MACQUARIE INFRASTRUCTURE HOLDINGS, LLC NEW YORK, Nov. 1, 2017 /PRNewswire/ -- Macquarie Infrastructure Corporation (NYSE: MIC) today reported its financial results for the third quarter of 2017.
"MIC's performance in the third quarter was consistent with the first half of the year with continued strong performance at Atlantic Aviation tempered by modest headwinds at our Contracted Power business," said James Hooke, chief executive officer of MIC. "We successfully completed the acquisitions of Epic Midstream and Orion Jet Center, as anticipated, and we continue to find opportunities to put growth capital to work at a rate that should see the Company achieve full year deployments of at least $650.0 million."
"MIC's financial results for the quarter supported an increase in our quarterly cash dividend to $1.42 per share -- a 10.1% uptick versus the third quarter in 2016," Hooke added. The Company reaffirmed its guidance with respect to a 10% increase year over year in its cash dividend in 2017. Management's expectation for growth in cash generation and dividends assumes the continued improvement in operating results of existing businesses, together with anticipated contributions from investments and acquisitions.
MIC reported a 14.8% decrease in net income to $36.2 million for the quarter ended September 30, 2017 compared with $42.5 million in the third quarter of 2016. The decrease reflects primarily unrealized non-cash losses on interest rate hedging contracts compared with unrealized gains on similar contracts in the prior period. The losses were partially offset by improved operating results. Through nine months of the year, MIC's net income increased 13.3% to $94.8 million.
The Company reported cash generated by operating activities of $148.5 million and $397.7 million in the quarter and nine months ended September 30, 2017, respectively, compared with $159.1 million and $437.0 million reported in the prior comparable periods. The decrease in cash from operations in the quarter reflects primarily the timing of payment of insurance premiums, higher state taxes and changes in working capital related to higher inventory costs. The impact of these was partially offset by improved operating results and contributions from acquired businesses.
MIC's businesses produced an aggregate $144.4 million and $432.4 million of Adjusted Free Cash Flow in the quarter and year to date periods ended September 30, 2017, respectively, up 9.5% and 10.4% 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 wind and solar facilities), less maintenance capital expenditures, less changes in working capital, adjusted for certain one-time items. (See Summary Financial Information below)
"With the consistent performance of our existing businesses, we made a decision to spend approximately $5.0 million more on our business development platforms and insourcing of operations of our renewable power business," Hooke noted. "This decision will make it likely that the Company will now generate growth in Free Cash Flow of approximately 9% in 2017 compared with 2016."
MIC has committed capital to various development platforms, including those involved in fuel storage, logistics and wind and solar power that are not expected to deliver cash flow generating projects over the near term. MIC also incurred costs in 2017 to insource aspects of the operations and oversight of the Company's renewable energy power generation projects that had previously been conducted by various third party providers. Management believes that insourcing will lead to improved performance from these projects. The combined cost of the two initiatives is expected to result in a reduction in Free Cash Flow generation of approximately $5.0 million, or $0.06 per share, for the full year.
Consistent with past practices, MIC is expected to provide the market with its views on 2018 performance in the context of its full year results release next February. 2018 guidance is likely to reflect the benefit of growth capital deployed in 2017, the impact of a fully functioning shared services capability and the expected uplift associated with the general rate filing by MIC's Hawaii Gas business.
"We're excited about our prospects in 2018, given the pending completion of the buildout of BEC II and the benefits of the gas lateral completed this past year, as well as the full-year contribution from the several acquisitions we have been able to complete," said Hooke. "We also expect to see some initial economic benefits from our investment in development of renewable power projects."
The MIC board of directors authorized a cash dividend of $1.42 per share, or $5.68 annualized, for the third quarter of 2017. The dividend will be payable November 16, 2017 to shareholders of record on November 13, 2017. The payment represents a 10.1% increase over the dividend paid for the third quarter of 2016 and is consistent with MIC's guidance for a 10% increase in its annual dividend in 2017 over 2016.
The ongoing implementation of MIC's shared services initiative is resulting in reductions in general and administrative expenses consistent with the Company's guidance for savings of between $7.0 and $8.0 million in 2017. As anticipated, the savings have been offset by expenses including primarily severance payments and consulting fees. Those expenses totaled $1.4 million in the third quarter and $6.8 million in the year to date periods. The Company does not expect to incur 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 generated by its businesses.
MIC expects to realize annual general and administrative 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 Resources, Tax, Information Technology, Procurement and Risk Management support to each of MIC's operating entities.
MIC incurred approximately $3.0 million of transaction related expenses during the third quarter as a result of a heightened level of activity associated with the evaluation of various investment and acquisition opportunities. Through nine months, transaction related costs have totaled $7.9 million. These costs have been recorded as an expense in the Corporate and Other segment of MIC's 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.
Management Changes
On September 11, 2017, James Hooke, MIC's chief executive officer notified the Company's board of directors of his intent to resign. Subsequently, Hooke and the board agreed that the effective date of his resignation would be December 31, 2017.
On October 30, 2017, the MIC board appointed Christopher Frost as chief executive officer of the Company, effective January 1, 2018. Frost, age 48, was appointed president and chief operating officer of the Company effective October 26, 2017.
Quarterly Segment Highlights
Growth in revenue at IMTT reflected a partial quarter contribution from the recently acquired Epic Midstream terminalling business, partially offset by a decline in utilization and a reduced contribution from IMTT subsidiary OMI Environmental Solutions due to reduced spill response activity. Utilization rates at IMTT decreased to 92.7% and 94.3% for the quarter and nine month periods ended September 30, 2017, respectively, versus 96.7% and 96.4% in the prior comparable periods. The sequential decline from 94.0% in the second quarter of 2017 reflected primarily the impact of two large tanks in Louisiana being out of service for portions of the quarter. Both tanks were re-leased by the middle of October.
Comparison of IMTT's results for the quarter to date period ended September 30, 2017 should be considered in light of the approximately $13.0 million of insurance proceeds related to dock damage recorded in Other Income, net and $13.9 million of related maintenance capital expenditures in the third quarter in 2016. Excluding these, IMTT's EBITDA excluding non-cash items would have increased by $4.9 million or 6.6% for the third quarter and by $14.2 million or 6.2% for the nine months ended September 30, 2017. Free Cash Flow generated by IMTT increased by 7.9% in the quarter ended September 30, 2017 and by 10.0% on a year to date basis in part as a result of improvement in operations and a reduction in maintenance capital expenditures.
Strong growth in general aviation flight activity during the third quarter, together with contributions from acquisitions, drove improvement in the financial performance of Atlantic Aviation. Domestic general aviation flight activity increased by approximately 4.0%, based on data reported by the Federal Aviation Administration.
The increase in flight activity, together with contributions from two additional sites added to the Atlantic Aviation network of fixed base operations (FBO) over the past twelve months, drove growth in EBITDA excluding non-cash items and Free Cash Flow of 12.8% and 15.4%, respectively, in the quarter. For the nine months ended September 30, 2017, EBITDA excluding non-cash items and Free Cash Flow generated by Atlantic increased 9.6% and 13.3%, respectively. At the end of the third quarter Atlantic Aviation completed its second FBO acquisition of the year, acquiring the Orion Jet Center at Opa Locka-Miami Executive Airport north of downtown Miami. The south Florida region is one of the fastest growing general aviation markets in the U.S.
