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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________

FORM 10-K
________________________
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2019
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to           
Commission File Number: 001-32384
________________________
MACQUARIE INFRASTRUCTURE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
________________________
Delaware
 
43-2052503
(Jurisdiction of Incorporation
or Organization)
 
(IRS Employer
Identification No.)
125 West 55th Street
New York, New York 10019
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (212) 231-1000
________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class:
 
Trading Symbol
 
Name of Exchange on Which Registered:
Common stock, par value $0.001 per share
 
MIC
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x Noo
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
☒
 
Accelerated Filer
☐
 
 
 
Non-accelerated Filer
☐
 
Smaller Reporting Company
☐
 
Emerging Growth Company
☐
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
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
The aggregate market value of the outstanding shares of stock held by non-affiliates of Macquarie Infrastructure Corporation at June 30, 2019 was $2,219,548,841 based on the closing price on the New York Stock Exchange on that date. This calculation does not reflect a determination that persons are affiliates for any other purposes.
There were 86,742,424 shares of common stock, with $0.001 par value, outstanding at February 21, 2020.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive proxy statement relating to Macquarie Infrastructure Corporation’s Annual Meeting of Stockholders for fiscal year ended December 31, 2019, to be held May 14, 2020 is incorporated by reference in Part III to the extent described therein.
 

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE CORPORATION
TABLE OF CONTENTS
 
 
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FORWARD-LOOKING STATEMENTS
We have included or incorporated by reference into this report, and from time to time may make in our public filings, press releases or other public statements, certain statements that may constitute forward-looking statements. These include without limitation those under “Business” in Part I, Item 1, “Risk Factors” in Part I, Item 1A, “Legal Proceedings” in Part I, Item 3, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7, and “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A. In addition, our management may make forward-looking statements to analysts, investors, representatives of the media and others. These forward-looking statements are not historical facts and represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and beyond our control. We may, in some cases, use words such as “project”, “believe”, “anticipate”, “plan”, “expect”, “estimate”, “intend”, “should”, “would”, “could”, “potentially”, “may” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements.
In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are identifying important factors that, individually or in the aggregate, could cause actual results to differ materially from those contained in any forward-looking statements made by us. Any such forward-looking statements are qualified by reference to the following cautionary statements.
Forward-looking statements in this report are subject to a number of risks and uncertainties, some of which are beyond our control, including, among other things:
•
the sale of the Company or any of its operating businesses as a result of our pursuit of strategic alternatives, or the termination of the sale effort;
•
changes in general economic, business or demographic conditions or trends in the U.S., including changes in GDP, interest rates and inflation, or changes in the political environment;
•
any event or occurrence that may limit our ability to pay or increase our dividend;
•
our ability to conclude a sufficient number of attractive growth projects, deploy growth capital in amounts consistent with our objectives in the prosecution of those and achieve targeted risk-adjusted returns on any growth project;
•
our ability to implement operating and internal growth strategies;
•
our ability to achieve targeted cost savings whether through the implementation of a shared services center or otherwise;
•
changes in demand and the markets for chemical, refined petroleum and vegetable and tropical oil products, the relative availability of tank storage capacity and the extent to which such products are imported or exported;
•
changes in patterns of commercial or general aviation (GA) air travel, including variations in customer demand;
•
the regulatory environment, including federal and state level energy policy, and the ability to estimate compliance costs, comply with any changes thereto, rates implemented by regulators, and the relationships and rights under and contracts with governmental agencies and authorities;
•
disruptions or other extraordinary or force majeure events and the ability to insure against losses resulting from such events or disruptions;
•
sudden or extreme volatility in commodity prices;
•
changes in competitive dynamics affecting our businesses;
•
technological innovations leading to changes in energy production, distribution and consumption patterns;
•
our ability to make, finance and integrate acquisitions and the quality of financial information and systems of acquired entities;
•
fluctuations in fuel costs, or the costs of supplies upon which our gas processing and distribution business is dependent, and the ability to recover increases in these costs from customers;
•
our ability to service, comply with the terms of and refinance at maturity our indebtedness, including due to dislocation in debt markets;
•
our ability to make alternate arrangements to account for any disruptions or shutdowns that may affect suppliers’ facilities or the operation of the barges upon which our gas processing and distribution business is dependent;
•
environmental risks, including the impact of climate change and weather conditions;
•
sudden or substantial changes in energy costs;

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•
unplanned outages and/or failures of technical and mechanical systems;
•
security breaches, cyber-attacks or similar disruptions to our operations;
•
payment of performance fees, if any, and base management fees to our Manager that could reduce distributable cash if paid in cash or could dilute existing stockholders if satisfied with the issuance of shares;
•
changes in U.S. income tax laws;
•
changes in labor markets, work interruptions or other labor stoppages;
•
our Manager’s affiliation with the Macquarie Group or equity market sentiment, which may affect the market price of our shares;
•
our limited ability to remove our Manager for underperformance and our Manager’s right to resign;
•
governmental shutdowns or budget delays;
•
unanticipated or unusual behavior of municipalities and states brought about by financial distress; and
•
the extent to which federal spending reduces the U.S. military presence in Hawaii or flight activity at airports at which Atlantic Aviation operates.
Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. A description of risks that could cause our actual results to differ appears under the caption “Risk Factors” in Part I, Item 1A and elsewhere in this report. It is not possible to predict or identify all risk factors and you should not consider that description to be a complete discussion of all potential risks or uncertainties that could cause our 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 report may not occur. These forward-looking statements are made as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should, however, consult further disclosures we may make in future filings with the Securities and Exchange Commission (SEC).
Macquarie Infrastructure Corporation (MIC) 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 MIC.

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PART I
ITEM 1. BUSINESS
MIC is a Delaware corporation formed on May 21, 2015. MIC’s predecessor, Macquarie Infrastructure Company LLC, was formed on April 13, 2004. Except as otherwise specified, all references in this Form 10-K to “MIC”, “we”, “us”, and “our” refer to Macquarie Infrastructure Corporation and its subsidiaries.
MIC Level Strategy

In October 2019, in addition to the active management of our existing portfolio of businesses, our Board resolved to simultaneously pursue strategic alternatives including potentially a sale of our Company or our operating businesses as a means of unlocking additional value for stockholders. We have not set a timetable for completing any transaction and there can be no assurance that any transaction(s) will occur on favorable terms or at all.
While we are pursuing a sale or sales, we continue to own, operate and intend to invest in our portfolio of infrastructure and infrastructure-like businesses with the objective of increasing the amount of Free Cash Flow they generate over time. Currently, we are focused on three strategic priorities:
1.
Investing in high-value, long-lived physical assets and extending the duration of revenue generating contracts or concessions;
2.
Prudently managing our financial resources by pursuing projects with returns appropriately in excess of our cost of capital that are expected to increase the cash generating capacity of our businesses over the long term; and
3.
Enhancing our financial strength and flexibility by maintaining an appropriate level of debt relative to the cash generating capacity of our businesses and by optimizing the cost and tenor of such debt.
We expect these efforts will, collectively, produce growth in the amount of cash generated by our businesses consistent with maintaining the highest level of environmental, health and safety and governance standards.
General
We currently own and operate a portfolio of infrastructure and infrastructure-like businesses that provide services to corporations, government agencies and individual customers primarily in the United States (U.S.). Our operations are organized into four segments:
•
International-Matex Tank Terminals (IMTT):  a business providing bulk liquid storage and handling services to third-parties at 17 terminals in the U.S. and two in Canada;
•
Atlantic Aviation:  a provider of fuel, terminal, aircraft hangaring and other services primarily to owners and operators of general aviation (GA) jet aircraft at 70 airports throughout the U.S.;
•
MIC Hawaii:  comprising an energy company that processes and distributes gas and provides related services (Hawaii Gas) and several smaller businesses collectively engaged in efforts to reduce the cost and improve the reliability and sustainability of energy in Hawaii; and
•
Corporate and Other:  comprising MIC Corporate (holding company headquarters in New York City) and a shared services center in Plano, Texas.
Effective October 1, 2018, the Bayonne Energy Center (BEC) and substantially all of our portfolio of solar and wind power generation businesses were classified as discontinued operations and our Contracted Power segment was eliminated. All prior comparable periods have been restated to reflect this change. By the end of September 2019, we completed the sales of all of our renewables businesses including our majority interest in a renewable power development business. A remaining relationship with a third-party developer of renewable power facilities has been reported as a component of Corporate and Other through the expiration of the relationship in July 2019.
Managing the deployment of growth capital effectively has been and is expected to continue to be an important part of our strategy and the creation of stockholder value. Our sources of growth capital include the retained capital generated by our businesses but not distributed as a cash dividend to our stockholders, capital generated through the issuance of additional debt and/or equity securities, or the proceeds from the sale of entire or portions of certain businesses. Over time, we expect to deploy growth capital in projects and bolt-on acquisitions across our businesses although we are not obligated to invest in the growth of any one business or segment or in any new segment. In addition, we seek to drive stockholder value by focusing on business performance improvement. These efforts include upgrading systems and technology, implementing data analytics tools and developing cross business efficiencies among others.

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Businesses
Our businesses, in general, are defined by a combination of the following characteristics:
•
ownership of long-lived, high-value physical assets that are difficult to replicate or substitute for;
•
being platforms for the deployment of growth capital;
•
having broadly consistent demand for their services over the longer term;
•
benefiting from relatively high operational leverage, such that increases in top-line growth can generate larger increases in earnings before interest, taxes, depreciation and amortization (EBITDA);
•
the provision of basic, often essential services;
•
having generally predictable maintenance capital expenditure requirements; and
•
having generally favorable competitive positions, largely due to high barriers to entry, including:
•
high initial development and construction costs;
•
difficulty in obtaining suitable land on which to operate;
•
high costs of customer switching;
•
long-term concessions, leases or customer contracts; and
•
lack of immediate, cost-effective alternatives for the services provided.
The businesses that comprise our Company exhibit these above characteristics to different degrees and at different times. For example, a more macro-economically correlated business like Atlantic Aviation may exhibit more volatility during periods of economic downturn than businesses with substantially contracted revenue streams. While not every business we own will meet all of the criteria described above, we seek to own a diversified portfolio of businesses that possesses a balance of these characteristics.
In addition to the benefits associated with these characteristics, net margins generated by most of our businesses tend to keep pace with historically normal rates of inflation. The price escalators built into many customer contracts, and the inflation and cost pass-through adjustments that are typically included in pricing, serve to insulate our businesses to a significant degree from the negative effects of inflation and commodity price fluctuations.
Our Manager
Macquarie Infrastructure Management (USA) Inc. (our Manager) serves as the external manager of our Company. Together we are parties to a Management Services Agreement pursuant to which our Manager provides corporate headquarters functions and services to the Company. Our Manager is a member of the Macquarie Group, a diversified international provider of financial, advisory and investment services. The Macquarie Group is headquartered in Sydney, Australia and is a global leader in the management of infrastructure investment vehicles on behalf of third-party investors and an advisor on the acquisition, disposition and financing of infrastructure assets.
We pay our Manager a monthly base management fee of 1% of our equity market capitalization less any cash balances at the holding company. For this, in accordance with the Management Services Agreement, our Manager provides normal ongoing corporate headquarters functions such as facilities, technology, employee benefits and access to services including human resources, legal, finance, tax and accounting among others. Our Manager is responsible for and oversees the management of our operating businesses, subject to the oversight and supervision of our Board. Our Manager compensates and has assigned, or seconded, to us our chief executive officer and chief financial officer on a full-time basis. It also compensates and seconds, or makes available, other personnel as required. MIC has no employees at the holding company level.
Our Manager may also earn a performance fee if the quarterly total return (capital appreciation plus dividends) for our stockholders is positive and exceeds the quarterly total return of a U.S. utilities index benchmark both in the quarter and cumulatively. If payable, the performance fee is equal to 20% of the difference between the benchmark return and the total return for our stockholders during the quarter. Per the terms of the Management Services Agreement, our Manager currently reinvests any base management or performance fees in new primary shares of our Company. Our Manager may elect to receive either base management or performance fees, if any, in cash but may only change its election during a 20-trading day window following our earnings release. Any change would apply to fees to which it was entitled thereafter.

4

To facilitate our pursuit of strategic alternatives, we announced that we entered into a Disposition Agreement (Disposition Agreement) with our Manager on October 30, 2019 (see Exhibit 10.3 of this Form 10-K). Outside of this agreement, we have limited ability to terminate the Management Services Agreement. With this agreement, our Management Services Agreement with our Manager will terminate as to any businesses, or substantial portions thereof, that are sold and, in connection therewith, we will make payments to our Manager calculated in accordance with the Disposition Agreement. The Disposition Agreement will terminate on the earlier to occur of (i) the termination of the Management Services Agreement and (ii) the sixth anniversary, subject to extension under certain circumstances if a transaction is pending.
Our Businesses
Use of Non-GAAP measures
In addition to our results under U.S. GAAP, we use certain non-GAAP measures including EBITDA excluding non-cash items and Free Cash Flow to assess the performance and prospects of our businesses.
We measure EBITDA excluding non-cash items as it reflects our businesses’ ability to effectively manage the amount 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.
In analyzing the financial performance of our businesses, we focus primarily on cash generation and Free Cash Flow in particular. We believe investors use Free Cash Flow as a measure of our ability to sustain and potentially increase our quarterly cash dividend and to fund a portion of our growth.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Consolidated — Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow” for further information on our calculation of EBITDA excluding non-cash items and Free Cash Flow and for reconciliations of these non-GAAP measures to the most comparable GAAP measures.
IMTT
Industry Overview
Bulk liquid terminals provide important infrastructure in the supply chain for a broad range of liquid commodities. They provide vital logistics services to oil producers and marketers, refiners, chemical manufacturers, renewable fuel producers, vegetable and tropical oil processors and commodity traders. Customers typically pay terminal operators such as IMTT on an ‘availability’ or ‘take or pay’ basis to provide tank capacity, loading and unloading access, and pipeline and trans-loading capacity, and also pay additional fees for ancillary services such as heating, throughput, blending and logistics.
A number of factors influence demand for bulk liquid terminals in the U.S. To some extent, demand for storage rises and falls according to local and regional consumption. In addition, import and export activity accounts for a material portion of the business. Shippers require storage for the staging, aggregation and/or distribution of products before and after transport. The extent of import/export activity depends on macroeconomic factors, such as currency fluctuations, as well as industry-specific conditions, such as supply and demand imbalances in different geographic regions. Demand for storage is also driven by fluctuations in the current and perceived future price and demand for the product being stored and the resulting price arbitrage.
Potential entrants into the bulk liquid terminals business face several barriers. Strict environmental regulations, availability of suitable land with connectivity to pipeline and transport logistics, including marine, road and rail infrastructure, local community resistance and initial investment costs may limit the construction of new bulk liquid terminals. These barriers are typically higher around waterways near major urban centers. As a consequence, new tanks are generally built where existing docks, pipelines and other infrastructure can support them. However, restrictions on land use, difficulties in securing environmental permits, and the potential for operational bottlenecks due to constraints on related infrastructure may limit the ability of existing terminals to expand the storage capacity of their facilities.
Business Overview
IMTT is one of the largest providers of independent, or third-party, bulk liquid terminal services in the U.S., based on capacity. IMTT handles products consumed by a diverse range of users in both domestic and foreign markets. IMTT stores or handles primarily refined petroleum products, various commodity and specialty chemicals, renewable fuels and vegetable and tropical oils (collectively liquid commodities). Crude oil constitutes an immaterial portion of IMTT’s overall storage and handling operations. The business operates 19 terminals including 17 in the U.S. and two in Canada (one partially owned) with principal operations in the New York Harbor market and on the Lower Mississippi River.
Since our initial investment in IMTT in May 2006, we have deployed capital in the growth and development of additional storage capacity, facilities and related infrastructure (pipes, pumps, docks, etc.) and acquisitions of facilities in Illinois and a portfolio of terminals primarily in the U.S. Southeast. We expect to be able to continue to deploy capital in the growth and expansion of storage capacity and capabilities and to generate attractive risk-adjusted returns.

5
IMTT — (continued)

IMTT's financial results for 2019 reflects a $39 million contract termination payment (the termination payment). Following is summary financial information for IMTT ($ in millions):
 
As of, and for the
Year Ended, December 31,
2019
 
2018
Revenue
$
515

 
$
510

Net income
71

 
63

EBITDA excluding non-cash items(1)
288

 
286

Total assets
4,172

 
4,020

_____________
(1)
See “Business — Our Businesses” in Part I, Item 1 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” in Part II, Item 7, for further information and a reconciliation of net income (loss) to EBITDA excluding non-cash items.
The table below summarizes the revenue generated by product type by IMTT in 2019, excluding the termination payment:
Refined Products
 
Chemical
 
Renewable/Vegetable
 & Tropical Oil
 
Other
55%
 
32%
 
7%
 
6
%
Locations
As of December 31, 2019, IMTT comprised the following facilities and storage capacity, not including tanks used in packaging, recovery tanks, and/or other storage capacity not typically leased.
Facility
 
Land
 
Aggregate Capacity
of Storage Tanks
in Service
(Millions of Barrels)
 
Percent of
Ownership
Facilities in the United States:
 
 
 
 
 
 
Lower Mississippi River Terminals (4)
 
Owned
 
20.6

 
100.0
%
Bayonne Terminal
 
Owned
 
15.9

 
100.0
%
Other Terminals (12)
 
Owned
 
6.8

 
100.0
%
Facilities in Canada:
 
 
 
 
 
 
Quebec City, Quebec
 
Leased
 
2.0

 
100.0
%
Placentia Bay, Newfoundland
 
Leased
 
3.0

 
20.1
%
Total
 
 
 
48.3

 
 
IMTT facilities generally operate 24 hours a day providing customers with prompt access to a wide range of logistical services. In each of its two key markets, IMTT’s scale ensures availability of sophisticated product handling capabilities. IMTT seeks to continuously improve speed and flexibility of operations at its facilities by investing in upgrades of its docks, pipelines and pumping infrastructure and facility management systems.
Lower Mississippi River Terminals (50% of gross profit, excluding the termination payment)
On the Lower Mississippi River, IMTT currently operates four terminals (St. Rose, Gretna, Avondale and Geismar). With combined storage capacity of 20.6 million barrels, the four sites give IMTT substantial market share in the storage and handling of refined petroleum products, bulk liquid chemicals, vegetable and tropical oils on the strategically important Lower Mississippi River. These terminals serve a predominantly import/export market.
The Lower Mississippi River facilities also give IMTT a substantial presence in a key domestic transport hub. The Lower Mississippi River serves as a major transshipment point for agricultural products (such as ethanol, vegetable and tropical oils) and commodity chemicals (such as methanol) between the central U.S. and the rest of the world. The region also has substantial traffic related to the refined petroleum industry. Lower Mississippi River refiners and traders send products to other regions of the U.S. and overseas and use IMTT’s Lower Mississippi River facilities to provide aggregation and transshipment services. The Lower Mississippi River facilities also serve as an aggregation point for feedstocks prior to being utilized by refinery and chemical plant

6
IMTT — (continued)

processing units located nearby. These facilities enjoy relatively unencumbered marine and road access when compared to other, more congested waterways such as the Houston Ship Channel.
Bayonne Terminal (33% of gross profit, excluding the termination payment)
Located on the Kill Van Kull between New Jersey and Staten Island, New York, the 15.9 million barrel capacity IMTT-Bayonne Terminal occupies an attractive position in New York Harbor where it has substantial market share. New York Harbor serves as the main refined petroleum products distribution hub in the northeast U.S. and a physical settlement site for certain futures contracts traded on the New York Mercantile Exchange (NYMEX). In addition to waterborne shipments, products reach New York Harbor through refined petroleum product pipelines including the Colonial Pipeline which originates in Houston, Texas. Pipelines also move imports and exports of refined petroleum products to and from New York Harbor and various inland markets. With connections to the Colonial, Buckeye and Harbor refined petroleum product pipelines, as well as rail and road connectivity and blending capabilities, the IMTT-Bayonne Terminal provides its customers with considerable logistical and commercial flexibility.
IMTT-Bayonne has the capability to quickly load and unload the largest bulk liquid transport ships entering New York Harbor which is an important competitive advantage. The U.S. Army Corp of Engineers has dredged the Kill Van Kull channel passing the IMTT-Bayonne docks to 50 feet. IMTT has dredged two of its docks to 47 feet, allowing large vessels to dock, load and unload products. Most of IMTT’s competitors in New York Harbor have facilities located on the southern portion of the Arthur Kill (water depth of approximately 37 feet), and large ships must transfer a portion of their cargoes to barges before docking (in a process known as lightering). Lightering increases the cost and time associated with loading and unloading.
Competition
The competitive environment in which IMTT operates varies by terminal location and product. The principal competition for each of IMTT’s facilities comes from other bulk liquid terminals located in the same regional market. Secondary competition for IMTT’s facilities comes from bulk liquid terminals located in the same broad geographic region as IMTT’s terminals. For example, IMTT’s Lower Mississippi River facilities indirectly compete for certain products with bulk liquid terminals located on the Houston Ship Channel.
Independent terminal operators generally compete based on location, connectivity and versatility of facilities, service and price. The services typically provided by the terminal include, among other things, the safe storage of the product at specified temperature, moisture and other conditions, as well as receipt and delivery from the terminal, all of which must comply with applicable environmental regulations. A terminal with a favorable location will have access to a variety of cost-effective transportation modes, both to and from the terminal. Transportation modes typically include waterways, railroads, roadways and pipelines. A terminal operator’s ability to obtain attractive prices is often dependent on the quality, versatility and reputation of its facilities.
IMTT faces significant competition from a variety of international, national and regional energy companies, including large, diversified midstream entities, global terminal operators and large multi-national energy companies. IMTT also faces competition through customers handling and transporting the products themselves or choosing other means of delivering products such as interstate pipelines. We believe that IMTT is favorably positioned to compete in the industry due to the strategic location of its terminals on the Lower Mississippi River and in New York Harbor and certain secondary markets, its reputation, the prices charged for its services and the connectivity, quality and versatility of those services. We believe that IMTT’s proximity to petroleum refineries and chemical plants in both of its key markets and to the very substantial end use market in the Northeast are sources of competitive advantage and provide diversity in our revenue.
As noted above, we believe that significant barriers to entry exist in the bulk liquid storage and handling services business. These barriers include large capital requirements and execution risk, a lengthy permitting and development cycle, financing challenges, a finite number of sites suitable for development, operating expertise and customer relationships.
Customers
IMTT provides bulk liquid storage and handling services primarily to oil refiners and marketers, chemical manufacturers, renewable fuel producers, vegetable and tropical oil processors and commodity traders. These customers, in turn, serve a range of end users in both domestic and foreign markets. Within its terminals, IMTT can repurpose tanks and related infrastructure for various bulk liquid products both to respond to and to anticipate changes in customer demand. IMTT does not depend on a single customer, the loss of which would have a material adverse effect on IMTT.
In 2019, excluding the termination payment, approximately 52% of IMTT’s revenue was generated by its top ten customers, of which eight were rated investment grade and two were not rated. Customers typically sign contracts which, among other things, provide for a fixed periodic payment (usually monthly) for access to and use of IMTT’s facilities. These payments may be expressed in terms of cents per barrel of capacity, a dollar amount per unit of infrastructure, or a dollar amount per month. The amounts are payable whether or not the customer uses the facilities and services and do not include additional charges for additional throughput

7
IMTT — (continued)

or ancillary services. In 2019, excluding the termination payment, approximately 81% of IMTT’s revenues were generated from these ‘availability’ style payments.
IMTT is responsible for exercising appropriate care of the products stored at its facilities and believes it maintains adequate insurance with respect to its exposure. IMTT does not have material direct exposure to short-term commodity price fluctuations because it typically does not purchase or market the products that it handles. IMTT’s customers retain title to products stored and have responsibility for securing insurance or self-insuring against loss or fluctuation in value.
Regulation
The rates that IMTT charges for its services are not subject to regulation. However, agencies including the United States Environmental Protection Agency, New Jersey Department of Environmental Protection, Louisiana Department of Environmental Quality, Department of Transportation, Department of Homeland Security and the United States Coast Guard, regulate IMTT’s operations. IMTT must comply with numerous federal, state and local environmental, occupational health and safety, security, tax and planning statutes and regulations. These regulations require IMTT to obtain and maintain permits to operate its facilities and impose standards that govern the way IMTT operates its business. If IMTT does not comply with the relevant regulations, it could lose its operating permits and/or incur fines and increased liability. While changes in environmental, health and safety regulations pose a risk of higher operating costs, such changes are generally phased in over time to manage the impact on both the industry and the business.
Few of IMTT’s facilities require significant environmental remediation. The facilities that require remediation are overseen by various state and federal agencies. Remediation efforts entail removal of the free product, groundwater control and treatment, soil treatment, repair/replacement of sewer systems, and the implementation of containment and monitoring systems. In some cases, these remediation activities are expected to continue for an additional ten to twenty years, or more. See “Legal Proceedings” in Part I, Item 3, for further discussions.
Employees
As of December 31, 2019, IMTT (excluding the terminal in Canada partially owned) had a total of 909 employees, of which 281 employees were subject to collective bargaining agreements. We believe relations with both union and non-union employees at IMTT are generally good.
The day-to-day operations of IMTT are managed by individual terminal managers who are responsible for most aspects of the operations. IMTT’s operations are overseen by senior personnel with significant experience in the bulk liquid terminals industry. The business is headquartered in New Orleans, Louisiana.
Atlantic Aviation
Industry Overview
Fixed based operations (FBOs) primarily service the GA segment of the air transportation industry. Local airport authorities own the airport properties and grant FBO operators a long-term ground lease that includes the right to provide fueling and other services. Fueling services provide the majority of an FBO’s revenue and gross margin.
FBOs often operate in environments with high barriers to entry. Airports tend to have limited physical space for additional FBO(s) and airport authorities generally do not have an incentive to add FBOs unless there is a significant demand for services that cannot be met by the existing FBO at the airport. Development of a new FBO requires securing airport approvals, completing the design and construction of the FBO and may involve substantial time and capital. Furthermore, airports typically impose minimum standards with respect to the experience, capital investment and breadth of services provided by the FBO.
The ownership of FBOs in the U.S. is highly fragmented with most facilities individually owned and operated rather than part of networks. Consolidation has been and is expected to continue to be an important feature of the industry as larger networks are able to achieve economies of scale in fuel and insurance purchasing, marketing and back office operations compared with individual owners/operators.
Demand for FBO services is driven broadly by economic activity and the level of GA flight activity, the latter defined as the number of take-offs and landings in a given period. We believe GA flight activity will continue to expand at rates broadly consistent with overall economic activity in the U.S.
Business Overview
At December 31, 2019, Atlantic Aviation operated FBOs at 70 airports in the U.S. Atlantic Aviation’s FBOs provide fuel, terminal, aircraft hangaring and other services primarily to owners/operators of GA aircraft, but also to commercial, military, freight and government aviation customers.

