MIC Reports Second Quarter 2018 Financial Results, Cash Dividend Of $1.00 Per Share
NEW YORK, Aug. 1, 2018 /PRNewswire/ -- Macquarie Infrastructure Corporation (NYSE: MIC) reported its financial results for the second quarter of 2018 in line with expectations.
Net income increased 39.4% to $36.3 million from $26.0 million in the second quarter of 2017 (the prior comparable period) on unrealized gains on derivative instruments (versus losses in 2017), a reduction in management fees and lower taxes.
Adjusted Proportionately Combined EBITDA excluding non-cash items of $170.8 million was down 2.9% versus the prior comparable period reflecting primarily a reduced contribution from IMTT, as forecast.
Cash generated by operating activities was flat with the prior comparable period at $121.9 million, with higher interest and tax expenses offset by favorable movements in working capital.
Adjusted Free Cash Flow, which excludes certain one-time items including transaction related costs, was $126.6 million, down 10.3% from $141.1 million in the prior comparable period on increased interest expense, taxes and maintenance capital expenditures.
The MIC board of directors authorized a cash dividend of $1.00 per share, or $4.00 annualized, for the second quarter of 2018. The dividend will be payable on August 16, 2018 to shareholders of record on August 13, 2018. The Company reaffirmed its previous guidance for a distribution of $1.00 per share in each quarter of 2018.
Christopher Frost, MIC chief executive officer, said: "We are pleased with the progress on our strategic priorities, particularly the sale of BEC and momentum in repurposing and repositioning initiatives at IMTT. MIC's financial results for the second quarter continue to demonstrate the underlying strength and resilience of our businesses."
"MIC's financial and operational performance was consistent with our guidance for the year and supported the authorization of a dividend of $1.00 per share. We remain confident in the sustainability of our dividend at the current level and the prospect of dividend growth over the medium term," added Frost.
Second Quarter Segment Results
-- IMTT generated EBITDA of $74.0 million, a decrease of 10% on the prior
comparable period, primarily due to the deferred revenue recognized in
connection with the cancellation of a construction project in June of
2017 and the forecasted temporary decline in capacity utilization.
Consistent with prior guidance, storage utilization declined to 86.1% in
the quarter compared with 94.0% in the prior comparable period. MIC
expects utilization to decline to the low 80s percent range before
recovering to the low 90s percent range in 2020, subject to market
conditions.
-- Atlantic Aviation generated EBITDA of $60.3 million, an increase of 5.1%
over the prior comparable period, driven by growth in general aviation
flight activity and contributions from acquired fixed base operations.
-- Contracted Power generated EBITDA of $33.1 million, up 20.1% on the
prior comparable period, on fees received from a developer of renewable
power projects, improved wind resources and increased tariff-based
revenue from the thermal power generation facility.
-- MIC Hawaii generated EBITDA of $11.5 million, down 21.4% on the prior
comparable period, primarily driven by higher expenses related to the
Company's design-build mechanical contractor and the Hawaii Gas rate
case. A portion of the increased costs at Hawaii Gas are expected to be
recovered in rates that were approved by the Hawaii Public Utilities
Commission in an Interim Decision and Order issued on June 27, 2018. The
new rates were implemented on July 1, 2018. MIC expects an increase in
regulated revenue at Hawaii Gas of approximately $8.9 million per year.
Strategic Initiatives
Sale of Bayonne Energy Center (BEC)
On July 29, 2018 MIC announced that it had entered into an agreement to sell 100% of BEC to NHIP II Bayonne Holdings LLC for $900 million in cash and assumed debt. Closing of the transaction is subject to receipt of customary approvals from the New York Public Service Commission and the Federal Energy Regulatory Commission, among others, and is expected to occur in the fourth quarter of 2018.
The debt balance outstanding at BEC at closing is expected to be $243.5 million. MIC anticipates using part of the net proceeds of approximately $650 million, after transaction fees and expenses, to reduce debt including $150 million outstanding on the revolving credit facility at the Company's IMTT business. MIC expects its ratio of net debt to EBITDA to be less than 4.5 times at year end 2018.
Proceeds not used to reduce debt will be available to fund a portion of MIC's planned growth capital deployments. The MIC Board will consider options for returning any excess capital to shareholders.
MIC expects the taxable gain from the sale of BEC to utilize the majority of its federal prior year Net Operating Loss carry-forward although the Company expects to be able to offset future federal taxable income with the tax benefits associated with capital deployments.
IMTT Repurposing and Repositioning
As previously announced, MIC is undertaking initiatives related to the repurposing of certain IMTT storage assets and repositioning portions of the business in response to shifts in global demand and trade flows impacting IMTT.
-- Repurposing Existing Capacity IMTT anticipates repurposing up to three
million barrels of storage capacity on the Lower Mississippi River away
from primarily heavy and residual oils to gasoline and distillates,
chemicals and vegetable and/or tropical oils. Capacity utilization at
IMTT is expected to average in the mid-80s percent range in 2018 and to
increase to the low 90s percent range in 2020, both subject to market
conditions. Capacity utilization averaged 86.1% during the second
quarter and 84.8% during June. Approximately 1.3 million barrels of IMTT
storage capacity is currently being repurposed. Of that, 500,000 barrels
were contracted in the second quarter and an additional 370,000 barrels
were contracted in the third quarter. IMTT expects to invest
approximately $15 million in the repurposing of storage capacity in 2018
and had deployed approximately $2.8 million through June.
-- Repositioning, Creating Additional Capacity and Capability IMTT expects
to deploy an additional approximately $15 million in 2018 on projects
that will develop new storage capacity and/or improve terminal
(primarily pipeline) connectivity. In July, repositioning activities
included the negotiation and signing of an agreement with a chemicals
manufacturer for the construction of approximately 200,000 barrels of
new capacity and related eight year storage contract. The project is
expected to be completed in late 2019 and require an investment of
approximately $20.0 million.
Portfolio and Capital Management
In its results release for the first quarter of 2018 MIC noted that it expected to deploy approximately $300 million during the year on a combination of growth projects and "bolt-on" acquisitions and to exit certain smaller, non-core businesses. To date, the Company has deployed, or committed to deploy, approximately $200 million including in the acquisition (on-field consolidation) of a fixed base operation by Atlantic Aviation in January 2018, the completion of the development of additional power generating capacity prior to the sale of BEC and the development of additional capacity and capability at IMTT.
Including a previously announced sale of IMTT subsidiary OMI Environmental Solutions, Inc., through June 30, 2018, MIC has exited businesses and terminated projects that have generated an aggregate approximately $40 million of cash proceeds.
Segment EBITDA Guidance
MIC adjusted its prior guidance for the generation of EBITDA in 2018 to reflect primarily the expected early fourth quarter closing of the sale of BEC. As a result, the expected contribution from Contracted Power has been reduced by $10 to $15 million to a range of $80 to $90 million. The Company also increased its estimate of expenses incurred in its Corporate/Other segment by $5 million to reflect the expected higher cost of advisory services incurred in connection with addressing shareholder matters.
