UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



 

FORM 8-K



 

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 30, 2018



 

MACQUARIE INFRASTRUCTURE CORPORATION

(Exact name of Registrant as specified in its charter)



 

   
Delaware   001-32384   43-2052503
(State or other jurisdiction
of incorporation)
  Commission File Number   (IRS Employer Identification No.)

125 West 55 th Street,
New York, New York 10019

(Address of Principal Executive Offices) (Zip Code)

(212) 231-1000
(Registrant’s telephone number, including area code)

N.A.
(Former name or former address, if changed since last report)



 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (240.12b-2 of this chapter).

Emerging growth company   o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o

 

 


 
 

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

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

Item 1.01 Entry into a Material Definitive Agreement.

On October 30, 2018, Macquarie Infrastructure Corporation (the “Company”) received a Limited Waiver (the “Waiver”) from Macquarie Infrastructure Management (USA) Inc. (the “Manager”) in connection with the Third Amended and Restated Management Services Agreement (the “MSA”), dated May 21, 2015, among the Company, MIC Ohana Corporation, a wholly owned subsidiary of the Company, and the Manager. Each capitalized term used but not defined herein has the meaning given to it in the MSA.

Pursuant to the Waiver, the Manager has waived its right to receive Base Management Fees with respect to the portion of Net Investment Value that is in excess of 0.08333% of the Net Investment Value per calendar month. In addition, the Manager has waived its right, for purposes of calculating Base Management Fees, to include in the definition of Net Investment Value (i) borrowings of the Company and its Managed Subsidiaries and (ii) the value of Future Investments of the Company and its subsidiaries. These waivers apply only with respect to payment of Base Management Fees, and not to the remainder of the MSA including with respect to the effect of a Delisting Event or the calculation of the Termination Fee.

The Waiver will be effective for Base Management Fee calculations under the MSA beginning November 1, 2018 until the earlier to occur of (i) the termination of the MSA or (ii) one year after the Manager provides written notice of the revocation of the Waiver.

The foregoing summary of the Waiver does not purport to be complete and is qualified in its entirety by the full text of the Waiver, which is filed as Exhibit 10.1 to this Current Report on Form 8-K.

Item 2.02 Results of Operations and Financial Condition.

Attached as Exhibit 99.1 hereto is a press release issued on October 31, 2018 by the Company regarding its financial results for the quarter ended September 30, 2018.

The information furnished pursuant to this Item 2.02, including Exhibit 99.1, is deemed to be furnished and not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act:”), is not otherwise subject to the liabilities of that Section and is not incorporated by reference into any filing under Securities Act of 1933, as amended, or the Exchange Act.

Item 7.01 Regulation FD Disclosure.

On October 31, 2018, the Company issued a press announcing the receipt of the Waiver and the increased role of the Compensation Committee with respect to the pay and performance decisions regarding the Chief Executive Officer and Chief Financial Officer.

The information furnished pursuant to this Item 7.01, including Exhibit 99.2, is deemed to be furnished and not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act:”), is not otherwise subject to the liabilities of that Section and is not incorporated by reference into any filing under Securities Act of 1933, as amended, or the Exchange Act.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits


 
 

EXHIBIT INDEX


 
 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
Dated: October 31, 2018     
       
     MACQUARIE INFRASTRUCTURE CORPORATION
       
    

By:  

/s/ Christopher Frost

Name: Christopher Frost
Title: Chief Executive Officer


Exhibit 10.1

 

 

 

October 30, 2018

 

 

Macquarie Infrastructure Corporation

MIC Ohana Corporation

125 West 55 th Street

New York, New York 10019

Attention: Mr. Norman Brown, Lead Independent Director

 

Re: Limited Waiver under the MSA

 

Mr. Brown:

 

Reference is made to the Third Amended and Restated Management Services Agreement (the “ MSA ”), by and among Macquarie Infrastructure Corporation, a Delaware corporation (the “ Company ”), MIC Ohana Corporation, a Delaware corporation (a “ Managed Subsidiary ”), and Macquarie Infrastructure Management (USA) Inc., a Delaware corporation (the “ Manager ”), dated as of May 21, 2015. The Manager desires to waive its right to receive certain payments under the MSA to the extent set forth below. Each capitalized term used but not defined herein has the meaning given to it in the MSA.

 

1. Solely for purposes of Section 7.2 of the MSA, in clauses (i), (ii), and (iii) of the definition of “Base Management Fee” in Article I of the MSA, the Manager hereby waives its right to receive a “Base Management Fee” with respect to such portion of Net Investment Value which is in excess of 0.08333% of the Net Investment Value per calendar month. For purposes of clarity, the effect of this Limited Waiver is such that clauses, (i), (ii), and (iii) will be interpreted to read as follows for the duration of this Limited Waiver:

 

(i)           where the Net Investment Value is less than or equal to USD500 million, 0.08333% per calendar month of such Net Investment Value;

 

(ii)           where the Net Investment Value is greater than USD500 million, but less than or equal to USD1,500, 0.08333% per calendar month of such Net Investment Value;

 

(iii)           where the Net Investment Value is greater than USD1,500 million, 0.08333% per calendar month of such Net Investment Value;

 

  1  

 

 

2. Solely for purposes of Section 7.2 of the MSA, in the definition of “Net Investment Value” in Article I of the MSA, the Manager hereby waives its right to include the amounts described in sub-sections (b) and (c) of the definition of “Net Investment Value”. For purposes of clarity, the effect of this Limited Waiver is such that the definition will be interpreted to read as follows for the duration of this Limited Waiver:

 

Net Investment Value ” means:

 

(a)            the Market Value of the shares of Company Common Stock; plus

 

(b)            [waived pursuant to the above]; plus

 

(c)            [waived pursuant to the above]; less

 

(d)           the aggregate amount held by the Company and its Managed Subsidiaries in cash or cash equivalents (but not including cash or cash equivalents held specifically for the benefit of any Subsidiary of a Managed Subsidiary).

 

3. For the avoidance of doubt, for purposes of the remainder of the MSA, including Article X of the MSA, and including with respect to the effect of a Delisting Event, the calculation of the Termination Fee or the determination of “substantially similar terms as set forth in this Agreement,” this Limited Waiver shall not apply in any respect and any such calculation or determination shall be made without reference to the waivers set forth in this Limited Waiver.

 

This Limited Waiver shall be effective for calculations of the Base Management Fee under Section 7.2 of the MSA for the period beginning November 1, 2018, and shall continue until the earlier to occur of: (i) the date of the termination of the MSA in accordance with its terms or (ii) the date that is one year after the Manager provides written notice to the Company and Managed Subsidiary, at the Manager’s sole discretion, of the Manager’s revocation of this Limited Waiver.

 

For the avoidance of doubt, except to the extent a provision is specifically waived by this Limited Waiver, the MSA remains unchanged and in full force and effect.

 

[Signature Page Follows]

 

  2  

 

 

  Sincerely,
         
  MACQUARIE INFRASTRUCTURE MANAGEMENT (USA) INC.
   
   
  By:  /s/ Graeme Conway   
    Name: Graeme Conway
    Title: President

 

 

cc:           Christopher Frost, Chief Executive Officer, Macquarie Infrastructure Corporation

 

 

ACKNOWLEDGED BY:

 

MACQUARIE INFRASTRUCTURE CORPORATION

 

 

By: /s/ Christopher Frost     
  Name: Christopher Frost
  Title: Chief Executive Officer

 

 

MIC OHANA CORPORATION

 

 

By: /s/ Christopher Frost  
  Name: Christopher Frost
  Title: President

 

 

 

[Signature Page to Limited Waiver]

 

Exhibit 99.1

MIC

   
125 West 55 th Street
New York, NY10019
United States
  Telephone
Facsimile
Internet
  +1 212 231 1825
+1 212 231 1828
www.macquarie.com/mic

Media Release

MIC REPORTS THIRD QUARTER 2018 FINANCIAL RESULTS,
ANNOUNCES CASH DIVIDEND OF $1.00 PER SHARE

Financial Performance for the Quarter in Line with Expectations:

Net income of $21.4 million
Adjusted Proportionately Combined EBITDA excluding non-cash items of $175.5 million
Cash provided by operating activities of $147.1 million
Adjusted Free Cash Flow of $127.5 million
Full-year 2018 guidance for Adjusted Proportionately Combined EBITDA excluding non-cash items, dividends reaffirmed
Manager waives certain fees under Management Services Agreement

Significant Momentum on Strategic Initiatives, Including:

400,000 barrels of storage capacity currently undergoing repurposing at IMTT expected to be re-contracted during November
Three additional repositioning projects at IMTT worth $80.0 million approved
Sale of Bayonne Energy Center (BEC) closed on October 12, 2018 - net proceeds used to reduce debt balances
Sale process for majority of renewable power generation assets launched - 2Q’19 closing targeted
Agreement on sale of design-build mechanical contractor, Critchfield Pacific, Inc. (CPI), reached - 4Q’18 closing anticipated

NEW YORK, October 31, 2018  — 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 12.2% 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 Adjusted Proportionately Combined EBITDA excluding non-cash items 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, Adjusted Proportionately Combined EBITDA excluding non-cash items 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.