MIC's portfolio of wind and solar power facilities benefitted from contributions from acquisitions completed during the past year, although these were partially offset by a reduction in wind and solar resources versus the prior comparable quarter and year to date periods. MIC has entered into agreements with developers of both wind and solar projects and continues to make a portion of its capital available for the construction of additional renewable power facilities. One of those developers sold a number of solar projects in the third quarter and distributed of a portion of the profits to MIC, per the terms of the development agreement, during the period.
MIC has elected to insource the operations oversight of its renewable power businesses. The insourcing was undertaken as a result of a lack of oversight on the part of third party service providers that led to lost power generation revenue and opportunities to optimize the performance of certain assets. With ten renewable facilities in its portfolio and additional facilities in development, MIC expects the insourced capability to facilitate creation of scale in the sector and to provide control benefits.
MIC's Bayonne Energy Center (BEC) is a thermal power facility providing peaking power to parts of New York City from a plant located in Bayonne, NJ. 62.5% of the plant's capacity generates revenue pursuant to a tolling agreement independent of the power needs of the community. 37.5% of the capacity is available on a merchant basis and therefore exposed to demand for peak power. The merchant portion of the facility underperformed expectations in the third quarter as a result of lower than anticipated capacity prices during the summer of 2017 and a reduction in utilization and energy margins relative to prior years driven by milder weather in 2017 versus 2016. The reduced contribution was partially offset by lower natural gas costs as a result of connecting the plant to a second, less expensive source of gas during the summer of 2017 and by additional tariff revenue from the grid operator for new services provided.
In aggregate, the businesses comprising MIC's Contracted Power segment generated $0.66 million, or 2.0%, less EBITDA excluding non-cash items and $0.75 million, or 2.8%, less Free Cash Flow in the third quarter of 2017 compared with the third quarter in 2016. For the nine months ended September 30, 2017, the segment produced an increase in EBITDA excluding non-cash items of $1.5 million and no change in Free Cash Flow.
The Company's MIC Hawaii segment reported revenue growth driven by an increase in the volume of gas sold by Hawaii Gas and contributions from acquisitions compared with the third quarter of 2016. A portion of the increase was offset by higher state taxes in the quarter and lower prices achieved on gas sales in certain markets.
For the quarter ended September 30, 2017, EBITDA excluding non-cash items and Free Cash Flow generated by MIC Hawaii decreased by $0.27 million, or 2.0%, and $0.56 million or 6.4%, respectively, versus the prior comparable period. For the nine months ended September 30, 2017, EBITDA excluding non-cash items was flat and Free Cash Flow increased by $1.9 million or 6.4%.
Summary Financial Information
Quarter Ended Change Nine Months Ended Change
September 30, Favorable/(Unfavorable) September 30, Favorable/(Unfavorable)
------------- ----------------------- ------------- -----------------------
2017 2016 $ % 2017 2016 $ %
---- ---- --- --- ---- ---- --- ---
($ In Thousands, Except Share and Per Share Data) (Unaudited)
GAAP Metrics
Net income $36,173 $42,481 (6,308) (14.8) $94,836 $83,738 11,098 13.3
Weighted average 83,644,806 81,220,841 2,423,965 3.0 82,743,285 80,570,192 2,173,093 2.7
number of shares
outstanding: basic
Net income per $0.48 $0.52 (0.04) (7.7) $1.23 $1.04 0.19 18.3
share attributable
to MIC
Cash provided by 148,465 159,070 (10,605) (6.7) 397,669 436,988 (39,319) (9.0)
operating activities
MIC Non-GAAP
Metrics
EBITDA excluding $182,684 $186,823 (4,139) (2.2) $533,923 $529,582 4,341 0.8
non-cash items(1)(2)
Shared service 1,402 - 1,402 NM 6,847 - 6,847 NM
implementation
costs
Investment and 3,023 - 3,023 NM 7,873 - 7,873 NM
acquisition costs
Adjusted EBITDA $187,109 $186,823 286 0.2 $548,643 $529,582 19,061 3.6
excluding non-cash
items(2)
Cash interest(3) $(27,151) $(27,389) 238 0.9 $(79,435) $(82,008) 2,573 3.1
Cash taxes (2,154) (1,115) (1,039) (93.2) (8,493) (5,283) (3,210) (60.8)
Maintenance (12,106) (24,472) 12,366 50.5 (23,062) (44,725) 21,663 48.4
capital
expenditures(4)
Noncontrolling interest(5) (1,308) (1,947) 639 32.8 (5,223) (5,954) 731 12.3
------ ------ --- ------ ------ ---
Adjusted Free Cash Flow $144,390 $131,900 12,490 9.5 $432,430 $391,612 40,818 10.4
======== ======== ====== ======== ======== ======
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 nine months ended September 30, 2016, EBITDA excluding non-cash items included $13.0 million and $15.5 million, respectively, of insurance recoveries related to damaged docks at IMTT.
(3) 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.
(4) For the quarter and nine months ended September 30, 2016, maintenance capital expenditures included $13.9 million associated with the rebuilding of damaged docks, the majority of which were insured losses, at IMTT.
(5) Noncontrolling interest adjustment represents the portion of Free Cash Flow not attributable to MIC's ownership interest.
Adjusted EBITDA excluding non-cash items, on a proportionately combined basis, would have increased by 8.2% to $185.0 million in the quarter ended September 30, 2017 excluding the impact of the insurance recovery by IMTT in 2016 discussed above. Through the nine months ended September 30, 2017, the increase would have been 7.0% to $541.0 million.
