MIC Reports 2017 Financial Results, Increase In Quarterly Dividend

|PR Newswire|About: MIC

- Fourth Quarter 2017 cash dividend of $1.44 per share authorized

- Tax reform extends federal income tax shield to 2020, including expected capital deployment tax shield extended to 2022

- Guidance for 2018 dividend of $1.00 per share, per quarter, initiated

PR Newswire

NEW YORK, Feb. 21, 2018 /PRNewswire/ -- Macquarie Infrastructure Corporation (NYSE: MIC) today reported financial results for full year 2017 that included growth investments of more than $625.0 million and a cash dividend of $1.44 per share for the fourth quarter.

"The performance of our businesses in the fourth quarter and the full year 2017 resulted in year over year growth in cash generation of 8.2%, including the impact of a 2.9% increase in the weighted number of shares outstanding," said Christopher Frost, chief executive officer of MIC. "Effective deployment of a substantial amount of growth capital offset a slightly weaker than anticipated rate of organic growth. With the increase in cash generation, we are pleased to announce that the MIC board has approved a cash dividend for the fourth quarter that raises the total distribution for 2017 to $5.56 per share, consistent with our guidance for a year over year increase of 10%."

"While our results for 2017 were solid, in an effort to improve MIC's overall mix of business we are undertaking a review of strategic options available to us with respect to the Bayonne Energy Center, OMI Environmental Solutions and other smaller businesses in our portfolio," Frost noted. "Having largely completed the development of the Bayonne Energy Center as envisioned when we acquired the business in 2015, we believe now may be an opportune time to monetize a portion of it. To address changing demand drivers for certain liquid products, as we have in the past, we intend to repurpose certain of the assets of our bulk liquid terminals business as well. We believe these actions will position MIC to continue to deliver attractive total shareholder returns."

"In addition, we have made the decision to reduce our 2018 dividend in favor of internally funding the repurposing of the assets at International-Matex Tank Terminals and to take advantage of the incentives to invest in growth projects that are a part of recent tax reform," Frost added. "We believe that our guidance for a dividend of $1.00 per share, per quarter, in 2018 strikes a balance between continuing to return the majority of our Free Cash Flow to shareholders in the form of a dividend and strengthening our balance sheet in support of future dividend growth."

MIC reported fourth quarter and full year 2017 net income of $361.3 million and $456.1 million, respectively, an increase of 408% and 195% compared with $71.1 million and $154.9 million in the comparable periods in 2016. The increases in net income were primarily the result of changes in U.S. tax law that went into effect with the signing of the Tax Cuts and Jobs Act of 2017 ("Tax Act") in December of 2017. A reduction in the Company's net Deferred Tax Liability to reflect a reduction in the corporate federal income tax rate constituted the largest portion of the benefit.

Net income before taxes decreased to $61.8 million and $222.0 million, respectively, for the fourth quarter and full year in 2017, compared with $82.0 million and $226.1 million in comparable periods in 2016. The decrease in pre-tax net income reflects primarily higher interest expense in the fourth quarter and a decrease in other income related to the absence of insurance recoveries in 2017 in the full year period.

The Company reported generation of cash from operating activities of $131.8 million and $529.5 million in the quarter and full-year periods ended December 31, 2017, respectively, compared with $123.3 million and $560.3 million in the comparable periods in 2016. Cash from operating activities declined primarily as a result of changes in working capital related to fluctuations in the price of jet fuel and gas sold by certain of MIC's businesses.

MIC produced $135.5 million and $568.0 million of Adjusted Free Cash Flow in the fourth quarter and full year periods in 2017, respectively, up from $118.6 million and $510.2 million in the comparable periods in 2016. The aggregate increase in Adjusted Free Cash Flow of 14.2% and 11.3% for the quarter and full-year, respectively, was partially offset by an increase in the weighted average number of shares of MIC outstanding.

Fourth Quarter 2017 Dividend

The MIC board of directors has authorized a cash dividend of $1.44 per share for the fourth quarter of 2017. The dividend will be payable March 8, 2018 to shareholders of record on March 5, 2018. Including the dividend of $1.44, MIC will have distributed approximately 81.4% of the Adjusted Free Cash Flow generated during 2017 for a dividend coverage ratio of approximately 1.2 times.

Outlook

Taking into consideration the planned repurposing of certain of the assets of International-Matex Tank Terminals ("IMTT"), MIC is forecasting generation of consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA") excluding non-cash items in a range of between $690.0 million and $720.0 million in 2018. The year over year decline reflects a decrease in EBITDA generated by IMTT, offset by continued increases at Atlantic Aviation, Contracted Power and MIC Hawaii. Atlantic Aviation is expected to benefit from ongoing increases in flight activity while Contracted Power is expected to benefit from the completion of the BEC II expansion project.

With respect to the Company's preliminary outlook for EBITDA excluding non-cash items in 2018, a reconciliation to net income (loss), the most comparable GAAP measure, is not available without unreasonable effort due to the Company's limited visibility into and inability to make accurate projections and estimates of items including management fees, hedging agreements, depreciation and any (benefit) provision for income taxes. These items may vary greatly from year to year and could significantly impact MIC's results as reported in accordance with GAAP.

MIC expects Free Cash Flow produced in 2018 to decline by between 8% and 10% versus 2017 including the impact of expected share issuance. The Company's forecast reflects primarily a reduction in cash generation by IMTT, increased interest expense and the near-term impact of tax reform. IMTT is forecast to generate a reduced amount of cash in 2018 as consequence of global shifts in refined petroleum product production and consumption that have reduced demand for residual and heavy oil and trading activity related to those products. IMTT's cash generating capacity will be lower while certain of its tanks are out of service for cleaning and repurposing.

Offsetting a portion of the anticipated decline in Free Cash Flow are contributions from the more than $625.0 million deployed in growth investments in 2017, together with the partial year impact of the pending Hawaii Gas rate case and potential capital deployment in 2018. The primary components of the 2017 capital deployment activity were:

  • Investments by Atlantic Aviation of approximately $230.0 million including acquisitions of FBOs in Oxford, CT and Opa-Locka, FL totaling $155.0 million;
  • Investments by IMTT of approximately $220.0 million including the acquisition of Epic Midstream Terminals for $171.5 million;
  • Investments within Contracted Power of approximately $140.0 million including construction of the Bayonne Energy Center Phase II ("BEC II") and related projects of approximately $120.0 million; and
  • Investments within MIC Hawaii of approximately $25.0 million.

MIC believes that the contribution to EBITDA from these investments will be approximately $60.0 million on an annualized basis.

"We believe that MIC's performance will continue to reflect the generally strong demand for the products and services its businesses provide," Frost said. "While we foresee a temporary downturn in the contribution from IMTT tied primarily to reduced demand for storage and handling of residual and heavy oil, we have a clear repurposing strategy with respect to capitalizing on our preeminent locations in the Lower Mississippi River and New York Harbor markets and taking advantage of positive demand trends in other products and segments of the bulk liquid marketplace."

The Company anticipates deploying approximately $350.0 million of growth capital per year in each of the next several years. Approximately half of the expected deployments in 2018 relate to residual expenditures for initiatives including previously granted lease extensions at Atlantic Aviation and the completion of BEC II. MIC anticipates funding the entirety of its planned 2018 deployments using internally generated resources including capital retained as a consequence of the dividend reduction, and potential proceeds from sales of non-core assets.

