Macquarie Infrastructure Corporation Reports Strong Second Quarter 2015 Financial Results, Increased Cash Dividend

  • Quarterly cash dividend increased by 16.8% over second quarter in 2014 to $1.11 per share
  • Underlying proportionately combined Free Cash Flow up 46% to $1.46 per share
  • Continued strong contribution from Atlantic Aviation, IMTT, acquisitions made in 2014 and 2015

NEW YORK--()--Macquarie Infrastructure Corporation (NYSE:MIC) reported its financial results for the second quarter of 2015 including proportionately combined Free Cash Flow of $0.96 per share. Excluding the impact of expenses incurred in connection with the Company’s refinancing of its International-Matex Tank Terminals (“IMTT”) business and its acquisition of Bayonne Energy Center (“BEC”), MIC’s adjusted proportionately combined Free Cash Flow per share increased 46% to $1.46 per share.

The increase in adjusted proportionately combined Free Cash Flow was the result of the consolidation of the 50% of IMTT that MIC did not own in the prior comparable period, the continued strong performance on the part of the Company’s IMTT and Atlantic Aviation subsidiaries, together with contributions from acquisitions completed over the last year.

On July 16, 2014 MIC completed the acquisition of the remainder of IMTT and on April 1, 2015 the Company closed on the acquisition of BEC. Excluding costs incurred in the refinancing of IMTT’s long-term debt, IMTT generated 90.2% more cash in the second quarter of 2015 than it did in the prior comparable period.

Atlantic Aviation completed the acquisition of seven additional fixed base operations between April 30, 2014 and January 26, 2015. In total, cash generation by Atlantic Aviation improved by over 23.4% in the quarter ended June 30, 2015 versus the prior comparable period.

“We’re pleased with the contribution to our overall results from each of our businesses, and particularly with the performance of the various acquisitions concluded since the end of the first quarter in 2014,” said James Hooke, chief executive officer of MIC. “As with the first quarter in 2015, our businesses generated Free Cash Flow in the second quarter at levels ahead of our expectations at the start of the year.”

MIC regards Free Cash Flow as an important tool in assessing the performance of its capital intensive, cash generative businesses. Proportionately combined Free Cash Flow refers to the sum of the Free Cash Flow generated by MIC’s businesses in proportion to its equity interest in each entity after holding company costs. See “Use of Non-GAAP Measures” below for MIC’s definition of Free Cash Flow and further information.

MIC’s reported increase in cash generation was partially offset on a per share basis by a 40% increase in its number of shares outstanding at the end of the second quarter in 2015 compared with the second quarter in 2014. The increased share count reflects the impact of capital raised in connection with acquisitions of IMTT and BEC as well as the settlement of base and performance fees earned by the Company’s Manager, Macquarie Infrastructure Management (USA) Inc. over the prior year.

On July 30, 2015, the MIC Board of Directors authorized the payment of a cash dividend for the second quarter of 2015 of $1.11 per share, an increase of 3.7% from the $1.07 per share paid following the first quarter and an increase of 16.8% over the $0.95 per share paid following the second quarter of 2014. The second quarter dividend will be paid on August 18, 2015 to shareholders of record on August 13, 2015.

“Consistent with our stated objectives, we are returning a substantial portion of the cash generated by our businesses to shareholders in the form of a cash dividend again this quarter,” said Hooke. “We remain confident in our ability to deliver year on year growth in our dividend of 14% in each of 2015 and 2016.” The payment of a dividend, including any increased dividend, is at all times subject to the continued stable performance of MIC’s businesses. MIC has increased its cash dividend in each of the last seven quarters.

MIC generated adjusted proportionately combined Free Cash Flow of $116.1 million in the second quarter, up 104.7% from $56.7 million in the comparable quarter in 2014. For the six months ended June 30, 2015, MIC’s adjusted proportionately combined Free Cash Flow increased to $239.5 million, up 96.9% from $121.6 million in the first half of 2014. The increases in both the quarter and year to date periods reflect primarily the acquisition of the remainder of IMTT, the improved performance of both IMTT and Atlantic Aviation, together with contributions from acquisitions completed during the preceding year.

In determining the adjusted proportionately combined Free Cash Flow generated by its businesses, MIC includes in its consolidated results only the operating results of those businesses. In May of 2015 the Company’s IMTT subsidiary incurred $31.4 million in interest rate swap breakage fees in connection with the refinancing of its long-term debt facilities which are excluded from the calculation of adjusted proportionately combined Free Cash Flow. Swap break fees arise out of the termination of out-of-market interest rate hedges.

MIC also paid approximately $8.4 million in transaction-related expenses in connection with its acquisition of BEC during the quarter that have been excluded from the calculation of adjusted proportionately combined Free Cash Flow. The Company reported incurring an additional approximately $0.7 million in relation to the transaction in the first quarter of the year.

Consolidated Results for the Second Quarter and Six Months

MIC reported a net loss, before tax, of $97.0 million for the second quarter of 2015 compared with net income of $15.2 million in the second quarter of 2014. For the six months ended June 30, 2015, MIC reported a net loss, before tax, of $242.9 million compared with net income of $43.9 million for the comparable period in 2014. The losses in the second quarter and year to date periods in 2015 reflect a doubling of gross profit in both periods primarily offset by higher costs, including fees payable to MIC’s Manager of $154.6 million and $319.8 million, respectively. The increased costs, other than management fees, reflect primarily the selling, general and administrative expenses of the businesses acquired by the Company during the past year, together with BEC-related transaction expenses of approximately $9.1 million, and costs associated with the conversion of the Company from a limited liability company to a corporation.

MIC’s consolidated revenue for the second quarter of 2015 rose 50.8% to $423.7 million compared with $280.9 million in the second quarter of 2014. Consolidated revenue increased 47.6% for the six-month period ended June 30, 2015 versus the comparable period in 2014. The increases reflect the contribution from acquisitions concluded during the past year, and growth in the volume of products sold, partially offset by a reduction in energy costs, such as those for aviation fuel, which are passed through to customers of MIC’s businesses and recovered in revenue.

Reported gross profit – defined as revenue less cost of goods sold – removes the volatility in revenue associated with fluctuations in energy costs. MIC’s consolidated gross profit rose 100.3% to $230.0 million in the second quarter of 2015 from $114.8 million in the same period in 2014. For the six months ended June 30, 2015, the Company’s gross profit increased 100.1% versus the comparable period in 2014. The increases in both periods reflect primarily the impact of acquisitions concluded in each of 2014 and 2015.

MIC’s consolidated operating loss for the quarter and six months ended June 30, 2015 reflects increased base management and performance fees, higher selling, general and administrative expenses, increased depreciation and amortization and interest expense, partially offset by improved performance at each of MIC’s businesses. The increased expenses include costs associated with acquired businesses and transaction-related expenses.

Use of Non-GAAP Measures

MIC reports EBITDA excluding non-cash items on a consolidated and operating segment basis and reconciles each to consolidated net income (loss). EBITDA excluding non-cash items is a measure relied upon by management in evaluating the performance of its businesses and investments. EBITDA excluding non-cash items is defined as earnings before interest, taxes, depreciation and amortization and non-cash items, which may include impairments, gains and losses on derivatives and adjustments for certain other items reflected in the statement of operations. EBITDA excluding non-cash items also excludes any base management and performance fees, if any, whether paid in cash or stock.

MIC believes that EBITDA excluding non-cash items provides additional insight into the performance of its operating businesses, relative to each other and to similar businesses without regard to capital structure, and into their ability to service or reduce debt, fund capital expenditures and/or support distributions to the holding company.

MIC also reports Free Cash Flow and Proportionately Combined Free Cash Flow, as defined below, on both a consolidated and an operating segment basis as a means of assessing the amount of cash generated by its businesses and as a supplement to other information provided in accordance with GAAP, and reconciles each to cash from operating activities. MIC believes that reporting Free Cash Flow provides additional insight into its ability to deploy cash as GAAP measures, such as net income (loss) and cash from operating activities, do not reflect all of the items that management considers in estimating the amount of cash generated by its operating businesses. MIC defines Free Cash Flow as cash from operating activities, which includes cash paid for interest, taxes and pension contributions, less maintenance capital expenditures, including principal repayments on capital lease obligations used to fund maintenance capital expenditures, and excludes changes in working capital.

Free Cash Flow does not fully reflect MIC’s ability to freely deploy generated cash, as it does not reflect required payments on indebtedness and other fixed obligations or the other cash items excluded when calculating Free Cash Flow. Free Cash Flow may be calculated in a different manner by other companies, which limits its usefulness as a comparative measure. Free Cash Flow should be used as a supplemental measure and not in lieu of MIC’s financial results as reported under GAAP.

MIC may report certain financial metrics on a proportionately combined basis including proportionately combined gross profit, proportionately combined EBITDA excluding non-cash items, proportionately combined cash interest, proportionately combined cash taxes, proportionately combined maintenance capital expenditures, proportionately combined Free Cash Flow including adjusted proportionately combined Free Cash Flow, proportionately combined Free Cash Flow per share, proportionately combined growth capital expenditures and proportionately combined net debt. The Company believes that such measures provide investors and management with additional insight into the financial results and cash generated on the basis of its varied ownership interests in its businesses and investments for the reporting periods.

