Macquarie Infrastructure Company LLC Reports Third Quarter 2014 Financial Results; Quarterly Cash Dividend Increased to $0.98 Per Share

  • Underlying Free Cash Flow per share increases 26.9%
  • Free Cash Flow guidance reaffirmed
  • Growth capital committed at IMTT and Hawaii Gas

NEW YORK--()--Macquarie Infrastructure Company LLC (NYSE:MIC) reported its financial results for the third quarter of 2014 including underlying proportionately combined Free Cash Flow of $1.37 per share, or an increase of 26.9% over the $1.08 per share generated in the third quarter of 2013. The increase reflects the impact of the acquisition in July of 2014 of the 50% of International-Matex Tank Terminals (“IMTT”, “IMTT Acquisition”) it did not already own and the continued strong performance of the company’s operating businesses.

“The operational leverage at Atlantic Aviation was evident in the third quarter as a 3.9% increase in GA flight movements resulted in a nearly 10% increase in the amount of distributable cash flow being generated by the business”

In determining underlying proportionately combined Free Cash Flow, MIC excludes approximately $43.3 million of primarily transaction-related expenses and voluntary pension contributions recorded in the quarter. Management believes that reporting underlying results better reflects the ongoing performance of its businesses than does reporting results including these items. Proportionately combined Free Cash Flow including the expenses was $0.73 per share for the quarter ended September 30, 2014.

“I’m particularly pleased with the progress we’ve made on the integration of IMTT, and Atlantic Aviation continued to exceed our expectations,” said James Hooke, chief executive officer of MIC. “The third quarter was a solid one for MIC. Although the costs associated with our transactions obscured the strength of our underlying cash generation, the increase in our quarterly cash dividend clearly demonstrates our confidence in our cash flow growth.”

The MIC board of directors authorized a cash dividend of $0.98 per share for the third quarter or 3.2% more than the $0.95 per share dividend authorized for the second quarter of 2014. Management now believes that the dividend can grow at a rate of at least 12% per year over the next two years, subject to the continued stable performance of MIC’s businesses and no material deterioration in the condition of the broader economy of the U.S. The dividend for the third quarter of 2014 will be paid on November 13, 2014 to shareholders of record on November 10, 2014.

“Given our financial results through three quarters of the year, and the cash generating capacity of our businesses over the medium term, our businesses are performing slightly ahead of expectations,” said Hooke. “We are reaffirming our guidance for underlying Free Cash Flow per share of $4.55 in 2014 and $5.10 in 2015 notwithstanding the increase in the number shares outstanding associated with a portion of the performance fee for the quarter being settled in shares.” The company introduced guidance for full year 2015 in July along with the announcement of the IMTT Acquisition.

MIC also announced that, following shareholder requests, it intends to evaluate a potential conversion from its current legal structure as a limited liability company (“LLC”) to a regular, or “C”, corporation. For tax purposes, an LLC is eligible to be treated as a pass through entity (e.g., a partnership) or as a corporation. In 2007 MIC elected to be treated as a corporation, not as a pass-through, for income tax purposes.

“A conversion to a C Corporation may make MIC attractive to a broader range of investors versus its existing legal structure as an LLC,” said Hooke. “Moreover, a conversion to a regular corporation could enhance the potential for MIC to be included in mainstream stock indices.” In order to effect a conversion, MIC would have to put the measure to a vote of shareholders in either a special meeting or its regular annual meeting. A final determination by the company as to pursuing such a conversion or the related timing has not been made.

MIC announced that it is undertaking additional growth projects at both its IMTT and Hawaii Gas businesses over the next 12 to 18 months. IMTT will invest up to $43.0 million in the construction of additional storage capacity and related infrastructure at its chemical logistics facility near Geismar, LA. The projects are expected to add more than 250,000 barrels of storage capacity plus related pipeline, vapor controls and pump capacity, as well as increase dock capacity and capability. IMTT expects the projects to generate approximately $5.5 million of incremental EBITDA annually of which half was included in its results for the trailing twelve months ended September 30, 2014. The development is expected to be completed and in service in the second quarter of 2016.

MIC management also noted that changes in crude oil prices, whether up or down, do not appear to have any material impact on the earnings or outlook for IMTT. Conversely, the company’s Atlantic Aviation and Hawaii Gas businesses both benefit marginally over the medium term from lower fuel costs.

Hawaii Gas has filed an application with the Hawaii Public Utilities Commission (“HPUC”) indicating its intent to invest approximately $12.8 million to increase its use of containerized Liquefied Natural Gas (“LNG”) to replace up to 30% of the Synthetic Natural Gas (“SNG”) processed and distributed by its utility operations. Regular deliveries of containerized LNG are expected to commence by late 2015.

Consolidated Results for Third Quarter and Nine Months

MIC is simplifying its financial reporting as a result of the acquisition of the second half of IMTT. Historically, IMTT’s results have been reported using the equity method of accounting whereby MIC took 50% of IMTT’s net income into its income statement through the ‘equity in earnings and amortization charges of investee’ line. As the owner of 100% of the business, MIC will consolidate IMTT’s results with those of its other businesses. MIC’s results for the third quarter and nine months ended September 30, 2014 reflect both consolidation and equity method accounting, however. The IMTT acquisition was completed on July 16 and MIC’s financial statements reflect equity method accounting for IMTT for the first 15 days of the quarter and consolidation from July 16 through quarter end.

MIC reported increases in consolidated revenue of 47.4% and 21.2% for the quarter and nine month period ended September 30, 2014, respectively. The increase in both periods reflects primarily the consolidation of IMTT beginning July 16 and increased contributions from each of MIC’s businesses other than the district energy business that was sold in August. The company notes, however, that changes in revenue may reflect fluctuations in energy costs such as jet fuel at Atlantic Aviation and petroleum feedstocks at Hawaii Gas that are passed through to consumers.

Reported gross profit – defined as revenue less cost of goods sold – removes the volatility in revenue associated with the pass through costs. MIC’s consolidated gross profit increased 68.8% to $182.3 million in the third quarter of 2014 from $108.0 million in the same period in 2013. For the nine months ended September 30, 2014 the company’s gross profit increased 30.5% to $410.2 million from $314.2 million in the comparable period in 2013. Again, the increase in both the quarter and nine month results reflect primarily the impact of the consolidation of IMTT.

MIC’s consolidated net income for the third quarter of 2014 increased to $991.0 million from $10.4 million in the third quarter of 2013. Net income for the nine months ended September 30, 2014 increased to $1.0 billion from $15.4 million in the comparable 2013 period. The increase in both the quarter and year to date figures reflects primarily a non-cash gain from acquisition/sale of business related to the IMTT acquisition and the sale of the district energy business, partially offset by a $116.6 million performance fee incurred during the third quarter. The MIC Board requested, and the company’s external Manager agreed, that $65.0 million of the fee be settled in cash using the proceeds from the sale of the district energy business. The remainder of the fee of $51.6 million was reinvested in additional shares of MIC.

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

MIC reported consolidated Free Cash Flow for third quarter of 2014 of $58.3 million compared with $54.5 million in the third quarter in 2013. Through nine months, MIC reported Free Cash Flow $170.6 million compared with $145.4 million in the prior comparable period. Reported Free Cash Flow was reduced by contributions to the defined benefit pension plans at each of IMTT and Hawaii Gas in the amount of $20.0 million and $5.0 million, respectively, as well as legal and transaction costs.

MIC will also consolidate IMTT for federal income tax reporting purposes from the date of acquisition. As a member of MIC’s consolidated tax group, IMTT’s otherwise taxable income can be shielded from federal income taxes with the application of MIC holding company level Net Operating Loss (“NOL”) carryforwards. Absent any other changes, the addition of taxable income from IMTT would accelerate the utilization of the NOLs. However, the higher base management fees resulting from the increase in MIC’s market capitalization, together with the performance fee generated in the third quarter have created additional NOLs. MIC management now believes it is unlikely the company will have a material consolidated federal income tax liability until 2017 and that additional tax planning strategies may exist to extend this date even further into the future.

Cash Generation

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

MIC believes that EBITDA excluding non-cash items provides additional insight into the performance of its operating businesses, relative to each other and to similar businesses, without regard to capital structure, and 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 where 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 and changes in working capital.

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

As a result of its acquisition in July of the 50% of IMTT that it did not previously own, MIC intends to discuss the performance of its businesses on a consolidated basis in this and subsequent periods. Until such time as MIC is able to report exclusively on a consolidated basis however, it will continue to rely on proportionately combined metrics including, gross profit, EBITDA excluding non-cash items, cash interest, cash taxes, maintenance capital expenditures, Free Cash Flow, Free Cash Flow per share, growth capital expenditures and net debt. MIC believes that such measures provide investors and management with additional insight into the financial results and the cash generated as a function of our varied ownership interest in our businesses and investments over the reporting period.

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

The following table summarizes MIC’s financial performance on a proportionately combined basis during the quarter and nine month periods ended September 30, 2014 and the prior comparable periods.