IMTT: $285 - $295 million
Atlantic Aviation: $265 - $275 million
Contracted Power: $80 - $90 million
MIC Hawaii: $60 - $65 million
Corporate/Other: $(20) - $(20) million
Summary Financial Information
Quarter Ended Change Six Months Ended Change
June 30, Favorable/ June 30, Favorable/
(Unfavorable) (Unfavorable)
------------ ------------
2018 2017 $ % 2018 2017 $ %
---- ---- --- --- ---- ---- --- ---
($ In Thousands, Except Share and Per Share Data) (Unaudited)
GAAP Metrics
Net income $36,279 $26,025 10,254 39.4 $83,074 $58,663 24,411 41.6
Weighted average number of shares outstanding: basic 85,082,209 82,430,324 2,651,885 3.2 84,952,551 82,285,053 2,667,498 3.2
Net income per share attributable to MIC $0.45 $0.32 0.13 40.6 $1.36 $0.75 0.61 81.3
Cash provided by operating activities(1) 121,900 121,043 857 0.7 266,002 248,637 17,365 7.0
MIC Non-GAAP Metrics
EBITDA excluding non-cash items(2) $168,935 $170,924 (1,989) (1.2) $349,854 $351,239 (1,385) (0.4)
Shared service implementation costs(3) - 3,091 (3,091) (100.0) - 5,445 (5,445) (100.0)
Investment and acquisition/disposition costs(3) 4,651 4,850 (199) (4.1) 5,595 4,850 745 15.4
Adjusted EBITDA excluding non-cash items(3) $173,586 $178,865 (5,279) (3.0) $355,449 $361,534 (6,085) (1.7)
======== ======== ====== ======== ======== ======
Cash interest(4) $(31,789) $(26,410) (5,379) (20.4) $(61,602) $(52,284) (9,318) (17.8)
Cash taxes (3,712) (2,618) (1,094) (41.8) (7,583) (6,339) (1,244) (19.6)
Maintenance capital expenditures (9,490) (6,480) (3,010) (46.5) (19,352) (10,956) (8,396) (76.6)
Noncontrolling interest(5) (1,948) (2,244) 296 13.2 (4,379) (3,915) (464) (11.9)
Adjusted Free Cash Flow(3) $126,647 $141,113 (14,466) (10.3) $262,533 $288,040 (25,507) (8.9)
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__________________
(1) Conformed to current period presentation for the adoption of ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. See Note 2, ''Basis of Presentation'', in our Notes to Consolidated
Condensed Financial Statements in Part I of Form 10-Q for the quarter ended June 30, 2018.
(2) 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.
(3) For 2018 and 2017, Adjusted EBITDA excluding non-cash items and Adjusted Free Cash Flow excludes costs relating to certain investment and acquisition/disposition activities. Adjusted EBITDA excluding non-cash items and Adjusted Free Cash Flow for 2017 also excludes implementation costs relating to our shared services center.
(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.
(5) Noncontrolling interest adjustment represents the portion of Free Cash Flow not attributable to MIC's ownership interest.
Conference Call and Webcast
When: MIC has scheduled a conference call for 8:00 a.m. Eastern Time on Thursday, August 2, 2018 during which management will review and comment on the second quarter 2018 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.
Supplemental Materials: MIC will prepare materials in support of its conference call. The materials will be available for downloading from the Company's website prior to the call.
Replay: For interested individuals unable to participate in the live conference call, a replay will be available after 2:00 p.m. on August 2, 2018 through midnight on August 8, 2018, at +1(404) 537-3406 or +1(855) 859-2056, Passcode: 7635099. 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, including Free Cash Flow, reflect MIC'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 expense reflected in the statements of operations. EBITDA excluding non-cash items also excludes base management fees and performance fees, if any, whether paid in cash or stock.
Given MIC's varied ownership levels in its CP and MIC Hawaii segments, together with obligations to report the results of these businesses on a consolidated basis, GAAP measures such as net income (loss) do not fully reflect all of the items management considers in assessing the amount of cash generated based on its ownership interest in its businesses. The Company notes that the proportionately combined metrics used may be calculated in a different manner by other companies and may limit their usefulness as a comparative measure. Therefore, proportionately combined metrics should be used as a supplemental measure to help understand MIC's financial performance and not in lieu of financial results reported under GAAP.
The Company's businesses can be characterized as 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 interest, tax payments 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 to 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 expense. 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 and are not included in pension expense. 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 to help understand MIC's financial performance and not in lieu of its financial results reported under GAAP.
See tables below for a reconciliation of EBITDA excluding non-cash items and EBITDA excluding non-cash items, to Net Income (loss) and a reconciliation of Free Cash Flow to cash from operating activities.
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 growth and maintenance 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 associated with acquisitions or dispositions, litigation risks; 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.MIC is not an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of MIC 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 MIC.
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
($ in Thousands, Except Share Data)
June 30, December 31,
2018 2017
---- ----
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $53,976 $47,121
Restricted cash 27,509 24,963
Accounts receivable, less allowance for doubtful accounts
of $1,143 and $895, respectively 128,629 158,152
Inventories 31,495 36,955
Prepaid expenses 10,073 14,685
Fair value of derivative instruments 15,893 11,965
Other current assets 14,261 13,804
Assets held for sale(1) 951,982 -
------- ---
Total current assets 1,233,818 307,645
Property, equipment, land and leasehold improvements, net 3,760,023 4,659,614
Investment in unconsolidated business 9,073 9,526
Goodwill 2,046,896 2,068,668
Intangible assets, net 833,325 914,098
Fair value of derivative instruments 26,652 24,455
Other noncurrent assets 26,527 24,945
------ ------
Total assets $7,936,314 $8,008,951
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Due to Manager - related party $7,435 $5,577
Accounts payable 42,187 60,585
Accrued expenses 71,293 89,496
Current portion of long-term debt 42,676 50,835
Fair value of derivative instruments 730 1,710
Other current liabilities 39,709 47,762
Liabilities held for sale(1) 307,149 -
------- ---
Total current liabilities 511,179 255,965
Long-term debt, net of current portion 3,342,260 3,530,311
Deferred income taxes 651,080 632,070
Fair value of derivative instruments 1,705 4,668
Tolling agreements - noncurrent - 52,595
Other noncurrent liabilities 186,020 182,639
------- -------
Total liabilities 4,692,244 4,658,248
--------- ---------
Commitments and contingencies - -
Stockholders' equity (2):
Common stock ($0.001 par value; 500,000,000 authorized; 85,186,385 shares $85 $85
issued and outstanding at June 30, 2018 and 84,733,957 shares issued and
outstanding at December 31, 2017)
Additional paid in capital 1,655,367 1,840,033
Accumulated other comprehensive loss (33,466) (29,993)
Retained earnings 1,458,767 1,343,567
--------- ---------
Total stockholders' equity 3,080,753 3,153,692
Noncontrolling interests 163,317 197,011
------- -------
Total equity 3,244,070 3,350,703
--------- ---------
Total liabilities and equity $7,936,314 $8,008,951
========== ==========
_________________
(1) See Note 2, ''Basis of Presentation'', in our Notes to Consolidated Condensed Financial Statements in Part 1 of Form 10-Q for the quarter ended June 30, 2018, for further discussion on assets and liabilities held for sale.