Conference Call and Webcast
When: MIC has scheduled a conference call for 8:00 a.m. Eastern Time on Thursday, November 2, 2017 during which management will review and comment on the third 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 November 2, 2017 through midnight on November 8, 2017, at +1(404) 537-3406 or +1(855) 859-2056, Passcode: 98492892. 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 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 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 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 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)
September 30, December 31,
2017 2016
---- ----
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $35,737 $44,767
Restricted cash 22,809 16,420
Accounts receivable, less allowance for doubtful accounts of $1,037 and $1,434, 145,506 124,846
respectively
Inventories 35,960 31,461
Prepaid expenses 13,799 14,561
Fair value of derivative instruments 8,675 5,514
Other current assets 16,742 7,099
------ -----
Total current assets 279,228 244,668
Property, equipment, land and leasehold improvements, net 4,611,633 4,346,536
Investment in unconsolidated business 9,526 8,835
Goodwill 2,075,965 2,024,409
Intangible assets, net 931,433 888,971
Fair value of derivative instruments 18,743 30,781
Other noncurrent assets 28,835 15,053
------ ------
Total assets $7,955,363 $7,559,253
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Due to Manager-related party $6,098 $6,594
Accounts payable 59,078 69,566
Accrued expenses 101,766 83,734
Current portion of long-term debt 48,335 40,016
Fair value of derivative instruments 3,992 9,297
Other current liabilities 40,932 41,802
------ ------
Total current liabilities 260,201 251,009
Long-term debt, net of current portion 3,424,776 3,039,966
Deferred income taxes 955,542 896,116
Fair value of derivative instruments 5,807 5,966
Tolling agreements - noncurrent 54,540 60,373
Other noncurrent liabilities 158,308 158,289
------- -------
Total liabilities 4,859,174 4,411,719
========= =========
Commitments and contingencies - -
Stockholders' equity(1):
Common stock ($0.001 par value; 500,000,000 authorized; 84,481,865 shares issued $84 $82
and outstanding at September 30, 2017 and 82,047,526 shares issued and outstanding
at December 31, 2016)
Additional paid in capital 1,942,417 2,089,407
Accumulated other comprehensive loss (26,222) (28,960)
Retained earnings 994,495 892,365
------- -------
Total stockholders' equity 2,910,774 2,952,894
Noncontrolling interests 185,415 194,640
------- -------
Total equity 3,096,189 3,147,534
--------- ---------
Total liabilities and equity $7,955,363 $7,559,253
========== ==========
(1) The Company is authorized to issue 100,000,000 shares of preferred stock, par value $0.001 per share. At September 30, 2017 and December 31, 2016, no preferred stock were issued or outstanding. The Company has 100 shares of special stock issued and outstanding to its
Manager at September 30, 2017 and December 31, 2016.
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
($ in Thousands, Except Share and Per Share Data)
Quarter Ended September 30,
Nine Months Ended September 30,
-------------------------------
2017 2016 2017 2016
---- ---- ---- ----
Revenue
Service revenue $358,220 $323,975 $1,067,069 $942,437
Product revenue 94,841 96,549 276,439 272,053
------ ------ ------- -------
Total revenue 453,061 420,524 1,343,508 1,214,490
------- ------- --------- ---------
Costs and expenses
Cost of services 153,218 134,512 455,038 371,832
Cost of product sales 35,669 39,845 123,143 107,923
Selling, general and administrative 84,898 77,468 244,817 222,182
Fees to Manager - related party 17,954 18,382 54,610 49,570
Depreciation 58,009 59,242 172,753 172,125
Amortization of intangibles 17,329 15,417 50,920 49,917
------ ------ ------ ------
Total operating expenses 367,077 344,866 1,101,281 973,549
------- ------- --------- -------
Operating income 85,984 75,658 242,227 240,941
Other income (expense)
Interest income 54 27 129 85
Interest expense(1) (29,291) (20,871) (90,129) (117,268)
Other income, net 4,973 16,689 7,893 20,389
----- ------ ----- ------
Net income before income taxes 61,720 71,503 160,120 144,147
Provision for income taxes (25,547) (29,022) (65,284) (60,409)
------- ------- ------- -------
Net income $36,173 $42,481 $94,836 $83,738
Less: net (loss) income attributable to noncontrolling (3,922) 455 (7,294) 165
interests
Net income attributable to MIC $40,095 $42,026 $102,130 $83,573
======= ======= ======== =======
Basic income per share attributable to MIC $0.48 $0.52 $1.23 $1.04
----- ----- ----- -----
Weighted average number of shares 83,644,806 81,220,841 82,743,285 80,570,192
outstanding: basic
Diluted income per share attributable to MIC $0.48 $0.51 $1.23 $1.03
----- ----- ----- -----
Weighted average number of shares 87,916,538 85,750,096 82,752,800 81,313,767
outstanding: diluted
Cash dividends declared per share $1.42 $1.29 $4.12 $3.74
----- ----- ----- -----
(1) Interest expense includes losses on derivative instruments of $162,000 and $6.9 million for the quarter and nine months ended September 30, 2017, respectively. For the quarter and nine months ended September 30, 2016, interest expense includes gains on derivative instruments of $3.7
million and losses on derivative instruments of $43.0 million, respectively.
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in Thousands)
Nine Months Ended
September 30,
-------------
2017 2016
---- ----
Operating activities
Net income $94,836 $83,738
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment 172,753 172,125
Amortization of intangible assets 50,920 49,917
Amortization of debt financing costs 6,464 7,536
Amortization of debt discount 2,377 -
Adjustments to derivative instruments 3,414 20,022
Fees to Manager- related party 54,610 49,570
Deferred taxes 56,791 55,126
Pension expense 6,481 6,512
Other non-cash income, net (2,651) (2,255)
Changes in other assets and liabilities, net of acquisitions:
Restricted cash (691) 727
Accounts receivable (18,938) (10,094)
Inventories (4,563) (1,047)
Prepaid expenses and other current assets (7,040) 5,967
Due to Manager-related party (178) 21
Accounts payable and accrued expenses (4,444) (3,365)
Income taxes payable (1,223) 3,848
Other, net (11,249) (1,360)
------- ------
Net cash provided by operating activities 397,669 436,988
------- -------
Investing activities
Acquisitions of businesses and investments, net of cash acquired (208,377) (38,989)
Purchases of property and equipment (234,833) (198,151)
Proceeds from insurance claim - 10,002
Loan to project developer (18,675) -
Loan repayment from project developer 6,604 -
Change in restricted cash (6,154) -
Other, net 178 861