   

For the Quarter Ended September 30, 2014

 
        Contracted       Contracted
IMTT IMTT Power and Proportionately IMTT Power and

50%(1)

 

100%(2)

  Hawaii Gas   Atlantic Aviation  

Energy(3)

  MIC Corporate  

Combined(4)

100%(5)

  Energy 100%
 
Gross profit 4,708 63,414 17,748 93,437 4,998 N/A 184,305 72,830 7,748
EBITDA excluding non-cash items 4,258 52,836 13,189 44,285 4,316 (8,799) 110,085 61,352 7,546
Free cash flow (6,203)   26,367   8,546   33,762   2,435   (15,008)   49,899 13,962   4,645
 
   

For the Quarter Ended September 30, 2013

 
      Contracted       Contracted
IMTT Power and Proportionately IMTT Power and

50%(1)

  Hawaii Gas   Atlantic Aviation  

Energy(3)

  MIC Corporate  

Combined(4)

100%(5)

  Energy 100%
 
Gross profit 35,438 17,239 82,645 4,430 N/A 139,752 70,875 8,136
EBITDA excluding non-cash items 31,810 12,879 38,306 3,166 (1,094) 85,067 63,620 7,476
Free cash flow 16,581   9,154   30,774   1,392   (854)   57,047 33,162   4,261
 
                 

For the Nine Months Ended September 30, 2014

 
Contracted Contracted
IMTT IMTT Power and Proportionately IMTT Power and

50%(1)

 

100%(2)

  Hawaii Gas   Atlantic Aviation  

Energy(3)

  MIC Corporate  

Combined(4)

100%(5)

  Energy 100%
 
Gross profit 85,727 63,414 57,120 267,106 14,245 N/A 487,612 234,867 22,558
EBITDA excluding non-cash items 78,712 52,836 43,160 123,737 12,738 (11,703) 299,480 210,260 22,066
Free cash flow 31,324   26,367   24,962   95,993   6,175   (13,303)   171,518 89,015   11,468
 
 

For the Nine Months Ended September 30, 2013

       
      Contracted       Contracted
IMTT Power and Proportionately IMTT Power and

50%(1)

  Hawaii Gas   Atlantic Aviation  

Energy(3)

  MIC Corporate  

Combined(4)

100%(5)

  Energy 100%
 
Gross profit 109,756 54,803 240,118 10,473 N/A 415,150 219,511 19,325
EBITDA excluding non-cash items 98,552 40,005 109,169 9,172 (4,463) 252,435 197,104 19,367
Free cash flow 45,926   25,583   85,761   5,052   3,350   165,672 91,851   11,671

______________________________

N/A- Not applicable.

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

(2) Represents our 100% ownership interest in IMTT subsequent to July 16, 2014.

(3) 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.

(4) 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.

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

IMTT

On July 16, 2014, MIC completed the acquisition of the 50% of IMTT that it did not already own. IMTT owns and operates 10 marine storage terminals in the U.S. and is the part owner and operator of two terminals in Canada. The terminals store and handle a wide variety of petroleum grades, chemicals and vegetable and animal oils. The discussion below refers to results for 100% of the business throughout the period.

IMTT’s revenue for the third quarter of 2014 increased 4.3% to $131.9 million from $126.4 million in the third quarter of 2013. Through nine months ended September 30, 2014, revenue rose 10.1% to $422.5 million from $383.8 million in the prior comparable period. The growth reflects an increased level of spill response activity by the business’ OMI Environmental Solutions (“OMI”) unit in 2014, higher heating and throughput revenue associated with the cold weather in early 2014 compared with the business’ results in 2013 and increased firm commitments.

Terminal operating costs and selling, general and administrative costs were higher in the third quarter of 2014 compared with the third quarter in 2013. Higher terminal operating costs reflect the increased activity at OMI. Labor and other costs at OMI and transaction related items increased selling, general and administrative expenses in both the quarter and nine month periods. IMTT expects to record additional selling, general and administrative costs (compensation expenses) associated with the transaction over the upcoming five quarters.

Capacity utilization increased to 92.5% in the third quarter of 2014 compared with 91.6% in the second quarter as certain tanks that were previously unavailable as a result of cleaning and inspection activities were returned to service. At quarter end, utilization was approaching historically normal levels. Utilization could continue to fluctuate over the short term depending on the schedule of cleaning and inspections and potential conversions of certain tanks from one product to another. Capacity utilization in the third quarter of 2014 was broadly flat with the prior comparable period.

Maintenance capital expenditures decreased to $11.2 million and $37.4 million in the quarter and year to date periods in 2014, respectively, compared with $14.5 million and $60.5 million in the prior comparable periods. The decrease reflects primarily the absence of the maintenance expenses incurred in 2013 related to the restoration of the Bayonne, NJ terminal following Hurricane Sandy in late 2012.

Free Cash Flow generated by IMTT decreased 57.9% to $14.0 million and decreased 3.1% to $89.0 million for the quarter and nine months ended September 30, 2014, respectively, versus the prior comparable periods in 2013. The decline in Free Cash Flow in both periods reflects primarily an increase in expenses associated with the acquisition completed in July including a defined benefit pension contribution in the quarter of $20.0 million as required under the IMTT Acquisition sale and purchase agreement and higher taxes. These were partially offset by improved operating results and lower maintenance capital expenditures.

The CEO cited the ongoing integration of IMTT as a key element in the company’s overall positive outlook. “We said in July that we expected to be able to achieve reductions in operating expenses of approximately $10.0 million per year and that we would bring maintenance capital expenditures more in line with industry standards at approximately $45.0 million per year and our work to date suggests that this should be possible and may have been modestly conservative,” he said. “We also wanted to refocus IMTT on deployment of growth capital and we’re pleased to report a step in that direction with the Geismar projects.”

Atlantic Aviation

Atlantic Aviation owns and operates a network of fixed-base operations (FBO) that provide fuel, terminal, aircraft hangaring and other services primarily to owners and operators of general aviation (GA) jet aircraft at 68 airports in the U.S. The network is one of the largest in the U.S. air transportation industry.

Revenue at Atlantic Aviation increased to $198.0 million from $183.2 million and to $585.2 million from $541.8 million in the third quarter and nine month periods ended September 30, 2014, respectively. The approximately 8% increase in both periods reflects continued same store revenue growth and the impact of fixed base operations acquired during the past year. Total gross profit increased by 13.1% and 11.2% in the quarter and nine month periods, respectively, while same store gross profit increased by 5.4% and 6.4% in the quarter and nine month periods, respectively. The growth in gross profit reflects increases in general aviation flight movements during the quarter. According to data provided by the Federal Aviation Administration, general aviation flight movements increased by 3.9% in the third quarter of 2014 compared with the third quarter of 2013.

Selling, general and administrative costs increased to $49.3 million from $44.3 million and to $143.6 million from $130.7 million in the quarter and nine month periods ended September 30, 2014, respectively. The increase in costs reflects primarily the acquisitions of a total of seven fixed base operations over the trailing twelve months. Same store costs increased modestly as a result of higher labor and utility expenses associated with the cold weather in the early portion of 2014.

Free Cash Flow at Atlantic Aviation increased to $33.8 million from $30.8 million and to $96.0 million from $85.8 million in the quarter and nine month periods ended September 30, 2014, respectively. The increase reflects the improvement in operating results and lower taxes in the nine month period, partially offset by an increase in interest expense as a result of the business’ debt having been unhedged in the prior comparable period.

Atlantic Aviation continues to generate improving financial results in line with the recovery in the broader economy in the U.S. and increases in general aviation flight movements. “The operational leverage at Atlantic Aviation was evident in the third quarter as a 3.9% increase in GA flight movements resulted in a nearly 10% increase in the amount of distributable cash flow being generated by the business,” Hooke said.

Hawaii Gas

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

Revenue at Hawaii Gas rose in the quarter and nine month periods ended September 30, 2014 to $64.5 million from $61.5 million and to $203.0 million from $193.1 million, respectively. The approximately 5% increase reflects an increase in the volume of gas sold in the third quarter and increases in average gross margins in both periods.

Cost of product sales and selling, general and administrative expenses were higher in the third quarter of 2014 compared with the third quarter in 2013. Cost of product sales were higher for the nine months ended September 30, 2014 as well, reflecting higher feedstock costs, partially offset by lower inter-island transportation costs. Selling, general and administrative expenses declined in the year to date period primarily as result of the absence of severance costs incurred in 2013.

Free Cash Flow generated by Hawaii Gas decreased to $8.5 million in the third quarter of 2014 from $9.2 million in the third quarter of 2013. For the nine months ended September 30, 2014, Free Cash Flow decreased to $25.0 million from $25.6 million in the comparable period in 2013. The decrease in both the quarter and year to date periods reflects primarily a voluntary excess defined benefit pension plan contribution of $5.0 million made in the third quarter of 2014, partially offset by lower taxes.

Contracted Power and Energy

MIC’s Contracted Power and Energy segment comprises investments in five solar photovoltaic and one wind power generating facility in the Southwest U.S. and a 10% equity interest in a second wind facility in Idaho. The wind power facilities were acquired in the third quarter of 2014. On August 21, 2014, MIC completed the previously announced sale of a 50.01% controlling interest in a district energy business that had been a part of the CP&E segment. The following discussion refers to results for these businesses over the period of MIC’s ownership and on a 100% basis.