(2) The Company is authorized to issue 100,000,000 shares of preferred stock, par value $0.001 per share. At June 30, 2018 and December 31, 2017, no preferred stock were issued or outstanding. The Company had 100 shares of special stock issued and
outstanding to its Manager at June 30, 2018 and December 31, 2017.
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
($ in Thousands, Except Share and Per Share Data)
Quarter Ended June 30, Six Months Ended June 30,
---------------------- -------------------------
2018 2017 2018 2017
---- ---- ---- ----
Revenue
Service revenue $375,997 $345,045 $778,606 $708,849
Product revenue 102,083 93,945 201,030 181,598
------- ------ ------- -------
Total revenue 478,080 438,990 979,636 890,447
------- ------- ------- -------
Costs and expenses
Cost of services 179,725 147,114 367,195 301,820
Cost of product sales 47,164 40,249 100,549 87,474
Selling, general and administrative 88,927 82,967 175,884 159,919
Fees to Manager - related party 10,852 18,433 23,780 36,656
Depreciation 61,086 57,063 122,444 114,744
Amortization of intangibles 18,224 15,898 35,440 33,591
------ ------ ------
Total operating expenses 405,978 361,724 825,292 734,204
------- ------- ------- -------
Operating income 72,102 77,266 154,344 156,243
Other income (expense)
Interest income 111 41 191 75
Interest expense(1) (30,287) (35,356) (49,077) (60,838)
Other income, net 6,248 1,738 6,290 2,920
----- ----- ----- -----
Net income before income taxes 48,174 43,689 111,748 98,400
Provision for income taxes (11,895) (17,664) (28,674) (39,737)
------- ------- ------- -------
Net income $36,279 $26,025 $83,074 $58,663
Less: net (loss) income attributable to (2,087) 5 (32,126) (3,372)
noncontrolling interests
Net income attributable to MIC $38,366 $26,020 $115,200 $62,035
======= ======= ======== =======
Basic income per share attributable to MIC $0.45 $0.32 $1.36 $0.75
Weighted average number of shares outstanding: 85,082,209 82,430,324 84,952,551 82,285,053
basic
Diluted income per share attributable to MIC $0.45 $0.32 $1.34 $0.75
Weighted average number of shares outstanding: 85,091,945 82,439,840 89,316,951 82,294,608
diluted
Cash dividends declared per share $1.00 $1.38 $2.00 $2.70
----- ----- ----- -----
(1) Interest expense includes gains on derivative instruments of $5.9 million and $21.0 million for the quarter and six months ended June 30, 2018, respectively. For the quarter and six months ended June 30, 2017, interest expense includes losses on derivative instruments of $7.7 million and
$6.8 million, respectively.
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in Thousands)
Six Months Ended
June 30,
--------
2018 2017(1)
---- ------
Operating activities
Net income $83,074 $58,663
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization of property and equipment 122,444 114,744
Amortization of intangible assets 35,440 33,591
Amortization of debt financing costs 5,239 4,301
Amortization of debt discount 1,800 1,495
Adjustments to derivative instruments (16,424) 8,382
Fees to Manager- related party 23,780 36,656
Deferred taxes 21,091 33,398
Pension expense 4,190 4,321
Other non-cash expense (income), net 35 (2,935)
Changes in other assets and liabilities, net of acquisitions/ dispositions:
Accounts receivable 9,603 (7,871)
Inventories (1,816) (4,256)
Prepaid expenses and other current assets 324 (2,529)
Due to Manager - related party (18) (122)
Accounts payable and accrued expenses (15,637) (15,782)
Income taxes payable 517 (1,506)
Other, net (7,640) (11,913)
Net cash provided by operating activities 266,002 248,637
------- -------
Investing activities
Acquisitions of businesses and investments, net of cash acquired (12,420) (66,321)
Purchases of property and equipment (109,830) (130,351)
Loan to project developer (17,800) (14,675)
Loan repayment from project developer 16,561 1,396
Proceeds from sale of business, net of cash divested 41,038 -
Other, net 157 61
Net cash used in investing activities (82,294) (209,890)
------- --------
Financing activities
Proceeds from long-term debt $208,500 $264,500
Payment of long-term debt (168,223) (98,542)
Proceeds from the issuance of shares 125 5,321
Dividends paid to common stockholders (207,344) (216,508)
Contributions received from noncontrolling interests 373 -
Distributions paid to noncontrolling interests (1,943) (2,040)
Offering and equity raise costs paid (80) (182)
Debt financing costs paid (2,874) (447)
Payment of capital lease obligations (54) (53)
Net cash used in financing activities (171,520) (47,951)
-------- -------
Effect of exchange rate changes on cash and cash equivalents (670) 188
Net change in cash, cash equivalents and restricted cash 11,518 (9,016)
------ ------
Cash, cash equivalents and restricted cash, beginning of period 72,084 61,257
------ ------
Cash, cash equivalents and restricted cash, end of period $83,602 $52,241
======= =======
Supplemental disclosures of cash flow information
Non-cash investing and financing activities:
Accrued equity offering costs $27 $44
=== ===
Accrued purchases of property and equipment $23,489 $41,354
======= =======
Issuance of shares to Manager $21,905 $36,927
======= =======
Issuance of shares to independent directors $750 $681
==== ====
Conversion of convertible senior notes to shares $6 $17
=== ===
Distributions payable to noncontrolling interests $21 $ -
=== === ===
Taxes paid, net $7,862 $7,845
====== ======
Interest paid $62,541 $54,601
======= =======
_________________
(1) Conformed to current period presentation for the adoption of ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. See Note 2,
''Basis of Presentation'', in our Notes to Consolidated Condensed Financial Statements in Part I of Form 10-Q for the quarter ended June 30, 2018.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated condensed balance sheets that sum
to the total of the same amounts presented in the consolidated condensed statements of cash flows:
As of June 30,
--------------
2018 2017
---- ----
Cash and cash equivalents $53,976 $28,873
Restricted cash - current 27,509 23,368
Restricted cash held for sale(2) 2,117 -
Total of cash, cash equivalents and restricted cash shown in the $83,602 $52,241
consolidated condensed statement of cash flows
______________________
(2) Represents restricted cash related to BEC, which were classified as held for sale at June 30, 2018. See Note 2, "Basis of Presentation", in our Notes to Consolidated Condensed Financial Statements in Part 1 of Form 10-Q for the quarter ended June 30, 2018, for further discussion.
