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MIC Reports Third Quarter 2019 Financial And Operational Results

- Results in line with management's guidance

- In a separate press release today, MIC announced its intention to pursue strategic alternatives

- 2019 guidance for EBITDA, Free Cash Flow and dividends reaffirmed

- Quarterly cash dividend of $1.00 per share authorized

- Storage utilization at IMTT increases sequentially to an average of 85.2% from 82.9%; substantially all heavy and residual oil storage on the Lower Mississippi River now leased

- Flight activity increases 1% at airports at which Atlantic Aviation operates

- Sales of remaining renewable power facilities completed

- Leverage stable at 3.6x net debt / EBITDA, as forecast

- Growth capital deployment expected to top $200 million in 2019

NEW YORK, Oct. 31, 2019 /PRNewswire/ -- Macquarie Infrastructure Corporation (MIC) today announced its third quarter 2019 financial results including the generation of net income from continuing operations of $15 million compared with net income of $2 million in the third quarter of 2018 (the prior comparable period). The increase primarily reflects the impact of a write-down in the prior comparable period of a business that was sold in the fourth quarter of 2018.

MIC's consolidated revenue declined to $405 million from $421 million in the prior comparable period reflecting primarily the absence of revenue from smaller businesses sold during the past year partially offset by an increase in the volume of fuel sold and services provided by Atlantic Aviation as well as an increase in storage utilization at International-Matex Tank Terminals (IMTT).

Expenses (cost of services/product sales and selling, general and administrative combined) incurred in the quarter declined by 2% primarily as a result of the absence of costs related to businesses sold during the past year and a lower average wholesale price of jet fuel. These gains were partially offset by anticipated increases in labor costs and property taxes at IMTT and unfavorable movements (non-cash) in the value of commodity hedges.

MIC's reported Adjusted EBITDA excluding non-cash items from continuing operations of $131 million was down 7% versus the prior comparable period. The decline reflects primarily expected higher labor costs and property taxes at IMTT.

Cash generated by MIC's operating activities during the third quarter increased 30% to $157 million versus the prior comparable period primarily as a result of current taxes payable as a result of the sale of the Company's portfolio of renewable power businesses.

Adjusted Free Cash Flow from continuing operations totaled $82 million, down 17% versus the prior comparable period reflecting the decrease in Adjusted EBITDA together with higher maintenance capital expenditures, interest expense and cash taxes.

MIC's Chief Executive Officer, Christopher Frost, said: "MIC's results for the third quarter of 2019 were consistent with our guidance and commentary previously provided to the market. Utilization at IMTT continued to recover and, although a portion of the recovery was offset by an expected increase in operating costs, the trajectory for the business remains positive over the medium term.

"Atlantic Aviation recorded an increase in both the volume of fuel sold and hangar rental services provided to our customers, driven in part by an increase in general aviation flight activity."

"I am pleased with the strength of MIC's balance sheet, which reflects the progress we have made to complete the sales of smaller and non-core businesses in our portfolio. These transactions have increased our financial flexibility and we expect to use the net proceeds to fund additional growth projects," Frost added.

MIC expects to deploy between $200 and $220 million in support of growth projects across its businesses in 2019. The Company deployed $52 million in the third quarter as work commenced on projects that had been delayed by high water on the Lower Mississippi River, bringing total deployment of growth capital to $143 million through the end of the third quarter.

The Company completed the sale of its portfolio of wind and solar power businesses in the third quarter, generating approximately $210 million net of taxes and transaction fees. The deconsolidation of debt associated with the renewables businesses and the repayment of $350 million of convertible notes in July reduced MIC's overall indebtedness by $625 million.

Reflecting the reduction in debt, MIC's leverage (net debt / EBITDA) was 3.6x at the end of the third quarter. The Company expects leverage to be approximately 4.1x at the end of 2019 as it funds growth projects and pays capital gains taxes resulting from the sale of the renewables businesses.

MIC reaffirmed its full-year 2019 guidance for the generation of Adjusted EBITDA excluding non-cash items of between $600 and $625 million.

IMTT:

$287 – $297 million

Atlantic Aviation:

$275 – $285 million

MIC Hawaii:

$60 – $65 million

Corporate and Other:

$(22) million

MIC also reaffirmed its guidance for the generation of Adjusted Free Cash Flow in a range of $390 to $435 million in 2019.