"We remain confident in our prospects and our ability to drive value for our shareholders. We have the financial and human capital to deploy in the construction or acquisition of quality, cash generative opportunities in each of our segments and look forward to making the most of favorable trends in those in 2018 and beyond," said Frost.

2017 Segment Cash Generation

MIC's fourth quarter and full-year results reflected continued strong performance by its airport services business, Atlantic Aviation, including contributions from two acquisitions completed in 2017. In May, Atlantic Aviation acquired the fixed base operator at Waterbury-Oxford Airport in Oxford, CT and acquired a fixed base operator at Miami Opa-Locka airport in Opa-Locka, FL in September. Excluding interest rate swap breakage fees and the premium paid on an interest rate cap associated with the refinancing of the business in 2016, Free Cash Flow generated by Atlantic Aviation decreased by 2.3% in the fourth quarter and increased 9.5% for the full year versus the prior comparable periods. The period over period decrease in Free Cash Flow generation in the fourth quarter was attributable in part to the timing of certain state income tax payments. Atlantic Aviation's performance was underpinned by growth in general aviation flight activity in the U.S. of approximately 3.6% in 2017.

The Company's bulk liquid terminals business, IMTT, benefitted from an acquisition of a portfolio of seven terminals in August of 2017 and generated increases in Free Cash Flow of 7.6% and 9.4%, respectively, in the fourth quarter and full year periods versus the comparable periods in 2016. Contributions from the acquired terminals helped offset non-renewal of a small number of primarily residual and heavy oil contracts late in the year and a full-year loss at IMTT subsidiary OMI Environmental Services, Inc. ("OMI"). OMI generates revenue primarily from oil spill clean-up and tank cleaning and inspection activities.

MIC's Contracted Power segment includes a thermal facility in Bayonne, NJ, the Bayonne Energy Center ("BEC"), and a portfolio of renewable facilities primarily in the southwest U.S. Together, these produced growth in segment Free Cash Flow of 15.7% in the fourth quarter and 3.4% for the full year versus the prior comparable periods. The increases in cash generation were the result of a full-year contribution from the acquisition of a renewable facility in 2016 and additional tariff-based services completed in 2017, together with receipt of development profits related to the sale of wind projects during the year. The increases were offset by higher interest expense and by mild weather in the Northeast that reduced demand for power from BEC as well as unplanned outages that had an adverse impact on portions of the renewables portfolio.

MIC Hawaii comprises Hawaii Gas, a mechanical contractor and several renewable power facilities, all located in Hawaii. Free Cash Flow produced by the segment increased by 8.0% in the fourth quarter and by 6.6% for the full year compared with 2016. The increases were attributable to a reduction in maintenance capital expenditures and the absence of a cash pension contribution, partially offset by negative Free Cash Flow generation by the mechanical contracting business reflecting primarily cost overruns on projects with fixed revenue.

MIC's Corporate and Other segment comprises primarily interest expense on holding company level debt, investments in various development platforms and costs not otherwise covered by the fee paid to MIC's external manager. The segment recorded positive Free Cash Flow in the fourth quarter of $2.4 million compared with negative Free Cash Flow of $5.2 million in the prior comparable quarter primarily as a result of a current federal income tax benefit that reflects tax sharing payments made to MIC by its subsidiaries. For the full year 2017, the Corporate and Other segment recorded negative Free Cash Flow of $21.0 million compared with negative Free Cash Flow of $15.3 million in 2016 as a result of increased costs related to both acquisitions and the implementation of the Company's shared services center.

"Each of our larger businesses produced solid growth in cash generation including the impact of capital deployed in 2017," noted Frost. "Portfolio wide, aggregate same store growth in Free Cash Flow was approximately 3% for the year with capital deployment contributing the balance. The deployment of growth capital relatively late in the year and in some case into projects that will not be in service until this year means that those deployments will have a larger impact on our 2018 results."

Impact of Tax Reform

At year-end 2016, MIC had gross Net Operating Loss ("NOL") carryforwards of approximately $400.0 million. At year-end 2017, MIC's gross NOL was approximately $350.0 million with $50.0 million having been used to offset current federal income taxes of approximately $63.0 million. As a consequence of the recent reforms to the U.S. Tax Code and their impact on the utilization of NOLs, MIC does not foresee having a material federal income tax liability prior to 2020.

The Tax Act includes a provision that allows for immediate expensing, or bonus depreciation, of investments in qualifying capital assets. MIC expects a substantial portion of its approximately $350.0 million per year of growth capital deployments over the 2018 – 2021 time period will be into qualifying assets. If the Company is successful in these efforts, it expects they will shield it from any material federal income tax liability until 2022.

The enactment of the Tax Act has an immediate impact on two of MIC's businesses. Although the regulated portion of MIC's Hawaii Gas business is expected to realize a year over year increase in revenue as a result of the pending rate case, any increase will be partially offset as a consequence of the business collecting a smaller amount of federal taxes. The revenue reduction will be offset by a corresponding decrease in Hawaii Gas' standalone federal income tax liability. Tax reform should have a positive impact on the unregulated portion of MIC Hawaii.

Second, IMTT has been capitalized in part using tax exempt bonds. The indenture agreements related to those bonds provide that the bondholder must be compensated for a reduction in federal tax rates. As a result, the interest on the bonds will increase by approximately 0.6% to compensate the bondholders for the reduced tax advantage under the new federal income tax regime.

 

Summary Financial Information


















Quarter Ended
December 31,


Change
Favorable/(Unfavorable)


Year Ended
December 31,


Change
Favorable/(Unfavorable)



2017


2016


$


%


2017


2016


$


%



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

GAAP Metrics

































Net income


$

361,276



$

71,131




290,145




NM



$

456,112



$

154,869




301,243




194.5


Weighted average number of shares outstanding: basic



84,572,725




81,853,027




2,719,698




3.3




83,204,404




80,892,654




2,311,750




2.9


Net income per share attributable to MIC


$

4.13



$

0.89




3.24




NM



$

5.42



$

1.93




3.49




180.8


Cash provided by operating activities



131,790




123,332




8,458




6.9




529,459




560,320




(30,861)




(5.5)


MIC Non-GAAP Metrics

































EBITDA excluding non-cash items(1)(2)


$

177,980



$

166,006




11,974




7.2



$

711,903



$

695,588




16,315




2.3


Shared service implementation costs(3)



1,655







1,655




NM




8,502







8,502




NM


Investment and acquisition costs(3)



1,381







1,381




NM




9,254







9,254




NM


Adjusted EBITDA excluding non-cash items(2)(3)


$

181,016



$

166,006




15,010




9.0



$

729,659



$

695,588




34,071




4.9


Cash interest(4)


$

(28,106)



$

(25,922)




(2,184)




(8.4)



$

(107,541)



$

(107,930)




389




0.4


Cash taxes



(2,667)




(2,027)




(640)




(31.6)




(11,160)




(7,310)




(3,850)




(52.7)


Cash pension contribution






(3,500)




3,500




100.0







(3,500)




3,500




100.0


Maintenance capital expenditures(5)



(12,140)




(13,478)




1,338




9.9




(35,202)




(58,203)




23,001




39.5


Noncontrolling interest(6)



(2,583)




(2,446)




(137)




(5.6)




(7,806)




(8,400)




594




7.1


Adjusted Free Cash Flow(3)(4)


$

135,520



$

118,633




16,887




14.2



$

567,950



$

510,245




57,705




11.3


______________________

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) For the quarter and year ended December 31, 2016, EBITDA excluding non-cash items included $1.0 million and $16.5 million, respectively, of insurance recoveries related to damaged docks at IMTT.