8
Atlantic Aviation — (continued)

Atlantic Aviation has been a part of the MIC portfolio since our IPO. In December 2004, the business owned and operated a total of 16 FBOs. Through a roll-up of FBOs, we have increased the size of the network to a total of 70 facilities. Consistent with our strategy of seeking to optimize the portfolio, we have exited markets we believe have limited growth potential in favor of entering those with better prospects. Since our IPO, we have deployed capital in Atlantic Aviation in the acquisition of FBOs and projects including the construction of terminals and aircraft hangars, fuel tank farms, aircraft parking (ramps) and a range of smaller projects.
Following is summary financial information for Atlantic Aviation ($ in millions):
 
As of, and for the
Year Ended, December 31,
 
2019
 
2018
Revenue
$
972

 
$
962

Net income
69

 
96

EBITDA excluding non-cash items(1)
276

 
263

Total assets
2,060

 
1,676

_____________
(1)
See “Business — Our Businesses” in Part I, Item 1 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” in Part II, Item 7, for further information and a reconciliation of net income (loss) to EBITDA excluding non-cash items.
Operations
Atlantic Aviation operates high-quality facilities and focuses on attracting customers who desire personalized service. Fuel sales generated approximately 60% of gross margin in 2019. Other services, including de-icing, aircraft parking and hangar rental, aircraft cleaning and catering provided the balance. Fuel is stored in tank farms owned either by Atlantic Aviation or by the airport and Atlantic Aviation operates owned or leased refueling vehicles to move fuel from the tank farms to the aircraft being serviced. At some of Atlantic Aviation’s locations, services are also provided to commercial airlines, freight operators and military and government users. Services provided to the airlines may include refueling from the airline’s own fuel supplies, de-icing and/or ground and ramp handling services.
Atlantic Aviation buys fuel at a wholesale price and sells fuel to customers either at a contracted price, or at a price negotiated at the point of purchase. While wholesale fuel prices can vary, Atlantic Aviation generally passes any changes through to customers and seeks to maintain and, when possible, increase its dollar-based margin per gallon. In general, the business has minimal exposure to commodity price fluctuations as it carries a limited inventory of jet fuel.
Atlantic Aviation continuously evaluates opportunities to reduce costs. Such opportunities may include business reengineering, more efficient purchasing, partnering with service providers and/or capturing synergies in acquisitions.
Locations
Atlantic Aviation’s FBOs operate pursuant to long-term leases from the airport authorities who own or manage the airport. Atlantic Aviation works with these airport authorities to optimize lease lengths through capital improvements or other enhancements to the airport.
Atlantic Aviation’s EBITDA-weighted average remaining lease length (including leases extendable at Atlantic Aviation’s sole discretion) was 19.0 years and 19.9 years at December 31, 2019 and 2018, respectively. The leases at ten of Atlantic Aviation’s FBOs, collectively accounting for approximately 16% of Atlantic Aviation’s gross margin, are expected to be renegotiated and extended within the next five years. No individual FBO generated more than 10% of Atlantic Aviation’s gross margin at December 31, 2019.
The airport authorities have certain termination rights in each of Atlantic Aviation’s leases of the FBO. These rights allow for termination if Atlantic Aviation defaults on the terms and conditions of the lease, abandons the property or becomes insolvent or bankrupt. Many of the leases allow for termination if liens are filed against the property. Leases related to fewer than twenty airports generally may be terminated for convenience or similar reasons. In these cases, generally, there are compensation agreements based on good faith negotiation, amortization schedules or obligations of the airport authority to make best efforts to remedy the FBO.
Atlantic Aviation periodically evaluates its portfolio of FBOs and occasionally concludes that some of its sites do not have scale or do not serve a market with sufficiently strong growth prospects to warrant continued operations at these locations. In these cases, it may elect to sell the site or not renew the lease upon maturity.

9
Atlantic Aviation — (continued)

Marketing
Atlantic Aviation has a number of marketing programs, each utilizing data derived from a proprietary point-of-sale system. This system supports activity tracking and provides customer relationship management data that facilitates the optimization of services provided to each customer.
Atlantic Aviation also maintains a loyalty program for pilots, Atlantic Awards, that provides an incentive to purchase fuel from Atlantic Aviation. Awards are recorded as a reduction in revenue in Atlantic Aviation’s consolidated financial statements.
Competition
Atlantic Aviation competes with other FBO operators at more than half of its locations, and its facilities may also face indirect competition from FBOs located at nearby airports. The FBOs compete based on the location of the facility relative to runways and street access, quality of customer service, safety, reliability, value-added features and price. Each FBO also faces competitive pressure resulting from the fact that aircraft may take on enough fuel at one location and not need to refuel at a specific destination.
Atlantic Aviation’s main competitors are Signature Flight Support, Jet Aviation, Million Air, Sheltair Aviation, TAC Air and Ross Aviation. To our knowledge, other than Signature Flight Support, no competitor operated more than 25 FBOs in the U.S. at December 31, 2019.
Customers
Atlantic Aviation does not depend on a single customer, the loss of which would have a material adverse effect on the business.
Regulation
The FBO industry is overseen by agencies, including the Department of Homeland Security, Department of Transportation, Environmental Protection Agency and state and local environmental agencies, but its primary regulator is the Federal Aviation Administration (FAA). In addition, local airport authorities also regulate FBOs. The business must comply with federal, state and local environmental statutes and regulations associated in part with the operation of fuel storage tank systems and mobile fueling vehicles. These requirements include tank and pipe testing for tightness, soil sampling for evidence of leaking and remediation of detected leaks and spills.
Atlantic Aviation’s FBOs are subject to regular inspection by local environmental agencies as well as local fire marshals and other agencies. The business does not expect that compliance and related remediation work, if any, will have a material negative impact on earnings or the competitive position of Atlantic Aviation. The business has not received notice requiring it to cease operations at any location or of any abatement proceeding by any government agency as a result of failure to comply with applicable environmental laws and regulations.
Employees
As of December 31, 2019, the business employed 1,999 people, of which 206 employees were subject to collective bargaining agreements. We believe relations with both union and non-union employees at Atlantic Aviation are generally good.
The day-to-day operations of Atlantic Aviation are managed by individual site managers who are responsible for most aspects of the operations at their site. Atlantic Aviation’s operations are overseen by senior personnel with significant experience in the aviation industry.
MIC Hawaii
Industry Overview
According to the Energy Information Administration, energy consumption in Hawaii is split approximately equally between the transportation market and the industrial/commercial/residential markets. Gas has an approximately 2% share of the Hawaii energy market and serves primarily the industrial/commercial/residential markets with applications including water heating, drying, cooking, emergency power generation and other select uses.
Beginning with the Hawaii Clean Energy Initiative in 2008, the State of Hawaii embarked on a program to be a leader in the development and deployment of clean energy solutions. MIC Hawaii has invested in multiple clean energy projects including a renewable natural gas facility that captures and purifies wastewater biogas for injection into the Hawaii Gas utility pipeline on Oahu. MIC Hawaii is pursuing additional growth opportunities in support of Hawaii’s clean energy goals.
Business Overview
MIC Hawaii comprises Hawaii Gas and several smaller businesses collectively engaged in efforts to reduce the cost and improve the reliability and sustainability of energy in Hawaii. From 2006 to 2015, our MIC Hawaii segment consisted solely of Hawaii Gas, a combination of Hawaii’s only government-franchised gas utility and an unregulated liquefied petroleum gas (LPG)

10
MIC Hawaii - (continued)

business. Founded in 1904, Hawaii Gas serves the State’s approximately 1.4 million residents and approximately 9.9 million visitors across Oahu, Hawaii, Maui, Kauai, Molokai and Lanai (the main islands).
Hawaii Gas’ utility business includes the processing, distribution and sale of synthetic natural gas (SNG) and renewable natural gas (RNG) and the distribution and sale of regasified liquefied natural gas (LNG) on the island of Oahu, as well as the distribution and sale of LPG via pipeline on all of the main islands. Hawaii Gas’ unregulated business distributes LPG by truck to individual tanks located on customer sites or distributes LPG in cylinders filled at central locations to customers on all the main islands. Customers include a wide variety of industrial, commercial, residential, hospitality, military, public sector and wholesale users.
Hawaii Gas’ primary products consist of:
Synthetic Natural Gas (SNG):  The business converts a light hydrocarbon feedstock (naphtha) into SNG which has a similar heating value to natural gas. Hawaii Gas operates the only SNG processing capability in Hawaii at its plant located on the island of Oahu. SNG is delivered by underground pipelines to utility customers throughout Oahu.
Liquefied Natural Gas (LNG):  LNG is transported to Hawaii in conventional intermodal cryogenic containers from the U.S. mainland. Hawaii Gas is authorized to substitute up to 30% of the SNG production with LNG to supply customers of the regulated utility on Oahu.
Liquefied Petroleum Gas (LPG):  LPG is a generic name for a mixture of hydrocarbon gases, typically propane and butane. LPG liquefies at a relatively low pressure under normal temperature conditions and can be efficiently transported in various quantities. LPG is typically stored in cylinders or tanks and Hawaii Gas maintains the largest network of LPG storage in Hawaii. Industrial/commercial/residential applications of LPG are similar to those of natural gas and SNG.
Renewable Natural Gas (RNG):  Hawaii Gas collects, purifies and injects biogas from the Honouliuli Wastewater Treatment Plant into the utility pipeline distribution system on Oahu. The business is evaluating a range of additional renewable natural gas sources including other wastewater treatment plants, landfills and locally produced biomass.
Following is summary financial information for MIC Hawaii ($ in millions):
 
As of, and for the
Year Ended, December 31,
2019
 
2018
Revenue
$
243

 
$
292

Net income (loss)
13

 
(12
)
EBITDA excluding non-cash items(1)
60

 
38

Total assets
537

 
501

_____________
(1)
See “Business — Our Businesses” in Part I, Item 1 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” in Part II, Item 7, for further information and a reconciliation of net income (loss) to EBITDA excluding non-cash items.
Customers
The businesses of MIC Hawaii provide services to industrial/commercial/residential and government customers. MIC Hawaii does not depend on any single customer, the loss of which would have a material adverse effect on the business.
Regulation
Hawaii Gas’ utility business is regulated by the Hawaii Public Utilities Commission (HPUC). The HPUC exercises broad regulatory oversight and investigative authority over all public utilities in Hawaii.
Rate Regulation.  The HPUC establishes the rates that Hawaii Gas can charge its utility customers via cost of service regulation. Although the HPUC sets the base rate for the gas sold by Hawaii Gas’ utility business, Hawaii Gas is permitted to pass through changes in its fuel costs by means of a monthly fuel adjustment charge.
Hawaii Gas’ utility rates are established by the HPUC in periodic rate cases typically initiated by Hawaii Gas. The business initiates a rate case by submitting a request to the HPUC for an increase in rates based upon, for example, increased costs related to providing services. Following initiation of the rate increase request and submissions by other intervening parties of their positions on the rate request, and potentially an evidentiary hearing, the HPUC issues a decision establishing the revenue requirements and the resulting rates that Hawaii Gas will be allowed to charge.

11
MIC Hawaii - (continued)

Other Regulations.  In addition to regulating utility rates, the HPUC acts on requests for the acquisition, sale, disposition or other exchange of utility properties, including mergers and consolidations, acts on requests for financings and approves material supply contracts.
Hawaii Gas' operations are also regulated by other agencies including the Pipeline and Hazardous Materials Safety Administration, Department of Transportation, Environmental Protection Agency, Hawaii Department of Health and state and local environmental agencies.
Competition
Depending upon the end-use, Hawaii Gas competes with electric generators as well as other gas providers and alternative energy sources. Electricity in Hawaii is generated by four electric utilities and various independent power producers. In addition, residential and some commercial customers in Hawaii have increased the rate at which they are installing solar photovoltaic generating capacity.
Hawaii Gas’ Utility Business.  Hawaii Gas holds the only government franchise for utility gas services in Hawaii. This enables Hawaii Gas to utilize public easements for its pipeline distribution systems. This franchise also provides for the exclusive use of extensive below-ground distribution infrastructure that Hawaii Gas owns and maintains. Hawaii Gas competes based on price, reliability and the energy preferences of its customers.
Hawaii Gas’ Non-Utility Business.  Hawaii Gas sells LPG in an unregulated market on the main islands of Hawaii. There are several other wholesale and smaller retail distributors that compete in the LPG market. Hawaii Gas believes it has a competitive advantage because of its established customer base, substantial storage facilities, distribution network and reputation for reliable service.
Fuel Supply, SNG Plant and Distribution System
Fuel Supply
Hawaii Gas sources naphtha feedstock for its SNG plant from Par Hawaii Refining, LLC pursuant to a contract that expires in December 2020. The majority of Hawaii Gas’ LPG is purchased from an off-island supplier. Hawaii Gas sources LNG from a U.S. mainland supplier pursuant to a contract that expires in July 2021. RNG is purchased from the City and County of Honolulu under a fixed rate contract that expires in December 2024.
SNG Plant and Distribution System (Utility Business)
Hawaii Gas processes and distributes SNG from a plant located on the west side of Oahu. A 22-mile transmission pipeline links the SNG plant to a distribution system consisting of approximately 900 miles of distribution and service pipelines transports gas to customers. On islands other than Oahu, LPG is distributed by direct deliveries from an off-island shipper and by barge from Oahu to holding facilities or baseyards on those islands. It is then distributed via pipelines to utility customers. Approximately 90% of the Hawaii Gas pipeline system is on Oahu.
Distribution System (Non-Utility Business)
The non-utility business of Hawaii Gas provides LPG to customers that are not connected to Hawaii Gas’ utility pipeline system on each of the main islands. The majority of Hawaii Gas’ non-utility customers are on islands other than Oahu. LPG is transported to these islands by direct deliveries from an off-island shipper and by barge from Oahu. Hawaii Gas also owns the infrastructure by which it distributes LPG to its customers, including harbor pipelines, trucks, several holding facilities and storage baseyards on Kauai, Maui and Hawaii.
Environmental Permits
The businesses of MIC Hawaii require environmental operating permits, the most significant of which are air and wastewater permits required for the Hawaii Gas SNG plant.
Employees
As of December 31, 2019, MIC Hawaii had 346 employees, of which 217 employees were subject to collective bargaining agreements. We believe relations with both union and non-union employees at MIC Hawaii are generally good.

12

Corporate and Other
Our Corporate and Other segment comprises primarily MIC Corporate and our shared services center. The financial results for MIC Corporate reflect the costs associated with operating as a public company. These include primarily the fees paid in connection with the evaluation of various investment and acquisition/disposition opportunities, fees paid to the New York Stock Exchange, fees paid to our external auditors and advisors and the cost of Director’s and Officer’s insurance. Other corporate headquarters costs including the salaries, benefits and incentives paid to individuals seconded to MIC, together with the cost of our facilities, technology and services provided to the holding company by our Manager, are covered in the Fees to Manager — related party line item.
We have a shared services center that provides common administrative functions including payroll processing, health and benefit plan administration, information technology, procurement, tax, legal and certain finance and accounting functions to the businesses in our portfolio. Substantially all of the costs associated with the operation of the shared services center are allocated to each of our operating companies. Any unallocated shared services costs are reported as a component of our Corporate and Other segment.
Employees
As of December 31, 2019, Corporate and Other had 125 employees at the shared services center. MIC Corporate has no employees as our Manager seconds those individuals who serve as our chief executive officer and chief financial officer on a full-time basis and makes other personnel available as required.
Consolidated
Our Employees
As of December 31, 2019, our consolidated businesses employed approximately 3,400 people, of which approximately 21% were subject to collective bargaining agreements.

13

AVAILABLE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains a website that contains annual, quarterly and current reports, proxy and information statements and other information that issuers (including Macquarie Infrastructure Corporation) file electronically with the SEC. The SEC’s website is www.sec.gov.
Our website is www.macquarie.com/mic. You can access our Investor Center through this website. We make available free of charge, on or through our Investor Center, our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, or the Exchange Act, as amended, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We also make available through our Investor Center the statements of beneficial ownership of shares filed by our Manager, our directors and officers, any holders of 10% or more of our shares outstanding and others under Section 16 of the Exchange Act.
You can also find information on the About MIC page on our website where we post documents including:
•
Amended and Restated Bylaws of Macquarie Infrastructure Corporation;
•
Third Amended and Restated Management Services Agreement;
•
Corporate Governance Guidelines;
•
Code of Business Conduct;
•
Charters for our Audit Committee, Compensation Committee and Nominating and Governance Committee;
•
Policy for Stockholder Nomination of Candidates to Become Directors of Macquarie Infrastructure Corporation; and
•
Information for Stockholder Communication with our Board, our Audit Committee and our Lead Independent Director.
Our Code of Business Conduct applies to our directors, officers and employees as well as all directors, officers and employees of our Manager involved in the management of the Company and its businesses. We will post any amendments to the Code of Business Conduct, and any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange (NYSE), on our website. The information on our website is not incorporated by reference into this report.
You can request a copy of these documents at no cost, excluding exhibits, by contacting Investor Relations at 125 West 55th Street, New York, NY 10019 (212-231-1825).

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ITEM 1A. RISK FACTORS
An investment in our shares involves a number of risks. The occurrence of any of these risks could have a significant or material adverse effect on our results of operations, cash flows or financial condition and could cause a corresponding decline in the market price of our shares.
Risks Related to Our Business Operations
While we are pursuing strategic alternatives, we may not be successful in identifying or completing any strategic alternative and any such strategic alternative may not unlock additional value for stockholders.
In October 2019, we announced that we were pursuing strategic alternatives, which could result in, among other things, a sale of one or more of our businesses or potentially of the Company. Our pursuit of strategic alternatives may not result in the identification or consummation of any transaction or may not yield additional value for our stockholders. In addition, we may incur substantial expenses associated with identifying and evaluating potential strategic alternatives. The process of pursuing strategic alternatives may be time consuming and disruptive to our business operations, and if we are unable to effectively manage the process, our businesses, financial condition and results of operations could be adversely affected. Any potential transactions, and the related valuations, would be dependent upon a number of factors that may be beyond our control, including, among others, market conditions, industry trends, the interest of third parties in our businesses and the availability of financing to potential buyers on reasonable terms.
Our strategy as an ongoing business requires significant growth capital expenditures and a failure to make such capital expenditures could have a material adverse effect on our business, financial condition, operating results and prospects.
In the event we elect not to proceed with any strategic alternatives or they are delayed, an important part of our strategy is the prudent deployment of capital to grow our existing businesses and develop and acquire additional businesses. Our ability to deploy capital depends on a number of variables including (i) commodity prices; (ii) customer demand; (iii) competitive and economic conditions; (iv) availability of suitable land on which to operate; (v) ability to obtain required regulatory approvals; and (vi) availability of capital. Our sources of growth capital include capital retained by our businesses, debt or equity issuances, and proceeds from the sales of businesses or assets. We may not generate sufficient cash or be able to arrange additional financing to fund our future growth needs on terms acceptable to us or at all. Our ability to arrange financing, if needed, will depend on, among other factors, our credit ratings, leverage, financial and operating performance, general economic, financial, and regulatory conditions and prevailing capital market conditions. Many of these factors are beyond our control. If we incur significant additional indebtedness, or if we do not continue to generate sufficient cash from our operations, our credit ratings could be adversely affected, which would likely increase our future borrowing costs and could affect our ability to access additional capital. If we fail to deploy growth capital as planned, we may be unable to, among other things, expand our businesses to meet competitive challenges; take advantage of strategic acquisition and development opportunities; upgrade our facilities and systems; and create stockholder value. Any or all of these could have a material adverse effect on our businesses, financial condition, operating results and prospects. In addition, under current law, certain capital expenditures are eligible for accelerated depreciation for U.S. federal income tax purposes. If we fail to take advantage of this accelerated depreciation when prudent to do so, our tax position could be materially adversely impacted.
Fluctuations in economic, equity and credit market conditions may have a material adverse effect on our results of operations, our liquidity or our ability to obtain credit on acceptable terms.
Should economic, equity and credit market conditions, collectively or individually, become disrupted, our ability to raise equity or obtain capital, to repay or refinance credit facilities at maturity, make significant capital expenditures, pay, maintain or grow dividends or fund growth may be costly and/or impaired. Our access to debt financing in particular will depend on a variety of factors such as market conditions, the general availability of credit, the overall availability of credit to our industry, our credit history and credit capacity, as well as the historical performance of our businesses and lender perceptions of their and our financial prospects. If we are unable to obtain debt financing, particularly as significant credit facilities mature, our internal sources of liquidity may not be sufficient.
Economic conditions may also increase our counterparty risk, particularly in those businesses whose revenues are determined under multi-year contracts, such as IMTT. Should conditions deteriorate, we would expect to see increases in counterparty defaults and/or bankruptcies, which could result in an increase in bad debt expense and may cause our operating results to decline.
Volatility in the financial markets may make projections regarding future obligations under pension plans difficult. Two of our businesses, Hawaii Gas and IMTT, have defined benefit retirement plans. Future funding obligations under those plans depend in large part on the future performance of plan assets and the mix of investment assets. Our defined benefit plans hold a significant amount of equity securities as well as fixed income securities. If the market values of these securities decline or if interest rates decline, our pension expense and cash funding requirements would increase and, as a result, could materially adversely affect the results and liquidity of these businesses and our Company.

15

Continued economic expansion and reductions in unemployment rates and the tightening of labor market could increase the cost of operating any of our businesses or make it more difficult to recruit and retain those with appropriate skillsets. In a tight labor market, it may take longer to identify and hire additional employees and such delays could, in turn, increase fees paid to recruiting firms or the amount of overtime paid to existing employees. A tightening labor market may also drive the cost of retaining employees with appropriate skillsets higher to the extent we face increased competition from employers willing or able to pay higher wages.
The documents governing our debt impose significant operating and financial restrictions, which may prevent us from pursuing certain business opportunities and taking certain actions.
Our senior secured revolving credit facilities impose, and future debt agreements may impose, operational and financial restrictions on us. These restrictions limit or prohibit, among other things, our ability to:
•
incur additional indebtedness;
•
pay dividends, redeem subordinated debt or make other restricted payments;
•
make certain investments or acquisitions;
•
grant or permit certain liens on our assets;
•
enter into certain transactions with affiliates;
•
merge, consolidate or transfer substantially all of our assets; and
•
transfer or sell assets, including capital stock of our subsidiaries.
These covenants could adversely affect our ability to finance our future operations or capital needs, withstand a future downturn in our business or the economy in general, engage in business activities, including future opportunities that may be in our interest, and plan for or react to market conditions or otherwise execute our business strategies. A breach of any of these covenants could result in a default in respect of the related indebtedness. If a default occurs, the relevant lenders or holders of such indebtedness could elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and proceed against any collateral securing that indebtedness. Acceleration of our other indebtedness could result in a default under the terms of the senior secured revolving credit facility or our convertible senior notes. There is no guarantee that we would be able to satisfy our obligations if any of our indebtedness is accelerated.
Our strategy includes an expectation that we will find, acquire or develop, and integrate, additional businesses.
Although our businesses tend to benefit from fundamental drivers of growth which are generally stable over time, we will attempt to augment that growth by finding, acquiring or developing, and integrating additional businesses. We anticipate that a portion of our future projected growth will be derived from inorganic sources which are contingent on our ability to successfully find and execute opportunities to deploy incremental capital. We may not find or acquire such opportunities on economically sensible terms. In addition, we may acquire businesses with financial reporting and control systems that are less sophisticated than ours. If we do acquire a business, we may not be successful in integrating it into our portfolio and/or achieving the expected level of returns. If we invest capital in a development project, we may not be successful in the execution of the full project or in integrating it into our portfolio and/or achieving the expected level of performance. Failure to do any of these could result in higher indebtedness or expenses and/or in generating less cash flows than expected or generating growing amounts of cash flows at a slower than anticipated rate, either of which could result in a reduction in our share price.
Decreasing the proportion of businesses in our portfolio that are not regulated or of a predominantly contracted nature increases the potential volatility in our financial results.
Other than our airport services business, our businesses generally possess one or more of the following characteristics: generally stable demand; contracted and inflation linked revenues; and regulated operations. Our airport services business generates revenue and cash flows in a way that is broadly reflective of the economic health of the country. To the extent we invest in or acquire or develop businesses with revenue and cash generating capacity that is similarly GDP sensitive or businesses that do not possess these characteristics, our financial results could become more volatile and our share price could decline as a result of an increase in the real or perceived risk.
If borrowing costs increase or if debt terms become more restrictive, the cost of refinancing and servicing our debt will increase, reducing our profitability and ability to freely deploy capital or pay dividends to stockholders.
Most of our indebtedness matures within four to seven years. Refinancing this debt may result in substantially higher interest rates or credit margins or substantially more restrictive covenants. Each of these could limit operational flexibility or reduce dividends and/or distributions from our operating businesses to us, which would have an adverse impact on our ability to freely deploy capital and continue to pay, maintain or grow dividends to our stockholders. We cannot provide assurance that we will be willing or able to make capital contributions to repay some or all of the debt if required.

16

The interest rates under our credit facilities may be impacted by the phase-out of LIBOR.
LIBOR, the London Interbank Offered Rate, is the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rates on loans globally. We generally use LIBOR as a reference rate to calculate interest rates under our credit facilities. In 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. It is unclear if LIBOR will cease to exist at that time or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index, the Secured Overnight Financing Rate (SOFR), calculated using short-term repurchase agreements backed by Treasury securities. SOFR is observed and backward looking, unlike LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members. Given that SOFR is a secured rate backed by government securities, it will be a rate that does not consider bank credit risk (as is the case with LIBOR). SOFR also may be more volatile than LIBOR. Whether or not SOFR, or another alternative reference rate, attains market traction as a LIBOR replacement tool remains in question. If LIBOR ceases to exist, we may need to renegotiate our credit agreements to replace LIBOR with an agreed upon replacement index, and certain of the interest rates under our credit agreements may change. The new rates may not be as favorable to us as those in effect prior to any LIBOR phase-out. We may also find it desirable to engage in more frequent interest rate hedging transactions.
Our holding company level debt could adversely affect our results of operations, cash flows and financial condition, limit our operational and financing flexibility and negatively impact our business. As a holding company, we are dependent on the ability of our businesses to make distributions to us to pay our expenses, pay dividends and repay indebtedness.
At December 31, 2019, we had $403 million of convertible senior notes outstanding and had available a $600 million senior secured revolving credit facility that was undrawn. These holding company level debt instruments increase our interest payments and could have significant adverse effects on our business, including:
•
requiring us to use a significant portion of our cash flow to pay interest on our indebtedness which will reduce the funds available for dividends to stockholders, additional acquisitions, pursuit of business opportunities or other business purposes;
•
impairing our ability to obtain additional financing;
•
making it more difficult for us to satisfy our financial obligations under our contractual and commercial commitments;
•
placing us at a competitive disadvantage compared with firms that may have proportionately less debt;
•
exposing us to risk of increased interest rates because any borrowings under the senior secured revolving credit facility are at variable rates of interest;
•
limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and
•
making us more vulnerable to economic downturns and adverse developments in our businesses.
We expect to obtain the funds to pay our operating expenses, pay dividends and to repay our holding company indebtedness primarily from our operating businesses. Our ability to meet our expenses and make these payments therefore depends on the future performance of our businesses, which will be affected by financial, business, economic and other factors, many of which we cannot control. Our businesses may not generate enough cash flow from operations in the future, which could result in our inability to repay indebtedness, pay, maintain or grow dividends or to fund other liquidity needs. As a holding company with no operations, we are dependent on the ability of our businesses to make distributions to us to pay our expenses, pay dividends and repay our indebtedness. In addition, the senior secured revolving credit facility is guaranteed by MIC Ohana Corporation, our direct, wholly owned subsidiary. MIC Ohana Corporation is a holding company whose only material asset is the capital stock of our other subsidiaries. If we do not have enough funds, we may be required to refinance all or part of our then existing debt, sell assets or borrow more funds, which we may not be able to accomplish on terms acceptable to us, or at all. In addition, the terms of existing or future debt agreements may restrict us from pursuing any of these alternatives.
We and any of our existing or future subsidiaries may incur substantially more indebtedness. This could further exacerbate the risks to our business as described herein.
We and any of our existing and future subsidiaries may incur substantial additional indebtedness. Although the terms of our senior secured revolving credit facility contain limitations on our ability to incur additional indebtedness, these restrictions are subject to qualifications and exceptions. If we incur any additional indebtedness that ranks equally with the indebtedness under our senior secured revolving credit facility, the holders of that additional debt will be entitled to share ratably with the lenders or holders of the indebtedness under the senior secured revolving credit facility in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of our Company. If new debt is added to our or any of our subsidiaries’ current debt levels, the related risks that we now face could be exacerbated.

