August 1, 2016 - 5:15 PM EDT
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Macquarie Infrastructure Corporation Reports Second Quarter 2016 Financial Results, Increased Dividend

  • Net income increases to $21.1 million from net loss of $63.5 million
  • Proportionately Combined Free Cash Flow increases 8.8% to $126.3 million
  • Weighted average shares outstanding increases 1.4% to 80,369,575
  • Quarterly cash dividend of $1.25 per share, up 12.6%, authorized
  • Backlog of growth projects increases with approval of BEC expansion

Macquarie Infrastructure Corporation (NYSE:MIC) reported its financial results for the second quarter of 2016 including net income of $21.1 million versus a net loss of $63.5 million in the second quarter of 2015. For the six months ended June 30, 2016, MIC reported net income of $41.3 million versus a net loss of $154.0 million in the prior comparable period.

Net income increased primarily as a result of the absence of any performance fees payable to the Company’s manager, the absence of transaction related expenses in connection with the acquisition of Bayonne Energy Center (“BEC”) in 2015 and the generation of increased gross profit by each of MIC’s operating companies in 2016. Partially offsetting the increases were higher interest expense and an increased provision for income taxes.

MIC’s financial performance metric, Proportionately Combined Free Cash Flow (“PCFCF”), increased 8.8% to $126.3 million in the second quarter of 2016 compared with the underlying PCFCF of $116.1 million generated in the second quarter in 2015. For the six month period, MIC reported an increase in PCFCF of 8.5% to $259.7 million versus an underlying $239.5 million in the prior comparable period. The increase in both periods was primarily the result of improvement in operations at each of MIC’s businesses including contributions from acquisitions in 2015 and 2016. Underlying figures in the prior comparable period excluded primarily the interest rate swap break fees at IMTT and transaction fees related to the acquisition of BEC. See “Use of Non-GAAP Measures” below for MIC’s definition of PCFCF.

The weighted average number of MIC shares outstanding during the quarter ended June 30, 2016 increased 1.4% year over year to 80,369,575. The increase was primarily the result of the reinvestment of base management fees payable to MIC’s manager in new shares during 2015 and 2016.

“Our businesses performed well during the second quarter and produced a result consistent with our guidance for the full year,” said James Hooke, chief executive officer of MIC. “Both Atlantic Aviation and the businesses comprising our Contracted Power and Energy (CP&E) segment delivered attractive year on year growth – Atlantic benefited from increases in both volume and margin on fuel sales as well as contributions from acquisitions completed in 2015 and 2016 and BEC produced more power than it did in the second quarter of last year. IMTT’s terminal operations grew in line with expectations, although its OMI Environmental Services (“OMI”) subsidiary operated at a small loss, and Hawaii Gas produced modest growth on an approximately 2% increase in the volume of gas sold.”

Reflective of the performance of MIC’s businesses during the period, the Company’s board of directors has authorized a cash dividend of $1.25 per share, or $5.00 annualized, for the second quarter of 2016. The dividend will be payable August 16, 2016 to shareholders of record on August 11, 2016. The cash payment represents a 12.6% increase over the dividend paid for the second quarter of 2015.

MIC remains on target to deliver a previously announced increase in its 2016 dividend to between $5.00 and $5.10 per share, up from $4.46 in 2015. Through two quarters, MIC will have distributed $2.45 per share in dividends. The payment of a future dividend is subject to the continued stable performance of MIC’s businesses and authorization by the Company’s board of directors.

MIC deployed $60.7 million of capital in support of growth projects and bolt-on acquisitions during the second quarter. Through the first half of the year the Company has deployed $123.2 million. MIC expects to deploy a total of approximately $250.0 million in growth capital in 2016.

“The receipt of regulatory consents and approval by our board of directors of our investment in containerized LNG in Hawaii and the expansion of BEC in New Jersey means that our backlog of growth investments is now nearly $370.0 million,” Hooke noted. The planned investment of $130.0 million in the development of 130MW of gas-fired power generating capacity at BEC in Bayonne, NJ is expected to be made largely in 2017.

The Company also reported that it completed the previously announced construction of a 6.5MW solar photovoltaic power generation facility in Hawaii. The first half of the facility was placed in service in late June followed by the second half in late July.

Overview of Consolidated (GAAP) Results for the Quarter and Six Months Ended June 30, 2016

MIC’s revenue decreased 6.2% to $397.6 million and 3.4% to $794.0 million versus the prior comparable quarter and six month periods, respectively. The decrease in the quarter reflects primarily:

  • declines in the cost of jet fuel sold by Atlantic Aviation and gas sold by Hawaii Gas;
  • reductions in revenue at IMTT related to the absence of any material spill response activity at OMI; and,
  • decreases in certain services including rail car handling at IMTT; partially offset by,
  • growth in revenue generated by the businesses in MIC’s CP&E segment.

The $26.1 million decrease in revenue in the quarter was entirely offset by a $37.8 million decrease in direct expenses, primarily the energy inputs noted above, recorded in cost of services/cost of product sales at each of Atlantic Aviation and Hawaii Gas. A reduction in direct expenses of $60.8 million for the six months to June 30 completely offset the decline in revenue for the half year. The pass-through of energy input costs, up or down, makes gross profit – revenue less direct expenses - effectively the “top line” to which MIC manages its businesses.

Gross profit increased 5.1% to $241.7 million and 7.1% to $488.6 million versus the prior comparable quarter and six month periods, respectively. The increase in the quarter reflects primarily:

  • improved performance by Atlantic Aviation as a result of increases in general aviation flight activity and acquisitions of additional sites;
  • a larger contribution from CP&E based on an increased utilization of BEC and improved wind and solar resources generally; and,
  • unrealized gains on propane price hedges at Hawaii Gas.

The improvement through six months reflects each of the above factors plus incremental gross profit from BEC in the first quarter.

Selling, general and administrative expenses decreased by 10.7% to $72.4 million in the second quarter and by 4.6% to $144.7 million in the first half of 2016. The decreases reflect primarily:

  • the absence of transaction related expenses associated with the acquisition of BEC primarily in the second quarter in 2015; and,
  • the absence of costs related to the conversion of MIC from a limited liability company to a corporation; partially offset by,
  • incremental costs associated with the ongoing operation of BEC in the second quarter; and,
  • higher salary and benefits costs at Atlantic Aviation together with incremental costs associated with acquired FBOs in both the quarter and six month periods.