(3) For the quarter and year ended December 31, 2017, Adjusted EBITDA excluding non-cash items and Adjusted Free Cash Flow exclude costs relating to implementation of our shared services initiative and costs relating to certain investment and acquisition activities.

(4) Cash interest is calculated as interest expense, net, 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. For purposes of calculating Adjusted Free Cash Flow, for the quarter and year ended December 31, 2016, cash interest excludes $17.8 million for the payment of interest rate swap breakage fees and $8.6 million for the payment of interest rate cap premium.

(5) For the year ended December 31, 2016, maintenance capital expenditures included $13.9 million associated with the rebuilding of damaged docks, the majority of which were insured losses, at IMTT.

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

 

Conference Call and Webcast

When: Management has scheduled a conference call for 8:00 a.m. Eastern Time on Thursday, February 22, 2018 during which it will review and comment on MIC's results for the fourth quarter and full year 2017.

How: To listen to the conference call please 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. Please allow extra time prior to the call to visit the site and download the necessary software to listen to the webcast.

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

Replay: For interested individuals unable to participate in the live conference call, a replay will be available after 2:00 p.m. on February 22, 2018 through midnight on March 1, 2018, at +1(404) 537-3406 or +1(855) 859-2056, Passcode: 9489207. 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 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 reflect the Company's proportionate interest in its wind and solar facilities.

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 Contracted Power 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 proportionate interest in its wind and solar facilities. 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 total 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 total return.

In its Report on Form 10-K, 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.

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 BALANCE SHEETS

($ in Thousands, Except Share Data)








As of December 31,



2017


2016

ASSETS









Current assets:









Cash and cash equivalents


$

47,121



$

44,767


Restricted cash



24,963




16,420


Accounts receivable, less allowance for doubtful accounts of $895 and $1,434, respectively



158,152




124,846


Inventories



36,955




31,461


Prepaid expenses



14,685




14,561


Fair value of derivative instruments



11,965




5,514


Other current assets



13,804




7,099


Total current assets



307,645




244,668


Property, equipment, land and leasehold improvements, net



4,659,614




4,346,536


Investment in unconsolidated business



9,526




8,835


Goodwill



2,068,668




2,024,409


Intangible assets, net



914,098




888,971


Fair value of derivative instruments



24,455




30,781


Other noncurrent assets



24,945




15,053


Total assets


$

8,008,951



$

7,559,253


LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:









Due to Manager – related party


$

5,577



$

6,594


Accounts payable



60,585




69,566


Accrued expenses



89,496




83,734


Current portion of long-term debt



50,835




40,016


Fair value of derivative instruments



1,710




9,297


Other current liabilities



47,762




41,802


Total current liabilities



255,965




251,009


Long-term debt, net of current portion



3,530,311




3,039,966


Deferred income taxes



632,070




896,116


Fair value of derivative instruments



4,668




5,966


Tolling agreements – noncurrent



52,595




60,373


Other noncurrent liabilities



182,639




158,289


Total liabilities



4,658,248




4,411,719


Commitments and contingencies







Stockholders' equity:









Common stock ($0.001 par value; 500,000,000 authorized; 84,733,957 shares issued and outstanding at December 31, 2017 and 82,047,526 shares issued and outstanding at December 31, 2016)


$

85



$

82


Additional paid in capital



1,840,033




2,089,407


Accumulated other comprehensive loss



(29,993)




(28,960)


Retained earnings



1,343,567




892,365


Total stockholders' equity



3,153,692




2,952,894


Noncontrolling interests



197,011




194,640


Total equity



3,350,703




3,147,534


Total liabilities and equity


$

8,008,951



$

7,559,253


 

MACQUARIE INFRASTRUCTURE CORPORATION


CONSOLIDATED STATEMENTS OF OPERATIONS

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




Year Ended December 31,



2017


2016


2015

Revenue












Service revenue


$

1,445,832



$

1,288,562



$

1,288,501

Product revenue



368,881




363,169




350,749

Total revenue



1,814,713




1,651,731




1,639,250

Costs and expenses












Cost of services



624,214




524,423




551,029

Cost of product sales



164,311




142,731




168,954

Selling, general and administrative



331,345




303,033




304,862

Fees to Manager – related party



71,388




68,486




354,959

Depreciation



234,164




226,492




215,243

Amortization of intangibles



68,253




65,425




101,435

Total operating expenses



1,493,675




1,330,590




1,696,482

Operating income (loss)



321,038




321,141




(57,232)

Other income (expense)












Interest income



199




132




55

Interest expense(1)



(110,602)




(116,933)




(123,079)

Other income, net



11,323




21,786




1,288

Net income (loss) before income taxes



221,958




226,126




(178,968)

Benefit (provision) for income taxes



234,154




(71,257)




65,161

Net income (loss)


$

456,112



$

154,869



$

(113,807)

Less: net income (loss) attributable to noncontrolling interests



4,910




(1,512)




(5,270)

Net income (loss) attributable to MIC


$

451,202



$

156,381



$

(108,537)

Basic income (loss) per share attributable to MIC


$

5.42



$

1.93



$

(1.39)

Weighted average number of shares outstanding: basic



83,204,404




80,892,654




77,997,826

Diluted income (loss) per share attributable to MIC


$

5.13



$

1.85



$

(1.39)

Weighted average number of shares outstanding: diluted



91,073,362




82,218,627




77,997,826

Cash dividends declared per share


$

5.56



$

5.05



$

4.46


(1) Interest expense includes gains on derivative instruments of $3.0 million and losses on derivative instruments of $5.0 million and $28.5 million for the years ended December 31, 2017, 2016 and 2015, respectively.

 

MACQUARIE INFRASTRUCTURE CORPORATION


CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in Thousands)




Year Ended December 31,



2017


2016


2015

Operating activities













Net income (loss)


$

456,112



$

154,869



$

(113,807)


Adjustments to reconcile net income (loss) to net cash provided by operating activities:













Depreciation and amortization of property and equipment



234,164




226,492




215,243


Amortization of intangible assets



68,253




65,425




101,435


Amortization of debt financing costs



8,700




21,041




9,075


Amortization of debt discount



3,266




1,007





Adjustments to derivative instruments



(9,010)




(54,549)




(47,208)


Fees to Manager – related party



71,388




68,486




287,139


Deferred taxes



(245,314)




63,947




(58,734)


Pension expense



8,106




8,601




7,300


Other non-cash income, net



(2,463)




(1,370)




(1,047)


Changes in other assets and liabilities, net of acquisitions:













Restricted cash



425




525




722


Accounts receivable



(31,444)




(8,415)




5,418


Inventories



(6,182)




(2,343)




(84)


Prepaid expenses and other current assets



(7,044)




7,794




(6,964)


Due to Manager – related party



(130)




135




(33)


Accounts payable and accrued expenses



(7,073)




4,686




(8,002)


Income taxes payable



464




8,251




(5,926)


Pension contribution






(3,500)





Other, net



(12,759)




(762)




(3,371)