Revenue across the CP&E segment decreased in the third quarter and increased in the nine month period ended September 30, 2014, primarily as a result of the sale of MIC’s non-controlling interest in a district energy business in August. The decrease in the third quarter was partially offset by the contribution from solar facilities acquired in 2013 and the modest contribution from wind facilities acquired in the third quarter.

Selling, general and administrative expenses include primarily transaction-related costs and legal and professional fees. These expenses were lower in the third quarter of 2014 compared with the prior comparable period and higher through the first nine months of the year reflecting the timing of acquisitions in the segment.

Free Cash Flow generated by CP&E increased to $4.6 million in the third quarter of 2014 from $4.3 million in the prior comparable period and decreased to $11.5 million for the nine months ended September 30, 2014 from $11.7 million in the prior comparable period. The increase in the quarter reflects primarily a benefit from lower taxes partially offset by an increase in interest expense. Free Cash Flow for the nine month period decreased primarily as a result of both higher interest expense and higher taxes.

MIC said that it expects to generate additional value from its portfolio of renewable power assets by consolidating back office operations. “We can improve our ability to operate these businesses, and to acquire others in the future, by moving to a shared services model of administration,” Hooke noted. The CP&E segment will be administered by a unit within the Atlantic Aviation back office.

Conference Call and WEBCAST

When: Management has scheduled a conference call for 8:00 a.m. Eastern Time on Thursday, October 30, 2014 during which it will review the Company’s results and answer questions from analysts and investors.

How: To listen to the conference call, please dial +1(650) 521-5252 or +1(877) 852-2928 at least 10 minutes prior to the scheduled start time. A simultaneous 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: MIC will prepare materials in support of its conference call. The materials will be available for downloading from the Company’s website the morning of October 30, 2014 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 October 30, 2014 through November 6, 2014, at +1(404) 537-3406 or +1(800) 585-8367, Passcode: 15049458. 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 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.

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 including, but not limited to those described in MIC’s Form 10-K, Form 10-Q and Form 8-K reports filed with the Securities and Exchange Commission, Some of these risks 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)
 
September 30, December 31,
2014 2013
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 37,344 $ 233,373
Restricted cash 24,209 51,884

Accounts receivable, less allowance for doubtful accounts of $1,188 and $953, respectively

98,048 60,823
Inventories 32,476 25,834
Prepaid expenses 8,895 10,132
Deferred income taxes 13,437 6,197
Equipment lease receivables current - 8,515
Other   42,898     9,792  
Total current assets 257,307 406,550
Property, equipment, land and leasehold improvements, net 3,216,061 854,169
Equipment lease receivables non-current - 16,155
Investment in unconsolidated business 21,306 83,703
Goodwill 1,929,220 514,494
Intangible assets, net 890,113 592,850
Deferred financing costs, net of accumulated amortization 46,304 22,740
Other   17,287     10,204  
Total assets $ 6,377,598   $ 2,500,865  
 
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Due to manager - related party $ 121,505 $ 3,032
Accounts payable 52,530 28,850
Accrued expenses 87,329 42,713
Current portion of long-term debt 19,954 163,083
Fair value of derivative instruments 26,734 13,027
Other   29,681     20,747  
Total current liabilities 337,733 271,452
Long-term debt, net of current portion 2,060,817 831,027
Deferred income taxes 916,889 189,719
Fair value of derivative instruments 20,349 -
Other   99,702     55,399  
Total liabilities   3,435,490     1,347,597  
Commitments and contingencies - -
Members’ equity:

LLC interests, or shares, no par value; 500,000,000 authorized; 70,133,479 shares issued and outstanding at September 30, 2014 and 56,295,595 shares issued and outstanding at December 31, 2013

1,946,331 1,226,733
Additional paid in capital 21,447 21,447
Accumulated other comprehensive loss (4,475 ) (8,445 )
Retained earnings (accumulated deficit)   823,552     (197,507 )
Total members’ equity 2,786,855 1,042,228
Noncontrolling interests   155,253     111,040  
Total equity   2,942,108     1,153,268  
Total liabilities and equity $ 6,377,598   $ 2,500,865  
 
 

MACQUARIE INFRASTRUCTURE COMPANY LLC

       
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
($ In Thousands, Except Share and Per Share Data)
 
Quarter Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2014   2013   2014   2013  
 
Revenue
Service revenue $ 317,915 $ 198,784 $ 725,623 $ 577,458
Product revenue 70,344 64,118 218,317 200,255
Financing and equipment lease income   379     817     1,836     2,779  
Total revenue   388,638     263,719     945,776     780,492  
Costs and expenses
Cost of services 158,476 111,074 386,927 326,904
Cost of product sales 47,815 44,626 148,651 139,343
Selling, general and administrative 77,497 53,669 189,797 154,998
Fees to manager - related party 130,501 15,242 153,990 76,912
Depreciation 35,958 10,039 60,540 28,730
Amortization of intangibles 11,369 8,618 29,590 25,866
Loss from customer contract termination 1,269 - 1,269 1,626
Loss on disposal of assets   20     50     886     226  
Total operating expenses   462,905     243,318     971,650     754,605  
Operating (loss) income (74,267 ) 20,401 (25,874 ) 25,887
Other income (expense)
Dividend income 257 - 257 -
Interest income 10 39 105 182
Interest expense(1) (16,566 ) (15,767 ) (48,522 ) (31,190 )
Loss on extinguishment of debt (90 ) - (90 ) (2,472 )
Equity in earnings and amortization charges of investee 993 8,576 26,079 30,327
Gain from acquisition/divestiture of businesses(2) 1,027,054 - 1,027,054 -
Other income, net   821     829     3,078     514  
Net income before income taxes 938,212 14,078 982,087 23,248
Benefit (provision) for income taxes(3)   52,462     (5,829 )   38,491     (9,241 )
Net income $ 990,674 $ 8,249 $ 1,020,578 $ 14,007
Less: net loss attributable to noncontrolling interests   (319 )   (2,158 )   (481 )   (1,423 )
Net income attributable to MIC LLC $ 990,993   $ 10,407   $ 1,021,059   $ 15,430  
 
Basic income per share attributable to MIC LLC $ 14.57   $ 0.20   $ 16.92   $ 0.31  
Weighted average number of shares outstanding: basic 68,005,171     53,043,185     60,354,086     50,525,617  
 
Diluted income per share attributable to MIC LLC $ 13.87   $ 0.20   $ 16.61   $ 0.31  
Weighted average number of shares outstanding: diluted   71,517,497     53,056,095     61,546,181     50,541,513  
Cash dividends declared per share $ 0.98   $ 0.875   $ 2.8675   $ 2.4375  

______________________________

(1) Interest expense includes gains on derivative instruments of $820,000 and losses of $13.1 million for the quarter and nine months ended September 30, 2014, respectively, of which net losses of $348,000 and $856,000, respectively, were reclassified from accumulated other comprehensive loss. For the quarter and nine months ended September 30, 2013, interest expense includes losses on derivative instruments of $8.0 million and $9.6 million, respectively, of which net losses of $344,000 and $1.2 million, respectively, were reclassified from accumulated other comprehensive loss.

(2) Gain from acquisition/divestiture of businesses represents the gain of $948.1 million from IMTT Acquisition from the remeasuring to fair value of the Company’s previous 50% ownership interest and the gain of $78.9 million from the sale of the Company's interest in the district energy business.

(3) Includes $138,000 and $340,000 of benefit for income taxes from accumulated other comprehensive loss reclassifications for the quarter and nine months ended September 30, 2014, respectively. For the quarter and nine months ended September 30, 2013, benefit for income taxes includes $137,000 and $463,000 from accumulated other comprehensive loss reclassifications, respectively.