17

Development and investment in our businesses involve various construction, operational and regulatory risks that could materially adversely affect our financial results.
The development, construction, operation and maintenance of our businesses involve various operational risks, which can include mechanical and structural failure, accidents, labor issues or the failure of technology to perform as anticipated. Events outside our control, such as economic developments, changes in fuel prices or the price of other feedstocks, governmental policy changes, demand for energy and the like, could materially reduce the revenues generated or increase the expenses of constructing, operating or maintaining our businesses. Degradation of the performance of our facilities may reduce our revenues. Unanticipated capital expenditures associated with maintaining, upgrading or repairing our facilities may reduce our profitability. We may also choose or be required to decommission a project or other asset. The decommissioning process could be protracted and result in the incurrence of significant financial and/or regulatory obligations or other uncertainties.
Our businesses may also face construction risks typical for infrastructure businesses, including, without limitation:
•
labor disputes, work stoppages or shortages of skilled labor;
•
shortages of fuels or materials;
•
slower than projected construction progress and the unavailability or late delivery of necessary equipment;
•
delays caused by or in obtaining the necessary regulatory approvals or permits;
•
adverse weather conditions and unexpected construction conditions;
•
accidents or the breakdown or failure of construction equipment or processes;
•
difficulties in obtaining suitable or adequate financing; and
•
catastrophic or force majeure events such as explosions, fires and terrorist activities and other similar events beyond our control.
Such developments could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of construction activities once undertaken. Construction costs may exceed estimates for various reasons, including inaccurate engineering and planning, labor and building material costs in excess of expectations and unanticipated problems with project start-up. Such unexpected increases may result in increased debt service costs and/or funds being insufficient to complete construction. Our facilities under development may generate little or no cash flow through the date of completion of development and may experience operating deficits after the date of completion. In addition, market conditions may change during construction and make such development less attractive than at the time it was commenced. Any events of this nature could severely delay or prevent the completion of, or significantly increase the cost of, the construction. In addition, there are risks inherent in the construction work which may give rise to claims or demands against us from time to time. Delays in the completion of any project may result in lost revenues or increased expenses.
We rely on third-party suppliers and contractors when developing our projects. The failure of those third parties to perform could adversely affect our results of operations, cash flows and financial condition.
We source engines, boilers, chillers, cogeneration systems and other complex components from third-party suppliers and engage third-party contractors for the construction of power projects. We typically sign contracts with our suppliers and contractors on a project-by-project basis and do not maintain long-term contracts with our suppliers or contractors. Therefore, we are generally exposed to price fluctuations and availability of products and components sourced from our suppliers and construction services procured from our contractors. Government policies, the price and availability of certain products and markets generally have been subject to significant volatility in recent years. Increases in the prices of products and components, decreases in their availability, fluctuations in construction, labor and installation costs, or changes in the terms of our relationships with our suppliers and contractors may increase the cost of procuring equipment and engaging contractors and hence materially adversely affect our results of operations, cash flows and financial condition.
Furthermore, the delivery of defective products or construction services by our suppliers or contractors which are otherwise not in compliance with contract specifications, or the late supply of products or construction services, may cause construction delays or projects that fail to adhere to our quality and safety standards, which could have a material adverse effect on our business, results of operations, cash flows and financial condition.
Finally, we rely on third-party contractors to help us develop new projects. If these contractors do not fulfill their contractual obligations, we could incur additional expenses or lose part of the capital we invested in these new facilities.

18

Our inability to realize targeted cost savings or maintain agreed upon service levels at our shared services center may negatively impact our business.
We have a shared services center that is providing common administrative functions, including payroll processing, health and benefit plan administration, information technology and certain finance and accounting functions to the businesses in our portfolio. If any of these shared services functions do not perform effectively, or if we fail to adequately monitor their performance, we may not be able to achieve expected cost savings or we may have to incur additional costs to correct errors made by such shared services functions and our reputation could be harmed. Depending on the function involved, such errors may also lead to business disruption, processing inefficiencies, effects on financial reporting, litigation or remediation costs. In addition, the concentration of processes in one shared services center means that any disruption at this facility could impact all or a substantial portion of our businesses. Any of these potential effects could have an adverse effect on our results of operations, cash flows and financial condition.
Changes to trade regulation, quotas, duties or tariffs, caused by the changing U.S. and geopolitical environments or otherwise, may increase our costs, result in fewer growth capital opportunities or projects, limit the amount of raw materials and products that we can import, decrease demand for certain of our services, or otherwise adversely impact our business.
The current U.S. administration has voiced concerns about imports from countries that it perceives as engaging in unfair trade practices, has increased tariffs on certain goods imported into the United States from those countries, including China and other countries from which we import components or raw materials, and has raised the possibility of imposing significant, additional tariff increases. The announcement of tariffs on imported products by the U.S has triggered retaliatory actions from certain foreign governments, including China, and may trigger retaliatory actions by other foreign governments, potentially resulting in a “trade war”. A “trade war” or other governmental action related to tariffs or international trade agreements or policies could increase our costs, reduce the demand or opportunity to deploy growth capital in our businesses at attractive rates of return, limit the amount of raw materials, components and other products that we can import, restrict our customers’ ability to deploy growth capital or transport products and therefore decrease demand for certain of our services, and/or adversely affect the U.S. economy or certain sectors thereof and, thus, adversely impact our businesses.
Warranties provided by our suppliers and contractors may be limited or insufficient to compensate our losses or may not cover the nature of our losses incurred.
We expect to benefit from various warranties, including product quality and performance warranties, provided by our suppliers and contractors. These suppliers and contractors, however, may file for bankruptcy, cease operations or otherwise become unable or unwilling to fulfill their warranty obligations. Even if a supplier fulfills its warranty obligations, the warranty may not be enough to compensate us for our losses. In addition, the warranty period generally expires several years after the date that the equipment is delivered or commissioned and is subject to liability limits. Where damages are caused by defective products provided by our suppliers or construction services delivered by our contractors, our suppliers or contractors may be unable or unwilling to perform their warranty obligations as a result of their financial condition or otherwise, or if the warranty period has expired or a liability limit has been reached, there may be a reduction or loss of warranty protection for the affected projects, which could have a material adverse effect on our business’ result of operations, cash flows and financial condition.
We are dependent on certain key personnel, and the loss of key personnel, or the inability to retain or replace qualified employees, could have an adverse effect on our consolidated businesses, results of operations, cash flows and financial condition.
We operate our consolidated businesses on a stand-alone basis, relying on existing management teams for day-to-day operations. Consequently, our operational success, as well as the success of our internal growth strategy, will be dependent on the continued efforts of the management teams of our consolidating businesses, who have extensive experience in the day-to-day operations of these businesses. Furthermore, we will likely be dependent on the operating management teams of businesses that we may acquire in the future. The loss of key personnel, or the inability to retain or replace qualified employees, could have an adverse effect on our business, results of operations, cash flows and financial condition.
Prolonged work stoppages by employees who are subject to a collective bargaining agreement could adversely affect our financial position.
As of December 31, 2019, approximately 21% of our businesses’ employees were covered by collective bargaining agreements. These agreements have staggered expirations over the next several years. Although we believe our employee relations to be generally good, a prolonged work stoppage, strike or other slowdown at any facility with organized labor could significantly disrupt our operations and could have a material adverse effect on our business, results of operations, cash flows or financial condition. In addition, we cannot ensure that upon the expiration of existing collective bargaining agreements, new agreements will be reached without union action or that any such new agreements will be on terms satisfactory to us. Any renegotiation of labor agreements could significantly increase our costs for wages, healthcare and other benefits.

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We own, and may acquire in the future, investments in which we share voting control and, consequently, our ability to exercise significant influence over the business may be limited.
While it is our preference to own or control our businesses or to be able to exercise significant influence over our investments, including with respect to the timing and amount of distributions to us from those businesses, we may in some cases find the potential economic benefits of owning less than a controlling interest to be compelling. In such cases, we will attempt to co-invest with like-minded individuals/organizations. However, there can be no certainty that our interests with such co-investor(s) will always be aligned or that we will always be in a position to determine the amount and timing of distributions from such investments.
Our ability to influence a joint venture business is typically governed by (and may be limited to) our rights under a stockholders’ agreement. We may not directly manage the day-to-day operations of a joint venture, and we may not be provided with notice of material events with respect to such joint venture businesses (including, without limitation, potential liabilities for environmental, health and safety matters) in as timely a manner and with the same level of detail as we would if we were in such a day-to-day management role.
If we do not manage the day-to-day operations of a joint venture, we may not have complete visibility into operational and financial systems, controls or processes, including among others, as they relate to environmental, health and safety measures. We may not be able to evaluate whether such financial, operational, or environmental, health and safety systems or controls are sufficiently robust or executed appropriately.
Our businesses are subject to environmental risks that may impact our future profitability.
Our businesses are subject to numerous statutes, rules and regulations relating to environmental protection and are exposed to various environmental risk and hazards.
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IMTT’s operations are subject to complex, stringent and expensive environmental regulations, including compliance with emission limitations and/or air permits as well as risks relating to the handling of hazardous materials.
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Atlantic Aviation is subject to risks and hazards as well as the environmental protection requirements related to the storage and handling of jet fuel and compliance with firefighting regulations.
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Hawaii Gas is subject to risks and hazards associated with the refining, storage and handling of combustible products.
Any of these risks could result in substantial losses including personal injury, loss of life, damage or destruction of property and equipment and environmental damage. Any losses we face could be greater than insurance levels maintained by our businesses and could have an adverse effect on their and our financial results. We also could be subject to fines and penalties for violation of applicable environmental regulations, which could be substantial. In addition, disruptions to physical assets could reduce our ability to serve customers and adversely affect future sales and cash flows.
Failure to comply with regulations or other claims may interrupt operations and result in civil or criminal penalties, significant unexpected compliance costs and liabilities that could adversely affect the profitability of any operating business and the distributions it makes to us. These rules and regulations are subject to change and compliance with any changes could result in a restriction of the activities of our businesses, significant capital expenditures and/or increased ongoing operating costs.
Our businesses own or lease properties that have been subject to environmental contamination in the past and could require remediation for which our businesses are or may be liable. The remediation could cost more than anticipated or could be incurred earlier than anticipated, or both. In addition, the businesses may discover additional environmental contamination that may require remediation at significant cost. Further, the past contamination of the properties, including by former owners or operators of such properties, could result in remediation obligations, personal injury, property damage, environmental damage or similar claims by third parties.
We may also be required to address other prior or future environmental contamination, including soil and groundwater contamination that results from the spillage of fuel, hazardous materials or other pollutants. Under various federal, state, local and foreign environmental statutes, rules and regulations, a current or previous owner or operator of real property may be liable for noncompliance with applicable environmental and health and safety requirements and for the costs of investigation, monitoring, removal or remediation of hazardous materials. These laws often impose liability, whether the current owner or operator knew of, or was responsible for, the presence of hazardous materials. Persons who arrange for the disposal or treatment of hazardous materials may also be liable for the costs of removal or remediation of those materials at the disposal or treatment facility, whether or not that facility is or ever was owned or operated by that person and whether or not the original disposal or treatment activity accorded with all regulatory requirements. The presence of hazardous materials on a property could result in personal injury, loss of life, damage or destruction of property and equipment, environmental damage and/or claims by third parties that could have a material adverse effect on our result of operations, cash flows and financial condition.

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Our income may be affected adversely if additional compliance costs are required as a result of new safety, health or environmental regulation.
Our businesses are subject to federal, state and local safety, health and environmental laws and regulations. These laws and regulations affect all aspects of their operations and are frequently modified. There is a risk that any one of our businesses may not be able to comply with some aspect of these laws and regulations, resulting in fines or penalties. Additionally, if new laws and regulations are adopted or if interpretations of existing laws and regulations change, we could be required to increase capital spending and/or incur increased operating expenses in order to comply. Because the regulatory environment frequently changes, we cannot predict when or how we may be affected by such changes. Emissions and other compliance testing technologies continue to improve, which may result in more stringent, targeted environmental regulations and compliance obligations in the future, the costs of which could be material and adversely affect our results of operations, cash flows and financial condition.
Our businesses are dependent on our relationships, on a contractual and regulatory level, with government entities that may have significant leverage over us. Government entities may be influenced by political considerations to take actions adverse to us.
Our businesses generally are, and will continue to be, subject to substantial regulation by governmental agencies. In addition, our businesses rely on obtaining and maintaining government permits, licenses, concessions, leases or contracts. Government entities, due to the wide-ranging scope of their authority, have significant leverage over us in their contractual and regulatory relationships with us that they may exercise in a manner that causes us delays in the operation of our businesses or pursuit of our strategy, or increased administrative expense. Furthermore, government permits, licenses, concessions, leases and contracts are generally very complex, which may result in periods of non-compliance, or disputes over interpretation or enforceability. If we fail to comply with these regulations or contractual obligations, we could be subject to financial penalties or we may lose our rights to operate the affected business, or both. Where our ability to operate a business is subject to a concession or lease from government entities, the concession or lease may restrict our ability to operate the business in a way that maximizes cash flows and profitability. Further, our ability to grow our current and future businesses will often require consent of numerous government regulators. Increased regulation restricting the ownership or management of U.S. assets by non-U.S. persons, given the non-U.S. ultimate ownership of our Manager, may limit our ability to pursue acquisitions. Any such regulation may also limit our Manager’s ability to continue to manage our operations, which could cause disruption to our businesses and a decline in our performance. In addition, any required government consents may be costly to seek and we may not be able to obtain them. Failure to obtain any required consents could limit our ability to achieve our growth strategy.
Our contracts with government entities may also contain clauses more favorable to the government counterparty than a typical commercial contract. For instance, a lease, concession or general service contract may enable the government to terminate the agreement without adequate compensation. In addition, government counterparties also may have the discretion to change or increase regulation of our operations, or implement laws or regulations affecting our operations, separate from any contractual rights they may have. Governments have considerable discretion in implementing regulations that could impact these businesses. Governments may be influenced by political considerations to take actions that may hinder the efficient and profitable operation of our businesses.
Many of our contracts, especially those with government entities or quasi-governmental entities are long-term contracts. These long-term contracts may be difficult to replace if terminated. In addition, buy-out or other early termination provisions could adversely affect our results of operations, cash flows and financial condition if exercised before the end of the contract.
Governmental agencies may determine the prices we charge and may be able to restrict our ability to operate our businesses to maximize profitability.
Where our businesses are sole or predominant service providers in their respective service areas and provide services that are essential to the community, they are likely to be subject to rate regulation by governmental agencies that will determine the prices they may charge. We may also face fees or other charges imposed by government agencies that increase our costs and over which we have no control. We may be subject to increases in fees or unfavorable price determinations that may be final with no right of appeal or that, despite a right of appeal, could result in our profits being negatively affected. In addition, we may have very little negotiating leverage in establishing contracts with government entities, which may decrease the prices that we otherwise might be able to charge or the terms upon which we provide products or services. Businesses we acquire in the future may also be subject to rate regulation or similar negotiating limitations.
Failure to comply with government regulations could result in contract terminations or we may be unable to enter into future government contracts.
We sign government contracts, from time to time, which are subject to various uncertainties, restrictions and regulations, which could result in withholding or delay of payments. In addition, government contracts are subject to specific regulations as well as various statutes related to employment practices, environmental protection, recordkeeping and accounting. These regulations and laws impact how we transact business with governmental clients and, in some instances, impose significant costs

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on business operations. If we fail to comply with any of these regulations, requirements or statutes, our existing government contracts could be terminated, and we could be temporarily or permanently barred from government contracting or subcontracting. If one or more of our government contracts are terminated or if we are barred from government contract work, or if reimbursement of our cost is disallowed, we could suffer a significant reduction in expected revenue and profits.
Delays in the government budget process or a government shutdown may adversely affect our operating results.
Certain of our businesses provide services to government customers, often under long-term contracts. Any delay in the federal or state government budget process or a federal or state government shutdown may result in our incurring substantial costs without reimbursement under these contracts for extended periods. In addition, our businesses rely on obtaining and maintaining government permits, licenses, concessions and leases. Governmental budget delays or government shutdowns could also negatively impact our ability to timely obtain approvals and consents needed to operate and grow our businesses. Any of these consequences could have an adverse impact on our operating results.
Unfavorable publicity or public perception of the industries in which we operate could adversely impact our operating results and our reputation.
Accidents and incidents involving the aviation industry, particularly those involving the airports and heliport at which we operate, whether or not directly related to our Company’s services, and any media coverage thereof, can adversely impact our Company’s reputation and the demand for our services. Similarly, negative publicity or public perception of the energy-related industries in which we operate, including through media coverage of environmental contamination and climate change concerns, could reduce demand for our services and harm our reputation. Any reduction in demand for the services our businesses provide or damage to our reputation could have a material adverse effect on our results of operations, cash flows and financial condition and business prospects.
A significant and sustained increase in the price of oil could have a negative impact on the revenue and/or profitability of certain of our businesses.
Higher prices for jet fuel could result in reduction in the use of aircraft by GA customers, which would have a negative impact on the profitability of Atlantic Aviation. Higher fuel prices could increase the cost of power to our businesses generally and they may not be able to fully pass the increase through to customers.
A sustained period of low energy prices may foreshadow a downturn in economic activity and capital investment that could have a negative impact on the performance and prospects of one or more of our businesses.
A period of low energy prices, or what has been characterized as an “oil” or “energy” glut, may not drive an increase in economic activity and capital investment. If instead it constrains growth in economic activity and capital investment, and/or results in an economic slowdown, demand for products and services provided by our airport services and/or bulk liquid terminal businesses may flatten or decline. A decline in the performance of these businesses could result in a decline in the value of our shares.
Fluctuations in commodity prices could adversely impact revenue, cost of services/goods sold and gross margin at our businesses.
Revenue at our Atlantic Aviation and Hawaii Gas businesses is generated primarily from the re-sale of a commodity. Accordingly, we may not be able to pass through all or any of the fluctuations to customers on a real time basis.
Energy efficiency and technology advances, as well as conservation efforts and changes in the sources and types of energy produced in the U.S. may result in reduced demand for our products and services.
Trends toward increased conservation and technological advances including installation of improved insulation, the development of more efficient heating and cooling devices and advances in energy generation technology, may reduce demand for certain of our products and services. During periods of high energy commodity costs, the prices of certain of our products and services generally increase, which may lead to increased conservation. In addition, federal and/or state regulation may require mandatory conservation measures, which could also reduce demand.
The discovery and development of new and unconventional energy sources in the U.S. may drive changes in related energy product logistics chains. The location and exploitation of these new energy sources could result in the dislocation of certain portions of some of our businesses. Changes in energy supply chain logistics or trends toward increased conservation could reduce demand for our products and services and could adversely affect our results of operations, cash flows and financial condition.
Each of our businesses experience a measure of seasonality and such seasonality may cause fluctuations in our results of operations.
Although our businesses tend to produce stable financial results owing to a preponderance of contracted/concession based revenues and the provision of generally essential services, each operates in an environment which can experience seasonal variations in results. Our bulk liquid terminals business may generate incrementally better financial results during cold weather months as a result of increased heating, throughput of certain products such as heating oil or a reduction in maintenance expenses. Our

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aviation services business may generate relatively better financial results during cold weather months as a result of increased GA traffic into bases in Florida and the intermountain West. Our gas production and distribution business may generate incrementally more cash during the peak tourism periods in Hawaii between mid-December and the end of March and from mid-June through mid-September. To the extent that our businesses collectively appear to generate more cash flows in the first quarter of the year, such performance, if annualized, could result in an overly optimistic estimate of the value of our shares.
Security breaches or interruptions in our information systems, the loss or misappropriation of confidential information, or cyber-attacks on our facilities or those of third parties on which we rely, could materially adversely affect our business.
We rely on information technology networks and systems to process, transmit and store electronic information used to operate our businesses, make operational decisions and manage inventory. We also share certain information technology networks with our Manager, and we use third-party information technology service providers. The information technology we use, as well as the information technology systems used by our Manager and third-party providers, could be vulnerable to security breach, damage or interruption from computer viruses, cyber-attacks, cyber terrorism, natural disasters or telecommunications failures. If our technology systems, or those of our Manager or third-party providers, were to fail or be breached and we were unable to recover in a timely manner, we may be unable to maintain critical business functions and/or confidential data could be compromised, we may incur substantial repair or replacement costs and/or our reputation could be damaged. The occurrence of any of these could have a material adverse effect on our business, results of operations, cash flows and financial condition.
We transmit confidential credit card information by way of secure private retail networks and rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure transmission and storage of confidential information, such as customer credit card information. Any material failure by us to achieve or maintain compliance with the Payment Card Industry security requirements or to rectify a security issue may result in fines and the imposition of restrictions on our ability to accept credit cards as a form of payment. Any loss, disclosure or misappropriation of, or access to, customers’, employees’ or business partners’ information or other breach of our information security can result in legal claims or legal proceedings, including regulatory investigations and actions, may have a negative impact on our reputation, could result in loss of customers, could lead to regulator enforcement actions against us, and could materially adversely affect our business, results of operations, cash flows and financial condition.
If our information technology systems, or the information technology systems of third parties on which we rely, cease to function properly or our cybersecurity is breached, we could suffer disruptions to our normal operations in a variety of ways, including among others: (i) unauthorized access to our facilities or a cyber-attack on our automated systems, or the power grids or communications networks we use, that could cause operational disruption and potential environmental hazards; (ii) a cyber-attack on third-party transportation systems that could result in supply chain disruptions, prevent our IMTT customers from transporting product to us for storage, or prevent our Hawaii Gas business from transporting product to its customers; and (iii) a cyber-attack on power generation facilities or refineries that could significantly impact prices and demand in the commodities markets. Any of these events could materially adversely affect our operating results. Additionally, certain cyber incidents may remain undetected for an extended period. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
Climate change, climate change regulations and greenhouse effects may adversely impact our operations and markets.
Climate change and the outcome of federal and state actions to address global climate change could result in significant new regulations, additional changes to fund energy efficiency activities or other regulatory actions. These actions could increase the costs of operating our businesses, reduce the demand for our products and services and impact the prices we charge our customers, any or all of which could adversely affect our results of operations. In addition, climate change could make severe weather events more frequent and increase the likelihood of capital expenditures to replace damaged physical property at our businesses.
Restrictions on emissions of methane or carbon dioxide that may be imposed could adversely impact the demand for, price of, and value of our products and reserves. As our operations also emit greenhouse gases directly, current and future laws or regulations limiting such emissions could increase our own costs. Future laws or regulations addressing greenhouse gas emissions could adversely impact our businesses.
Changes or new financial accounting standards may cause us to alter the reporting of our results or operations or cause us to change business practices.
Financial accounting standards are promulgated by the Financial Accounting Standards Board (FASB), and interpreted by the SEC and various regulatory bodies formed to interpret, modify and/or create new accounting policies. Changes in those policies can have a significant effect on our reported results of operations, cash flows and financial condition and may affect our reporting of our financial results in periods prior to the implementation of such policies.

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We may face greater exposure to terrorism than other companies because of the nature of our businesses.
Our businesses may face greater risk of terrorist attack than other businesses, particularly our operations within the immediate vicinity of metropolitan and suburban areas. Because our businesses provide basic or essential services relied on by many people, our facilities may be at greater risk for terrorism attacks than other businesses, which could affect our operations significantly. Any terrorist attacks that occur at or near our business locations would be likely to cause significant harm to our employees and assets. In recent years, insurers have significantly reduced the amount of insurance coverage available for liability to persons other than employees or passengers for claims resulting from acts of terrorism, war or similar events. A terrorist attack that makes use of our property, or property under our control, may result in liability far in excess of available insurance coverage. In addition, any terrorist attack, regardless of location, could cause a disruption to our business and a decline in earnings. Furthermore, such an attack would likely result in an increase in insurance premiums and a reduction in coverage and could reduce profitability.
Risks Related to IMTT
IMTT’s business is dependent on the demand for bulk liquid terminal services in the markets it serves.
Demand for IMTT’s bulk liquid terminal services is largely a function of demand for chemical, refined petroleum, renewable fuels and vegetable and tropical oil products and the extent to which such products are imported into and/or exported out of the locations where IMTT operates its terminal infrastructure. Demand for chemical, refined petroleum and vegetable and tropical oil products is influenced by factors including economic conditions, growth in the economy, the absolute and relative pricing of chemical, refined petroleum and vegetable and tropical oil products and their substitutes. Import and export of these products are influenced by demand and supply imbalances in the U.S. and overseas, the cost of producing chemical, refined petroleum and vegetable and tropical oil products domestically versus overseas and the cost of transporting the products between different locations within the U.S. and abroad.
Backwardation (meaning the futures prices for commodities are below the current, or spot, prices) can negatively impact demand for IMTT’s storage infrastructure, particularly by commodities traders. If underlying product market conditions are not favorable, the demand for IMTT’s services may materially decrease and IMTT’s results of operations, cash flows and financial condition may be materially adversely affected.
In addition, changes in government regulations that affect imports and exports of chemical, refined petroleum, renewable fuels and vegetable and tropical oil products, including the imposition of surcharges or taxes on imported or exported products, could adversely affect import and export to and from the U.S. A reduction in demand for bulk liquid terminal services, particularly in New York Harbor or the Lower Mississippi River, as a consequence of lower demand for, or imports/exports of, chemical, refined petroleum, renewable fuels or vegetable and tropical oil products, could lead to a decline in storage rates and amount of tankage leased by IMTT and adversely affect IMTT’s revenue and profitability and the distributions it makes to us.
IMTT’s business could be adversely affected by a substantial change in bulk liquid terminal or refining capacity or demand in the locations where it operates or in other alternative or substitute locations.
An increase in available bulk liquid terminal capacity in excess of growth in demand for such storage in the key locations in which IMTT operates, such as New York Harbor and the Lower Mississippi River, or in Houston or other parts of the Gulf Coast could result in overcapacity and a decline in storage rates and the tankage leased by IMTT. This could adversely affect IMTT’s revenue and profitability and the distributions it makes to us.
Demand for products at IMTT’s terminal locations may also drive pricing and utilization. Demand is influenced by a range of factors including changes in refined petroleum product supply or demand patterns, forward-price structure, financial market conditions and regulations.
The interplay and proximity of production centers, terminal capacity and end user demand centers is critical for the commercial viability of a terminal. Shifts in any of these factors may cause a decline in demand for our terminal services or make other terminals more attractive, which could adversely affect IMTT’s revenue and profitability and the distributions it makes to us.
If IMTT does not deploy capital for growth or make such deployment on economically acceptable terms, any future growth of the business may be limited.
A portion of IMTT’s historical growth has been dependent on the deployment of growth capital. IMTT faces uncertainties and competition in the pursuit of growth opportunities. For example, decisions regarding new growth projects rely on numerous estimates, including among other factors, predictions of future demand for IMTT’s services, future supply shifts, refined petroleum output estimates, commodity price environments, economic conditions, various construction matters and potential changes in the financial condition of IMTT’s customers. IMTT’s predictions of such factors could cause it to forego certain investments or to lose opportunities to competitors who make investments based on more aggressive predictions. If IMTT cannot find projects with economically acceptable terms, future growth of this business may be limited.