Net cash provided by operating activities



529,459




560,320




381,156


Investing activities













Acquisitions of businesses and investments, net of cash acquired



(209,962)




(69,168)




(266,895)


Purchases of property and equipment



(340,952)




(314,684)




(194,148)


Proceeds from insurance claim



83




11,068





Loan to project developer



(23,341)




(5,000)





Loan repayment from project developer



17,079








Change in restricted cash



(9,295)




(84)




10,559


Other, net



272




1,023




1,668


Net cash used in investing activities



(566,116)




(376,845)




(448,816)


 

MACQUARIE INFRASTRUCTURE CORPORATION


CONSOLIDATED STATEMENTS OF CASH FLOWS – (continued)

($ in Thousands)




Year Ended December 31,



2017


2016


2015

Financing activities













Proceeds from long-term debt


$

931,001



$

1,311,000



$

2,486,569


Payment of long-term debt



(440,950)




(1,476,228)




(2,554,552)


Proceeds from the issuance of shares



6,060




12,623




492,433


Dividends paid to common stockholders



(452,949)




(396,093)




(341,560)


Contributions received from noncontrolling interests



458




15,431




532


Purchase of noncontrolling interest






(9,909)





Distributions paid to noncontrolling interests



(3,936)




(4,630)




(2,546)


Offering and equity raise costs paid



(466)




(1,601)




(16,984)


Debt financing costs paid



(717)




(17,392)




(23,816)


Proceeds from the issuance of convertible senior notes






402,500





Change in restricted cash



397




5,587




5,166


Payment of capital lease obligations



(398)




(2,601)




(2,346)


Net cash provided by (used in) financing activities



38,500




(161,313)




42,896


Effect of exchange rate changes on cash and
cash equivalents



511




211




(856)


Net change in cash and cash equivalents



2,354




22,373




(25,620)


Cash and cash equivalents, beginning of period



44,767




22,394




48,014


Cash and cash equivalents, end of period


$

47,121



$

44,767



$

22,394


Supplemental disclosures of cash flow information













Non-cash investing and financing activities:













Accrued financing costs


$

107



$

3



$

3


Accrued purchases of property and equipment


$

24,940



$

28,228



$

23,396


Acquisition of equipment through capital leases


$



$



$

398


Issuance of shares to Manager


$

72,274



$

135,345



$

218,645


Issuance of shares to independent directors


$

681



$

750



$

750


Issuance of shares for acquisition of business


$

125,000



$



$


Conversion of convertible senior notes to shares


$

20



$

4



$

25


Conversion of LLC interests to common stock


$



$



$

79


Conversion of LLC interests to additional paid in capital


$



$



$

2,428,334


Distributions payable to noncontrolling interests


$

22



$

42



$

33


Taxes paid (refund), net


$

10,704



$

(898)



$

6,654


Interest paid


$

112,132



$

108,737



$

109,450


 

MACQUARIE INFRASTRUCTURE CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS – MD&A





Quarter Ended
December 31,


Change
Favorable/
(Unfavorable)


Year Ended
December 31,


Change
Favorable/
(Unfavorable)



2017


2016


$


%


2017


2016


$


%



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

Revenue

































Service revenue


$

378,763



$

346,125




32,638




9.4



$

1,445,832



$

1,288,562




157,270




12.2


Product revenue



92,442




91,116




1,326




1.5




368,881




363,169




5,712




1.6


Total revenue



471,205




437,241




33,964




7.8




1,814,713




1,651,731




162,982




9.9


Costs and expenses

































Cost of services



169,176




152,591




(16,585)




(10.9)




624,214




524,423




(99,791)




(19.0)


Cost of product sales



41,168




34,808




(6,360)




(18.3)




164,311




142,731




(21,580)




(15.1)


Selling, general and administrative



86,528




80,851




(5,677)




(7.0)




331,345




303,033




(28,312)




(9.3)


Fees to Manager - related party



16,778




18,916




2,138




11.3




71,388




68,486




(2,902)




(4.2)


Depreciation



61,411




54,367




(7,044)




(13.0)




234,164




226,492




(7,672)




(3.4)


Amortization of intangibles



17,333




15,508




(1,825)




(11.8)




68,253




65,425




(2,828)




(4.3)


Total operating expenses



392,394




357,041




(35,353)




(9.9)




1,493,675




1,330,590




(163,085)




(12.3)


Operating income



78,811




80,200




(1,389)




(1.7)




321,038




321,141




(103)





Other income (expense)

































Interest (expense) income, net(1)



(20,403)




382




(20,785)




NM




(110,403)




(116,801)




6,398




5.5


Other income, net



3,430




1,397




2,033




145.5




11,323




21,786




(10,463)




(48.0)


Net income before income taxes



61,838




81,979




(20,141)




(24.6)




221,958




226,126




(4,168)




(1.8)


Benefit (provision) for income taxes



299,438




(10,848)




310,286




NM




234,154




(71,257)




305,411




NM


Net income


$

361,276



$

71,131




290,145




NM



$

456,112



$

154,869




301,243




194.5


Less: net income (loss) attributable to noncontrolling
interests



12,204




(1,677)




(13,881)




NM




4,910




(1,512)




(6,422)




NM


Net income attributable to MIC


$

349,072



$

72,808




276,264




NM



$

451,202



$

156,381




294,821




188.5


Basic income per share attributable to MIC


$

4.13



$

0.89




3.24




NM



$

5.42



$

1.93




3.49




180.8


Weighted average number of shares outstanding: basic



84,572,725




81,853,027




2,719,698




3.3




83,204,404




80,892,654




2,311,750




2.9


____________________

NM — Not meaningful

(1) Interest expense, net, includes gains on derivative instruments of $9.9 million and $3.0 million for the quarter and year ended December 31, 2017, respectively. For the quarter and year ended December 31, 2016, interest (expense) income, net, includes gains on derivative instruments of $38.0 million and losses on derivative instruments of $5.0 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
December 31,


Change
Favorable/
(Unfavorable)


Year Ended
December 31,


Change
Favorable/
(Unfavorable)



2017


2016


$


%


2017


2016


$


%



($ In Thousands) (Unaudited)

Net income


$

361,276



$

71,131











$

456,112



$

154,869










Interest expense (income), net(1)



20,403




(382)












110,403




116,801










(Benefit) provision for income taxes



(299,438)




10,848












(234,154)




71,257










Depreciation



61,411




54,367












234,164




226,492










Amortization of intangibles



17,333




15,508












68,253




65,425










Fees to Manager – related party



16,778




18,916












71,388




68,486










Pension expense(2)



1,625




2,088












8,106




8,601










Other non-cash income, net(3)



(1,408)




(6,470)












(2,369)




(16,343)










EBITDA excluding non-cash items(4)


$

177,980



$

166,006




11,974




7.2



$

711,903



$

695,588




16,315




2.3


EBITDA excluding non-cash items(4)


$

177,980



$

166,006











$

711,903



$

695,588










Interest (expense) income, net(1)



(20,403)




382












(110,403)




(116,801)










Adjustments to derivative instruments recorded in interest expense(1)



(10,828)




(40,816)












(9,104)




(13,177)










Amortization of debt financing costs(1)



2,236




13,505












8,700




21,041










Amortization of debt discount(1)



889




1,007












3,266




1,007










Interest rate swap breakage fees






(17,770)















(17,770)










Interest rate cap premium






(8,629)















(8,629)










Provision for current income taxes



(2,667)




(2,027)












(11,160)




(7,310)










Pension contribution






(3,500)















(3,500)










Changes in working capital



(15,417)




15,174












(63,743)




9,871










Cash provided by operating activities



131,790




123,332












529,459




560,320










Changes in working capital



15,417




(15,174)












63,743




(9,871)










Maintenance capital expenditures(5)



(12,140)




(13,478)












(35,202)




(58,203)










Free cash flow


$

135,067



$

94,680




40,387




42.7



$

558,000



$

492,246




65,754




13.4


_________________

(1) Interest expense (income), 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. Interest expense (income), net, also included a non-cash write-off of deferred financing fees related to the February 2016 refinancing at Hawaii Gas and the October 2016 refinancing at Atlantic Aviation.