MACQUARIE INFRASTRUCTURE COMPANY LLC

 
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
($ In Thousands)
   
Nine Months Ended
  September 30, 2014   September 30, 2013
 
 
Operating activities
Net income $ 1,020,578 $ 14,007
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization of property and equipment 64,914 33,751
Amortization of intangible assets 29,590 25,866
Loss on disposal of assets 822 106
Loss from customer contract termination 1,269 1,626
Equity in earnings and amortization charges of investee (26,079) (30,327)
Equity distributions from investee 25,086 19,025
Gain from acquisition/divestiture of businesses (1,027,181) -
Amortization of debt financing costs 4,467 2,892
Loss on extinguishment of debt 90 2,434
Adjustments to derivative instruments (3,937) 1,160
Base management fees to be settled/settled in shares 32,444 23,524
Performance fees to be settled/settled in shares 56,546 53,388
Equipment lease receivable, net 2,805 2,814
Deferred rent 293 197
Deferred taxes (38,812) 6,567
Other non-cash expenses (income), net 1,884 (743)
Changes in other assets and liabilities, net of acquisitions:
Restricted cash 28,481 (465)
Accounts receivable (4,182) (8,524)
Inventories 1,006 (3,535)
Prepaid expenses and other current assets (3,089) 1,026
Due to manager - related party 64,998 2
Accounts payable and accrued expenses 14,933 (13,794)
Income taxes payable (17,633) (819)
Pension contribution (26,960) (2,250)
Other, net   (7,970)   (168)
Net cash provided by operating activities   194,363   127,760
 
Investing activities
Acquisitions of businesses and investments, net of cash acquired (1,141,306) (14,666)
Proceeds from sale of business, net of cash divested 265,295 -
Return of investment in unconsolidated business 12,564 -
Purchases of property and equipment (81,912) (51,435)
Other, net   (331)   64
Net cash used in investing activities   (945,690)   (66,037)
 
Financing activities
Proceeds from long-term debt 196,884 481,917
Dividends paid to shareholders (171,003) (82,139)
Proceeds from the issuance of shares 764,750 227,558
Offering and equity raise costs paid (25,588) (11,041)
Proceeds from the issuance of convertible senior notes 350,000 -
Proceeds from the issuance of shares pursuant to MIC Direct 187 -
Contributions received from noncontrolling interests - 22,362
Distributions paid to noncontrolling interests (61,397) (1,652)
Payment of long-term debt (480,863) (740,752)
Debt financing costs paid (15,124) (18,973)
Change in restricted cash (991) 4,036
Payment of notes and capital lease obligations   (1,481)   (1,372)
Net cash provided by (used in) financing activities   555,374   (120,056)
 
Effect of exchange rate changes on cash and cash equivalents (76) -
Net change in cash and cash equivalents (196,029) (58,333)
Cash and cash equivalents, beginning of period   233,373   141,376
Cash and cash equivalents, end of period $ 37,344 $ 83,043
 
Supplemental disclosures of cash flow information
Non-cash investing and financing activities:
Accrued equity offering costs $ 12 $ -
Accrued financing costs $ 7 $ -
Accrued purchases of property and equipment $ 10,585 $ 12,331
Acquisition of equipment through capital leases $ 732 $ 1,320
Issuance of shares to manager for performance fees $ 4,960 $ 90,302
Issuance of shares to manager for base management fees $ 30,555 $ 21,487
Issuance of shares to independent directors $ 750 $ 640
Issuance of shares for acquisition of business $ 115,000 $ -
Conversion of construction loan to term loan $ 60,360 $ 24,749
Distributions payable to noncontrolling interests $ 387 $ 281
Taxes paid $ 17,955 $ 3,493
Interest paid $ 45,399 $ 28,090
 
MDA - CONSOLIDATED STATEMENT OF OPERATIONS
               
 
Quarter Ended Change Nine Months Ended Change
September 30, Favorable/(Unfavorable) September 30, Favorable/(Unfavorable)
2014   2013   $   %   2014   2013   $   %  
($ In Thousands) (Unaudited)
Revenue
Service revenue $ 317,915 $ 198,784 119,131 59.9 $ 725,623 $ 577,458 148,165 25.7
Product revenue 70,344 64,118 6,226 9.7 218,317 200,255 18,062 9.0
Financing and equipment lease income   379     817   (438 ) (53.6 )   1,836     2,779   (943 ) (33.9 )
Total revenue   388,638     263,719   124,919   47.4   945,776     780,492   165,284   21.2
 
Costs and expenses
Cost of services 158,476 111,074 (47,402 ) (42.7 ) 386,927 326,904 (60,023 ) (18.4 )
Cost of product sales   47,815     44,626   (3,189 ) (7.1 )   148,651     139,343   (9,308 ) (6.7 )
Gross profit 182,347 108,019 74,328 68.8 410,198 314,245 95,953 30.5
Selling, general and administrative 77,497 53,669 (23,828 ) (44.4 ) 189,797 154,998 (34,799 ) (22.5 )
Fees to manager - related party 130,501 15,242 (115,259 ) NM 153,990 76,912 (77,078 ) (100.2 )
Depreciation 35,958 10,039 (25,919 ) NM 60,540 28,730 (31,810 ) (110.7 )
Amortization of intangibles 11,369 8,618 (2,751 ) (31.9 ) 29,590 25,866 (3,724 ) (14.4 )
Loss from customer contract termination 1,269 - (1,269 ) NM 1,269 1,626 357 22.0
Loss on disposal of assets   20     50   30   60.0   886     226   (660 ) NM
Total operating expenses   256,614     87,618   (168,996 ) (192.9 )   436,072     288,358   (147,714 ) (51.2 )
Operating (loss) income (74,267 ) 20,401 (94,668 ) NM (25,874 ) 25,887 (51,761 ) (199.9 )
Other income (expense)
Dividend income 257 - 257 NM 257 - 257 NM
Interest income 10 39 (29 ) (74.4 ) 105 182 (77 ) (42.3 )
Interest expense(1) (16,566 ) (15,767 ) (799 ) (5.1 ) (48,522 ) (31,190 ) (17,332 ) (55.6 )
Loss on extinguishment of debt (90 ) - (90 ) NM (90 ) (2,472 ) 2,382 96.4
Equity in earnings and amortization charges of investee 993 8,576 (7,583 ) (88.4 ) 26,079 30,327 (4,248 ) (14.0 )
Gain from acquisition/divestiture of businesses 1,027,054 - 1,027,054 NM 1,027,054 - 1,027,054 NM
Other income, net   821     829   (8 ) (1.0 )   3,078     514   2,564   NM
Net income before income taxes 938,212 14,078 924,134 NM 982,087 23,248 958,839 NM
Benefit (provision) for income taxes   52,462     (5,829 ) 58,291   NM   38,491     (9,241 ) 47,732   NM
Net income $ 990,674 $ 8,249 982,425 NM $ 1,020,578 $ 14,007 1,006,571 NM
Less: net loss attributable to noncontrolling interests   (319 )   (2,158 ) (1,839 ) (85.2 )   (481 )   (1,423 ) (942 ) (66.2 )
Net income attributable to MIC LLC $ 990,993   $ 10,407   980,586   NM $ 1,021,059   $ 15,430   1,005,629   NM

______________________________

NM - Not meaningful

(1) Interest expense includes gains on derivative instruments of $820,000 and losses of $13.1 million for the quarter and nine months ended September 30, 2014, respectively. For the quarter and nine months ended September 30, 2013, interest expense includes losses on derivative instruments of $8.0 million and $9.6 million, respectively.

               
MACQUARIE INFRASTRUCUTRE COMPANY LLC
RECONCILIATION OF CONSOLIDATED NET INCOME ATTRIBUTABLE TO MIC LLC TO EBITDA
EXCLUDING NON-CASH ITEMS AND CASH FROM OPERATING ACTIVITIES TO FREE CASH FLOW
 
Quarter Ended Change Nine Months Ended Change
September 30, Favorable/(Unfavorable) September 30, Favorable/(Unfavorable)
2014   2013   $ %   2014     2013   $ %
($ In Thousands) (Unaudited)
 
Net income attributable to MIC LLC(1) $ 990,993 $ 10,407 $ 1,021,059 $ 15,430
Interest expense, net(2) 16,556 15,728 48,417 31,008
(Benefit) provision for income taxes (52,462 ) 5,829 (38,491 ) 9,241
Depreciation(3) 35,958 10,039 60,540 28,730
Depreciation - cost of services(3) 963 1,620 4,374 5,021
Amortization of intangibles(4) 11,369 8,618 29,590 25,866
Loss from customer contract termination 1,269 - 1,269 1,626
Loss on extinguishment of debt 90 - 90 2,434
Loss on disposal of assets 6 - 822 106
Gain from acquisition/divestiture of businesses (1,027,181 ) - (1,027,181 ) -
Equity in earnings and amortization charges of investee (993 ) (8,576 ) (26,079 ) (30,327 )
Equity distributions from investee(5) - 11,146 25,086 19,025
Base management fees to be settled/settled in shares 13,915 8,336 32,444 23,524
Performance fees to be settled/settled in cash/shares(6) 116,586 6,906 121,546 53,388
Other non-cash expense (income), net   1,988     (1,340 )     1,696     (1,969 )  
EBITDA excluding non-cash items $ 109,057   $ 68,713   40,344 58.7 $ 255,182   $ 183,103   72,079 39.4
 
EBITDA excluding non-cash items $ 109,057 $ 68,713 $ 255,182 $ 183,103
Interest expense, net(2) (16,556 ) (15,728 ) (48,417 ) (31,008 )
Adjustments to derivative instruments recorded in interest expense(2) (9,304 ) 4,449 (3,937 ) 1,160
Amortization of debt financing costs(2) 2,326 995 4,467 2,892
Equipment lease receivables, net 777 740 2,805 2,814
Benefit/provision for income taxes, net of changes in deferred taxes 3,620 (799 ) (321 ) (2,674 )
Pension contribution(7) (25,825 ) - (26,960 ) -
Changes in working capital(6)   (1,067 )   (7,707 )   11,544     (28,527 )
Cash provided by operating activities 63,028 50,663 194,363 127,760
Changes in working capital(6) 1,067 7,707 (11,544 ) 28,527
Maintenance capital expenditures   (5,783 )   (3,889 )     (12,246 )   (10,897 )  
Free cash flow $ 58,312   $ 54,481   3,831 7.0 $ 170,573   $ 145,390   25,183 17.3

______________________________

(1) Net income attributable to MIC LLC excludes net loss attributable to noncontrolling interests of $319,000 and $481,000 for the quarter and nine months ended September 30, 2014, respectively, and net loss attributable to noncontrolling interests of $2.2 million and $1.4 million for the quarter and nine months ended September 30, 2013, respectively.

