Macquarie Infrastructure Company Reports First Quarter 2015 Financial Results, Substantial Growth in Cash Generation

  • Total Free Cash Flow increases 89.0% to $122.7 million from $64.9 million
  • Proportionately Combined Free Cash Flow per share increases 45.6% to $1.68 from $1.15
  • Cash dividend of $1.07 ($4.28 annualized) per share authorized
  • Anticipated federal income tax liability extended to late 2018

NEW YORK--()--Macquarie Infrastructure Company LLC (NYSE:MIC) reported an 89.0% increase in proportionately combined Free Cash Flow to $122.7 million in the first quarter of 2015 from $64.9 million in the first quarter of 2014. The increase reflects the acquisition of the second half of the Company’s International-Matex Tank Terminals (“IMTT”) bulk liquid terminals business in July of 2014 and the improved operating performance of MIC’s businesses.

“We continue to anticipate deploying approximately $150.0 million in growth projects that have already been identified and approximately $100.0 million in smaller acquisitions executed on behalf of our existing businesses.”

Proportionately combined Free Cash Flow per share increased 45.6% to $1.68 versus $1.15 in the prior comparable period. The smaller per share increase compared with the growth in total Free Cash Flow reflects the impact on a weighted average basis of the issuance of 16.8 million additional shares over the 12 months ended March 31, 2015.

MIC issued additional shares in capital raisings conducted in relation to the acquisitions of IMTT in July of 2014 and the Bayonne Energy Center (“BEC”) in March of 2015 and to MIC’s manager in satisfaction of base and performance fees that became payable during the twelve months ended March 31, 2015.

The growth in MIC’s Free Cash Flow and Free Cash Flow per share in the first quarter of 2015 continues a track record of operating performance improvement across its portfolio of infrastructure businesses including:

  • year-on-year growth in key performance measures at Atlantic Aviation reflective of the ongoing recovery in general aviation in the U.S. and market share gain;
  • continued growth in terminal operations at IMTT together with lower than anticipated maintenance capital expenditures (approximately $0.03 per share versus expected $0.15), partially offset by lower heating and spill response revenue compared with unusually high levels in 2014; and,
  • increased contributions to MIC’s results from its Hawaii Gas business and Contracted Power and Energy segment (net of dispositions).

Reflecting the improved cash generation, the MIC Board of Directors has authorized a cash dividend of $1.07 per share, or $4.28 annualized, for the first quarter of 2015. The dividend will be payable on May 19, 2015 to shareholders of record on May 14, 2015. The quarterly cash payment represents a 4.9% increase over the dividend paid for the fourth quarter of 2014.

“The generation of Free Cash Flow in the first quarter was ahead of our guidance on an annualized basis,” said James Hooke, chief executive officer of MIC. “With only one quarter of results in and with what we believe will be the normalization of certain items over the remainder of the year, it is too early to revise our guidance of 14% year-on-year growth. However, I am pleased to have started the year ahead of plan.”

In addition to contributions from acquisitions concluded in 2014, MIC expects to benefit from the continued deployment of capital across all of its businesses. “We expect to deploy approximately $250.0 million over the course of the year,” said Hooke. “We continue to anticipate deploying approximately $150.0 million in growth projects that have already been identified and approximately $100.0 million in smaller acquisitions executed on behalf of our existing businesses.”

Consolidated Results for the First Quarter

MIC’s consolidated revenue for the first quarter of 2015 increased by 44.3% compared with the first quarter in 2014 primarily as a result of the inclusion of results for IMTT following the acquisition of the second half of that business in July of 2014. The increase was partially offset by lower cost energy inputs in 2015 compared with 2014 resulting from the decline in the price of oil and oil products. MIC notes that these decreases in revenue reflect the pass-through nature of energy-related costs.

Gross profit removes the volatility in revenue associated with fluctuations in energy inputs and highlights underlying trends in aggregate volume and margins at MIC. The Company’s consolidated gross profit doubled to $226.0 million in the first quarter of 2015 from $113.0 in the first quarter in 2014. The gross profit increase again reflects the consolidation of IMTT and contributions from acquisitions concluded by Atlantic Aviation as well as improved underlying operating performance at each of MIC’s other businesses.

MIC reported a consolidated net loss, before taxes, of $145.8 million in the first quarter of 2015 compared with consolidated net income of $28.6 million in the first quarter of 2014. The net loss reflects primarily the impact of the performance fees incurred in the 2015 quarter.

Segment Results for the First Quarter

MIC’s bulk liquid marine terminals business, IMTT, one of the largest independent terminal operations in the country, generated a 54.5% increase in Free Cash Flow in the first quarter of 2015 compared with the first quarter in 2014. The increase reflects a reduction in cash taxes, maintenance capital expenditures and cash interest versus the prior comparable quarter. EBITDA excluding non-cash items was down 1.3% versus the first quarter in 2014 as a result of reduced heating gross profit and a reduced contribution from OMI Environmental Services.

“IMTT generated a significant amount of Free Cash Flow in the quarter, driven by the progress we continued to make with respect to improving operations,” said Hooke. “Excluding the impact of the reduction in heating gross profit and OMI spill response activity, EBITDA generated by IMTT in the first quarter of 2015 would have increased by 8.5% compared with the first quarter in 2014.”

Heating revenue and gross profit related to heating heavy liquids declined by $5.1 million and $3.9 million, respectively, in the first quarter of 2015 versus the prior comparable period. Consumption of natural gas – and the price of natural gas – spiked unusually in 2014 as a result of what is commonly referred to as the Polar Vortex.

Spill response activity at IMTT subsidiary OMI Environmental Solutions (“OMI”) was lower in the first quarter of 2015 as well. Spill response revenue and gross profit declined by $7.5 million and $3.3 million, respectively, compared with the first quarter in 2014. OMI was involved in several clean-up operations including a substantial event on the Houston Ship Channel in the first half of 2014.