(2) Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses. Any cash contributions to pension plans are not included in pension expense, but rather reflected as a reduction to Free Cash Flow, as noted in the table above.

(3) Other non-cash income, net, primarily includes non-cash amortization of tolling liabilities, unrealized gains (losses) on commodity hedges, adjustments to asset retirement obligations 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.

(4) For the quarter and year ended December 31, 2016, EBITDA excluding non-cash items included $1.0 million and $16.5 million, respectively, of insurance recoveries related to damaged docks at IMTT.

(5) For the year ended December 31, 2016, maintenance capital expenditures included $13.9 million associated with the rebuilding of damaged docks, the majority of which were insured losses, at IMTT.

 

MACQUARIE INFRASTRUCTURE CORPORATION

RECONCILIATION FROM CONSOLIDATED FREE CASH FLOW TO PROPORTIONATELY

COMBINED FREE CASH FLOW




Quarter Ended
December 31,


Change
Favorable/
(Unfavorable)


Year Ended
December 31,


Change
Favorable/
(Unfavorable)



2017


2016


$


%


2017


2016


$


%



($ In Thousands) (Unaudited)

Free Cash Flow – Consolidated basis


$

135,067



$

94,680




40,387




42.7



$

558,000



$

492,246




65,754




13.4


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



(18,621)




(16,099)












(75,134)




(72,631)










MIC's share of CP Free Cash Flow



16,042




13,654












67,342




64,234










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



(6,347)




(5,879)












(38,715)




(36,311)










MIC's share of MIC Hawaii Free Cash Flow



6,343




5,878












38,701




36,308










Free Cash Flow – Proportionately Combined basis


$

132,484



$

92,234




40,250




43.6



$

550,194



$

483,846




66,348




13.7


 

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
December 31,


Change
Favorable/
(Unfavorable)


Year Ended
December 31,


Change
Favorable/
(Unfavorable)



2017


2016


2017


2016



$


$


$


%


$


$


$


%



($ In Thousands) (Unaudited)

Revenue



139,294




135,686




3,608




2.7




549,422




532,472




16,950




3.2


Cost of services



48,317




54,434




6,117




11.2




196,369




204,279




7,910




3.9


Selling, general and administrative expenses



10,779




8,365




(2,414)




(28.9)




36,406




32,687




(3,719)




(11.4)


Depreciation and amortization



32,637




30,773




(1,864)




(6.1)




126,463




134,385




7,922




5.9


Operating income



47,561




42,114




5,447




12.9




190,184




161,121




29,063




18.0


Interest (expense) income, net(1)



(7,650)




2,710




(10,360)




NM




(38,357)




(38,752)




395




1.0


Other (expense) income, net



(196)




1,562




(1,758)




(112.5)




1,758




18,509




(16,751)




(90.5)


Benefit (provision) for income taxes



256,150




(19,019)




275,169




NM




209,464




(57,736)




267,200




NM


Net income



295,865




27,367




268,498




NM




363,049




83,142




279,907




NM


Less: net income attributable to noncontrolling interests


















59




59




100.0


Net income attributable to MIC



295,865




27,367




268,498




NM




363,049




83,083




279,966




NM


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



295,865




27,367












363,049




83,142










Interest expense (income), net(1)



7,650




(2,710)












38,357




38,752










(Benefit) provision for income taxes



(256,150)




19,019












(209,464)




57,736










Depreciation and amortization



32,637




30,773












126,463




134,385










Pension expense(2)



1,347




1,805












6,996




7,219










Other non-cash expense, net



452




26












767




657










EBITDA excluding non-cash items(3)



81,801




76,280




5,521




7.2




326,168




321,891




4,277




1.3


EBITDA excluding non-cash items(3)



81,801




76,280












326,168




321,891










Interest (expense) income, net(1)



(7,650)




2,710












(38,357)




(38,752)










Adjustments to derivative instruments recorded in interest expense(1)



(3,577)




(12,892)












(3,834)




(2,169)










Amortization of debt financing costs(1)



411




412












1,647




1,654










Provision for current income taxes



(1,348)




(2,367)












(4,417)




(5,438)










Changes in working capital



(20,382)




7,992












(32,795)




(3,734)










Cash provided by operating activities



49,255




72,135












248,412




273,452










Changes in working capital



20,382




(7,992)












32,795




3,734










Maintenance capital expenditures(4)



(6,580)




(5,521)












(20,143)




(38,620)










Free cash flow



63,057




58,622




4,435




7.6




261,064




238,566




22,498




9.4


____________________

NM — Not meaningful

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

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

(3) For the quarter and year ended December 31, 2016, EBITDA excluding non-cash items included $1.0 million and $16.5 million, respectively, of insurance recoveries related to damaged docks. These insurance recoveries were used to repair damaged docks and recorded in Other (expense) income, net. The cost of those repairs were recorded in Maintenance Capital Expenditures. Excluding insurance proceeds, EBITDA excluding non-cash items would have been $75.3 million and $305.4 million for the quarter and year ended December 31, 2016, respectively. On that basis, EBITDA excluding non-cash items would have increased by $6.5 million, or 8.6%, for the quarter ended December 31, 2017, and increased by $20.8 million, or 6.8%, for the year ended December 31, 2017 compared with the prior comparable periods.

(4) For the year ended December 31, 2016, maintenance capital expenditures included $13.9 million associated with the rebuilding of damaged docks, the majority of which were insured losses. Excluding these costs, maintenance capital expenditures would have been $24.7 million for the year ended December 31, 2016. On that basis, maintenance capital expenditures would have decreased by $4.6 million, or 18.6%, for the year ended December 31, 2017 compared with the prior comparable period.