2


 
 

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 $(6.1) 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
º 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

3


 
 

º 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
º 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:
º acquisition of a fixed base operation by Atlantic Aviation
º completion of additional thermal power generating capacity at BEC
º 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
º Sale and redeployment of proceeds from wind and solar facilities expected to maximize value relative to expanding portfolio through acquisition
º Company expects to retain its solar facility in Hawaii and to maintain existing relationships with developers of renewable power projects
º 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
º 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.

 
IMTT:   $ 285 – $295 million  
Atlantic Aviation:   $ 265 – $275 million  
Contracted Power:   $ 85 – $95 million  
MIC Hawaii, including negative cont. from CPI:   $ 55 – $60 million  
Corporate/Other:   $ (20) – $(20) million  

4


 
 

Summary Financial Information

               
  Quarter Ended
September 30,
  Change
Favorable/
(Unfavorable)
  Nine Months Ended
September 30,
  Change
Favorable/
(Unfavorable)
     2018   2017   $   %   2018   2017   $   %
     ($ In Thousands, Except Share and Per Share Data) (Unaudited)
GAAP Metrics
                                                                       
Net income   $ 21,376     $ 36,173       (14,797 )       (40.9 )     $ 104,450     $ 94,836       9,614       10.1  
Weighted average number of shares outstanding: basic     85,378,088       83,644,806       1,733,282       2.1       85,095,956       82,743,285       2,352,671       2.8  
Net income per share attributable to MIC   $ 0.25     $ 0.48       (0.23 )       (47.9 )     $ 1.61     $ 1.23       0.38       30.9  
Cash provided by operating activities (1)     147,051       149,723       (2,672 )       (1.8 )       413,053       398,360       14,693       3.7  
MIC Non-GAAP Metrics
                                                                       
EBITDA excluding non-cash items (2)   $ 159,796     $ 182,684       (22,888 )       (12.5 )     $ 509,650     $ 533,923       (24,273 )       (4.5 )  
Shared service implementation costs (3)           1,402       (1,402 )       (100.0 )             6,847       (6,847 )       (100.0 )  
CPI investment adjustment (3)     17,083             17,083       NM       17,083             17,083       NM  
Investment and acquisition/disposition costs (3)     1,878       3,023       (1,145 )       (37.9 )       7,473       7,873       (400 )       (5.1 )  
Adjusted EBITDA excluding
non-cash items (3)
  $ 178,757     $ 187,109       (8,352 )       (4.5 )     $ 534,206     $ 548,643       (14,437 )       (2.6 )  
Cash interest (4)   $ (32,456 )     $ (27,151 )       (5,305 )       (19.5 )     $ (94,058 )     $ (79,435 )       (14,623 )       (18.4 )  
Cash taxes     (3,076 )       (2,154 )       (922 )       (42.8 )       (10,659 )       (8,493 )       (2,166 )       (25.5 )  
Maintenance capital expenditures     (13,372 )       (12,106 )       (1,266 )       (10.5 )       (32,724 )       (23,062 )       (9,662 )       (41.9 )  
Noncontrolling interest (5)     (2,394 )       (1,308 )       (1,086 )       (83.0 )       (6,773 )       (5,223 )       (1,550 )       (29.7 )  
Adjusted Free Cash Flow (3)   $ 127,459     $ 144,390       (16,931 )       (11.7 )     $ 389,992     $ 432,430       (42,438 )       (9.8 )  

NM — Not meaningful.

(1) Conformed to current period presentation for the adoption of ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . See Note 2, “Basis of Presentation”, in our Notes to Consolidated Condensed Financial Statements in Part I of Form 10-Q for the quarter ended September 30, 2018.
(2) EBITDA excluding non-cash items is calculated as net income before interest expense, taxes, depreciation and amortization expense, management fees, pension expense and other non-cash (income) expense recorded in the consolidated statement of operations. See below for reconciliation of net income (loss) to EBITDA excluding non-cash items.
(3) Adjusted EBITDA excluding non-cash items and Adjusted Free Cash Flow excludes costs relating to certain investment and acquisition/disposition activities during 2018 and 2017. Adjusted EBITDA excluding non-cash item and Adjusted Free Cash Flow excludes the write-down of our investment in CPI for 2018, and excludes implementation costs relating to our shared services center for 2017.
(4) Cash interest is calculated as interest expense, net, excluding the impact of non-cash adjustments for unrealized (gains) losses from derivative instruments, amortization of deferred financing costs and the amortization of debt discount recorded in the consolidated statement of operations.
(5) Noncontrolling interest adjustment represents the portion of Free Cash Flow not attributable to MIC’s ownership interest.

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.

5


 
 

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

6


 
 

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

7


 
 

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.

FOR FURTHER INFORMATION, PLEASE CONTACT:

 
Investors
Jay A. Davis
Investor Relations
MIC
212-231-1825
  Media

Melissa McNamara
Corporate Communications
MIC
212-231-1667

8


 
 

MACQUARIE INFRASTRUCTURE CORPORATION
 
CONSOLIDATED CONDENSED BALANCE SHEETS
($ in Thousands, Except Share Data)

   
  September 30,
2018
  December 31,
2017
     (Unaudited)     
ASSETS
                 
Current assets:
                 
Cash and cash equivalents   $ 50,162     $ 47,121  
Restricted cash     41,238       24,963  
Accounts receivable, less allowance for doubtful accounts of $1,114 and $895, respectively     130,777       158,152  
Inventories     30,807       36,955  
Prepaid expenses     9,329       14,685  
Fair value of derivative instruments     17,510       11,965  
Other current assets     13,040       13,804  
Assets held for sale (1)     971,934        
Total current assets     1,264,797       307,645  
Property, equipment, land and leasehold improvements, net     3,753,291       4,659,614  
Investment in unconsolidated business     9,296       9,526  
Goodwill     2,043,800       2,068,668  
Intangible assets, net     813,348       914,098  
Fair value of derivative instruments     26,958       24,455  
Other noncurrent assets     26,980       24,945  
Total assets   $ 7,938,470     $ 8,008,951  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                 
Current liabilities:
                 
Due to Manager-related party   $ 4,474     $ 5,577  
Accounts payable     54,628       60,585  
Accrued expenses     83,424       89,496  
Current portion of long-term debt     392,903       50,835  
Fair value of derivative instruments     534       1,710  
Other current liabilities     52,089       47,762  
Liabilities held for sale (1)     299,659        
Total current liabilities     887,711       255,965  
Long-term debt, net of current portion     3,009,008       3,530,311  
Deferred income taxes     656,708       632,070  
Fair value of derivative instruments     1,174       4,668  
Tolling agreements – noncurrent           52,595  
Other noncurrent liabilities     187,957       182,639  
Total liabilities     4,742,558       4,658,248  
Commitments and contingencies            

9


 
 

MACQUARIE INFRASTRUCTURE CORPORATION
 
CONSOLIDATED CONDENSED BALANCE SHEETS – (continued)
($ in Thousands, Except Share Data)

   
  September 30,
2018
  December 31,
2017
     (Unaudited)     
Stockholders’ equity (2) :
                 
Common stock ($0.001 par value; 500,000,000 authorized; 85,550,576 shares issued and outstanding at September 30, 2018 and 84,733,957 shares issued and outstanding at December 31, 2017)   $ 86     $ 85  
Additional paid in capital     1,585,328       1,840,033  
Accumulated other comprehensive loss     (32,085 )       (29,993 )  
Retained earnings     1,480,471       1,343,567  
Total stockholders’ equity     3,033,800       3,153,692  
Noncontrolling interests     162,112       197,011  
Total equity     3,195,912       3,350,703  
Total liabilities and equity   $ 7,938,470     $ 8,008,951  

(1) See Note 2, “Basis of Presentation”, for further discussion on assets and liabilities held for sale.
(2) The Company is authorized to issue 100,000,000 shares of preferred stock, par value $0.001 per share. At September 30, 2018 and December 31, 2017, no preferred stock were issued or outstanding. The Company had 100 shares of special stock issued and outstanding to its Manager at September 30, 2018 and December 31, 2017.