Proportionately combined metrics used by MIC may be calculated in a different manner by other companies and may limit their usefulness as a comparative measure. Proportionately combined metrics should be used as a supplement to and not in lieu of financial results reported in accordance with GAAP.

The following tables summarize MIC’s financial performance on a proportionately combined basis for the quarter and six-month periods ended June 30, 2015, and for the prior comparable periods.

   

For the Quarter Ended June 30, 2015

($ in Thousands) (Unaudited)

IMTT
100%(1)

  Atlantic Aviation   Contracted Power and Energy(2)   Hawaii Gas   MIC Corporate   Proportionately Combined(3)   Contracted Power and Energy 100%
           
Gross profit 81,332 98,060 28,247 19,648 N/A 227,287

30,985

EBITDA excluding non-cash items 75,648 48,706 12,799 15,889 (3,506 ) 149,536 15,245
Free cash flow 29,891   37,586   2,863   12,457   (6,482 )   76,315 4,341
 

For the Quarter Ended June 30, 2014

IMTT
50%(4)

  Atlantic Aviation   Contracted Power and Energy(2)   Hawaii Gas   MIC Corporate   Proportionately Combined(3) IMTT

100%(5)

  Contracted Power and Energy 100%
 
Gross profit 38,523 86,460 5,681 19,400 N/A 150,064 77,046 8,989
EBITDA excluding non-cash items 34,718 39,416 4,544 14,980 (2,046 ) 91,611 69,435 8,024
Free cash flow 16,111   30,464   2,128   7,780   216     56,699 32,221   4,048
                 

For the Six Months Ended June 30, 2015

IMTT

100%(1)

  Atlantic Aviation   Contracted Power and Energy(2)   Hawaii

Gas

  MIC Corporate   Proportionately Combined(3) Contracted Power and Energy

100%

 
Gross profit 165,802 206,175 35,067 43,832 N/A 450,876 40,170
EBITDA excluding non-cash items 154,052 104,965 17,250 32,743 (6,264 ) 302,746 21,730
Free cash flow 96,075   83,656   4,456   26,607   (11,798 )   198,996 7,030
 

For the Six Months Ended June 30, 2014

IMTT

50%(4)

  Atlantic Aviation   Contracted Power and Energy(2)   Hawaii

Gas

  MIC Corporate   Proportionately Combined(3) IMTT

100%(5)

  Contracted Power and Energy

100%

 
Gross profit 81,019 173,669 9,248 39,372 N/A 303,308 162,037 14,810
EBITDA excluding non-cash items 74,454 79,452 8,422 29,971 (2,904 ) 189,395 148,908 14,520
Free cash flow 37,527   62,231   3,740   16,416   1,705     121,619 75,053   6,823

__________________________

N/A- Not applicable.

(1) Represents our 100% ownership interest in IMTT subsequent to July 16, 2014. IMTT owns 66.7% of its Quebec marine terminal in Canada. The remainder is owned by one other party. IMTT consolidates the results of the Quebec terminal in its financial statements and adjusts the portion that it does not own through noncontrolling interest. The above table shows 100% of IMTT, including the 33.3% portion of the Quebec terminal that it does not own, which is not significant. Both MIC’s and IMTT’s EBITDA excluding non-cash items and Free Cash Flow reflects 100% of the results of the Quebec terminal.

(2) Proportionately combined Free Cash Flow for Contracted Power and Energy is equal to MIC's controlling ownership interest in its solar and wind power generation businesses and the district energy business, up to August 21, 2014, date of sale. As of April 1, 2015, Contracted Power and Energy also includes 100% of BEC, a gas-fired power generation facility.

(3) Proportionately combined Free Cash Flow is equal to the sum of Free Cash Flow attributable to MIC's ownership interest in each of its operating businesses and MIC Corporate.

(4) Our proportionate interest in IMTT prior to the acquisition of the remaining 50% interest on July 16, 2014.

(5) Represents 100% of IMTT as a stand-alone business.

 

IMTT

On July 16, 2014, MIC completed the acquisition of the 50% interest in IMTT that it did not already own. IMTT comprises 10 wholly owned marine storage terminals in the U.S. and partial interests in two terminals in Canada. The terminals store and handle a wide variety of petroleum grades, chemicals and vegetable and animal oils. To aid in meaningful analysis of the performance of IMTT across periods, the discussion below refers to results for 100% of the business, not MIC’s 50% interest for the quarter and six months ended June 30, 2014.

For the quarter and year to date periods ended June 30, 2015 versus the prior comparable periods in 2014, respectively:

  • revenue decreased 0.1% and 3.5%
  • maintenance capital expenditures decreased 60.0% and 67.5%
  • adjusted Free Cash Flow increased 90.2% and 69.8%

The revenue decrease in both the quarter and year to date periods in 2015 compared with 2014 reflects a reduction in spill response activity on the part of IMTT subsidiary OMI Environmental Solutions and reduced heating revenue. OMI was involved in smaller emergency response projects in the first half of 2015 versus the first half of 2014. Heating revenue was unusually high during the 2014 periods as a result of what is commonly known as the Polar Vortex. The decline in revenue was partially offset by storage pricing at IMTT that increased as a result of inflation adjustment provisions in the business’ storage contracts, although the volatility in commodity prices has seen customers seek contracts with shorter durations. Capacity utilization rose to and remained at historically normal levels throughout the first half of 2015. Capacity utilization was 94.5% in the second quarter and 94.8% through six months.

Costs declined in the second quarter and first half of 2015 reflecting both the decline in spill response activity and continued improvement in cost controls and efficiencies following the acquisition of the remainder of the business one year ago. MIC believes it is on track to realize the approximately $10 million in expense reductions it had identified in July 2014 by the end of this year.

IMTT reported $31.4 million in swap breakage fees related to the termination of out-of-market interest rate hedges in the second quarter of 2015. The fees were incurred in connection with the successful refinancing of IMTT’s long-term debt. The refinancing resulted in an increase of the average maturity of the debt facilities from less than three years to over nine years.

Maintenance capital expenditures were substantially lower in the quarter and year to date periods ended June 30, 2015 primarily as a result of the implementation of more stringent project review and approval processes. IMTT is now expected to deploy between $40 and $45 million on maintenance projects in 2015.

Free Cash Flow generated by IMTT decreased 7.2% to $29.9 million in the second quarter and increased 28.0% to $96.1 million for the first half of 2015. The decrease in the quarter reflects the impact of interest rate swap breakage costs incurred in connection with the refinancing of the business’ long term debt in May. Excluding the impact of the breakage costs, adjusted Free Cash Flow increased 90.2% and 69.8% for the quarter and six month ended June 30, 2015, respectively.

Atlantic Aviation

Atlantic Aviation comprises a network of 69 fixed-base operations (FBO) that primarily provide fuel, terminal and aircraft hangar services to owners and operators of general aviation (GA) aircraft at airports throughout the U.S. The network is the largest of its kind in the U.S. air transportation industry.

For the quarter and year to date periods ended June 30, 2015 versus the prior comparable periods in 2014, respectively:

  • total gross profit increased 13.4% and 18.7%
  • same store gross profit increased 8.8% and 8.8%
  • maintenance capital expenditures increased 201.0% and 209.2%
  • Free Cash Flow increased 23.4% and 34.4%

The performance of Atlantic Aviation in the quarter and year to date periods ended June 30, 2015 reflected the continued improvement in the U.S. economy more broadly. Atlantic Aviation’s results are correlated with GA aircraft flight activity and, according to the Federal Aviation Administration, flight activity rose 1.4% in the second quarter led by a 2.5% increase in domestic take-offs and landings. Reported flight activity does not correlate perfectly with the performance of Atlantic Aviation, however it is a data point used by management to assess the overall health of the GA industry. The increases reported in the second quarter are a continuation of a trend that has been in place since the first quarter in 2009.

Atlantic Aviation’s results also reflect the impact of the acquisition of seven FBOs during the past year. MIC notes that the additional bases, six of which are located in Florida, have performed in line with expectations. The addition of these FBOs has helped drive increased activity across all of its facilities resulting in same store (excluding the acquisitions) gross profit growth of 8.8% in each of the quarter and year to date periods ended June 30, 2015.

Selling, general and administrative expenses, as well as depreciation and amortization, increased in the second quarter of 2015 compared with the second quarter in 2014 primarily as a result of the acquisitions concluded during the prior twelve months.

Maintenance capital expenditures at Atlantic Aviation were higher in the quarter and year to date periods ended June 30, 2015 by $2.4 million and $4.2 million, respectively, primarily driven by replacement of equipment at various locations. Given the over-performance versus expectations, management elected to deploy more in maintenance capital expenditures.

The increase in Free Cash Flow generated by Atlantic Aviation reflects both the contributions from sites acquired during the past year and improved operating performance generally.