“We continue to make good progress in our efforts to reduce expenses and would expect to realize annualized savings of $10.0 million by the end of 2015,” Hooke noted. “Maintenance capital expenditures were very low in the first quarter of the year as we continued to put policies and processes around management of these in place, although we expect a normalization in the remainder of 2015 and continue to believe that IMTT will spend approximately $45.0 million on maintenance over the whole of the year.”

The Company anticipates completing a refinancing of IMTT’s long term debt in the second quarter of 2015. The current capitalization of the business includes an approximately $1.3 billion revolving credit facility that matures in February of 2018. As previously disclosed, management intends to increase the tenor of the facility or facilities used to capitalize the business.

MIC’s Atlantic Aviation business continued to benefit from the upswing in general aviation flight activity in the U.S., the impact of acquisitions of additional fixed base operations (“FBOs”) by the business in 2014, positive trends in the industry generally and market share gains. The Free Cash Flow generated by Atlantic Aviation increased by 45.0% in the first quarter of 2015 compared with the first quarter in 2014. The increase reflects a 40.5% increase in EBITDA excluding non-cash items as well as a decrease in cash taxes partially offset by an increase in maintenance capital expenditures and cash interest.

“The outstanding cash generation reported by Atlantic Aviation in the first quarter reflect trends including an increase in the size of general aviation jets, and market share gains that have come at the expense of competitors,” said Hooke. “The Atlantic network has been strengthened considerably with the addition of the FBOs in Florida that we acquired during the past 12 months and others are struggling to match Atlantic’s service levels, particularly in the east coast corridor.” Atlantic Aviation’s network of 69 FBOs includes six facilities in Florida.

Atlantic Aviation generated strong results on same store basis – excluding the impact the acquisitions – as well. Same store gross profit increased 9.4% on growth in fuel gross profit and rental revenue.

During the first quarter of 2015 MIC’s Contracted Power & Energy segment consisted of five solar and two wind power generation facilities. The wind power facilities were acquired during the second half of 2014. In the prior comparable period the segment also included results for a district energy business that was sold in August of 2014.

As a result of the acquisition and divestiture activity over the trailing twelve months, comparison of the performance of the segment with prior periods is not meaningful and a same store comparison is not material. In the first quarter of 2015 CP&E generated EBITDA of $6.5 million including approximately $700,000 of expenses incurred in connection with the acquisition of BEC. Free Cash Flow generated by the segment totaled $2.7 million for the quarter.

Including BEC, MIC expects the segment to generate EBITDA of approximately $75.0 million over the whole of 2015.

Gas sales increased by 3.6% at MIC’s Hawaii Gas business during the first quarter of 2015 compared with the first quarter in 2014 primarily driven by an increase in average margins and growth in sales to commercial accounts as customers continue to switch from electricity and diesel to gas. The resulting increase in gross profit, together with a modest reduction in selling, general and administrative expenses, contributed to growth in EBITDA excluding non-cash items of $1.9 million or 12.4%.

Hawaii Gas generated $14.2 million in Free Cash Flow for the quarter, up 63.8% on the prior comparable period, as a result of the improved operating performance, lower taxes and the absence of pension contributions.

MIC’s Corporate and Other segment includes public company expenses, board of directors costs and expenses associated with capital markets activities including interest expense on corporate level debt securities and revolving credit facilities. The segment result also reflects the impact of (non-cash) base management and performance fees paid by the Company to its external manager.

The Company’s Corporate and Other segment results for the first quarter of 2015 include $165.3 million of base and performance fees, all of which were settled with the issuance of additional shares. An increase in selling, general and administrative expenses resulted in EBITDA excluding non-cash items totaling ($2.8) million for the first quarter in 2015 compared with ($0.9) million in the first quarter in 2014. Including interest expense on convertible notes issued in July of 2014 and commitment fees on a revolving credit facility, Free Cash Flow generated by the Corporate and Other segment decreased to ($5.3) million from $1.5 million in the prior comparable period.

The BEC Transaction

MIC raised a net $471.6 million of additional equity in March 2015 to fund, in part, the acquisition of BEC and general corporate needs. The acquisition of BEC was concluded on April 1, 2015. The $215.2 million cash portion of the $724.3 million acquisition (including preliminary adjustments for working capital) was funded using a portion of the capital raised in March. MIC expects BEC to be immediately accretive to its Free Cash Flow.

Special Meeting

As previously announced, MIC will hold a Special Meeting of shareholders on Friday, May 15, 2015. Among other matters, shareholders will be asked to approve the conversion of the Company from a Delaware Limited Liability Company to a Delaware corporation. The meeting will be held at 10:00am at the Company’s offices in New York City.

Cash Generation, Proportionately Combined and Reconciled to GAAP

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

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

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

 
          /--------------------------------------------------For the Quarter Ended March 31, 2015-------------------------------------------------/
IMTT

100%(1)

    Atlantic Aviation    

Contracted

Power and

Energy(2)

   

Hawaii

Gas

    MIC Corporate    

Proportionately

Combined(3)

   

Contracted

Power and

Energy

100%

                   
Gross profit 84,470 108,115 6,820 24,184 N/A 223,589 9,185
EBITDA excluding non-cash items 78,404 56,259 4,451 16,854 (2,758) 153,210 6,485
Free cash flow 66,184     46,070     1,593     14,150     (5,316)     122,681 2,689
 
 
          /----------------------------------------------------------------------For the Quarter Ended March 31, 2014------------------------------------------------------------------------/

IMTT

50%(4)

    Atlantic Aviation    

Contracted

Power and

Energy(2)

   

Hawaii

Gas

    MIC Corporate    

Proportionately

Combined(3)

   

IMTT

100%(5)

   

Contracted

Power and

Energy

100%

                         
Gross profit 42,496 87,209 3,567 19,972 N/A 153,243 84,991 5,821
EBITDA excluding non-cash items 39,737 40,036 3,878 14,991 (858) 97,783 79,473 6,496
Free cash flow 21,416     31,767     1,612     8,636     1,489     64,920 42,832     2,775
 

_______________________

N/A- Not applicable.
 