10


 
 

MACQUARIE INFRASTRUCTURE CORPORATION
 
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
($ in Thousands, Except Share and Per Share Data)

       
  Quarter Ended
September 30,
  Nine Months Ended
September 30,
     2018   2017   2018   2017
Revenue
                                   
Service revenue   $ 361,031     $ 358,220     $ 1,139,637     $ 1,067,069  
Product revenue     112,249       94,841       313,279       276,439  
Total revenue     473,280       453,061       1,452,916       1,343,508  
Costs and expenses
                                   
Cost of services     166,694       153,218       533,889       455,038  
Cost of product sales     47,823       35,669       148,372       123,143  
Selling, general and administrative     86,487       84,898       262,371       244,817  
Fees to Manager-related party     12,333       17,954       36,113       54,610  
Goodwill impairment     3,215             3,215        
Depreciation     56,924       58,009       179,368       172,753  
Amortization of intangibles     20,030       17,329       55,470       50,920  
Total operating expenses     393,506       367,077       1,218,798       1,101,281  
Operating income     79,774       85,984       234,118       242,227  
Other income (expense)
                                   
Interest income     113       54       304       129  
Interest expense (1)     (32,616 )       (29,291 )       (81,693 )       (90,129 )  
Other (expense) income, net     (18,011 )       4,973       (11,721 )       7,893  
Net income before income taxes     29,260       61,720       141,008       160,120  
Provision for income taxes     (7,884 )       (25,547 )       (36,558 )       (65,284 )  
Net income   $ 21,376     $ 36,173     $ 104,450     $ 94,836  
Less: net loss attributable to noncontrolling interests     (328 )       (3,922 )       (32,454 )       (7,294 )  
Net income attributable to MIC   $ 21,704     $ 40,095     $ 136,904     $ 102,130  
Basic income per share attributable to MIC   $ 0.25     $ 0.48     $ 1.61     $ 1.23  
Weighted average number of shares outstanding: basic     85,378,088       83,644,806       85,095,956       82,743,285  
Diluted income per share attributable to MIC   $ 0.25     $ 0.48     $ 1.61     $ 1.23  
Weighted average number of shares outstanding: diluted     85,398,566       87,916,538       85,109,213       82,752,800  
Cash dividends declared per share   $ 1.00     $ 1.42     $ 3.00     $ 4.12  

(1) Interest expense includes gains on derivative instruments of $4.8 million and $25.8 million for the quarter and nine months ended September 30, 2018, respectively. For the quarter and nine months ended September 30, 2017, interest expense includes losses on derivative instruments of $162,000 and $6.9 million, respectively.

11


 
 

MACQUARIE INFRASTRUCTURE CORPORATION
 
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in Thousands)

   
  Nine Months Ended
September 30,
     2018   2017 (1)
Operating activities
                 
Net income   $ 104,450     $ 94,836  
Adjustments to reconcile net income to net cash provided by operating activities:
                 
Non-cash goodwill impairment     3,215        
Depreciation and amortization of property and equipment     179,368       172,753  
Amortization of intangible assets     55,470       50,920  
Amortization of debt financing costs     7,430       6,464  
Amortization of debt discount     2,710       2,377  
Adjustments to derivative instruments     (19,782 )       3,414  
Fees to Manager-related party     36,113       54,610  
Deferred taxes     25,899       56,791  
Pension expense     6,284       6,481  
Other non-cash expense (income), net (2)     14,359       (2,651 )  
Changes in other assets and liabilities, net of acquisitions/dispositions:
                 
Accounts receivable     6,200       (18,938 )  
Inventories     (2,003 )       (4,563 )  
Prepaid expenses and other current assets     2,605       (7,040 )  
Due to Manager-related party     155       (178 )  
Accounts payable and accrued expenses     4,896       (4,444 )  
Income taxes payable     654       (1,223 )  
Other, net     (14,970 )       (11,249 )  
Net cash provided by operating activities     413,053       398,360  
Investing activities
                 
Acquisitions of businesses and investments, net of cash acquired     (12,515 )       (208,377 )  
Purchases of property and equipment     (159,037 )       (234,833 )  
Loan to project developer     (17,800 )       (18,675 )  
Loan repayment from project developer     16,561       6,604  
Proceeds from sale of business, net of cash divested     41,038        
Other, net     467       179  
Net cash used in investing activities     (131,286 )       (455,102 )  

12


 
 

MACQUARIE INFRASTRUCTURE CORPORATION
 
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS – (continued)
(Unaudited)
($ in Thousands)

   
  Nine Months Ended
September 30,
     2018   2017 (1)
Financing activities
                 
Proceeds from long-term debt   $ 275,500     $ 585,500  
Payment of long-term debt     (223,529 )       (200,722 )  
Proceeds from the issuance of shares           5,699  
Dividends paid to common stockholders     (292,715 )       (332,867 )  
Contributions received from noncontrolling interests     567       102  
Distributions paid to noncontrolling interests     (3,028 )       (2,962 )  
Offering and equity raise costs paid     (35 )       (355 )  
Debt financing costs paid     (2,874 )       (447 )  
Payment of capital lease obligations     (87 )       (366 )  
Net cash (used in) provided by financing activities     (246,201 )       53,582  
Effect of exchange rate changes on cash and cash equivalents     (442 )       449  
Net change in cash, cash equivalents and restricted cash     35,124       (2,711 )  
Cash, cash equivalents and restricted cash, beginning of period     72,084       61,257  
Cash, cash equivalents and restricted cash, end of period   $ 107,208     $ 58,546  
Supplemental disclosures of cash flow information
                 
Non-cash investing and financing activities:
                 
Accrued equity offering costs   $ 83     $ 97  
Accrued financing costs   $     $ 21  
Accrued purchases of property and equipment   $ 23,801     $ 33,184  
Issuance of shares to Manager   $ 37,372     $ 54,927  
Issuance of shares to independent directors   $ 750     $ 681  
Issuance of shares for acquisition of business   $     $ 125,000  
Conversion of convertible senior notes to shares   $ 6     $ 17  
Distributions payable to noncontrolling interests   $ 5     $ 32  
Taxes paid, net   $ 10,991     $ 9,810  
Interest paid   $ 91,200     $ 82,108  

(1) Conformed to current period presentation for the adoption of ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . See Note 2, “Basis of Presentation”, in our Notes to Consolidated Condensed Financial Statements in Part I of Form 10-Q for the quarter ended September 30, 2018.
(2) Other non-cash expense (income), net, includes the write-down of the Company’s investment in the design-build mechanical contractor business for the nine months ended September 30, 2018.

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:

   
  As of September 30,
     2018   2017
Cash and cash equivalents   $   50,162     $   35,737  
Restricted cash – current     41,238       22,809  
Restricted cash held for sale (3)     15,808        
Total of cash, cash equivalents and restricted cash shown in the consolidated condensed statement of cash flows   $ 107,208     $ 58,546  

(3) Represents restricted cash related to BEC, which were classified as held for sale at September 30, 2018. See Note 2, “Basis of Presentation”, in our Notes to Consolidated Condensed Financial Statements in Part I of Form 10-Q for the quarter ended September 30, 2018, for further discussion.