Contracted Power and Energy Segment

At the end of the second quarter, MIC’s CP&E segment comprised controlling interests in five solar power generating facilities (photovoltaic) in the Southwest U.S., two wind power generating facilities in each of New Mexico and Idaho and a 100% interest in a gas-fired turbine power generation facility in New Jersey (BEC). MIC completed the acquisition of the wind facilities in the second half of 2014 and the acquisition of BEC on April 1, 2015. Until August 21, 2014, the segment also included a controlling interest in a district energy business in Chicago. As a result of the various acquisition and divestiture activities, comparisons with prior period results are not meaningful.

Both the renewables (wind and solar) and gas-fired power generating facilities underperformed versus MIC’s revenue expectations in the second quarter. Solar and wind resources were below historical norms as a result of unusual weather patterns across the regions in which those facilities are located. The performance of the gas-fired facility was modestly below expectations as a result of lower transmission congestion credits and lower capacity payments. Costs were in-line with expectations across the entire segment including approximately $8.4 million in transaction-related costs associated with the acquisition of BEC.

The $4.3 million in Free Cash Flow generated by CP&E during the second quarter (adjusted Free Cash Flow of $12.7 million, excluding transaction-related expenses) was aided by the repayment of $257.6 million of debt at BEC during the quarter. Subsequent to the quarter end, the balance of $251.5 million of debt at BEC was also repaid. The repaid facility was a Term Loan B at a comparatively high leverage level relative to MIC’s existing businesses and had a cash flow sweep that limited distributions from BEC.

Hawaii Gas

Hawaii Gas is the only regulated (“utility”) gas processing and pipeline distribution network on the islands of Hawaii. Hawaii Gas is also the owner and operator of the largest unregulated (“non-utility”) gas distribution business on the islands.

For the quarter and year to date periods ended June 30, 2015 versus the prior comparable periods in 2014, respectively:

  • gross profit increased 1.3% and 11.3%
  • maintenance capital expenditures decreased 18.5% and increased 27.2%
  • Free Cash Flow increased 60.1% and 62.1%

Hawaii Gas volumes increased 3.8% and 3.3% more gas in the second quarter and year to date periods in 2015 compared with the same periods in 2014, adjusted for changes in the inventory in customer tanks in both years. The increase in gross profit reflects primarily growth in commercial consumption and commercial customer additions in both periods, excluding the impact of unrealized commodity hedges, and flat residential consumption in the quarter and six month periods.

Local supplies of LPG declined in the second quarter compared with the second quarter in 2014 resulting in an increase in shipments of LPG from off-island sources. Hawaii Gas has constructed additional storage capacity over the past several years in order to accommodate increased shipments from off-island sources.

The increases in Free Cash Flow generated by Hawaii Gas in both the second quarter and year to date periods reflect improved operating results as well as reductions in income taxes and maintenance capital expenditures.

Corporate and Other

Results for MIC’s Corporate and Other segment reflect the fees payable to the Company’s Manager, various public company costs and interest expense on holding company level debt. Offsets to operating company current federal income taxes, specifically the application of consolidated net operating loss carryforwards, are also recorded in Corporate and Other.

Fees were higher in quarter and year to date periods in 2015 versus the prior comparable periods as a result of increases in MIC’s market capitalization and improved total shareholder returns. Selling, general and administrative costs rose primarily as a result of expenses incurred in connection with the conversion of the Company from a limited liability company to a corporation. Interest expense comprises primarily debt services costs, specifically interest on convertible notes. Other than performance fees, expenses incurred in the quarter and year to date periods were consistent with the Company’s expectations.

Increased Financial Flexibility

MIC increased its financial flexibility during the second quarter of 2015 with the refinancing of IMTT, the filing of a prospectus supplement for at-the-market equity sales and an increase in the available capacity on its holding company level revolving credit facility. The successful completion of the refinancing of the long-term debt at IMTT on May 21, 2015 included an increase in the weighted average maturity of all facilities from less than three years to over nine years.

On June 24, 2015, MIC entered into an equity distribution agreement and filed a prospectus supplement to its existing shelf registration statement to facilitate market based equity sales in an aggregate amount not to exceed $400.0 million. The at-the-market, or “ATM”, program will permit the Company to raise relatively small amounts of equity capital from time to time to fund growth projects including small acquisitions.

MIC increased the capacity on its holding company level revolving credit facility from $250.0 million to $360.0 million during the second quarter. No changes to any of the terms of the facility were made. At June 30, 2015, MIC had access to an aggregate approximately $1.1 billion in undrawn debt facilities with which to finance continued growth.

Conference Call and Webcast

When: Management has scheduled a conference call for 8:00 a.m. Eastern Time on Tuesday, August 4, 2015 during which it will review the Company’s results and answer questions from analysts and investors.

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

Slides: MIC will prepare materials in support of its conference call presentation. The materials will be available for downloading from the Company’s website the morning of August 4, 2015 prior to the conference call. A link to the materials will be located on the homepage of the MIC website.

Replay: For interested individuals unable to participate in the live conference call, a replay will be available after 2:00 p.m. on August 4, 2015 through midnight on August 11, 2015, at +1(404) 537-3406, or +1(855) 859-2056 Passcode: 71530591. An online archive of the webcast will be available on the MIC website for one year following the call. MIC-G

About Macquarie Infrastructure Corporation

Macquarie Infrastructure Corporation owns, operates and invests in a diversified group of infrastructure 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, a gas processing and distribution business, Hawaii Gas, and several entities comprising a Contracted Power and Energy segment. MIC is managed by a wholly-owned subsidiary of the Macquarie Group. For additional information, please visit the Macquarie Infrastructure Corporation website at www.macquarie.com/mic.

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 report 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; its shared decision-making with co-investors over investments including the distribution of dividends; 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 costs; its ability to recover increases in costs from customers, reliance on sole or limited source suppliers, risks or conflicts of interests involving its relationship with the Macquarie Group and changes in U.S. federal tax law.

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

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

 
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
($ in Thousands, Except Share Data)
     

June 30,

2015

December 31,

2014

(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 168,184 $ 48,014
Restricted cash 21,060 21,282
Accounts receivable, less allowance for doubtful accounts
of $1,513 and $771, respectively 115,019 96,885
Inventories 31,025 28,080
Prepaid expenses 15,019 14,276
Deferred income taxes 25,412 25,412
Other   28,209   22,941
Total current assets 403,928 256,890
Property, equipment, land and leasehold improvements, net 4,037,977 3,362,585
Investment in unconsolidated business 9,166 9,773
Goodwill 2,019,204 1,996,259
Intangible assets, net 960,076 959,634
Deferred financing costs, net of accumulated amortization 42,541 32,037
Other   19,780   8,010
Total assets $ 7,492,672 $ 6,625,188
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Due to manager - related party $ 142,169 $ 4,858
Accounts payable 53,507 49,733
Accrued expenses 72,810 77,248
Current portion of long-term debt 28,346 27,655
Fair value of derivative instruments 24,846 32,111
Other   33,126   32,727
Total current liabilities 354,804 224,332
Long-term debt, net of current portion 2,782,737 2,364,866
Deferred income taxes 812,312 904,108
Fair value of derivative instruments 23,689 27,724
Tolling agreements - noncurrent 73,800 -
Other   141,812   133,990
Total liabilities   4,189,154   3,655,020
Commitments and contingencies - -
 
 
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS - continued
($ in Thousands, Except Share Data)
     

June 30, 2015

December 31, 2014

(Unaudited)

Stockholders’ equity:
Preferred stock ($0.001 par value; 100,000,000 authorized; no shares issued and outstanding at June 30, 2015)(1); $ - $ -
Special stock ($0.001 par value; 100 authorized; 100 shares issued and outstanding at June 30, 2015)(1); - -
Common stock ($0.001 par value; 500,000,000 authorized; 79,501,783 shares issued and outstanding at June 30, 2015)(1); 79 -
LLC interests (no par value; 71,089,590 LLC interests issued and outstanding at December 31, 2014)(1); - 1,942,745
Additional paid in capital(1) 2,455,851 21,447
Accumulated other comprehensive loss (23,975 ) (21,550 )
Retained earnings   692,423     844,521  
Total stockholders’ equity 3,124,378 2,787,163
Noncontrolling interests   179,140     183,005  
Total equity   3,303,518     2,970,168  
Total liabilities and equity $ 7,492,672   $ 6,625,188  

__________________________

(1) See Note 9, "Stockholders' Equity", for discussions on preferred stock, special stock, common stock, LLC interests and additional paid in capital.
 