Fees payable to MIC’s external manager decreased 89.4% to $16.4 million in the second quarter and 90.2% to $31.2 million in the first half of 2016 primarily as a result of the absence of any performance fees in 2016. All base management fees generated were reinvested in new shares.

The items above resulted in MIC reporting net income of $21.1 million and $41.3 million in the quarter and six months ended June 30, 2016, respectively, compared with net losses of $63.5 million and $154.0 million, respectively, in the prior comparable periods. Net income also reflects:

  • higher interest expense as a result of unfavorable mark to market of interest rate swaps; and,
  • an increased provision for income taxes as a result of the absence of any tax benefit associated with performance fees incurred in 2015; partially offset by,
  • the absence of impairments at Atlantic Aviation incurred in the first quarter of 2015.

MIC deployed an aggregate $69.6 million and $145.3 million in the second quarter and six months ended June 30, 2016, respectively, in the acquisition of businesses and purchases of property and equipment.

Overview of Proportionately Combined non-GAAP Results for the Quarter and Six Months Ended June 30, 2016

The following items are discussed on a proportionately combined basis reflective of MIC’s partial interest in certain of its businesses. See “Use of Non-GAAP Measures” below for MIC’s definition of Free Cash Flow, EBITDA excluding Non-Cash Items and proportionately combined metrics as well as further information on MIC’s use of these measures. See also the reconciliation of Net Income (Loss) to EBITDA excluding Non-Cash Items and Free Cash Flow attached to this release.

The above Overview of Consolidated Results, adjusted for non-cash items, generated an increase in EBITDA excluding non-cash items of 4.0% to $164.2 million and 8.1% to $337.1 million in the quarter and six months ended June 30, 2016, respectively.

Cash interest expense decreased 14.3% to $26.4 million versus the prior comparable quarter and by 2.7% to $52.9 million versus the prior comparable six month period. The decrease in cash interest expense in both periods reflects primarily a reduction in the interest rate and outstanding debt balance at BEC, partially offset by increased debt balances at each of IMTT and MIC Corporate.

Cash taxes increased to $1.7 million from a tax benefit of $0.4 million in the second quarter and to $4.2 million from $0.4 million through six months primarily as a result of the absence of a performance fee and associated tax benefits in 2016 versus the comparable periods in 2015. Any federal income tax liability generated in 2016, other than Alternative Minimum Tax, is expected to be offset by net operating loss carryforwards available at the holding company level.

Maintenance capital expenditures decreased by 13.6% to $9.8 million in the second quarter and increased by 15.7% to $20.3 million through the first six months of the year. The changes in the quarter and six month periods were attributable to reduced maintenance capital expenditures at Atlantic Aviation and Hawaii Gas (net of customer reimbursements) in the quarter, partially offset by an increase in maintenance capital expenditures at IMTT in the half-year.

Free Cash Flow increased 8.8% to $126.3 million in the second quarter and by 8.5% to $259.7 million in the first half of 2016. The growth in cash generation was primarily a result of improved performance at Atlantic Aviation, an increased contribution from the renewables portion of CP&E based on an improvement in wind and solar resources in both quarters, and based on the acquisition of BEC in the second quarter of 2015. Underlying figures in the prior comparable period excluded primarily the interest rate swap break fees at IMTT of $31.4 million and transaction fees related to the acquisition of BEC of $9.1 million.

Conference Call and Webcast

When: Management has scheduled a conference call for 8:00 a.m. Eastern Time on Tuesday, August 2, 2016 during which it will review and comment on the Company’s results for the second quarter.

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

Slides: The Company will prepare materials in support of its conference call presentation. The materials will be available for downloading from the Company’s website the morning of August 2, 2016 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 2, 2016 through midnight on August 8, 2016, at +1(404) 537-3406 or +1(855) 859-2056, Passcode: 49732812. An online archive of the webcast will be available on the Company’s website for one year following the call. MIC-G

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, a gas processing and distribution business, Hawaii Gas, and entities comprising a Contracted Power and Energy segment. For additional information, please visit the MIC website at www.macquarie.com/mic.

Use of Non-GAAP Measures

In analyzing the financial performance of its businesses, MIC focuses primarily on cash generation and Free Cash Flow in particular. The Company believes investors use Free Cash Flow as a measure of its ability to sustain and potentially increase its quarterly cash dividend.

In addition, MIC measures EBITDA excluding non-cash items, a component of Free Cash Flow, as it reflects its businesses’ ability to effectively manage the volume of products sold or services provided, the margin earned on those transactions and the management of operating expenses independent of the capitalization and tax attributes of those businesses.

MIC also uses proportionately combined financial metrics, which reflect its ownership interest in each of its businesses and MIC Corporate. The Company uses these measures to assess the amount of cash generated in proportion to its ownership interest in its businesses. Given its varied ownership levels in some of its businesses, principally in the CP&E segment, together with the Company’s obligations to report the results of these businesses on a consolidated basis, management believes that GAAP measures such as net income (loss) do not fully reflect all of the items it considers in assessing the amount of cash generated based on its ownership interest in its businesses. MIC notes that the proportionately combined metrics it uses 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 its financial performance and not in lieu of its financial results reported under GAAP.

MIC defines Free Cash Flow as EBITDA excluding non-cash items less cash paid for interest, taxes, pension contributions, and maintenance capital expenditures, including principal repayments on capital lease obligations used to fund maintenance capital expenditures. Thus, MIC views Free Cash Flow and EBITDA excluding non-cash items as key performance indicators with respect to the ongoing performance of its businesses and their ability to generate cash, in part in support of the Company’s dividend. In this release, MIC has disclosed Free Cash Flow on a consolidated basis and for each of its operating segments and MIC Corporate.

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 and adjustments for other non-cash items 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.