 

Atlantic Aviation


















Quarter Ended
December 31,


Change
Favorable/
(Unfavorable)


Year Ended
December 31,


Change
Favorable/
(Unfavorable)



2017


2016


2017


2016



$


$


$


%


$


$


$


%



($ In Thousands) (Unaudited)

Revenue



225,282




196,180




29,102




14.8




846,431




740,209




106,222




14.4


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



105,509




85,773




(19,736)




(23.0)




378,494




303,899




(74,595)




(24.5)


Gross margin



119,773




110,407




9,366




8.5




467,937




436,310




31,627




7.2


Selling, general and administrative expenses



58,693




55,312




(3,381)




(6.1)




222,205




212,331




(9,874)




(4.7)


Depreciation and amortization



26,296




21,618




(4,678)




(21.6)




100,190




90,659




(9,531)




(10.5)


Operating income



34,784




33,477




1,307




3.9




145,542




133,320




12,222




9.2


Interest expense, net(1)



(864)




(6,524)




5,660




86.8




(14,512)




(33,961)




19,449




57.3


Other (expense) income, net



(32)




(123)




91




74.0




(151)




68




(219)




NM


Benefit (provision) for income taxes



30,257




(10,631)




40,888




NM




(6,509)




(39,889)




33,380




83.7


Net income



64,145




16,199




47,946




NM




124,370




59,538




64,832




108.9


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



64,145




16,199












124,370




59,538










Interest expense, net(1)



864




6,524












14,512




33,961










(Benefit) provision for income taxes



(30,257)




10,631












6,509




39,889










Depreciation and amortization



26,296




21,618












100,190




90,659










Pension expense(2)



5




60












20




110










Other non-cash expense, net



390




457












1,642




905










EBITDA excluding non-cash items



61,443




55,489




5,954




10.7




247,243




225,062




22,181




9.9


EBITDA excluding non-cash items



61,443




55,489












247,243




225,062










Interest expense, net(1)



(864)




(6,524)












(14,512)




(33,961)










Convertible senior notes interest(3)



(2,013)




(1,969)












(7,782)




(1,969)










Adjustments to derivative instruments recorded in interest expense(1)



(2,721)




(8,574)












429




(4,158)










Amortization of debt financing costs(1)



351




11,699












1,170




14,195










Interest rate swap breakage fees






(17,770)















(17,770)










Interest rate cap premium






(8,629)















(8,629)










(Provision) benefit for current income taxes



(8,647)




384












(14,457)




(2,137)










Changes in working capital



(573)




(248)












(7,240)




11,164










Cash provided by operating activities



46,976




23,858












204,851




181,797










Changes in working capital



573




248












7,240




(11,164)










Maintenance capital expenditures



(2,894)




(4,816)












(7,965)




(10,632)










Free cash flow



44,655




19,290




25,365




131.5




204,126




160,001




44,125




27.6


____________________

NM — Not meaningful

(1) Interest expense, net, included adjustments to derivative instruments and non-cash amortization of deferred financing fees. For the quarter and year ended December 31, 2016, interest expense also included non-cash write-off of deferred financing costs related to the October 2016 refinancing.

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

(3) 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
December 31,


Change
Favorable/
(Unfavorable)


Year Ended
December 31,


Change
Favorable/
(Unfavorable)



2017


2016


2017


2016



$


$


$


%


$


$


$


%



($ In Thousands) (Unaudited)

Product revenue



35,245




35,993




(748)




(2.1)




145,926




150,010




(4,084)




(2.7)


Cost of product sales



4,996




5,807




811




14.0




20,524




23,302




2,778




11.9


Selling, general and administrative expenses



7,385




6,143




(1,242)




(20.2)




25,703




25,474




(229)




(0.9)


Depreciation and amortization



15,269




13,855




(1,414)




(10.2)




60,300




55,548




(4,752)




(8.6)


Operating income



7,595




10,188




(2,593)




(25.5)




39,399




45,686




(6,287)




(13.8)


Interest (expense) income, net(1)



(3,056)




10,328




(13,384)




(129.6)




(23,487)




(21,286)




(2,201)




(10.3)


Other income, net



5,025




182




4,843




NM




11,465




4,021




7,444




185.1


Benefit (provision) for income taxes



2,040




(6,702)




8,742




130.4




(6,169)




(14,328)




8,159




56.9


Net income



11,604




13,996




(2,392)




(17.1)




21,208




14,093




7,115




50.5


Less: net income attributable to noncontrolling interest



12,281




1,875




(10,406)




NM




5,058




2,092




(2,966)




(141.8)


Net (loss) income attributable to MIC



(677)




12,121




(12,798)




(105.6)




16,150




12,001




4,149




34.6


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



11,604




13,996












21,208




14,093










Interest expense (income), net(1)



3,056




(10,328)












23,487




21,286










(Benefit) provision for income taxes



(2,040)




6,702












6,169




14,328










Depreciation and amortization



15,269




13,855












60,300




55,548










Other non-cash income, net(2)



(1,933)




(1,623)












(8,103)




(7,047)










EBITDA excluding non-cash
items



25,956




22,602




3,354




14.8




103,061




98,208




4,853




4.9


EBITDA excluding non-cash
items



25,956




22,602












103,061




98,208










Interest (expense) income, net(1)



(3,056)




10,328












(23,487)




(21,286)










Adjustments to derivative instruments recorded in interest expense(1)



(4,019)




(16,756)












(5,301)




(4,762)










Amortization of debt financing costs(1)



379




376












1,516




1,489










(Provision) benefit for current income taxes



(135)




2












(129)




(6)










Changes in working capital



6,223




780












(3,480)




(1,129)










Cash provided by operating activities



25,348




17,332












72,180




72,514










Changes in working capital



(6,223)




(780)












3,480




1,129










Maintenance capital expenditures



(504)




(453)












(526)




(1,012)










Free cash flow



18,621




16,099




2,522




15.7




75,134




72,631




2,503




3.4


_____________________

NM — Not meaningful

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

(2) 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
December 31,


Change
Favorable/
(Unfavorable)


Year Ended
December 31,


Change
Favorable/
(Unfavorable)



2017


2016


2017


2016



$


$


$


%


$


$


$


%



($ In Thousands) (Unaudited)

Product revenue



57,197




55,123




2,074




3.8




222,955




213,159




9,796




4.6


Service revenue



15,437




15,504




(67)




(0.4)




54,913




20,762




34,151




164.5


Total revenue



72,634




70,627




2,007




2.8




277,868




233,921




43,947




18.8


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



36,172




29,001




(7,171)




(24.7)




143,787




119,429




(24,358)




(20.4)


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



15,350




12,389




(2,961)




(23.9)




49,365




16,335




(33,030)




NM


Cost of revenue – total



51,522




41,390




(10,132)




(24.5)




193,152




135,764




(57,388)




(42.3)


Gross margin



21,112




29,237




(8,125)




(27.8)




84,716




98,157




(13,441)




(13.7)


Selling, general and administrative expenses



7,209




8,046




837




10.4




26,938




24,276




(2,662)




(11.0)


Depreciation and amortization



4,381




3,629




(752)




(20.7)




15,303




11,325




(3,978)




(35.1)


Operating income



9,522




17,562




(8,040)




(45.8)




42,475




62,556




(20,081)




(32.1)


Interest (expense) income, net(1)



(1,246)




665




(1,911)




NM




(7,041)




(5,559)




(1,482)




(26.7)


Other expense, net



(349)




(224)




(125)




(55.8)




(731)




(812)




81




10.0


Benefit (provision) for income taxes



1,485




(5,578)




7,063




126.6




(9,287)




(20,441)




11,154




54.6


Net income



9,412




12,425




(3,013)




(24.2)




25,416




35,744




(10,328)




(28.9)


Less: net loss attributable to noncontrolling interests



(77)




(3,552)




(3,475)




(97.8)




(148)




(3,663)




(3,515)




(96.0)


Net income attributable to MIC



9,489




15,977




(6,488)




(40.6)




25,564




39,407




(13,843)




(35.1)


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



9,412




12,425












25,416




35,744










Interest expense (income), net(1)



1,246




(665)












7,041




5,559










(Benefit) provision for income taxes



(1,485)