 

MACQUARIE INFRASTRUCTURE CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

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

 

   

Quarter Ended

 

Six Months Ended

June 30, 2015

 

June 30, 2014

June 30, 2015

 

June 30, 2014

Revenue

Service revenue $ 327,809 $ 205,269 $ 653,811 $ 407,708
Product revenue 95,880 74,964 168,376 147,973
Financing and equipment lease income   -     710     -     1,457  
Total revenue   423,689     280,943     822,187     557,138  
Costs and expenses
Cost of services 148,417 115,497 281,834 228,451
Cost of product sales 45,247 50,597 84,374 100,836
Selling, general and administrative 81,064 56,836 151,717 112,300
Fees to manager - related party 154,559 14,495 319,832 23,489
Depreciation 51,801 12,428 109,223 24,582
Amortization of intangibles 17,902 9,456 65,873 18,221
Loss on disposal of assets   104     866     649     866  
Total operating expenses   499,094     260,175     1,013,502     508,745  
Operating (loss) income (75,405 ) 20,768 (191,315 ) 48,393
Other income (expense)
Dividend income 267 - 798 -
Interest income 7 31 13 95
Interest expense(1) (22,342 ) (17,945 ) (53,863 ) (31,956 )
Equity in earnings and amortization charges of investee - 10,799 - 25,086
Other income, net   425     1,576     1,471     2,257  
Net (loss) income before income taxes (97,048 ) 15,229 (242,896 ) 43,875
Benefit (provision) for income taxes(2)   33,531     (5,485 )   88,864     (13,971 )
Net (loss) income $ (63,517 ) $ 9,744 $ (154,032 ) $ 29,904
Less: net (loss) income attributable to noncontrolling interests   (421 )   44     (1,934 )   (162 )
Net (loss) income attributable to MIC $ (63,096 ) $ 9,700   $ (152,098 ) $ 30,066  
 
Basic (loss) income per common stock attributable to MIC $ (0.80 ) $ 0.17   $ (2.00 ) $ 0.53  
Weighted average number of common stock outstanding: basic 79,246,069     56,559,924     76,214,929     56,465,136  
 
Diluted (loss) income per common stock attributable to MIC $ (0.80 ) $ 0.17   $ (2.00 ) $ 0.53  
Weighted average number of common stock outstanding: diluted   79,246,069     56,572,519     76,214,929     56,477,888  
Cash dividends declared per common stock $ 1.11   $ 0.95   $ 2.18   $ 1.8875  

__________________________

(1) Interest expense includes gains on derivative instruments of $3.1 million and losses on derivative instruments of $9.8 million for the quarter and six months ended June 30, 2015, respectively. For the quarter and six months ended June 30, 2014, interest expense includes losses on derivative instruments of $8.6 million and $13.9 million, respectively, of which net losses of $269,000 and $508,000, respectively, were reclassified from accumulated other comprehensive loss.
(2) Includes $107,000 and $202,000 of benefit for income taxes from accumulated other comprehensive loss reclassifications for the quarter and six months ended June 30, 2014, respectively.
 
 
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in Thousands)
 
  Six Months Ended
June 30, 2015     June 30, 2014
 
Operating activities
Net (loss) income $ (154,032 ) $ 29,904
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization of property and equipment 109,223 27,993
Amortization of intangible assets 65,873 18,221
Loss on disposal of assets 548 816
Equity in earnings and amortization charges of investee - (25,086 )
Equity distributions from investee - 25,086
Amortization of debt financing costs 4,566 2,141
Adjustments to derivative instruments (40,465 ) 5,367
Fees to manager- related party 252,012 23,489
Equipment lease receivable, net - 2,028
Deferred rent 885 189
Deferred taxes (89,312 ) 10,030
Other non-cash expenses (income), net 1,957 (319 )
Changes in other assets and liabilities, net of acquisitions:
Restricted cash 2,071 25,262
Accounts receivable (13,081 ) (10,851 )
Inventories (152 ) (1,227 )
Prepaid expenses and other current assets 3,580 877
Due to manager - related party 67,813 (51 )
Accounts payable and accrued expenses (10,489 ) 270
Income taxes payable (5,461 ) (313 )
Pension contribution - (1,135 )
Other, net   (1,592 )   (1,356 )
Net cash provided by operating activities   193,944     131,335  
 
Investing activities
Acquisitions of businesses and investments, net of cash acquired (236,956 ) (232,947 )
Return of investment in unconsolidated business - 12,297
Purchases of property and equipment (50,025 ) (36,053 )
Other, net   522     46  
Net cash used in investing activities   (286,459 )   (256,657 )
 
 
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - continued
(Unaudited)
($ in Thousands)
 
    Six Months Ended
June 30, 2015   June 30, 2014
 
Financing activities
Proceeds from long-term debt $ 1,654,569 $ 104,884
Payment of long-term debt (1,744,761 ) (16,726 )
Proceeds from the issuance of common stock 487,937 -
Dividends paid to common stockholders (162,967 ) (104,502 )
Contributions received from noncontrolling interests 532 -
Distributions paid to noncontrolling interests (1,238 ) (1,406 )
Offering and equity raise costs paid (16,540 ) (17 )
Debt financing costs paid (14,293 ) (2,317 )
Proceeds from the issuance of common stock pursuant to MIC Direct 188 130
 
Change in restricted cash 10,975 (2,599 )
Payment of capital lease obligations (1,419 ) (915 )
Net cash provided by (used in) financing activities 212,983 (23,468 )
Effect of exchange rate changes on cash and cash equivalents (298 ) -
Net change in cash and cash equivalents   120,170     (148,790 )
Cash and cash equivalents, beginning of period   48,014     233,373  
Cash and cash equivalents, end of period $ 168,184   $ 84,583  
 
Supplemental disclosures of cash flow information
Non-cash investing and financing activities:
Accrued equity offering costs $ 168   $ 286  
Accrued financing costs $ 887   $ 322  
Accrued purchases of property and equipment $ 16,359   $ 2,501  
Acquisition of equipment through capital leases $ 398   $ -  
Issuance of common stock to manager $ 182,513   $ 18,100  
Issuance of common stock to independent directors $ 750   $ 750  
Conversion of convertible senior notes to common stock $ 25   $ -  
Conversion of LLC interests to common stock(1) $ 79   $ -  
Conversion of LLC interests to additional paid in capital(1) $ 2,428,334   $ -  
Conversion of construction loan to term loan $ -   $ 60,360  
Distributions payable to noncontrolling interests $ 39   $ 406  
Taxes paid $ 5,909   $ 4,254  
Interest paid $ 54,038   $ 24,173  
 

__________________________

(1) See Note 9, "Stockholders' Equity", for discussion on presentation of common stock, LLC interests and additional paid in capital.
 
 
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - MD&A
               

Quarter Ended June 30,

Change
Favorable/(Unfavorable)

Six Months Ended June 30,

 

Change
Favorable/(Unfavorable)

  2015     2014     $   %     2015     2014     $   %  
($ In Thousands) (Unaudited)
Revenue
Service revenue $ 327,809 $ 205,269 122,540 59.7 $ 653,811 $ 407,708 246,103 60.4
Product revenue 95,880 74,964 20,916 27.9 168,376 147,973 20,403 13.8
Financing and equipment lease income   -     710     (710 ) (100.0 )   -     1,457     (1,457 ) (100.0 )
Total revenue   423,689     280,943     142,746   50.8   822,187     557,138     265,049   47.6
 
Costs and expenses
Cost of services 148,417 115,497 (32,920 ) (28.5 ) 281,834 228,451 (53,383 ) (23.4 )
Cost of product sales   45,247     50,597     5,350   10.6   84,374     100,836     16,462   16.3
Gross profit 230,025 114,849 115,176 100.3 455,979 227,851 228,128 100.1
Selling, general and administrative 81,064 56,836 (24,228 ) (42.6 ) 151,717 112,300 (39,417 ) (35.1 )
Fees to manager - related party 154,559 14,495 (140,064 ) NM 319,832 23,489 (296,343 ) NM
Depreciation 51,801 12,428 (39,373 ) NM 109,223 24,582 (84,641 ) NM
Amortization of intangibles 17,902 9,456 (8,446 ) (89.3 ) 65,873 18,221 (47,652 ) NM
Loss on disposal of assets   104     866     762   88.0   649     866     217   25.1
Total operating expenses   305,430     94,081     (211,349 ) NM   647,294     179,458     (467,836 ) NM
Operating (loss) income (75,405 ) 20,768 (96,173 ) NM (191,315 ) 48,393 (239,708 ) NM
Other income (expense)
Dividend income 267 - 267 NM 798 - 798 NM
Interest income 7 31 (24 ) (77.4 ) 13 95 (82 ) (86.3 )
Interest expense(1) (22,342 ) (17,945 ) (4,397 ) (24.5 ) (53,863 ) (31,956 ) (21,907 ) (68.6 )
Equity in earnings and amortization charges of investee - 10,799 (10,799 ) (100.0 ) - 25,086 (25,086 ) (100.0 )
Other income, net   425     1,576     (1,151 ) (73.0 )   1,471     2,257     (786 ) (34.8 )
Net (loss) income before income taxes (97,048 ) 15,229 (112,277 ) NM (242,896 ) 43,875 (286,771 ) NM
Benefit (provision) for income taxes   33,531     (5,485 )   39,016   NM   88,864     (13,971 )   102,835   NM
Net (loss) income $ (63,517 ) $ 9,744 (73,261 ) NM $ (154,032 ) $ 29,904 (183,936 ) NM
Less: net (loss) income attributable to noncontrolling interests   (421 )   44     465   NM   (1,934 )   (162 )   1,772   NM
Net (loss) income attributable to MIC $ (63,096 ) $ 9,700     (72,796 ) NM $ (152,098 ) $ 30,066     (182,164 ) NM
 
NM - Not meaningful
(1) Interest expense includes gains on derivative instruments of $3.1 million and losses on derivative instruments of $9.8 million for the quarter and six months ended June 30, 2015, respectively. For the quarter and six months ended June 30, 2014, interest expense includes losses on derivative instruments of $8.6 million and $13.9 million, respectively.
 