(1) Represents our 100% ownership interest in IMTT subsequent to July 16, 2014.
 
(2) Proportionately combined Free Cash Flow for Contracted Power and Energy is equal to MIC's controlling ownership interest in its solar and wind power generation businesses and the district energy business, up to August 21, 2014, date of sale.
 
(3) Proportionately combined Free Cash Flow is equal to the sum of Free Cash Flow attributable to MIC's ownership interest in each of its operating businesses and MIC Corporate.
 
(4) Our proportionate interest in IMTT prior to the acquisition of the remaining 50% interest on July 16, 2014.
 
(5) Represents 100% of IMTT as a stand-alone business.
 

Conference Call and Webcast

When: Management has scheduled a conference call for 8:00 a.m. Eastern Time on Tuesday, May 5, 2015 during which it will review and comment on the Company’s results for the first 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 May 5, 2015 prior to the conference call. A link to the materials will be located on the homepage of the MIC website.

Replay: For interested individuals unable to participate in the live conference call, a replay will be available after 2:00 p.m. on May 5, 2014 through midnight on May 12, 2015, at +1(404) 537-3406 or +1(855) 859-2056, Passcode: 21960275. An online archive of the webcast will be available on the Company’s website for one year following the call. MIC-G

About Macquarie Infrastructure Company

Macquarie Infrastructure Company owns, operates and invests in a diversified group of infrastructure businesses providing basic services to customers in the United States. Its businesses consist of a bulk liquid marine terminals business, International-Matex Tank Terminals, an airport services business, Atlantic Aviation, a gas processing and distribution business, Hawaii Gas, and several entities comprising a Contracted Power and Energy segment. MIC is managed by a wholly-owned subsidiary of the Macquarie Group. For additional information, please visit the Macquarie Infrastructure Company website at www.macquarie.com/mic. MIC-G.

Forward-Looking Statements

This filing contains forward-looking statements. MIC may, in some cases, use words such as "project”, "believe”, "anticipate”, "plan”, "expect”, "estimate”, "intend”, "should”, "would”, "could”, "potentially”, or "may” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements in this report are subject to a number of risks and uncertainties, some of which are beyond MIC’s control including, among other things: changes in general economic or business conditions; its ability to service, comply with the terms of and refinance debt, successfully integrate and manage acquired businesses, retain or replace qualified employees, manage growth, make and finance future acquisitions, and implement its strategy; its shared decision-making with co-investors over investments including the distribution of dividends; its regulatory environment establishing rate structures and monitoring quality of service, demographic trends, the political environment, the economy, tourism, construction and transportation costs, air travel, environmental costs and risks, fuel and gas costs; its ability to recover increases in costs from customers, reliance on sole or limited source suppliers, risks or conflicts of interests involving its relationship with the Macquarie Group and changes in U.S. federal tax law.

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

“Macquarie Group” refers to the Macquarie Group of companies, which comprises Macquarie Group Limited and its worldwide subsidiaries and affiliates. Macquarie Infrastructure Company LLC 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 Company LLC.

 
MACQUARIE INFRASTRUCTURE COMPANY LLC
 
CONSOLIDATED CONDENSED BALANCE SHEETS
($ in Thousands, Except Share Data)
 
          March 31,

2015

      December 31,

2014

(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 101,312 $ 48,014
Restricted cash 9,565 21,282
Accounts receivable, less allowance for doubtful accounts
of $1,328 and $771, respectively 96,928 96,885
Inventories 26,114 28,080
Prepaid expenses 14,642 14,276
Deferred income taxes 25,412 25,412
Other   18,355     22,941  
Total current assets 292,328 256,890
Property, equipment, land and leasehold improvements, net 3,331,537 3,362,585
Investment in unconsolidated business 9,166 9,773
Goodwill 1,992,742 1,996,259
Intangible assets, net 916,515 959,634
Deferred financing costs, net of accumulated amortization 30,548 32,037
Other   11,936     8,010  
Total assets $ 6,584,772   $ 6,625,188  
 
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Due to manager - related party $ 154,822 $ 4,858
Accounts payable 42,119 49,733
Accrued expenses 62,152 77,248
Current portion of long-term debt 28,187 27,655
Fair value of derivative instruments 29,499 32,111
Other   25,820     32,727  
Total current liabilities 342,599 224,332
Long-term debt, net of current portion 1,940,406 2,364,866
Deferred income taxes 845,486 904,108
Fair value of derivative instruments 32,620 27,724
Other   139,828     133,990  
Total liabilities   3,300,939     3,655,020  
Commitments and contingencies - -
Members’ equity:
LLC interests, or shares, no par value; 500,000,000 authorized; 77,412,136 shares

issued and outstanding at March 31, 2015 and 71,089,590 shares issued and

outstanding at December 31, 2014

2,351,612 1,942,745
Additional paid in capital 21,447 21,447
Accumulated other comprehensive loss (23,975 ) (21,550 )
Retained earnings   755,519     844,521  
Total members’ equity 3,104,603 2,787,163
Noncontrolling interests   179,230     183,005  
Total equity   3,283,833     2,970,168  
Total liabilities and equity $ 6,584,772   $ 6,625,188  
 
 
MACQUARIE INFRASTRUCTURE COMPANY LLC
 
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
($ in Thousands, Except Share and Per Share Data)
 
 
        Quarter Ended

March 31,

2015

  Quarter Ended

March 31,

2014

 
Revenue
Service revenue $ 326,002

 

$

202,439

Product revenue

72,496 73,009
Financing and equipment lease income -     747  
Total revenue 398,498     276,195  
 