MIC believes that both Free Cash Flow and EBITDA excluding non-cash items support a more complete understanding of the business factors and economic trends reflected in the financial performance of its businesses than would otherwise be achieved using GAAP results alone. Specifically, both Free Cash Flow and EBITDA excluding non-cash items reflect the ability of the Company’s businesses to generate cash on an ongoing basis. MIC’s businesses can be characterized as owners of high-value, long-lived assets which tend to generate Free Cash Flow in excess of GAAP net income as a result of: (i) non-cash depreciation, amortization and impairment charges; (ii) MIC’s ability to defer all or a portion of current federal income taxes; (iii) non-cash unrealized gains or losses on derivative instruments; and, (iv) various other non-cash items such as pension expense, amortization of tolling liabilities and gains (losses) on disposal of assets. The non-cash pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses. In addition, management uses Free Cash Flow as a measure of the Company’s ability to sustain and potentially increase its quarterly cash dividend. MIC believes that external consumers of its financial statements, including investors and research analysts, use this metric to assess the performance of the Company and as an indicator of its success in generating a cash return on investment.

MIC does not consider Free Cash Flow to be a measure of liquidity because it does not fully reflect the Company’s ability to deploy generated cash for discretionary spending. It does not take into consideration required payments on indebtedness and other fixed obligations or the other cash items that are excluded when calculating Free Cash Flow. MIC 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 the Company’s financial performance and not in lieu of its financial results reported under GAAP.

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, MIC has adopted a framework to categorize specific capital expenditures. In broad terms, maintenance capital expenditures primarily maintain the Company’s businesses at current levels of operations, capability, profitability or cash flow. MIC considers a number of factors to determine 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 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 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; risks associated with development, investment and expansion in the power industry; 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 and other commodity 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, 2016 December 31, 2015(1)
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 23,261 $ 22,394
Restricted cash 14,482 18,946
Accounts receivable, less allowance for doubtful accounts

  of $1,387 and $1,690, respectively

96,799 95,597
Inventories 31,492 29,489
Prepaid expenses 14,407 21,690
Other current assets   17,614   28,453
Total current assets 198,055 216,569
Property, equipment, land and leasehold improvements, net 4,128,736 4,116,163
Investment in unconsolidated business 9,025 8,274
Goodwill 2,021,611 2,017,211
Intangible assets, net 911,922 934,892
Other noncurrent assets   11,040   15,695
Total assets $ 7,280,389 $ 7,308,804
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Due to Manager - related party $ 73,618 $ 73,317
Accounts payable 50,312 56,688
Accrued expenses 69,961 78,527
Current portion of long-term debt 61,096 40,099
Fair value of derivative instruments 19,601 19,628
Other current liabilities   39,618   40,531
Total current liabilities 314,206 308,790
Long-term debt, net of current portion 2,763,545 2,746,525
Deferred income taxes 850,034 816,836
Fair value of derivative instruments 46,008 15,698
Tolling agreements - noncurrent 64,261 68,150
Other noncurrent liabilities   149,030   150,363
Total liabilities   4,187,084   4,106,362
Commitments and contingencies - -
Stockholders’ equity (2):

Common stock ($0.001 par value; 500,000,000 authorized;80,502,929 shares issued and

  outstanding at June 30, 2016 and 80,006,744 shares issued and outstanding at December

  31, 2015)

$ 81 $ 80
Additional paid in capital 2,167,561 2,317,421
Accumulated other comprehensive loss (25,757) (23,295)
Retained earnings   777,531   735,984
Total stockholders’ equity 2,919,416 3,030,190
Noncontrolling interests   173,889   172,252
Total equity   3,093,305   3,202,442
Total liabilities and equity $ 7,280,389 $ 7,308,804
_________________
(1) Conformed to current period presentation. See Note 2, "Basis of Presentation", for Recently Issued Accounting Standards adopted in

the six months ended June 30, 2016.

(2) See Note 8, "Stockholders' Equity", for discussions on preferred stock and special stock.
 
               
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,
  2016   2015   2016   2015
Revenue
Service revenue $ 306,221 $ 327,809 $ 618,462 $ 653,811
Product revenue   91,358   95,880   175,504   168,376
Total revenue   397,579   423,689   793,966   822,187
Costs and expenses
Cost of services 120,857 148,417 237,320 281,834
Cost of product sales 35,018 45,247 68,078 84,374
Selling, general and administrative 72,430 81,064 144,714 151,717
Fees to Manager - related party 16,392 154,559 31,188 319,832
Depreciation 59,662 51,801 112,883 109,223
Amortization of intangibles   16,713   17,902   34,500   65,873
Total operating expenses   321,072   498,990   628,683   1,012,853
Operating income (loss) 76,507 (75,301) 165,283 (190,666)
Other income (expense)
Interest income 25 7 58 13
Interest expense(1) (39,502) (22,342) (96,397) (53,863)
Other income, net   271   588   3,700   1,620
Net income (loss) before income taxes 37,301 (97,048) 72,644 (242,896)
(Provision) benefit for income taxes   (16,220)   33,531   (31,387)   88,864
Net income (loss) $ 21,081 $ (63,517) $ 41,257 $ (154,032)
Less: net income (loss) attributable to noncontrolling interests   1,889   (421)   (290)   (1,934)
Net income (loss) attributable to MIC $ 19,192 $ (63,096) $ 41,547 $ (152,098)
 
Basic income (loss) per share attributable to MIC $ 0.24 $ (0.80) $ 0.52 $ (2.00)
Weighted average number of shares outstanding: basic   80,369,575   79,246,069   80,241,293   76,214,929
 
Diluted income (loss) per share attributable to MIC $ 0.24 $ (0.80) $ 0.51 $ (2.00)
Weighted average number of shares outstanding: diluted   81,323,294   79,246,069   81,194,505   76,214,929
Cash dividends declared per share $ 1.25 $ 1.11 $ 2.45 $ 2.18
 
(1) Interest expense includes losses on derivative instruments of $14.9 million and $46.7 million for the quarter and six months ended June 30,

2016, respectively. For the quarter and six months ended June 30, 2015, interest expense includes gains on derivative instruments of $3.5

million and losses on derivative instruments of $8.9 million, respectively.