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS - MD&A
Quarter Ended Change Six Months Ended Change
June 30, Favorable/ June 30, Favorable/
(Unfavorable) (Unfavorable)
------------ ------------
2018 2017 $ % 2018 2017 $ %
---- ---- --- --- ---- ---- --- ---
($ In Thousands, Except Share and Per Share Data) (Unaudited)
Revenue
Service revenue $375,997 $345,045 30,952 9.0 $778,606 $708,849 69,757 9.8
Product revenue 102,083 93,945 8,138 8.7 201,030 181,598 19,432 10.7
------- ------ ----- ------- ------- ------
Total revenue 478,080 438,990 39,090 8.9 979,636 890,447 89,189 10.0
------- ------- ------ ------- ------- ------
Costs and expenses
Cost of services 179,725 147,114 (32,611) (22.2) 367,195 301,820 (65,375) (21.7)
Cost of product sales 47,164 40,249 (6,915) (17.2) 100,549 87,474 (13,075) (14.9)
Selling, general and administrative 88,927 82,967 (5,960) (7.2) 175,884 159,919 (15,965) (10.0)
Fees to Manager - related party 10,852 18,433 7,581 41.1 23,780 36,656 12,876 35.1
Depreciation 61,086 57,063 (4,023) (7.1) 122,444 114,744 (7,700) (6.7)
Amortization of intangibles 18,224 15,898 (2,326) (14.6) 35,440 33,591 (1,849) (5.5)
------ ------ ------ ------ ------ ------
Total operating expenses 405,978 361,724 (44,254) (12.2) 825,292 734,204 (91,088) (12.4)
------- ------- ------- ------- ------- -------
Operating income 72,102 77,266 (5,164) (6.7) 154,344 156,243 (1,899) (1.2)
Other income (expense)
Interest income 111 41 70 170.7 191 75 116 154.7
Interest expense(1) (30,287) (35,356) 5,069 14.3 (49,077) (60,838) 11,761 19.3
Other income, net 6,248 1,738 4,510 NM 6,290 2,920 3,370 115.4
----- ----- ----- ----- ----- -----
Net income before income taxes 48,174 43,689 4,485 10.3 111,748 98,400 13,348 13.6
Provision for income taxes (11,895) (17,664) 5,769 32.7 (28,674) (39,737) 11,063 27.8
------- ------- ----- ------- ------- ------
Net income $36,279 $26,025 10,254 39.4 $83,074 $58,663 24,411 41.6
Less: net (loss) income attributable to (2,087) 5 2,092 NM (32,126) (3,372) 28,754 NM
noncontrolling interests
Net income attributable to MIC $38,366 $26,020 12,346 47.4 $115,200 $62,035 53,165 85.7
======= ======= ====== ======== ======= ======
Basic income per share attributable to $0.45 $0.32 0.13 40.6 $1.36 $0.75 0.61 81.3
MIC
Weighted average number of shares 85,082,209 82,430,324 2,651,885 3.2 84,952,551 82,285,053 2,667,498 3.2
outstanding: basic
________________________
NM - Not meaningful
(1) Interest expense includes gains on derivative instruments of $5.9 million and $21.0 million for the quarter and six months ended June 30, 2018, respectively. For the
quarter and six months ended June 30, 2017, interest expense includes losses on derivative instruments of $7.7 million and $6.8 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 Six Months Ended Change
June 30, Favorable/ June 30, Favorable/
(Unfavorable) (Unfavorable)
------------ ------------
2018 2017 $ % 2018 2017 $ %
---- ---- --- --- ---- ---- --- ---
($ In Thousands) (Unaudited)
Net income $36,279 $26,025 $83,074 $58,663
Interest expense, net(1) 30,176 35,315 48,886 60,763
Provision for income taxes 11,895 17,664 28,674 39,737
Depreciation 61,086 57,063 122,444 114,744
Amortization of intangibles 18,224 15,898 35,440 33,591
Fees to Manager- related party 10,852 18,433 23,780 36,656
Pension expense(2) 1,937 1,627 4,190 4,321
Other non-cash (income) expense, net(3) (1,514) (1,101) 3,366 2,764
EBITDA excluding non-cash items $168,935 $170,924 (1,989) (1.2) $349,854 $351,239 (1,385) (0.4)
======== ======== ====== ======== ======== ======
EBITDA excluding non-cash items $168,935 $170,924 $349,854 $351,239
Interest expense, net(1) (30,176) (35,315) (48,886) (60,763)
Adjustments to derivative (4,706) 5,930 (19,755) 2,683
instruments recorded in
interest expense(1)
Amortization of debt 2,190 2,099 5,239 4,301
financing costs(1)
Amortization of debt 903 876 1,800 1,495
discount(1)
Provision for current income (3,712) (2,618) (7,583) (6,339)
taxes
Changes in working capital(4) (11,534) (20,853) (14,667) (43,979)
------- ------- ------- -------
Cash provided by operating 121,900 121,043 266,002 248,637
activities
Changes in working capital(4) 11,534 20,853 14,667 43,979
Maintenance capital (9,490) (6,480) (19,352) (10,956)
expenditures
Free cash flow $123,944 $135,416 (11,472) (8.5) $261,317 $281,660 (20,343) (7.2)
======== ======== ======= ======== ======== =======
__________________
(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.
(2) Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses.
(3) Other non-cash (income) expense, net, primarily includes non-cash amortization of tolling liabilities, unrealized gains (losses) on commodity hedges and non-cash gains
(losses) related to disposal of assets. See "Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items, Free Cash Flow and
Proportionately Combined Metrics"above for further discussion.
(4) Conformed to current period presentation for the adoption of ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. See Note 2, ''Basis of
Presentation'', in our Notes to Consolidated Condensed Financial Statements in Part I of Form 10-Q for the quarter ended June 30, 2018.