With respect to the Company's guidance for EBITDA and Free Cash Flow in 2019, a reconciliation of EBITDA to net income (loss), the most comparable GAAP measure and a reconciliation of Free Cash Flow to cash from operating activities, the most comparable GAAP measure, are not available without unreasonable effort due to the Company's limited visibility into and an inability to make accurate projections and estimates of items including management fees, hedging agreements, depreciation and any (benefit) provision for income taxes. These items may vary greatly from year to year and could significantly impact MIC's results as reported in accordance with GAAP.

Third Quarter 2019 Segment Results

  • IMTT generated EBITDA of $62 million, down 10% compared with the third quarter in 2018 primarily reflecting an anticipated increase in labor costs and higher property taxes. Utilization increased to 85.2% from 82.1% in the prior comparable period driven by an increase in demand on the Lower Mississippi River for storage of refinery feedstocks in response to IMO 2020. Storage revenue was flat as the benefit of the increase in utilization was offset by lower average storage rates resulting from the renewal of certain legacy contracts at lower rates. Storage utilization levels at IMTT are expected to be in a mid- to high-80s percent range at year end.
  • Atlantic Aviation generated EBITDA of $64 million, down 2% versus the prior comparable period. Atlantic Aviation's result was impacted by a $3 million negative adjustment to EBITDA primarily related to its maintenance business and higher operating costs, both partially offset by increases in the volume of fuel sold and hangar rental services provided. Data provided by the Federal Aviation Administration showed general aviation flight activity in the third quarter increased 0.7% industry-wide and increased 1% at the airports on which Atlantic Aviation operates.
  • MIC Hawaii generated EBITDA of $12 million versus EBITDA of ($5) million in the third quarter of 2018. The third quarter 2018 result included the write-down of a subsidiary business (sold in the fourth quarter). Excluding the impact of the write-down, the MIC Hawaii result was flat year on year.
  • MIC's Corporate and Other segment recorded EBITDA of ($5) million for the quarter versus ($6) million in the prior comparable period. A required reclassification of transaction costs from continuing operations to discontinued operations drove most of the improvement.

Third Quarter 2019 Dividend

The MIC board of directors authorized a cash dividend of $1.00 per share, or $4.00 annualized, for the third quarter consistent with guidance provided in February 2019. The dividend will be paid November 14, 2019 to shareholders of record on November 11, 2019. MIC reaffirmed its guidance for the payment of dividend of $1.00 per share in the fourth quarter of 2019.

Including the dividend for the third quarter, MIC will have distributed approximately 79% of its Adjusted Free Cash Flow from continuing operations generated year to date. For the full year MIC expects to distribute approximately 84% of its Adjusted Free Cash Flow as dividends.

MIC intends to pay a dividend of $1.00 per share, per quarter, in 2020 as well. The payment of a dividend is predicated on, 1) the composition of the MIC portfolio of businesses remaining unchanged, 2) the businesses and operations performing as expected and at levels that support the dividend, and 3) general economic conditions and stability in the broader market.

Pursuit of Strategic Alternatives

In a separate press release, MIC today announced its intention to pursue strategic alternatives including the sale of the Company or its operating businesses as a part of ongoing efforts to unlock shareholder value. To facilitate the pursuit of strategic alternatives, MIC also announced that it has entered into a disposition agreement with Macquarie Infrastructure Management (USA) Inc. ("MIMUSA"), the external manager of the Company. The agreement was filed with the Securities and Exchange Commission this morning. A copy of the release can be found on MIC's website.

MIC has appointed Lazard as its lead financial advisor and White & Case as its legal counsel in connection with its pursuit of strategic alternatives.

Summary Financial Information



Quarter Ended
September 30,

Change 
Favorable/
(Unfavorable)

Nine Months Ended
September 30,


Change
Favorable/
(Unfavorable)



2019


2018


$


%


2019


2018


$


%



($ in Millions, Except Share and Per Share Data) (Unaudited)


















GAAP Metrics

















Continuing Operations

















Net income


$

15


$

2


$

13


NM


$

85


$

69


$

16


23

Net income per share attributable to MIC


0.18


0.02


0.16


NM


0.99


0.81


0.18


22

Cash provided by operating activities



157



121



36


30



416



366



50


14

Discontinued Operations

















Net income


$

46


$

20


$

26


130


$

54


$

36


$18


50

Net income per share attributable to MIC


0.53


0.23


0.30


130


0.67


0.80


(0.13)