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IMTT’s agreements may be terminated or expire at the end of the current term upon requisite notice or renewed on different terms. If one or more of the current agreements is terminated and IMTT is unable to secure comparable alternative arrangements, its results of operations, cash flows and financial condition may be adversely affected.
Upon expiration, agreements can generally be terminated by either party, though some agreements require the giving of requisite notice. Changing market conditions, including changes in refined petroleum product supply or demand patterns, forward-price structure, financial market conditions, regulations, accounting rules or other factors could cause IMTT’s customers to be unwilling to renew their storage agreements when those agreements terminate, or make them willing to renew only at lower rates or for shorter periods. If any of IMTT’s agreements are terminated or expire and IMTT is unable to secure comparable alternative arrangements, IMTT may not be able to generate additional revenue from remaining counterparties to replace any shortfall. Additionally, IMTT may incur substantial costs if modifications to its terminals are required by a new or renegotiated agreement.
Recent trends in the demand for certain products stored at IMTT’s facilities, as well as recent pricing trends in the commodities futures markets, have had, and may continue to have, an adverse impact on the demand for IMTT’s services.
IMTT could incur significant costs and liabilities in responding to contamination that occurs at its facilities.
Significant liabilities involving air emissions and/or water discharges may exist in or be created by IMTT’s operations or were created as a result of historical operations and waste disposal practices of prior owners of IMTT’s facilities related to handling of refined petroleum products, chemicals, hazardous substances and wastes. IMTT’s pipeline and terminals have been used for transportation, storage and distribution of crude oil, refined petroleum products and chemicals for several decades. Although IMTT has utilized operating and disposal practices that were standard in the industry at the time, refined petroleum products or crude oil, chemicals, hazardous substances and wastes from time to time have been spilled or released on or under the terminal properties.
In addition, certain terminal properties were previously owned and operated by parties other than IMTT and those parties may have spilled or released refined petroleum products or crude oil, chemicals, hazardous substances or wastes. The terminal properties are subject to federal, state and local laws that impose investigatory, corrective action and remediation obligations, some of which are joint and several or strict liability obligations without regard to fault, to address and prevent environmental contamination. IMTT may incur significant costs and liabilities in responding to any soil and groundwater contamination that occurs or exists on its properties, even if the contamination was caused by prior owners and operators of its facilities. IMTT may not be able to recover these costs from insurance or other sources of contractual indemnity. To the extent that the costs associated with meeting these requirements are substantial and not adequately provided for, there could be a material adverse effect on IMTT’s business, results of operations, cash flows and financial condition.
IMTT may incur significant costs and liabilities in complying with environmental and occupational health and safety laws and regulations.
IMTT’s operations involve the storage and handling of refined petroleum, chemical and vegetable and tropical oil products which are subject to federal, state, and local laws and regulations governing release of materials and vapors into the environment, occupational health and safety laws and regulations, and others relating to the protection of the environment. Compliance with these can be difficult and may require significant capital expenditures and operating costs to mitigate or prevent pollution. Moreover, IMTT’s business is subject to spills, discharges or other releases of refined petroleum or chemical products or other hazardous substances or wastes into the environment and neighboring areas, in which event joint and several or strict liability may be imposed on us with respect to costs required to remediate and restore affected properties, for claims made by neighboring landowners and other third parties for personal injury, natural resource and property damages, and for costs required to conduct health studies. Failure to comply with applicable environmental, health, and safety laws and regulations may result in the assessment of sanctions, including fines, administrative, civil or criminal penalties, and permit revocations, the imposition of investigatory, corrective action, or remediation obligations and the issuance of injunctions limiting or prohibiting some or all of IMTT’s operations.
New laws and regulations, the amendment of existing laws and regulations, increased government enforcement or other developments could require IMTT to make additional expenditures. Many laws and regulations are being made more stringent, and the cost of compliance with these can be expected to increase over time. IMTT is not able to predict the impact of new or changed laws or regulations or how such requirements may be interpreted or enforced, but any such expenditures or costs for environmental and occupational health and safety compliance could have a material adverse effect on its results of operations, cash flows and financial condition.
IMTT’s business involves hazardous activities and is partly located in a region with a history of significant adverse weather events and is potentially a target for terrorist attacks. We cannot assure that IMTT is, or will be in the future, adequately insured against all such risks.
The storage and handling of refined petroleum, chemical and vegetable and tropical oil products is subject to the risk of spills, leakage, contamination, fires and explosions. Any of these events may result in loss of revenue, loss of reputation or goodwill, fines, penalties and other liabilities. In certain circumstances, such events could also require IMTT to halt or significantly alter operations at all or part of the facility at which the event occurred. IMTT carries insurance to protect against most of the accident-

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related risks involved in the conduct of the business; however, the limits of IMTT’s coverage mean IMTT cannot insure against all risks. Losses from terrorism or acts of war, which results in significant damage to one or more of IMTT’s major facilities, may have a negative impact on IMTT’s future cash flow and profitability and the distributions it makes to us. Further, future losses sustained by insurers during hurricanes and storms in the U.S. Gulf and Northeast regions may result in reductions in insurance coverage and/or increased insurance premiums for IMTT’s properties.
Many of IMTT’s facilities have been in service for several decades. Costs of maintaining those facilities could adversely affect IMTT’s results of operations.
IMTT’s terminals comprise generally long-lived assets. Some of the assets have been in service for several decades. The age and condition of the assets could result in increased maintenance or remediation expenditures and an increased risk of product releases and associated costs and liabilities. Any significant increase in these expenditures, costs or liabilities could materially adversely affect IMTT’s results of operations, cash flows and financial condition.
IMTT’s business is subject to federal, state and local laws and regulations that govern the product quality specifications of the products that it stores or handles. Changes in these regulations could impose costs on IMTT that would adversely affect its results of operations, cash flows and financial condition.
Refined petroleum and other products that IMTT stores and handles are consumed in various end markets. Various federal, state and local agencies have the authority to prescribe specific product quality specifications for commodities sold into the public market. Changes in product quality specifications or blending requirements could reduce IMTT’s revenue, require IMTT to incur additional costs or capital expenditures. If IMTT is unable to recover these costs through increased revenue, its cash flows could be adversely affected.
IMTT’s business could be adversely affected by the insolvency or loss of large customers.
In 2019, excluding the termination payment, IMTT’s ten largest customers by revenue generated approximately 52% of its revenue. The loss of one or more of these customers for any reason, including, but not limited to, insolvency, industry consolidation or deconsolidation or changes in market conditions, could result in a reduction in storage capacity utilization in the event such capacity is not leased to other customers and may adversely affect IMTT’s revenue and profitability and the distributions it makes to us.
Risks Related to Atlantic Aviation
Deterioration in the economy in general or in the aviation industry that results in less air traffic at airports that Atlantic Aviation services would have a material adverse impact on our business.
A large part of the business’ revenue is derived from fueling and other services provided to GA customers and, to a lesser extent, commercial, freight and military customers. An economic downturn could reduce the level of air traffic, adversely affecting Atlantic Aviation.
Air travel and air traffic can also be affected by events that stem from national, local or industry specific matters. Events such as wars, outbreaks of disease, severe weather and terrorist activities in the U.S. or overseas may reduce air traffic. Local circumstances include downturns in the economic conditions of the area in which an airport is located or the relocation of FBO customers to alternative airports.
In addition, changes to regulations governing the tax treatment relating to GA travel, either for businesses or individuals, may cause a reduction in GA travel. Increased environmental regulation restricting or increasing the cost of aviation activities could also cause the business’ revenue to decline.
A decline in financial markets activity could have a negative impact on Atlantic Aviation’s results of operations.
Atlantic Aviation's financial results may be adversely affected by a deterioration in domestic and/or international financial markets activity. A deterioration in either equity or credit markets and its impact on the value of debt or equity issuances and/or merger and acquisition activity may cause GA activity to decline and negatively impact our results of operations, cash flows and financial condition.
Atlantic Aviation is subject to a variety of competitive pressures, and the actions of competitors may have a material adverse effect on its revenue, market share, and fuel margins, causing a decline in the profitability of this business.
FBO operators at an airport compete based on a number of factors including location of their facilities relative to runways and street access, service, value added features, reliability and price. Many of Atlantic Aviation’s FBOs compete with one or more FBOs at their respective airports and with FBOs at nearby airports. Furthermore, leases related to FBO operations may be subject to competitive bidding at the end of their term. Some present and potential competitors may have or may obtain greater financial and marketing resources than Atlantic Aviation, which may negatively impact Atlantic Aviation’s ability to compete at each airport or for lease renewal. Certain competitors may aggressively or irrationally price their bids for airport leases and may limit the

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business’ ability to grow or renew its portfolio. Excessive price discounting may cause a decline in market share or the amount of fuel sold, declines in hangar rentals and/or de-icing and may result in increased margin pressure, adversely affecting the profitability of this business.
Atlantic Aviation’s FBOs do not have the right to be the sole provider of FBO services at any airport. The authority responsible for each airport may grant leases to additional operators and new competitors could be established at those airports. The addition of new competitors may reduce or impair Atlantic Aviation’s ability to grow or improve its financial performance.
Airport leases may not be renewed on economically favorable terms.
Atlantic Aviation generates revenue pursuant to leases granted by airport authorities. Airport authorities may choose not to renew a lease at all or to only renew the lease on terms which are unfavorable to Atlantic Aviation. In addition, airport authorities may require Atlantic Aviation to participate in a bidding process to renew a lease, which could require unanticipated capital spending and could divert management’s attention during the pendency of the process. The loss or modification of any of Atlantic Aviation’s airport leases could adversely impact its results of operations, cash flows and financial condition.
The termination for cause or convenience of one or more of the FBO leases would damage Atlantic Aviation’s operations significantly.
Atlantic Aviation’s revenue is derived from long-term leases granted by airport authorities on 70 airports in the U.S. If Atlantic Aviation defaults on the terms or conditions of its leases, the relevant authority may terminate the lease without compensation. Atlantic Aviation would then lose the income from that location and potentially the expected returns from prior capital expenditures. Such an event could have a material adverse effect on Atlantic Aviation’s results of operations, cash flows and financial condition.
Failure to adequately maintain the facilities comprising our FBOs or the integrity of our fuel supplies may have a material adverse impact on the revenue or market share of one or more of the FBOs in the network resulting in a decline in profitability of the business.
FBO operators compete in part based on the overall quality and attractiveness of their facilities as well as the safety of their operations. Inadequate maintenance of any of the hangars, terminals, ramps or other assets comprising Atlantic Aviation’s FBOs could result in customers’ electing not to utilize Atlantic Aviation where another provider operates or to elect not to use a particular airport where an alternative in the same market exists. The resulting decline in customer visits or negative impact on reputation could adversely impact revenue from fuel sales, hangar/office rental, ramp and/or ramp services fees and could impact more than one facility.
Aircraft owners and operators rely on FBOs to control the quality of the fuel they sell. Failure to maintain the integrity of fuel supplies as a result of inadequate or inappropriate procedure or maintenance of fuel farms (storage facilities), fuel trucks, or related equipment could result in the introduction of contaminants and could lead to damage or failure of aircraft and could adversely impact the reputation, revenue and/or profitability of the business.
Failure to complete, or realize anticipated performance from acquisitions, expansions or developments could negatively impact Atlantic Aviation; the business’ increased indebtedness to fund such acquisitions, expansions or developments could reduce our operating flexibility.
Completing acquisitions, expansions or developments are subject to various risks and uncertainties, and we may not complete such transactions on a timely basis or at all, which could have an adverse effect on the business and results of operations, cash flows and financial condition.
FBO industry participants are often smaller, private companies with less sophisticated information systems and financial reporting and control capabilities. If we complete the acquisitions, we may be unable to integrate the assets into our existing operations on a timely basis or to achieve expected efficiencies. The integration could be expensive and could be time consuming for our management.
We may not be able to achieve anticipated levels of financial performance at the acquired FBO within our expected time frames or at all. Atlantic Aviation may incur additional indebtedness to fund future acquisitions, expansions or developments. This increased level of indebtedness will increase interest expense and could reduce funds available for reinvestment or distribution to us.
Deterioration of GA air traffic at airports where Atlantic Aviation operates would decrease Atlantic Aviation’s ability to refinance or service its debt.
As of December 31, 2019, Atlantic Aviation had $1,015 million of term loan debt outstanding and access to a senior secured revolving credit facility of $350 million that was not drawn. These debt facilities require compliance with certain operating and financial covenants. Atlantic Aviation's ability to meet its debt service obligations and to refinance or repay its outstanding indebtedness will depend primarily upon cash flows it generates.

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Reductions in U.S. military spending could result in a reduction in demand for services provided by Atlantic Aviation at certain airports in the U.S.
The U.S. military operates aircraft that are serviced at Atlantic Aviation FBOs. Cuts in U.S. military spending, to the extent they result in a reduction in the number of flights by military aircraft, could reduce revenue and gross margin at Atlantic Aviation. Deployments or other changes in military operations may also reduce the number of military aircraft serviced by Atlantic Aviation, reducing revenue and gross margin.
Atlantic Aviation is subject to extensive governmental regulations that could require significant expenditures. Regulators, such as the Transportation Security Administration (TSA), have and may again consider regulations which could impair the relative convenience of GA and adversely affect demand for Atlantic Aviation’s services.
FBOs are subject to extensive regulatory requirements compliance with which could result in significant costs. For example, the FAA, from time to time, issues directives and other regulations relating to the management, maintenance and operation of airport facilities. Compliance with those requirements may cause Atlantic Aviation to incur significant expenditures. The proposal and enactment of additional laws and regulations, as well as any failure to comply with such laws and regulations, could significantly increase the cost of Atlantic Aviation’s operations and reduce overall revenue. In addition, certain new regulations, if implemented, could decrease the convenience and attractiveness of GA travel relative to commercial air travel and may adversely impact demand for Atlantic Aviation’s services.
The lack of accurate and reliable industry data can result in unfavorable strategic planning, mergers and acquisitions and macro pricing decisions.
The business uses industry and airport-specific GA traffic data published by the FAA to identify trends in the FBO industry. The business also uses this traffic data as a key input to decision-making in strategic planning, mergers and acquisitions and macro pricing matters. However, as noted by the FAA on their website, the data has several limitations and challenges. As a result, the use of the FAA traffic data may result in conclusions in strategic planning, mergers and acquisitions or macro pricing decisions that are ultimately sub-optimal.
Changes in regulations related to the use of certain firefighting systems could result in Atlantic Aviation incurring additional expenses associated with modifying or replacing these systems, and remediation costs relating to the use of these systems could be substantial.
Atlantic Aviation employs foam-based firefighting systems in certain of its hangars as required by local laws and regulation. Some of these utilize materials that have been, in certain jurisdictions, deemed hazardous substances. If Atlantic Aviation were to be required to modify or replace some or all of these systems, the expense associated with such modification or replacement could have a material adverse impact on the results of operations, cash flows and financial condition of the business. In addition, the cost of remediation in connection with the release of firefighting foam could be substantial.
Risks Related to MIC Hawaii
Hawaii Gas is exposed to the effects of volatility in commodity prices. To the extent that higher prices cannot be effectively hedged or passed on to customers, both in the short term or the long term, the business’ gross margin, cash flows and liquidity will be adversely affected.
The profitability of Hawaii Gas is based on the margin of sales prices over costs. LPG, LNG and feedstock for the SNG plant are commodities and changes in global supply of and demand for these products can have a significant impact on costs. Hawaii Gas has no control over commodity prices and, to the extent that these prices cannot be hedged or passed on to customers, the business’ results of operations, cash flows and financial condition could be adversely affected.
Depending on the terms of our contracts with suppliers, as well as the extent and success of our use of financial instruments to reduce our exposure related to volatility in the cost of LPG, changes in the market price of Hawaii Gas’ fuel supplies could create payment obligations that expose the business to increased liquidity risk.
The operations of Hawaii Gas are subject to a variety of competitive pressures and the actions of competitors could have a material adverse effect on operating results.
Energy resources including diesel, solar, geo-thermal and wind, may be substituted for gas in certain end-use applications, particularly if the price of gas increases relative to these resources, whether due to higher costs or otherwise. Customers could elect to meet their energy needs through any or all of these alternate resources as a result of higher gas prices, lower costs of alternative generation resources or convenience. This could have an adverse effect on the business’ results of operations, cash flows and financial condition.

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Hawaii Gas relies on its SNG plant, including its transmission pipeline, for a significant portion of its sales. Disruptions at that facility could adversely affect the business’ ability to serve customers.
Disruptions at the SNG plant resulting from mechanical or operational issues or power failures could affect Hawaii Gas' ability to produce SNG. Most of the utility sales on Oahu are of SNG and all SNG is produced at the Oahu plant. Hawaii Gas has a back-up system in place, however, disruptions to both the primary and the back-up systems could have a significant adverse effect on Hawaii Gas’ results of operations, cash flows and financial condition.
Hawaii Gas obtains its primary feedstock for its SNG plant from a refinery located on Oahu and sources its LPG supply from an off-island distributor. Supply disruptions may have an adverse effect on the operations of the business.
The extended unavailability of the refinery that supplies SNG feedstock, or the inability to purchase LPG from off-island sources, could adversely affect operations. The business has a limited ability to store LPG, and any disruption in supply may cause a depletion of LPG stocks. Disruptions in the supply of SNG or LPG, if occurring for an extended period, could materially adversely impact the business’ results of operations, cash flows and financial condition.
The MIC Hawaii businesses are subject to risks associated with volatility in the Hawaii economy.
Hawaii’s economy and demand for our business’ products are heavily influenced by economic conditions in the U.S. and Asia and their impact on tourism, as well as by government spending. If the local economy deteriorates, the amount of gas sold by Hawaii Gas could be negatively affected by business closures or reduced consumption, which could adversely impact the business’ financial performance. Additionally, slow or no economic growth in Hawaii could adversely impact the amount of gas sold to new and existing customers and reduce the level of new commercial and residential construction. A reduction in government activity in Hawaii, particularly military activity could also have a negative impact on the MIC Hawaii businesses.
Hawaii Gas’ utility business is subject to regulation by the HPUC and actions by the HPUC or changes to the regulatory environment may constrain the operation or profitability of the business.
The HPUC regulates all franchised or certificated public service companies operating in Hawaii. The HPUC prescribes rates, tariffs, charges and fees; determines the allowable rate returns on equity; issues guidelines concerning the general management of franchised or certificated utility businesses and acts on requests for the acquisition, sale, disposition or other exchange of utility properties, including mergers and consolidations.
Any adverse decision by the HPUC concerning the level or method of determining utility rates, the items and amounts that may be included in the rate base, the returns on equity or rate base, the potential consequences of exceeding or not meeting such returns, or any prolonged delay in rendering a decision in a rate or other proceeding, could have an adverse effect on our business.
The enactment of legislation in 2018 requiring Hawaii to be carbon neutral by 2045 or a potential Renewable Portfolio Standard (RPS) for utility gas usage or supply, similar to the one implemented for electric utility generation, could result in supply disruptions, increased energy costs to ratepayers or a negative impact on Hawaii Gas’ future financial performance.

The Hawaii legislature or municipal governments could impose a gas RPS, enact other restrictive legislation or impose changes to building codes, which may result in increased energy costs to the business and its customers (i.e. the cost of finding new renewable fuel supplies or developing new technologies could be prohibitive), in supply disruptions and/or in restriction of future business. Similar impacts could result from the enactment of carbon neutrality legislation in 2018.
Hawaii Gas seeks to increase its use of renewable feedstocks and to increase the percentage of RNG distributed to its customers. This initiative exposes Hawaii Gas to new technology, supply, counterparty and regulatory risks that could impact the performance of the business.
Hawaii Gas is pursuing a range of renewable resources that may provide pipeline quality gas in scalable quantities. These initiatives include the current contract for recovery of biogas from the Honouliuli wastewater treatment plant and ongoing discussions with additional wastewater treatment plants, landfills and biomass producers. Blending of RNG with existing fuels and integrating RNG into the Hawaii Gas’ pipeline network may present technical challenges resulting in project delays, cost overruns or pipeline disruptions. Use of RNG may also expose Hawaii Gas to the risk of supply fluctuations due to the variability in performance of processes such as anaerobic digestion. These technical and supply risks may impact the financial performance of the business.
Because of its geographic location, Hawaii, and in turn the MIC Hawaii businesses, are subject to earthquakes, volcanos and certain weather risks that could materially disrupt operations.
Hawaii is subject to earthquakes, volcanic activity and certain weather risks, such as hurricanes, floods, heavy and sustained rains and tidal waves that could materially disrupt operations. Because MIC Hawaii’s properties, such as its SNG plant, SNG transmission line and several storage facilities, are close to the ocean, weather-related disruptions to operations are possible. In addition, earthquakes and volcanic activity may cause disruptions. These events could damage the business’ assets or could result

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in wide-spread damage to its customers, thereby reducing the amount of gas sold and, to the extent such damages are not covered by insurance, adversely impacting the business’ results of operations, cash flows and financial condition.
Reductions in U.S. military spending could result in a reduction in demand for gas in Hawaii.
The U.S. military has a significant presence in Hawaii and is a substantial contributor to its economy. To the extent that federal spending cuts, including voluntary or mandatory cuts in U.S. military spending results in a reduced military presence in Hawaii, such reductions could reduce the demand for gas and new construction in Hawaii.
Because of its geographic location and the unique economy of Hawaii, MIC Hawaii is subject to challenges in hiring and maintaining staff with specialized skill sets.
The changing nature of the Hawaii energy complex has had an impact on our staffing requirements. Volatility in feedstock prices, together with the impact of the State of Hawaii’s goals to reduce dependency on imported petroleum, requires staff with specialized knowledge of the energy sector. Because the resident labor pool in Hawaii is both small and oriented mainly to Hawaii’s basic industries, it is difficult to find individuals with these specialized skill sets. Unemployment rates in Hawaii are traditionally lower than those in the U.S. Mainland. Moreover, relocation to Hawaii is costly and often requires employees to make cultural and family adjustments not normally required in a relocation. The inability to source and retain staff with appropriate skill sets could adversely impact the performance of the MIC Hawaii businesses. In addition, dependence on skilled labor trades could result in constraints on growth and profitability as a result of competition for a limited labor pool.
Hawaii Gas’ operations on the islands of Hawaii, Maui and Kauai rely on LPG that is transported from Oahu to those islands by Jones Act qualified barges and by non-Jones Act vessels from off-island ports. Disruptions to service by those vessels could adversely affect the financial performance of our business.
The Jones Act requires that all goods transported by water between U.S. ports be carried in U.S.-flag ships and that they meet certain other requirements. The business has time charter agreements for the only two Jones Act qualified barges available in Hawaii capable of carrying large amounts of LPG. If the barges are unable to transport LPG from Oahu and the business is not able to secure off-island sources of LPG or obtain an exemption to the Jones Act that would permit importation of a sufficient quantity of LPG from the mainland U.S., the business could be adversely affected. If the barges require refurbishment or repair at a greater frequency than forecast, cash outflows for capital costs could adversely impact Hawaii Gas’ results of operations, cash flows and financial condition.
Generation underperformance at individual projects within MIC Hawaii could lead to financial penalties or contract terminations under existing off-take agreements.
Certain distributed generation projects have minimum production clauses included in their respective power purchase agreements. These minimum production levels are specified in each respective contract. Failure to meet these minimum production levels, could result in liquidated damages, other financial penalties, or contract termination which could negatively impact the business’ results of operations, cash flows and financial condition.
Certain MIC Hawaii projects depend on electric interconnection and transmission facilities that we do not own or control and that are potentially subject to transmission constraints. If these facilities fail to provide adequate transmission capacity, MIC Hawaii projects may be restricted in their ability to deliver electricity to customers.
MIC Hawaii’s electricity generation facilities depend on grid interconnection and transmission facilities owned and operated by others to deliver the power they produce. Certain off-taker contracts include limited provisions allowing for occasional curtailment of electricity generated by MIC Hawaii due to the limitations of the electricity transmission system. Any constraints on, or the failure of, interconnections or transmission facilities could prevent MIC Hawaii from selling power and could adversely affect MIC Hawaii’s results of operations, cash flows and financial condition.
MIC Hawaii depends on counterparties, including operation and maintenance (O&M) providers and power purchasers, performing in accordance with their agreements. If they fail to so perform, our MIC Hawaii businesses could incur losses of revenue or additional expenses and business disruptions.
Counterparties to long-term agreements within MIC Hawaii may not perform their obligations in accordance with such agreements. Should they fail to perform, due to financial difficulty or otherwise, MIC Hawaii may be required to seek alternative O&M providers. The failure of any of the parties to perform in accordance with these agreements could adversely affect MIC Hawaii’s results of operations, cash flows and financial condition.