MACQUARIE INFRASTRUCTURE CORPORATION
RECONCILIATION FROM CONSOLIDATED FREE CASH FLOW TO
PROPORTIONATELY COMBINED FREE CASH FLOW
Change
Favorable/(Unfavorable)
-----------------------
Quarter Ended Change Six Months Ended June 30,
June 30, Favorable/(Unfavorable)
-------- -----------------------
2018 2017 $ % 2018 2017 $ %
---- ---- --- --- ---- ---- --- ---
($ In Thousands) (Unaudited)
Free Cash Flow - Consolidated $123,944 $135,416 (11,472) (8.5) $261,317 $281,660 (20,343) (7.2)
basis
100% of Contracted Power Free (25,973) (20,704) (40,500) (30,543)
Cash Flow included in
consolidated Free Cash Flow
MIC's share of Contracted Power Free Cash Flow 24,027 18,462 36,126 26,633
100% of MIC Hawaii Free Cash (7,226) (9,295) (17,976) (24,231)
Flow included in consolidated
Free Cash Flow
MIC's share of MIC Hawaii Free 7,224 9,293 17,971 24,226
Cash Flow
Free Cash Flow - Proportionately $121,996 $133,172 (11,176) (8.4) $256,938 $277,745 (20,807) (7.5)
Combined 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 Six Months Ended Change
June 30, Favorable/ June 30, Favorable/
(Unfavorable) (Unfavorable)
------------ ------------
2018 2017 2018 2017
---- ---- ---- ----
$ $ $ % $ $ $ %
--- --- --- --- --- --- --- ---
($ In Thousands) (Unaudited)
Revenue 129,363 137,144 (7,781) (5.7) 268,752 275,961 (7,209) (2.6)
Cost of services 49,716 49,224 (492) (1.0) 104,141 99,070 (5,071) (5.1)
Selling, general and administrative 7,814 7,485 (329) (4.4) 17,120 16,523 (597) (3.6)
expenses
Depreciation and amortization 32,770 30,795 (1,975) (6.4) 66,019 62,315 (3,704) (5.9)
------ ------ ------ ------ ------ ------
Operating income 39,063 49,640 (10,577) (21.3) 81,472 98,053 (16,581) (16.9)
Interest expense, net(1) (10,933) (11,763) 830 7.1 (18,672) (20,520) 1,848 9.0
Other income, net 154 452 (298) (65.9) 450 1,160 (710) (61.2)
Provision for income taxes (8,087) (15,716) 7,629 48.5 (17,773) (32,264) 14,491 44.9
Net income 20,197 22,613 (2,416) (10.7) 45,477 46,429 (952) (2.1)
====== ====== ====== ====== ====== ====
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 20,197 22,613 45,477 46,429
Interest expense, net(1) 10,933 11,763 18,672 20,520
Provision for income taxes 8,087 15,716 17,773 32,264
Depreciation and amortization 32,770 30,795 66,019 62,315
Pension expense(2) 1,743 1,350 3,823 3,766
Other non-cash expense, net 310 69 404 137 `
--- --- --- ---
EBITDA excluding non-cash items 74,040 82,306 (8,266) (10.0) 152,168 165,431 (13,263) (8.0)
====== ====== ====== ======= ======= =======
EBITDA excluding non-cash items 74,040 82,306 152,168 165,431
Interest expense, net(1) (10,933) (11,763) (18,672) (20,520)
Adjustments to derivative (1,351) 1,587 (5,393) 267
instruments recorded in interest
expense(1)
Amortization of debt financing 412 412 823 823
costs(1)
Provision for current income taxes (4,376) (1,155) (8,652) (3,413)
Changes in working capital 5,545 (16,881) 10,634 (16,145)
----- ------- ------ -------
Cash provided by operating activities 63,337 54,506 130,908 126,443
Changes in working capital (5,545) 16,881 (10,634) 16,145
Maintenance capital expenditures (5,483) (2,987) (12,472) (5,447)
Free cash flow 52,309 68,400 (16,091) (23.5) 107,802 137,141 (29,339) (21.4)
====== ====== ======= ======= ======= =======
_____________________
(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.
Atlantic Aviation
-----------------
Quarter Ended Change Six Months Ended June 30, Change
June 30, Favorable/ Favorable/
(Unfavorable) (Unfavorable)
------------ ------------
2018 2017 2018 2017
---- ---- ---- ----
$ $ $ % $ $ $ %
--- --- --- --- --- --- --- ---
($ In Thousands) (Unaudited)
Revenue 232,931 196,939 35,992 18.3 480,133 409,692 70,441 17.2
Cost of services (exclusive of 115,994 86,957 (29,037) (33.4) 232,687 180,879 (51,808) (28.6)
depreciation and amortization
shown separately below)
Gross margin 116,937 109,982 6,955 6.3 247,446 228,813 18,633 8.1
Selling, general and administrative 56,717 52,596 (4,121) (7.8) 116,656 106,486 (10,170) (9.6)
expenses
Depreciation and amortization 26,959 23,575 (3,384) (14.4) 52,438 48,608 (3,830) (7.9)
------ ------ ------ ------ ------ ------
Operating income 33,261 33,811 (550) (1.6) 78,352 73,719 4,633 6.3
Interest expense, net(1) (4,242) (5,907) 1,665 28.2 (4,311) (9,353) 5,042 53.9
Other expense, net (555) (19) (536) NM (499) (105) (394) NM
Provision for income taxes (7,600) (11,077) 3,477 31.4 (19,711) (25,627) 5,916 23.1
Net income 20,864 16,808 4,056 24.1 53,831 38,634 15,197 39.3
====== ====== ===== ====== ====== ======
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 20,864 16,808 53,831 38,634
Interest expense, net(1) 4,242 5,907 4,311 9,353
Provision for income taxes 7,600 11,077 19,711 25,627
Depreciation and amortization 26,959 23,575 52,438 48,608
Pension expense(2) 6 5 11 10
Other non-cash expense (income), 597 (22) 909 40
net
EBITDA excluding non-cash items 60,268 57,350 2,918 5.1 131,211 122,272 8,939 7.3
====== ====== ===== ======= ======= =====
EBITDA excluding non-cash items 60,268 57,350 131,211 122,272
Interest expense, net(1) (4,242) (5,907) (4,311) (9,353)
Convertible senior notes (2,013) (2,013) (4,025) (3,757)
interest(3)
Adjustments to derivative (1,077) 2,553 (5,444) 2,686
instruments recorded in interest
expense(1)
Amortization of debt financing 283 221 562 535
costs(1)
Provision for current income taxes (7,207) (1,730) (13,740) (4,602)
Changes in working capital 4,572 784 10,591 (5,332)
----- --- ------ ------
Cash provided by operating 50,584 51,258 114,844 102,449
activities
Changes in working capital (4,572) (784) (10,591) 5,332
Maintenance capital expenditures (1,807) (1,981) (3,109) (2,906)
------ ------
Free cash flow 44,205 48,493 (4,288) (8.8) 101,144 104,875 (3,731) (3.6)
====== ====== ====== ======= ======= ======
_____________________
NM - Not meaningful
(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 Six Months Ended June
30, Change
June 30, Favorable/ Favorable/
(Unfavorable) (Unfavorable)
------------ ------------
2018 2017 2018 2017
---- ---- ---- ----
$ $ $ % $ $ $ %
--- --- --- --- --- --- --- ---
($ In Thousands) (Unaudited)
Product revenue 41,403 40,166 1,237 3.1 76,690 68,236 8,454 12.4
Cost of product sales 5,862 5,498 (364) (6.6) 11,699 10,357 (1,342) (13.0)
Selling, general and administrative 7,510 6,244 (1,266) (20.3) 15,022 11,409 (3,613) (31.7)
expenses
Depreciation and amortization 14,519 14,861 342 2.3 30,046 30,201 155 0.5
------ ------ --- ------ ------ ---
Operating income 13,512 13,563 (51) (0.4) 19,923 16,269 3,654 22.5
Interest expense, net(1) (4,832) (8,767) 3,935 44.9 (5,717) (14,150) 8,433 59.6
Other income, net 6,721 1,341 5,380 NM 7,726 2,106 5,620 NM
Provision for income taxes (3,654) (1,845) (1,809) (98.0) (4,604) (1,872) (2,732) (145.9)
Net income 11,747 4,292 7,455 173.7 17,328 2,353 14,975 NM
Less: net (loss) income attributable to (2,003) 16 2,019 NM (32,059) (3,333) 28,726 NM
noncontrolling interest
Net income attributable to MIC 13,750 4,276 9,474 NM 49,387 5,686 43,701 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 11,747 4,292 17,328 2,353
Interest expense, net(1) 4,832 8,767 5,717 14,150
Provision for income taxes 3,654 1,845 4,604 1,872
Depreciation and amortization 14,519 14,861 30,046 30,201
Other non-cash income, net(2) (1,690) (2,232) (3,578) (4,256)
------ ------ ------
EBITDA excluding non-cash items 33,062 27,533 5,529 20.1 54,117 44,320 9,797 22.1
====== ====== ===== ====== ====== =====
EBITDA excluding non-cash items 33,062 27,533 54,117 44,320
Interest expense, net(1) (4,832) (8,767) (5,717) (14,150)
Adjustments to derivative (2,178) 1,474 (8,148) (360)
instruments recorded in interest
expense(1)
Amortization of debt financing 379 379 758 758
costs(1)
(Provision) benefit for current income (54) 85 (70) (3)
taxes
Changes in working capital(3) (12,694) (7,621) (11,775) (8,206)
------- ------ ------- ------
Cash provided by operating 13,683 13,083 29,165 22,359
activities
Changes in working capital(3) 12,694 7,621 11,775 8,206
Maintenance capital expenditures (404) - (440) (22)
Free cash flow 25,973 20,704 5,269 25.4 40,500 30,543 9,957 32.6
====== ====== ===== ====== ====== =====
_____________________
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.
