MIC Reports Third Quarter 2018 Financial Results, Announces Cash Dividend Of $1.00 Per Share

NEW YORK, Oct. 31, 2018 /PRNewswire/ -- Macquarie Infrastructure Corporation (NYSE: MIC) reported financial and operational results for the third quarter of 2018 that were in line with expectations.

Net income decreased 40.9% to $21.4 million from $36.2 million in the third quarter of 2017 (the prior comparable period) primarily due to a write-down of its investment in CPI, increased costs related to acquisitions and higher interest expense, partially offset by lower taxes and a reduction in management fees. For the nine months ended September 30, 2018, net income increased 10.1% to $104.5 million versus the comparable period in 2017.

Adjusted Proportionately Combined EBITDA excluding non-cash items decreased by 5.1% to $175.5 million versus the prior comparable period reflecting primarily a forecast reduction in earnings at IMTT. For the nine months ended September 30, 2018, Adjusted Proportionately Combined EBITDA excluding non-cash items decreased by 3.0% to $525.0 million versus the comparable period in 2017.

Cash generated by operating activities decreased versus the prior comparable period to $147.1 million, with reduced earnings and higher interest expense and taxes partially offset by favorable movements in working capital.

Adjusted Free Cash Flow, which excludes certain one-time items such as transaction related costs, was $127.5 million, down 11.7% from $144.4 million in the prior comparable period as a result of increased interest expense, maintenance capital expenditures and taxes. For the nine months ended September 30, 2018, Adjusted Free Cash Flow decreased by 9.8% to $390.0 million versus the comparable period in 2017.

The MIC board of directors authorized a cash dividend of $1.00 per share, or $4.00 annualized, for the third quarter of 2018. The dividend will be payable on November 15, 2018 to shareholders of record on November 12, 2018. The Company reaffirmed its previous guidance for a distribution of $1.00 per share in each quarter of 2018.

The Company announced that Macquarie Infrastructure Management (USA) Inc., the external manager of MIC, has elected to waive certain fees to which it is entitled under a Management Services Agreement with MIC. The Manager has elected to waive base management fees in excess of 1% of MIC's equity market capitalization, less cash on its balance sheet, and any fees on holding company debt.

The waivers reduce the annualized base management fees payable to the Manager by approximately $10.0 million compared with the fees payable for the third quarter of 2018. The Manager is expected to continue to reinvest its ongoing base management fees in new primary shares of the Company. The waivers are effective November 1, 2018 and, although they can be revoked, MIC believes that the Manager currently has no intention of doing so. The Manager is required to provide one year notice of revocation. The waivers have no impact on calculation of any performance fee to which the Manager may be entitled in the future.

Christopher Frost, MIC's chief executive officer, said of the Company's results for the quarter: "Our operating companies continued to perform as anticipated and we advanced a significant number of initiatives related to our strategic priorities. We are particularly pleased with the considerable progress being made on both the repurposing of storage capacity and repositioning of IMTT as well as the continued rationalization of our portfolio through sales of non-core operations. In addition, the proceeds from the timely completion of the sale of Bayonne Energy Center (BEC) have strengthened our balance sheet and provided us with considerable financial flexibility to support the ongoing growth of the enterprise."

"MIC's financial and operational performance also supported the authorization of a dividend of $1.00 per share for the third quarter consistent with our guidance. Assuming no material deterioration in the health of the economy, and the continued stable performance of our businesses, we remain confident in the sustainability of our dividend," added Frost.