--- ---
Net cash used in investing activities (461,257) (226,277)
-------- --------
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - (continued)
(Unaudited)
($ in Thousands)
Nine Months Ended
September 30,
-------------
2017 2016
---- ----
Financing activities
Proceeds from long-term debt $585,500 $370,000
Payment of long-term debt (200,722) (295,950)
Proceeds from the issuance of shares 5,699 7,651
Dividends paid to common stockholders (332,867) (290,527)
Contributions received from
noncontrolling interests 102 15,431
Purchase of noncontrolling interest - (9,909)
Distributions paid to noncontrolling
interests (2,962) (3,682)
Offering and equity raise costs paid (355) (678)
Debt financing costs paid (447) (1,784)
Change in restricted cash 527 5,379
Payment of capital lease obligations (366) (1,151)
---- ------
Net cash provided by (used in)
financing activities 54,109 (205,220)
------ --------
Effect of exchange rate changes on
cash and cash equivalents 449 494
Net change in cash and cash
equivalents (9,030) 5,985
------ -----
Cash and cash equivalents, beginning
of period 44,767 22,394
------ ------
Cash and cash equivalents, end of
period $35,737 $28,379
======= =======
Supplemental disclosures of cash flow
information
Non-cash investing and financing
activities:
Accrued equity offering costs $97 $90
=== ===
Accrued financing costs $21 $548
=== ====
Accrued purchases of property and
equipment $33,184 $31,728
======= =======
Issuance of shares to Manager $54,927 $116,373
======= ========
Issuance of shares to independent
directors $681 $750
==== ====
Issuance of shares for acquisition of
business $125,000 $ -
======== === ===
Conversion of convertible senior
notes to shares $17 $4
=== ===
Distributions payable to
noncontrolling interests $32 $10
=== ===
Taxes paid, net $9,810 $1,426
====== ======
Interest paid $82,108 $81,998
======= =======
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS - MD&A
Quarter Ended Change Nine Months Ended Change
September 30, Favorable/ September 30, Favorable/
(Unfavorable) (Unfavorable)
------------ ------------
2017 2016 $ % 2017 2016 $ %
---- ---- --- --- ---- ---- --- ---
($ In Thousands, Except Share and Per Share Data) (Unaudited)
Revenue
Service revenue $358,220 $323,975 34,245 10.6 $1,067,069 $942,437 124,632 13.2
Product revenue 94,841 96,549 (1,708) (1.8) 276,439 272,053 4,386 1.6
------ ------ ------ ------- ------- -----
Total revenue 453,061 420,524 32,537 7.7 1,343,508 1,214,490 129,018 10.6
------- ------- ------ --------- --------- -------
Costs and expenses
Cost of services 153,218 134,512 (18,706) (13.9) 455,038 371,832 (83,206) (22.4)
Cost of product sales 35,669 39,845 4,176 10.5 123,143 107,923 (15,220) (14.1)
Selling, general and administrative 84,898 77,468 (7,430) (9.6) 244,817 222,182 (22,635) (10.2)
Fees to Manager - related party 17,954 18,382 428 2.3 54,610 49,570 (5,040) (10.2)
Depreciation 58,009 59,242 1,233 2.1 172,753 172,125 (628) (0.4)
Amortization of intangibles 17,329 15,417 (1,912) (12.4) 50,920 49,917 (1,003) (2.0)
------ ------ ------ ------ ------ ------
Total operating expenses 367,077 344,866 (22,211) (6.4) 1,101,281 973,549 (127,732) (13.1)
------- ------- ------- --------- ------- --------
Operating income 85,984 75,658 10,326 13.6 242,227 240,941 1,286 0.5
Other income (expense)
Interest income 54 27 27 100.0 129 85 44 51.8
Interest expense(1) (29,291) (20,871) (8,420) (40.3) (90,129) (117,268) 27,139 23.1
Other income, net 4,973 16,689 (11,716) (70.2) 7,893 20,389 (12,496) (61.3)
----- ------ ------- ----- ------ -------
Net income before income taxes 61,720 71,503 (9,783) (13.7) 160,120 144,147 15,973 11.1
Provision for income taxes (25,547) (29,022) 3,475 12.0 (65,284) (60,409) (4,875) (8.1)
------- ------- ----- ------- ------- ------
Net income $36,173 $42,481 (6,308) (14.8) $94,836 $83,738 11,098 13.3
Less: net (loss) income attributable to (3,922) 455 4,377 NM (7,294) 165 7,459 NM
noncontrolling interests
Net income attributable to MIC $40,095 $42,026 (1,931) (4.6) $102,130 $83,573 18,557 22.2
======= ======= ====== ======== ======= ======
Basic income per share attributable to $0.48 $0.52 (0.04) (7.7) $1.23 $1.04 0.19 18.3
MIC
Weighted average number of shares 83,644,806 81,220,841 2,423,965 3.0 82,743,285 80,570,192 2,173,093 2.7
outstanding: basic
NM - Not meaningful
(1) Interest expense includes losses on derivative instruments of $162,000 and $6.9 million for the quarter and nine months ended September 30, 2017, respectively. For the quarter and nine months ended September 30, 2016, interest expense includes gains on derivative instruments of $3.7 million and losses on derivative instruments of $43.0 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 Change Nine Months Ended Change
September 30, Favorable/ September 30, Favorable/
(Unfavorable) (Unfavorable)
------------ ------------
2017 2016 $ % 2017 2016 $ %
---- ---- --- --- ---- ---- --- ---
($ In Thousands) (Unaudited)
Net income $36,173 $42,481 $94,836 $83,738
Interest expense, net(1) 29,237 20,844 90,000 117,183
Provision for income taxes 25,547 29,022 65,284 60,409
Depreciation 58,009 59,242 172,753 172,125
Amortization of intangibles 17,329 15,417 50,920 49,917
Fees to Manager-related party 17,954 18,382 54,610 49,570
Pension expense(2) 2,160 2,117 6,481 6,512
Other non-cash income, net(3) (3,725) (682) (961) (9,872)
------ ---- ---- ------
EBITDA excluding non-cash items(4) $182,684 $186,823 (4,139) (2.2) $533,923 $529,582 4,341 0.8
======== ======== ====== ======== ======== =====
EBITDA excluding non-cash items(4) $182,684 $186,823 $533,923 $529,582
Interest expense, net(1) (29,237) (20,844) (90,000) (117,183)
Adjustments to derivative instruments recorded (959) (8,832) 1,724 27,639
in interest expense(1)
Amortization of debt financing costs(1) 2,163 2,287 6,464 7,536
Amortization of debt discount(1) 882 - 2,377 -
Provision for income taxes, net of changes in deferred taxes (2,154) (1,115) (8,493) (5,283)
Changes in working capital (4,914) 751 (48,326) (5,303)
------ --- ------- ------
Cash provided by operating activities 148,465 159,070 397,669 436,988
Changes in working capital 4,914 (751) 48,326 5,303
Maintenance capital (12,106) (24,472) (23,062) (44,725)
expenditures(5)
Free cash flow $141,273 $133,847 7,426 5.5 $422,933 $397,566 25,367 6.4
======== ======== ===== ======== ======== ======
(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 nine months ended September 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, 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.
(4) For the quarter and nine months ended September 30, 2016, EBITDA excluding non-cash items included $13.0 million and $15.5 million, respectively, of insurance recoveries related to damaged docks at IMTT.