(16)

Cash (used in) provided by operating activities



(46)



26



(72)


NM



(57)



47



(104)


NM

Weighted average number of shares outstanding: basic


86,276,237


85,378,088


898,149


1


86,075,394


85,095,956


979,438


1

MIC Non-GAAP Metrics

















EBITDA excluding non-cash items - continuing 
     operations


$

133


$

123


$

10


8


$

467


$

425


$

42


10

Investment and acquisition/disposition costs


(2)


1


(3)


NM


1


7


(6)


(86)

Write-down in investment



-



17



(17)


(100)



-



17



(17)


(100)

Adjusted EBITDA excluding non-cash items - continuing 
     operations


$

131


$

141


$

(10)


(7)


$

468


$

449


$

19


4

Cash interest


$

(27)


$

(26)


$

(1)


(4)


$

(86)


$

(74)


$

(12)


(16)

Cash taxes 


(4)


(3)


(1)


(33)


(13)


(11)


(2)


(18)

Maintenance capital expenditures


(18)


(13)


(5)


(38)


(41)


(31)


(10)


(32)

Adjusted Free Cash Flow - continuing operations


$

82


$

99


$

(17)


(17)


$

328


$

333


$

(5)


(2)

EBITDA excluding non-cash items - Discontinued 
     operations


(1)


37


(38)


(103)


21


85


(64)


(75)

Cash interest


(1)


(6)


5


83


(9)


(20)


11


55

Cash taxes 


(52)


-


(52)


NM


(52)


-


(52)


NM

Maintenance capital expenditures


-


-


-


-


-


(1)


1


100

Free Cash Flow - Discontinued operations


$

(54)


$

31


$

(85)


NM


$

(40)


$

64


$

(104)


(163)

Adjusted Free Cash Flows


$

28


$

130


$

(102)


(78)


$

288


$

397


$

(109)


(27)










(1)

For the quarter and nine months ended September 30, 2019, cash provided by continuing operations includes the current federal tax liability of $43 million primarily related to the gain on sale of the renewable businesses reported in the results from discontinued operations.

(2)

For the quarter and nine months ended September 30, 2019, the Company reclassified investment and acquisition/ disposition costs from continuing operations to discontinued operations.

Conference Call and Webcast

When: MIC has scheduled a conference call for 8:00 a.m. Eastern Time on Thursday, October 31, 2019 during which management will review and comment on the third quarter 2019 results.

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

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

Replay: For interested individuals unable to participate in the live conference call, a replay will be available after 2:00 p.m. on October 31, 2019 through midnight on November 6, 2019, at +1(404) 537-3406 or +1(855) 859-2056, Passcode: 9578278. An online archive of the webcast will be available on the Company's website for one year following the call.

About MIC

MIC owns and operates a diversified group of businesses providing basic services to customers in the United States. Its businesses consist of a bulk liquid terminals business, International-Matex Tank Terminals; an airport services business, Atlantic Aviation; and entities comprising an energy services, production and distribution segment, MIC Hawaii. For additional information, please visit the MIC website at www.macquarie.com/mic.

Use of Non-GAAP Measures

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow

In addition to MIC's results under U.S. GAAP, the Company uses certain non-GAAP measures to assess the performance and prospects of its businesses. In particular MIC uses EBITDA excluding non-cash items and Free Cash Flow.

MIC measures EBITDA excluding non-cash items as a reflection of its businesses' ability to effectively manage the volume of products sold or services provided, the operating margin earned on those transactions and the management of operating expenses independent of the capitalization and tax attributes of those businesses. The Company believes investors use EBITDA excluding non-cash items primarily as a measure to assess the operating performance of its businesses and to make comparisons with the operating performance of other businesses whose depreciation and amortization expense may vary widely from MIC's, particularly where acquisitions and other non-operating factors are involved. MIC defines EBITDA excluding non-cash items as net income (loss) or earnings —the most comparable GAAP measure— before interest, taxes, depreciation and amortization and non-cash items including impairments, unrealized derivative gains and losses, adjustments for other non-cash items and pension expense reflected in the statements of operations. EBITDA excluding non-cash items also excludes base management fees and performance fees, if any, whether paid in cash or stock.

The Company's businesses can be characterized as owners of high-value, long-lived assets capable of generating substantial Free Cash Flow. MIC defines Free Cash Flow as cash from operating activities —the most comparable GAAP measure — which includes cash paid for interest, taxes and pension contributions, less maintenance capital expenditures, which includes principal repayments on capital lease obligations used to fund maintenance capital expenditures and excludes changes in working capital.