 

MACQUARIE INFRASTRUCTURE CORPORATION

RECONCILIATION OF CONSOLIDATED NET (LOSS) INCOME ATTRIBUTABLE TO MIC TO EBITDA EXCLUDING NON-CASH ITEMS AND CASH FROM OPERATING ACTIVITIES TO FREE CASH FLOW

                     

Quarter Ended

June 30,

Change
Favorable/(Unfavorable)

Six Months Ended June 30,

Change
Favorable/(Unfavorable)

2015 2014 $ % 2015 2014 $ %
($ In Thousands) (Unaudited)
 
Net (loss) income attributable to MIC(1) $ (63,096 ) $ 9,700 $ (152,098 ) $ 30,066
Interest expense, net(2) 22,335 17,914 53,850 31,861
(Benefit) provision for income taxes (33,531 ) 5,485 (88,864 ) 13,971
Depreciation(3) 51,801 12,428 109,223 24,582
Depreciation - cost of services(3) - 1,707 - 3,411
Amortization of intangibles(4) 17,902 9,456 65,873 18,221
Loss on disposal of assets 95 816 548 816
Equity in earnings and amortization charges of investee - (10,799 ) - (25,086 )
Equity distributions from investee(5) - 16,959 - 25,086
Fees to manager- related party(6) 154,559 14,495 319,832 23,489
Other non-cash expense (income), net   1,917     (828 )       (1,138 )   (292 )  
EBITDA excluding non-cash items $ 151,982   $ 77,333     74,649 96.5 $ 307,226   $ 146,125   161,101 110.2
 
EBITDA excluding non-cash items $ 151,982 $ 77,333 $ 307,226 $ 146,125
Interest expense, net(2) (22,335 ) (17,914 ) (53,850 ) (31,861 )
Adjustments to derivative instruments recorded in interest expense(2) (12,387 ) 4,273 (7,034 ) 5,367
Amortization of debt financing costs(2) 2,951 1,100 4,566 2,141
Interest rate swap breakage fees (31,385 ) - (31,385 ) -
Equipment lease receivable, net - 1,032 - 2,028
Benefit/provision for income taxes, net of changes in deferred taxes 357 (1,894 ) (448 ) (3,941 )
Pension contribution - (825 ) - (1,135 )
Changes in working capital(6)   (12,255 )   9,153     (25,131 )   12,611  
Cash provided by operating activities 76,928 72,258 193,944 131,335
Changes in working capital(6) 12,255 (9,153 ) 25,131 (12,611 )
Maintenance capital expenditures   (11,390 )   (3,638 )       (17,505 )   (6,463 )  
Free cash flow $ 77,793   $ 59,467     18,326 30.8 $ 201,570   $ 112,261   89,309 79.6
 

__________________________

(1) Net (loss) income attributable to MIC excludes net loss attributable to noncontrolling interests of $421,000 and $1.9 million for the quarter and six months ended June 30, 2015, respectively, and net income attributable to noncontrolling interests of $44,000 and net loss attributable to noncontrolling interests of $162,000 for the quarter and six months ended June 30, 2014, respectively.
(2) Interest expense, net, includes adjustment to derivative instruments and non-cash amortization of deferred financing fees. For the quarter and six months ended June 30, 2015, interest expense also includes non-cash write-off of deferred financing costs related to the May 2015 refinancing at IMTT.
(3) Depreciation − cost of services includes depreciation expense for our previously owned district energy business, a component of CP&E segment, which is reported in cost of services in our consolidated condensed statements of operations. Depreciation and Depreciation − cost of services does not include acquisition-related step-up depreciation expense $2.0 million and $3.9 million for the quarter and six months ended June 30, 2014, respectively, in connection with our previous 50% investment in IMTT, which is reported in equity in earnings and amortization charges of investee in our consolidated condensed statements of operations.
(4) Amortization of intangibles does not include acquisition-related step-up amortization expense of $85,000 and $171,000 for the quarter and six months ended June 30, 2014, respectively, in connection with our previous 50% investment in IMTT, which is reported in equity in earnings and amortization charges of investee in our consolidated condensed statements of operations.
(5) Equity distributions from investee in the above table includes distributions we received only up to our share of the earnings recorded in the calculation for EBITDA excluding non-cash items.
(6) In July 2015, our Board requested, and our Manager agreed, that $67.8 million of the performance fee for the second quarter of 2015 would be and was settled in cash in July 2015 to minimize dilution. The remainder of the fee will be reinvested in our common stock in July 2016 using the June 2016 monthly volume weighted average price.
 
 

MACQUARIE INFRASTRUCTURE CORPORATION

RECONCILIATION FROM CONSOLIDATED FREE CASH FLOW TO PROPORTIONATELY COMBINED FREE CASH FLOW

         
Quarter Ended

June 30,

Change
Favorable/(Unfavorable)

Six Months Ended June 30,

Change
Favorable/(Unfavorable)

2015   2014 $   % 2015   2014 $   %
($ In Thousands) (Unaudited)
 
Free Cash Flow- Consolidated basis $ 77,793 $ 59,467 18,326 30.8 $ 201,570 $ 112,261 89,309 79.6
Equity distributions from investee(1) - (16,959 ) - (25,086 )
100% of CP&E Free Cash Flow included in consolidated Free Cash Flow (4,341 ) (4,048 ) (7,030 ) (6,823 )
MIC's share of IMTT Free Cash Flow(2) - 16,111 - 37,527
MIC's share of CP&E Free Cash Flow   2,863     2,128         4,456     3,740    
Free Cash Flow- Proportionately Combined basis $ 76,315   $ 56,699     19,616 34.6 $ 198,996   $ 121,619   77,377 63.6

_________________

(1) Equity distributions from investee represent the portion of distributions received from IMTT that are recorded in cash from operating activities prior to the IMTT Acquisition on July 16, 2014.

(2) Represents our proportionate share of IMTT's Free Cash Flow prior to the IMTT Acquisition on July 16, 2014.

 
 

MACQUARIE INFRASTRUCTURE CORPORATION

RECONCILIATION OF SEGMENT NET INCOME (LOSS) TO EBITDA EXCLUDING NON-CASH ITEMS AND CASH FROM OPERATING ACTIVITIES TO FREE CASH FLOW

               

IMTT

 
 
Quarter Ended

June 30,

Change
Favorable/ (Unfavorable)

Six Months Ended June 30,

Change
Favorable/
(Unfavorable)

2015 2014 2015 2014
$ $ $ % $ $ $ %

 

($ In Thousands) (Unaudited)

 
Revenues 142,384 142,518 (134 ) (0.1 ) 280,445 290,596 (10,151 ) (3.5 )
Cost of services 61,052   65,472   4,420   6.8 114,643   128,559   13,916   10.8
Gross Profit 81,332 77,046 4,286 5.6 165,802 162,037 3,765 2.3
General and administrative expenses 8,302 10,497 2,195 20.9 16,006 18,363 2,357 12.8
Depreciation and amortization 31,673   19,646   (12,027 ) (61.2 ) 67,552   37,920   (29,632 ) (78.1 )
Operating income 41,357 46,903 (5,546 ) (11.8 ) 82,244 105,754 (23,510 ) (22.2 )
Interest expense, net(1) (6,263 ) (8,813 ) 2,550 28.9 (13,169 ) (15,946 ) 2,777 17.4
Other income, net 769 1,377 (608 ) (44.2 ) 1,401 1,871 (470 ) (25.1 )
Provision for income taxes (14,659 ) (15,455 ) 796 5.2 (28,748 ) (36,557 ) 7,809 21.4
Noncontrolling interest (108 ) (9 ) (99 ) NM (358 ) (138 ) (220 ) (159.4 )
Net income(2) 21,096   24,003   (2,907 ) (12.1 ) 41,370   54,984   (13,614 ) (24.8 )
 
Reconciliation of net income to EBITDA excluding non-cash items and cash provided by operating activities to Free Cash Flow:
 
Net income(2) 21,096 24,003 41,370 54,984
Interest expense, net(1) 6,263 8,813 13,169 15,946
Provision for income taxes 14,659 15,455 28,748 36,557
Depreciation and amortization 31,673 19,646 67,552 37,920
Other non-cash expenses 1,957   1,518     3,213   3,501    
EBITDA excluding non-cash items 75,648   69,435   6,213   8.9 154,052   148,908   5,144   3.5
 