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Risks Related to Having an External Manager
We are subject to the terms and conditions of the Management Services Agreement and Disposition Agreement between us and our Manager, which limit our ability to take certain actions and may make strategic transactions more costly.
We cannot unilaterally amend the Management Services Agreement between us and our Manager. Changes in the compensation of our Manager, certain rights held by our Manager or other components of the Management Services Agreement require the approval of our Manager and limit our ability to make changes that could be beneficial to stockholders generally without the consent of our Manager.
On October 30, 2019, we signed a Disposition Agreement with our Manager to facilitate our pursuit of strategic alternatives (see Exhibit 10.3 of this Form 10-K). Outside of this agreement, we do not have the ability to terminate the Management Services Agreement other than in limited circumstances. With this agreement, our Management Services Agreement with our Manager will terminate as to any businesses, or substantial portions thereof, that are sold and, in connection therewith, we will make payments to our Manager calculated in accordance with the Disposition Agreement. The Disposition Agreement will terminate on the earlier to occur of (i) the termination of the Management Services Agreement and (ii) the sixth anniversary, subject to extension under certain circumstances if a transaction is pending.
Our Manager owns a significant portion of our outstanding stock. A sale of all or a portion of the common stock owned by our Manager could be interpreted by the equity markets as a lack of confidence in our prospects.
Our Manager, in its sole discretion, determines whether to reinvest base management and performance fees, if any, in shares of our common stock and whether to hold or sell those securities. Reinvestment of base management and performance fees, if any, in additional common stock would increase our Manager’s ownership stake in our Company. At December 31, 2019, our Manager owned 15.30% of our outstanding shares. Our Manager has sold and could from time to time sell the shares that it acquires via reinvestment of fees. If our Manager decides to sell any of its shares in our Company, such sales may be interpreted by some market participants as a lack of confidence in our Company and put downward pressure on the market price of our stock. Sales of shares of stock by our Manager would increase the supply and could decrease the price if demand is insufficient to absorb such sales.
Certain provisions of our Management Services Agreement, certificate of incorporation and bylaws make it difficult for third parties to acquire control of our Company and could deprive investors of the opportunity to obtain a takeover premium for their shares of common stock.
Subject to terms of the Disposition Agreement, there are limited circumstances in which our Manager can be terminated under our Management Services Agreement. The Management Services Agreement provides that in circumstances where our common stock ceases to be listed on a recognized U.S. exchange as a result of the acquisition of our common stock by third parties in an amount that results in our common stock ceasing to meet the distribution and trading criteria on such exchange or market, our Manager has the option to either propose an alternate fee structure and remain as our Manager or resign, terminate the Management Services Agreement upon 30 days’ written notice and be paid a substantial termination fee. The termination fee payable on our Manager’s exercise of its right to resign as our Manager subsequent to a delisting of our common stock could delay or prevent a change in control that may favor our stockholders. Furthermore, in the event of such a delisting, any proceeds from the sale, lease or exchange of a significant amount of assets must be reinvested in new assets of our Company, subject to debt repayment obligations. We would also be prohibited from incurring any new indebtedness or engaging in any transactions with stockholders or our affiliates without the prior written approval of our Manager. These provisions could deprive stockholders of opportunities to realize a premium on the common stock owned by them. The Disposition Agreement provides that the Management Services Agreement will terminate as to any businesses, or substantial portions thereof, that are sold, and certain payments will be made to our Manager in connection therewith.
Our certificate of incorporation and bylaws contain provisions that could have the effect of making it more difficult for a third-party to acquire, or discouraging a third-party from acquiring, control of our Company. These provisions include:
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restrictions on our ability to enter into certain transactions with our major stockholders, with the exception of our Manager; similar restrictions are also contained in Section 203 of the Delaware General Corporation Law;
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allowing only our Board to fill vacancies, including newly created directorships and requiring that directors may be removed with or without cause by a stockholder vote of 66 2/3%;
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requiring that only the chairman or Board may call a special meeting of our stockholders;
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prohibiting stockholders from taking any action by written consent;
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establishing advance notice requirements for nominations of candidates for election to our Board or for proposing matters that can be acted upon by our stockholders at a stockholders’ meeting; and
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having a substantial number of additional shares of common stock authorized but unissued.

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Our Manager’s decision to reinvest its monthly base management fees and quarterly performance fees, if any, in common stock or retain the cash will affect stockholders differently.
Our Manager is paid a base management fee based on our market capitalization and potentially performance fees based on the total return generated relative to a U.S. utilities index benchmark. Our Manager, in its sole discretion, may elect to retain base management fees and performance fees, if any, paid in cash or to reinvest such payments in additional common stock. In the event our Manager chooses not to reinvest the fees to which it is entitled in additional shares of common stock, the amount paid will reduce the cash that may otherwise be distributed as a dividend to all stockholders or used in our Company’s operations. In the event our Manager chooses to reinvest the fees to which it is entitled in additional common stock, effectively returning the cash to us, such reinvestment and the issuance of new shares of common stock will dilute existing stockholders by the increase in the percentage of common stock owned by our Manager. Either option may adversely impact the market for our shares.
In addition, our Manager has typically elected to invest its fees in shares of common stock, and, unless otherwise agreed with us, can only change this election during a 20-trading day window following our earnings release. Any change would apply to fees incurred thereafter. Accordingly, stockholders would generally have notice of our Manager’s intent to receive fees in cash rather than reinvest before the change was effective.
Our Manager is not required to offer all acquisition opportunities to us and may offer such opportunities to other entities. Our management may waive investment opportunities presented by our Manager.
Pursuant to our Management Services Agreement, we have first priority ahead of all current and future funds, investment vehicles, separate accounts and other entities managed by our Manager or by members of the Macquarie Group with respect to four specific types of acquisition opportunities within the United States. The four types of acquisition opportunities over which we have first priority include FBOs, airport parking, district energy and “user pays”, contracted and regulated assets that represent an investment of greater than AUD $40 million. Other than these types of opportunities, our Manager does not have an obligation to offer to us any particular acquisition opportunities, even if they meet our investment objectives, and our Manager and its affiliates can offer any or all other acquisition opportunities on a priority basis or otherwise to current and future funds, investment vehicles and accounts sponsored by our Manager or its affiliates. Our businesses may compete with these entities for investment opportunities, and there can be no assurance that we will prevail with respect to such investments.
In addition, our management may determine not to pursue investment opportunities presented to us by our Manager, including those presented on a priority basis. If our management waives any such opportunity, our Manager and its affiliates may offer such opportunity to any other entity, including any entities sponsored or advised by members of the Macquarie Group. As such, not every acquisition opportunity presented to us by our Manager may be pursued by us and may ultimately be presented to entities with whom we compete for investments.
Our Manager can resign with 90 days’ notice, and our CEO or CFO could be removed by our Manager, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations, which could adversely affect our financial results and negatively impact the market price of our common stock.
Our Manager has the right, under the Management Services Agreement, to resign at any time with 90 days’ notice, whether we have found a replacement manager or not. In addition, our Manager could re-assign or remove our CEO and/or our CFO from their positions and responsibilities at our Company without our Board's approval and with little or no notice. If our Manager resigns or our CEO and/or CFO are removed, we may not be able to find a new external manager or hire internal management with similar expertise within 90 days to provide the same or equivalent services on acceptable terms, or at all. If we are unable to do so, our operations are likely to experience a disruption, our financial results could be adversely affected, perhaps materially, and the market price of our common stock may decline substantially. In addition, the coordination of our internal management, acquisition activities and supervision of our businesses is likely to suffer if we were unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by our Manager and its affiliates.
Furthermore, if our Manager resigns, we and our subsidiaries will be required to cease use of the Macquarie brand and change their names to remove any reference to “Macquarie”. This may cause the value of our Company and the market price of our common stock to decline.
Our externally managed model may not be viewed favorably by investors.
We are externally managed by a member of the Macquarie Group. Our Manager receives a fee for the corporate headquarters functions it provides including the compensation of our management team and those who provide services to us on a shared basis, health and welfare benefits, the provision of facilities, technology and insurance (other than directors and officers). The fee is based on our equity market capitalization and thus increases as we grow. The size of the fee may bear no direct correlation with the actual cost of providing the agreed upon services and may be higher than the cost of managing our Company internally. Per the terms of the Management Services Agreement with our Manager, the current default election for satisfying any base management or performance fees, if any, to which our Manager may be entitled is the issuance of additional shares of common stock. To the

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extent fees continue to be reinvested in our common stock, all stockholders will be diluted and our hurdle for growing distributable cash on a per share basis will be higher.
Our Manager’s affiliation with Macquarie Group Limited and the Macquarie Group may result in conflicts of interest or a decline in the market price of our common stock.
Our Manager is an affiliate of Macquarie Group Limited and a member of the Macquarie Group. From time to time, we have entered into, and in the future, we may enter into, transactions and relationships involving Macquarie Group Limited, its affiliates, or other members of the Macquarie Group. Such transactions have included and may include, among other things, the entry into debt facilities and derivative instruments with members of the Macquarie Group serving as lender or counterparty, and financial advisory or equity and debt underwriting services provided to us by the Macquarie Group.
Although our Audit Committee, all of the members of which are independent directors, is required to review and approve in advance of any related party transactions, including those involving members of the Macquarie Group or its affiliates, the relationship of our Manager to the Macquarie Group may result in conflicts of interest.
In addition, as a result of our Manager’s being a member of the Macquarie Group, negative market perceptions of Macquarie Group Limited generally or of Macquarie’s infrastructure management model, or Macquarie Group statements or actions with respect to other managed vehicles, may affect market perceptions of us and cause a decline in the price of our common stock unrelated to our financial performance and prospects.
In the event of the underperformance of our Manager, we may be unable to remove our Manager, which could limit our ability to improve our performance and could adversely affect the market price of our common stock.
Under the terms of the Management Services Agreement, our Manager must significantly underperform for the Management Services Agreement to be terminated. Our Board cannot remove our Manager unless:
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our common stock underperforms a weighted average of two benchmark indices by more than 30% in relative terms and more than 2.5% in absolute terms in 16 out of 20 consecutive quarters prior to and including the most recent full quarter, and the holders of a minimum of 66.67% of the outstanding shares of our common stock (excluding any shares owned by our Manager or any affiliate of our Manager) vote to remove our Manager;
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our Manager materially breaches the terms of the Management Services Agreement and such breach has been unremedied within 60 days after notice;
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our Manager acts with gross negligence, willful misconduct, bad faith or reckless disregard of its duties in carrying out its obligations under the Management Services Agreement, or engages in fraudulent or dishonest acts; or
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our Manager experiences certain bankruptcy events.
Our Board cannot remove our Manager unless the market performance of our common stock also significantly underperforms the benchmark index. If we were unable to remove our Manager in circumstances where the absolute market performance of our common stock does not meet expectations, the market price of our common stock could be negatively affected.
Risks Related to Ownership of Our Stock
Our guidance is based on estimates and circumstances may arise that may result in the reduction or elimination of our dividend. 

We periodically disclose our expected annual cash dividend and/or dividend growth rate. These are estimates and may be affected by inaccurate assumptions and/or known or unknown risks and uncertainties some of which are beyond our control. See “Forward-Looking Statements.” If the payment of dividends at the anticipated level would leave us with insufficient cash to take timely advantage of growth opportunities (including through acquisitions), to meet any large unanticipated liquidity requirements, to reduce our indebtedness, to fund our operations, or to otherwise properly address our business prospects, our Board may elect to reduce or eliminate our dividend. If our dividend is reduced below levels anticipated by the market, our stock price could be adversely affected.
The market price and marketability of our common stock may from time to time be significantly affected by numerous factors beyond our control, which may adversely affect our ability to raise capital through future equity financings.
The market price of our common stock may fluctuate significantly. Many factors that are beyond our control may significantly affect the market price and marketability of our common stock and may adversely affect our ability to raise capital through equity financings. These factors include, but are not limited to:
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significant volatility in the market price and trading volume of securities of Macquarie Group Limited and/or vehicles managed by the Macquarie Group or branded under the Macquarie name or logo;

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significant volatility in the market price and trading volume of securities of registered investment companies, business development companies or companies in our sectors;
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the conclusion of a sale or sales of businesses in connection with our pursuit of strategic alternatives or the termination of such efforts;
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changes in our earnings or variations in operating results;
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changes in our ratings from any of the ratings agencies;
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any shortfall in EBITDA excluding non-cash items or Free Cash Flow from levels expected by securities analysts;
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changes in regulatory policies or tax law;
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operating performance of companies comparable to us;
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loss of funding sources; and
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substantial sales of our common stock by our Manager or other significant stockholders.
The performances of our businesses or our holding company structure may limit our ability to make regular dividends in the future to our stockholders because we are reliant upon the cash flows and distributions from our businesses.
Our Company is a holding company with no operations. We are dependent upon the ability of our businesses to make distributions to our Company to enable it to meet its expenses, and to pay, maintain or grow dividends to stockholders in the future. The ability of our operating subsidiaries and the businesses we own to make distributions to our Company is subject to their operating performance, the terms of their debt agreements and the applicable laws of their respective jurisdictions. In addition, the ability of each business to reduce its outstanding debt will be similarly limited by its operating performance.
We could be adversely impacted by actions of activist stockholders, and such activism could impact the value of our securities.
We value constructive input from our stockholders and the investment community. However, there is no assurance that the actions taken by our Board and management in seeking to maintain constructive engagement with our stockholders will be successful. Certain of our stockholders may express views with respect to the operation of our business, our business strategy, corporate governance considerations or other matters that are contrary to ours. Responding to these, or to actions that may be taken by activist stockholders can be costly and time-consuming, disruptive to our operations and divert the attention of management and our employees. The perceived uncertainties as to our future direction due to activist actions could affect the market price of our securities, result in the loss of potential business opportunities and make it more difficult to attract and retain qualified personnel, board members and business partners.
We are currently subject to putative securities class action and shareholder derivative lawsuits and could become subject to other similar actions in the future, the unfavorable outcome of which could have a materially adverse impact our business or results of operations.
In April 2018, two lawsuits seeking to establish class actions were filed against us and certain current and former officers of our Company and one of our subsidiaries. These lawsuits allege violations of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder and knowing material misstatements and omissions in our public disclosures concerning our business and the sustainability of our dividend to stockholders. In addition, three shareholder derivative complaints were filed asserting derivative claims on behalf of the Company against certain current and former officers and directors, arising out of the same subject matter at issue in the securities class action lawsuits. While we intend to vigorously defend against these lawsuits, there is no assurance that we will be successful in the defense or that insurance will be available or adequate to fund any settlement or judgment or the litigation costs of the actions. In addition, we are obligated to indemnify and incur legal expenses on behalf of current and former officers under certain circumstances. These lawsuits, and any similar proceedings or claims that may be brought against us in the future, may divert management resources and cause us to incur substantial costs, and any unfavorable outcome could result in payment of damages and could adversely affect our reputation, any or all of which could have a material adverse impact our business and results of operations.
The price of our stock may be vulnerable to actions of market participants whose strategies may not involve buying and holding our securities in pursuit of an attractive total return.
Our common stock has been the subject of short selling efforts by certain market participants. Short sales are transactions in which a market participant borrows, then sells a security that it does not own. The market participant is obligated to replace the security borrowed by purchasing the security at or before the time the security is recalled. If the price at the time of replacement/recall is lower than the price at which the security was originally sold by the market participant, then the market participant will realize a gain on the transaction. Thus, it is in the market participant’s interest for the price of the security to decline during the period up to the time of replacement/recall.

34

Previous short selling efforts have had an impact on, and may in the future impact, the value of our stock in an extreme and volatile manner to our detriment and the detriment of our stockholders. In addition, market participants have published, and may in the future publish, negative, inaccurate or misleading information regarding our Company and our management team. We believe that the publication of such information has led, and may in the future lead to, significant downward pressure on the price of our stock to our detriment and the further detriment of our stockholders. These and other efforts by certain market participants to unduly influence the price of our common stock for financial gain may cause value of our stockholders’ investments to decline, may make it more difficult for us to raise equity capital when needed without significantly diluting existing stockholders, and may reduce demand from new investors to purchase our shares.
We previously identified a material weakness in our internal control over financial reporting, and the failure to maintain an effective system of internal controls in the future could result in loss of investor confidence and adversely impact our stock price.
Effective internal controls are necessary for us to provide reliable and accurate financial statements. In our Annual Report on Form 10-K for the year ended December 31, 2018, we reported management’s conclusion that, because of a material weakness at Atlantic Aviation relating to non-credit card fuel revenues, our internal control over financial reporting was not effective as of such date. During 2019, we completed the remediation measures related to the material weakness and management concluded that our internal control over financial reporting was effective as of December 31, 2019. Completion of remediation does not provide assurance that our remediation or other controls will continue to operate properly. If we are unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our stock and our access to capital. In addition, implementing any appropriate changes to internal controls will result in additional expenses.
We may issue preferred stock with rights, preferences and privileges that may be superior to the common stock, and these could have negative consequences for holders of our common stock.
We may issue shares of preferred stock in one or more financing transactions. We may also use the authorized preferred stock for funding transactions, including, among other things, acquisitions, strategic partnerships, joint ventures, restructurings, business combinations and investments, although we have no immediate plans to do so. We cannot provide assurances that any such transaction will be consummated on favorable terms or at all, that they will enhance stockholder value, or that it will not adversely affect our business or the trading price of our common stock. Any shares of preferred stock could be issued with rights, preferences and privileges that may be superior to those of our common stock. In addition, preferred stock could be issued for capital raising, financing and acquisition needs or opportunities that have the effect of making an acquisition of our Company more difficult or costly, as could also be the case if the Board were to issue additional common stock.
Our reported Earnings per Share (EPS), as defined under GAAP, does not reflect the cash generated by our businesses and may result in unfavorable comparisons with other businesses.
Our businesses own and invest in high-value, long-lived assets that generate substantial amounts of depreciation and amortization. Depreciation and amortization are non-cash expenses that serve to reduce reported EPS. We pay our Manager base management fees and may pay performance fees both of which may be reinvested in additional shares thereby rendering them a non-cash expense. Whether the fees are settled in cash or reinvested in additional shares, they have the effect of reducing EPS. As a result, our financial performance may appear to be substantially worse compared with other businesses. To the extent that our results appear to be worse, we may have relatively greater difficulty attracting investors in our stock.
Our total assets include a substantial amount of goodwill and other intangible assets. The write-off of a significant portion of intangible assets would negatively affect our reported earnings.
Our total assets reflect a substantial amount of goodwill and other intangible assets. At December 31, 2019, goodwill and other intangible assets, net, represented approximately 40% of our total assets. Goodwill and other intangible assets were primarily recognized as a result of the acquisitions of our businesses. Other intangible assets consist primarily of airport operating rights, customer relationships and trade names. On at least an annual basis, we assess whether there has been any impairment in the value of goodwill and other intangible assets or when there are triggering events or circumstances. If the carrying value of the tested asset exceeds its estimated fair value, impairment is deemed to have occurred. In this event, the intangible is written down to fair value. Under current accounting rules, this would result in a charge to reported earnings. We have recognized significant impairments in the past, and any future determination requiring the write-off of a significant portion of goodwill or other intangible assets would negatively affect our reported earnings and total capitalization and could be material.

35

Our total assets include a substantial amount of intangible assets and fixed assets. The depreciation and amortization of these assets may negatively impact our reported earnings.
The high level of intangible and physical assets written up to fair value upon acquisition of our businesses generates substantial amounts of depreciation and amortization. These non-cash items serve to lower net income as reported in our consolidated statement of operations as well as our taxable income. The generation of net losses or relatively small net income may contribute to a net operating loss (NOL) carryforward that can be used to offset current taxable income in future periods. However, the continued reporting of little or negative net income may adversely affect the attractiveness of our Company to some potential investors and may reduce the market for our common stock.
Risks Related to Taxation
The current treatment of qualified dividend income and long-term capital gains under U.S. federal income tax law may be changed in the future.
Under current law, qualified dividend income and long-term capital gains are taxed to non-corporate investors at a maximum U.S. federal income tax rate of 20%. In addition, certain holders that are individuals, estates or trusts are subject to 3.8% surtax on all or a portion of their “net investment income,” which may include all or a portion of their dividend income and net gains from the disposition of our shares. This tax treatment may be adversely affected, changed or repealed in the future and may affect market perceptions of our Company and the market price of our shares could be negatively affected.
Our ability to use our NOL carryforwards to offset future taxable income may be subject to certain limitations.
In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, and analogous state income tax provisions, a corporation (or other entity taxable as a corporation, such as the Company) that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs and certain other tax attributes to offset future taxable income. Generally speaking, an “ownership change” occurs if the aggregate percentage ownership of the stock of the corporation held by one or more “five-percent stockholders” (as defined in the Code) increases by more than fifty percentage points over such stockholders’ lowest percentage ownership during the testing period, which is generally the three year-period ending on the transaction date. If we undergo an ownership change, our ability to utilize NOLs and certain other tax attributes could be limited.
We have significant state income tax NOLs, which may not be realized before they expire.
We have incurred state NOLs and have provided a valuation allowance against a portion of those. There can be no assurance that we will utilize these state losses or future losses that may be generated. Further, several states have imposed limitations on the ability of NOL carryforwards to offset current year income. There can be no assurance that other states will not suspend or limit the use of NOL carryforwards.
Recent changes to U.S. tax laws may adversely affect our results of operations and financial condition and create the risk that we may need to adjust our accounting for these changes.
The Tax Cut and Jobs Act made significant changes to U.S. tax laws and includes numerous provisions that affect businesses, including ours. For instance, as a result of lower corporate tax rates, the Tax Cut and Jobs Act tends to reduce both the value of deferred tax assets and the amount of deferred tax liabilities. It also limits interest rate deductions and the amount of NOLs that can be used each year and alters the expensing of capital expenditures. The Tax Cut and Jobs Act is unclear in certain respects and will require interpretations and implementing regulations by the IRS, as well as state tax authorities, and the Tax Cut and Jobs Act could be subject to amendments and technical corrections, any of which could lessen or increase the adverse (and positive) impacts of the Tax Cut and Jobs Act. The accounting treatment of these tax law changes is complex, and some of the changes may affect both current and future periods.
The treatment of depreciation and other tax deductions under current U.S. federal income tax law may be adversely affected, changed or repealed in the future.
Under current law, certain capital expenditures are eligible for accelerated depreciation, including 100% bonus depreciation for qualifying assets purchased and placed in service after September 27, 2017 and prior to January 1, 2023, for U.S. federal income tax purposes. In addition, certain other expenses are eligible to be deducted for U.S. federal income tax purposes. This tax treatment may be adversely affected, changed or repealed by future changes in tax laws at any time, which may affect market perceptions of our Company and the market price of our shares could be negatively affected.
Our Company could be adversely affected by changes in tax laws and/or changes in the interpretation of existing tax laws.
We are subject to various taxing regimes, including federal, state, local and foreign taxes such as income, excise, sales/use, payroll, franchise, property, gross receipts, withholding and ad valorem taxes. New tax laws and regulations and changes in existing tax laws and regulations or the interpretation thereof are continuously being enacted or proposed and could result in increased expenditures for tax in the future and could have a material adverse effect on our Company’s results of operations, cash flows and financial condition.

36

Our property taxes could increase due to reassessment or property tax rate changes.
We are required to pay real property taxes in respect of our properties and such taxes may increase as our properties are reassessed by taxing authorities or as property tax rates change. An increase in the assessed value of our properties or our property tax rates may not be passed along to our customers and could adversely impact our results of operations, cash flows and financial condition.
Our Company and our subsidiaries are subject to examinations and challenges by taxing authorities.
Periodic examinations or audits by taxing authorities could increase our tax liabilities and result in the imposition of interest and penalties. If challenges arising from such examinations and audits are not resolved in our Company’s favor, they could have a material adverse effect on our Company’s results of operations, cash flows and financial condition.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
In general, the assets of our businesses, including real property, are pledged to secure the financing arrangements of each business on a stand-alone basis. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” in Part II, Item 7, for a further discussion of these financing arrangements.
IMTT
IMTT operates 17 wholly-owned bulk liquid terminals in the U.S., one in Canada and has a minority interest in a company that owns a single bulk liquid terminal, also in Canada. The land on which the facilities are located is either owned or leased by IMTT with leased land comprising a small proportion of the total land in use. IMTT also owns the storage tanks, piping and transportation infrastructure such as truck and rail loading equipment located at the facilities and the majority of any related ship docks. Ship docks at facilities in Quebec and Geismar, L.A. are leased. Management believes the aforementioned equipment is generally well maintained and adequate for the present operations. For further details, see “Our Businesses — IMTT — Locations” in Part I, Item 1.
Atlantic Aviation
Atlantic Aviation does not own any real property. Its operations are carried out under various long-term leases. The business leases office space for its head office in Plano, Texas. For more information regarding Atlantic Aviation’s FBO locations, see “Our Businesses — Atlantic Aviation — Locations” in Part I, Item 1.
Atlantic Aviation owns or leases vehicles including fuel trucks and other equipment needed to provide service to customers. Routine maintenance is performed on this equipment and a portion is replaced as appropriate to ensure continued safe and efficient operations and the maintenance of service level standards. Management believes the equipment is generally well maintained and adequate for present operations. Changes in market conditions allowed Atlantic Aviation to move to purchasing or procuring capital leases for larger equipment. Atlantic Aviation believes that these assets are a core part of the business and have long useful lives making ownership desirable if conditions permit.
MIC Hawaii
Hawaii Gas owns real property and equipment including its SNG plant on Oahu and the land on which it sits; several LPG storage yards on islands other than Oahu; approximately 1,100 miles of underground piping, of which approximately 900 miles are on Oahu; and a 22-mile transmission pipeline from the SNG plant to Pier 38 in Honolulu. In addition, MIC Hawaii has controlling interests in operating solar facilities and distributed energy products. For more information regarding MIC Hawaii’s operations, see “Our Businesses — MIC Hawaii — Fuel Supply, SNG Plant and Distribution System” in Part I, Item 1.

ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings pending that we believe will have a material adverse effect on us. We are involved in ordinary course legal, regulatory, administrative and environmental proceedings that are incidental to our businesses. Typically, expenses associated with these proceedings are covered by insurance.