Costs and expenses
Cost of services 133,417 112,954
Cost of product sales 39,127 50,239
Selling, general and administrative 70,653 55,464
Fees to manager - related party 165,273 8,994
Depreciation 57,422 12,154
Amortization of intangibles 47,971 8,765
Loss on disposal of assets 545     -  
Total operating expenses 514,408     248,570  
Operating (loss) income (115,910 ) 27,625
 
Other income (expense)
Dividend income 531 -
Interest income 6 64
Interest expense(1) (31,521 ) (14,011 )
Equity in earnings and amortization charges of investee - 14,287
Other income, net   1,046     681  
Net (loss) income before income taxes (145,848 ) 28,646
Benefit (provision) for income taxes(2)   55,333     (8,486 )
Net (loss) income $ (90,515 )

 

$

20,160
Less: net loss attributable to noncontrolling interests   (1,513 )   (206 )
Net (loss) income attributable to MIC LLC $ (89,002 )

 

$

20,366  
 
Basic (loss) income per share attributable to MIC LLC $ (1.22 )

 

$

0.36  
Weighted average number of shares outstanding: basic 73,150,111     56,369,295  
 
Diluted (loss) income per share attributable to MIC LLC $ (1.22 )

 

$

0.36  
Weighted average number of shares outstanding: diluted   73,150,111     56,382,205  
Cash dividends declared per share $ 1.07  

 

$

0.9375  
 

_____________________

(1) Interest expense includes losses on derivative instruments of $12.9 million and $5.3 million for the quarters ended March 31, 2015 and 2014, respectively, of which net loss of 239,000 was reclassified from accumulated other comprehensive loss for the quarter ended March 31, 2014.
 
(2) Includes $95,000 of benefit for income taxes from accumulated other comprehensive loss reclassification for the quarter ended March 31, 2014.
 
 
MACQUARIE INFRASTRUCTURE COMPANY LLC
 
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in Thousands)
        Quarter Ended

March 31,

2015

    Quarter Ended

March 31,

2014

 
 
Operating activities
Net (loss) income $ (90,515 ) $ 20,160
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization of property and equipment 57,422 13,858
Amortization of intangible assets 47,971 8,765
Loss on disposal of assets 453 -
Equity in earnings and amortization charges of investee - (14,287 )
Equity distributions from investee - 8,127
Amortization of debt financing costs 1,615 1,041
Adjustments to derivative instruments 2,833 1,094
Base management fees to be settled/settled in shares 16,545 8,994
Performance fees to be settled in shares 148,728 -
Equipment lease receivable, net - 996
Deferred rent 233 50
Deferred taxes (56,138 ) 6,439
Other non-cash expenses, net 745 692
Changes in other assets and liabilities, net of acquisitions:
Restricted cash 669 14,643
Accounts receivable 222 (6,431 )
Inventories 2,087 1,973
Prepaid expenses and other current assets 5,901 (492 )
Due to manager - related party (88 ) (116 )
Accounts payable and accrued expenses (18,153 ) (4,166 )
Income taxes payable (853 ) (69 )
Pension contribution - (310 )
Other, net   (2,661 )   (1,884 )
Net cash provided by operating activities   117,016     59,077  
 
Investing activities
Acquisitions of businesses and investments, net of cash acquired (18,137 ) (1,052 )
Purchases of property and equipment (25,481 ) (21,613 )
Other, net   544     52  
Net cash used in investing activities   (43,074 )   (22,613 )
 
Financing activities
Proceeds from long-term debt $ 29,000 $ 4,884
Payment of long-term debt (452,628 ) (11,084 )
Proceeds from the issuance of shares 487,937 -
Dividends paid to shareholders (78,075 ) (51,469 )
Distributions paid to noncontrolling interests (1,000 ) (656 )
Offering and equity raise costs paid (15,964 ) (5 )
Debt financing costs paid - (1,050 )
Proceeds from the issuance of shares pursuant to MIC Direct 95 72
Change in restricted cash 11,047 (1,506 )
Payment of capital lease obligations (758 ) (454 )
Net cash used in financing activities (20,346 ) (61,268 )
Effect of exchange rate changes on cash and cash equivalents (298 ) -
Net change in cash and cash equivalents   53,298     (24,804 )
Cash and cash equivalents, beginning of period   48,014     233,373  
Cash and cash equivalents, end of period $ 101,312   $ 208,569  
 
Supplemental disclosures of cash flow information
Non-cash investing and financing activities:
Accrued equity offering costs $ 349   $ 1  
Accrued financing costs $ 126   $ -  
Accrued purchases of property and equipment $ 5,239   $ 1,797  
Acquisition of equipment through capital leases $ 398   $ -  
Issuance of shares to manager for base management fees $ 15,221   $ 8,777  
Conversion of convertible senior notes to shares $ 2   $ -  
Conversion of construction loan to term loan $ -   $ 60,360  
Distributions payable to noncontrolling interests $ 75   $ 128  
Taxes paid $ 1,657   $ 2,116  
Interest paid $ 26,887   $ 11,351  
 
 

MACQUARIE INFRASTRUCTURE COMPANY LLC

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS – MD&A

 
        Quarter Ended March 31,     Change

Favorable/(Unfavorable)

2015   2014 $   %
($ In Thousands) (Unaudited)
Revenue  
Service revenue $ 326,002 $ 202,439 123,563 61.0
Product revenue 72,496 73,009 (513 ) (0.7 )
Financing and equipment lease income -     747   (747 ) (100.0 )
Total revenue   398,498     276,195   122,303   44.3
 