EBITDA excluding non-cash items 75,648 69,435 154,052 148,908
Interest expense, net(1) (6,263 ) (8,813 ) (13,169 ) (15,946 )
Adjustments to derivative instruments recorded in interest expense(1) (3,955 ) (2,513 ) (6,334 ) (6,649 )
Amortization of debt financing costs(1) 1,416 843 1,529 1,687
Interest rate swap breakage fees (31,385 ) - (31,385 ) -
Provision for income taxes, net of changes in deferred taxes 473 (11,612 ) (104 ) (26,721 )
Changes in working capital (6,741 ) (10,189 ) (18,353 ) (4,941 )
Cash provided by operating activities 29,193 37,151 86,236 96,338
Changes in working capital 6,741 10,189 18,353 4,941
Maintenance capital expenditures (6,043 ) (15,119 )   (8,514 ) (26,226 )  
Free cash flow 29,891   32,221   (2,330 ) (7.2 ) 96,075   75,053   21,022   28.0

__________________________

 
NM - Not meaningful

(1) Interest expense, net, includes adjustments to derivative instruments and non-cash amortization of deferred financing fees. For the quarter and six months ended June 30, 2015, interest expense also includes non-cash write-off of deferred financing costs related to the May 2015 refinancing.

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

 
 

Atlantic Aviation

               
 
 

Quarter Ended
June 30,

Change
Favorable/
(Unfavorable)

Six Months Ended June 30,

Change
Favorable/
(Unfavorable)

2015 2014 2015 2014
$ $ $ % $ $ $ %
($ In Thousands) (Unaudited)
Revenues 185,425 193,212 (7,787 ) (4.0 ) 373,366 387,173 (13,807 ) (3.6 )
Cost of services 87,365   106,752   19,387   18.2 167,191   213,504   46,313   21.7
Gross Profit 98,060 86,460 11,600 13.4 206,175

 

173,669 32,506 18.7
Selling, general and administrative expenses 50,037 47,067 (2,970 ) (6.3 ) 102,046 94,310 (7,736 ) (8.2 )
Depreciation and amortization 21,810 15,607 (6,203 ) (39.7 ) 81,525 30,540 (50,985 ) (166.9 )
Loss on disposal of assets 104   866   762   88.0 649   866   217   25.1
Operating income 26,109 22,920 3,189 13.9 21,955 47,953 (25,998 ) (54.2 )
Interest expense, net(1) (5,605 ) (13,352 ) 7,747 58.0 (18,690 ) (22,917 ) 4,227 18.4
Other income (expense) 39 (15 ) 54 NM 12 (13 ) 25 192.3
(Provision) benefit for income taxes (8,335 ) (3,855 ) (4,480 ) (116.2 ) 7,304   (8,770 ) 16,074   183.3
Net income(2) 12,208   5,698   6,510   114.3 10,581   16,253   (5,672 ) (34.9 )
 
Reconciliation of net income to EBITDA excluding non-cash items and cash provided by operating activities to Free Cash Flow:
Net income(2) 12,208 5,698 10,581 16,253
Interest expense, net(1) 5,605 13,352 18,690 22,917
Provision (benefit) for income taxes 8,335 3,855 (7,304 ) 8,770
Depreciation and amortization 21,810 15,607 81,525 30,540
Loss on disposal of assets 95 816 548 816
Other non-cash expenses 653   88     925   156    
EBITDA excluding non-cash items 48,706   39,416   9,290   23.6 104,965   79,452   25,513   32.1
 
EBITDA excluding non-cash items 48,706 39,416 104,965 79,452
Interest expense, net(1) (5,605 ) (13,352 ) (18,690 ) (22,917 )
Adjustments to derivative instruments recorded in interest expense(1) (2,485 ) 5,679 2,581 8,305
Amortization of debt financing costs(1) 806 785 1,614 1,516
Provision/benefit for income taxes, net of changes in deferred taxes (278 ) (882 ) (633 ) (2,126 )
Changes in working capital 2,412   (1,274 ) (1,794 ) (2,245 )
Cash provided by operating activities 43,556 30,372 88,043 61,985
Changes in working capital (2,412 ) 1,274 1,794 2,245
Maintenance capital expenditures (3,558 ) (1,182 )   (6,181 ) (1,999 )  
Free cash flow 37,586   30,464   7,122   23.4 83,656   62,231   21,425   34.4
_____________________
NM - Not meaningful
(1) Interest expense, net, includes adjustments to derivative instruments and non-cash amortization of deferred financing fees.

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

 

 

Contracted Power and Energy

 
               
 

Quarter Ended
June 30,

 

Change
Favorable/
(Unfavorable)

Six Months Ended June 30,

Change
Favorable/
(Unfavorable)

2015 2014 2015 2014
$ $ $ % $ $ $ %
($ In Thousands) (Unaudited)
 
Service revenues - 12,057 (12,057 ) (100.0 ) - 20,535 (20,535 ) (100.0 )
Product revenues 36,121 5,830 30,291 NM 47,953 9,488 38,465 NM
Finance lease revenues - 710   (710 ) (100.0 ) -   1,457   (1,457 ) (100.0 )
Total revenues 36,121 18,597   17,524   94.2 47,953   31,480   16,473   52.3
 

Cost of revenue - service(1)

-

8,745 8,745 100.0 - 14,947 14,947 100.0

Cost of revenue - product

5,136 863   (4,273 ) NM 7,783   1,723   (6,060 ) NM

Cost of revenue - total

5,136 9,608 4,472 46.5 7,783 16,670 8,887 53.3
Gross profit 30,985 8,989 21,996 NM 40,170 14,810 25,360 171.2
Selling, general and administrative expenses 14,170 2,765 (11,405 ) NM 16,808 4,317 (12,491 ) NM
Depreciation and amortization 13,854 3,982   (9,872 ) NM 21,299   7,710   (13,589 ) (176.3 )
Operating income 2,961 2,242 719 32.1 2,063 2,783 (720 ) (25.9 )
Interest expense, net(2) (4,945) (2,690 ) (2,255 ) (83.8 ) (11,283 ) (5,335 ) (5,948 ) (111.5 )
Other income - 1,648 (1,648 ) (100.0 ) 1,116 2,409 (1,293 ) (53.7 )
Provision for income taxes (3,683) (616 ) (3,067 ) NM (2,865 ) (1,215 ) (1,650 ) (135.8 )
Noncontrolling interest 529 570   (41 ) (7.2 ) 2,292   1,097   1,195   108.9
Net (loss) income(3) (5,138) 1,154   (6,292 ) NM (8,677 ) (261 ) (8,416 ) NM
 
Reconciliation of net (loss) income to EBITDA excluding non-cash items and cash (used in) provided by operating activities to Free Cash Flow:
Net (loss) income(3) (5,138) 1,154 (8,677 ) (261 )
Interest expense, net(2) 4,945 2,690 11,283 5,335
Provision for income taxes 3,683 616 2,865 1,215
Depreciation and amortization (1) 13,854 5,689 21,299 11,121
Other non-cash income (2,099) (2,125 )   (5,040 ) (2,890 )  
EBITDA excluding non-cash items 15,245 8,024   7,221   90.0 21,730   14,520   7,210   49.7
 
EBITDA excluding non-cash items 15,245 8,024 21,730 14,520
Interest expense, net(2) (4,945) (2,690 ) (11,283 ) (5,335 )
Adjustments to derivative instruments recorded in interest expense(2) (5,939) (1,559 ) (3,412 ) (3,084 )
Amortization of debt financing costs(2) 31 194 48 386
Equipment lease receivable, net - 1,032 - 2,028
Provision for income taxes, net of changes in deferred taxes - (630 ) (2 ) (1,019 )
Changes in working capital (6,441) 9,698   (4,698 ) 22,121  
Cash (used in) provided by operating activities (2,049) 14,069 2,383 29,617
Changes in working capital 6,441 (9,698 ) 4,698 (22,121 )
Maintenance capital expenditures (51) (323 )   (51 ) (673 )  
Free cash flow 4,341 4,048   293   7.2 7,030   6,823   207   3.0
 

_____________________

NM - Not meaningful

(1)  Includes depreciation expense of $1.7 million and $3.4 million related to the district energy business for the quarter and six months ended June 30, 2014, respectively.