(3) Conformed to current period presentation for the adoption of ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. See Note 2, ''Basis of Presentation'', in our Notes to Consolidated Condensed Financial Statements in Part I of Form 10-Q for the quarter ended June 30, 2018.
MIC Hawaii
----------
Quarter Ended Change Six Months Ended June
30, Change
June 30, Favorable/ Favorable/
(Unfavorable) (Unfavorable)
------------ ------------
2018 2017 2018 2017
---- ---- ---- ----
$ $ $ % $ $ $ %
--- --- --- --- --- --- --- ---
($ In Thousands) (Unaudited)
Product revenue 60,680 53,779 6,901 12.8 124,340 113,362 10,978 9.7
Service revenue 14,935 12,193 2,742 22.5 32,184 25,650 6,534 25.5
Total revenue 75,615 65,972 9,643 14.6 156,524 139,012 17,512 12.6
Cost of product sales (exclusive of 41,302 34,751 (6,551) (18.9) 88,850 77,117 (11,733) (15.2)
depreciation and amortization
shown separately below)
Cost of services (exclusive of 14,015 10,944 (3,071) (28.1) 30,367 21,884 (8,483) (38.8)
depreciation and amortization
shown separately below)
Cost of revenue - total 55,317 45,695 (9,622) (21.1) 119,217 99,001 (20,216) (20.4)
------ ------ ------- ------ -------
Gross margin 20,298 20,277 21 0.1 37,307 40,011 (2,704) (6.8)
Selling, general and administrative 7,974 6,770 (1,204) (17.8) 15,203 12,855 (2,348) (18.3)
expenses
Depreciation and amortization 4,896 3,730 (1,166) (31.3) 9,051 7,211 (1,840) (25.5)
----- ----- ------ ----- ----- ------
Operating income 7,428 9,777 (2,349) (24.0) 13,053 19,945 (6,892) (34.6)
Interest expense, net(1) (1,887) (2,207) 320 14.5 (3,177) (3,918) 741 18.9
Other income (expense), net 6 (36) 42 116.7 (1,313) (241) (1,072) NM
Provision for income taxes (2,144) (2,563) 419 16.3 (2,949) (5,942) 2,993 50.4
Net income 3,403 4,971 (1,568) (31.5) 5,614 9,844 (4,230) (43.0)
Less: net loss attributable to (84) (11) 73 NM (67) (39) 28 71.8
noncontrolling interests
Net income attributable to MIC 3,487 4,982 (1,495) (30.0) 5,681 9,883 (4,202) (42.5)
===== ===== ====== ===== ===== ======
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 3,403 4,971 5,614 9,844
Interest expense, net(1) 1,887 2,207 3,177 3,918
Provision for income taxes 2,144 2,563 2,949 5,942
Depreciation and amortization 4,896 3,730 9,051 7,211
Pension expense(2) 128 272 255 545
Other non-cash (income) expense, (954) 897 5,245 6,468
net(3)
EBITDA excluding non-cash items 11,504 14,640 (3,136) (21.4) 26,291 33,928 (7,637) (22.5)
====== ====== ====== ====== ====== ======
EBITDA excluding non-cash items 11,504 14,640 26,291 33,928
Interest expense, net(1) (1,887) (2,207) (3,177) (3,918)
Adjustments to derivative (100) 316 (770) 90
instruments recorded in interest
expense(1)
Amortization of debt financing 95 99 192 204
costs(1)
Provision for current income taxes (590) (2,041) (1,229) (3,492)
Changes in working capital(4) (11) (1,812) (6,150) (10,539)
--- ------ ------ -------
Cash provided by operating 9,011 8,995 15,157 16,273
activities
Changes in working capital(4) 11 1,812 6,150 10,539
Maintenance capital expenditures (1,796) (1,512) (3,331) (2,581)
------ ------
Free cash flow 7,226 9,295 (2,069) (22.3) 17,976 24,231 (6,255) (25.8)
===== ===== ====== ====== ====== ======
_____________________
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.
(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 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) Conformed to current period presentation for the adoption of ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. See Note 2, ''Basis of
Presentation'', in our Notes to Consolidated Condensed Financial Statements in Part I of Form 10-Q for the quarter ended June 30, 2018.