Costs and expenses
Cost of services 133,417 112,954 (20,463 ) (18.1 )
Cost of product sales   39,127     50,239   11,112   22.1
Gross profit 225,954 113,002 112,952 100.0
Selling, general and administrative 70,653 55,464 (15,189 ) (27.4 )
Fees to manager - related party 165,273 8,994 (156,279 ) NM
Depreciation 57,422 12,154 (45,268 ) NM
Amortization of intangibles 47,971 8,765 (39,206 ) NM
Loss on disposal of assets   545     -   (545 ) NM
Total operating expenses   341,864     85,377   (256,487 ) NM
Operating (loss) income (115,910 ) 27,625 (143,535 ) NM
 
Other income (expense)
Dividend income 531 - 531 NM
Interest income 6 64 (58 ) (90.6 )
Interest expense(1) (31,521 ) (14,011 ) (17,510 ) (125.0 )
Equity in earnings and amortization charges of investee - 14,287 (14,287 ) (100.0 )
Other income, net   1,046     681   365   53.6
Net (loss) income before income taxes (145,848 ) 28,646 (174,494 ) NM
Benefit (provision) for income taxes   55,333     (8,486 ) 63,819   NM
Net (loss) income $ (90,515 ) $ 20,160 (110,675 ) NM
Less: net loss attributable to noncontrolling interests (1,513 )   (206 ) 1,307   NM
Net (loss) income attributable to MIC LLC $ (89,002 ) $ 20,366   (109,368 ) NM
 

_____________________

NM - Not meaningful
(1) Interest expense includes losses on derivative instruments of $12.9 million and $5.3 million for the quarters ended March 31, 2015 and 2014, respectively.
 
 

MACQUARIE INFRASTRUCTURE COMPANY LLC

RECONCILIATION OF CONSOLIDATED NET (LOSS) INCOME ATTRIBUTABLE TO MIC LLC TO EBITDA

EXCLUDING NON-CASH ITEMS AND CASH FROM OPERATING ACTIVITIES TO FREE CASH

FLOW

 
        Quarter Ended March 31,     Change

Favorable/(Unfavorable)

2015     2014 $   %

($ in Thousands) (Unaudited)

 
Net (loss) income attributable to MIC LLC(1) $ (89,002 ) $ 20,366
Interest expense, net(2) 31,515 13,947
(Benefit) provision for income taxes (55,333 ) 8,486
Depreciation(3) 57,422 12,154
Depreciation - cost of services(3) - 1,704
Amortization of intangibles(4) 47,971 8,765
Loss on disposal of assets 453 -
Equity in earnings and amortization charges of investee - (14,287 )
Equity distributions from investee(5) - 8,127
Base management fees to be settled/settled in shares 16,545 8,994
Performance fees to be settled in shares 148,728 -
Other non-cash (income) expense, net (3,055 )   536    
EBITDA excluding non-cash items $ 155,244   $ 68,792   86,452 125.7
 
EBITDA excluding non-cash items $ 155,244 $ 68,792
Interest expense, net(2) (31,515 ) (13,947 )
Adjustments to derivative instruments recorded in interest expense(2) 5,353 1,094
Amortization of debt financing costs(2) 1,615 1,041
Equipment lease receivable, net - 996
Benefit/provision for income taxes, net of changes in deferred taxes (805 ) (2,047 )
Pension contribution - (310 )
Changes in working capital   (12,876 )   3,458  
Cash provided by operating activities 117,016 59,077
Changes in working capital 12,876 (3,458 )
Maintenance capital expenditures   (6,115 )   (2,825 )  
Free cash flow $ 123,777   $ 52,794   70,983 134.5
 

_________________

(1) Net (loss) income attributable to MIC LLC excludes net loss of $1.5 million and $206,000 attributable to noncontrolling interests for the quarters ended March 31, 2015 and 2014, respectively.
 
(2) Interest expense, net, includes adjustments to derivative instruments related to interest rate swaps and non-cash amortization of deferred financing fees.
 
(3) Depreciation - cost of services includes depreciation expense for our previously owned district energy business, a component of CP&E segment, which was reported in cost of services in our consolidated condensed statements of operations. Depreciation and Depreciation - cost of services did not include acquisition-related step-up depreciation expense of $2.0 million for the quarter ended March 31, 2014 in connection with our previous 50% investment in IMTT, which was reported in equity in earnings and amortization charges of investee in our consolidated condensed statement of operations.
 
(4) Amortization of intangibles did not include acquisition-related step-up amortization expense of $85,000 for the quarter ended March 31, 2014 in connection with our previous 50% investment in IMTT, which was reported in equity in earnings and amortization charges of investee in our consolidated condensed statement of operations.
 
(5) Equity distributions from investee in the above table includes distributions we received only up to our share of the earnings recorded in the calculation for EBITDA excluding non-cash items.
 
 

MACQUARIE INFRASTRUCTURE COMPANY LLC

RECONCILIATION FROM CONSOLIDATED FREE CASH FLOW TO PROPORTIONATELY

COMBINED FREE CASH FLOW

 
        Quarter Ended March 31,       Change

Favorable/(Unfavorable)

2015     2014 $   %

($ in Thousands) (Unaudited)

 
 
Free Cash Flow- Consolidated basis $ 123,777 $ 52,794 70,983 134.5
Equity distributions from investee(1) - (8,127 )

100% of CP&E Free Cash Flow included in consolidated Free Cash Flow

(2,689 ) (2,775 )
MIC's share of IMTT Free Cash Flow(2) - 21,416
MIC's share of CP&E Free Cash Flow   1,593     1,612    
Free Cash Flow- Proportionately Combined basis $ 122,681   $ 64,920   57,761 89.0

 

_________________

(1) Equity distributions from investee represent the portion of distributions received from IMTT that are recorded in cash from operating activities prior to the IMTT Acquisition on July 16, 2014.
 
(2) Represents our proportionate share of IMTT's Free Cash Flow prior to the IMTT Acquisition on July 16, 2014.
 