37

IMTT Bayonne — Remediation
The Bayonne, New Jersey terminal, portions of which have been acquired over a 30-year period, have pervasive remediation requirements that were assumed at the time of purchase from the various former owners. One former owner retained environmental remediation responsibilities for a purchased site and shares in other remediation costs. These remediation requirements are documented in two memoranda of agreement and an administrative consent order with the State of New Jersey. Remediation efforts entail removal of free product, soil treatment, repair/replacement of sewer systems, and the implementation of containment and monitoring systems. These remediation activities are estimated to span a period of ten to twenty or more years and cost from $30 million to $65 million over the next 20 years. The cost of the remediation activities at the terminal are estimated based on currently available information, in undiscounted U.S. dollars and is inherently subject to relatively large fluctuation.
Shareholder Litigation
On April 23, 2018, a complaint captioned City of Riviera Beach General Employees Retirement System v. Macquarie Infrastructure Corp., et al., Case 1:18-cv-03608 (VSB), was filed in the United States District Court for the Southern District of New York. A substantially identical complaint captioned Daniel Fajardo v. Macquarie Infrastructure Corporation, et al., Case No. 1:18-cv-03744 (VSB) was filed in the same court on April 27, 2018. Both complaints asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder on behalf of a putative class consisting of all purchasers of MIC common stock between February 22, 2016 and February 21, 2018. The named defendants in both cases were the Company and four current or former officers of MIC and one of its subsidiaries, IMTT Holdings LLC. The complaints in both actions allege that the Company and the individual defendants knowingly made material misstatements and omitted material facts in its public disclosures concerning the Company’s and IMTT’s business and the sustainability of the Company’s dividend to stockholders. On January 30, 2019, the Court issued an opinion and order consolidating the two cases, appointing Moab Partners, L.P. (Moab) as Lead Plaintiff and approving Moab’s selection of lead counsel. On February 20, 2019, Moab filed a consolidated class action complaint. In addition to the claims noted above, the consolidated class action complaint also asserts claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 relating to the Company’s November 2016 secondary public offering of common stock. The consolidated amended complaint also adds Macquarie Infrastructure Management (USA) Inc., Barclays Capital Inc. and seven additional current or former officers or directors of MIC as defendants. On April 22, 2019, the Company and the other defendants filed motions to dismiss the consolidated class action complaint in its entirety, with prejudice. Briefing concluded on July 22, 2019. The Company intends to continue to vigorously contest the claims asserted, which the Company believes are entirely meritless.
On August 9, 2018, a shareholder derivative complaint captioned Phyllis Wright v. Liam Stewart, et al., Case No. 1:18-cv-07174 (VSB), was filed in the United States District Court for the Southern District of New York. A substantially identical complaint captioned Raymond Greenlee v. James Hooke, et al., Case No. 1:18-cv-09339 (VSB) was filed in the same court on October 12, 2018. A third and substantially similar shareholder derivative complaint captioned Kim Johnson v. Liam Stewart, et al., Case No. 1:18-cv-011062 (VSB) was filed in the same court on November 27, 2018. Each of the shareholder derivative complaints assert derivative claims on behalf of the Company against certain of its current and former officers and directors arising out of the same subject matter at issue in the City of Riviera Beach and Fajardo complaints discussed above. The causes of action asserted include violation of Section 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duties, waste of corporate assets, unjust enrichment, and aiding and abetting breach of fiduciary duty. A motion to consolidate the three actions is currently pending. Proceedings in the Wright, Greenlee and Johnson cases are otherwise stayed pending resolution of the motions to dismiss the securities class actions described above. The Company expects that the named defendants will vigorously contest the claims asserted in the Wright, Greenlee and Johnson complaints.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

38

PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our shares are traded on the NYSE under the symbol “MIC”. As of February 21, 2020, we had 86,742,424 shares issued and outstanding that we believe were held by approximately 280 holders of record.
The following graph compares MIC’s total return to the total return of the MSCI U.S. Utilities Index and to the Russell 1000 Index for the period January 1, 2015 through December 31, 2019. The MSCI U.S. Utilities Index is the benchmark against which MIC’s total return (dividends plus capital appreciation) is measured when determining the generation of a performance fee.
A10KSHAREGRAPH2019A01.JPG

39

Securities Authorized for Issuance Under Equity Compensation Plans
The table below sets forth information with respect to shares authorized for issuance as of December 31, 2019:
Plan Category
 
Plan
 
Number of
Securities to
Be Issued
Upon
Exercise of
Outstanding
Options,
Warrants
and Rights(1)
(a)
 
Weighted-
Average
Exercise
Price of
Outstanding
Options,
Warrants
and Rights
(b)
 
Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans
(Excluding
Securities
Under
Column (a))
(c)
Equity compensation plans approved by stockholders
 
2014 Independent Directors Equity Plan(2)
 
21,390

 
$
—

 
227,224

 
2016 Omnibus Employee Incentive Plan(3)
 
131,261

 
—

 
1,368,739

Equity compensation plans not approved by stockholders
 
 
 
—

 
—

 
—

Total
 
 
 
152,651

 
$
—

 
1,595,963

_____________
(1)
Represents the number of shares issuable upon the vesting of director stock units pursuant to our 2014 Independent Directors Equity Plan (2014 Plan) and restricted and performance stock units pursuant to our 2016 Omnibus Employee Incentive Plan (2016 Plan).
(2)
The 2014 Plan provides for the grant of director stock units covering up to 300,000 shares of common stock. Only our Company’s independent directors are eligible under the 2014 Plan. Each director stock unit is an unsecured promise to transfer one share of our common stock on the settlement date, subject to satisfaction of the applicable terms and conditions. The units vest on the day prior to the following year’s annual meeting.  
(3)
The 2016 Plan provides for the grant of equity awards covering up to 1,500,000 shares of common stock. The employees of the operating businesses, consultants and others who provide service for our Company are eligible under the 2016 Plan. Types of awards include stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, cash-based awards and other stock-based awards. Equity awards under the 2016 Plan generally vest no earlier than the first anniversary of the date of grant. 
Dividend Policy
We intend to provide investors with the benefits of access to a portfolio of infrastructure and infrastructure-like businesses that we believe will generate growing amounts of cash flow over time as a result of their positive correlation with inflation and provision of basic services to customers. Consistent with this, we intend to distribute most of the cash generated from operations of our businesses as a quarterly cash dividend. Our Board has authorized a quarterly cash dividend of $1.00 per share for the quarter ended December 31, 2019. Together with the dividends for the first three quarters for 2019, this represents a cumulative 2019 dividend of $4.00 per share.
Our Board regularly reviews our dividend policy and the proportion of our Free Cash Flow that the distribution represents (payout ratio). In determining whether to adjust the amount of our quarterly dividend, our Board will take into account such matters as the state of the capital markets and general business and economic conditions, the impact of any acquisitions or dispositions related to our pursuit of strategic alternatives, the Company’s financial condition, results of operations, indebtedness levels, capital requirements, capital opportunities and any contractual, legal and regulatory restrictions on the payment of dividends by the Company to its stockholders or by its subsidiaries to the Company, and any other factors that it deems relevant, subject to maintaining a prudent level of reserves and without creating undue volatility in the amount of such dividends where possible. Moreover, the Company’s senior secured credit facility and the debt commitments at our businesses contain restrictions that may limit the Company’s ability to pay dividends. Although historically we have declared cash dividends on our shares, any or all of these or other factors could result in the modification of our dividend policy, or the reduction, modification or elimination of our dividend in the future.

40

Since January 1, 2018, MIC has paid or declared the following dividends:
Declared
 
Period
Covered
 
$
per Share
 
Record
Date
 
Payable
Date
February 14, 2020
 
Fourth quarter 2019
 
$
1.00

 
March 6, 2020
 
March 11, 2020
October 29, 2019
 
Third quarter 2019
 
1.00

 
November 11, 2019
 
November 14, 2019
July 30, 2019
 
Second quarter 2019
 
1.00

 
August 12, 2019
 
August 15, 2019
April 29, 2019
 
First quarter 2019
 
1.00

 
May 13, 2019
 
May 16, 2019
February 14, 2019
 
Fourth quarter 2018
 
1.00

 
March 4, 2019
 
March 7, 2019
October 30, 2018
 
Third quarter 2018
 
1.00

 
November 12, 2018
 
November 15, 2018
July 31, 2018
 
Second quarter 2018
 
1.00

 
August 13, 2018
 
August 16, 2018
May 1, 2018
 
First quarter 2018
 
1.00

 
May 14, 2018
 
May 17, 2018
February 19, 2018
 
Fourth quarter 2017
 
1.44

 
March 5, 2018
 
March 8, 2018
Tax Treatment of 2019 Dividends
The Company has determined that 100% of the dividends paid in 2019 were characterized as a dividend for U.S. federal income tax purposes. Future dividends, if any, may be characterized as either dividends or returns of capital depending on the earnings and profits of the Company as determined in accordance with the Internal Revenue Code. Holders of MIC shares are encouraged to seek their own tax advice regarding their investment in MIC.

41

ITEM 6. SELECTED FINANCIAL DATA
The selected financial data includes the results of operations, cash flows and balance sheet data for the years ended, and as of, December 31, 2019, 2018, 2017, 2016 and 2015 for our consolidated group, with the results of businesses acquired during those five years included from the date of each acquisition. The selected financial data for each of the five years in the period ended December 31, 2019 have been derived from the consolidated financial statements of the Company, as adjusted for the presentation of discontinued operations. The information below should be read in conjunction with the consolidated financial statements (and notes thereto) and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7.
 
Year Ended December 31,
2019
 
2018
 
2017
 
2016
 
2015
($ In Millions, Except Share and Per Share Data)
STATEMENT OF OPERATIONS DATA:
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
Service revenue
$
1,484

 
$
1,515

 
$
1,446

 
$
1,289

 
$
1,289

Product revenue
243

 
246

 
223

 
213

 
227

Total revenue
1,727

 
1,761

 
1,669

 
1,502

 
1,516

Cost and expenses
 
 
 
 
 
 
 
 
 
Cost of services
653

 
712

 
624

 
524

 
551

Cost of product sales
165

 
179

 
144

 
119

 
150

Selling, general and administrative
334

 
327

 
306

 
278

 
275

Fees to Manager - related party
32

 
45

 
71

 
68

 
355

Goodwill impairment
—

 
3

 
—

 
—

 
—

Depreciation
195

 
193

 
178

 
176

 
170

Amortization of intangibles
59

 
68

 
64

 
61

 
98

Total operating expenses
1,438

 
1,527

 
1,387

 
1,226

 
1,599

Operating income (loss)
289

 
234

 
282

 
276

 
(83
)
Interest income
7

 
1

 
—

 
—

 
—

Interest expense
(154
)
 
(113
)
 
(87
)
 
(96
)
 
(94
)
Other (expense) income, net
(2
)
 
(7
)
 
9

 
18

 
—

Net income (loss) from continuing operations before income taxes
140

 
115

 
204

 
198

 
(177
)
(Provision) benefit for income taxes
(39
)
 
(50
)
 
230

 
(69
)
 
56

Net income (loss) from continuing operations
$
101

 
$
65

 
$
434

 
$
129

 
$
(121
)
 
 
 
 
 
 
 
 
 
 
Discontinued Operations(1)
 
 
 
 
 
 
 
 
 
Net income (loss) from discontinued operations before income taxes
$
85

 
$
32

 
$
18

 
$
28

 
$
(2
)
(Provision) benefit for income taxes
(33
)
 
(2
)
 
4

 
(2
)
 
9

Net income from discontinued operations
52

 
30

 
22

 
26

 
7

Net income (loss)
$
153

 
$
95

 
$
456

 
$
155

 
$
(114
)
 


 


 


 


 


Net income (loss) from continuing operations
$
101

 
$
65

 
$
434

 
$
129

 
$
(121
)
Less: net loss attributable to noncontrolling interests
—

 
(3
)
 
—

 
(3
)
 
—

Net income (loss) from continuing operations attributable to MIC
$
101

 
$
68

 
$
434

 
$
132

 
$
(121
)
 
 
 
 
 
 
 
 
 
 

42

 
Year Ended December 31,
2019
 
2018
 
2017
 
2016
 
2015
($ In Millions, Except Share and Per Share Data)
STATEMENT OF OPERATIONS DATA:
 
 
 
 
 
 
 
 
 
Net income from discontinued operations
$
52

 
$
30

 
$
22

 
$
26

 
$
7

Less: net (loss) income attributable to noncontrolling interests
(3
)
 
(39
)
 
5

 
2

 
(6
)
Net income from discontinued operations attributable to MIC
$
55

 
$
69

 
$
17

 
$
24

 
$
13

Net income (loss) attributable to MIC
$
156

 
$
137

 
$
451

 
$
156

 
$
(108
)
 
 
 
 
 
 
 
 
 
 
Basic income (loss) per share from continuing operations attributable to MIC
$
1.17

 
$
0.80

 
$
5.22

 
$
1.63

 
$
(1.55
)
Basic income per share from discontinued operations attributable to MIC
0.65

 
0.80

 
0.20

 
0.30

 
0.16

Basic income (loss) per share attributable to MIC
$
1.82

 
$
1.60

 
$
5.42

 
$
1.93

 
$
(1.39
)
Weighted average number of shares outstanding: basic
86,178,212

 
85,233,989

 
83,204,404

 
80,892,654

 
77,997,826

Diluted income (loss) per share from continuing operations attributable to MIC
$
1.17

 
$
0.80

 
$
4.94

 
$
1.55

 
$
(1.55
)
Diluted income per share from discontinued operations attributable to MIC
0.65

 
0.80

 
0.19

 
0.30

 
0.16

Diluted income (loss) per share attributable to MIC
$
1.82

 
$
1.60

 
$
5.13

 
$
1.85

 
$
(1.39
)
Weighted average number of shares outstanding: diluted
86,204,301

 
85,249,865

 
91,073,362

 
82,218,627

 
77,997,826

Cash dividends declared per share
$
4.00

 
$
4.00

 
$
5.56

 
$
5.05

 
$
4.46

 
Year Ended December 31,
2019
 
2018
 
2017
 
2016
 
2015
($ In Millions)
STATEMENT OF CASH FLOWS DATA:
 
 
 
 
 
 
 
 
 
Cash flow from continuing operations
 
 
 
 
 
 
 
 
 
Cash provided by operating activities
$
468

 
$
473

 
$
464

 
$
488

 
$
361

Cash used in investing activities
(248
)
 
(156
)
 
(421
)
 
(288
)
 
(238
)
Cash (used in) provided by financing activities
(706
)
 
(390
)
 
70

 
(138
)
 
302

Net (decrease) increase in cash, cash equivalents and restricted cash from continuing operations
$
(486
)
 
$
(73
)
 
$
113

 
$
62

 
$
425

Cash flow from discontinued operations(1)
 
 
 
 
 
 
 
 
 
Cash (used in) provided by operating activities
$
(48
)
 
$
46

 
$
65

 
$
72

 
$
20

Cash provided by (used in) investing activities
239

 
616

 
(136
)
 
(86
)
 
(208
)
Cash provided by (used in) financing activities
24

 
(31
)
 
(32
)
 
(29
)
 
(264
)
Net increase (decrease) in cash, cash equivalents and restricted cash from discontinued operations
$
215

 
$
631

 
$
(103
)
 
$
(43
)
 
$
(452
)

43

 
As of December 31,
2019
 
2018
 
2017
 
2016
 
2015
($ In Millions)
BALANCE SHEET DATA:
 
 
 
 
 
 
 
 
 
Current assets from continuing operations
$
529

 
$
772

 
$
271

 
$
209

 
$
179

Current assets held for sale(1)
—

 
648

 
37

 
36

 
38

Total current assets
529

 
1,420

 
308

 
245

 
217

Property, equipment, land and leasehold improvements, net
3,202

 
3,141

 
3,197

 
2,963

 
2,869

Operating lease assets, net(2)
336

 
—

 
—

 
—

 
—

Intangible assets, net
729

 
789

 
852

 
822

 
864

Goodwill
2,043

 
2,043

 
2,047

 
2,003

 
1,996

Noncurrent assets held for sale(1)
—

 
—

 
1,551

 
1,476

 
1,342

Total assets
6,861

 
7,444

 
8,009

 
7,559

 
7,309

Current liabilities from continuing operations
230

 
521

 
205

 
196

 
261

Current liabilities held for sale(1)
—

 
317

 
51

 
55

 
48

Total current liabilities(2)
230

 
838

 
256

 
251

 
309

Deferred income taxes
679

 
681

 
645

 
904

 
827

Long-term debt, net of current portion
2,654

 
2,653

 
2,992

 
2,473

 
2,226

Operating lease liabilities - noncurrent(2)
320

 
—

 
—

 
—

 
—

Noncurrent liabilities held for sale(1)
—

 
—

 
603

 
643

 
601

Total liabilities
4,050

 
4,327

 
4,658

 
4,412

 
4,106

Stockholders' equity
2,802

 
2,965

 
3,154

 
2,953

 
3,030

_____________
(1)
See Note 5, “Discontinued Operations and Dispositions”, in our consolidated financial statements in “Financial Statements and Supplementary Data” in Part II, Item 8, of this Form 10-K for further discussions.
(2)
In 2019, we adopted ASU No. 2016-2, Leases (Topic 842), which requires lessees to recognize a right-of-use asset and lease liability on the balance sheet. See Note 3, "Implementation of ASU No. 2016-2", and Note 4, "Leases", in our consolidated financial statements in “Financial Statements and Supplementary Data” in Part II, Item 8, of this Form 10-K for further discussions.

44

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations of Macquarie Infrastructure Corporation should be read in conjunction with the consolidated financial statements and the notes to those statements included elsewhere herein.
Results of Operations: 2018 vs. 2017
Unless specified below, for a comparison and discussion of our consolidated and operating businesses' results of operations for 2018 compared with 2017, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7, in our Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the U.S. Securities and Exchange Commission on February 20, 2019.
Results of Operations: Consolidated
In October 2019, in addition to the active management of our existing portfolio of businesses, our Board resolved to simultaneously pursue strategic alternatives including potentially a sale of our Company or our operating businesses as a means of unlocking additional value for stockholders. We have not set a timetable for completing any transaction and there can be no assurance that any transaction(s) will occur on favorable terms or at all.
In 2019, consistent with our strategic objective of divesting of smaller and non-core businesses, we completed the sale of our wind and solar power generating portfolios. The sales resulted in the deconsolidation of $295 million of long-term debt. In addition, we also completed the sale of our majority interest in a renewable power development business and concluded a relationship with a third-party developer of renewable power facilities.
In July 2019, we fully repaid the outstanding balance of $350 million of 2.875% Convertible Senior Notes at maturity using cash on hand. Our leverage at December 31, 2019 was 3.9 times Net Debt/EBITDA.
Our 2019 consolidated results reflect: (i) a termination payment received at IMTT, (ii) the absence of any contribution from the sale of the mechanical contractor business and an environmental services business during 2018; (iii) increases in hangar rental revenue and the amount of fuel sold at Atlantic Aviation; and (iv) the positive impact of new utility rates implemented in July 2018 at Hawaii Gas. Contributions to our results for 2019 were partially offset by lower fee income from a third-party developer of renewable power projects and overall higher professional services fees.
Results from discontinued operations increased in 2019 compared with 2018 primarily as a result of the gain on sale of our wind and solar power generating facilities and the gain on sale of our majority interest in a renewable power development business. The increase in 2019 was partially offset by the absence of a contribution from the BEC business sold in October 2018, and the income tax expense associated with the gain on sale of our renewable businesses in 2019.



45
Results of Operations: Consolidated — (continued)

 
Year Ended
December 31,
 
Change
Favorable/(Unfavorable)
2019
 
2018
 
$
 
%
($ In Millions, Except Share and Per Share Data) (Unaudited)
Revenue
 
 
 
 
 
 
 
Service revenue
$
1,484

 
$
1,515

 
(31
)
 
(2
)
Product revenue
243

 
246

 
(3
)
 
(1
)
Total revenue
1,727

 
1,761

 
(34
)
 
(2
)
Costs and expenses
 
 
 
 
 
 
 
Cost of services
653

 
712

 
59

 
8

Cost of product sales
165

 
179

 
14

 
8

Selling, general and administrative
334

 
327

 
(7
)
 
(2
)
Fees to Manager - related party
32

 
45

 
13

 
29

Goodwill impairment
—

 
3

 
3

 
100

Depreciation
195

 
193

 
(2
)
 
(1
)
Amortization of intangibles
59

 
68

 
9

 
13

Total operating expenses 
1,438

 
1,527

 
89

 
6

Operating income
289

 
234

 
55

 
24

Other income (expense)
 
 
 
 
 
 
 
Interest income
7

 
1

 
6

 
NM

Interest expense(1)
(154
)
 
(113
)
 
(41
)
 
(36
)
Other expense, net
(2
)
 
(7
)
 
5

 
71

Net income from continuing operations before income taxes
140

 
115

 
25

 
22

Provision for income taxes
(39
)
 
(50
)
 
11

 
22

Net income from continuing operations
101

 
65

 
36

 
55

Discontinued Operations
 
 
 
 
 
 
 
Net income from discontinued operations before income taxes
85

 
32

 
53

 
166

Provision for income taxes
(33
)
 
(2
)
 
(31
)
 
NM

Net income from discontinued operations
52

 
30

 
22

 
73

Net income
153

 
95

 
58

 
61

 
 
 
 
 
 
 
 
Net income from continuing operations
101

 
65

 
36

 
55

Less: net loss attributable to noncontrolling interests
—

 
(3
)
 
(3
)
 
(100
)
Net income from continuing operations attributable to MIC
101

 
68

 
33

 
49

Net income from discontinued operations
52

 
30

 
22

 
73

Less: net loss attributable to noncontrolling interests
(3
)
 
(39
)
 
(36
)
 
(92
)
Net income from discontinued operations attributable to MIC
55

 
69

 
(14
)
 
(20
)
Net income attributable to MIC
$
156

 
$
137

 
19

 
14

Basic income per share from continuing operations attributable to MIC
$
1.17

 
$
0.80

 
0.37

 
46

Basic income per share from discontinued operations attributable to MIC
0.65

 
0.80

 
(0.15
)
 
(19
)
Basic income per share attributable to MIC
$
1.82

 
$
1.60

 
0.22

 
14

Weighted average number of shares outstanding: basic
86,178,212

 
85,233,989

 
944,223

 
1

_____________
NM — Not meaningful
(1)
Interest expense includes losses on derivative instruments of $13 million and gains on derivative instruments of $8 million in 2019 and 2018, respectively.
Revenue
Consolidated revenues decreased in 2019 compared with 2018 primarily as a result of, (i) the sale of the mechanical contractor business and an environmental services business during 2018; (ii) lower average storage rates and decrease in utilization at IMTT; (iii) lower wholesale cost of fuel at Atlantic Aviation; and (iv) lower amount of gas sold by Hawaii Gas. The decrease in revenue in 2019 were partially offset by the receipt of the termination payment by IMTT, increases in hangar rentals and the amount of fuel sold at Atlantic Aviation and the positive impact of new utility rates implemented at Hawaii Gas.

46
Results of Operations: Consolidated — (continued)

Cost of Services and Product Sales
Consolidated cost of services and cost of product sales decreased in 2019 compared with 2018 primarily due to, (i) the absence of costs related to the mechanical contractor business and environmental services business, (ii) lower wholesale cost of fuel at Atlantic Aviation; and (iii) a less of an unfavorable change in unrealized losses on commodity hedges at Hawaii Gas (see “Results of Operations — MIC Hawaii” below).
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased in 2019 compared with 2018 primarily due to, (i) higher salaries and benefits, rent and professional fees at Atlantic Aviation; (ii) an increase in expenses incurred in connection with our pursuit of strategic alternatives; (iii) expenses related to a long-term incentive compensation plan for senior management of our operating businesses implemented in 2019; and (iv) consulting expenses incurred in connection with our evaluation of opportunities for improved efficiencies.
The increase in selling, general and administrative expenses in 2019 was partially offset by the absence of expenses related to businesses that were sold during 2018, lower costs incurred in connection with the evaluation of various investment and acquisition and disposition opportunities and lower professional services fees, primarily in connection with ongoing litigation.
Fees to Manager
Our Manager is entitled to a monthly base management fee based on our market capitalization and potentially a quarterly performance fee based on total stockholder returns relative to a U.S. utilities index. We incurred base management fees of $32 million and $45 million in 2019 and 2018, respectively. Base management fees decreased primarily due to our Manager’s waiver of two elements of the base management fee to which it is entitled and a reduction in the market capitalization of our Company. Effective November 1, 2018, base management fees were calculated on the equity market capitalization of our Company less cash on hand at the holding company. No performance fees were incurred in either of the current or prior comparable periods. The unpaid portion of base management fees and performance fees, if any, at the end of each reporting period is included in the line item Due to Manager-related party in our consolidated balance sheets.
In accordance with the Third Amended and Restated Management Services Agreement, our Manager elected to reinvest any fees to which it was entitled in new primary shares in all of the period shown below and has currently elected to reinvest future base management fees and performance fees, if any, in new primary shares.
Period
 
Base Management Fee Amount
($ in Millions)
 
Performance
Fee Amount
($ in Millions)
 
Shares
Issued
2019 Activities:
 
  

 
 
  
 
  

 
Fourth quarter 2019
 
$
9

 
$
—
 
208,881

(1) 
Third quarter 2019
 
8

 
 
—
 
201,827

 
Second quarter 2019
 
7

 
 
—
 
192,103

 
First quarter 2019
 
8

 
 
—
 
184,448

 
2018 Activities:
 
 
 
 
 
 
 
 
Fourth quarter 2018
 
$
9

 
$
—
 
220,208

 
Third quarter 2018
 
12

 
 
—
 
269,286

 
Second quarter 2018
 
11

 
 
—
 
277,053

 
First quarter 2018
 
13

 
 
—
 
265,002

 
_____________
(1)
Our Manager elected to reinvest all of the monthly base management fees for the fourth quarter of 2019 in new primary shares. We issued 208,881 shares for the quarter ended December 31, 2019, including 70,954 shares that were issued in January 2020 for the December 2019 monthly base management fee.
Goodwill Impairment
During 2018, we wrote-off the goodwill balance related to the mechanical contractor business.
Depreciation
Depreciation expense increased in 2019 compared with 2018 primarily reflecting assets placed in service, partially offset by the write-off of fixed assets related to the mechanical contractor business in 2018.

47
Results of Operations: Consolidated — (continued)

Amortization of Intangibles
Amortization of intangibles decreased in 2019 compared with 2018 primarily due to write-off of intangible assets related to the mechanical contractor business in 2018.
Interest Expense and (Losses) Gains on Derivative Instruments
Interest expense includes losses on derivative instruments of $13 million and gains on derivative instruments of $8 million in 2019 and 2018, respectively. (Losses) gains on derivatives recorded in interest expense are attributable to the change in fair value of interest rate hedging instruments. In 2018, interest expense also included non-cash write-off of deferred financing costs at Atlantic Aviation related to the December 2018 refinancing of its term loan and revolving credit facility. Excluding the derivative adjustments and the write-off of deferred financing costs, cash interest expense increased to $113 million in 2019 from $98 million in 2018 reflects primarily an increase in the weighted average interest rate of debt facilities. See discussions of interest expense for each of our operating businesses below.
Other Expense, net
Other expense, net, decreased primarily due to the absence of the write-down of our investment in the mechanical contractor business in 2018 and the decrease in fee income in 2019 from a third-party developer of renewable power facilities, which concluded in July 2019. The decrease in other expense, net, also reflects the write-off of costs associated with projects related to the importation of bulk LNG that were terminated by Hawaii Gas in 2019.
Discontinued Operations
Income from discontinued operations increased primarily as a result of the gain on sale of our wind and solar power generating facilities and the gain on sale of our majority interest in a renewable power development business during 2019. The increase in 2019 was partially offset by the absence of a contribution from the BEC business sold in October 2018.
Income Taxes
We file a consolidated federal income tax return that includes the financial results of IMTT, Atlantic Aviation, MIC Hawaii and our allocable share of the taxable income (loss) from the solar and wind facilities through the date of sale. The solar and wind facilities in which we owned less than 100% of the equity were held in limited liability companies and treated as partnerships for tax purposes. Pursuant to a tax sharing agreement, the businesses included in our consolidated federal income tax return pay MIC an amount equal to the federal income tax each would have paid on a standalone basis as if they were not part of the consolidated federal income tax return. In addition, our businesses file income tax returns and may pay taxes in the state and local jurisdictions in which they operate.
At December 31, 2018, we had $152 million in federal income tax NOL carryforwards, which were used to fully offset the 2019 federal taxable income from continuing operations and a portion of the taxable gain on the sale of the renewable business in 2019. We recorded $12 million in current state income tax liability from continuing operations. In addition, we incurred $33 million in current federal income tax liability and $9 million in current state income tax liability from discontinued operations primarily from the gain on sale of the renewable businesses during the year.