5,578












9,287




20,441










Depreciation and amortization



4,381




3,629












15,303




11,325










Pension expense(2)



273




223












1,090




1,272










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



(614)




(5,448)












2,494




(11,539)










EBITDA excluding non-cash items



13,213




15,742




(2,529)




(16.1)




60,631




62,802




(2,171)




(3.5)


EBITDA excluding non-cash items



13,213




15,742












60,631




62,802










Interest (expense) income, net(1)



(1,246)




665












(7,041)




(5,559)










Adjustments to derivative instruments recorded in interest expense(1)



(511)




(2,594)












(398)




(2,088)










Amortization of debt financing costs(1)



100




100












403




948










Provision for current income taxes



(3,047)




(1,846)












(8,312)




(8,353)










Pension contribution






(3,500)















(3,500)










Changes in working capital



6,488




3,788












(6,364)




9,342










Cash provided by operating activities



14,997




12,355












38,919




53,592










Changes in working capital



(6,488)




(3,788)












6,364




(9,342)










Maintenance capital expenditures



(2,162)




(2,688)












(6,568)




(7,939)










Free cash flow



6,347




5,879




468




8.0




38,715




36,311




2,404




6.6


___________________

NM — Not meaningful

(1) Interest (expense) income, net, includes adjustments to derivative instruments related to interest rate swaps and non-cash amortization of deferred financing fees. For the year ended December 31, 2016, interest (expense) income, net, 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. Any cash contributions to pension plans are not included in pension expense, but rather reflected as a reduction to Free Cash Flow, as noted in the table above.

(3) Other non-cash (income) expense, net, primarily includes non-cash adjustments related to unrealized gains (losses) on commodity hedges and asset retirement obligations. 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
December 31,


Change
Favorable/
(Unfavorable)


Year Ended
December 31,


Change
Favorable/
(Unfavorable)



2017


2016


2017


2016



$


$


$


%


$


$


$


%



($ In Thousands) (Unaudited)

Fees to Manager – related party



16,778




18,916




2,138




11.3




71,388




68,486




(2,902)




(4.2)


Selling, general and administrative expenses(1)



3,712




4,225




513




12.1




25,013




13,056




(11,957)




(91.6)


Depreciation



161







(161)




NM




161







(161)




NM


Operating loss



(20,651)




(23,141)




2,490




10.8




(96,562)




(81,542)




(15,020)




(18.4)


Interest expense, net(2)



(7,587)




(6,797)




(790)




(11.6)




(27,006)




(17,243)




(9,763)




(56.6)


Other expense, net



(1,018)







(1,018)




NM




(1,018)







(1,018)




NM


Benefit for income taxes



9,506




31,082




(21,576)




(69.4)




46,655




61,137




(14,482)




(23.7)


Net (loss) income



(19,750)




1,144




(20,894)




NM




(77,931)




(37,648)




(40,283)




(107.0)


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

































Net (loss) income



(19,750)




1,144












(77,931)




(37,648)










Interest expense, net(2)



7,587




6,797












27,006




17,243










Benefit for income taxes



(9,506)




(31,082)












(46,655)




(61,137)










Depreciation



161















161













Fees to Manager-related party



16,778




18,916












71,388




68,486










Other non-cash expense



297




118












831




681










EBITDA excluding non-cash items



(4,433)




(4,107)




(326)




(7.9)




(25,200)




(12,375)




(12,825)




(103.6)


EBITDA excluding non-cash items



(4,433)




(4,107)












(25,200)




(12,375)










Interest expense, net(2)



(7,587)




(6,797)












(27,006)




(17,243)










Convertible senior notes interest(3)



2,013




1,969












7,782




1,969










Amortization of debt financing costs(2)



995




918












3,964




2,755










Amortization of debt discount(2)



889




1,007












3,266




1,007










Benefit for current income taxes



10,510




1,800












16,155




8,624










Changes in working capital



(7,173)




2,862












(13,864)




(5,772)










Cash used in operating activities



(4,786)




(2,348)












(34,903)




(21,035)










Changes in working capital



7,173




(2,862)












13,864




5,772










Free cash flow



2,387




(5,210)




7,597




145.8




(21,039)




(15,263)




(5,776)




(37.8)



































____________________

NM — Not meaningful

(1) For the quarter and year ended December 31, 2017, selling, general and administrative expenses included $1.7 million and $8.5 million, respectively, of costs related to the implementation of a shared service initiative and $1.4 million and $9.3 million, respectively, of costs incurred in connection with the evaluation of various investment and acquisition opportunities.

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

(3) 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 December 31, 2017









IMTT


Atlantic (AT)
Aviation


Contracted
Power(1)


MIC
Hawaii(1)


MIC
Corporate


Proportionately
Combined(2)




Contracted
Power
100%


MIC
Hawaii
100%



($ in Thousands) (Unaudited)







Net income (loss)



295,865




64,145




10,394




9,413




(19,750)




360,067








11,604




9,412


Interest expense, net(3)



7,650




864




2,660




1,246




7,587




20,007








3,056




1,246


Benefit for income taxes



(256,150)




(30,257)




(2,040)




(1,485)




(9,506)




(299,438)








(2,040)




(1,485)


Depreciation and amortization of intangibles



32,637




26,296




13,387




4,376




161




76,857








15,269




4,381


Fees to Manager – related
party















16,778




16,778












Pension expense(4)



1,347




5







273







1,625











273


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



452




390




(1,934)




(614)




297




(1,409)








(1,933)




(614)


EBITDA excluding non-cash items



81,801




61,443




22,467




13,209




(4,433)




174,487








25,956




13,213


EBITDA excluding non-cash items



81,801




61,443




22,467




13,209




(4,433)




174,487








25,956




13,213


Interest expense, net(3)



(7,650)




(864)




(2,660)




(1,246)




(7,587)




(20,007)








(3,056)




(1,246)


Convertible senior notes interest(6)






(2,013)










2,013















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



(3,577)




(2,721)




(3,616)




(510)







(10,424)








(4,019)




(511)


Amortization of debt financing costs(3)



411




351




364




99




995




2,220








379




100


Amortization of debt discount(3)















889




889












(Provision) benefit for current income taxes



(1,348)




(8,647)




(136)




(3,047)




10,510




(2,668)








(135)




(3,047)


Changes in working capital



(20,382)




(573)




6,832




6,477




(7,173)




(14,819)








6,223




6,488


Cash provided by (used in) operating activities



49,255




46,976




23,251




14,982




(4,786)




129,678








25,348




14,997


Changes in working capital



20,382




573




(6,832)




(6,477)




7,173




14,819








(6,223)




(6,488)


Maintenance capital expenditures



(6,580)




(2,894)




(377)




(2,162)







(12,013)








(504)




(2,162)


Proportionately Combined Free Cash flow



63,057




44,655




16,042




6,343




2,387




132,484








18,621




6,347


 



For the Quarter Ended December 31, 2016









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



27,367




16,199




11,413




12,419




1,144




68,542








13,996




12,425


Interest (income) expense, net(3)



(2,710)




6,524




(9,260)




(657)




6,797




694








(10,328)




(665)


Provision (benefit) for income taxes



19,019




10,631




6,702




5,578




(31,082)




10,848








6,702




5,578


Depreciation and amortization of intangibles



30,773




21,618




11,980




3,623







67,994








13,855




3,629


Fees to Manager – related party















18,916




18,916












Pension expense(4)