 
     
MACQUARIE INFRASTRUCTURE CORPORATION
 
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in Thousands)
 
Six Months Ended June 30,
  2016     2015
 
Operating activities
Net income (loss) $ 41,257 $ (154,032)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of property and equipment 112,883 109,223
Amortization of intangible assets 34,500 65,873
Amortization of debt financing costs 5,249 4,566
Adjustments to derivative instruments 29,030 (40,465)
Fees to Manager- related party 31,188 252,012
Deferred taxes 27,219 (89,312)
Other non-cash expense, net 2,646 3,390
Changes in other assets and liabilities, net of acquisitions:
Restricted cash 2,368 2,071
Accounts receivable (1,788) (13,081)
Inventories (2,104) (152)
Prepaid expenses and other current assets 9,498 3,580
Due to Manager - related party 90 67,813
Accounts payable and accrued expenses (13,789) (10,489)
Income taxes payable 1,393 (5,461)
Other, net   (1,722)   (1,592)
Net cash provided by operating activities   277,918   193,944
 
Investing activities
Acquisitions of businesses and investments, net of cash acquired (16,613) (236,956)
Purchases of property and equipment (118,734) (50,025)
Proceeds from insurance claim 7,235 -
Other, net   513   522
Net cash used in investing activities   (127,599)   (286,459)
 
Financing activities
Proceeds from long-term debt $ 251,000 $ 1,654,569
Payment of long-term debt (216,581) (1,744,761)
Proceeds from the issuance of shares 1,323 488,125
Dividends paid to common stockholders (188,608) (162,967)
Contributions received from noncontrolling interests 15,431 532
Purchase of noncontrolling interest (9,909) -
Distributions paid to noncontrolling interests (2,505) (1,238)
Offering and equity raise costs paid (149) (16,540)
Debt financing costs paid (1,203) (14,293)
Change in restricted cash 2,096 10,975
Payment of capital lease obligations (789) (1,419)
Net cash (used in) provided by financing activities (149,894) 212,983
 
Effect of exchange rate changes on cash and cash equivalents 442 (298)
Net change in cash and cash equivalents   867   120,170
Cash and cash equivalents, beginning of period   22,394   48,014
Cash and cash equivalents, end of period $ 23,261 $ 168,184
 
Supplemental disclosures of cash flow information
Non-cash investing and financing activities:
Accrued equity offering costs $ 260 $ 168
Accrued financing costs $ 443 $ 887
Accrued purchases of property and equipment $ 20,794 $ 16,359
Acquisition of equipment through capital leases $ - $ 398
Issuance of shares to Manager $ 30,977 $ 182,513
Issuance of shares to independent directors $ 750 $ 750
Conversion of convertible senior notes to shares $ 4 $ 25
Conversion of LLC interests to common stock(1) $ - $ 79
Conversion of LLC interests to additional paid in capital(1) $ - $ 2,428,334
Distributions payable to noncontrolling interests $ - $ 39
Taxes paid, net $ 2,766 $ 5,909
Interest paid $ 55,956 $ 54,209
______________
(1) See Note 8, "Stockholders' Equity", for discussion on 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)

  2016     2015   $   %   2016     2015   $   %

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

Revenue  
Service revenue $ 306,221 $ 327,809 (21,588) (6.6) $ 618,462 $ 653,811 (35,349) (5.4)
Product revenue   91,358   95,880   (4,522) (4.7)   175,504   168,376   7,128 4.2
Total revenue   397,579   423,689   (26,110) (6.2)   793,966   822,187   (28,221) (3.4)
 
Costs and expenses
Cost of services(1) 120,857 148,417 27,560 18.6 237,320 281,834 44,514 15.8
Cost of product sales(1)   35,018   45,247   10,229 22.6   68,078   84,374   16,296 19.3
Gross profit 241,704 230,025 11,679 5.1 488,568 455,979 32,589 7.1
Selling, general and administrative 72,430 81,064 8,634 10.7 144,714 151,717 7,003 4.6
Fees to Manager - related party 16,392 154,559 138,167 89.4 31,188 319,832 288,644 90.2
Depreciation 59,662 51,801 (7,861) (15.2) 112,883 109,223 (3,660) (3.4)
Amortization of intangibles   16,713   17,902   1,189 6.6   34,500   65,873   31,373 47.6
Total operating expenses   165,197   305,326   140,129 45.9   323,285   646,645   323,360 50.0
Operating income (loss) 76,507 (75,301) 151,808 NM 165,283 (190,666) 355,949 186.7
 
Other income (expense)
Interest income 25 7 18 NM 58 13 45 NM
Interest expense(2) (39,502) (22,342) (17,160) (76.8) (96,397) (53,863) (42,534) (79.0)
Other income, net   271   588   (317) (53.9)   3,700   1,620   2,080 128.4
Net income (loss) before income taxes 37,301 (97,048) 134,349 138.4 72,644 (242,896) 315,540 129.9
(Provision) benefit for income taxes   (16,220)   33,531   (49,751) (148.4)   (31,387)   88,864   (120,251) (135.3)
Net income (loss) $ 21,081 $ (63,517) 84,598 133.2 $ 41,257 $ (154,032) 195,289 126.8
Less: net income (loss) attributable to noncontrolling interests   1,889   (421)   (2,310) NM   (290)   (1,934)   (1,644) (85.0)
Net income (loss) attributable to MIC $ 19,192 $ (63,096)   82,288 130.4 $ 41,547 $ (152,098)   193,645 127.3
Basic income (loss) per share attributable to MIC $ 0.24 $ (0.80)   1.04 130.0 $ 0.52 $ (2.00) 2.52 126.0
Weighted average number of shares outstanding: basic   80,369,575   79,246,069   1,123,506 1.4 80,241,293 76,214,929 4,026,364 5.3
 
NM - Not meaningful
(1) Cost of services and cost of product sales exclude depreciation.

(2) Interest expense includes losses on derivative instruments of $14.9 million and $46.7 million for the quarter and six months ended June 30, 2016, respectively. For the quarter and six months ended June 30, 2015, interest expense includes gains on derivative instruments of $3.5 million and losses on derivative instruments of $8.9 million, respectively.