In 2017, we recorded an income tax benefit primarily due to the impact of the Tax Cut and Jobs Act in 2017. The Tax Cut and Jobs Act required the revaluation of the net deferred tax liability which resulted in a tax benefit of $312 million (primarily at IMTT and Atlantic Aviation).
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow
In addition to our results under U.S. GAAP, we use certain non-GAAP measures including EBITDA excluding non-cash items and Free Cash Flow to assess the performance and prospects of our businesses.
We measure EBITDA excluding non-cash items as it reflects our businesses’ ability to effectively manage the amount 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. We believe investors use EBITDA excluding non-cash items primarily as a measure of the operating performance of MIC’s businesses and to make comparisons with the operating performance of other businesses whose depreciation and amortization expense may vary widely from ours, particularly where acquisitions and other non-operating factors are involved. We define 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.

48
Results of Operations: Consolidated — (continued)

Our businesses are characteristically owners of high-value, long-lived assets capable of generating substantial Free Cash Flow. We define 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.
We use Free Cash Flow as a measure of our ability to sustain and potentially increase our quarterly cash dividend and funding a portion of our growth. GAAP metrics such as net income (loss) do not provide us with the same level of visibility into our performance and prospects as a result of: (i) the capital intensive nature of our businesses and the generation of non-cash depreciation and amortization; (ii) shares issued to our external Manager under the Management Services Agreement; (iii) our ability to defer all or a portion of current federal income taxes; (iv) non-cash unrealized gains or losses on derivative instruments; (v) gains (losses) on disposal of assets; (vi) non-cash compensation expenses related to a long-term incentive compensation plan for senior management of the operating businesses implemented in 2019; and (vii) pension expenses. Pension expenses primarily consist of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses. Any cash contributions to pension plans are reflected as a reduction to Free Cash Flow and are not included in pension expense. We believe that external consumers of our financial statements, including investors and research analysts, use Free Cash Flow both to assess MIC’s performance and as an indicator of its success in generating an attractive risk-adjusted total return.
In this Annual Report on Form 10-K, we have disclosed Free Cash Flow on a consolidated basis and for each of our operating segments and MIC Corporate and Other. We believe 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 our 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 our definition of Free Cash Flow. We note 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 and not in lieu of our financial results reported under GAAP.
Classification of Maintenance Capital Expenditures and Growth Capital Expenditures
We categorize capital expenditures as either maintenance capital expenditures or growth capital expenditures. As neither maintenance capital expenditure nor growth capital expenditure is a GAAP term, we have adopted a framework to categorize specific capital expenditures. In broad terms, maintenance capital expenditures primarily maintain our 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 flows. We consider a number of factors in determining whether a specific capital expenditure will be classified as maintenance or growth.
We do not bifurcate specific capital expenditures into maintenance and growth components. Each discrete capital expenditure is considered within the above framework and the entire capital expenditure is classified as either maintenance or growth.

49
Results of Operations: Consolidated — (continued)

A reconciliation of net income from continuing operations to EBITDA excluding non-cash items from continuing operations and a reconciliation from cash provided by operating activities from continuing operations to Free Cash Flow from continuing operations, on a consolidated basis, is provided below. Similar reconciliations for each of our operating businesses and Corporate and Other follow.
 
Year Ended
December 31,
 
Change
Favorable/(Unfavorable)
2019
 
2018
 
$
 
%
($ In Millions) (Unaudited)
Net income from continuing operations
$
101

 
$
65

 
 
 
 
Interest expense, net(1)
147

 
112

 
 
 
 
Provision for income taxes
39

 
50

 
 
 
 
Depreciation
195

 
193

 
 
 
 
Amortization of intangibles
59

 
68

 
 
 
 
Fees to Manager- related party
32

 
45

 
 
 
 
Goodwill impairment
—

 
3

 
 
 
 
Other non-cash expense, net(2)
26

 
33

 
 
 
 
EBITDA excluding non-cash items - continuing operations
$
599

 
$
569

 
30

 
5

 
 
 
 
 
 
 
 
EBITDA excluding non-cash items - continuing operations
$
599

 
$
569

 
 
 
 
Interest expense, net(1)
(147
)
 
(112
)
 
 
 
 
Adjustments to derivative instruments recorded in interest expense(1)
21

 
(1
)
 
 
 
 
Amortization of debt financing costs(1)
9

 
11

 
 
 
 
Amortization of debt discount(1)
4

 
4

 
 
 
 
Provision for current income taxes
(12
)
 
(14
)
 
 
 
 
Changes in working capital(3)
(6
)
 
16

 
 
 
 
Cash provided by operating activities - continuing operations
468

 
473

 
 
 
 
Changes in working capital(3)
6

 
(16
)
 
 
 
 
Maintenance capital expenditures
(69
)
 
(49
)
 
 
 
 
Free cash flow - continuing operations
405

 
408

 
(3
)
 
(1
)
Free cash flow - discontinued operations
(31
)
 
67

 
(98
)
 
(146
)
Total Free Cash Flow
$
374

 
$
475

 
(101
)
 
(21
)
_____________
(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. Interest expense, net, also included a non-cash write-off of deferred financing fees related to December 2018 refinancing at Atlantic Aviation.
(2)
Other non-cash expense, net, primarily includes pension expense of $9 million and $8 million in 2019 and 2018, respectively, unrealized gains (losses) on commodity hedges, expenses related to a long-term incentive compensation plan for senior management of the operating businesses implemented in 2019 and non-cash gains (losses) related to the disposal of assets. Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses. Other non-cash expense, net, also includes the write-down of our investment in the mechanical contractor business in 2018. See “Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow” above for further discussions.
(3)
In 2019, the changes in working capital include the current federal income tax paid primarily related to the gain on sale of the renewable businesses reported in the results from discontinued operations.

50
Results of Operations: IMTT


The financial performance of IMTT is driven by the amount of bulk liquid storage capacity the business has under contract (lease) and the rates for storage and other services achieved on those contracts. The portion of IMTT’s storage capacity under lease (utilization) averaged 85.2% and 84.0% for the quarter and year ended December 31, 2019, respectively, compared with 82.0% and 84.6% for the quarter and year ended December 31, 2018, respectively. The decrease in average utilization for the full year primarily reflects a reduction in demand for storage and handling of clean refined petroleum products in the New York Harbor market, partially offset by increased demand for storage and handling of heavy petroleum products in the Lower Mississippi River market. IMTT expects utilization to average in the high 80s percent for full year 2020, subject to market conditions.
IMTT renewed certain contracts for storage and handling of clean refined petroleum products in the New York Harbor market at lower average rates in 2019. The impact of lower average rates was partially offset by an increase in utilization, primarily in the Lower Mississippi River market, related to demand for storage and handling of a range of products related to the implementation of the International Maritime Organization’s IMO Marpol Annex VI (IMO 2020) regulations on January 1, 2020. Demand for storage of heavy and residual products as well as other IMO 2020 suitable blend stocks increased in the Lower Mississippi River market during the past year.
The changes in demand for marine fuels associated with the implementation of IMO 2020 are expected to continue to create uncertainty for the fuel supply and storage markets through the first half of 2020. The uncertainty is being driven by issues associated with changes in supply chain logistics, uncertainty around product specification, blending capabilities, product sustainability and compatibility with marine engines among others.  
On February 20, 2020, IMTT entered into an agreement with Diamond Green Diesel (DGD), a joint venture between Valero Energy Corporation and Darling Ingredients, pursuant to which it will construct two pipelines connecting its St. Rose, L.A. terminal with the DGD renewable diesel refinery at Norco, L.A. five miles away. IMTT will also expand its marine and rail infrastructure and repurpose approximately 790,000 barrels of existing storage capacity from heavy and residual petroleum service to renewable diesel feedstocks and finished product. The project is expected to be completed prior to the end of 2021.
IMTT works with existing and new customers continuously to meet their storage and logistics needs. Critical to IMTT’s success is its ability to construct new assets on a build-to-suit basis and/or to repurpose existing tanks and infrastructure to meet these needs. These projects range from simple, inexpensive modifications to large scale developments requiring extensive planning and capital investment. IMTT currently expects these development and repurposing efforts will, going forward, (i) increase its customer base and brand loyalty, (ii) improve utilization and average storage rates, (iii) increase exposure to new products that it believes have better sustainable growth prospects, (iv) generate a larger proportion of its revenue from longer-dated contracts and (iv) reduce its exposure to short-term, cyclical markets with slower growth prospects.

51
Results of Operations: IMTT — (continued)

 
Year Ended
December 31,
 
Change
Favorable/(Unfavorable)
2019
 
2018
 
$
 
$
 
$
 
%
($ In Millions) (Unaudited)
Revenue
515

 
510

 
5

 
1

Cost of services
204

 
201

 
(3
)
 
(1
)
Selling, general and administrative expenses
33

 
32

 
(1
)
 
(3
)
Depreciation and amortization
132

 
132

 
—

 
—

Operating income
146

 
145

 
1

 
1

Interest expense, net(1)
(47
)
 
(46
)
 
(1
)
 
(2
)
Other income, net
1

 
—

 
1

 
NM

Provision for income taxes
(29
)
 
(36
)
 
7

 
19

Net income
71

 
63

 
8

 
13

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
71

 
63

 
 
 
 
Interest expense, net(1)
47

 
46

 
 
 
 
Provision for income taxes
29

 
36

 
 
 
 
Depreciation and amortization
132

 
132

 
 
 
 
Other non-cash expense, net(2)
9

 
9

 
 
 
 
EBITDA excluding non-cash items
288

 
286

 
2

 
1

EBITDA excluding non-cash items
288

 
286

 
 
 
 
Interest expense, net(1)
(47
)
 
(46
)
 
 
 
 
Adjustments to derivative instruments recorded in interest expense(1)
7

 
(2
)
 
 
 
 
Amortization of debt financing costs(1)
1

 
2

 
 
 
 
Provision for current income taxes
(6
)
 
(6
)
 
 
 
 
Changes in working capital
10

 
5

 
 
 
 
Cash provided by operating activities
253

 
239

 
 
 
 
Changes in working capital
(10
)
 
(5
)
 
 
 
 
Maintenance capital expenditures
(46
)
 
(33
)
 
 
 
 
Free cash flow
197

 
201

 
(4
)
 
(2
)
_____________
NM — Not meaningful
(1)
Interest expense, net, includes adjustments to derivative instruments and non-cash amortization of deferred financing fees.
(2)
Other non-cash expense, net, primarily includes pension expense of $8 million in both 2019 and 2018 and expenses related to a long-term incentive compensation plan implemented in 2019. Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses. See “Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow” above for further discussions.
Revenue
IMTT generates most of its revenue from contracts comprising a fixed monthly charge for access to or use of a specified amount of capacity, infrastructure or land. The monthly charge typically increases annually with inflation. We refer to revenue generated from such contracts or fixed charges as firm commitments. At December 31, 2019, firm commitments had a revenue weighted average remaining contract life of 2.0 years. Revenue from firm commitments, excluding the termination payment received in the quarter ended March 31, 2019, comprised 80.8% of total revenue in 2019.


52
Results of Operations: IMTT — (continued)

IMTT generated an increase in revenue of $5 million in 2019 compared with 2018 primarily due to the receipt of a $39 million termination payment. The increase was partially offset by an absence of revenue from an environmental services business sold in April 2018, lower average storage rates on new and renewing contracts and the decline in utilization.
Cost of Services and Selling, General and Administrative Expenses
Cost of services and selling, general and administrative expenses combined increased by $4 million in 2019 compared with 2018 primarily due to higher labor costs and increased repair and maintenance costs. The increase in cost of services and selling, general and administrative expenses combined was partially offset by lower fuel costs and the absence of costs related to the environmental services business sold in April 2018.
Interest Expense, net
Interest expense includes losses on derivative instruments of $5 million and gains on derivative instruments of $3 million in 2019 and 2018, respectively. Excluding the derivative adjustments, cash interest expense decreased to $39 million in 2019 from $46 million in 2018 primarily as a result of lower average debt balances.
Income Taxes
The taxable income generated by IMTT is reported on our consolidated federal income tax return. The business files standalone state and foreign income tax returns in the jurisdictions in which it operates. The Provision for Current Income Taxes of $6 million in 2019 in the above table includes $5 million of state income tax expense and $1 million of provincial income tax expense.
Most of the difference between IMTT’s book and federal taxable income relates to depreciation of terminal fixed assets. For book purposes, these fixed assets are depreciated primarily over 5 to 30 years using the straight-line method of depreciation. For federal income tax purposes, these same fixed assets are depreciated primarily over 5 to 15 years using accelerated methods. In addition, most terminal fixed assets qualify for federal bonus tax depreciation. A significant portion of the terminal fixed assets in Louisiana constructed in the period after Hurricane Katrina in 2005 were financed with Growth Opportunity (GO) Zone Bonds. GO Zone Bond financed assets are depreciated, for tax purposes, primarily over 9 to 20 years using the straight-line method. Most of the states in which the business operates do not allow the use of bonus tax depreciation. Louisiana allows the use of bonus depreciation except for assets financed with GO Zone Bonds.
IMTT has state NOL carryforwards that are specific to the state in which they were generated. The utilization of NOL carryforwards may reduce or eliminate state taxable income in the future.
Maintenance Capital Expenditures
In 2019, IMTT incurred maintenance capital expenditures of $46 million and $44 million on an accrual basis and cash basis, respectively, compared with $33 million and $31 million on an accrual basis and cash basis, respectively, in 2018. The increase in maintenance capital expenditures in 2019 was primarily a result of $12 million spent on the first phase of the rehabilitation of a pier in Bayonne. The total cost of maintaining the pier is expected to be approximately $30 million and the work is anticipated to be completed within four years.
Results of Operations: Atlantic Aviation
The fundamental driver of the financial performance of Atlantic Aviation is the number of GA flight movements in a year. Over the long-term, the rate of growth in GA flight movements has tended to be positively correlated with the level of economic activity in the U.S. Based on data reported by the Federal Aviation Administration (FAA), industry-wide domestic flight activity increased by 0.3% for the quarter and year ended December 31, 2019 versus the comparable periods in 2018. According to the U.S. Federal Reserve, the U.S. economy (GDP) expanded at a rate of 2.3% in 2019. Presently, we believe that this represents a temporary break in the historical correlation due to shorter-term factors such as weather conditions and the timing and location of specific events.
According to the data reported by the FAA, the total number of GA flight movements at airports where Atlantic Aviation operates increased by 2.1% and 0.8% during the quarter and year ended December 31, 2019, respectively, versus the prior comparable periods.
Atlantic Aviation seeks to extend FBO leases prior to their maturity in order to maintain visibility into the cash generating capacity of these assets over the long-term. Atlantic Aviation calculates a weighted average remaining lease life based on EBITDA excluding non-cash items in the prior calendar year adjusted for the impact of acquisitions, dispositions and lease extensions. The weighted average remaining lease life was 19.0 years and 19.9 years at December 31, 2019 and 2018, respectively.

53
Results of Operations: Atlantic Aviation — (continued)

 
Year Ended
December 31,
 
Change
Favorable/(Unfavorable)
2019
 
2018
 
$
 
$
 
$
 
%
($ In Millions) (Unaudited)
Revenue
972

 
962

 
10

 
1

Cost of services (exclusive of depreciation and amortization shown separately below)
449

 
467

 
18

 
4

Gross margin
523

 
495

 
28

 
6

Selling, general and administrative expenses
249

 
232

 
(17
)
 
(7
)
Depreciation and amortization
106

 
106

 
—

 
—

Operating income
168

 
157

 
11

 
7

Interest expense, net(1)
(74
)
 
(25
)
 
(49
)
 
(196
)
Other expense, net
(1
)
 
(1
)
 
—

 
—

Provision for income taxes
(24
)
 
(35
)
 
11

 
31

Net income
69

 
96

 
(27
)
 
(28
)
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
69

 
96

 
 
 
 
Interest expense, net(1)
74

 
25

 
 
 
 
Provision for income taxes
24

 
35

 
 
 
 
Depreciation and amortization
106

 
106

 
 
 
 
Other non-cash expense, net(2)
3

 
1

 
 
 
 
EBITDA excluding non-cash items
276

 
263

 
13

 
5

EBITDA excluding non-cash items
276

 
263

 
 
 
 
Interest expense, net(1)
(74
)
 
(25
)
 
 
 
 
Convertible senior notes interest(3)
—

 
(7
)
 
 
 
 
Adjustments to derivative instruments recorded in interest expense(1)
12

 
1

 
 
 
 
Amortization of debt financing costs(1)
4

 
4

 
 
 
 
Provision for current income taxes
(22
)
 
(23
)
 
 
 
 
Changes in working capital
13

 
13

 
 
 
 
Cash provided by operating activities
209

 
226

 
 
 
 
Changes in working capital
(13
)
 
(13
)
 
 
 
 
Maintenance capital expenditures
(16
)
 
(8
)
 
 
 
 
Free cash flow
180

 
205

 
(25
)
 
(12
)
_____________
(1)
Interest expense, net, includes adjustments to derivative instruments and non-cash amortization of deferred financing fees. In 2018, interest expense also included non-cash write-off of deferred financing costs related to the December 2018 refinancing.
(2)
Other non-cash expense, net, primarily includes expenses related to a long-term incentive compensation plan implemented in 2019 and non-cash gains (losses) related to the disposal of assets. See “Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow” above for further discussions.
(3)
Represents the cash interest expense related to the $403 million of MIC Corporate 2.00% Convertible Senior Notes due October 2023 that was reclassified to Atlantic Aviation through December 6, 2018, the date of Atlantic Aviation’s refinancing. The proceeds from this Note issuance in October 2016 were used principally to reduce the drawn balance of Atlantic Aviation’s revolving credit facility. Cash interest expense on the Note issuance is recorded in Corporate and Other after December 6, 2018.

54
Results of Operations: Atlantic Aviation — (continued)

Atlantic Aviation generates most of its revenue from sales of jet fuel. Increases and decreases in the cost of jet fuel are generally passed through to customers in real time. Accordingly, reported revenue will fluctuate based on the cost of jet fuel to Atlantic Aviation and may not reflect the business’ ability to effectively manage the amount of fuel sold and the margin achieved on those sales. For example, an increase in revenue may be attributable to an increase in the cost of the jet fuel and not an increase in the amount or margin per gallon. Conversely, a decline in revenue may be attributable to a decrease in the cost of jet fuel and not a reduction in the amount or margin per gallon.
Gross margin, which we define as revenue less cost of services, excluding depreciation and amortization, is the effective “top line” for Atlantic Aviation as it reflects the business’ ability to drive growth in the amount of products and services sold and the margins earned on those sales over time. We believe that our investors view gross margin as reflective of our ability to manage amount and price throughout the commodity cycle. Gross margin can be reconciled to operating income — the most comparable GAAP measure — by subtracting selling, general and administrative expenses and depreciation and amortization in the table above.
Revenue and Gross Margin
The majority of the revenue generated and gross margin earned by Atlantic Aviation is the result of fueling GA aircraft at facilities located at the 70 U.S. airports on which the business operates. Atlantic Aviation seeks to maintain and, where appropriate, increase dollar-based margins on fuel sales.
Revenue increased in 2019 compared with 2018 as a result of an increase in the amount of fuel sold and an increase in rental revenue, partially offset by a lower wholesale cost of fuel. The decrease in the wholesale cost of fuel is reflected in a corresponding decrease in cost of services.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased in 2019 compared with 2018 primarily as a result of higher salaries and benefits, rent and professional fees.
Operating Income
Operating income increased in 2019 compared with 2018 due to the increase in gross margin, partially offset by the increase in selling, general and administrative expenses.
Interest Expense, Net
Interest expense includes losses on derivative instruments of $7 million and gains on derivative instruments of $4 million in 2019 and 2018, respectively. In 2018, interest expense also included non-cash write-off of deferred financing costs related to the December 2018 refinancing of its term loan and revolving credit facility. Excluding the derivative adjustments and the write-off of deferred financing costs, cash interest expense increased to $58 million in 2019 from approximately $29 million in 2018. The increase in cash interest expense reflects a higher average debt balance and a higher weighted average interest rate.
Cash interest expense in 2018 included the cash interest expense related to the $403 million of MIC Corporate 2.00% Convertible Senior Notes due October 2023 that was reclassified to Atlantic Aviation through December 6, 2018, the date of Atlantic Aviation’s refinancing. The proceeds from this Note issuance in October 2016 were used principally to reduce the drawn balance of Atlantic Aviation’s revolving credit facility. Cash interest expense on the Note issuance is recorded in Corporate and Other after December 6, 2018.
Income Taxes
The taxable income generated by Atlantic Aviation is reported on our consolidated federal income tax return. The business files standalone state income tax returns in most of the states in which it operates. The tax expense in the table above includes both state income taxes and the portion of the consolidated federal income tax liability attributable to the business. The Provision for Current Income Taxes of $22 million in 2019 in the above table includes $16 million of federal income tax expense and $6 million of state income tax expense.
Atlantic Aviation has state NOL carryforwards that are specific to the state in which they were generated. The utilization of NOL carryforwards may reduce or eliminate state taxable income in the future.
Maintenance Capital Expenditures
In 2019, Atlantic Aviation incurred maintenance capital expenditures of $16 million and $12 million on an accrual basis and cash basis, respectively, compared with $8 million and $9 million on an accrual basis and cash basis, respectively, in 2018.

55
Results of Operations: MIC Hawaii


The financial performance of MIC Hawaii is a function of the number of customers served, their consumption of energy and the prices achieved on sales by each of Hawaii Gas’s utility and non-utility operations and under power purchase agreements. The amount of gas consumption is correlated with general economic activity over the long-term with tourism being a key component. Customer consumption trends and rates are a function of, among other factors, energy efficiency, weather, the range of competitive energy sources and MIC Hawaii’s input commodity costs.
The increased contribution from MIC Hawaii in 2019 compared with 2018 reflects the full year impact of a general rate case settled in mid-2018, lower propane costs and the sale of the mechanical contractor business in late 2018. The increase was partially offset by a decrease in the amount of gas sold by Hawaii Gas, in part, as a result of isolated operational issues at customer locations.

56
Results of Operations: MIC Hawaii — (continued)

 
Year Ended
December 31,
 
Change
Favorable/(Unfavorable)
2019
 
2018
 
$
 
$
 
$
 
%
($ In Millions) (Unaudited)
Product revenue
243

 
245

 
(2
)
 
(1
)
Service revenue
—

 
47

 
(47
)
 
(100
)
Total revenue
243

 
292

 
(49
)
 
(17
)
Cost of product sales (exclusive of depreciation and amortization shown separately below)
165

 
179

 
14

 
8

Cost of services (exclusive of depreciation and amortization shown
    separately below)
—

 
44

 
44

 
100

Cost of revenue — total
165

 
223

 
58

 
26

Gross margin
78

 
69

 
9

 
13

Selling, general and administrative expenses
24

 
29

 
5

 
17

Goodwill impairment
—

 
3

 
3

 
100

Depreciation and amortization
16

 
23

 
7

 
30

Operating income
38

 
14

 
24

 
171

Interest expense, net(1)
(10
)
 
(8
)
 
(2
)
 
(25
)
Other expense, net
(6
)
 
(24
)
 
18

 
75

(Provision) benefit for income taxes
(9
)
 
6

 
(15
)
 
NM

Net income (loss)
13

 
(12
)
 
25

 
NM

Less: net loss attributable to noncontrolling interests
—

 
(3
)
 
(3
)
 
(100
)
Net income (loss) attributable to MIC
13

 
(9
)
 
22

 
NM

Reconciliation of net income (loss) to EBITDA excluding non-cash items and a reconciliation of cash provided by operating activities to Free Cash Flow:
 
 
 
 
 
 
 
Net income (loss)
13

 
(12
)
 
 
 
 
Interest expense, net(1)
10

 
8

 
 
 
 
Provision (benefit) for income taxes
9

 
(6
)
 
 
 
 
Goodwill impairment
—

 
3

 
 
 
 
Depreciation and amortization
16

 
23

 
 
 
 
Other non-cash expense, net(2)
12

 
22

 
 
 
 
EBITDA excluding non-cash items
60

 
38

 
22

 
58

EBITDA excluding non-cash items
60

 
38

 
 
 
 
Interest expense, net(1)
(10
)
 
(8
)
 
 
 
 
Adjustments to derivative instruments recorded in interest expense(1)
2

 
—

 
 
 
 
(Provision) benefit for current income taxes
(4
)
 
1

 
 
 
 
Changes in working capital
8

 
14

 
 
 
 
Cash provided by operating activities
56

 
45

 
 
 
 
Changes in working capital
(8
)
 
(14
)
 
 
 
 
Maintenance capital expenditures
(7
)
 
(8
)
 
 
 
 
Free cash flow
41

 
23

 
18

 
78

_____________
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.

57
Results of Operations: MIC Hawaii — (continued)

(2)
Other non-cash expense, net, primarily includes non-cash adjustments related to unrealized gains (losses) on commodity hedges, pension expense, expenses related to a long-term incentive compensation plan implemented in 2019 and non-cash gains (losses) related to the disposal of assets. Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses. Other non-cash expense, net, also includes the write-down of our investment in the mechanical contractor business in 2018. See “Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow” above for further discussions.
MIC Hawaii comprises Hawaii Gas and several smaller businesses collectively engaged in efforts to reduce the cost and improve the reliability and sustainability of energy in Hawaii. The businesses of MIC Hawaii generate revenue primarily from the provision of gas services to commercial, residential and governmental customers and from the production of electricity.
Hawaii Gas generates most of its revenue from the sale of gas. Accordingly, revenue can fluctuate based on the wholesale cost of gas to Hawaii Gas and may not reflect the business’ ability to effectively manage the amount of gas sold and the margins achieved on those sales. For example, an increase in revenue may be attributable to an increase in the wholesale cost of gas passed through to Hawaii Gas’ customers and not an increase in the amount of gas sold or margin achieved. Conversely, a decline in revenue may be attributable to a decrease in the wholesale cost of gas passed through to Hawaii Gas’ customers and not a reduction in the amount of gas sold or margin achieved.
Gross margin, which we define as revenue less cost of product sales, excluding depreciation and amortization, is the effective “top line” for Hawaii Gas as it is reflective of the business’ ability to drive growth in the amount of products sold and the margins earned on those sales over time. We believe that investors use gross margin to evaluate the business as it is reflective of our performance in managing amount and price throughout the commodity cycle. Gross margin is reconciled to operating income — the most comparable GAAP measure — by subtracting selling, general and administrative expenses and depreciation and amortization in the table above.
Revenue and Gross Margin
Revenue declined in 2019 compared with 2018 primarily as a result of the sale of the mechanical contractor business and a decrease in the amount of gas sold by Hawaii Gas. The decrease in revenue in 2019 was partially offset by the full year impact of a general rate case completed by Hawaii Gas in mid-2018.
Gross margin increased $9 million in 2019 compared with 2018 primarily as a result of changes in the value of unrealized commodity hedges. The business recorded unrealized losses of $4 million and $13 million on commodity hedges in 2019 and 2018, respectively. The change during 2019 reflects a less unfavorable movement in the forward curve for propane relative to hedge contracts in place and an increase in the proportion of expected propane purchases hedged.
Excluding the impact of changes in the value of commodity hedges and the sale of the mechanical contractor business, gross margin increased in 2019 compared with 2018 primarily as a result of an increase in contribution margin related to the utility rate case and lower propane costs, partially offset by the decrease in the amount of gas sold.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased in 2019 compared with 2018 due to the absence of costs from the mechanical contractor business. Excluding the sale of the mechanical contractor business, selling, general and administrative expenses increased by $2 million in 2019 versus the prior comparable periods primarily as a result of higher salaries and benefits and the implementation of a long-term incentive compensation plan.
Goodwill Impairment
In 2018, we wrote-off the goodwill balance related to the mechanical contractor business.
Depreciation and Amortization
Depreciation and amortization expense decreased in 2019 compared with 2018 primarily as a result of the write-offs of the intangible assets and fixed asset balances at the mechanical contractor business.
Operating Income
Operating income increased in 2019 compared with 2018 primarily due to the increase in gross margin and decreases in depreciation and amortization expenses and selling, general and administrative expenses and the absence of a goodwill impairment in 2019.