(5) For the quarter and nine months ended September 30, 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 Change Nine Months Ended Change
September 30, Favorable/ September 30, Favorable/
(Unfavorable) (Unfavorable)
------------ ------------
2017 2016 $ % 2017 2016 $ %
---- ---- --- --- ---- ---- --- ---
($ In Thousands) (Unaudited)
Free Cash Flow - Consolidated basis $141,273 $133,847 7,426 5.5 $422,933 $397,566 25,367 6.4
100% of CP Free Cash Flow included in (25,970) (26,718) (56,513) (56,532)
consolidated Free Cash Flow
MIC's share of CP Free Cash Flow 24,667 24,773 51,300 50,580
100% of MIC Hawaii Free Cash Flow (8,137) (8,696) (32,368) (30,432)
included in consolidated Free Cash Flow
MIC's share of MIC Hawaii Free Cash Flow 8,132 8,694 32,358 30,430
----- ----- ------ ------
Free Cash Flow - Proportionately Combined $139,965 $131,900 8,065 6.1 $417,710 $391,612 26,098 6.7
basis
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 Change Nine Months Ended Change
September 30, Favorable/ September 30, Favorable/
(Unfavorable) (Unfavorable)
------------ ------------
2017 2016 2017 2016
---- ---- ---- ----
$ $ $ % $ $ $ %
--- --- --- --- --- --- --- ---
($ In Thousands) (Unaudited)
Revenue 134,167 133,143 1,024 0.8 410,128 396,786 13,342 3.4
Cost of services 48,982 53,085 4,103 7.7 148,052 149,845 1,793 1.2
Selling, general and administrative expenses 9,104 8,358 (746) (8.9) 25,627 24,322 (1,305) (5.4)
Depreciation and amortization 31,511 35,709 4,198 11.8 93,826 103,612 9,786 9.4
------ ------ ----- ------ ------- -----
Operating income 44,570 35,991 8,579 23.8 142,623 119,007 23,616 19.8
Interest expense, net(1) (10,187) (7,827) (2,360) (30.2) (30,707) (41,462) 10,755 25.9
Other income, net 794 13,495 (12,701) (94.1) 1,954 16,947 (14,993) (88.5)
Provision for income taxes (14,422) (17,079) 2,657 15.6 (46,686) (38,717) (7,969) (20.6)
------- ------- ----- ------- ------- ------
Net income 20,755 24,580 (3,825) (15.6) 67,184 55,775 11,409 20.5
Less: net income attributable to noncontrolling interests - - - - - 59 59 100.0
--- --- --- --- --- ---
Net income attributable to MIC 20,755 24,580 (3,825) (15.6) 67,184 55,716 11,468 20.6
====== ====== ====== ====== ====== ======
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 20,755 24,580 67,184 55,775
Interest expense, net(1) 10,187 7,827 30,707 41,462
Provision for income taxes 14,422 17,079 46,686 38,717
Depreciation and amortization 31,511 35,709 93,826 103,612
Pension expense(2) 1,883 1,752 5,649 5,414
Other non-cash expense, net 178 73 315 631
--- --- --- ---
EBITDA excluding non-cash items(3) 78,936 87,020 (8,084) (9.3) 244,367 245,611 (1,244) (0.5)
====== ====== ====== ======= ======= ======
EBITDA excluding non-cash items(3) 78,936 87,020 244,367 245,611
Interest expense, net(1) (10,187) (7,827) (30,707) (41,462)
Adjustments to derivative instruments recorded in interest expense(1) (524) (2,433) (257) 10,723
Amortization of debt financing costs(1) 413 411 1,236 1,242
Provision for income taxes, net of changes in deferred taxes 344 (904) (3,069) (3,071)
Changes in working capital 3,732 (1,243) (12,413) (11,726)
----- ------ ------- -------
Cash provided by operating activities 72,714 75,024 199,157 201,317
Changes in working capital (3,732) 1,243 12,413 11,726
Maintenance capital expenditures(4) (8,116) (19,860) (13,563) (33,099)
------ ------- ------- -------
Free cash flow 60,866 56,407 4,459 7.9 198,007 179,944 18,063 10.0
====== ====== ===== ======= ======= ======
(1) Interest expense, 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 nine months ended September 30, 2016, EBITDA excluding non-cash items included $13.0 million and $15.5 million, respectively, of insurance recoveries related to damaged docks. These insurance recoveries were used to repair damaged docks and were recorded in Other Income, net. The cost of those repairs were recorded in Maintenance Capital Expenditures. Excluding insurance proceeds, EBITDA excluding non-cash items would have been $74.0 million and $230.1 million for
the quarter and nine months ended September 30, 2016, respectively. On that basis, EBITDA excluding non-cash items would have increased by $4.9 million, or 6.6%, for the quarter ended September 30, 2017, and increased by $14.2 million, or 6.2%, for the nine months ended September 30, 2017, compared with the prior comparable periods.
(4) For the quarter and nine months ended September 30, 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 $6.0 million and $19.2 million for the quarter and nine months ended September 30, 2016, respectively. On that basis, maintenance capital expenditures would have increased by $2.1 million, or 35.2%, for the
quarter ended September 30, 2017, and decreased by $5.7 million, or 29.5%, for the nine months ended September 30, 2017, compared with the prior comparable periods.
Atlantic Aviation
-----------------
Quarter Ended Change Nine Months Ended Change
September 30, Favorable/ September 30, Favorable/
(Unfavorable) (Unfavorable)
------------ ------------
2017 2016 2017 2016
---- ---- ---- ----
$ $ $ % $ $ $ %
--- --- --- --- --- --- --- ---
($ In Thousands) (Unaudited)
Revenue 211,457 186,823 24,634 13.2 621,149 544,029 77,120 14.2
Cost of services (exclusive of depreciation 92,106 77,524 (14,582) (18.8) 272,985 218,126 (54,859) (25.2)
and amortization shown separately below)
Gross margin 119,351 109,299 10,052 9.2 348,164 325,903 22,261 6.8
Selling, general and administrative expenses 57,026 53,027 (3,999) (7.5) 163,512 157,019 (6,493) (4.1)
Depreciation and amortization 25,286 22,148 (3,138) (14.2) 73,894 69,041 (4,853) (7.0)
------ ------ ------ ------ ------ ------
Operating income 37,039 34,124 2,915 8.5 110,758 99,843 10,915 10.9
Interest expense, net(1) (4,295) (5,199) 904 17.4 (13,648) (27,437) 13,789 50.3
Other (expense) income, net (14) (150) 136 90.7 (119) 191 (310) (162.3)
Provision for income taxes (11,139) (11,543) 404 3.5 (36,766) (29,258) (7,508) (25.7)
------- ------- --- ------- ------- ------
Net income 21,591 17,232 4,359 25.3 60,225 43,339 16,886 39.0
====== ====== ===== ====== ====== ======
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 21,591 17,232 60,225 43,339
Interest expense, net(1) 4,295 5,199 13,648 27,437
Provision for income taxes 11,139 11,543 36,766 29,258
Depreciation and amortization 25,286 22,148 73,894 69,041
Pension expense(2) 5 16 15 50
Other non-cash expense, net 1,212 200 1,252 448