             

MACQUARIE INFRASTRUCTURE CORPORATION

 

RECONCILIATION OF CONSOLIDATED NET INCOME (LOSS) TO

EBITDA EXCLUDING NON-CASH ITEMS AND TO FREE CASH FLOW

 
Quarter Ended

June 30,

Change

Favorable/(Unfavorable)

Six Months Ended

June 30,

  Change

Favorable/(Unfavorable)

  2016     2015   $ %   2016     2015   $   %
($ In Thousands) (Unaudited)
 
Net income (loss) $ 21,081 $ (63,517) $ 41,257 $ (154,032)
Interest expense, net(1) 39,477 22,335 96,339 53,850
Provision (benefit) for income taxes 16,220 (33,531) 31,387 (88,864)
Depreciation 59,662 51,801 112,883 109,223
Amortization of intangibles 16,713 17,902 34,500 65,873
Fees to Manager- related party(2) 16,392 154,559 31,188 319,832
Other non-cash (income) expense, net (3)   (2,761)   2,433       (4,795)   1,344  
EBITDA excluding non-cash items $ 166,784 $ 151,982   14,802 9.7 $ 342,759 $ 307,226 35,533 11.6
 
EBITDA excluding non-cash items $ 166,784 $ 151,982 $ 342,759 $ 307,226
Interest expense, net(1) (39,477) (22,335) (96,339) (53,850)
Adjustments to derivative instruments recorded in interest expense(1) 9,866 (12,387) 36,471 (7,034)
Amortization of debt financing costs(1) 2,370 2,951 5,249 4,566
Interest rate swap breakage fees - (31,385) - (31,385)
Provision/benefit for income taxes, net of changes in deferred taxes (1,662) 357 (4,168) (448)
Maintenance capital expenditures   (9,840)   (11,390)       (20,253)   (17,505)  
Free cash flow $ 128,041 $ 77,793   50,248 64.6 $ 263,719 $ 201,570 62,149 30.8
 
 

(1) Interest expense, net, includes adjustment to derivative instruments and non-cash amortization of deferred financing fees. Interest expense also included a non-cash write-off of deferred financing fees related to the February 2016 refinancing at Hawaii Gas for the six months ended June 30, 2016 and a non-cash write-off of deferred financing costs related to the May 2015 refinancing at IMTT for the quarter and six months ended June 30, 2015.

(2) In July 2015, our Board requested, and our Manager agreed, that $67.8 million of the performance fee for the quarter ended June 30, 2015 be settled in cash in July 2015 to minimize dilution. The remaining $67.8 million obligation was settled and reinvested in 944,046 shares by our Manager on August 1, 2016 using the June 2016 monthly volume weighted average share price of $71.84.

(3) Other non-cash (income) expense, net, primarily includes non-cash pension expense, amortization of tolling liabilities, unrealized gains (losses) on commodity hedges and non-cash gains (losses) related to disposal of assets.

 
                 

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)

  2016   2015   $ %   2016   2015 $   %
($ In Thousands) (Unaudited)
 
Free Cash Flow- Consolidated basis $ 128,041 $ 77,793 50,248 64.6 $ 263,719 $ 201,570 62,149 30.8
100% of CP&E Free Cash Flow included in consolidated Free Cash Flow (17,871) (4,341) (29,814) (7,030)
MIC's share of CP&E Free Cash Flow   16,147   2,863     25,807   4,456  
Free Cash Flow- Proportionately Combined basis $ 126,317 $ 76,315 50,002 65.5 $ 259,712 $ 198,996 60,716 30.5
 
                   

MACQUARIE INFRASTRUCTURE CORPORATION

 

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

 

IMTT

Quarter Ended

June 30,

 

Six Months Ended

June 30,

 

2016 2015

Change
Favorable/ (Unfavorable)

2016 2015

Change
Favorable/

(Unfavorable)

$ $ $ % $ $ $ %
($ In Thousands) (Unaudited)
 
Revenues 128,218 142,384 (14,166) (9.9) 263,643 280,445 (16,802) (6.0)
Cost of services(1) 46,459 61,052 14,593 23.9 96,760 114,643 17,883 15.6
Gross profit 81,759 81,332 427 0.5 166,883 165,802 1,081 0.7
General and administrative expenses 7,790 8,302 512 6.2 15,964 16,006 42 0.3
Depreciation and amortization 35,282 31,673 (3,609) (11.4) 67,903 67,552 (351) (0.5)
Operating income 38,687 41,357 (2,670) (6.5) 83,016 82,244 772 0.9
Interest expense, net(2) (13,764) (6,263) (7,501) (119.8) (33,635) (13,169) (20,466) (155.4)
Other income, net 464 769 (305) (39.7) 3,452 1,401 2,051 146.4
Provision for income taxes (10,409) (14,659) 4,250 29.0 (21,638) (28,748) 7,110 24.7
Net income(3) 14,978 21,204 (6,226) (29.4) 31,195 41,728 (10,533) (25.2)
Less: net income attributable to noncontrolling interests - 108 108 100.0 59 358 299 83.5
Net income attributable to MIC(3) 14,978 21,096 (6,118) (29.0) 31,136 41,370 (10,234) (24.7)
 
Reconciliation of net income to EBITDA excluding non-cash items and Free Cash Flow:
Net income(3) 14,978 21,204 31,195 41,728
Interest expense, net(2) 13,764 6,263 33,635 13,169
Provision for income taxes 10,409 14,659 21,638 28,748
Depreciation and amortization 35,282 31,673 67,903 67,552
Other non-cash expense, net (4) 1,946 1,849   4,220 2,855  
EBITDA excluding non-cash items 76,379 75,648 731 1.0 158,591 154,052 4,539 2.9
 
EBITDA excluding non-cash items 76,379 75,648 158,591 154,052
Interest expense, net(2) (13,764) (6,263) (33,635) (13,169)
Adjustments to derivative instruments recorded in interest expense(2) 3,546 (3,955) 13,156 (6,334)
Amortization of debt financing costs(2) 411 1,416 831 1,529
Interest rate swap breakage fees - (31,385) - (31,385)
Provision for income taxes, net of changes in deferred taxes (937) 473 (2,167) (104)
Maintenance capital expenditures (6,942) (6,043)   (13,239) (8,514)  
Free cash flow 58,693 29,891 28,802 96.4 123,537 96,075 27,462 28.6
_____________________
(1) Cost of services excludes depreciation.