Management uses Free Cash Flow as a measure of its ability to provide investors with an attractive risk-adjusted return by sustaining and potentially increasing MIC's quarterly cash dividend and funding a portion of the Company's growth. GAAP metrics such as net income (loss) do not provide MIC management with the same level of visibility to into the performance and prospects of the business as a result of: (i) the capital intensive nature of MIC's businesses and the generation of non-cash depreciation and amortization; (ii) shares issued to the Company's external manager under the Management Services Agreement, (iii) the Company's ability to defer all or a portion of current federal income taxes; (iv) non-cash unrealized gains or losses on derivative instruments; (v) gains (losses) on disposal of assets, (vi) non-cash compensation expenses related to a long-term incentive compensation plan for senior management of the operating businesses implemented in 2019; and (vii) pension expense.  Pension expenses primarily consist of interest expense, expected return on plan assets and amortization of actuarial and performance gains and losses. Any cash contributions to pension plans are reflected as a reduction in Free Cash Flow and are not included in pension expense. Management believes that external consumers of its financial statements, including investors and research analysts, use Free Cash Flow both to assess the Company's performance and as an indicator of its success in generating an attractive risk-adjusted return.


In its Quarterly Report on Form 10-Q, the Company has disclosed Free Cash Flow on a consolidated basis and for each of its operating segments and MIC Corporate. Management believes that both EBITDA excluding non-cash items and Free Cash Flow support a more complete and accurate understanding of the financial and operating performance of its businesses than would otherwise be achieved using GAAP results alone.

Free Cash Flow does not take into consideration required payments on indebtedness and other fixed obligations or other cash items that are excluded from MIC's definition of Free Cash Flow. Management notes that Free Cash Flow may be calculated differently by other companies thereby limiting its usefulness as a comparative measure. Free Cash Flow should be used as a supplemental measure to help understand MIC's financial performance and not in lieu of its financial results reported under GAAP.

See the tables below for a reconciliation of Net Income (loss) to EBITDA excluding non-cash items from continuing operations and a reconciliation of cash provided by operating activities from continuing operations to Free Cash Flow from continuing operations.

Classification of Maintenance Capital Expenditures and Growth Capital Expenditures

MIC categorizes capital expenditures as either maintenance capital expenditures or growth capital expenditures. As neither maintenance capital expenditure nor growth capital expenditure is a GAAP term, the Company has adopted a framework to categorize specific capital expenditures. In broad terms, maintenance capital expenditures primarily maintain MIC's businesses at current levels of operations, capability, profitability or cash flow, while growth capital expenditures primarily provide new or enhanced levels of operations, capability, profitability or cash flow. Management considers a number of factors in determining whether a specific capital expenditure will be classified as maintenance or growth.

MIC does not bifurcate specific capital expenditures into growth and maintenance components. Each discrete capital expenditure is considered within the above framework and the entire capital expenditure is classified as either maintenance or growth.

Forward-Looking Statements

This press release contains forward-looking statements. MIC may, in some cases, use words such as "project", "believe", "anticipate", "plan", "expect", "estimate", "intend", "should", "would", "could", "potentially", or "may" or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements in this release are subject to a number of risks and uncertainties, some of which are beyond MIC's control including, among other things: changes in general economic or business conditions; its ability to service, comply with the terms of and refinance debt, successfully integrate and manage acquired businesses, retain or replace qualified employees, complete growth projects, deploy growth capital and manage growth, make and finance future acquisitions, and implement its strategy; the regulatory environment; demographic trends, the political environment, the economy, tourism, construction and transportation costs, air travel, environmental costs and risks; fuel and gas and other commodity costs; its ability to recover increases in costs from customers, cybersecurity risks, work interruptions or other labor stoppages; risks associated with acquisitions or dispositions, litigation risks; risks related to its shared services initiative and its ability to achieve cost savings; reliance on sole or limited source suppliers, risks or conflicts of interests involving its relationship with the Macquarie Group and changes in U.S. federal tax law.

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

MIC is not an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of MIC do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of MIC.