(2) Interest expense, net, includes adjustment to derivative instruments 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 is reported in cost of services in our consolidated condensed statements of operations. Depreciation and Depreciation − cost of services does not include acquisition-related step-up depreciation expense of $315,000 and $4.2 million for the quarter and nine months ended September 30, 2014, respectively, compared with $2.0 million and $5.9 million for the quarter and nine months ended September 30, 2013, respectively, in connection with our previous 50% investment in IMTT, which is reported in equity in earnings and amortization charges of investee in our consolidated condensed statements of operations.

(4) Amortization of intangibles does not include acquisition-related step-up amortization expense of $14,000 and $185,000 for the quarter and nine months ended September 30, 2014, respectively, compared with $85,000 and $256,000 for the quarter and nine months ended September 30, 2013, respectively, in connection with our previous 50% investment in IMTT, which is reported in equity in earnings and amortization charges of investee in our consolidated condensed statements of operations.

(5) Equity distributions from investee in the above table includes distributions we received only up to our share of the earnings recorded in the calculation for EBITDA excluding non-cash items.

(6) In October of 2014, our Board requested, and our Manager agreed, that $65.0 million of the performance fee be settled in cash using the proceeds from the sale of the district energy business in order to minimize dilution. The remainder of the fee of $51.6 million was reinvested in additional shares of MIC. The impact of the cash settled portion has been excluded from the calculation of Free Cash Flow.

(7) For the quarter and nine months ended September 30, 2013, pension contributions of $900,000 and $2.3 million, respectively, were reported in changes in working capital for those periods.

 

               
MACQUARIE INFRASTRUCUTRE COMPANY LLC
RECONCILIATION OF CONSOLIDATED FREE CASH FLOW TO
PROPORTIONATELY COMBINED FREE CASH FLOW
 
Quarter Ended Change Nine Months Ended Change
September 30, Favorable/(Unfavorable) September 30, Favorable/(Unfavorable)
  2014     2013   $   %     2014     2013   $ %
($ In Thousands) (Unaudited)
 
Free Cash Flow- Consolidated basis $ 58,312 $ 54,481 3,831 7.0 $ 170,573 $ 145,390 25,183 17.3
Equity distributions from investee(1) - (11,146 ) (25,086 ) (19,025 )
100% of CP&E Free Cash Flow included in consolidated Free Cash Flow (4,645 ) (4,261 ) (11,468 ) (11,671 )
MIC's share of IMTT Free Cash Flow(2) (6,203 ) 16,581 31,324 45,926
MIC's share of CP&E Free Cash Flow   2,435     1,392       6,175     5,052    
Free Cash Flow- Proportionately Combined basis $ 49,899   $ 57,047   (7,148 ) (12.5 ) $ 171,518   $ 165,672   5,846 3.5

______________________________

(1) Equity distributions from investee represent the portion of distributions received from IMTT that are recorded in cash from operating activities. The distribution for the fourth quarter of 2013 from IMTT was received in the first quarter of 2014, as customary. Conversely, the distribution for the fourth quarter of 2012 from IMTT was received in the same period.

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

       

International-Matex Tank Terminals

 

Quarter Ended Nine Months Ended
September 30, Change September 30, Change
2014     2013  

Favorable/(Unfavorable)

2014     2013  

Favorable/(Unfavorable)

$   $   $     %   $   $   $     %  
($ In Thousands) (Unaudited)
 
Revenues 131,920 126,447 5,473 4.3 422,516 383,753 38,763 10.1
Cost of services(1) 59,090   55,572   (3,518 ) (6.3 ) 187,649   164,242   (23,407 ) (14.3 )
Gross Profit 72,830 70,875 1,955 2.8 234,867 219,511 15,356 7.0
General and administrative expenses(2) 13,619 8,084 (5,535 ) (68.5 ) 31,982 24,420 (7,562 ) (31.0 )
Depreciation and amortization 27,506 19,051 (8,455 ) (44.4 ) 65,426 56,109 (9,317 ) (16.6 )
Casualty losses, net(1) -   200   200   100.0 -   6,700   6,700   100.0
Operating income 31,705 43,540 (11,835 ) (27.2 ) 137,459 132,282 5,177 3.9
Interest expense, net(3) (5,558 ) (9,376 ) 3,818 40.7 (21,504 ) (17,099 ) (4,405 ) (25.8 )
Other (expense) income (188 ) 620 (808 ) (130.3 ) 1,683 1,804 (121 ) (6.7 )
Provision for income taxes (9,531 ) (15,181 ) 5,650 37.2 (46,088 ) (48,894 ) 2,806 5.7
Noncontrolling interest (190 ) (44 ) (146 ) NM (328 ) (220 ) (108 ) (49.1 )
Net income(4) 16,238   19,559   (3,321 ) (17.0 ) 71,222   67,873   3,349   4.9
 

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

 
Net income(4) 16,238 19,559 71,222 67,873
Interest expense, net(3) 5,558 9,376 21,504 17,099
Provision for income taxes 9,531 15,181 46,088 48,894
Depreciation and amortization 27,506 19,051 65,426 56,109
Casualty losses, net(1) - 200 - 6,700
Other non-cash expenses(5) 2,519   253     6,020   429    
EBITDA excluding non-cash items 61,352   63,620   (2,268 ) (3.6 ) 210,260   197,104   13,156   6.7
 
EBITDA excluding non-cash items 61,352 63,620 210,260 197,104
Interest expense, net(3) (5,558 ) (9,376 ) (21,504 ) (17,099 )
Adjustments to derivative instruments recorded in interest expense(3) (5,518 ) (1,768 ) (12,167 ) (15,784 )
Amortization of debt financing costs(3) 956 824 2,643 1,990
Provision for income taxes, net of changes in deferred taxes (6,101 ) (5,624 ) (32,822 ) (13,847 )
Pension contribution(6) (20,000 ) - (20,000 ) -
Changes in working capital 2,219   2,619   (2,722 ) 4,035  
Cash provided by operating activities 27,350 50,295 123,688 156,399
Changes in working capital (2,219 ) (2,619 ) 2,722 (4,035 )
Maintenance capital expenditures(7) (11,169 ) (14,514 )   (37,395 ) (60,513 )  
Free cash flow 13,962   33,162   (19,200 ) (57.9 ) 89,015   91,851   (2,836 ) (3.1 )

______________________________

NM - Not meaningful

(1) Casualty losses, net, includes $2.5 million and $1.5 million related to the quarters ended December 31, 2012 and March 31, 2013, respectively, which were recorded in cost of services in those periods. These amounts have been included in the nine months ended September 30, 2013.

(2) General and administrative expenses for the quarter and nine months ended September 30, 2014 includes transactional costs in connection with the IMTT Acquisition.

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

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

(5) IMTT management's calculation of IMTT's EBITDA prior to acquisition included various non-cash items, unlike MIC’s other businesses. In order to ensure IMTT’s EBITDA excluding non-cash items does in fact excludes non-cash items, and to promote consistency across its reporting segments, MIC has excluded known non-cash items when calculating IMTT’s EBITDA excluding non-cash items including primarily the non-cash pension expense of $2.3 million and $5.6 million for the quarter and nine months ended September 30, 2014, respectively. The non-cash pension expense of $2.9 million and $8.5 million was reported in changes in working capital for the quarter and nine months ended September 30, 2013, respectively.

(6) Pension contribution of $4.5 million for the quarter and nine months ended September 30, 2013 were reported in changes in working capital for those periods.

(7) Maintenance capital expenditures includes a reclassification from growth capital expenditures in the quarters ended December 31, 2012 and March 31, 2013 of $1.2 million and $509,000, respectively. These amounts have been included in the nine months ended September 30, 2013.