13


 
 

MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS – MD&A

               
  Quarter Ended
September 30,
  Change
Favorable/
(Unfavorable)
  Nine Months Ended
September 30,
  Change
Favorable/
(Unfavorable)
     2018   2017   $   %   2018   2017   $   %
     ($ In Thousands, Except Share and Per Share Data) (Unaudited)
Revenue
                                                                       
Service revenue   $ 361,031     $ 358,220       2,811       0.8     $ 1,139,637     $ 1,067,069       72,568       6.8  
Product revenue     112,249       94,841       17,408       18.4       313,279       276,439       36,840       13.3  
Total revenue     473,280       453,061       20,219       4.5       1,452,916       1,343,508       109,408       8.1  
Costs and expenses
                                                                       
Cost of services     166,694       153,218       (13,476 )       (8.8 )       533,889       455,038       (78,851 )       (17.3 )  
Cost of product sales     47,823       35,669       (12,154 )       (34.1 )       148,372       123,143       (25,229 )       (20.5 )  
Selling, general and administrative     86,487       84,898       (1,589 )       (1.9 )       262,371       244,817       (17,554 )       (7.2 )  
Fees to Manager-related party     12,333       17,954       5,621       31.3       36,113       54,610       18,497       33.9  
Goodwill impairment     3,215             (3,215 )       NM       3,215             (3,215 )       NM  
Depreciation     56,924       58,009       1,085       1.9       179,368       172,753       (6,615 )       (3.8 )  
Amortization of intangibles     20,030       17,329       (2,701 )       (15.6 )       55,470       50,920       (4,550 )       (8.9 )  
Total operating expenses     393,506       367,077       (26,429 )       (7.2 )       1,218,798       1,101,281       (117,517 )       (10.7 )  
Operating income     79,774       85,984       (6,210 )       (7.2 )       234,118       242,227       (8,109 )       (3.3 )  
Other income (expense)
                                                                       
Interest income     113       54       59       109.3       304       129       175       135.7  
Interest expense (1)     (32,616 )       (29,291 )       (3,325 )       (11.4 )       (81,693 )       (90,129 )       8,436       9.4  
Other (expense) income,
net
    (18,011 )       4,973       (22,984 )       NM       (11,721 )       7,893       (19,614 )       NM  
Net income before income taxes     29,260       61,720       (32,460 )       (52.6 )       141,008       160,120       (19,112 )       (11.9 )  
Provision for income taxes     (7,884 )       (25,547 )       17,663       69.1       (36,558 )       (65,284 )       28,726       44.0  
Net income   $ 21,376     $ 36,173       (14,797 )       (40.9 )     $ 104,450     $ 94,836       9,614       10.1  
Less: net loss attributable to noncontrolling interests     (328 )       (3,922 )       (3,594 )       (91.6 )       (32,454 )       (7,294 )       25,160       NM  
Net income attributable to MIC   $ 21,704     $ 40,095       (18,391 )       (45.9 )     $ 136,904     $ 102,130       34,774       34.0  
Basic income per share attributable to MIC   $ 0.25     $ 0.48       (0.23 )       (47.9 )     $ 1.61     $ 1.23       0.38       30.9  
Weighted average number of shares outstanding: basic     85,378,088       83,644,806       1,733,282       2.1       85,095,956       82,743,285       2,352,671       2.8  

NM — Not meaningful

(1) Interest expense includes gains on derivative instruments of $4.8 million and $25.8 million for the quarter and nine months ended September 30, 2018, respectively. For the quarter and nine months ended September 30, 2017, interest expense includes losses on derivative instruments of $162,000 and $6.9 million, respectively.

14


 
 

MACQUARIE INFRASTRUCTURE CORPORATION
RECONCILIATION OF CONSOLIDATED NET INCOME TO EBITDA EXCLUDING
NON-CASH ITEMS AND A RECONCILIATION FROM CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW

               
  Quarter Ended
September 30,
  Change
Favorable/
(Unfavorable)
  Nine Months Ended
September 30,
  Change
Favorable/
(Unfavorable)
     2018   2017   $   %   2018   2017   $   %
     ($ In Thousands) (Unaudited)
Net income   $ 21,376     $ 36,173                       $ 104,450     $ 94,836                    
Interest expense, net (1)     32,503       29,237                         81,389       90,000                    
Provision for income taxes     7,884       25,547                         36,558       65,284                    
Goodwill impairment     3,215                               3,215                          
Depreciation     56,924       58,009                         179,368       172,753                    
Amortization of intangibles     20,030       17,329                         55,470       50,920                    
Fees to Manager-related
party
    12,333       17,954                         36,113       54,610                    
Pension expense (2)     2,094       2,160                         6,284       6,481                    
Other non-cash expense (income), net (3)     3,437       (3,725 )                      6,803       (961 )                 
EBITDA excluding non-cash
items
  $ 159,796     $ 182,684       (22,888 )       (12.5 )     $ 509,650     $ 533,923       (24,273 )       (4.5 )  
EBITDA excluding non-cash
items
  $ 159,796     $ 182,684                       $ 509,650     $ 533,923                    
Interest expense, net (1)     (32,503 )       (29,237 )                         (81,389 )       (90,000 )                    
Adjustments to derivative instruments recorded in interest expense (1)     (3,054 )       (959 )                         (22,809 )       1,724                    
Amortization of debt financing costs (1)     2,191       2,163                         7,430       6,464                    
Amortization of debt
discount (1)
    910       882                         2,710       2,377                    
Provision for current income
taxes
    (3,076 )       (2,154 )                         (10,659 )       (8,493 )                    
Changes in working capital (4)     22,787       (3,656 )                   8,120       (47,635 )              
Cash provided by operating activities     147,051       149,723                         413,053       398,360                    
Changes in working capital (4)     (22,787 )       3,656                         (8,120 )       47,635                    
Maintenance capital
expenditures
    (13,372 )       (12,106 )                      (32,724 )       (23,062 )                 
Free cash flow   $ 110,892     $ 141,273       (30,381 )       (21.5 )     $ 372,209     $ 422,933       (50,724 )       (12.0 )  

(1) Interest expense, net, includes adjustments to derivative instruments, non-cash amortization of deferred financing fees and non-cash amortization of debt discount related to the 2.00% Convertible Senior Notes due October 2023.
(2) Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses.
(3) Other non-cash expense (income), net, primarily includes non-cash amortization of tolling liabilities, unrealized gains (losses) on commodity hedges and non-cash gains (losses) related to the disposal of assets. Other non-cash expense (income), net, also includes the write-down of our investment in CPI for the quarter and nine months ended September 30, 2018. See “ Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items, Free Cash Flow and Proportionately Combined Metrics ” above for further discussion.
(4) Conformed to current period presentation for the adoption of ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . See Note 2, “Basis of Presentation”, in our Notes to Consolidated Condensed Financial Statements in Part I of Form 10-Q for the quarter ended September 30, 2018.

15


 
 

MACQUARIE INFRASTRUCTURE CORPORATION
RECONCILIATION FROM CONSOLIDATED FREE CASH FLOW TO
PROPORTIONATELY COMBINED FREE CASH FLOW

               
  Quarter Ended
September 30,
  Change Favorable/
(Unfavorable)
  Nine Months Ended
September 30,
  Change
Favorable/
(Unfavorable)
     2018   2017   $   %   2018   2017   $   %
     ($ In Thousands) (Unaudited)
Free Cash Flow – Consolidated
basis
  $ 110,892     $ 141,273       (30,381 )       (21.5 )     $ 372,209     $ 422,933       (50,724 )       (12.0 )  
100% of Contracted Power Free Cash Flow included in consolidated Free Cash Flow     (30,865 )       (25,970 )                         (71,365 )       (56,513 )                    
MIC’s share of Contracted Power Free Cash Flow     28,474       24,667                         64,600       51,300                    
100% of MIC Hawaii Free Cash Flow included in consolidated Free Cash Flow     11,342       (8,137 )                         (6,634 )       (32,368 )                    
MIC’s share of MIC Hawaii Free Cash Flow     (11,345 )       8,132                      6,626       32,358                 
Free Cash Flow – Proportionately Combined basis   $ 108,498     $ 139,965       (31,467 )       (22.5 )     $ 365,436     $ 417,710       (52,274 )       (12.5 )  

16


 
 

MACQUARIE INFRASTRUCTURE CORPORATION
RECONCILIATION OF SEGMENT NET INCOME (LOSS) TO EBITDA
EXCLUDING NON-CASH ITEMS AND A RECONCILIATION FROM CASH PROVIDED
BY/(USED IN) OPERATING ACTIVITIES TO FREE CASH FLOW

IMTT

               
  Quarter Ended
September 30,
  Change Favorable/
(Unfavorable)
  Nine Months Ended
September 30,
  Change
Favorable/
(Unfavorable)
     2018   2017   2018   2017
     $   $   $   %   $   $   $   %
      ($ In Thousands) (Unaudited) 
Revenue     118,229       134,167       (15,938 )       (11.9 )       386,981       410,128       (23,147 )       (5.6 )  
Cost of services     43,864       48,982       5,118       10.4       148,005       148,052       47       0.0  
Selling, general and administrative expenses     7,565       9,104       1,539       16.9       24,685       25,627       942       3.7  
Depreciation and amortization     32,683       31,511       (1,172 )       (3.7 )       98,702       93,826       (4,876 )       (5.2 )  
Operating income     34,117       44,570       (10,453 )       (23.5 )       115,589       142,623       (27,034 )       (19.0 )  
Interest expense, net (1)     (11,677 )       (10,187 )       (1,490 )       (14.6 )       (30,349 )       (30,707 )       358       1.2  
Other income, net     414       794       (380 )       (47.9 )       864       1,954       (1,090 )       (55.8 )  
Provision for income taxes     (6,422 )       (14,422 )       8,000       55.5       (24,195 )       (46,686 )       22,491       48.2  
Net income     16,432       20,755       (4,323 )       (20.8 )       61,909       67,184       (5,275 )       (7.9 )  
Reconciliation of net income to EBITDA excluding non-cash items and a reconciliation of cash provided by operating activities to Free Cash Flow:
                                                                       