 

 

MACQUARIE INFRASTRUCTURE CORPORATION


CONSOLIDATED CONDENSED BALANCE SHEETS

($ in Millions, Except Share Data)



September 30,
2019


December 31,
2018


(Unaudited)



ASSETS




Current assets:




Cash and cash equivalents

$

473


$

589

Restricted cash

1


23

Accounts receivable, net of allowance for doubtful accounts

89


95

Inventories

29


29

Prepaid expenses

15


13

Other current assets

23


23

Current assets held for sale(1)

-


648

Total current assets

630


1,420

Property, equipment, land and leasehold improvements, net

3,153


3,141

Operating lease assets, net

330


-

Investment in unconsolidated business 

9


8

Goodwill

2,043


2,043

Intangible assets, net

745


789

Other noncurrent assets

14


43

Total assets

$

6,924


$

7,444

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Due to Manager-related party

$

3


$

3

Accounts payable

48


38

Accrued expenses

80


86

Current portion of long-term debt

11


361

Operating lease liabilities - current

20


-

Income taxes payable

47


-

Other current liabilities

40


33

Current liabilities held for sale(1)

-


317

Total current liabilities

249


838

Long-term debt, net of current portion

2,654


2,653

Deferred income taxes

665


681

Operating lease liabilities - noncurrent

314


-

Other noncurrent liabilities

159


155

Total liabilities

4,041


4,327

Commitments and contingencies

-


-

Stockholders' equity(2):




Additional paid in capital

$

1,276


$

1,510

Accumulated other comprehensive loss

(29)


(30)

Retained earnings

1,627


1,485

Total stockholders' equity

2,874


2,965

Noncontrolling interests(3)

9


152

Total equity

2,883


3,117

Total liabilities and equity

$

6,924


$

7,444










(1)

See Note 3, "Discontinued Operations and Dispositions", in our Notes to Consolidated Condensed Financial Statements in Part 1 of Form 10-Q for the quarter ended September 30, 2019, for further discussion on assets and liabilities held for sale.

(2)

The Company is authorized to issue the following classes of stock: (i) 500,000,000 shares of common stock, par value $0.001 per share. At September 30, 2019 and December 31, 2018, the Company had 86,394,716 shares and 85,800,303 shares of common stock issued and outstanding, respectively; (ii) 100,000,000 shares of preferred stock, par value $0.001 per share. At September 30, 2019 and December 31, 2018, no preferred stocks were issued or outstanding; and (iii) 100 shares of special stock, par value $0.001 per share, issued and outstanding to its Manager as at September 30, 2019 and December 31, 2018.

(3)

Includes $141 million of noncontrolling interest related to discontinued operations at December 31, 2018. See Note 3, "Discontinued Operations and Dispositions", in our Notes to Consolidated Condensed Financial Statements in Part 1 of Form 10-Q for the quarter ended September 30, 2019, for further discussions.

 

 

MACQUARIE INFRASTRUCTURE CORPORATION

 

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

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










Quarter Ended
September 30,


Nine Months Ended
September 30,



2019


2018


2019


2018

Revenue






Service revenue

$

347

$

361

$

1,120

$

1,140

Product revenue


58

60

183

184

Total revenue


405

421

1,303

1,324

Costs and expenses






Cost of services


154

167

484

534

Cost of product sales


43

39

128

128

Selling, general and administrative


81

78

245

240

Fees to Manager-related party


8

12

23

36

Goodwill Impairment


-

3

-

3

Depreciation


49

49

145

143

Amortization of intangibles


14

20

44

53

Total operating expenses 


349

368

1,069

1,137

Operating income


56

53

234

187

Other income (expense)






Interest income


2

-

6

-

Interest expense(1)


(36)

(28)

(124)

(71)

Other (expense) income, net


-

(21)

2

(15)

Net income from continuing operations before income taxes


22

4

118

101

Provision for income taxes


(7)

(2)

(33)

(32)

Net income from continuing operations

$

15

$

2

$

85

$

69







Discontinued Operations(2)






Net income from discontinued operations before income taxes

$

78

$

26

$

86

$

41

(Provision) benefit for income taxes


(32)

(6)

(32)

(5)

Net income from discontinued operations

$

46

$

20

$

54

$

36

Net income

$

61

$

22

$

139

$

105

Net income from continuing operations

$

15

$

2

$

85

$

69

Net income from continuing operations attributable to MIC

$

15

$

2

$

85

$

69

Net income from discontinued operations

$

46

$

20

$

54

$

36

Less: net loss attributable to noncontrolling interests


-

-

(3)