(2) 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.

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

(4) Other non-cash expense, net, primarily includes non-cash adjustments related to pension expense and non-cash gains (losses) related to disposal of assets.
 
                 

Atlantic Aviation

 
 
Quarter Ended

June 30,

 

Six Months Ended

June 30,

 

2016 2015

Change
Favorable/ (Unfavorable)

2016 2015

Change
Favorable/

(Unfavorable)

$ $ $ % $ $ $ %
($ In Thousands) (Unaudited)
 
Revenues 179,218 185,425 (6,207) (3.3) 357,206 373,366 (16,160) (4.3)
Cost of services(1) 74,440 87,365 12,925 14.8 140,602 167,191 26,589 15.9
Gross profit 104,778 98,060 6,718 6.9 216,604 206,175 10,429 5.1
Selling, general and administrative expenses 51,381 50,037 (1,344) (2.7) 103,992 102,046 (1,946) (1.9)
Depreciation and amortization 24,702 21,810 (2,892) (13.3) 46,893 81,525 34,632 42.5
Operating income 28,695 26,213 2,482 9.5 65,719 22,604 43,115 190.7
Interest expense, net(2) (8,924) (5,605) (3,319) (59.2) (22,238) (18,690) (3,548) (19.0)
Other (expense) income, net (49) (65) 16 24.6 341 (637) 978 153.5
Provision for income taxes (7,973) (8,275) 302 3.6 (17,715) (1,586) (16,129) NM
Net income(3) 11,749 12,268 (519) (4.2) 26,107 1,691 24,416 NM
 
Reconciliation of net income to EBITDA excluding non-cash

items and Free Cash Flow:

Net income(3) 11,749 12,268 26,107 1,691
Interest expense, net(2) 8,924 5,605 22,238 18,690
Provision for income taxes 7,973 8,275 17,715 1,586
Depreciation and amortization 24,702 21,810 46,893 81,525
Other non-cash expense, net (4) 356 748   282 1,473  
EBITDA excluding non-cash items 53,704 48,706 4,998 10.3 113,235 104,965 8,270 7.9
 
EBITDA excluding non-cash items 53,704 48,706 113,235 104,965
Interest expense, net(2) (8,924) (5,605) (22,238) (18,690)
Adjustments to derivative instruments recorded in interest expense(2) 1,179 (2,485) 6,787 2,581
Amortization of debt financing costs(2) 905 806 1,705 1,614
Provision for income taxes, net of changes in deferred taxes (910) (278) (2,362) (633)
Maintenance capital expenditures (1,457) (3,558)   (3,741) (6,181)  
Free cash flow 44,497 37,586 6,911 18.4 93,386 83,656 9,730 11.6
_____________________
NM - Not meaningful
(1) Cost of services excludes depreciation.
(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.
(4) Other non-cash expense, net, primarily includes non-cash gains (losses) related to disposal of assets.
 
                 

Contracted Power and Energy

 
Quarter Ended

June 30,

 

Six Months Ended

June 30,

 

2016 2015

Change
Favorable/ (Unfavorable)

2016 2015

Change
Favorable/

(Unfavorable)

$ $ $ % $ $ $ %
($ In Thousands) (Unaudited)
 
Revenues 38,300 36,121 2,179 6.0 68,479 47,953 20,526 42.8
Cost of product sales(1) 5,794 5,136 (658) (12.8) 10,151 7,783 (2,368) (30.4)
Gross profit 32,506 30,985 1,521 4.9 58,328 40,170 18,158 45.2
Selling, general and administrative expenses 6,547 14,170 7,623 53.8 12,507 16,808 4,301 25.6
Depreciation and amortization 13,847 13,854 7 0.1 27,693 21,299 (6,394) (30.0)
Operating income 12,112 2,961 9,151 NM 18,128 2,063 16,065 NM
Interest expense, net(2) (11,002) (4,945) (6,057) (122.5) (28,850) (11,283) (17,567) (155.7)
Other income 3 - 3 NM 308 1,116 (808) (72.4)
(Provision) benefit for income taxes (1,917) (3,683) 1,766 48.0 387 (2,865) 3,252 113.5
Net loss(3) (804) (5,667) 4,863 85.8 (10,027) (10,969) 942 8.6
Less: net income (loss) attributable to noncontrolling interests 1,889 (529) (2,418) NM (349) (2,292) (1,943) (84.8)
Net loss attributable to MIC(3) (2,693) (5,138) 2,445 47.6 (9,678) (8,677) (1,001) (11.5)
 
Reconciliation of net loss to EBITDA excluding non-cash items and Free Cash Flow:
Net loss(3) (804) (5,667) (10,027) (10,969)
Interest expense, net(2) 11,002 4,945 28,850 11,283
Provision (benefit) for income taxes 1,917 3,683 (387) 2,865
Depreciation and amortization 13,847 13,854 27,693 21,299
Other non-cash income, net (4) (1,945) (1,570)   (3,965) (2,748)  
EBITDA excluding non-cash items 24,017 15,245 8,772 57.5 42,164 21,730 20,434 94.0
 
EBITDA excluding non-cash items 24,017 15,245 42,164 21,730
Interest expense, net(2) (11,002) (4,945) (28,850) (11,283)
Adjustments to derivative instruments recorded in interest expense(2) 4,504 (5,939) 15,772 (3,412)
Amortization of debt financing costs(2) 354 31 737 48
Provision/benefit for income taxes, net of changes in deferred taxes (2) - (9) (2)
Maintenance capital expenditures - (51)   - (51)  
Free cash flow 17,871 4,341 13,530 NM 29,814 7,030 22,784 NM
_____________________
NM- Not meaningful
(1) Cost of product sales excludes depreciation.
(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.
(4) Other non-cash income, net, primarily includes amortization of tolling liabilities.
 
