)




(3,741)







(3,273)







(20,253)









Proportionately Combined Free Cash Flow



123,537




93,386




25,807




21,736




(4,754)




259,712








29,814


 

(1)

Represents MIC's proportionately combined interests in the businesses comprising this reportable segment.

 

(2)

The sum of the amounts attributable to MIC in proportion to its ownership.

 

(3)

Interest expense, net, includes adjustments to derivative instruments, non-cash amortization of deferred financing charges and non-cash amortization of debt discount related to the 2.00% Convertible Senior Notes due October 2023. For the six months ended June 30, 2016, interest expense, net, also included a non-cash write-off of deferred financing fees related to the February 2016 refinancing at Hawaii Gas.

 

(4)

Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses.

 

(5)

Other non-cash expense (income), net, primarily includes non-cash amortization of tolling liabilities, unrealized gains (losses) on commodity hedges and non-cash gains (losses) related to disposal of assets. See "Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items, Free Cash Flow and Proportionately Combined Metrics" above for further discussion.

 

(6)

Represents the cash interest expense reclassified from MIC Corporate to Atlantic Aviation related to the 2.00% Convertible Senior Notes due October 2023, proceeds of which were used to pay down a portion of Atlantic Aviation's credit facility in October 2016.

 

(7)

On March 31, 2016, IMTT acquired the remaining 33.3% interest in its Quebec terminal that it did not previously own. IMTT was previously providing management services to this terminal and no operational changes are expected. Prior to the acquisition, IMTT consolidated the results of the Quebec terminal in its financial statements and adjusted for the portion that it did not own through noncontrolling interests. Since the IMTT Acquisition in July 2014 and prior to the acquisition of the noncontrolling interest, MIC reported IMTT's EBITDA excluding non-cash items and Free Cash Flow including the 33.3% portion of the Quebec terminal. The contribution from the minority interest was not significant. Therefore, there were no changes to our historical EBITDA excluding non-cash items, Free Cash Flow or results generally as a function of acquiring this noncontrolling interest.

 

View original content:http://www.prnewswire.com/news-releases/mic-reports-second-quarter-2017-financial-results-announces-acquisition-and-investment-increases-quarterly-cash-dividend-300498692.html

SOURCE Macquarie Infrastructure Corporation

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