1,805




60







223







2,088











223


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



26




457




(1,623)




(5,448)




118




(6,470)








(1,623)




(5,448)


EBITDA excluding non-cash items(7)



76,280




55,489




19,212




15,738




(4,107)




162,612








22,602




15,742


EBITDA excluding non-cash items(7)



76,280




55,489




19,212




15,738




(4,107)




162,612








22,602




15,742


Interest income (expense), net(3)



2,710




(6,524)




9,260




657




(6,797)




(694)








10,328




665


Convertible senior notes interest(6)






(1,969)










1,969















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



(12,892)




(8,574)




(14,844)




(2,583)







(38,893)








(16,756)




(2,594)


Amortization of debt financing costs(3)



412




11,699




363




100




918




13,492








376




100


Amortization of debt discount(3)















1,007




1,007












Interest rate swap breakage fees






(17,770)













(17,770)












Interest rate cap premium






(8,629)













(8,629)












(Provision) benefit for current income taxes



(2,367)




384




2




(1,846)




1,800




(2,027)








2




(1,846)


Pension contribution












(3,500)







(3,500)











(3,500)


Changes in working capital



7,992




(248)




1,039




3,777




2,862




15,422








780




3,788


Cash provided by (used in) operating activities



72,135




23,858




15,032




12,343




(2,348)




121,020








17,332




12,355


Changes in working capital



(7,992)




248




(1,039)




(3,777)




(2,862)




(15,422)








(780)




(3,788)


Maintenance capital expenditures



(5,521)




(4,816)




(339)




(2,688)







(13,364)








(453)




(2,688)


Proportionately Combined Free Cash Flow



58,622




19,290




13,654




5,878




(5,210)




92,234








16,099




5,879


 



For the Year Ended December 31, 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)



363,049




124,370




20,252




25,422




(77,931)




455,162








21,208




25,416


Interest expense, net(3)



38,357




14,512




20,837




7,035




27,006




107,747








23,487




7,041


(Benefit) provision for income taxes



(209,464)




6,509




6,169




9,287




(46,655)




(234,154)








6,169




9,287


Depreciation and amortization of intangibles



126,463




100,190




52,777




15,284




161




294,875








60,300




15,303


Fees to Manager – related party















71,388




71,388












Pension expense(4)



6,996




20







1,090







8,106











1,090


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



767




1,642




(8,082)




2,494




831




(2,348)








(8,103)




2,494


EBITDA excluding non-cash items



326,168




247,243




91,953




60,612




(25,200)




700,776








103,061




60,631


EBITDA excluding non-cash items



326,168




247,243




91,953




60,612




(25,200)




700,776








103,061




60,631


Interest expense, net(3)



(38,357)




(14,512)




(20,837)




(7,035)




(27,006)




(107,747)








(23,487)




(7,041)


Convertible senior notes interest(6)






(7,782)










7,782















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



(3,834)




429




(4,704)




(398)







(8,507)








(5,301)




(398)


Amortization of debt financing costs(3)



1,647




1,170




1,458




402




3,964




8,641








1,516




403


Amortization of debt discount(3)















3,266




3,266












(Provision) benefit for current income taxes



(4,417)




(14,457)




(129)




(8,312)




16,155




(11,160)








(129)




(8,312)


Changes in working capital



(32,795)




(7,240)




(2,992)




(6,356)




(13,864)




(63,247)








(3,480)




(6,364)


Cash provided by (used in) operating activities



248,412




204,851




64,749




38,913




(34,903)




522,022








72,180




38,919


Changes in working capital



32,795




7,240




2,992




6,356




13,864




63,247








3,480




6,364


Maintenance capital expenditures



(20,143)




(7,965)




(399)




(6,568)







(35,075)








(526)




(6,568)


Proportionately Combined Free Cash Flow



261,064




204,126




67,342




38,701




(21,039)




550,194








75,134




38,715


 



For the Year Ended December 31, 2016









IMTT(8)


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)



83,142




59,538




12,309




35,741




(37,648)




153,082








14,093




35,744


Interest expense, net(3)



38,752




33,961




18,541




5,564




17,243




114,061








21,286




5,559


Provision (benefit) for income taxes



57,736




39,889




14,327




20,441




(61,137)




71,256








14,328




20,441


Depreciation and amortization of intangibles



134,385




90,659




48,047




11,317







284,408








55,548




11,325


Fees to Manager – related party















68,486




68,486












Pension expense(4)



7,219




110







1,272







8,601











1,272


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



657




905




(7,028)




(11,539)




681




(16,324)








(7,047)




(11,539)


EBITDA excluding non-cash items(7)



321,891




225,062




86,196




62,796




(12,375)




683,570








98,208




62,802


EBITDA excluding non-cash items(7)



321,891




225,062




86,196




62,796




(12,375)




683,570








98,208




62,802


Interest expense, net(3)



(38,752)




(33,961)




(18,541)




(5,564)




(17,243)




(114,061)








(21,286)




(5,559)


Convertible senior notes interest(6)






(1,969)










1,969















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



(2,169)




(4,158)




(4,088)




(2,080)







(12,495)








(4,762)




(2,088)


Amortization of debt financing costs(3)



1,654




14,195




1,434




948




2,755




20,986








1,489




948


Amortization of debt discount(3)















1,007




1,007












Interest rate swap breakage
fees






(17,770)













(17,770)












Interest rate cap premium






(8,629)













(8,629)












(Provision) benefit for current income taxes



(5,438)




(2,137)




(7)




(8,353)




8,624




(7,311)








(6)




(8,353)


Pension contribution












(3,500)







(3,500)











(3,500)


Changes in working capital



(3,734)




11,164




(1,148)




9,335




(5,772)




9,845








(1,129)




9,342


Cash provided by (used in) operating activities



273,452




181,797




63,846




53,582




(21,035)




551,642








72,514




53,592


Changes in working capital



3,734




(11,164)




1,148




(9,335)




5,772




(9,845)








1,129




(9,342)


Maintenance capital expenditures(9)



(38,620)




(10,632)




(760)




(7,939)







(57,951)








(1,012)




(7,939)


Proportionately Combined Free Cash Flow



238,566




160,001




64,234




36,308




(15,263)




483,846








72,631




36,311


____________________             








(1) Represents MIC's proportionately combined interests in the businesses comprising these reportable segments.








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








(3) Interest expense (income), 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. Interest expense (income), net, also includes a non-cash write-off of deferred financing fees related to the February 2016 refinancing at Hawaii Gas and the October 2016 refinancing at Atlantic Aviation.








(4) Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses. Any cash contributions to pension plans are not included in pension expense, but rather reflected as a reduction to Free Cash Flow, as noted in the table above.








(5) Other non-cash expense (income), net, primarily includes non-cash amortization of tolling liabilities, unrealized gains (losses) on commodity hedges, adjustments to asset retirement obligations 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) For the quarter and year ended December 31, 2016, EBITDA excluding non-cash items included $1.0 million and $16.5 million, respectively, of insurance recoveries related to damaged docks at IMTT.








(8) 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.








(9) For the year ended December 31, 2016, maintenance capital expenditures included $13.9 million associated with the rebuilding of damaged docks, the majority of which were insured losses, at IMTT.








 

 

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SOURCE Macquarie Infrastructure Corporation