Corporate and Other
-------------------
Quarter Ended Change Six Months Ended June 30, Change
June 30, Favorable/ Favorable/
(Unfavorable) (Unfavorable)
------------ ------------
2018 2017 2018 2017
---- ---- ---- ----
$ $ $ % $ $ $ %
--- --- --- --- --- --- --- ---
($ In Thousands) (Unaudited)
Fees to Manager-related party 10,852 18,433 7,581 41.1 23,780 36,656 12,876 35.1
Selling, general and administrative 10,144 11,092 948 8.5 14,346 15,087 741 4.9
expenses(1)
Depreciation 166 - (166) NM 330 - (330) NM
--- --- ---- --- --- ----
Operating loss (21,162) (29,525) 8,363 28.3 (38,456) (51,743) 13,287 25.7
Interest expense, net(2) (8,282) (6,671) (1,611) (24.1) (17,009) (12,822) (4,187) (32.7)
Other expense, net (78) - (78) NM (74) - (74) NM
Benefit for income taxes 9,590 13,537 (3,947) (29.2) 16,363 25,968 (9,605) (37.0)
Net loss (19,932) (22,659) 2,727 12.0 (39,176) (38,597) (579) (1.5)
======= ======= ===== ======= ======= ====
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 (19,932) (22,659) (39,176) (38,597)
Interest expense, net(2) 8,282 6,671 17,009 12,822
Benefit for income taxes (9,590) (13,537) (16,363) (25,968)
Depreciation 166 - 330 -
Fees to Manager-related party 10,852 18,433 23,780 36,656
Pension expense(3) 60 - 101 -
Other non-cash expense, net 223 187 386 375
--- --- --- ---
EBITDA excluding non-cash items (9,939) (10,905) 966 8.9 (13,933) (14,712) 779 5.3
====== ======= === ======= ======= ===
EBITDA excluding non-cash items (9,939) (10,905) (13,933) (14,712)
Interest expense, net(2) (8,282) (6,671) (17,009) (12,822)
Convertible senior notes 2,013 2,013 4,025 3,757
interest(4)
Amortization of debt financing 1,021 988 2,904 1,981
costs(2)
Amortization of debt discount(2) 903 876 1,800 1,495
Benefit for current income taxes 8,515 2,223 16,108 5,171
Changes in working capital (8,946) 4,677 (17,967) (3,757)
------ ----- ------- ------
Cash used in operating activities (14,715) (6,799) (24,072) (18,887)
Changes in working capital 8,946 (4,677) 17,967 3,757
Free cash flow (5,769) (11,476) 5,707 49.7 (6,105) (15,130) 9,025 59.6
====== ======= ===== ====== ======= =====
_____________________
NM - Not meaningful
(1) For the quarter and six months ended June 30, 2018, selling, general and administrative expenses included $4.7 million and $5.6 million, respectively, of costs incurred in connection with the evaluation of various investment and acquisition/ disposition opportunities, compared with $4.9 million for the quarter and six months ended June 30, 2017. For the quarter and six
months ended June 30, 2017, selling, general and administrative expenses also included $3.1 million and $5.4 million, respectively, of costs related to the implementation of a shared service center.
(2) Interest expense, net, included non-cash amortization of deferred financing fees and non-cash amortization of debt discount related to the 2.00% Convertible Senior Notes due October 2023.
(3) Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses.
(4) Represents the cash interest expense reclassified to Atlantic Aviation related to the 2.00% Convertible Senior Notes due October 2023, proceeds of which were used to pay down a portion of Atlantic Aviation's credit facility in October 2016.
MACQUARIE INFRASTRUCTURE CORPORATION
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA
EXCLUDING NON-CASH ITEMS AND A RECONCILIATION FROM CASH PROVIDED BY/(USED
IN) OPERATING ACTIVITIES TO PROPORTIONATELY COMBINED FREE CASH FLOW
For the Quarter Ended June 30, 2018
-----------------------------------
IMTT Atlantic Contracted MIC MIC Proportionately Contracted MIC
Aviation Power(1) Hawaii(1) Corporate Combined(2) Power Hawaii
100% 100%
--- ---
($ in Thousands) (Unaudited)
Net income (loss) 20,197 20,864 10,947 3,402 (19,932) 35,478 11,747 3,403
Interest expense, net(3) 10,933 4,242 4,350 1,886 8,282 29,693 4,832 1,887
Provision (benefit) for income taxes 8,087 7,600 3,654 2,144 (9,590) 11,895 3,654 2,144
Depreciation and amortization 32,770 26,959 13,062 4,894 166 77,851 14,519 4,896
Fees to Manager-related party - - - - 10,852 10,852 - -
Pension expense(4) 1,743 6 - 128 60 1,937 - 128
Other non-cash expense (income), 310 597 (1,751) (954) 223 (1,575) (1,690) (954)
net(5)
EBITDA excluding non-cash items 74,040 60,268 30,262 11,500 (9,939) 166,131 33,062 11,504
------ ------ ------ ------ ------ ------- ------ ------
EBITDA excluding non-cash items 74,040 60,268 30,262 11,500 (9,939) 166,131 33,062 11,504
Interest expense, net(3) (10,933) (4,242) (4,350) (1,886) (8,282) (29,693) (4,832) (1,887)
Convertible senior notes interest(6) - (2,013) - - 2,013 - - -
Adjustments to derivative (1,351) (1,077) (1,893) (99) - (4,420) (2,178) (100)
instruments recorded in interest
expense, net(3)
Amortization of debt financing 412 283 365 95 1,021 2,176 379 95
costs(3)
Amortization of debt discount(3) - - - - 903 903 - -
(Provision) benefit for current income (4,376) (7,207) (54) (590) 8,515 (3,712) (54) (590)
taxes
Changes in working capital 5,545 4,572 (12,562) (10) (8,946) (11,401) (12,694) (11)
----- ----- ------- --- ------ ------- ------- ---
Cash provided by (used in) operating 63,337 50,584 11,768 9,010 (14,715) 119,984 13,683 9,011
activities
Changes in working capital (5,545) (4,572) 12,562 10 8,946 11,401 12,694 11
Maintenance capital expenditures (5,483) (1,807) (303) (1,796) - (9,389) (404) (1,796)
------ ------ ---- ------ --- ------ ---- ------
Proportionately Combined Free Cash flow 52,309 44,205 24,027 7,224 (5,769) 121,996 25,973 7,226
====== ====== ====== ===== ====== ======= ====== =====
For the Quarter Ended June 30, 2017
-----------------------------------
IMTT Atlantic Contracted MIC MIC Proportionately Contracted MIC
Aviation Power(1) Hawaii(1) Corporate Combined(2) Power Hawaii
100% 100%
--- ---
($ in Thousands) (Unaudited)
Net income (loss) 22,613 16,808 4,107 4,973 (22,659) 25,842 4,292 4,971
Interest expense, net(3) 11,763 5,907 7,789 2,204 6,671 34,334 8,767 2,207
Provision (benefit) for income taxes 15,716 11,077 1,845 2,563 (13,537) 17,664 1,845 2,563
Depreciation and amortization 30,795 23,575 12,980 3,726 - 71,076 14,861 3,730
Fees to Manager-related party - - - - 18,433 18,433 - -
Pension expense(4) 1,350 5 - 272 - 1,627 - 272