----- --- ----- ---
EBITDA excluding non-cash 63,528 56,338 7,190 12.8 185,800 169,573 16,227 9.6
items
EBITDA excluding non-cash 63,528 56,338 185,800 169,573
items
Interest expense, net(1) (4,295) (5,199) (13,648) (27,437)
Convertible senior notes interest(3) (2,012) - (5,769) -
Adjustments to derivative instruments 464 (2,371) 3,150 4,416
recorded in interest expense(1)
Amortization of debt financing costs(1) 284 791 819 2,496
Provision for income taxes, net of changes in (1,208) (159) (5,810) (2,521)
deferred taxes
Changes in working capital (1,335) 5,142 (6,667) 11,412
------ ----- ------ ------
Cash provided by operating activities 55,426 54,542 157,875 157,939
Changes in working capital 1,335 (5,142) 6,667 (11,412)
Maintenance capital expenditures (2,165) (2,075) (5,071) (5,816)
------ ------ ------ ------
Free cash flow 54,596 47,325 7,271 15.4 159,471 140,711 18,760 13.3
====== ====== ===== ======= ======= ======
(1) Interest expense, 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) 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 Change Nine Months Ended Change
September 30, Favorable/ September 30, Favorable/
(Unfavorable) (Unfavorable)
------------ ------------
2017 2016 2017 2016
---- ---- ---- ----
$ $ $ % $ $ $ %
--- --- --- --- --- --- --- ---
($ In Thousands) (Unaudited)
Product revenue 42,445 45,538 (3,093) (6.8) 110,681 114,017 (3,336) (2.9)
Cost of product sales 5,171 7,344 2,173 29.6 15,528 17,495 1,967 11.2
Selling, general and administrative expenses 6,909 6,824 (85) (1.2) 18,318 19,331 1,013 5.2
Depreciation and amortization 14,830 14,000 (830) (5.9) 45,031 41,693 (3,338) (8.0)
------ ------ ---- ------ ------ ------
Operating income 15,535 17,370 (1,835) (10.6) 31,804 35,498 (3,694) (10.4)
Interest expense, net(1) (6,281) (2,764) (3,517) (127.2) (20,431) (31,614) 11,183 35.4
Other income, net 4,334 3,531 803 22.7 6,440 3,839 2,601 67.8
Provision for income taxes (6,337) (8,013) 1,676 20.9 (8,209) (7,626) (583) (7.6)
------ ------ ----- ------ ------ ----
Net income 7,251 10,124 (2,873) (28.4) 9,604 97 9,507 NM
Less: net (loss) income attributable to noncontrolling interest (3,890) 566 4,456 NM (7,223) 217 7,440 NM
------ --- ----- ------ --- -----
Net income (loss) attributable to MIC 11,141 9,558 1,583 16.6 16,827 (120) 16,947 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 7,251 10,124 9,604 97
Interest expense, net(1) 6,281 2,764 20,431 31,614
Provision for income taxes 6,337 8,013 8,209 7,626
Depreciation and amortization 14,830 14,000 45,031 41,693
Other non-cash income, net(2) (1,914) (1,459) (6,170) (5,424)
------ ------ ------ ------
EBITDA excluding non-cash items 32,785 33,442 (657) (2.0) 77,105 75,606 1,499 2.0
====== ====== ==== ====== ====== =====
EBITDA excluding non-cash items 32,785 33,442 77,105 75,606
Interest expense, net(1) (6,281) (2,764) (20,431) (31,614)
Adjustments to derivative instruments recorded (922) (3,778) (1,282) 11,994
in interest expense(1)
Amortization of debt financing costs(1) 379 376 1,137 1,113
Provision for income taxes, net of changes in deferred taxes 9 1 6 (8)
Changes in working capital (1,842) 949 (9,703) (1,909)
------ --- ------ ------
Cash provided by operating activities 24,128 28,226 46,832 55,182
Changes in working capital 1,842 (949) 9,703 1,909
Maintenance capital expenditures - (559) (22) (559)
--- ---- --- ----
Free cash flow 25,970 26,718 (748) (2.8) 56,513 56,532 (19) (0.0)
====== ====== ==== ====== ====== ===
NM - Not meaningful
(1) Interest expense, 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 Change Nine Months Ended Change
September 30, Favorable/ September 30, Favorable/
(Unfavorable) (Unfavorable)
------------ ------------
2017 2016 2017 2016
---- ---- ---- ----
$ $ $ % $ $ $ %
--- --- --- --- --- --- --- ---
($ In Thousands) (Unaudited)
Product revenue 52,396 51,011 1,385 2.7 165,758 158,036 7,722 4.9
Service revenue 13,826 5,258 8,568 163.0 39,476 5,258 34,218 NM
------ ----- ----- ------ ----- ------
Total revenue 66,222 56,269 9,953 17.7 205,234 163,294 41,940 25.7
Cost of product sales (exclusive of depreciation 30,498 32,501 2,003 6.2 107,615 90,428 (17,187) (19.0)
and amortization shown separately below)
Cost of services (exclusive of depreciation and amortization shown separately below) 12,131 3,946 (8,185) NM 34,015 3,946 (30,069) NM
------ ----- ------ ------ ----- -------
Cost of revenue - total 42,629 36,447 (6,182) (17.0) 141,630 94,374 (47,256) (50.1)
------ ------ ------ ------- ------ -------
Gross margin 23,593 19,822 3,771 19.0 63,604 68,920 (5,316) (7.7)
Selling, general and administrative expenses 6,874 6,540 (334) (5.1) 19,729 16,230 (3,499) (21.6)
Depreciation and amortization 3,711 2,802 (909) (32.4) 10,922 7,696 (3,226) (41.9)
----- ----- ---- ------ ----- ------
Operating income 13,008 10,480 2,528 24.1 32,953 44,994 (12,041) (26.8)
Interest expense, net(1) (1,877) (1,571) (306) (19.5) (5,795) (6,224) 429 6.9
Other expense, net (141) (187) 46 24.6 (382) (588) 206 35.0
Provision for income taxes (4,830) (3,246) (1,584) (48.8) (10,772) (14,863) 4,091 27.5
------ ------ ------ ------- ------- -----
Net income 6,160 5,476 684 12.5 16,004 23,319 (7,315) (31.4)
Less: net loss attributable to noncontrolling interests (32) (111) (79) (71.2) (71) (111) (40) (36.0)
--- ---- --- --- ---- ---
Net income attributable to MIC 6,192 5,587 605 10.8 16,075 23,430 (7,355) (31.4)
===== ===== === ====== ====== ======
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 6,160 5,476 16,004 23,319
Interest expense, net(1) 1,877 1,571 5,795 6,224
Provision for income taxes 4,830 3,246 10,772 14,863
Depreciation and amortization 3,711 2,802 10,922 7,696
Pension expense(2) 272 349 817 1,048
Other non-cash (income) expense, (3,360) 316 3,108 (6,090)
net(3)
EBITDA excluding non-cash items 13,490 13,760 (270) (2.0) 47,418 47,060 358 0.8
====== ====== ==== ====== ====== ===
EBITDA excluding non-cash items 13,490 13,760 47,418 47,060
Interest expense, net(1) (1,877) (1,571) (5,795) (6,224)
Adjustments to derivative instruments recorded in interest expense(1) 23 (250) 113 506
Amortization of debt financing 99 96 303 848
costs(1)
Provision for income taxes, net of changes in deferred taxes (1,773) (1,361) (5,265) (6,507)
Changes in working capital (2,535) (1,394) (12,852) 5,554
------ ------ ------- -----
Cash provided by operating activities 7,427 9,280 23,922 41,237