                 

Hawaii Gas

 
Quarter Ended

June 30,

 

Six Months Ended

June 30,

 

2016 2015

Change
Favorable/ (Unfavorable)

2016 2015

Change
Favorable/

(Unfavorable)

$ $ $ % $ $ $ %
($ In Thousands) (Unaudited)
 
Revenues 53,058 59,759 (6,701) (11.2) 107,025 120,423 (13,398) (11.1)
Cost of product sales(1) 29,224 40,111 10,887 27.1 57,927 76,591 18,664 24.4
Gross profit 23,834 19,648 4,186 21.3 49,098 43,832 5,266 12.0
Selling, general and administrative expenses 4,434 4,862 428 8.8 9,690 10,218 528 5.2
Depreciation and amortization 2,544 2,366 (178) (7.5) 4,894 4,720 (174) (3.7)
Operating income 16,856 12,420 4,436 35.7 34,514 28,894 5,620 19.5
Interest expense, net(2) (2,229) (1,806) (423) (23.4) (4,653) (3,749) (904) (24.1)
Other expense, net (147) (116) (31) (26.7) (401) (260) (141) (54.2)
Provision for income taxes (5,706) (4,068) (1,638) (40.3) (11,617) (9,600) (2,017) (21.0)
Net income(3) 8,774 6,430 2,344 36.5 17,843 15,285 2,558 16.7
 
Reconciliation of net income to EBITDA excluding non-cash items and Free Cash Flow:
Net income(3) 8,774 6,430 17,843 15,285
Interest expense, net(2) 2,229 1,806 4,653 3,749
Provision for income taxes 5,706 4,068 11,617 9,600
Depreciation and amortization 2,544 2,366 4,894 4,720
Other non-cash (income) expense, net(4) (3,305) 1,219   (5,707) (611)  
EBITDA excluding non-cash items 15,948 15,889 59 0.4 33,300 32,743 557 1.7
 
EBITDA excluding non-cash items 15,948 15,889 33,300 32,743
Interest expense, net(2) (2,229) (1,806) (4,653) (3,749)
Adjustments to derivative instruments recorded in interest expense(2) 637 (8) 756 131
Amortization of debt financing costs(2) 88 120 752 241
Provision for income taxes, net of changes in deferred taxes (2,129) - (5,146) -
Maintenance capital expenditures (1,441) (1,738)   (3,273) (2,759)  
Free cash flow 10,874 12,457 (1,583) (12.7) 21,736 26,607 (4,871) (18.3)
_____________________
(1) Cost of product sales includes unrealized gains (losses) on commodity hedges and excludes depreciation.

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

(3) Corporate allocation expense, intercompany fees and the tax effect have been excluded from the above table as they are eliminated on consolidation.
(4) Other non-cash (income) expense, net, primarily includes non-cash adjustments related to pension expense and unrealized gains (losses) on commodity hedges.
 

Corporate and Other

                   
 
Quarter Ended

June 30,

 

Six Months Ended

June 30,

 

2016 2015

Change
Favorable/ (Unfavorable)

2016 2015

Change
Favorable/

(Unfavorable)

$ $ $ % $ $ $ %
($ In Thousands) (Unaudited)
 
Fees to Manager-related party 16,392 154,559 138,167 89.4 31,188 319,832 288,644 90.2
Selling, general and administrative expenses 3,451 3,693 242 6.6 4,906 6,639 1,733 26.1
Operating loss (19,843) (158,252) 138,409 87.5 (36,094) (326,471) 290,377 88.9
Interest expense, net(1) (3,558) (3,716) 158 4.3 (6,963) (6,959) (4) (0.1)
Benefit for income taxes 9,785 64,216 (54,431) (84.8) 19,196 131,663 (112,467) (85.4)
Net loss(2) (13,616) (97,752) 84,136 86.1 (23,861) (201,767) 177,906 88.2
 
Reconciliation of net loss to EBITDA excluding non-cash items and Free Cash Flow:
Net loss(2) (13,616) (97,752) (23,861) (201,767)
Interest expense, net(1) 3,558 3,716 6,963 6,959
Benefit for income taxes (9,785) (64,216) (19,196) (131,663)
Fees to Manager-related party(3) 16,392 154,559 31,188 319,832
Other non-cash expense, net 187 187   375 375  
EBITDA excluding non-cash items (3,264) (3,506) 242 6.9 (4,531) (6,264) 1,733 27.7
 
EBITDA excluding non-cash items (3,264) (3,506) (4,531) (6,264)
Interest expense, net (1) (3,558) (3,716) (6,963) (6,959)
Amortization of debt financing costs(1) 612 578 1,224 1,134
Benefit for income taxes, net of changes in deferred taxes 2,316 162   5,516 291  
Free cash flow (3,894) (6,482) 2,588 39.9 (4,754) (11,798) 7,044 59.7
_____________________
(1) Interest expense, 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 quarter ended June 30, 2015 be settled in cash in July 2015 to minimize dilution. The remaining $67.8 million obligation was settled and reinvested in 944,046 shares by our Manager on August 1, 2016 using the June 2016 monthly volume weighted average share price of $71.84.

 
     

MACQUARIE INFRASTRUCTURE CORPORATION

 

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

 
For the Quarter Ended June 30, 2016  
($ in Thousands) (Unaudited) IMTT  

Atlantic
Aviation

 

Contracted
Power and
Energy(1)

  Hawaii Gas   MIC Corporate  

Proportionately
Combined(2)

Contracted Power
and Energy 100%

 
Net income (loss) 14,978 11,749 (153) 8,774 (13,616) 21,732 (804)
Interest expense, net(3) 13,764 8,924 9,661 2,229 3,558 38,136 11,002
Provision (benefit) for income taxes 10,409 7,973 1,915 5,706 (9,785) 16,218 1,917
Depreciation and amortization of intangibles 35,282 24,702 11,973 2,544 - 74,501 13,847
Fees to Manager-related party - - - - 16,392 16,392 -
Other non-cash expense (income), net(4) 1,946 356 (1,945) (3,305) 187 (2,761) (1,945)
EBITDA excluding non-cash items 76,379 53,704 21,451 15,948 (3,264) 164,218 24,017
 