               

Hawaii Gas

 
Quarter Ended Nine Months Ended
September 30, Change September 30, Change
2014   2013  

Favorable/(Unfavorable)

2014   2013  

Favorable/(Unfavorable)

$   $   $   %   $   $   $   %  
($ In Thousands) (Unaudited)
 
Revenues 64,494 61,469 3,025 4.9 202,979 193,088 9,891 5.1
Cost of product sales(1) 46,746   44,230   (2,516 ) (5.7 ) 145,859   138,285   (7,574 ) (5.5 )
Gross profit 17,748 17,239 509 3.0 57,120 54,803 2,317 4.2
Selling, general and administrative expenses 4,970 4,818 (152 ) (3.2 ) 15,364 16,139 775 4.8
Depreciation and amortization 2,308   2,160   (148 ) (6.9 ) 6,861   6,508   (353 ) (5.4 )
Operating income 10,470 10,261 209 2.0 34,895 32,156 2,739 8.5
Interest expense, net(2) (1,589 ) (2,097 ) 508 24.2 (5,267 ) (5,040 ) (227 ) (4.5 )
Other expense (42 ) (146 ) 104 71.2 (181 ) (251 ) 70 27.9
Provision for income taxes (3,590 ) (3,191 ) (399 ) (12.5 ) (11,709 ) (10,669 ) (1,040 ) (9.7 )
Net income(3) 5,249   4,827   422   8.7 17,738   16,196   1,542   9.5
 
Reconciliation of net income to EBITDA excluding non-cash items

and cash provided by operating activities to Free Cash Flow:

Net income(3) 5,249 4,827 17,738 16,196
Interest expense, net(2) 1,589 2,097 5,267 5,040
Provision for income taxes 3,590 3,191 11,709 10,669
Depreciation and amortization 2,308 2,160 6,861 6,508
Other non-cash expenses(1) 453   604     1,585   1,592    
EBITDA excluding non-cash items 13,189   12,879   310   2.4 43,160   40,005   3,155   7.9
 
EBITDA excluding non-cash items 13,189 12,879 43,160 40,005
Interest expense, net(2) (1,589 ) (2,097 ) (5,267 ) (5,040 )
Adjustments to derivative instruments recorded in interest expense(2) (203 ) 269 (57 ) (426 )
Amortization of debt financing costs(2) 121 113 360 342
Provision for income taxes, net of changes in deferred taxes 4,674 (94 ) (662 ) (3,961 )
Pension contribution(4) (5,825 ) - (6,960 ) -
Changes in working capital 1,703   (3,023 ) (2,074 ) (3,810 )
Cash provided by operating activities 12,070 8,047 28,500 27,110
Changes in working capital (1,703 ) 3,023 2,074 3,810
Maintenance capital expenditures (1,821 ) (1,916 )   (5,612 ) (5,337 )  
Free cash flow 8,546   9,154   (608 ) (6.6 ) 24,962   25,583   (621 ) (2.4 )

______________________________

(1) For the nine months ended September 30, 2013, cost of product sales includes non-cash income of $489,000 for asset retirement obligation credit that is not expected to recur. This non-cash income is excluded when calculating EBITDA excluding non-cash items.

(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) For the quarter and nine months ended September 30, 2013, pension contributions of $900,000 and $2.3 million, respectively, were reported in changes in working capital for those periods.

       

Atlantic Aviation

 
Quarter Ended Nine Months Ended
September 30, Change September 30, Change
2014     2013  

Favorable/(Unfavorable)

2014     2013  

Favorable/(Unfavorable)

$   $   $     %   $   $   $     %  
($ In Thousands) (Unaudited)
Revenues 197,980 183,198 14,782 8.1 585,153 541,840 43,313 8.0
Cost of services 104,543   100,553   (3,990 ) (4.0 ) 318,047   301,722   (16,325 ) (5.4 )
Gross Profit 93,437 82,645 10,792 13.1 267,106 240,118 26,988 11.2
Selling, general and administrative expenses 49,288 44,342 (4,946 ) (11.2 ) 143,598 130,729 (12,869 ) (9.8 )
Depreciation and amortization 16,493 14,072 (2,421 ) (17.2 ) 47,033 41,917 (5,116 ) (12.2 )
Loss on disposal of assets 20   50   30   60.0 886   226   (660 ) NM
Operating income 27,636 24,181 3,455 14.3 75,589 67,246 8,343 12.4
Interest expense, net(1) (4,689 ) (11,481 ) 6,792 59.2 (27,606 ) (20,206 ) (7,400 ) (36.6 )
Loss on extinguishment of debt - - - - - (2,472 ) 2,472 100.0
Other income 35 54 (19 ) (35.2 ) 22 54 (32 ) (59.3 )
Provision for income taxes (9,231 ) (5,185 ) (4,046 ) (78.0 ) (18,001 ) (18,009 ) 8   -
Net income(2) 13,751   7,569   6,182   81.7 30,004   26,613   3,391   12.7
 
Reconciliation of net income to EBITDA excluding non-cash items

and cash provided by operating activities to Free Cash Flow:

Net income(2) 13,751 7,569 30,004 26,613
Interest expense, net(1) 4,689 11,481 27,606 20,206
Provision for income taxes 9,231 5,185 18,001 18,009
Depreciation and amortization 16,493 14,072 47,033 41,917
Loss on extinguishment of debt - - - 2,434
Loss on disposal of assets 6 - 822 106
Other non-cash expense (income) 115   (1 )   271   (116 )  
EBITDA excluding non-cash items 44,285   38,306   5,979   15.6 123,737   109,169   14,568   13.3
 
EBITDA excluding non-cash items 44,285 38,306 123,737 109,169
Interest expense, net(1) (4,689 ) (11,481 ) (27,606 ) (20,206 )
Adjustments to derivative instruments recorded in interest expense(1) (3,593 ) 5,551 4,712 5,604
Amortization of debt financing costs(1) 812 702 2,328 2,011
Provision for income taxes, net of changes in deferred taxes (442 ) (394 ) (2,568 ) (5,569 )
Changes in working capital 5,170   (3,609 ) 2,925   1,284  
Cash provided by operating activities 41,543 29,075 103,528 92,293
Changes in working capital (5,170 ) 3,609 (2,925 ) (1,284 )
Maintenance capital expenditures (2,611 ) (1,910 )   (4,610 ) (5,248 )  
Free cash flow 33,762   30,774   2,988   9.7 95,993   85,761   10,232   11.9

______________________________

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 Nine Months Ended
September 30, Change September 30, Change
2014   2013  

Favorable/(Unfavorable)

2014   2013  

Favorable/(Unfavorable)

$   $   $   %   $   $   $   %  
($ In Thousands) (Unaudited)
 
Service revenues 8,952 15,586 (6,634 ) (42.6 ) 29,487 35,618 (6,131 ) (17.2 )
Revenues from product sales 5,850 2,649 3,201 120.8 15,338 7,167 8,171 114.0
Finance lease revenues 379   817   (438 ) (53.6 ) 1,836   2,779   (943 ) (33.9 )
Total revenues 15,181   19,052   (3,871 ) (20.3 ) 46,661   45,564   1,097   2.4
 
Cost of revenue — service(1) 6,364 10,520 4,156 39.5 21,311 25,181 3,870 15.4
Cost of revenue — product 1,069   396   (673 ) (169.9 ) 2,792   1,058   (1,734 ) (163.9 )
Cost of revenue — total 7,433 10,916 3,483 31.9 24,103 26,239 2,136 8.1
Gross profit 7,748 8,136 (388 ) (4.8 ) 22,558 19,325 3,233 16.7
Selling, general and administrative expenses 2,541 3,231 690 21.4 6,858 5,573 (1,285 ) (23.1 )
Depreciation 3,832 2,096 (1,736 ) (82.8 ) 10,894 5,174 (5,720 ) (110.6 )
Amortization of intangibles 190 329 139 42.2 838 997 159 15.9
Loss from customer contract termination 1,269   -   (1,269 ) NM 1,269   1,626   357   22.0
Operating (loss) income (84 ) 2,480 (2,564 ) (103.4 ) 2,699 5,955 (3,256 ) (54.7 )
Interest expense, net(2) (2,422 ) (2,172 ) (250 ) (11.5 ) (7,757 ) (5,914 ) (1,843 ) (31.2 )
Loss on extinguishment of debt (90 ) - (90 ) NM (90 ) - (90 ) NM
Equity in loss of investee (68 ) - (68 ) NM (68 ) - (68 ) NM
Other income 1,380 920 460 50.0 3,789 3,156 633 20.1
Provision for income taxes (199 ) (1,557 ) 1,358 87.2 (1,414 ) (2,972 ) 1,558 52.4
Noncontrolling interest 911   3,836   (2,925 ) (76.3 ) 2,008   3,580   (1,572 ) (43.9 )
Net (loss) income (572 ) 3,507   (4,079 ) (116.3 ) (833 ) 3,805   (4,638 ) (121.9 )
 

Reconciliation of net (loss) income to EBITDA excluding non-cash
items and cash provided by (used in) operating activities to Free
Cash Flow:

Net (loss) income (572 ) 3,507 (833 ) 3,805
Interest expense, net(2) 2,422 2,172 7,757 5,914
Provision for income taxes 199 1,557 1,414 2,972
Depreciation(1) 4,795 3,716 15,268 10,195
Amortization of intangibles 190 329 838 997
Loss on extinguishment of debt 90 - 90 -
Loss from customer contract termination 1,269 - 1,269 1,626
Equity in loss of investee 68 - 68 -
Other non-cash income (915 ) (3,805 )   (3,805 ) (6,142 )  
EBITDA excluding non-cash items 7,546   7,476   70   0.9 22,066   19,367   2,699   13.9
 
EBITDA excluding non-cash items 7,546 7,476 22,066 19,367
Interest expense, net(2) (2,422 ) (2,172 ) (7,757 ) (5,914 )
Adjustments to derivative instruments recorded in interest expense(2) (1,425 ) (1,371 ) (4,509 ) (4,018 )
Amortization of debt financing costs(2) 116 180 502 539
Equipment lease receivable, net 777 740 2,805 2,814
Provision for income taxes, net of changes in deferred taxes 116 (529 ) (903 ) (805 )
Changes in working capital 1,865   (1,081 ) 23,986   (18,333 )
Cash provided by (used in) operating activities 6,573 3,243 36,190 (6,350 )
Changes in working capital (1,865 ) 1,081 (23,986 ) 18,333
Maintenance capital expenditures (63 ) (63 )   (736 ) (312 )  
Free cash flow 4,645   4,261   384   9.0 11,468   11,671   (203 ) (1.7 )

______________________________

NM - Not meaningful

(1) Includes depreciation expense of $1.0 million and $4.4 million for the quarter and nine months ended September 30, 2014, respectively, and depreciation expense of $1.6 million and $5.0 million for the quarter and nine months ended September 30, 2013, respectively.