Net income     16,432       20,755                         61,909       67,184                    
Interest expense, net (1)     11,677       10,187                         30,349       30,707                    
Provision for income taxes     6,422       14,422                         24,195       46,686                    
Depreciation and amortization     32,683       31,511                         98,702       93,826                    
Pension expense (2)     1,914       1,883                         5,737       5,649                    
Other non-cash expense, net     207       178                      611       315                 
EBITDA excluding non-cash
items
    69,335       78,936       (9,601 )       (12.2 )       221,503       244,367       (22,864 )       (9.4 )  
EBITDA excluding non-cash
items
    69,335       78,936                         221,503       244,367                    
Interest expense, net (1)     (11,677 )       (10,187 )                         (30,349 )       (30,707 )                    
Adjustments to derivative instruments recorded in interest expense (1)     (870 )       (524 )                         (6,263 )       (257 )                    
Amortization of debt financing costs (1)     411       413                         1,234       1,236                    
Benefit (provision) for current income taxes     2,593       344                         (6,059 )       (3,069 )                    
Changes in working capital     (721 )       3,732                   9,913       (12,413 )              
Cash provided by operating activities     59,071       72,714                         189,979       199,157                    
Changes in working capital     721       (3,732 )                         (9,913 )       12,413                    
Maintenance capital
expenditures
    (8,863 )       (8,116 )                      (21,335 )       (13,563 )                 
Free cash flow     50,929       60,866       (9,937 )       (16.3 )       158,731       198,007       (39,276 )       (19.8 )  

(1) Interest expense, net, includes adjustments to derivative instruments and non-cash amortization of deferred financing fees.
(2) Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses.

17


 
 

Atlantic Aviation

               
  Quarter Ended
September 30,
  Change
Favorable/
(Unfavorable)
  Nine Months Ended
September 30,
  Change
Favorable/
(Unfavorable)
     2018   2017   2018   2017
     $   $   $   %   $   $   $   %
      ($ In Thousands) (Unaudited) 
Revenue     234,908       211,457       23,451       11.1       715,041       621,149       93,892       15.1  
Cost of services (exclusive of depreciation and amortization shown separately below)     113,077       92,106       (20,971 )       (22.8 )       345,764       272,985       (72,779 )       (26.7 )  
Gross margin     121,831       119,351       2,480       2.1       369,277       348,164       21,113       6.1  
Selling, general and administrative expenses     57,146       57,026       (120 )       (0.2 )       173,802       163,512       (10,290 )       (6.3 )  
Depreciation and amortization     25,582       25,286       (296 )       (1.2 )       78,020       73,894       (4,126 )       (5.6 )  
Operating income     39,103       37,039       2,064       5.6       117,455       110,758       6,697       6.0  
Interest expense, net (1)     (5,290 )       (4,295 )       (995 )       (23.2 )       (9,601 )       (13,648 )       4,047       29.7  
Other expense, net     (20 )       (14 )       (6 )       (42.9 )       (519 )       (119 )       (400 )       NM  
Provision for income taxes     (9,058 )       (11,139 )       2,081       18.7       (28,769 )       (36,766 )       7,997       21.8  
Net income     24,735       21,591       3,144       14.6       78,566       60,225       18,341       30.5  
Reconciliation of net income to EBITDA excluding non-cash items and a reconciliation of cash provided by operating activities to Free Cash Flow:
                                                                       
Net income     24,735       21,591                         78,566       60,225                    
Interest expense, net (1)     5,290       4,295                         9,601       13,648                    
Provision for income taxes     9,058       11,139                         28,769       36,766                    
Depreciation and amortization     25,582       25,286                         78,020       73,894                    
Pension expense (2)     5       5                         16       15                    
Other non-cash expense, net     323       1,212                      1,232       1,252                 
EBITDA excluding non-cash
items
    64,993       63,528       1,465       2.3       196,204       185,800       10,404       5.6  
EBITDA excluding non-cash
items
    64,993       63,528                         196,204       185,800                    
Interest expense, net (1)     (5,290 )       (4,295 )                         (9,601 )       (13,648 )                    
Convertible senior notes interest (3)     (2,013 )       (2,012 )                         (6,038 )       (5,769 )                    
Adjustments to derivative instruments recorded in interest expense (1)     (354 )       464                         (5,798 )       3,150                    
Amortization of debt financing costs (1)     280       284                         842       819                    
Provision for current income
taxes
    (5,729 )       (1,208 )                         (19,469 )       (5,810 )                    
Changes in working capital     6,313       (1,335 )                   16,904       (6,667 )              
Cash provided by operating activities     58,200       55,426                         173,044       157,875                    
Changes in working capital     (6,313 )       1,335                         (16,904 )       6,667                    
Maintenance capital expenditures     (2,191 )       (2,165 )                      (5,300 )       (5,071 )                 
Free cash flow     49,696       54,596       (4,900 )       (9.0 )       150,840       159,471       (8,631 )       (5.4 )  

NM — Not meaningful

(1) Interest expense, net, includes adjustments to derivative instruments and non-cash amortization of deferred financing fees.
(2) Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses.
(3) Represents the cash interest expense reclassified from MIC Corporate related to the 2.00% Convertible Senior Notes due October 2023, proceeds of which were used to pay down a portion of Atlantic Aviation’s credit facility in October 2016.

18


 
 

Contracted Power

               
  Quarter Ended
September 30,
  Change
Favorable/
(Unfavorable)
  Nine Months Ended
September 30,
  Change
Favorable/
(Unfavorable)
     2018   2017   2018   2017
     $   $   $   %   $   $   $   %
      ($ In Thousands) (Unaudited) 
Product revenue     52,450       42,445       10,005       23.6       129,140       110,681       18,459       16.7  
Cost of product sales     8,744       5,171       (3,573 )       (69.1 )       20,443       15,528       (4,915 )       (31.7 )  
Selling, general and administrative expenses     8,204       6,909       (1,295 )       (18.7 )       23,226       18,318       (4,908 )       (26.8 )  
Depreciation and amortization     8,026       14,830       6,804       45.9       38,072       45,031       6,959       15.5  
Operating income     27,476       15,535       11,941       76.9       47,399       31,804       15,595       49.0  
Interest expense, net (1)     (4,944 )       (6,281 )       1,337       21.3       (10,661 )       (20,431 )       9,770       47.8  
Other income, net     3,448       4,334       (886 )       (20.4 )       11,174       6,440       4,734       73.5  
Provision for income taxes     (7,852 )       (6,337 )       (1,515 )       (23.9 )       (12,456 )       (8,209 )       (4,247 )       (51.7 )  
Net income     18,128       7,251       10,877       150.0       35,456       9,604       25,852       NM  
Less: net loss attributable to noncontrolling interest     (260 )       (3,890 )       (3,630 )       (93.3 )       (32,319 )       (7,223 )       25,096       NM  
Net income attributable to MIC     18,388       11,141       7,247       65.0       67,775       16,827       50,948       NM  
Reconciliation of net income to EBITDA excluding non-cash items and a reconciliation of cash provided by operating activities to Free Cash Flow:
                                                                       
Net income     18,128       7,251                         35,456       9,604                    
Interest expense, net (1)     4,944       6,281                         10,661       20,431                    
Provision for income taxes     7,852       6,337                         12,456       8,209                    
Depreciation and amortization     8,026       14,830                         38,072       45,031                    
Other non-cash income, net (2)     (1,574 )       (1,914 )                      (5,152 )       (6,170 )                 
EBITDA excluding non-cash
items
    37,376       32,785       4,591       14.0       91,493       77,105       14,388       18.7  
EBITDA excluding non-cash
items
    37,376       32,785                         91,493       77,105                    
Interest expense, net (1)     (4,944 )       (6,281 )                         (10,661 )       (20,431 )                    
Adjustments to derivative instruments recorded in interest expense (1)     (1,863 )       (922 )                         (10,011 )       (1,282 )                    
Amortization of debt financing
costs (1)
    380       379                         1,138       1,137                    
(Provision) benefit for current income taxes     (84 )       9                         (154 )       6                    
Changes in working capital (3)     (5,615 )       (565 )                   (17,390 )       (8,771 )              
Cash provided by operating activities     25,250       25,405                         54,415       47,764                    
Changes in working capital (3)     5,615       565                         17,390       8,771                    
Maintenance capital expenditures                                (440 )       (22 )                 
Free cash flow     30,865       25,970       4,895       18.8       71,365       56,513       14,852       26.3  

NM — Not meaningful

(1) Interest expense, net, includes adjustments to derivative instruments and non-cash amortization of deferred financing fees.
(2) Other non-cash income, net, primarily includes amortization of tolling liabilities. See “Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items, Free Cash Flow and Proportionately Combined Metrics ” above for further discussion.
(3) Conformed to current period presentation for the adoption of ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . See Note 2, “Basis of Presentation”, in our Notes to Consolidated Condensed Financial Statements in Part I of Form 10-Q for the quarter ended September 30, 2018.