 

MACQUARIE INFRASTRUCTURE COMPANY LLC

RECONCILIATION OF SEGMENT NET INCOME (LOSS) TO EBITDA EXCLUDING NON-CASH

ITEMS AND CASH FROM OPERATING ACTIVITIES TO FREE CASH FLOW

 
IMTT
 
          Quarter Ended March 31,
2015     2014     Change

Favorable/(Unfavorable)

$ $ $     %
($ In Thousands) (Unaudited)
 
Revenues 138,061 148,078 (10,017 ) (6.8 )
Cost of services 53,591   63,087   9,496   15.1
Gross Profit 84,470 84,991 (521 ) (0.6 )
General and administrative expenses 7,704 7,866 162 2.1
Depreciation and amortization 35,879   18,274   (17,605 ) (96.3 )
Operating income 40,887 58,851 (17,964 ) (30.5 )
Interest expense, net(1) (6,906 ) (7,133 ) 227 3.2
Other income, net 632 494 138 27.9
Provision for income taxes (14,089 ) (21,102 ) 7,013 33.2
Noncontrolling interest (250 ) (129 ) (121 ) (93.8 )
Net income(2) 20,274   30,981   (10,707 ) (34.6 )
 

Reconciliation of net income to EBITDA excluding non-cash

items and cash provided by operating activities to Free Cash

Flow:

 
Net income(2) 20,274 30,981
Interest expense, net(1) 6,906 7,133
Provision for income taxes 14,089 21,102
Depreciation and amortization 35,879 18,274
Other non-cash expenses 1,256   1,983    
EBITDA excluding non-cash items 78,404   79,473   (1,069 ) (1.3 )
 
EBITDA excluding non-cash items 78,404 79,473
Interest expense, net(1) (6,906 ) (7,133 )
Adjustments to derivative instruments recorded in interest expense(1) (2,379 ) (4,136 )
Amortization of debt financing costs(1) 113 844
Provision for income taxes, net of changes in deferred taxes (577 ) (15,109 )
Changes in working capital (11,612 ) 5,248  
Cash provided by operating activities 57,043 59,187
Changes in working capital 11,612 (5,248 )
Maintenance capital expenditures (2,471 ) (11,107 )  
Free cash flow 66,184   42,832   23,352   54.5
 
_____________________
(1) Interest expense, net, includes adjustments to derivative instruments and non-cash amortization of deferred financing fees.
 
(2) Corporate allocation expense, intercompany fees and the tax effect have been excluded from the above table as they are eliminated on consolidation.
 
 
Atlantic Aviation
 
          Quarter Ended March 31,
2015   2014   Change

Favorable/(Unfavorable)

$ $ $   %
($ In Thousands) (Unaudited)
 
Revenues 187,941 193,961 (6,020 ) (3.1 )
Cost of services 79,826   106,752   26,926   25.2
Gross Profit 108,115 87,209 20,906 24.0
Selling, general and administrative expenses 52,009 47,243 (4,766 ) (10.1 )
Depreciation and amortization 59,715 14,933 (44,782 ) NM
Loss on disposal of assets 545   -   (545 ) NM
Operating (loss) income (4,154 ) 25,033 (29,187 ) (116.6 )
Interest expense, net(1) (13,085 ) (9,565 ) (3,520 ) (36.8 )
Other (expense) income (27 ) 2 (29 ) NM
Benefit (provision) for income taxes 15,639   (4,915 ) 20,554   NM
Net (loss) income(2) (1,627 ) 10,555   (12,182 ) (115.4 )
 

Reconciliation of net (loss) income to EBITDA excluding non-

cash items and cash provided by operating activities to Free

Cash Flow:

 
Net (loss) income(2) (1,627 ) 10,555
Interest expense, net(1) 13,085 9,565
(Benefit) provision for income taxes (15,639 ) 4,915
Depreciation and amortization 59,715 14,933
Loss on disposal of assets 453 -
Other non-cash expenses 272   68    
EBITDA excluding non-cash items 56,259   40,036   16,223   40.5
 
EBITDA excluding non-cash items 56,259 40,036
Interest expense, net(1) (13,085 ) (9,565 )
Adjustments to derivative instruments recorded in interest expense(1) 5,066 2,626
Amortization of debt financing costs(1) 808 731
Benefit/provision for income taxes, net of changes in deferred taxes (355 ) (1,244 )
Changes in working capital (4,206 ) (971 )
Cash provided by operating activities 44,487 31,613
Changes in working capital 4,206 971
Maintenance capital expenditures (2,623 ) (817 )  
Free cash flow 46,070   31,767   14,303   45.0
 
_____________________
NM - Not meaningful
 
(1) Interest expense, net, includes adjustments to derivative instruments and non-cash amortization of deferred financing fees.
 
(2) Corporate allocation expense, intercompany fees and the tax effect have been excluded from the above table as they are eliminated on consolidation.
 
Contracted Power and Energy
 
        Quarter Ended March 31,
2015     2014     Change

Favorable/(Unfavorable)

$ $ $   %
($ In Thousands) (Unaudited)
 
Service revenues - 8,478 (8,478 ) (100.0 )
Product revenues 11,832 3,658 8,174 NM
Finance lease revenues -   747   (747 ) (100.0 )
Total revenues 11,832   12,883   (1,051 ) (8.2 )
 
Cost of revenue — service(1) - 6,202 6,202 100.0
Cost of revenue — product 2,647   860   (1,787 ) NM
Cost of revenue — total 2,647 7,062 4,415 62.5

Gross profit

9,185 5,821 3,364 57.8
Selling, general and administrative expenses 2,638 1,552 (1,086 ) (70.0 )
Depreciation and amortization 7,445   3,728   (3,717 ) (99.7 )
Operating (loss) income (898 ) 541 (1,439 ) NM
Interest expense, net(2) (6,338 ) (2,645 ) (3,693 ) (139.6 )
Other income 1,116 761 355 46.6
Benefit (provision) for income taxes 818 (599 ) 1,417 NM
Noncontrolling interest 1,763   527   1,236   NM
Net loss (3,539 ) (1,415 ) (2,124 ) (150.1 )
 