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

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

 
 

Hawaii Gas

               
 

Quarter Ended
June 30,

Change
Favorable/
(Unfavorable)

Six Months Ended June 30,

Change
Favorable/ (Unfavorable)

2015 2014 2015 2014
$ $ $ % $ $ $ %

 

($ In Thousands) (Unaudited)

 
Revenues 59,759 69,134 (9,375 ) (13.6 ) 120,423 138,485 (18,062 ) (13.0 )
Cost of product sales 40,111   49,734   9,623   19.3 76,591   99,113   22,522   22.7
Gross profit 19,648 19,400 248 1.3 43,832 39,372 4,460 11.3
Selling, general and administrative expenses 4,862 4,771 (91 ) (1.9 ) 10,218 10,394 176 1.7
Depreciation and amortization 2,366   2,295   (71 ) (3.1 ) 4,720   4,553   (167 ) (3.7 )
Operating income 12,420 12,334 86 0.7 28,894 24,425 4,469 18.3
Interest expense, net(1) (1,806 ) (1,891 ) 85 4.5 (3,749 ) (3,678 ) (71 ) (1.9 )
Other expense (116 ) (57 ) (59 ) (103.5 ) (260 ) (139 ) (121 ) (87.1 )
Provision for income taxes (4,068 ) (4,092 ) 24   0.6 (9,600 ) (8,119 ) (1,481 ) (18.2 )
Net income(2) 6,430   6,294   136   2.2 15,285   12,489   2,796   22.4
 
Reconciliation of net income to EBITDA excluding non-cash items and cash provided by operating activities to Free Cash Flow:
Net income(2) 6,430 6,294 15,285 12,489
Interest expense, net(1) 1,806 1,891 3,749 3,678
Provision for income taxes 4,068 4,092 9,600 8,119
Depreciation and amortization 2,366 2,295 4,720 4,553
Other non-cash expenses (income) 1,219   408     (611 ) 1,132    
EBITDA excluding non-cash items 15,889   14,980   909   6.1 32,743   29,971   2,772   9.2
 
EBITDA excluding non-cash items 15,889 14,980 32,743 29,971
Interest expense, net(1) (1,806 ) (1,891 ) (3,749 ) (3,678 )
Adjustments to derivative instruments recorded in interest expense(1) (8 ) 153 131 146
Amortization of debt financing costs(1) 120 121 241 239
Provision for income taxes, net of changes in deferred taxes - (2,625 ) - (5,336 )
Pension contribution - (825 ) - (1,135 )
Changes in working capital (3,169 ) 1,711   (646 ) (3,777 )
Cash provided by operating activities 11,026 11,624 28,720 16,430
Changes in working capital 3,169 (1,711 ) 646 3,777
Maintenance capital expenditures (1,738 ) (2,133 )   (2,759 ) (3,791 )  
Free cash flow 12,457   7,780   4,677   60.1 26,607   16,416   10,191   62.1
_____________________

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

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

 

 

Corporate and Other

                 
 
 

Quarter Ended
June 30,

Change
Favorable/
(Unfavorable)

Six Months Ended June 30,

Change
Favorable/
(Unfavorable)

2015 2014 2015 2014
$ $ $ % $ $ $ %
($ In Thousands) (Unaudited)
 
Fees to manager-related party 154,559 14,495 (140,064 ) NM 319,832 23,489 (296,343 ) NM
Selling, general and administrative expenses 3,693   2,233   (1,460 ) (65.4 ) 6,639   3,279   (3,360 ) (102.5 )
Operating loss (158,252 ) (16,728 ) (141,524 ) NM (326,471 ) (26,768 ) (299,703 ) NM
Interest (expense) income, net(1) (3,716 ) 19 (3,735 ) NM (6,959 ) 69 (7,028 ) NM
Benefit for income taxes 64,276 3,078 61,198 NM 122,773 4,133 118,640 NM
Noncontrolling interest -   (614 ) 614   100.0 -   (935 ) 935   100.0
Net loss(2) (97,692 ) (14,245 ) (83,447 ) NM (210,657 ) (23,501 ) (187,156 ) NM
 
Reconciliation of net loss to EBITDA excluding non-cash items and cash used in operating activities to Free Cash Flow:
Net loss(2) (97,692 ) (14,245 ) (210,657 ) (23,501 )
Interest expense (income), net(1) 3,716 (19 ) 6,959 (69 )
Benefit for income taxes (64,276 ) (3,078 ) (122,773 ) (4,133 )

Fees to manager-related party(3)

154,559 14,495 319,832 23,489
Other non-cash expense 187   801     375   1,310    
EBITDA excluding non-cash items (3,506 ) (2,046 ) (1,460 ) (71.4 ) (6,264 ) (2,904 ) (3,360 ) (115.7 )
 
EBITDA excluding non-cash items (3,506 ) (2,046 ) (6,264 ) (2,904 )
Interest (expense) income, net (1) (3,716 ) 19 (6,959 ) 69
Amortization of debt financing costs(1) 578 - 1,134 -
Benefit for income taxes, net of changes in deferred taxes 162 2,243 291 4,540
Changes in working capital(3) 1,684   (982 ) 360   (3,488 )
Cash used in operating activities (4,798 ) (766 ) (11,438 ) (1,783 )
Changes in working capital(3) (1,684 ) 982     (360 ) 3,488    
Free cash flow (6,482 ) 216   (6,698 ) NM (11,798 ) 1,705   (13,503 ) NM
_____________________

NM- Not meaningful

(1) Interest (expense) income, net, includes non-cash amortization of deferred financing fees.

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

(3) In July 2015, our Board requested, and our Manager agreed, that $67.8 million of the performance fee for the second quarter of 2015 would be and was settled in cash in July 2015 to minimize dilution. The remainder of the fee will be reinvested in our common stock in July 2016 using the June 2016 monthly volume weighted average price.

 
 

MACQUARIE INFRASTRUCTURE CORPORATION

RECONCILIATION OF PROPORTIONATELY COMBINED NET INCOME (LOSS) TO EBITDA EXCLUDING NON-CASH ITEMS AND CASH FROM OPERATING ACTIVITIES TO FREE CASH FLOW

   

For the Quarter Ended June 30, 2015

($ in Thousands) (Unaudited) IMTT

100%(1)

  Atlantic Aviation

100%

  Contracted Power and Energy(2)   Hawaii Gas 100%   MIC Corporate 100%   Proportionately Combined(3)   Contracted Power and Energy 100%
           
Net income (loss) attributable to MIC 21,096 12,208 (5,559 ) 6,430 (97,692 ) (63,517 ) (5,138 )
Interest expense, net(4) 6,263 5,605 4,854 1,806 3,716 22,244 4,945
Provision (benefit) for income taxes 14,659 8,335 3,683 4,068 (64,276 ) (33,531 ) 3,683
Depreciation 28,907 8,013 10,945 2,109 - 49,974 12,772
Amortization of intangibles 2,766 13,797 1,038 257 - 17,858 1,082
Fees to manager-related party(5) - - - - 154,559 154,559 -
Loss on disposal of assets - 95 - - - 95 -
Other non-cash expense (income) 1,957     653     (2,162 )   1,219     187     1,854   (2,099 )
EBITDA excluding non-cash items 75,648     48,706     12,799     15,889     (3,506 )   149,536   15,245  
 
EBITDA excluding non-cash items 75,648 48,706 12,799 15,889 (3,506 ) 149,536 15,245
Interest expense, net(4) (6,263 ) (5,605 ) (4,854 ) (1,806 ) (3,716 ) (22,244 ) (4,945 )
Adjustments to derivative instruments recorded in interest expense, net(4) (3,955 ) (2,485 ) (5,056 ) (8 ) - (11,504 ) (5,939 )
Amortization of deferred finance charges(4) 1,416 806 25 120 578 2,945 31
Interest rate swap breakage fees (31,385 ) - - - - (31,385 ) -
Provision/benefit for income taxes, net of changes in deferred taxes 473 (278 ) - - 162 357 -
Changes in working capital(5) (6,741 )   2,412     (6,036 )   (3,169 )   1,684     (11,850 ) (6,441 )
Cash provided by (used in) operating activities 29,193 43,556 (3,122 ) 11,026 (4,798 ) 75,855 (2,049 )
Changes in working capital(5) 6,741 (2,412 ) 6,036 3,169 (1,684 ) 11,850 6,441
Maintenance capital expenditures (6,043 )   (3,558 )   (51 )   (1,738 )   -     (11,390 ) (51 )
Free cash flow 29,891     37,586     2,863     12,457     (6,482 )   76,315   4,341  
 
 

For the Quarter Ended June 30, 2014

($ in Thousands) (Unaudited) IMTT

50%(6)

  Atlantic Aviation

100%

  Contracted Power and Energy(2)   Hawaii Gas 100%   MIC Corporate 100%   Proportionately Combined(3) IMTT

100% (7)

  Contracted Power and Energy 100%
 
Net income (loss) attributable to MIC 12,002 5,698 761 6,294 (14,245 ) 10,509 24,003 1,154
Interest expense (income), net(4) 4,407 13,352 1,779 1,891 (19 ) 21,409 8,813 2,690
Provision (benefit) for income taxes 7,728 3,855 314 4,092 (3,078 ) 12,911 15,455 616
Depreciation 9,587 6,789 3,561 1,983 - 21,920 19,174 5,363
Amortization of intangibles 236 8,818 163 312 - 9,529 472 326
Fees to manager-related party - - - - 14,495 14,495 - -
Loss on disposal of assets - 816 - - - 816 - -
Other non-cash expense (income) 759     88     (2,033 )   408     801     23   1,518     (2,125 )
EBITDA excluding non-cash items 34,718     39,416     4,544     14,980     (2,046 )   91,611   69,435     8,024  
 