EBITDA excluding non-cash items 76,379 53,704 21,451 15,948 (3,264) 164,218 24,017
Interest expense, net(3) (13,764) (8,924) (9,661) (2,229) (3,558) (38,136) (11,002)
Adjustments to derivative instruments recorded in interest expense, net(3) 3,546 1,179 4,019 637 - 9,381 4,504
Amortization of deferred finance charges(3) 411 905 340 88 612 2,356 354
Provision/benefit for income taxes, net of changes in deferred taxes (937) (910) (2) (2,129) 2,316 (1,662) (2)
Maintenance capital expenditures (6,942) (1,457) - (1,441) - (9,840) -
Free cash flow 58,693 44,497 16,147 10,874 (3,894) 126,317 17,871
 
 
 
 
For the Quarter Ended June 30, 2015  
($ in Thousands) (Unaudited) IMTT (5)

Atlantic
Aviation

Contracted
Power and
Energy(1)

Hawaii Gas MIC Corporate

Proportionately
Combined(2)

Contracted Power
and Energy 100%

 
Net income (loss) 21,204 12,268 (6,151) 6,430 (97,752) (64,001) (5,667)
Interest expense, net(3) 6,263 5,605 4,854 1,806 3,716 22,244 4,945
Provision (benefit) for income taxes 14,659 8,275 3,683 4,068 (64,216) (33,531) 3,683
Depreciation and amortization of intangibles 31,673 21,810 11,983 2,366 - 67,832 13,854
Fees to Manager-related party(6) - - - - 154,559 154,559 -
Other non-cash expense (income), net(4) 1,849 748 (1,570) 1,219 187 2,433 (1,570)
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(3) (6,263) (5,605) (4,854) (1,806) (3,716) (22,244) (4,945)
Adjustments to derivative instruments recorded in interest expense, net(3) (3,955) (2,485) (5,056) (8) - (11,504) (5,939)
Amortization of deferred finance charges(3) 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 -
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
 
           

MACQUARIE INFRASTRUCTURE CORPORATION

 

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

 
For the Six Months Ended June 30, 2016  
($ in Thousands) (Unaudited) IMTT(5)  

Atlantic
Aviation

 

Contracted
Power and
Energy(1)

Hawaii Gas MIC Corporate

Proportionately
Combined(2)

Contracted Power
and Energy 100%

 
Net income (loss) 31,195 26,107 (8,593) 17,843 (23,861) 42,691 (10,027)
Interest expense, net(3) 33,635 22,238 25,449 4,653 6,963 92,938 28,850
Provision (benefit) for income taxes 21,638 17,715 (389) 11,617 (19,196) 31,385 (387)
Depreciation and amortization 67,903 46,893 23,945 4,894 - 143,635 27,693
Fees to Manager-related party - - - - 31,188 31,188 -
Other non-cash expense (income), net(4) 4,220 282 (3,946) (5,707) 375 (4,776) (3,965)
EBITDA excluding non-cash items 158,591 113,235 36,466 33,300 (4,531) 337,061 42,164
 
EBITDA excluding non-cash items 158,591 113,235 36,466 33,300 (4,531) 337,061 42,164
Interest expense, net(3) (33,635) (22,238) (25,449) (4,653) (6,963) (92,938) (28,850)
Adjustments to derivative instruments recorded in interest expense, net(3) 13,156 6,787 14,090 756 - 34,789 15,772
Amortization of deferred finance charges(3) 831 1,705 709 752 1,224 5,221 737
Provision/benefit for income taxes, net of changes in deferred taxes (2,167) (2,362) (9) (5,146) 5,516 (4,168) (9)
Maintenance capital expenditures (13,239) (3,741) - (3,273) - (20,253) -
Free cash flow 123,537 93,386 25,807 21,736 (4,754) 259,712 29,814
 
 
 
For the Six Months Ended June 30, 2015  
($ in Thousands) (Unaudited) IMTT (5)

Atlantic
Aviation

Contracted
Power and
Energy(1)

Hawaii Gas MIC Corporate

Proportionately
Combined(2)

Contracted Power
and Energy 100%

 
Net income (loss) 41,728 1,691 (10,054) 15,285 (201,767) (153,117) (10,969)
Interest expense, net(3) 13,169 18,690 9,614 3,749 6,959 52,181 11,283
Provision (benefit) for income taxes 28,748 1,586 2,865 9,600 (131,663) (88,864) 2,865
Depreciation and amortization 67,552 81,525 17,557 4,720 - 171,354 21,299
Fees to Manager-related party(6) - - - - 319,832 319,832 -
Other non-cash expense (income), net(4) 2,855 1,473 (2,732) (611) 375 1,360 (2,748)
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(3) (13,169) (18,690) (9,614) (3,749) (6,959) (52,181) (11,283)
Adjustments to derivative instruments recorded in interest expense, net(3) (6,334) 2,581 (3,165) 131 - (6,787) (3,412)
Amortization of deferred finance charges(3) 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)
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
 
___________________________

(1) Proportionately combined Free Cash Flow for Contracted Power and Energy is equal to MIC's controlling ownership interest in its solar and wind power facilities. As of April 1, 2015, Contracted Power and Energy also includes 100% of BEC, a gas-fired power facility.

(2) 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.

(3) Interest expense, net, includes adjustment to derivative instruments and non-cash amortization of deferred financing fees. Interest expense also included a non-cash write-off of deferred financing fees related to the February 2016 refinancing at Hawaii Gas for the six months ended June 30, 2016 and a non-cash write-off of deferred financing costs related to the May 2015 refinancing at IMTT for the quarter and six months ended June 30, 2015.

(4) Other non-cash expense (income), net, primarily includes non-cash pension expense, amortization of tolling liabilities, unrealized gains (losses) on commodity hedges and non-cash gains (losses) related to disposal of assets.

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

(6) In July 2015, our Board requested, and our Manager agreed, that $67.8 million of the performance fee for the quarter ended June 30, 2015 be settled in cash in July 2015 to minimize dilution. The remaining $67.8 million obligation was settled and reinvested in 944,046 shares by our Manager on August 1, 2016 using the June 2016 monthly volume weighted average share price of $71.84.

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Jay A. Davis, 212-231-1825
Investor Relations
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Melissa McNamara, 212-231-1667
Corporate Communications


Source: Business Wire (August 1, 2016 - 5:15 PM EDT)

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