Reconciliation of net loss to EBITDA excluding non-cash items

and cash provided by operating activities to Free Cash Flow:

 
Net loss (3,539 ) (1,415 )
Interest expense, net(2) 6,338 2,645
(Benefit) provision for income taxes (818 ) 599
Depreciation and amortization (1) 7,445 5,432
Other non-cash income (2,941 ) (765 )  
EBITDA excluding non-cash items 6,485   6,496   (11 ) (0.2 )
 
EBITDA excluding non-cash items 6,485 6,496
Interest expense, net(2) (6,338 ) (2,645 )
Adjustments to derivative instruments recorded in interest expense(2) 2,527 (1,525 )
Amortization of debt financing costs(2) 17 192
Equipment lease receivable, net - 996
Benefit/provision for income taxes, net of changes in deferred taxes (2 ) (389 )
Changes in working capital 1,743   12,423  
Cash provided by operating activities 4,432 15,548
Changes in working capital (1,743 ) (12,423 )
Maintenance capital expenditures -   (350 )  
Free cash flow 2,689   2,775   (86 ) (3.1 )
 
_____________________
NM - Not meaningful
 
(1) Includes depreciation expense of $1.7 million related to the district energy business for the quarter ended March 31, 2014.
 
(2) Interest expense, net, includes adjustments to derivative instruments and non-cash amortization of deferred financing fees.
 
 
Hawaii Gas
 
          Quarter Ended March 31,
2015   2014   Change

Favorable/(Unfavorable)

$ $ $   %
($ In Thousands) (Unaudited)
 
Revenues 60,664 69,351 (8,687 ) (12.5 )
Cost of product sales 36,480   49,379   12,899   26.1
Gross profit 24,184 19,972 4,212 21.1
Selling, general and administrative expenses 5,356 5,623 267 4.7
Depreciation and amortization 2,354   2,258   (96 ) (4.3 )
Operating income 16,474 12,091 4,383 36.3
Interest expense, net(1) (1,943 ) (1,787 ) (156 ) (8.7 )
Other expense (144 ) (82 ) (62 ) (75.6 )
Provision for income taxes (5,532 ) (4,027 ) (1,505 ) (37.4 )
Net income(2) 8,855   6,195   2,660   42.9
 

Reconciliation of net income to EBITDA excluding non-cash

items and cash provided by operating activities to Free Cash

Flow:

 
Net income(2) 8,855 6,195
Interest expense, net(1) 1,943 1,787
Provision for income taxes 5,532 4,027
Depreciation and amortization 2,354 2,258
Other non-cash (income) expenses (1,830 ) 724    
EBITDA excluding non-cash items 16,854   14,991   1,863   12.4
 
EBITDA excluding non-cash items 16,854 14,991
Interest expense, net(1) (1,943 ) (1,787 )
Adjustments to derivative instruments recorded in interest expense(1) 139 (7 )
Amortization of debt financing costs(1) 121 118
Provision for income taxes, net of changes in deferred taxes - (2,711 )
Pension contribution - (310 )
Changes in working capital 2,523   (5,488 )
Cash provided by operating activities 17,694 4,806
Changes in working capital (2,523 ) 5,488
Maintenance capital expenditures (1,021 ) (1,658 )  
Free cash flow 14,150   8,636   5,514   63.8
 
_____________________
(1) Interest expense, net, includes adjustments to derivative instruments related to interest rate swaps and non-cash amortization of deferred financing fees.
 
(2) Corporate allocation expense, intercompany fees and the tax effect have been excluded from the above table as they are eliminated on consolidation.
 
 
Corporate and Other
 
          Quarter Ended March 31,
2015   2014   Change

Favorable/(Unfavorable)

$ $ $   %
($ In Thousands) (Unaudited)
 
Base management fees 16,545 8,994 (7,551 ) (84.0 )
Performance fees 148,728 - (148,728 ) NM
Selling, general and administrative expenses 2,946   1,046   (1,900 ) (181.6 )
Operating loss (168,219 ) (10,040 ) (158,179 ) NM
Interest (expense) income, net(1) (3,243 ) 50 (3,293 ) NM
Benefit for income taxes 58,497 1,055 57,442 NM
Noncontrolling interest -   (321 ) 321   100.0
Net loss(2) (112,965 ) (9,256 ) (103,709 ) NM
 

Reconciliation of net loss to EBITDA excluding non-cash items

and cash used in operating activities to Free Cash Flow:

 
Net loss(2) (112,965 ) (9,256 )
Interest expense (income), net(1) 3,243 (50 )
Benefit for income taxes (58,497 ) (1,055 )
Base management fees to be settled/settled in shares 16,545 8,994
Performance fee to be settled in shares 148,728 -
Other non-cash expense 188   509    
EBITDA excluding non-cash items (2,758 ) (858 ) (1,900 ) NM
 
EBITDA excluding non-cash items (2,758 ) (858 )
Interest (expense) income, net (1) (3,243 ) 50
Amortization of debt financing costs(1) 556 -
Benefit for income taxes, net of changes in deferred taxes 129 2,297
Changes in working capital (1,324 ) (2,506 )
Cash used in operating activities (6,640 ) (1,017 )
Changes in working capital 1,324   2,506    
Free cash flow (5,316 ) 1,489   (6,805 ) NM
 
_____________________
NM- Not meaningful
 
(1) Interest (expense) income, net, includes non-cash amortization of deferred financing fees.
 
(2) Corporate allocation expense, intercompany fees and the tax effect have been excluded from the above table as they are eliminated

on consolidation.