19


 
 

MIC Hawaii

               
  Quarter Ended
September 30,
  Change
Favorable/
(Unfavorable)
  Nine Months Ended
September 30,
  Change
Favorable/
(Unfavorable)
     2018   2017   2018   2017
     $   $   $   %   $   $   $   %
     ($ In Thousands) (Unaudited)
Product revenue     59,799       52,396       7,403       14.1       184,139       165,758       18,381       11.1  
Service revenue     9,122       13,826       (4,704 )       (34.0 )       41,306       39,476       1,830       4.6  
Total revenue     68,921       66,222       2,699       4.1       225,445       205,234       20,211       9.8  
Cost of product sales (exclusive of depreciation and amortization shown separately below)     39,079       30,498       (8,581 )       (28.1 )       127,929       107,615       (20,314 )       (18.9 )  
Cost of services (exclusive of depreciation and amortization shown separately below)     9,753       12,131       2,378       19.6       40,120       34,015       (6,105 )       (17.9 )  
Cost of revenue – total     48,832       42,629       (6,203 )       (14.6 )       168,049       141,630       (26,419 )       (18.7 )  
Gross margin     20,089       23,593       (3,504 )       (14.9 )       57,396       63,604       (6,208 )       (9.8 )  
Selling, general and administrative expenses     7,650       6,874       (776 )       (11.3 )       22,853       19,729       (3,124 )       (15.8 )  
Goodwill impairment     3,215             (3,215 )       NM       3,215             (3,215 )       NM  
Depreciation and amortization     10,489       3,711       (6,778 )       (182.6 )       19,540       10,922       (8,618 )       (78.9 )  
Operating (loss) income     (1,265 )       13,008       (14,273 )       (109.7 )       11,788       32,953       (21,165 )       (64.2 )  
Interest expense, net (1)     (2,069 )       (1,877 )       (192 )       (10.2 )       (5,246 )       (5,795 )       549       9.5  
Other expense, net     (21,923 )       (141 )       (21,782 )       NM       (23,236 )       (382 )       (22,854 )       NM  
Benefit (provision) for income taxes     7,299       (4,830 )       12,129       NM       4,350       (10,772 )       15,122       140.4  
Net (loss) income     (17,958 )       6,160       (24,118 )       NM       (12,344 )       16,004       (28,348 )       (177.1 )  
Less: net loss attributable to noncontrolling interests     (68 )       (32 )       36       112.5       (135 )       (71 )       64       90.1  
Net (loss) income attributable to MIC     (17,890 )       6,192       (24,082 )       NM       (12,209 )       16,075       (28,284 )       (176.0 )  
Reconciliation of net (loss) income to EBITDA excluding non-cash items and a reconciliation of cash provided by operating activities to Free Cash Flow:
                                                                 
Net (loss) income     (17,958 )       6,160                         (12,344 )       16,004                    
Interest expense, net (1)     2,069       1,877                         5,246       5,795                    
(Benefit) provision for income taxes     (7,299 )       4,830                         (4,350 )       10,772                    
Goodwill impairment     3,215                               3,215                          
Depreciation and amortization     10,489       3,711                         19,540       10,922                    
Pension expense (2)     128       272                         383       817                    
Other non-cash expense (income), net (3)     4,303       (3,360 )                      9,548       3,108                 
EBITDA excluding non-cash items     (5,053 )       13,490       (18,543 )       (137.5 )       21,238       47,418       (26,180 )       (55.2 )  
EBITDA excluding non-cash items     (5,053 )       13,490                         21,238       47,418                    
Interest expense, net (1)     (2,069 )       (1,877 )                         (5,246 )       (5,795 )                    
Adjustments to derivative instruments recorded in interest expense (1)     33       23                         (737 )       113                    
Amortization of debt financing costs (1)     97       99                         289       303                    
Provision for current income taxes     (2,032 )       (1,773 )                         (3,261 )       (5,265 )                    
Changes in working capital (4)     22,570       (2,554 )                   16,420       (13,093 )              
Cash provided by operating activities     13,546       7,408                         28,703       23,681                    
Changes in working capital (4)     (22,570 )       2,554                         (16,420 )       13,093                    
Maintenance capital expenditures     (2,318 )       (1,825 )                      (5,649 )       (4,406 )                 
Free cash flow     (11,342 )       8,137       (19,479 )       NM       6,634       32,368       (25,734 )       (79.5 )  

NM — Not meaningful

(1) Interest expense, net, includes adjustments to derivative instruments related to interest rate swaps and non-cash amortization of deferred financing fees.
(2) Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses.

20


 
 

MIC Hawaii  – (continued)

(3) Other non-cash expense (income), net, primarily includes non-cash adjustments related to unrealized gains (losses) on commodity hedges and non-cash gains (losses) related to the disposal of assets. Other non-cash expense (income), net, also includes the write-down of our investment in CPI for the quarter and nine months ended September 30, 2018. See “ Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items, Free Cash Flow and Proportionately Combined Metrics ” above for further discussion.
(4) Conformed to current period presentation for the adoption of ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . See Note 2, “Basis of Presentation”, in our Notes to Consolidated Condensed Financial Statements in Part I of Form 10-Q for the quarter ended September 30, 2018.

21


 
 

Corporate and Other

               
  Quarter Ended
September 30,
  Change
Favorable/
(Unfavorable)
  Nine Months Ended September 30,   Change
Favorable/
(Unfavorable)
     2018   2017   2018   2017
     $   $   $   %   $   $   $   %
     ($ In Thousands) (Unaudited)
Fees to Manager-related party     12,333       17,954       5,621       31.3       36,113       54,610       18,497       33.9  
Selling, general and administrative expenses (1)     7,150       6,214       (936 )       (15.1 )       21,496       21,301       (195 )       (0.9 )  
Depreciation     174             (174 )       NM       504             (504 )       NM  
Operating loss     (19,657 )       (24,168 )       4,511       18.7       (58,113 )       (75,911 )       17,798       23.4  
Interest expense, net (2)     (8,523 )       (6,597 )       (1,926 )       (29.2 )       (25,532 )       (19,419 )       (6,113 )       (31.5 )  
Other income (expense), net     70             70       NM       (4 )             (4 )       NM  
Benefit for income taxes     8,149       11,181       (3,032 )       (27.1 )       24,512       37,149       (12,637 )       (34.0 )  
Net loss     (19,961 )       (19,584 )       (377 )       (1.9 )       (59,137 )       (58,181 )       (956 )       (1.6 )  
Reconciliation of net loss to EBITDA excluding non-cash items and a reconciliation of cash used in operating activities to Free Cash Flow:
                                                                       
Net loss     (19,961 )       (19,584 )                         (59,137 )       (58,181 )                    
Interest expense, net (2)     8,523       6,597                         25,532       19,419                    
Benefit for income taxes     (8,149 )       (11,181 )                         (24,512 )       (37,149 )                    
Depreciation     174                               504                          
Fees to Manager-related party     12,333       17,954                         36,113       54,610                    
Pension expense (3)     47                               148                          
Other non-cash expense, net     178       159                      564       534                 
EBITDA excluding non-cash items     (6,855 )       (6,055 )       (800 )       (13.2 )       (20,788 )       (20,767 )       (21 )       (0.1 )  
EBITDA excluding non-cash items     (6,855 )       (6,055 )                         (20,788 )       (20,767 )                    
Interest expense, net (2)     (8,523 )       (6,597 )                         (25,532 )       (19,419 )                    
Convertible senior notes interest (4)     2,013       2,012                         6,038       5,769                    
Amortization of debt financing costs (2)     1,023       988                         3,927       2,969                    
Amortization of debt discount (2)     910       882                         2,710       2,377                    
Benefit for current income taxes     2,176       474                         18,284       5,645                    
Changes in working capital     240       (2,934 )                   (17,727 )       (6,691 )              
Cash used in operating activities     (9,016 )       (11,230 )                         (33,088 )       (30,117 )                    
Changes in working capital     (240 )       2,934                      17,727       6,691                 
Free cash flow     (9,256 )       (8,296 )       (960 )       (11.6 )       (15,361 )       (23,426 )       8,065       34.4  