Third Quarter and Year to Date Results, by Segment

• IMTT generated Adjusted Proportionately Combined EBITDA excluding non-cash items of $69.3 million in the third quarter, down 12% versus the prior comparable quarter, primarily due an anticipated decline in capacity utilization and slightly lower average storage rates driven by rate decreases for gasoline and distillates in New York Harbor, compared with 2017. Bulk liquid storage utilization declined to an average of 82.1% in the quarter, consistent with prior guidance for a mid-80s percent average utilization rate in 2018, compared with 92.7% in the third quarter of 2017.
  Storage utilization at IMTT is expected to remain in the low 80s percent range through year-end 2018 before recovering to a low 90s percent range by early 2020, subject to market conditions. The contribution to EBITDA from the anticipated recovery in utilization is expected to be partially offset by decreases in storage rates, particularly those for gasoline and distillates in New York Harbor, over the same period. Through the nine months ended September 30, 2018, EBITDA generated by IMTT decreased to $221.5 million, down 9.4% versus the comparable period in 2017, as a result of lower earnings stemming from contract non-renewals and lower deferred revenue.
• Atlantic Aviation generated Adjusted Proportionately Combined EBITDA excluding non-cash items of $65.0 million in the third quarter, up 2.3% versus the prior comparable quarter, driven by contributions from acquisitions of fixed base operations and increased hangar rental income. The modest year over year increase reflects the absence of a number of events that were beneficial to Atlantic Aviation's results in 2017 as well as airport-led runway maintenance and flight/landing restrictions at several of airports on which the business operates in 2018. Through the nine months ended September 30, 2018, Adjusted Proportionately Combined EBITDA excluding non-cash items generated by Atlantic Aviation increased to $196.2 million, up 5.6% compared with the same period in 2017.
• Contracted Power generated Adjusted Proportionately Combined EBITDA excluding non-cash items of $37.4 million in the third quarter, up 14.0% versus the prior comparable quarter, as a result of contributions related to the expansion of the BEC power generation facility (BEC II) and improved operating conditions for the Company's portfolio of wind and solar power generation assets. Through the nine months ended September 30, 2018, Adjusted Proportionately Combined EBITDA excluding non-cash items generated by Contracted Power increased to $91.5 million, up 18.7% compared with the same period in 2017.
• MIC Hawaii generated EBITDA of $(5.1) million in the third quarter including $17.1 million of write-downs related to CPI and $12.0 million excluding those write-downs. The segment results reflect higher expenses at CPI and lower non-utility margins at Hawaii Gas partially offset by increased utility margins at Hawaii Gas as a result of a rate increase authorized under an interim Decision and Order from the Hawaii Public Utilities Commission in June. Through the nine months ended September 30, 2018, EBITDA generated by MIC Hawaii was $21.2 million and $38.3 million including and excluding the impact of the write-downs, respectively.
  MIC has entered into an agreement to sell CPI for a nominal amount in a transaction that is expected to close in the fourth quarter of 2018.
• The Company's Corporate and Other segment includes primarily fees payable to the MIC's Manager, professional fees and costs associated with being a public company. The segment generated Adjusted Proportionately Combined EBITDA excluding non-cash items of $(6.9) million, compared with $(6.0) million in the prior comparable quarter, primarily as a result of higher professional fees. Through the nine months ended September 30, 2018, Adjusted Proportionately Combined EBITDA excluding non-cash items generated by the Corporate and Other segment was flat with the same period in 2017.
  

Strategic Initiatives
Sale of Bayonne Energy Center

• Successful closing of the sale of BEC on October 12, 2018
• Receipt of $657.4 million in cash, transfer of $243.5 million of BEC debt to purchaser
• Net proceeds after transaction related expenses used to repay the majority of outstanding balances on all revolving credit facilities
• Other than $150.0 million paid down at IMTT, revolving credit facilities may be redrawn to fund growth capital agenda
• Sale and debt repayment substantially improves balance sheet strength and financial flexibility

Repurposing of Existing Capacity at IMTT

• Repurposing up to 3.0 million barrels of storage capacity on the Lower Mississippi River
• Converting capacity away heavy and residual oil to gasoline and distillates, chemicals and vegetable and/or tropical oils
• Approximately 1.3 million barrels of storage capacity being repurposed in 2018
• 600,000 repurposed barrels expected to be in service prior to year-end

Repositioning of IMTT with Additional Capacity and Capability

• Expect to deploy approximately $15.0 million in 2018 on projects that will add new storage capacity and/or improve terminal capability
• Expected to invest approximately $80.0 million in the additional capacity, dock and new truck rack capability
• Pending a final investment decision by Methanex on the development of additional methanol production capability (expected mid-2019), IMTT will construct 714,000 barrels of storage capacity at its Geismar Chemical Logistics facility for Methanex
• Committed to construction of an additional dock at its terminal in Geismar, LA to be in service in late 2019 supporting existing operations and potential expansion opportunities
• Committed to the construction of an automated, multi-user, six bay truck loading facility for petroleum and biodiesel products at its terminal in Bayonne, NJ to be in service in late 2019