Changes in working capital 2,535 1,394 12,852 (5,554)
Maintenance capital expenditures (1,825) (1,978) (4,406) (5,251)
------ ------ ------ ------
Free cash flow 8,137 8,696 (559) (6.4) 32,368 30,432 1,936 6.4
===== ===== ==== ====== ====== =====
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 nine months ended September 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 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 Change Nine Months Ended Change
September 30, Favorable/ September 30, Favorable/
(Unfavorable) (Unfavorable)
------------ ------------
2017 2016 2017 2016
---- ---- ---- ----
$ $ $ % $ $ $ %
--- --- --- --- --- --- --- ---
($ In Thousands) (Unaudited)
Fees to Manager-related party 17,954 18,382 428 2.3 54,610 49,570 (5,040) (10.2)
Selling, general and administrative 6,214 3,925 (2,289) (58.3) 21,301 8,831 (12,470) (141.2)
expenses(1)
Operating loss (24,168) (22,307) (1,861) (8.3) (75,911) (58,401) (17,510) (30.0)
Interest expense, net(2) (6,597) (3,483) (3,114) (89.4) (19,419) (10,446) (8,973) (85.9)
Benefit for income taxes 11,181 10,859 322 3.0 37,149 30,055 7,094 23.6
------ ------ --- ------ ------ -----
Net loss (19,584) (14,931) (4,653) (31.2) (58,181) (38,792) (19,389) (50.0)
======= ======= ====== ======= ======= =======
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 (19,584) (14,931) (58,181) (38,792)
Interest expense, net(2) 6,597 3,483 19,419 10,446
Benefit for income taxes (11,181) (10,859) (37,149) (30,055)
Fees to Manager-related party 17,954 18,382 54,610 49,570
Other non-cash expense 159 188 534 563
--- --- --- ---
EBITDA excluding non-cash items (6,055) (3,737) (2,318) (62.0) (20,767) (8,268) (12,499) (151.2)
====== ====== ====== ======= ====== =======
EBITDA excluding non-cash items (6,055) (3,737) (20,767) (8,268)
Interest expense, net(2) (6,597) (3,483) (19,419) (10,446)
Convertible senior notes interest(3) 2,012 - 5,769 -
Amortization of debt financing costs(2) 988 613 2,969 1,837
Amortization of debt discount(2) 882 - 2,377 -
Benefit for income taxes, net of changes in deferred taxes 474 1,308 5,645 6,824
Changes in working capital (2,934) (2,703) (6,691) (8,634)
------ ------ ------ ------
Cash used in operating activities (11,230) (8,002) (30,117) (18,687)
Changes in working capital 2,934 2,703 6,691 8,634
----- ----- ----- -----
Free cash flow (8,296) (5,299) (2,997) (56.6) (23,426) (10,053) (13,373) (133.0)
====== ====== ====== ======= ======= =======
(1) For the quarter and nine months ended September 30, 2017, selling, general and administrative expenses included $1.4 million and $6.8 million, respectively, of costs related to the implementation of a shared service initiative. Selling, general and administrative expenses for the quarter and nine months ended September 30, 2017 also includes $3.0 million and $7.9 million, respectively, of costs incurred in connection with the evaluation of various investment and
acquisition opportunities.
(2) Interest expense, net, included non-cash amortization of deferred financing fees and non-cash amortization of debt discount related to the 2.00% Convertible Senior Notes due October 2023.
(3) Represents the cash interest expense reclassified to Atlantic Aviation related to the 2.00% Convertible Senior Notes due October 2023, proceeds of which were used to pay down a portion of Atlantic Aviation's credit facility in October 2016.
MACQUARIE INFRASTRUCTURE CORPORATION
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA
EXCLUDING NON-CASH ITEMS AND A RECONCILIATION FROM CASH PROVIDED BY/(USED IN)
OPERATING ACTIVITIES TO PROPORTIONATELY COMBINED FREE CASH FLOW
For the Quarter Ended September 30, 2017
----------------------------------------
IMTT Atlantic Contracted MIC Hawaii(1) MIC Corporate Proportionately Contracted Power
Aviation Power(1) Combined(2) 100% MIC
Hawaii
100%
---
($ in Thousands) (Unaudited)
Net income (loss) 20,755 21,591 7,705 6,161 (19,584) 36,628 7,251 6,160
Interest expense, net(3) 10,187 4,295 5,598 1,875 6,597 28,552 6,281 1,877
Provision (benefit) for income taxes 14,422 11,139 6,337 4,830 (11,181) 25,547 6,337 4,830
Depreciation and 31,511 25,286 12,949 3,706 - 73,452 14,830 3,711
amortization
of intangibles
Fees to Manager-related - - - - 17,954 17,954 - -
party
Pension expense(4) 1,883 5 - 272 - 2,160 - 272
Other non-cash expense (income), net(5) 178 1,212 (1,913) (3,361) 159 (3,725) (1,914) (3,360)
--- ----- ------ ------ --- ------ ------ ------
EBITDA excluding non-cash items 78,936 63,528 30,676 13,483 (6,055) 180,568 32,785 13,490
------ ------ ------ ------ ------ ------- ------ ------
EBITDA excluding non-cash items 78,936 63,528 30,676 13,483 (6,055) 180,568 32,785 13,490
Interest expense, net(3) (10,187) (4,295) (5,598) (1,875) (6,597) (28,552) (6,281) (1,877)
Convertible senior notes interest(6) - (2,012) - - 2,012 - - -
Adjustments to (524) 464 (786) 23 - (823) (922) 23
derivative instruments
recorded in interest
expense, net(3)
Amortization of debt financing charges(3) 413 284 365 99 988 2,149 379 99
Amortization of debt discount(3) - - - - 882 882 - -
Provision/benefit for 344 (1,208) 10 (1,773) 474 (2,153) 9 (1,773)
income taxes, net of
changes in deferred taxes
Changes in working capital 3,732 (1,335) (2,284) (2,534) (2,934) (5,355) (1,842) (2,535)
----- ------ ------ ------ ------ ------ ------ ------
Cash provided by (used in) operating activities 72,714 55,426 22,383 7,423 (11,230) 146,716 24,128 7,427
Changes in working capital (3,732) 1,335 2,284 2,534 2,934 5,355 1,842 2,535
Maintenance capital expenditures (8,116) (2,165) - (1,825) - (12,106) - (1,825)
------ ------ --- ------ --- ------- --- ------
Proportionately Combined Free Cash flow 60,866 54,596 24,667 8,132 (8,296) 139,965 25,970 8,137
====== ====== ====== ===== ====== ======= ====== =====
For the Quarter Ended September 30, 2016
----------------------------------------
IMTT Atlantic Contracted MIC MIC Proportionately
Aviation Power(1) Combined(2) Contracted MIC
Hawaii(1) Corporate Power 100% Hawaii
100%
---
($ in Thousands) (Unaudited)
Net income (loss) 24,580 17,232 9,489 5,479 (14,931) 41,849 10,124 5,476
Interest expense, net(3) 7,827 5,199 2,352 1,568 3,483 20,429 2,764 1,571
Provision (benefit) for 17,079 11,543 8,014 3,246 (10,859) 29,023 8,013 3,246
income taxes
Depreciation and 35,709 22,148 12,122 2,800 - 72,779 14,000 2,802
amortization of
intangibles
Fees to Manager-related - - - - 18,382 18,382 - -
party