 
 

MACQUARIE INFRASTRUCTURE COMPANY LLC

RECONCILIATION OF PROPORTIONATELY COMBINED NET INCOME (LOSS) TO EBITDA

EXCLUDING NON-CASH ITEMS AND CASH FROM OPERATING ACTIVITIES TO FREE CASH

FLOW

 
      /---------------------------------------------------For the Quarter Ended March 31, 2015---------------------------------------------------/
         
($ in Thousands) (Unaudited) IMTT

100% (1)

  Atlantic Aviation

100%

 

Contracted

Power and

Energy(2)

  Hawaii Gas 100%  

MIC

Corporate

100%

  Proportionately Combined(3)

Contracted

Power and

Energy 100%

         
Net income (loss) attributable to MIC LLC 20,274 (1,627) (2,374) 8,855 (112,965) (87,837) (3,539)
Interest expense, net(4) 6,906 13,085 4,760 1,943 3,243 29,937 6,338
Provision (benefit) for income taxes 14,089 (15,639) (818) 5,532 (58,497) (55,333) (818)
Depreciation 33,115 14,999 5,441 2,042 - 55,597 7,266
Amortization of intangibles 2,764 44,716 133 312 - 47,925 179
Base management fee settled/to be settled in shares - - - - 16,545 16,545 -
Performance fees to be settled in shares - - - - 148,728 148,728 -
Loss on disposal of assets - 453 - - - 453 -
Other non-cash expense (income) 1,256   272   (2,691)   (1,830)   188   (2,805) (2,941)
EBITDA excluding non-cash items 78,404   56,259   4,451   16,854   (2,758)   153,210 6,485
 
EBITDA excluding non-cash items 78,404 56,259 4,451 16,854 (2,758) 153,210 6,485
Interest expense, net(4) (6,906) (13,085) (4,760) (1,943) (3,243) (29,937) (6,338)
Adjustments to derivative instruments recorded in interest expense, net(4) (2,379) 5,066 1,891 139 - 4,717 2,527
Amortization of deferred finance charges(4) 113 808 13 121 556 1,611 17
Provision/benefit for income taxes, net of changes in deferred taxes (577) (355) (2) - 129 (805) (2)
Changes in working capital (11,612)   (4,206)   1,354   2,523   (1,324)   (13,265) 1,743
Cash provided by (used in) operating activities 57,043 44,487 2,947 17,694 (6,640) 115,531 4,432
Changes in working capital 11,612 4,206 (1,354) (2,523) 1,324 13,265 (1,743)
Maintenance capital expenditures (2,471)   (2,623)   -   (1,021)   -   (6,115) -
Free cash flow 66,184   46,070   1,593   14,150   (5,316)   122,681 2,689
 
 
      /--------------------------------------------------------------For the Quarter Ended March 31, 2014----------------------------------------------------------------/
       
($ in Thousands) (Unaudited)

IMTT

50% (5)

 

Atlantic Aviation

100%

 

Contracted

Power and

Energy(2)

  Hawaii Gas 100%  

MIC

Corporate 100%

  Proportionately Combined(3)

IMTT 100%

(6)

 

Contracted

Power and

Energy 100%

           
Net income (loss) attributable to MIC LLC 15,491 10,555 525 6,195 (9,256) 23,510 30,981 (1,415)
Interest expense (income), net(4) 3,567 9,565 1,731 1,787 (50) 16,600 7,133 2,645
Provision (benefit) for income taxes 10,551 4,915 429 4,027 (1,055) 18,867 21,102 599
Depreciation 8,905 6,802 3,354 1,946 - 21,007 17,809 5,110
Amortization of intangibles 233 8,131 161 312 - 8,837 465 322
Base management fee settled in shares - - - - 8,994 8,994 - -
Other non-cash expense (income) 992   68   (2,323)   724   509   (30) 1,983   (765)
EBITDA excluding non-cash items 39,737   40,036   3,878   14,991   (858)   97,783 79,473   6,496
 
EBITDA excluding non-cash items 39,737 40,036 3,878 14,991 (858) 97,783 79,473 6,496
Interest (expense) income, net(4) (3,567) (9,565) (1,731) (1,787) 50 (16,600) (7,133) (2,645)
Adjustments to derivative instruments recorded in interest expense, net (4) (2,068) 2,626 (763) (7) - (212) (4,136) (1,525)
Amortization of deferred finance charges(4) 422 731 101 118 - 1,372 844 192
Equipment lease receivables, net - - 498 - - 498 - 996
Provision/benefit for income taxes, net of changes in deferred taxes (7,555) (1,244) (196) (2,711) 2,297 (9,408) (15,109) (389)
Pension contribution - - - (310) - (310) - -
Changes in working capital 2,624   (971)   10,530   (5,488)   (2,506)   4,189 5,248   12,423
Cash provided by (used in) operating activities 29,594 31,613 12,318 4,806 (1,017) 77,313 59,187 15,548
Changes in working capital (2,624) 971 (10,530) 5,488 2,506 (4,189) (5,248) (12,423)
Maintenance capital expenditures (5,554)   (817)   (175)   (1,658)   -   (8,204) (11,107)   (350)
Free cash flow 21,416   31,767   1,612   8,636   1,489   64,920 42,832   2,775
 
___________________________
(1) Represents our 100% ownership interest in IMTT subsequent to July 16, 2014.
 
(2) Proportionately combined Free Cash Flow for Contracted Power and Energy is equal to MIC's controlling ownership interest in its solar and wind power generation businesses and the district energy business, up to August 21, 2014, date of sale.
 
(3) Proportionately combined Free Cash Flow is equal to the sum of Free Cash Flow attributable to MIC's ownership interest in each of its operating businesses and MIC Corporate.
 
(4) Interest (expense) income, net, includes adjustments to derivative instruments related to interest rate swaps and non-cash amortization of deferred financing fees.
 
(5) Our proportionate interest in IMTT prior to the acquisition of the remaining 50% interest on July 16, 2014.
 
(6) Represents 100% of IMTT as a stand-alone business.
 

Contacts

For further information:
Macquarie Infrastructure Company
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Investor Relations
or
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