(32)

Net income from discontinued operations attributable to MIC

$

46

$

20

$

57

$

68

Net income attributable to MIC

$

61

$

22

$

142

$

137

Basic income per share from continuing operations attributable to MIC

$

0.18

$

0.02

$

0.99

$

0.81

Basic income per share from discontinued operations attributable to MIC


0.53

0.23

0.67

0.80

Basic income per share attributable to MIC

$

0.71

$

0.25

$

1.66

$

1.61

Weighted average number of shares outstanding: basic 


86,276,237

85,378,088

86,075,394

85,095,956

Diluted income per share from continuing operations attributable to MIC 

$

0.18

$

0.02

$

0.99

$

0.81

Diluted income per share from discontinued operations attributable to MIC 


0.53

0.23

0.67

0.80

Diluted income per share attributable to MIC

$

0.71

$

0.25

$

1.66

$

1.61

Weighted average number of shares outstanding: diluted


86,303,694

85,398,566

86,101,022

85,109,213

Cash dividends declared per share

$

1.00

$

1.00

$

3.00

$

3.00










(1)

Interest expense includes losses on derivative instruments of $2 million and $14 million for the quarter and nine months ended September 30, 2019, respectively. Interest expense includes gains on derivative instruments of $3 million and $17 million for the quarter and nine months ended September 30, 2018, respectively.

(2)

See Note 3, "Discontinued Operations and Dispositions", in our Notes to Consolidated Condensed Financial Statements in Part 1 of Form 10-Q for the quarter ended September 30, 2019, for discussions on businesses classified as held for sale.

 

 

MACQUARIE INFRASTRUCTURE CORPORATION

 

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

($ in Millions)



Nine Months Ended
September 30,


2019


2018

Operating activities





Net income from continuing operations

$

85


$

69

Adjustments to reconcile net income to net cash provided by operating activities from continuing                                            
     operations:





Goodwill impairment


-


3

Depreciation and amortization of property and equipment


145


143

Amortization of intangible assets


44


53

Amortization of debt financing costs


7


6

Amortization of debt discount


3


3

Adjustments to derivative instruments


29


(9)

Fees to Manager- related party


23


36

Deferred taxes


20


21

Other non-cash expense, net


12


26

Changes in other assets and liabilities, net of acquisitions:





   Accounts receivable


4


13

   Inventories


(1)


(2)

   Prepaid expenses and other current assets


(10)


1

   Accounts payable and accrued expenses


5


6

   Income taxes payable


47


1

   Other, net


3


(4)

Net cash provided by operating activities from continuing operations


416


366

Investing activities





Acquisitions of businesses and investments, net of cash, cash equivalents and restricted cash acquired


-


(13)

Purchases of property and equipment


(172)


(131)

Loan to project developer


(1)


(18)

Loan repayment from project developer


16


17

Proceeds from sale of business, net of cash divested


-


41

Other, net


(3)


-

Net cash used in investing activities from continuing operations


(160)


(104)

Financing activities





Proceeds from long-term debt


-


276

Payment of long-term debt


(358)


(204)

Contributions received from noncontrolling interests


-


1

Dividends paid to common stockholders


(258)


(293)

Debt financing costs paid


(1)


(3)

Net cash used in financing activities from continuing operations


(617)


(223)

Net change in cash, cash equivalents and restricted cash from continuing operations


(361)


39

 

 

MACQUARIE INFRASTRUCTURE CORPORATION


CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS – (continued)

(Unaudited)

($ in Millions)



Nine Months Ended
September 30,


2019


2018

Cash flows (used in) provided by discontinued operations:




Net cash (used in) provided by operating activities

(57)


47

Net cash provided by (used in) investing activities

239


(28)

Net cash provided by (used in) financing activities

24


(23)

Net cash provided by (used in) discontinued operations

206


(4)





Net change in cash, cash equivalents and restricted cash

(155)


35

Cash, cash equivalents and restricted cash, beginning of period

629


72

Cash, cash equivalents and restricted cash, end of period

$474


$107

Supplemental disclosures of cash flow information from continuing operations:                                                                      




Non-cash investing and financing activities:




Accrued purchases of property and equipment

$

18


$

20

Issuance of shares to Manager  

23


37

Issuance of shares to Independent Directors  

1


1

Taxes paid, net

9


11

Interest paid, net

95


73


The following table provides a reconciliation of cash, cash equivalents and restricted cash from both continuing and discontinued operations reported within the consolidated condensed balance sheets that is presented in the consolidated condensed statements of cash flows:



As of September 30,


2019


2018

Cash and cash equivalents

$

473


$

49

Restricted cash - current

1


23

Cash, cash equivalents and restricted cash included in assets held for sale(1)                                                                                                         

-


35

Total of cash, cash equivalents and restricted cash shown in the consolidated condensed statement of 
     cash flows

$

474


$

107

 










(1)

Represents cash, cash equivalents and restricted cash related to businesses classified as held for sale. See Note 3, "Discontinued Operations and Dispositions", in our Notes to Consolidated Condensed Financial Statements in Part 1 of Form 10-Q for the quarter ended September 30, 2019, for further discussion.

 

 

MACQUARIE INFRASTRUCTURE CORPORATION


CONSOLIDATED STATEMENTS OF OPERATIONS – MD&A



Quarter Ended
September 30,


Change
Favorable/
(Unfavorable)


Nine Months Ended
 September 30,


Change
Favorable/
(Unfavorable)


2019


2018


$

%


2019


2018


$


%


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

Revenue















Service revenue

$

347


$

361


(14)

(4)


$

1,120


$

1,140


(20)


(2)

Product revenue

58


60


(2)

(3)


183


184


(1)


(1)

Total revenue

405


421


(16)

(4)


1303


1324


(21)


(2)

Costs and expenses















Cost of services

154


167


13

8


484


534


50


9

Cost of product sales

43


39


(4)

(10)


128


128


-


-

Selling, general and administrative

81


78


(3)

(4)


245


240


(5)


(2)

Fees to Manager - related party

8


12


4

33


23


36


13


36

Goodwill Impairment

-


3


3

100


-


3


3


100

Depreciation

49


49


-

-


145


143


(2)


(1)

Amortization of intangibles

14


20


6

30


44


53


9


17

Total operating expenses 

349


368


19

5


1069


1137


68


6

Operating income

56


53


3

6


234


187


47


25

Other income (expense)















Interest income

2


-


2

NM


6


-


6


NM

Interest expense(1)

(36)


(28)


(8)

(29)


(124)


(71)


(53)


(75)

Other income (expense) , net

-


(21)


21

100


2


(15)


17


113

Net income from continuing operations before income 
     taxes

22


4


18

NM


118


101


17


17

Provision for income taxes

(7)


(2)


(5)

NM


(33)


(32)


(1)


(3)

Net income from continuing operations

$15


$2


13

NM


$

85


$

69


16


23

Discontinued Operations















Net income from discontinued operations before income 
     taxes

$

78


$

26


52

200


$

86


$

41


45


110

Provision for income taxes

(32)


(6)


(26)

NM


(32)


(5)


(27)


NM

Net income from discontinued operations

$

46


$

20


26

130


$

54


$

36


18


50

Net income

$

61


$

22


39

177


$

139


$

105


34


32

Net income from continuing operations

$

15


$

2


13

NM


$

85


$

69


16


23

Net income from continuing operations attributable 
     to MIC

$

15


$

2


13

NM


$

85


$

69


16


23

Net income from discontinued operations

$

46


$

20


26

130


$

54


$

36


18


50

Less: net loss attributable to noncontrolling interests

-


-


-

-


(3)


(32)


(29)


(91)

Net income from discontinued operations attributable 
     to MIC

$

46


$

20


26

130


$

57


$

68


(11)


(16)

Net income attributable to MIC

$

61


$

22


39

177


$

142


$

137


5


4

Basic income per share from continuing operations 
     attributable to MIC

$

0.18


$

0.02


0.16

NM


$

0.99


$

0.81


0.18


22

Basic income per share from discontinued operations 
     attributable to MIC

0.53


0.23


0.30

130


0.67


0.80


(0.13)


(16)

Basic income per share attributable to MIC

$

0.71


$

0.25


0.46

184


$

1.66


$

1.61


0.05


3

Weighted average number of shares outstanding: basic 

86,276,237


85,378,088


898,149

1


86,075,394


85,095,956


979,438


1









NM — Not meaningful

(1)

Interest expense includes losses on derivative instruments of $2 million and $14 million for the quarter and nine months ended September 30, 2019, respectively. For the quarter and nine months ended September 30, 2018, interest expense includes gains on derivative instruments of $3 million and $17 million, respectively.