NM — Not meaningful

(1) For the quarter and nine months ended September 30, 2018, selling, general and administrative expenses included $1.9 million and $7.5 million, respectively, of costs incurred in connection with the evaluation of various investment and acquisition/disposition opportunities, compared with $3.0 million and $7.9 million, respectively, for the quarter and nine months ended September 30, 2017. For the quarter and nine months ended September 30, 2017, selling, general and administrative expenses also included $1.4 million and $6.8 million, respectively, of costs related to the implementation of a shared service center.
(2) Interest expense, net, included non-cash amortization of deferred financing fees and non-cash amortization of debt discount related to the 2.00% Convertible Senior Notes due October 2023.
(3) Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses.
(4) Represents the cash interest expense reclassified to Atlantic Aviation related to the 2.00% Convertible Senior Notes due October 2023, proceeds of which were used to pay down a portion of Atlantic Aviation’s credit facility in October 2016.

22


 
 

MACQUARIE INFRASTRUCTURE CORPORATION
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA EXCLUDING
NON-CASH ITEMS AND A RECONCILIATION FROM CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES TO PROPORTIONATELY COMBINED FREE CASH FLOW

                 
                 
  For the Quarter Ended September 30, 2018            
     IMTT   Atlantic Aviation   Contracted Power (1)   MIC Hawaii (1)   MIC Corporate   Proportionately Combined (2)     Contracted
Power
100%
  MIC Hawaii 100%
     ($ in Thousands) (Unaudited)            
Net income (loss)     16,432       24,735       17,252       (17,958 )       (19,961 )       20,500                18,128       (17,958 )  
Interest expense, net (3)     11,677       5,290       4,373       2,068       8,523       31,931                4,944       2,069  
Provision (benefit) for income taxes     6,422       9,058       7,852       (7,299 )       (8,149 )       7,884                7,852       (7,299 )  
Goodwill impairment                       3,215             3,215                      3,215  
Depreciation and amortization     32,683       25,582       6,186       10,485       174       75,110                8,026       10,489  
Fees to Manager-related party                             12,333       12,333                       
Pension expense (4)     1,914       5             128       47       2,094                      128  
Other non-cash expense (income), net (5)     207       323       (1,522 )       4,303       178       3,489             (1,574 )       4,303  
EBITDA excluding non-cash items     69,335       64,993       34,141       (5,058 )       (6,855 )       156,556             37,376       (5,053 )  
EBITDA excluding non-cash items     69,335       64,993       34,141       (5,058 )       (6,855 )       156,556                37,376       (5,053 )  
Interest expense, net (3)     (11,677 )       (5,290 )       (4,373 )       (2,068 )       (8,523 )       (31,931 )                (4,944 )       (2,069 )  
Convertible senior notes interest (6)           (2,013 )                   2,013                             
Adjustments to derivative instruments recorded in interest expense, net (3)     (870 )       (354 )       (1,571 )       34             (2,761 )                (1,863 )       33  
Amortization of debt financing costs (3)     411       280       361       97       1,023       2,172                380       97  
Amortization of debt discount (3)                             910       910                       
Benefit (provision) for current income taxes     2,593       (5,729 )       (84 )       (2,032 )       2,176       (3,076 )                (84 )       (2,032 )  
Changes in working capital     (721 )       6,313       (5,450 )       22,570       240       22,952             (5,615 )       22,570  
Cash provided by (used in) operating activities     59,071       58,200       23,024       13,543       (9,016 )       144,822                25,250       13,546  
Changes in working capital     721       (6,313 )       5,450       (22,570 )       (240 )       (22,952 )                5,615       (22,570 )  
Maintenance capital expenditures     (8,863 )       (2,191 )             (2,318 )             (13,372 )                   (2,318 )  
Proportionately Combined Free Cash flow     50,929       49,696       28,474       (11,345 )       (9,256 )       108,498             30,865       (11,342 )  

23


 
 

                 
                 
  For the Quarter Ended September 30, 2017            
     IMTT   Atlantic Aviation   Contracted Power (1)   MIC Hawaii (1)   MIC Corporate   Proportionately Combined (2)     Contracted
Power
100%
  MIC Hawaii 100%
     ($ in Thousands) (Unaudited)            
Net income (loss)     20,755       21,591       7,705       6,161       (19,584 )       36,628                7,251       6,160  
Interest expense, net (3)     10,187       4,295       5,598       1,875       6,597       28,552                6,281       1,877  
Provision (benefit) for income taxes     14,422       11,139       6,337       4,830       (11,181 )       25,547                6,337       4,830  
Depreciation and amortization     31,511       25,286       12,949       3,706             73,452                14,830       3,711  
Fees to Manager-related party                             17,954       17,954                       
Pension expense (4)     1,883       5             272             2,160                      272  
Other non-cash expense (income), net (5)     178       1,212       (1,913 )       (3,361 )       159       (3,725 )             (1,914 )       (3,360 )  
EBITDA excluding non-cash items     78,936       63,528       30,676       13,483       (6,055 )       180,568             32,785       13,490  
EBITDA excluding non-cash items     78,936       63,528       30,676       13,483       (6,055 )       180,568                32,785       13,490  
Interest expense, net (3)     (10,187 )       (4,295 )       (5,598 )       (1,875 )       (6,597 )       (28,552 )                (6,281 )       (1,877 )  
Convertible senior notes interest (6)           (2,012 )                   2,012                             
Adjustments to derivative instruments recorded in interest expense, net (3)     (524 )       464       (786 )       23             (823 )                (922 )       23  
Amortization of debt financing costs (3)     413       284       365       99       988       2,149                379       99  
Amortization of debt discount (3)                             882       882                       
Benefit (provision) for current income taxes     344       (1,208 )       10       (1,773 )       474       (2,153 )                9       (1,773 )  
Changes in working capital (7)     3,732       (1,335 )       (995 )       (2,553 )       (2,934 )       (4,085 )             (565 )       (2,554 )  
Cash provided by (used in) operating activities     72,714       55,426       23,672       7,404       (11,230 )       147,986                25,405       7,408  
Changes in working capital (7)     (3,732 )       1,335       995       2,553       2,934       4,085                565       2,554  
Maintenance capital expenditures     (8,116 )       (2,165 )             (1,825 )             (12,106 )                   (1,825 )  
Proportionately Combined Free Cash Flow     60,866       54,596       24,667       8,132       (8,296 )       139,965             25,970       8,137  

24


 
 

                 
                 
  For the Nine Months Ended September 30, 2018            
     IMTT   Atlantic Aviation   Contracted Power (1)   MIC Hawaii (1)   MIC Corporate   Proportionately Combined (2)     Contracted
Power
100%
  MIC Hawaii 100%
     ($ in Thousands) (Unaudited)            
Net income (loss)     61,909       78,566       32,467       (12,346 )       (59,137 )       101,459                35,456       (12,344 )  
Interest expense, net (3)     30,349       9,601       9,619       5,246       25,532       80,347                10,661       5,246  
Provision (benefit) for income taxes     24,195       28,769       12,456       (4,350 )       (24,512 )       36,558                12,456       (4,350 )  
Goodwill impairment                       3,215             3,215                      3,215  
Depreciation and amortization     98,702       78,020       32,892       19,529       504       229,647                38,072       19,540  
Fees to Manager-related party                             36,113       36,113                       
Pension expense (4)     5,737       16             383       148       6,284                      383  
Other non-cash expense (income), net (5)     611       1,232       (5,157 )       9,548       564       6,798             (5,152 )       9,548  
EBITDA excluding non-cash items     221,503       196,204       82,277       21,225       (20,788 )       500,421             91,493       21,238  
EBITDA excluding non-cash items     221,503       196,204       82,277       21,225       (20,788 )       500,421                91,493       21,238  
Interest expense, net (3)     (30,349 )       (9,601 )       (9,619 )       (5,246 )       (25,532 )       (80,347 )                (10,661 )       (5,246 )  
Convertible senior notes interest (6)           (6,038 )                   6,038                             
Adjustments to derivative instruments recorded in interest expense, net (3)     (6,263 )       (5,798 )       (8,665 )       (732 )             (21,458 )                (10,011 )       (737 )  
Amortization of debt financing costs (3)     1,234       842       1,091       289       3,927       7,383                1,138       289  
Amortization of debt discount (3)                             2,710       2,710                       
(Provision) benefit for current income taxes     (6,059 )       (19,469 )       (154 )       (3,261 )       18,284       (10,659 )                (154 )       (3,261 )  
Changes in working capital     9,913       16,904       (16,823 )       16,421       (17,727 )       8,688             (17,390 )       16,420  
Cash provided by (used in) operating activities     189,979       173,044       48,107       28,696       (33,088 )       406,738                54,415       28,703  
Changes in working capital     (9,913 )       (16,904 )       16,823       (16,421 )       17,727       (8,688 )                17,390       (16,420 )  
Maintenance capital expenditures     (21,335 )       (5,300 )       (330 )       (5,649 )             (32,614 )             (440 )       (5,649 )  
Proportionately Combined Free Cash Flow     158,731       150,840       64,600       6,626       (15,361 )       365,436             71,365       6,634  