Other non-cash expense (income), 69 (22) (2,232) 898 187 (1,100) (2,232) 897
net(5)
EBITDA excluding non-cash items 82,306 57,350 24,489 14,636 (10,905) 167,876 27,533 14,640
------ ------ ------ ------ ------- ------- ------ ------
EBITDA excluding non-cash items 82,306 57,350 24,489 14,636 (10,905) 167,876 27,533 14,640
Interest expense, net(3) (11,763) (5,907) (7,789) (2,204) (6,671) (34,334) (8,767) (2,207)
Convertible senior notes interest(6) - (2,013) - - 2,013 - - -
Adjustments to derivative 1,587 2,553 1,312 315 - 5,767 1,474 316
instruments recorded in interest
expense, net(3)
Amortization of debt financing 412 221 365 99 988 2,085 379 99
costs(3)
Amortization of debt discount(3) - - - - 876 876 - -
(Provision) benefit for current income (1,155) (1,730) 85 (2,041) 2,223 (2,618) 85 (2,041)
taxes
Changes in working capital(7) (16,881) 784 (7,215) (1,793) 4,677 (20,428) (7,621) (1,812)
------- --- ------ ------ ----- ------- ------ ------
Cash provided by (used in) operating 54,506 51,258 11,247 9,012 (6,799) 119,224 13,083 8,995
activities
Changes in working capital(7) 16,881 (784) 7,215 1,793 (4,677) 20,428 7,621 1,812
Maintenance capital expenditures (2,987) (1,981) - (1,512) - (6,480) - (1,512)
Proportionately Combined Free Cash Flow 68,400 48,493 18,462 9,293 (11,476) 133,172 20,704 9,295
====== ====== ====== ===== ======= ======= ====== =====
For the Six Months Ended Ended June 30, 2018
--------------------------------------------
IMTT Atlantic Contracted MIC MIC Proportionately Contracted MIC
Aviation Power(1) Hawaii(1) Corporate Combined(2) Power Hawaii
100% 100%
--- ---
($ in Thousands) (Unaudited)
Net income (loss) 45,477 53,831 15,215 5,612 (39,176) 80,959 17,328 5,614
Interest expense, net(3) 18,672 4,311 5,246 3,178 17,009 48,416 5,717 3,177
Provision (benefit) for income taxes 17,773 19,711 4,604 2,949 (16,363) 28,674 4,604 2,949
Depreciation and amortization 66,019 52,438 26,706 9,044 330 154,537 30,046 9,051
Fees to Manager-related party - - - - 23,780 23,780 - -
Pension expense(4) 3,823 11 - 255 101 4,190 - 255
Other non-cash expense (income), 404 909 (3,635) 5,245 386 3,309 (3,578) 5,245
net(5)
EBITDA excluding non-cash items 152,168 131,211 48,136 26,283 (13,933) 343,865 54,117 26,291
------- ------- ------ ------ ------- ------- ------ ------
EBITDA excluding non-cash items 152,168 131,211 48,136 26,283 (13,933) 343,865 54,117 26,291
Interest expense, net(3) (18,672) (4,311) (5,246) (3,178) (17,009) (48,416) (5,717) (3,177)
Convertible senior notes interest(6) - (4,025) - - 4,025 - - -
Adjustments to derivative (5,393) (5,444) (7,094) (766) - (18,697) (8,148) (770)
instruments recorded in interest
expense, net(3)
Amortization of debt financing 823 562 730 192 2,904 5,211 758 192
costs(3)
Amortization of debt discount(3) - - - - 1,800 1,800 - -
(Provision) benefit for current income (8,652) (13,740) (70) (1,229) 16,108 (7,583) (70) (1,229)
taxes
Changes in working capital 10,634 10,591 (11,373) (6,149) (17,967) (14,264) (11,775) (6,150)
------ ------ ------- ------ ------- ------- ------- ------
Cash provided by (used in) operating 130,908 114,844 25,083 15,153 (24,072) 261,916 29,165 15,157
activities
Changes in working capital (10,634) (10,591) 11,373 6,149 17,967 14,264 11,775 6,150
Maintenance capital expenditures (12,472) (3,109) (330) (3,331) - (19,242) (440) (3,331)
------- ------ ---- ------ --- ------- ---- ------
Proportionately Combined Free Cash Flow 107,802 101,144 36,126 17,971 (6,105) 256,938 40,500 17,976
======= ======= ====== ====== ====== ======= ====== ======
For the Six Months Ended Ended June 30, 2017
--------------------------------------------
IMTT Atlantic Contracted MIC MIC Proportionately Contracted MIC
Aviation Power(1) Hawaii(1) Corporate Combined(2) Power Hawaii
100% 100%
--- ---
($ in Thousands) (Unaudited)
Net income (loss) 46,429 38,634 2,153 9,848 (38,597) 58,467 2,353 9,844
Interest expense, net(3) 20,520 9,353 12,579 3,914 12,822 59,188 14,150 3,918
Provision (benefit) for income taxes 32,264 25,627 1,872 5,942 (25,968) 39,737 1,872 5,942
Depreciation and amortization 62,315 48,608 26,441 7,202 - 144,566 30,201 7,211
Fees to Manager-related party - - - - 36,656 36,656 - -
Pension expense(4) 3,766 10 - 545 - 4,321 - 545
Other non-cash expense (income), 137 40 (4,235) 6,469 375 2,786 (4,256) 6,468
net(5)
EBITDA excluding non-cash items 165,431 122,272 38,810 33,920 (14,712) 345,721 44,320 33,928
------- ------- ------ ------ ------- ------- ------ ------
EBITDA excluding non-cash items 165,431 122,272 38,810 33,920 (14,712) 345,721 44,320 33,928
Interest expense, net(3) (20,520) (9,353) (12,579) (3,914) (12,822) (59,188) (14,150) (3,918)
Convertible senior notes interest(6) - (3,757) - - 3,757 - - -
Adjustments to derivative 267 2,686 (302) 89 - 2,740 (360) 90
instruments recorded in interest
expense, net(3)
Amortization of debt financing 823 535 729 204 1,981 4,272 758 204
costs(3)
Amortization of debt discount(3) - - - - 1,495 1,495 - -
(Provision) benefit for current income (3,413) (4,602) (3) (3,492) 5,171 (6,339) (3) (3,492)
taxes
Changes in working capital(7) (16,145) (5,332) (8,094) (10,519) (3,757) (43,847) (8,206) (10,539)
------- ------ ------ ------- ------ ------- ------ -------
Cash provided by (used in) operating 126,443 102,449 18,561 16,288 (18,887) 244,854 22,359 16,273
activities
Changes in working capital(7) 16,145 5,332 8,094 10,519 3,757 43,847 8,206 10,539
Maintenance capital expenditures (5,447) (2,906) (22) (2,581) - (10,956) (22) (2,581)
---
Proportionately Combined Free Cash Flow 137,141 104,875 26,633 24,226 (15,130) 277,745 30,543 24,231
======= ======= ====== ====== ======= ======= ====== ======
___________________________
(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 fees and non-cash amortization of debt discount related to the 2.00% Convertible Senior Notes due October 2023.
(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) Conformed to current period presentation for the adoption of ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. See Note 2, ''Basis of Presentation'', in our Notes to Consolidated Condensed Financial Statements in Part I of Form 10-Q for the quarter ended June 30, 2018.
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SOURCE Macquarie Infrastructure Corporation