EBITDA excluding non-cash items 34,718 39,416 4,544 14,980 (2,046 ) 91,611 69,435 8,024
Interest (expense) income, net(4) (4,407 ) (13,352 ) (1,779 ) (1,891 ) 19 (21,409 ) (8,813 ) (2,690 )
Adjustments to derivative instruments recorded in interest expense, net(4) (1,257 ) 5,679 (780 ) 153 - 3,796 (2,513 ) (1,559 )
Amortization of deferred finance charges(4) 422 785 103 121 - 1,430 843 194
Equipment lease receivables, net - - 516 - - 516 - 1,032
Provision/benefit for income taxes, net of changes in deferred taxes (5,806 ) (882 ) (315 ) (2,625 ) 2,243 (7,385 ) (11,612 ) (630 )
Pension contribution - - - (825 ) - (825 ) - -
Changes in working capital (5,095 )   (1,274 )   8,411     1,711     (982 )   2,772   (10,189 )   9,698  
Cash provided by (used in) operating activities 18,576 30,372 10,700 11,624 (766 ) 70,506 37,151 14,069
Changes in working capital 5,095 1,274 (8,411 ) (1,711 ) 982 (2,772 ) 10,189 (9,698 )
Maintenance capital expenditures (7,560 )   (1,182 )   (162 )   (2,133 )   -     (11,036 ) (15,119 )   (323 )
Free cash flow 16,111     30,464     2,128     7,780     216     56,699   32,221     4,048  
   

For the Six Months Ended June 30, 2015

($ in Thousands) (Unaudited) IMTT

100%(1)

  Atlantic Aviation

100%

  Contracted Power and Energy(2)   Hawaii Gas 100%   MIC Corporate 100%   Proportionately Combined(3)   Contracted Power and Energy 100%
           
Net income (loss) attributable to MIC 41,370 10,581 (7,933 ) 15,285 (210,657 ) (151,354 ) (8,677 )
Interest expense, net(4) 13,169 18,690 9,614 3,749 6,959 52,181 11,283
Provision (benefit) for income taxes 28,748 (7,304 ) 2,865 9,600 (122,773 ) (88,864 ) 2,865
Depreciation 62,022 23,012 16,386 4,151 - 105,571 20,038
Amortization of intangibles 5,530 58,513 1,171 569 - 65,783 1,261
Fees to manager-related party(5) - - - - 319,832 319,832 -
Loss on disposal of assets - 548 - - - 548 -
Other non-cash expense (income) 3,213     925     (4,853 )   (611 )   375     (951 ) (5,040 )
EBITDA excluding non-cash items 154,052     104,965     17,250     32,743     (6,264 )   302,746   21,730  
 
EBITDA excluding non-cash items 154,052 104,965 17,250 32,743 (6,264 ) 302,746 21,730
Interest expense, net(4) (13,169 ) (18,690 ) (9,614 ) (3,749 ) (6,959 ) (52,181 ) (11,283 )
Adjustments to derivative instruments recorded in interest expense, net(4) (6,334 ) 2,581 (3,165 ) 131 - (6,787 ) (3,412 )
Amortization of deferred finance charges(4) 1,529 1,614 38 241 1,134 4,556 48
Interest rate swap breakage fees (31,385 ) - - - - (31,385 ) -
Provision/benefit for income taxes, net of changes in deferred taxes (104 ) (633 ) (2 ) - 291 (448 ) (2 )
Changes in working capital(5) (18,353 )   (1,794 )   (4,682 )   (646 )   360     (25,115 ) (4,698 )
Cash provided by (used in) operating activities 86,236 88,043 (175 ) 28,720 (11,438 ) 191,386 2,383
Changes in working capital(5) 18,353 1,794 4,682 646 (360 ) 25,115 4,698
Maintenance capital expenditures (8,514 )   (6,181 )   (51 )   (2,759 )   -     (17,505 ) (51 )
Free cash flow 96,075     83,656     4,456     26,607     (11,798 )   198,996   7,030  
 
 
 

For the Six Months Ended June 30, 2014

($ in Thousands) (Unaudited) IMTT

50%(6)

  Atlantic Aviation

100%

  Contracted Power and Energy(2)   Hawaii Gas 100%   MIC Corporate 100%   Proportionately Combined(3) IMTT 100%(7)   Contracted Power and Energy 100%
 
Net income (loss) attributable to MIC 27,492 16,253 1,286 12,489 (23,501 ) 34,019 54,984 (261 )
Interest expense (income), net(4) 7,973 22,917 3,510 3,678 (69 ) 38,009 15,946 5,335
Provision (benefit) for income taxes 18,279 8,770 743 8,119 (4,133 ) 31,778 36,557 1,215
Depreciation 18,492 13,591 6,915 3,929 - 42,926 36,983 10,473
Amortization of intangibles 469 16,949 324 624 - 18,366 937 648
Fees to manager-related party - - - - 23,489 23,489 - -
Loss on disposal of assets - 816 - - - 816 - -
Other non-cash expense (income) 1,751     156     (4,355 )   1,132     1,310     (7 ) 3,501     (2,890 )
EBITDA excluding non-cash items 74,454     79,452     8,422     29,971     (2,904 )   189,395   148,908     14,520  
 
EBITDA excluding non-cash items 74,454 79,452 8,422 29,971 (2,904 ) 189,395 148,908 14,520
Interest (expense) income, net(4) (7,973 ) (22,917 ) (3,510 ) (3,678 ) 69 (38,009 ) (15,946 ) (5,335 )
Adjustments to derivative instruments recorded in interest expense, net (4) (3,325 ) 8,305 (1,542 ) 146 - 3,584 (6,649 ) (3,084 )
Amortization of deferred finance charges(4) 844 1,516 203 239 - 2,802 1,687 386
Equipment lease receivables, net - - 1,014 - - 1,014 - 2,028
Provision/benefit for income taxes, net of changes in deferred taxes (13,361 ) (2,126 ) (511 ) (5,336 ) 4,540 (16,793 ) (26,721 ) (1,019 )
Pension contribution - - - (1,135 ) - (1,135 ) - -
Changes in working capital (2,471 )   (2,245 )   18,942     (3,777 )   (3,488 )   6,961   (4,941 )   22,121  
Cash provided by (used in) operating activities 48,169 61,985 23,018 16,430 (1,783 ) 147,819 96,338 29,617
Changes in working capital 2,471 2,245 (18,942 ) 3,777 3,488 (6,961 ) 4,941 (22,121 )
Maintenance capital expenditures (13,113 )   (1,999 )   (337 )   (3,791 )   -     (19,240 ) (26,226 )   (673 )
Free cash flow 37,527     62,231     3,740     16,416     1,705     121,619   75,053     6,823  
___________________________

(1) Represents our 100% ownership interest in IMTT subsequent to July 16, 2014. IMTT owns 66.7% of its Quebec marine terminal in Canada. The remainder is owned by one other party. IMTT consolidates the results of the Quebec terminal in its financial statements and adjusts the portion that it does not own through noncontrolling interest. The above table shows 100% of IMTT, including the 33.3% portion of the Quebec terminal that it does not own, which is not significant. Both MIC’s and IMTT’s EBITDA excluding non-cash items and Free Cash Flow reflects 100% of the results of the Quebec terminal.

(2) Proportionately combined Free Cash Flow for Contracted Power and Energy is equal to MIC's controlling ownership interest in its solar and wind power generation businesses and the district energy business, up to August 21, 2014, date of sale. As of April 1, 2015, Contracted Power and Energy also includes 100% of BEC, a gas-fired power generation facility.

(3) Proportionately combined Free Cash Flow is equal to the sum of Free Cash Flow attributable to MIC's ownership interest in each of its operating businesses and MIC Corporate.

(4) Interest expense, net, includes adjustment to derivative instruments and non-cash amortization of deferred financing fees. For the quarter and six months ended June 30, 2015, interest expense also includes non-cash write-off of deferred financing costs related to the May 2015 refinancing at IMTT.

(5) In July 2015, our Board requested, and our Manager agreed, that $67.8 million of the performance fee for the second quarter of 2015 would be and was settled in cash in July 2015 to minimize dilution. The remainder of the fee will be reinvested in our common stock in July 2016 using the June 2016 monthly volume weighted average price.

(6) Our proportionate interest in IMTT prior to the acquisition of the remaining 50% interest on July 16, 2014.

(7) Represents 100% of IMTT as a stand-alone business.

Contacts

Macquarie Infrastructure Corporation
Investor Enquiries:
Jay A. Davis, 212-231-1825
Investor Relations
or
Media Enquiries:
Stephen Yan, 212-231-1277
Corporate Communications

Contacts

Macquarie Infrastructure Corporation
Investor Enquiries:
Jay A. Davis, 212-231-1825
Investor Relations
or
Media Enquiries:
Stephen Yan, 212-231-1277
Corporate Communications