25


 
 

                 
                 
  For the Nine Months Ended September 30, 2017            
     IMTT   Atlantic Aviation   Contracted Power (1)   MIC Hawaii (1)   MIC Corporate   Proportionately Combined (2)     Contracted
Power
100%
  MIC Hawaii 100%
     ($ in Thousands) (Unaudited)            
Net income (loss)     67,184       60,225       9,858       16,009       (58,181 )       95,095                9,604       16,004  
Interest expense, net (3)     30,707       13,648       18,177       5,789       19,419       87,740                20,431       5,795  
Provision (benefit) for income taxes     46,686       36,766       8,209       10,772       (37,149 )       65,284                8,209       10,772  
Depreciation and amortization     93,826       73,894       39,390       10,908             218,018                45,031       10,922  
Fees to Manager-related party                             54,610       54,610                       
Pension expense (4)     5,649       15             817             6,481                      817  
Other non-cash expense (income), net (5)     315       1,252       (6,148 )       3,108       534       (939 )             (6,170 )       3,108  
EBITDA excluding non-cash items     244,367       185,800       69,486       47,403       (20,767 )       526,289             77,105       47,418  
EBITDA excluding non-cash items     244,367       185,800       69,486       47,403       (20,767 )       526,289                77,105       47,418  
Interest expense, net (3)     (30,707 )       (13,648 )       (18,177 )       (5,789 )       (19,419 )       (87,740 )                (20,431 )       (5,795 )  
Convertible senior notes interest (6)           (5,769 )                   5,769                             
Adjustments to derivative instruments recorded in interest expense, net (3)     (257 )       3,150       (1,088 )       112             1,917                (1,282 )       113  
Amortization of debt financing costs (3)     1,236       819       1,094       303       2,969       6,421                1,137       303  
Amortization of debt discount (3)                             2,377       2,377                       
(Provision) benefit for current income taxes     (3,069 )       (5,810 )       7       (5,265 )       5,645       (8,492 )                6       (5,265 )  
Changes in working capital (7)     (12,413 )       (6,667 )       (9,089 )       (13,072 )       (6,691 )       (47,932 )             (8,771 )       (13,093 )  
Cash provided by (used in) operating activities     199,157       157,875       42,233       23,692       (30,117 )       392,840                47,764       23,681  
Changes in working capital (7)     12,413       6,667       9,089       13,072       6,691       47,932                8,771       13,093  
Maintenance capital expenditures     (13,563 )       (5,071 )       (22 )       (4,406 )             (23,062 )             (22 )       (4,406 )  
Proportionately Combined Free Cash Flow     198,007       159,471       51,300       32,358       (23,426 )       417,710             56,513       32,368  

(1) Represents MIC’s proportionately combined interests in the businesses comprising these reportable segments.
(2) The sum of the amounts attributable to MIC in proportion to its ownership.
(3) Interest expense, net, includes adjustments to derivative instruments, non-cash amortization of deferred financing fees and non-cash amortization of debt discount related to the 2.00% Convertible Senior Notes due October 2023.
(4) Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses.
(5) Other non-cash expense (income), net, primarily includes non-cash amortization of tolling liabilities, unrealized gains (losses) on commodity hedges and non-cash gains (losses) related to the disposal of assets. Other non-cash expense (income), net, also includes the write-down of our investment in CPI for the quarter and nine months ended September 30, 2018. See “Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items, Free Cash Flow and Proportionately Combined Metrics” above for further discussion.
(6) Represents the cash interest expense reclassified from MIC Corporate to Atlantic Aviation related to the 2.00% Convertible Senior Notes due October 2023, proceeds of which were used to pay down a portion of Atlantic Aviation’s credit facility in October 2016.
(7) Conformed to current period presentation for the adoption of ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. See Note 2, “Basis of Presentation”, in our Notes to Consolidated Condensed Financial Statements in Part I of Form 10-Q for the quarter ended September 30, 2018.

26


 

 

Exhibit 99.2

 

Media Release

 

MIC MANAGER WAIVES CERTAIN FEES UNDER MANAGEMENT

SERVICES AGREEMENT, ENHANCES ALIGNMENT OF

EXECUTIVE COMPENSATION

 

·          Manager waives fees in excess of 1% of equity market capitalization, reduces fees by approximately $10.0 million per year

 

·          Manager requires minimum share ownership by CEO and CFO, Compensation Committee to have additional input on executive performance and pay

 

 

 

NEW YORK, October 31, 2018 - Macquarie Infrastructure Corporation (NYSE: MIC) announced that its external manager, Macquarie Infrastructure Management (USA) Inc. (MIMUSA or Manager), will waive portions of the base management fees to which it is entitled under the Management Services Agreement between the two entities. The waiver is effective from November 1, 2018.

 

The Manager has also implemented changes to the compensation plans for MIC’s chief executive officer and chief financial officer, both of whom are seconded to MIC by the Manager. The changes include the implementation of minimum shareholding requirements and additional input on the part of the Company’s Compensation Committee to better align the incentives of the executives with those of shareholders more broadly.

 

“The independent members of the MIC Board of Directors support the decision by the Manager to waive certain base management fees,” said Norman Brown, MIC’s lead independent director. “With these changes, together with the addition to the MIC board of our current CEO and two new independent directors, we continue to address concerns raised by stakeholders earlier this year. Furthermore, these changes greatly improve the alignment of interest between the Manager, our senior executives and our shareholders.”

 

Management Services Agreement

 

MIMUSA has waived two components of the base management fee formula and significantly reduced the base management fees payable by MIC. Specifically, the Manager will cap the base management fee at 1.0% of MIC’s equity market capitalization. The Manager will also waive any fees to which it may be entitled as a result of the Company maintaining holding company level debt. The waivers result in a reduction in the fees paid to the Manager of approximately $10.0 million per year based on MIC’s market value and capital structure at the end of the third quarter.

 

 

 

 

 

MIC expects MIMUSA to continue to reinvest any base management fees to which it may be entitled in new primary shares of the Company. The waiver has no impact on the existing performance fee structure.

 

Although MIMUSA reserves the right to revoke the fee waiver and revert to the prior terms of the agreement subject to providing the Company with not less than a one year notice, MIC believes MIMUSA has no current intent to do so. A revocation of the waiver would not trigger a recapture of previously waived fees.

 

Executive Compensation

 

The Company and the Manager are also enacting several changes to executive compensation to better align incentives and provide greater oversight from the independent members of the MIC Board of Directors. MIC’s chief executive officer and chief financial officer will be subject to minimum shareholding requirements. In addition, the Company’s Compensation Committee will have a larger role in the setting of performance targets and pay.

 

MIC’s chief executive officer will be required to purchase and maintain a position in shares of MIC equal to not less than six times base compensation. MIC’s chief financial officer will be required to purchase and maintain a position of not less than two times base compensation. The current executives have until the end of January in 2022 to accumulate their respective positions.

 

The Compensation Committee of the MIC Board of Directors, comprising solely independent members of the Board, will participate to a greater extent in an annual process with the Manager of setting performance objectives, evaluating actual performance, and providing input to the Manager on annual compensation decisions.

 

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

 

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.

 

 

For further information, please contact:

 

Investors

Jay A. Davis

Investor Relations

MIC

+1 212-231-1825

 

 

Media

Melissa McNamara

Corporate Communications

MIC

+1 212-231-1667