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

               

Corporate and Other

 
Quarter Ended Nine Months Ended
September 30, Change September 30, Change
2014   2013  

Favorable/(Unfavorable)

2014   2013  

Favorable/(Unfavorable)

$   $   $   %   $   $   $   %  
($ In Thousands) (Unaudited)
 
Base management fees 13,915 8,336 (5,579 ) (66.9 ) 32,444 23,524 (8,920 ) (37.9 )
Performance fees 116,586 6,906 (109,680 ) NM 121,546 53,388 (68,158 ) (127.7 )
Selling, general and administrative expenses 8,860   1,278   (7,582 ) NM 12,139   4,987   (7,152 ) (143.4 )
Operating loss (139,361 ) (16,520 ) (122,841 ) NM (166,129 ) (81,899 ) (84,230 ) (102.8 )
Interest (expense) income, net(1) (2,727 ) 22 (2,749 ) NM (2,658 ) 152 (2,810 ) NM
Gain from acquisition/divestiture of businesses(2) 1,027,054 - 1,027,054 NM 1,027,054 - 1,027,054 NM
Other expense - - - - - (16 ) 16 100.0
Benefit for income taxes 73,305 4,104 69,201 NM 77,438 22,409 55,029 NM
Noncontrolling interest (493 ) (1,678 ) 1,185   70.6 (1,428 ) (2,157 ) 729   33.8
Net income (loss)(3) 957,778   (14,072 ) 971,850   NM 934,277   (61,511 ) 995,788   NM
 

Reconciliation of net income (loss) to EBITDA excluding non-cash
items and cash used in operating activities to Free Cash Flow:

Net income (loss)(3) 957,778 (14,072 ) 934,277 (61,511 )
Interest expense (income), net(1) 2,727 (22 ) 2,658 (152 )
Benefit for income taxes (73,305 ) (4,104 ) (77,438 ) (22,409 )
Base management fees to be settled/settled in shares 13,915 8,336 32,444 23,524
Performance fees to be settled/settled in cash/shares 116,586 6,906 121,546 53,388
Gain from acquisition/divestiture of businesses(2) (1,027,181 ) - (1,027,181 ) -
Other non-cash expense 681   1,862     1,991   2,697    
EBITDA excluding non-cash items (8,799 ) (1,094 ) (7,705 ) NM (11,703 ) (4,463 ) (7,240 ) (162.2 )
 
EBITDA excluding non-cash items (8,799 ) (1,094 ) (11,703 ) (4,463 )
Interest (expense) income, net (1) (2,727 ) 22 (2,658 ) 152
Amortization of debt financing costs(1) 457 - 457 -
Benefit for income taxes, net of changes in deferred taxes (3,939 ) 218 601 7,661
Changes in working capital 6,478   6   2,990   (7,668 )
Cash used in operating activities (8,530 ) (848 ) (10,313 ) (4,318 )
Changes in working capital (6,478 ) (6 )   (2,990 ) 7,668    
Free cash flow (15,008 ) (854 ) (14,154 ) NM (13,303 ) 3,350   (16,653 ) NM

______________________________

NM- Not meaningful

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

(2) Represents the gain from the remeasuring to fair value of our previous 50% ownership of IMTT and the gain recognized on the sale of the district energy business. See "Results of Operations - Consolidated" for further discussions.

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

                 
MACQUARIE INFRASTRUCUTRE 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 September 30, 2014

                               
($ in Thousands) (Unaudited)

IMTT

50%(1)

 

IMTT

100%(2)

  Hawaii Gas 100%   Atlantic Aviation

100%

  Contracted Power and Energy(3)   MIC Corporate 100%   Proportionately Combined(4)

IMTT

100%(5)

  Contracted Power and Energy 100%
 
Net income (loss) attributable to MIC LLC 1,256 13,726 5,249 13,751 (524 ) 957,778 991,236 16,238 (572 )
Interest expense, net(6) 215 5,129 1,589 4,689 1,647 2,727 15,996 5,558 2,422
Provision (benefit) for income taxes 854 7,823 3,590 9,231 (9 ) (73,305 ) (51,816 ) 9,531 199
Depreciation 1,091 22,926 1,997 7,203 3,273 - 36,489 25,107 4,795
Amortization of intangibles 411 1,578 311 9,290 96 - 11,686 2,399 190
Loss on disposal of assets - - - 6 - - 6 - -
Loss from customer contract termination - - - - 635 - 635 - 1,269
Loss on extinguishment of debt - - - - 45 - 45 - 90
Equity in loss of investee - - - - 67 - 67 - 68
Base management fee to be settled in shares - - - - - 13,915 13,915 - -
Performance fees to be to be settled in cash/shares - - - - - 116,586 116,586 - -
Gain from acquisition/disposition of businesses - - - - - (1,027,181 ) (1,027,181 ) - -
Other non-cash expense (income)(7) 433     1,654     453     115     (913 )   681     2,423   2,519     (915 )
EBITDA excluding non-cash items 4,258     52,836     13,189     44,285     4,316     (8,799 )   110,085   61,352     7,546  
 
EBITDA excluding non-cash items 4,258 52,836 13,189 44,285 4,316 (8,799 ) 110,085 61,352 7,546
Interest expense, net(6) (215 ) (5,129 ) (1,589 ) (4,689 ) (1,647 ) (2,727 ) (15,996 ) (5,558 ) (2,422 )
Adjustments to derivative instruments recorded in interest expense, net(6) (718 ) (4,083 ) (203 ) (3,593 ) (713 ) - (9,309 ) (5,518 ) (1,425 )
Amortization of deferred finance charges(6) 68 820 121 812 64 457 2,342 956 116
Equipment lease receivables, net - - - - 389 - 389 - 777
(Provision)/benefit for income taxes, net of changes in deferred taxes (4,656 ) 3,211 4,674 (442 ) 58 (3,939 ) (1,094 ) (6,101 ) 116
Pension contribution - (20,000 ) (5,825 ) - - - (25,825 ) (20,000 ) -
Changes in working capital 9,251     (16,283 )   1,703     5,170     2,726     6,478     9,045   2,219     1,865  
Cash provided by (used in) operating activities 7,989 11,372 12,070 41,543 5,192 (8,530 ) 69,636 27,350 6,573
Changes in working capital (9,251 ) 16,283 (1,703 ) (5,170 ) (2,726 ) (6,478 ) (9,045 ) (2,219 ) (1,865 )
Maintenance capital expenditures (4,941 )   (1,288 )   (1,821 )   (2,611 )   (32 )   -     (10,692 ) (11,169 )   (63 )
Free cash flow (6,203 )   26,367     8,546     33,762     2,435     (15,008 )   49,899   13,962     4,645  
 
 

For the Quarter Ended September 30, 2013

                           
($ in Thousands) (Unaudited)

IMTT

50%(1)

  Hawaii Gas 100%   Atlantic Aviation

100%

  Contracted Power and Energy(3)   MIC Corporate 100%   Proportionately Combined(4)

IMTT

100%(5)

 

Contracted
Power and
Energy 100%

 
Net income (loss) attributable to MIC LLC 9,780 4,827 7,569 2,407 (14,072 ) 10,511 19,559 3,507
Interest expense (income), net(6) 4,688 2,097 11,481 1,254 (22 ) 19,498 9,376 2,172
Provision (benefit) for income taxes 7,591 3,191 5,185 766 (4,104 ) 12,629 15,181 1,557
Depreciation 9,135 1,849 6,094 2,209 - 19,287 18,270 3,716
Amortization of intangibles 391 311 7,978 165 - 8,844 781 329
Casualty losses, net(8) 100 - - - - 100 200 -
Base management fee settled in shares - - - - 8,336 8,336 - -
Performance fee settled in shares - - - - 6,906 6,906 - -
Other non-cash expense (income)(7) 127     604     (1 )   (3,634 )   1,862     (1,043 ) 253     (3,805 )
EBITDA excluding non-cash items 31,810     12,879     38,306     3,166     (1,094 )   85,067   63,620     7,476  
 