Pension expense(4) 1,752 16 - 349 - 2,117 - 349
Other non-cash expense 73 200 (1,459) 316 188 (682) (1,459) 316
(income), net(5)
EBITDA excluding non- 87,020 56,338 30,518 13,758 (3,737) 183,897 33,442 13,760
cash items(7)
EBITDA excluding non- 87,020 56,338 30,518 13,758 (3,737) 183,897 33,442 13,760
cash items(7)
Interest expense, net(3) (7,827) (5,199) (2,352) (1,568) (3,483) (20,429) (2,764) (1,571)
Adjustments to derivative instruments (2,433) (2,371) (3,334) (253) - (8,391) (3,778) (250)
recorded in interest
expense, net(3)
Amortization of debt financing charges(3) 411 791 362 96 613 2,273 376 96
Provision/benefit for (904) (159) - (1,361) 1,308 (1,116) 1 (1,361)
income taxes, net of
changes in deferred taxes
Changes in working capital (1,243) 5,142 875 (1,390) (2,703) 681 949 (1,394)
------ ----- --- ------ ------ --- --- ------
Cash provided by (used 75,024 54,542 26,069 9,282 (8,002) 156,915 28,226 9,280
in) operating activities
Changes in working capital 1,243 (5,142) (875) 1,390 2,703 (681) (949) 1,394
Maintenance capital (19,860) (2,075) (421) (1,978) - (24,334) (559) (1,978)
expenditures(8)
Proportionately 56,407 47,325 24,773 8,694 (5,299) 131,900 26,718 8,696
Combined Free Cash
Flow
For the Nine Months Ended September 30, 2017
--------------------------------------------
IMTT Atlantic Aviation Contracted MIC MIC Proportionately Contracted Power
Power(1) Combined(2) 100% MIC
Hawaii(1) Corporate Hawaii
100%
---
($ in Thousands) (Unaudited)
Net income (loss) 67,184 60,225 9,858 16,009 (58,181) 95,095 9,604 16,004
Interest expense, net(3) 30,707 13,648 18,177 5,789 19,419 87,740 20,431 5,795
Provision (benefit) for 46,686 36,766 8,209 10,772 (37,149) 65,284 8,209 10,772
income taxes
Depreciation and amortization of intangibles 93,826 73,894 39,390 10,908 - 218,018 45,031 10,922
Fees to Manager-related - - - - 54,610 54,610 - -
party
Pension expense(4) 5,649 15 - 817 - 6,481 - 817
Other non-cash expense (income), net(5) 315 1,252 (6,148) 3,108 534 (939) (6,170) 3,108
--- ----- ------ ----- --- ---- ------ -----
EBITDA excluding non-cash items 244,367 185,800 69,486 47,403 (20,767) 526,289 77,105 47,418
------- ------- ------ ------ ------- ------- ------ ------
EBITDA excluding non-cash items 244,367 185,800 69,486 47,403 (20,767) 526,289 77,105 47,418
Interest expense, net(3) (30,707) (13,648) (18,177) (5,789) (19,419) (87,740) (20,431) (5,795)
Convertible senior notes interest(6) - (5,769) - - 5,769 - - -
Adjustments to derivative instruments recorded in
interest expense, net(3) (257) 3,150 (1,088) 112 - 1,917 (1,282) 113
Amortization of debt financing charges(3) 1,236 819 1,094 303 2,969 6,421 1,137 303
Amortization of debt discount(3) - - - - 2,377 2,377 - -
Provision/benefit for income taxes, net of changes
in deferred taxes (3,069) (5,810) 7 (5,265) 5,645 (8,492) 6 (5,265)
Changes in working capital (12,413) (6,667) (9,824) (12,833) (6,691) (48,428) (9,703) (12,852)
------- ------ ------ ------- ------ ------- ------ -------
Cash provided by (used in) operating activities 199,157 157,875 41,498 23,931 (30,117) 392,344 46,832 23,922
Changes in working capital 12,413 6,667 9,824 12,833 6,691 48,428 9,703 12,852
Maintenance capital expenditures (13,563) (5,071) (22) (4,406) - (23,062) (22) (4,406)
------- ------ --- ------ --- ------- --- ------
Proportionately Combined Free Cash Flow 198,007 159,471 51,300 32,358 (23,426) 417,710 56,513 32,368
======= ======= ====== ====== ======= ======= ====== ======
For the Nine Months Ended September 30, 2016
--------------------------------------------
IMTT(9) Atlantic Aviation Contracted MIC MIC Proportionately Contracted Power
Power(1) Combined(2) 100% MIC
Hawaii(1) Corporate Hawaii
100%
---
($ in Thousands) (Unaudited)
Net income (loss) 55,775 43,339 896 23,322 (38,792) 84,540 97 23,319
Interest expense, net(3) 41,462 27,437 27,801 6,221 10,446 113,367 31,614 6,224
Provision (benefit) for income taxes 38,717 29,258 7,625 14,863 (30,055) 60,408 7,626 14,863
Depreciation and 103,612 69,041 36,067 7,694 - 216,414 41,693 7,696
amortization of
intangibles
Fees to Manager-related - - - - 49,570 49,570 - -
party
Pension expense(4) 5,414 50 - 1,048 - 6,512 - 1,048
Other non-cash expense (income), net(5) 631 448 (5,405) (6,090) 563 (9,853) (5,424) (6,090)
--- --- ------ ------ --- ------ ------ ------
EBITDA excluding non-cash items(7) 245,611 169,573 66,984 47,058 (8,268) 520,958 75,606 47,060
------- ------- ------ ------ ------ ------- ------ ------
EBITDA excluding non-cash items(7) 245,611 169,573 66,984 47,058 (8,268) 520,958 75,606 47,060
Interest expense, net(3) (41,462) (27,437) (27,801) (6,221) (10,446) (113,367) (31,614) (6,224)
Adjustments to 10,723 4,416 10,756 503 - 26,398 11,994 506
derivative instruments
recorded in interest
expense, net(3)
Amortization of debt financing charges(3) 1,242 2,496 1,071 848 1,837 7,494 1,113 848
Provision/benefit for (3,071) (2,521) (9) (6,507) 6,824 (5,284) (8) (6,507)
income taxes, net of
changes in deferred taxes
Changes in working capital (11,726) 11,412 (2,187) 5,558 (8,634) (5,577) (1,909) 5,554
------- ------ ------ ----- ------ ------ ------ -----
Cash provided by (used in) operating activities 201,317 157,939 48,814 41,239 (18,687) 430,622 55,182 41,237
Changes in working capital 11,726 (11,412) 2,187 (5,558) 8,634 5,577 1,909 (5,554)
Maintenance capital expenditures(8) (33,099) (5,816) (421) (5,251) - (44,587) (559) (5,251)
------- ------ ---- ------ --- ------- ---- ------
Proportionately Combined Free Cash Flow 179,944 140,711 50,580 30,430 (10,053) 391,612 56,532 30,432
======= ======= ====== ====== ======= ======= ====== ======
(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, 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 nine months ended September 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) For the quarter and nine months ended September 30, 2016, EBITDA excluding non-cash items included $13.0 million and $15.5 million, respectively, of insurance recoveries related to damaged docks at IMTT.
(8) For the quarter and nine months ended September 30, 2016, maintenance capital expenditures included $13.9 million associated with the rebuilding of damaged docks, the majority of which were insured losses, at IMTT.
(9) 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-third-quarter-2017-financial-results-increases-quarterly-cash-dividend-300547835.html
SOURCE Macquarie Infrastructure Corporation