 

 

MACQUARIE INFRASTRUCTURE CORPORATION


RECONCILIATION OF CONSOLIDATED NET INCOME TO EBITDA EXCLUDING

NON-CASH ITEMS AND A RECONCILIATION FROM CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW



Quarter Ended
September 30,


Change
Favorable/
(Unfavorable)


Nine Months
Ended
 September 30,


Change
Favorable/
(Unfavorable)


2019


2018


$

%


2019


2018


$


%


($ In Millions) (Unaudited)
















Net income from continuing operations

$

15


$

2





$

85


$

69





Interest expense, net(1)

34


28





118


71





Provision for income taxes

7


2





33


32





Goodwill Impairment

-


3





-


3





Depreciation

49


49





145


143





Amortization of intangibles

14


20





44


53





Fees to Manager- related party

8


12





23


36





Other non-cash expense, net (2)

6


7





19


18





EBITDA excluding non-cash items - continuing operations

$

133


$

123


10

8


$

467


$

425


42


10
















EBITDA excluding non-cash items - continuing operations

$

133


$

123





$

467


$

425





Interest expense, net(1)

(34)


(28)





(118)


(71)





Adjustments to derivative instruments recorded in 
     interest expense(1)

4


(1)





22


(12)





Amortization of debt financing costs(1)

2


2





7


6





Amortization of debt discount(1)

1


1





3


3





Provision for current income taxes

(4)


(3)





(13)


(11)





Changes in working capital (3)

55


27





48


26





Cash provided by operating activities - continuing operations

157


121





416


366





Changes in working capital (3)

(55)


(27)





(48)


(26)





Maintenance capital expenditures

(18)


(13)





(41)


(31)





Free cash flow - continuing operations  

84


81


3

4


327


309


18


6

Free cash flow - discontinued operations  

(54)


31


(85)

NM


(40)


64


(104)


(163)

Total Free Cash Flow  

$

30


$

112


(82)

(73)


$

287


$

373


(86)


(23)









NM - Not meaningful

(1)

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

(2)

Other non-cash expense, net, primarily includes pension expense of $2 million and $6 million for the quarter and nine month periods ended September 30, 2019 and 2018, respectively, unrealized gains (losses) on commodity hedges, expenses related to a long-term incentive compensation plan for senior management of the operating businesses implemented in 2019 and non-cash gains (losses) related to the disposal of assets. Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses. Other non-cash expense, net, also includes the write-down of our investment in the mechanical contractor business for the quarter and nine months ended September 30, 2018. See "Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow" above for further discussion.

(3)

For the quarter and nine months ended September 30, 2019, the change in working capital includes the current federal income tax liability of $43 million primarily related to the gain on sale of the renewable businesses reported in the results from discontinued operations.

 

 

...

MACQUARIE INFRASTRUCTURE CORPORATION


RECONCILIATION OF SEGMENT NET INCOME (LOSS) TO EBITDA

EXCLUDING NON-CASH ITEMS AND A RECONCILIATION FROM CASH PROVIDED

BY (USED IN) OPERATING ACTIVITIES TO FREE CASH FLOW


IMTT



Quarter Ended
September 30,


Change
Favorable/
(Unfavorable)



Nine Months
Ended
 September 30,


Change
Favorable/
(Unfavorable)


2019


2018







2019


2018






$


$


$


%



$


$


$


%


($ In Millions) (Unaudited)

Revenue

118


118


-


-



398


386


12


3

Cost of services

50


44


(6)


(14)



149


148


(1)


(1)

Selling, general and administrative expenses

9


7


(2)


(29)



26


24


(2)


(8)

Depreciation and amortization

32


33


1


3



98


99


1


1

Operating income

27


34


(7)


(21)



125


115


10


9

Interest expense, net(1)

(10)


(12)


2


17



(38)


(31)


(7)


(23)

Provision for income taxes

(5)


(6)


1


17



(25)


(24)


(1)


(4)

Net income

12


16


(4)


(25)



62


60


2


3

Reconciliation of net income to EBITDA
   excluding non-cash items and a reconciliation
   of cash provided by operating activities to Free
   Cash Flow:

















Net income

12


16







62


60





Interest expense, net(1)

10


12







38


31





Provision for income taxes

5


6







25


24





Depreciation and amortization

32


33







98


99





Other non-cash expense, net (2)

3


2







7


7





EBITDA excluding non-cash items

62