EBITDA excluding non-cash items 31,810 12,879 38,306 3,166 (1,094 ) 85,067 63,620 7,476
Interest (expense) income, net(6) (4,688 ) (2,097 ) (11,481 ) (1,254 ) 22 (19,498 ) (9,376 ) (2,172 )
Adjustments to derivative instruments recorded in interest expense, net(6) (884 ) 269 5,551 (686 ) - 4,250 (1,768 ) (1,371 )
Amortization of deferred finance charges(6) 412 113 702 92 - 1,319 824 180
Equipment lease receivables, net - - - 370 - 370 - 740
Provision/benefit for income taxes, net of changes in deferred taxes (2,812 ) (94 ) (394 ) (265 ) 218 (3,347 ) (5,624 ) (529 )
Changes in working capital(9) 1,310     (3,023 )   (3,609 )  

(1,815

)   6    

(7,132

) 2,619     (1,081 )
Cash provided by (used in) operating activities 25,148 8,047 29,075

(391

)

(848 )

61,030

50,295 3,243
Changes in working capital(9) (1,310 ) 3,023 3,609

1,815

 

(6 )

7,132

(2,619 ) 1,081
Maintenance capital expenditures(10) (7,257 )   (1,916 )   (1,910 )   (32 )   -     (11,115 ) (14,514 )   (63 )
Free cash flow 16,581     9,154     30,774     1,392     (854 )   57,047   33,162     4,261  
 
                 

For the Nine Months Ended September 30, 2014

                               
($ in Thousands) (Unaudited)

IMTT

50%(1)

 

IMTT

100%(2)

  Hawaii Gas 100%   Atlantic Aviation

100%

  Contracted Power and Energy(3)   MIC Corporate 100%   Proportionately Combined(4)

IMTT 100%(5)

 

Contracted
Power and
Energy 100%

 
Net income attributable to MIC LLC 28,748 13,726 17,738 30,004 762 934,277 1,025,255 71,222 (833 )
Interest expense, net(6) 8,188 5,129 5,267 27,606 5,157 2,658 54,004 21,504 7,757
Provision (benefit) for income taxes 19,133 7,823 11,709 18,001 734 (77,438 ) (20,039 ) 46,088 1,414
Depreciation 19,582 22,926 5,926 20,794 10,187 - 79,415 62,090 15,268
Amortization of intangibles 879 1,578 935 26,239 420 - 30,051 3,336 838
Loss from customer contract termination - - - - 635 - 635 - 1,269
Loss on extinguishment of debt - - - - 45 - 45 - 90
Equity in loss of investee - - - - 67 - 67 - 68
Base management fee settled/to be settled in shares - - - - - 32,444 32,444 - -
Performance fees to be settled in cash/shares - - - - - 121,546 121,546 - -
Gain from acquisition/disposition of businesses - - - - - (1,027,181 ) (1,027,181 ) - -
Loss on disposal of assets - - - 822 - - 822 - -
Other non-cash expense (income)(7) 2,183     1,654     1,585     271     (5,268 )   1,991     2,416   6,020     (3,805 )
EBITDA excluding non-cash items 78,712     52,836     43,160     123,737     12,738     (11,703 )   299,480   210,260     22,066  
 
EBITDA excluding non-cash items 78,712 52,836 43,160 123,737 12,738 (11,703 ) 299,480 210,260 22,066
Interest expense, net(6) (8,188 ) (5,129 ) (5,267 ) (27,606 ) (5,157 ) (2,658 ) (54,004 ) (21,504 ) (7,757 )
Adjustments to derivative instruments recorded in interest expense, net(6) (4,042 ) (4,083 ) (57 ) 4,712 (2,255 ) - (5,725 ) (12,167 ) (4,509 )
Amortization of deferred finance charges(6) 912 820 360 2,328 267 457 5,143 2,643 502
Equipment lease receivables, net - - - - 1,403 - 1,403 - 2,805
(Provision)/benefit for income taxes, net of changes in deferred taxes (18,017 ) 3,211 (662 ) (2,568 ) (453 ) 601 (17,887 ) (32,822 ) (903 )
Pension contribution - (20,000 ) (6,960 ) - - - (26,960 ) (20,000 ) -
Changes in working capital 6,781     (16,283 )   (2,074 )   2,925     21,667     2,990     16,006   (2,722 )   23,986  
Cash provided by (used in) operating activities 56,158 11,372 28,500 103,528 28,210 (10,313 ) 217,455 123,688 36,190
Changes in working capital (6,781 ) 16,283 2,074 (2,925 ) (21,667 ) (2,990 ) (16,006 ) 2,722 (23,986 )
Maintenance capital expenditures (18,054 )   (1,288 )   (5,612 )   (4,610 )   (368 )   -     (29,932 ) (37,395 )   (736 )
Free cash flow 31,324     26,367     24,962     95,993     6,175     (13,303 )   171,518   89,015     11,468  
 
 
 

For the Nine Months Ended September 30, 2013

                           
($ in Thousands) (Unaudited)

IMTT

50%(1)

 

Hawaii Gas
100%

  Atlantic Aviation

100%

  Contracted Power and Energy(3)  

MIC Corporate
100%

  Proportionately Combined(4)

IMTT 100%(5)

 

Contracted
Power and
Energy 100%

 

Net income (loss) attributable to MIC LLC 33,937 16,196 26,613 3,418 (61,511 ) 18,652 67,873 3,805
Interest expense (income), net(6) 8,550 5,040 20,206 3,233 (152 ) 36,876 17,099 5,914
Provision (benefit) for income taxes 24,447 10,669 18,009 2,074 (22,409 ) 32,790 48,894 2,972
Depreciation 27,328 5,573 17,983 5,704 - 56,588 54,656 10,195
Amortization of intangibles 727 935 23,934 499 - 26,094 1,453 997
Loss from customer contract termination - - - 813 - 813 - 1,626
Casualty losses, net(8) 3,350 - - - - 3,350 6,700 -

Loss on disposal of assets

- - 106 - - 106 - -
Loss on extinguishment of debt - - 2,434 - - 2,434 - -
Base management fee settled in shares - - - - 23,524 23,524 - -
Performance fee settled in shares - - - - 53,388 53,388 - -
Other non-cash expense (income)(7) 215     1,592     (116 )   (6,568 )   2,697     (2,181 ) 429     (6,142 )
EBITDA excluding non-cash items 98,552     40,005     109,169     9,172     (4,463 )   252,435   197,104     19,367  
 
EBITDA excluding non-cash items 98,552 40,005 109,169 9,172 (4,463 ) 252,435 197,104 19,367
Interest (expense) income, net(6) (8,550 ) (5,040 ) (20,206 ) (3,233 ) 152 (36,876 ) (17,099 ) (5,914 )
Adjustments to derivative instruments recorded in interest expense, net (6) (7,892 ) (426 ) 5,604 (2,009 ) - (4,723 ) (15,784 ) (4,018 )
Amortization of deferred finance charges(6) 995 342 2,011 274 - 3,622 1,990 539
Equipment lease receivables, net - - - 1,407 - 1,407 - 2,814
Provision/benefit for income taxes, net of changes in deferred taxes (6,924 ) (3,961 ) (5,569 ) (403 ) 7,661 (9,195 ) (13,847 ) (805 )
Changes in working capital(9) 2,018     (3,810 )   1,284    

(15,403

)   (7,668 )  

(23,579

) 4,035     (18,333 )
Cash provided by (used in) operating activities 78,200 27,110 92,293

(10,195

) (4,318 )

183,089

156,399 (6,350 )
Changes in working capital(9) (2,018 ) 3,810 (1,284 )

15,403

7,668

23,579

(4,035 ) 18,333
Maintenance capital expenditures(10) (30,257 )   (5,337 )   (5,248 )   (156 )   -     (40,998 ) (60,513 )   (312 )
Free cash flow 45,926     25,583     85,761     5,052     3,350     165,672   91,851     11,671  

______________________________

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

(2) Represents our 100% ownership interest in IMTT subsequent to July 16, 2014.

(3) 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.

(4) 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.

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

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

(7) IMTT management's calculation of IMTT's EBITDA prior to acquisition included various non-cash items, unlike MIC’s other businesses. In order to ensure IMTT’s EBITDA excluding non-cash items does in fact excludes non-cash items, and to promote consistency across its reporting segments, MIC has excluded known non-cash items when calculating IMTT’s EBITDA excluding non-cash items including primarily the non-cash pension expense of $2.3 million and $5.6 million for the quarter and nine months ended September 30, 2014, respectively. The non-cash pension expense of $2.9 million and $8.5 million was reported in changes in working capital for the quarter and nine months ended September 30, 2013, respectively.

(8) Casualty losses, net, includes $2.5 million and $1.5 million related to the quarters ended December 31, 2012 and March 31, 2013, respectively, which were recorded in cost of services in those periods. These amounts have been included in the nine months ended September 30, 2013.

(9) Pension contribution of $4.5 million for the quarter and nine months ended September 30, 2013 for IMTT were reported in changes in working capital for those periods. For the quarter and nine months ended September 30, 2013, pension contributions of $900,000 and $2.3 million, respectively, were reported in changes in working capital for Hawaii Gas for those periods.

(10) Maintenance capital expenditures at IMTT includes a reclassification from growth capital expenditures in the quarters ended December 31, 2012 and March 31, 2013 of $1.2 million and $509,000, respectively. These amounts have been included in the nine months ended September 30, 2013.

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