Portfolio and Capital Management

• MIC expects to deploy approximately $200.0 million in 2018 on growth projects and "bolt-on" acquisitions and has deployed, or committed to deploy, approximately $130.0 million to date:
• acquisition of a fixed base operation by Atlantic Aviation
• completion of additional thermal power generating capacity at BEC
• development of additional capacity and capability at IMTT
• MIC has exited certain smaller, non-core businesses in 2018 and has launched a process to sell the majority of its operating wind and solar facilities
• Sale and redeployment of proceeds from wind and solar facilities expected to maximize value relative to expanding portfolio through acquisition
• Company expects to retain its solar facility in Hawaii and to maintain existing relationships with developers of renewable power projects
• Sale process expected to conclude in the second quarter in 2019
• Including BEC, MIC has exited businesses and terminated projects that have generated more than $700 million in cash proceeds and deconsolidated $243.5 million of debt
• Transactions consistent with strategic priority of rationalizing portfolio, strengthening balance sheet and increasing financial flexibility

Segment EBITDA Guidance
MIC adjusted its guidance for the generation of Adjusted Proportionately Combined EBITDA excluding non-cash items in 2018 following the July 29 announcement of the sale of BEC and the expected early fourth quarter closing of the sale. Segment level Adjusted Proportionately Combined EBITDA excluding non-cash items guidance has been further refined to account for sales of other businesses and the receipt of the Company's share of development profits related to a renewable power project.

MIC's guidance for full-year Adjusted Proportionately Combined EBITDA excluding non-cash items from each of its IMTT, Atlantic Aviation and Corporate/Other segments is unchanged from the second quarter. MIC now expects the Adjusted Proportionately Combined EBITDA excluding non-cash items contribution from Contracted Power for the full year 2018 to increase to between $85.0 and $95.0 million from between $80.0 million and $90.0 million.

MIC Hawaii is expected to generate EBITDA of between $38.0 and $48.0 million including the impact of the write-down of the Company's investment in CPI. Excluding the impact of the write-down, EBITDA is expected to be in a range of between $55.0 and $60.0 million.

MIC continues to expect that its businesses will generate aggregate Adjusted Proportionately Combined EBITDA excluding non-cash items for the full year 2018 of between $670.0 and $705.0 million.

Conference Call and Webcast
When: MIC has scheduled a conference call for 8:00 a.m. Eastern Time on Thursday, November 1, 2018 during which management will review and comment on the third quarter 2018 results.

How: To listen to the conference call 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. Allow extra time prior to the call to visit the site and download the software needed to listen to the webcast.

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

Replay: For interested individuals unable to participate in the live conference call, a replay will be available after 2:00 p.m. on November 1, 2018 through midnight on November 7, 2018, at +1(404) 537-3406 or +1(855) 859-2056, Passcode: 3055347. An online archive of the webcast will be available on the Company's website for one year following the call.

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

Use of Non-GAAP Measures
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items, Free Cash Flow and Proportionately Combined Metrics

In addition to MIC's results under U.S. GAAP, the Company uses certain non-GAAP measures to assess the performance and prospects of its businesses. In particular, MIC uses EBITDA excluding non-cash items, Free Cash Flow and certain proportionately combined financial metrics. Proportionately combined financial metrics, including Free Cash Flow, reflect MIC's proportionate interest in its wind and solar facilities.

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

Given MIC's varied ownership levels in its CP and MIC Hawaii segments, together with obligations to report the results of these businesses on a consolidated basis, GAAP measures such as net income (loss) do not fully reflect all of the items management considers in assessing the amount of cash generated based on its ownership interest in its businesses. The Company notes that the proportionately combined metrics used may be calculated in a different manner by other companies and may limit their usefulness as a comparative measure. Therefore, proportionately combined metrics should be used as a supplemental measure to help understand MIC's financial performance and not in lieu of financial results reported under GAAP.

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

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

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

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

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

Classification of Maintenance Capital Expenditures and Growth Capital Expenditures

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

In some cases, specific capital expenditures contain characteristics of both maintenance and growth capital expenditures. MIC does not bifurcate specific capital expenditures into growth and maintenance components. Each discrete capital expenditure is considered within the above framework and the entire capital expenditure is classified as either maintenance or growth.

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

MIC's actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. Additional risks of which MIC is not currently aware could also cause its actual results to differ. In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements. The forward-looking events discussed in this release may not occur. These forward-looking statements are made as of the date of this release. MIC undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. MIC is not an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of MIC do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of MIC.  

 

 

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated condensed balance sheets that sum to the total of the same amounts presented in the consolidated condensed statements of cash flows:

 

SOURCE Macquarie Infrastructure Corporation

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