58
Results of Operations: MIC Hawaii — (continued)

Interest Expense, Net
Interest expense includes losses on derivative instruments of $1 million and gains on derivative instruments of $1 million in 2019 and 2018, respectively. Excluding the derivative adjustments, cash interest expense was approximately $8 million in both 2019 and 2018.
Other Expenses, Net
Other expense, net, primarily reflects the write-off of costs associated with projects related to the importation of bulk LNG that were terminated by Hawaii Gas in 2019 and the write-down of our investment in the mechanical contracting business in 2018.
Income Taxes
The taxable income generated by the MIC Hawaii businesses is reported on our consolidated federal income tax return. The businesses file standalone state income tax returns in Hawaii. The tax expense in the table above includes both the state income tax and the portion of the consolidated federal income tax liability attributable to the businesses. The (Provision) Benefit for Current Income Taxes of $4 million in 2019 in the above table includes primarily $4 million of federal income tax expense.
MIC Hawaii has state NOL carryforwards that may reduce or eliminate state taxable income in the future.
Maintenance Capital Expenditures
In 2019, MIC Hawaii incurred maintenance capital expenditures of $7 million both on an accrual and cash basis compared with $8 million both on an accrual and cash basis in 2018.

59
Results of Operations: Corporate and Other


Our Corporate and Other segment primarily comprises results from MIC Corporate, our shared services center and from our relationship with a developer of renewable power facilities (formerly reported in Contracted Power). The relationship with the developer concluded during July 2019.
 
Year Ended
December 31,
 
Change
Favorable/(Unfavorable)
2019
 
2018
 
$
 
$
 
$
 
%
($ In Millions) (Unaudited)
Product revenue
—

 
1

 
(1
)
 
(100
)
Total revenue
—

 
1

 
(1
)
 
(100
)
Selling, general and administrative expenses
31

 
38

 
7

 
18

Fees to Manager-related party
32

 
45

 
13

 
29

Operating loss
(63
)
 
(82
)
 
19

 
23

Interest expense, net(1)
(16
)
 
(33
)
 
17

 
52

Other income, net
4

 
18

 
(14
)
 
(78
)
Benefit for income taxes
23

 
15

 
8

 
53

Net loss
(52
)
 
(82
)
 
30

 
37

Reconciliation of net loss to EBITDA excluding non-cash items and a reconciliation of cash provided by operating activities to Free Cash Flow:
 
 
 
 
 
 
 
Net loss
(52
)
 
(82
)
 
 
 
 
Interest expense, net(1)
16

 
33

 
 
 
 
Benefit for income taxes
(23
)
 
(15
)
 
 
 
 
Fees to Manager-related party
32

 
45

 
 
 
 
Other non-cash expense, net
2

 
1

 
 
 
 
EBITDA excluding non-cash items
(25
)
 
(18
)
 
(7
)
 
(39
)
EBITDA excluding non-cash items
(25
)
 
(18
)
 
 
 
 
Interest expense, net(1)
(16
)
 
(33
)
 
 
 
 
Convertible senior notes interest(2)
—

 
7

 
 
 
 
Amortization of debt financing costs(1)
4

 
5

 
 
 
 
Amortization of debt discount(1)
4

 
4

 
 
 
 
Benefit for current income taxes
20

 
14

 
 
 
 
Changes in working capital(3)
(37
)
 
(16
)
 
 
 
 
Cash used in operating activities
(50
)
 
(37
)
 
 
 
 
Changes in working capital(3)
37

 
16

 
 
 
 
Free cash flow
(13
)
 
(21
)
 
8

 
38

_____________
(1)
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.
(2)
Represents the cash interest expense related to the $403 million of MIC Corporate 2.00% Convertible Senior Notes due October 2023 reclassified to Atlantic Aviation through December 6, 2018, the date of Atlantic Aviation’s refinancing. The proceeds from this Note issuance in October 2016 were used principally to reduce the drawn balance on Atlantic Aviation’s revolving credit facility. Cash interest expense on this Note issuance is included in Corporate and Other after December 6, 2018.
(3)
In 2019, the changes in working capital include the current federal income tax paid primarily related to the gain on sale of the renewable businesses reported in the results from discontinued operations.

60
Results of Operations: Corporate and Other — (continued)

Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased in 2019 compared with 2018 primarily due to, (i) lower costs incurred in connection with the evaluation of various investment and acquisition and disposition opportunities; and (ii) lower professional services fees, primarily in connection with ongoing litigation; partially offset by (iii) expenses incurred in connection with our pursuit of strategic alternatives; and (iv) consulting expenses incurred in connection with our evaluation of opportunities to improve efficiencies.
Fees to Manager
Fees to Manager in 2019 and 2018 comprised base management fees of $32 million and $45 million, respectively. Base management fees were lower in 2019 compared with 2018 primarily due to our Manager’s waiver of two elements of the base management fee to which it is entitled and a reduction in the market capitalization of our Company. Effective November 1, 2018, base management fees have been calculated as 1% of the equity market capitalization of our Company less cash on hand at the holding company. No performance fees were incurred in either 2019 or 2018.
Interest Expense, Net
Cash interest expense decreased to $8 million in 2019 from $17 million in 2018 primarily as a result of lower average debt balances.
Cash interest expense in 2018 excluded the cash interest paid on the $403 million of MIC Corporate 2.00% Convertible Senior Notes due October 2023 through the date of the refinancing of Atlantic Aviation’s debt on December 6, 2018. The proceeds from this Note issuance in October 2016 were used principally to reduce the drawn balance of Atlantic Aviation’s revolving credit facility and the related interest expense was recorded in Atlantic Aviation's results of operations. Cash interest expense on this Note issuance is included in Corporate and Other after December 6, 2018.
Other Income, Net
Other income, net, decreased in 2019 compared with 2018 primarily as a result of a reduction in fee income from a third-party developer of renewable power facilities. The relationship with the developer concluded during July 2019.
Income Taxes
The Benefit for Current Income Taxes of $20 million in 2019 in the above table reflects the federal income tax payable by IMTT, Atlantic Aviation and MIC Hawaii that is offset in consolidation with the application of MIC holding company level NOL carryforwards. At December 31, 2018, we had $152 million in federal NOL carryforwards, which was used to fully offset the 2019 federal taxable income from continuing operations and a portion of the taxable gain on the sale of the renewable business in 2019.

61
Liquidity and Capital Resources

General
Our primary cash requirements include normal operating expenses, debt service, debt principal payments, payments of dividends and capital expenditures. Our primary source of cash is operating activities, although we may draw on credit facilities, issue new equity or debt or sell assets to generate cash.
We may from time to time seek to purchase or retire our outstanding debt in open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on market conditions, our liquidity needs and other factors.
At December 31, 2019, our consolidated debt outstanding from continuing operations totaled $2,722 million (excluding adjustments for unamortized debt discounts), our consolidated cash balance from continuing operations totaled $357 million and consolidated available capacity under our revolving credit facilities from continuing operations totaled $1,610 million, excluding letters of credit outstanding of $13 million. On July 15, 2019, we fully repaid the outstanding balance of $350 million on our 2.875% Convertible Senior Notes due July 2019 at maturity using cash on hand.
The following table shows MIC’s debt obligations from continuing operations at February 21, 2020 ($ in millions):
Business
 
Debt
 
Weighted
Average
Remaining Life
(in years)
 
Balance
Outstanding
 
Weighted
Average Rate(1)
MIC Corporate
 
Convertible Senior Notes
 
3.6
 
$
403

 
2.00
%
IMTT
 
Senior Notes
 
6.2
 
600

 
3.97
%
 
 
Tax-Exempt Bonds(2)
 
5.8
 
509

 
2.90
%
Atlantic Aviation
 
Term Loan(3)(4)
 
5.8
 
1,015

 
5.13
%
MIC Hawaii
 
Term Loan(4)
 
3.5
 
95

 
3.17
%
 
 
Senior Notes
 
2.5
 
100

 
4.22
%
Total
 
 
 
5.4
 
$
2,722

 
3.89
%
_____________
(1)
Reflects annualized interest rate on all facilities including interest rate hedges.
(2)
On December 5, 2018, IMTT completed the amendment of its existing $509 million Tax-Exempt Bonds and extended the maturity to December 2025.
(3)
On December 6, 2018, Atlantic Aviation completed the refinancing of its $1,025 million Term Loan facility maturing on December 2025.
(4)
The weighted average remaining life does not reflect the scheduled amortization on these facilities.
The following table profiles each revolving credit facility from continuing operations at our businesses and at MIC Corporate as of February 21, 2020 ($ in millions):
Business
 
Debt
 
Weighted
Average
Remaining
Life (in
years)
 
Undrawn
Amount
 
Interest Rate(1)
MIC Corporate(2)
 
Revolving Facility
 
1.9
 
$
600

 
LIBOR + 2.00%
IMTT(3)
 
USD Revolving Facility
 
3.8
 
550

 
LIBOR + 1.50%
 
 
CAD Revolving Facility
 
3.8
 
50

 
Bankers' Acceptance Rate + 1.50%
Atlantic Aviation(4)
 
Revolving Facility
 
3.8
 
350

 
LIBOR + 2.00%
MIC Hawaii(5)
 
Revolving Facility
 
3.0
 
60

 
LIBOR + 1.25%
Total(6)
 
 
 
3.1
 
$
1,610

 
 
_____________
(1)
Excludes commitment fees.
(2)
On January 3, 2018, the Company completed the refinancing and upsizing of its senior secured revolving credit facility and extended its maturity to January 2022. The applicable margin on the interest rate is based on a ratings grid.
(3)
On December 5, 2018, IMTT completed the amendment of its $550 million USD revolving credit facility and $50 million CAD revolving credit facility and extended the maturity for both facilities to December 2023. The applicable margin on the interest rate is based on a ratings and leverage grid.

62
Liquidity and Capital Resources — (continued)

(4)
On December 6, 2018, Atlantic Aviation completed the refinancing of its prior revolving credit facility with a $350 million revolving credit facility maturing in December 2023. The applicable margin on the interest rate is based on a leverage grid.
(5)
On February 12, 2018, Hawaii Gas completed the refinancing of its existing $60 million revolving credit facility and extended its maturity to February 2023.
(6)
Excludes letters of credit outstanding of $13 million.
We will, in general, apply available cash to the repayment of revolving credit facility balances as a means of minimizing interest expense and draw on those facilities to fund growth projects and for general corporate purposes.
We use revolving credit facilities at each of our operating companies and the holding company as a means of maintaining access to sufficient liquidity to meet future requirements, managing interest expense and funding growth projects. We base our assessment of the sufficiency of our liquidity and capital resources on the assumptions that:
•
our businesses overall generate, and are expected to continue to generate, significant operating cash flow;
•
the ongoing capital expenditures associated with our businesses are readily funded from their respective operating cash flow or available debt facilities; and
•
we will be able to refinance, extend and/or repay the principal amount of maturing long-term debt on terms that can be supported by our businesses.
We capitalize our businesses in part using floating rate bank debt with medium-term maturities of between four and seven years. In general, we hedge any floating rate exposure for the majority of the term of these facilities. We also use longer dated private placement debt and other forms of capital including bond or hybrid debt instruments to capitalize our businesses. In general, the debt facilities at our businesses are non-recourse to the holding company and there are no cross-collateralization or cross-guarantee provisions in these facilities.
COMMITMENTS AND CONTINGENCIES
The following table summarizes our future obligations for continuing operations, by period due, as of December 31, 2019, under our various contractual obligations and commitments. We had no other off-balance sheet arrangement at that date or currently.
 
Payments Due by Period
Total
 
Less than
One Year
 
1 – 3 Years
 
3 – 5 Years
 
More than
5 Years
($ In Millions)
Long-term debt(1)
$
2,722

 
$
12

 
$
122

 
$
505

 
$
2,083

Interest obligations(2)
624

 
113

 
219

 
194

 
98

Operating lease obligations(3)
730

 
46

 
87

 
84

 
513

Pension and post-retirement benefit obligations(4)
135

 
15

 
24

 
26

 
70

Purchase commitments
149

 
32

 
60

 
57

 
—

Service commitments
5

 
3

 
2

 
—

 
—

Capital expenditure commitments
16

 
14

 
2

 
—

 
—

Total contractual cash obligations(5)(6)
$
4,381

 
$
235

 
$
516

 
$
866

 
$
2,764

_____________
(1)
The long-term debt represents the consolidated principal obligations to various lenders. The primary debt facilities are subject to certain covenants, the violation of which could result in acceleration of the maturity dates. For a description of the material terms of MIC and its businesses, see Note 9, “Long-Term Debt”, in our consolidated financial statements in “Financial Statements and Supplementary Data” in Part II, Item 8, of this Form 10-K.
(2)
The variable rate portion on the interest obligation on long-term debt was calculated using three-months LIBOR forward spot rate at December 31, 2019.
(3)
This represents the minimum annual rentals required to be paid under non-cancellable operating leases with terms in excess of one year. In 2019, we adopted ASU No. 2016-2, which requires lessees to recognize a right-of-use asset and lease liability on the balance sheet. See Note 3, "Implementation of ASU No. 2016-2", and Note 4, "Leases", in our consolidated financial statements in “Financial Statements and Supplementary Data” in Part II, Item 8, of this Form 10-K for further discussions.
(4)
The pension and post-retirement benefit obligation is forecasted payments, by actuaries, for the next ten years.

63
Liquidity and Capital Resources — (continued)

(5)
The above table does not reflect certain long-term obligations for which we are unable to estimate the period in which the obligation will be incurred.
(6)
The above table does not reflect certain expenses that we may incur dependent on the outcome of our pursuit of strategic alternatives. These include payments to our Manager calculated in accordance with the Disposition Agreement, fees to financial advisors and other professional services providers and transaction related payments to certain employees of our operating businesses.
In addition to these commitments and contingencies, we typically incur capital expenditures on a regular basis. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Classification of Maintenance Capital Expenditures and Growth Capital Expenditures” and “Investing Activities” below for further discussions of growth capital expenditures. Maintenance capital expenditures are discussed above in “Results of Operations” for each of our businesses.
We also have other contingencies, including pending or threatened legal and administrative proceedings that are not reflected above as amounts at this time are not ascertainable. See “Legal Proceedings” in Part I, Item 3.
Our sources of cash to meet these obligations are:
•
cash generated from our operations (see “Operating Activities” below);
•
the issuance of shares or debt securities (see “Financing Activities” below);
•
refinancing of our current credit facilities on or before maturity (see “Financing Activities” below);
•
cash available from our undrawn credit facilities (see “Financing Activities” below); and
•
if advantageous, the sale of all or part of any of our businesses (see “Investing Activities” below).
ANALYSIS OF CONSOLIDATED HISTORICAL CASH FLOWS FROM CONTINUING OPERATIONS
The following section discusses our sources and uses of cash on a consolidated basis from continuing operations. All intercompany activities such as corporate allocations, capital contributions to our businesses and distributions from our businesses have been excluded from the tables as these transactions are eliminated on consolidation.
  
 
Year Ended
December 31,
 
Change
Favorable/(Unfavorable)
 
2019
 
2018
 
($ In Millions)
 
$
 
$
 
$
 
%
Cash provided by operating activities
 
468

 
473

 
(5
)
 
(1
)
Cash used in investing activities
 
(248
)
 
(156
)
 
(92
)
 
(59
)
Cash used in financing activities
 
(706
)
 
(390
)
 
(316
)
 
(81
)
Historical Cash Flows: 2018 vs. 2017
For a comparison and discussion of our consolidated liquidity and capital resources and our cash flow activities for 2018 compared with 2017, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7, in our Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the U.S. Securities and Exchange Commission on February 20, 2019.
Operating Activities from Continuing Operations
Cash provided by (used in) operating activities is generally comprised of EBITDA excluding non-cash items (as defined by us), less cash interest, tax and pension payments and changes in working capital. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” for discussions around the components of EBITDA excluding non-cash items on a consolidated basis from continuing operations and for each of our businesses above.
The decrease in consolidated cash provided by operating activities from continuing operations in 2019 compared with 2018 was primarily due to:
•
prepayment of federal income taxes;
•
an unfavorable movement in accounts receivable due to timing of collections and billings on fuel sales and storage contracts; and
•
an increase in interest expense; partially offset by
•
an increase in EBITDA excluding non-cash items;

64
Liquidity and Capital Resources — (continued)

•
an increase in accounts payable and accrued expenses primarily for professional fees related to our pursuit of strategic alternatives; and
•
a net increase in deferred revenue.
We believe our operating activities overall provide a source of sustainable and stable cash flows over the long-term with the opportunity for future growth as a result of:
•consistent customer demand driven by the basic nature of the services provided;
•our strong competitive position due to factors including:
•high initial development and construction costs;
•difficulty in obtaining suitable land on which to operate (for example, airports, waterfront near ports);
•concessions, leases or customer contracts;
•required government approvals, which may be difficult or time-consuming to obtain;
•lack of immediate cost-effective alternatives for the services provided; and
•product/service pricing that we expect will keep pace with cost increases as a result of:
•consistent demand;
•limited alternatives;
•contractual terms; and
•regulatory rate setting.
Investing Activities from Continuing Operations
Cash provided by investing activities include proceeds from divestitures of businesses and disposal of fixed assets. Cash used in investing activities include acquisitions of businesses in new and existing segments and capital expenditures. Acquisitions of businesses are generally funded by raising additional equity and/or drawing on credit facilities.
In general, maintenance capital expenditures are funded from cash provided by operating activities and growth capital expenditures are funded by drawing on our available credit facilities or with equity capital. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” for discussions on maintenance capital expenditures for each of our businesses.
The increase in consolidated cash used in investing activities from continuing operations in 2019 compared with 2018 resulted from an increase in capital expenditures in 2019 and the absence of cash proceeds received from the sale of non-core businesses in 2018. These increases to cash used in investing activities were partially offset by cash proceeds received from the repayment of a loan from a third-party renewable developer during 2019 and cash used in an acquisition during the quarter ended March 31, 2018 that did not recur in 2019.
Capital Deployment (includes both continuing and discontinued operations)
Capital deployment includes growth capital expenditures and “bolt-on” acquisitions, the majority of which are expected to generate incremental earnings. In 2019 and 2018, growth capital deployed totaled $211 million and $175 million, respectively. Capital deployed from continuing operations in 2019 was $196 million.
We continuously evaluate opportunities to prudently deploy capital in bolt-on acquisitions and growth projects across our existing businesses. We are undertaking and expect to undertake capital projects related to the repurposing and repositioning of certain assets at IMTT and the enhancement of the capabilities of the businesses in our other segments. In total, we expect to deploy between $200 million and $225 million of growth capital during 2020 with the majority expended in support of IMTT.
Financing Activities from Continuing Operations
Cash provided by financing activities primarily includes new equity issuance and debt issuance related to acquisitions and capital expenditures. Cash used in financing activities primarily includes dividends to our stockholders and the repayment of debt principal balances on maturing debt.
The increase in consolidated cash used in financing activities from continuing operations in 2019 compared with 2018 resulted from debt repayment in 2019 compared with net debt borrowings in 2018. In 2019, we fully repaid the outstanding balance of $350 million on our 2.875% Convertible Senior Notes due July 2019 at maturity using cash on hand. Debt borrowings during 2018 was primarily used to fund an acquisition, growth capital expenditures and general corporate purposes. These increases to cash

65
Liquidity and Capital Resources — (continued)

used in financing activities were partially offset by the decrease in dividends paid to stockholders in 2019 and the absence of deferred financing costs paid in 2018 related to the Atlantic Aviation debt refinancing and IMTT debt amendment.
IMTT
On December 5, 2018, IMTT amended its credit agreement. The amendment extended the maturity date of IMTT’s $600 million revolving credit facility from May 21, 2020 to December 5, 2023 and extended the maturity date of the $509 million Tax-Exempt Bond purchase facility from May 21, 2022 to December 5, 2025.
At December 31, 2019, IMTT had $1,109 million of debt outstanding consisting of $600 million of senior notes and $509 million of Tax-Exempt Bonds. IMTT’s $600 million of revolving credit facilities remained undrawn at December 31, 2019. In 2019 and 2018, cash interest expense was $39 million and $46 million, respectively. At December 31, 2019, IMTT was in compliance with its financial covenants.
Atlantic Aviation
On December 6, 2018, Atlantic Aviation entered into a credit agreement for a seven-year, $1,025 million senior secured first lien term loan facility and a five-year, $350 million senior secured first lien revolving credit facility. At December 31, 2019, the outstanding balance on the term loan facility was $1,015 million and the revolving credit facility remained undrawn.
In 2019 and 2018, cash interest expense was $58 million and approximately $29 million, respectively. Cash interest expense in 2018 included the cash interest paid on the $403 million of MIC Corporate 2.00% Convertible Senior Notes issued in October 2016 through December 6, 2018, the date of Atlantic Aviation's refinancing. The proceeds from this Note issuance in October 2016 were used principally to reduce the drawn balance of Atlantic Aviation's revolving credit facility. Cash interest expense on the Note issuance is recorded in Corporate and Other after December 6, 2018.
At December 31, 2019, Atlantic Aviation was in compliance with its financial covenants.
MIC Hawaii
At December 31, 2019, MIC Hawaii had total debt outstanding of $195 million in term loans and senior secured note borrowings and a $60 million revolving credit facility that was undrawn. Cash interest expense was approximately $8 million for both 2019 and 2018. At December 31, 2019, MIC Hawaii was in compliance with their financial covenants.
Corporate and Other
On January 3, 2018, the Company completed the refinancing and upsizing of its senior secured revolving credit facility to $600 million and extended the maturity through January 3, 2022. The senior secured revolving credit facility remained undrawn at December 31, 2019.
At December 31, 2019, MIC also has a $403 million of Convertible Senior Notes outstanding, that bear interest at 2.00%. In July 2019, MIC fully repaid the outstanding balance of $350 million on its 2.875% Convertible Senior Notes due July 2019 at maturity using cash on hand.
Cash interest expense was $8 million and $17 million in 2019 and 2018, respectively. Cash interest expense in 2018 excluded the cash interest paid on the $403 million of MIC Corporate 2.00% Convertible Senior Notes due October 2023 through the date of the refinancing of Atlantic Aviation’s debt on December 6, 2018. The proceeds from this note issuance in October 2016 were used principally to reduce the drawn balance of Atlantic Aviation’s revolving credit facility and the related interest expense was recorded in Atlantic Aviation's results of operations. Cash interest expense on this Note issuance is included in Corporate and Other after December 6, 2018.
At December 31, 2019, MIC was in compliance with its financial covenants.
For a description of the material terms of MIC and its businesses' debt facilities, see Note 9, “Long-Term Debt”, in our consolidated financial statements in “Financial Statements and Supplementary Data” in Part II, Item 8, of this Form 10-K.

66

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our financial statements requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions and judgments and uncertainties, and potentially could result in materially different results under different conditions. Our critical accounting policies and estimates are discussed below. These estimates and policies are consistent with the estimates and accounting policies followed by the businesses we own and operate.
Business Combinations
Our acquisitions of businesses that we control are accounted for under the purchase method of accounting. The amounts assigned to the identifiable assets acquired and liabilities assumed in connection with acquisitions are based on estimated fair values as of the date of the acquisition, with the remainder, if any, recorded as goodwill. The fair values are determined by our management, taking into consideration information supplied by the management of acquired entities and other relevant information. Such information includes valuations supplied by independent appraisal experts for significant business combinations. The valuations are generally based upon future cash flow projections for the acquired assets, discounted to a present value. The determination of fair values requires significant judgment both by management and outside experts engaged to assist in this process.
Goodwill, Intangible Assets and Property, Plant and Equipment
Significant assets acquired in connection with our acquisition of businesses include contractual arrangements, customer relationships, non-compete agreements, trademarks, property and equipment and goodwill.
Goodwill and Trademarks
Trademarks are generally considered to be indefinite life intangibles. Trademarks and goodwill are not amortized in most circumstances although it may be appropriate to amortize some trademarks. We are required to perform annual impairment reviews (or more frequently in certain circumstances) for unamortized intangible assets.
ASU No. 2011-08, Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment, permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test, as discussed below. If an entity concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not perform the two-step impairment test.
ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, simplifies the measurement of goodwill and no longer requires an entity to perform a hypothetical purchase price allocation when computing the estimated fair value to measure goodwill impairment. Instead, impairment will be assessed by quantifying the difference between the fair value of a reporting unit and its carrying amount. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, on condition that the charge doesn’t exceed the total amount of goodwill allocated to that reporting unit.
If an entity concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if there is a triggering event that indicates impairment, the Company needs to perform a quantitative impairment test. This requires management to make judgments in determining what assumptions to use in the calculation. The first step is to determine the estimated fair value of each reporting unit with goodwill. The reporting units of the Company, for purposes of the impairment test, are those components of operating segments for which discrete financial information is available and segment management regularly reviews the operating results of that component. When determining reporting units, components with similar economic characteristics are combined.
The Company estimates the fair value of each reporting unit by estimating the present value of the reporting unit’s future discounted cash flows or value expected to be realized in a third-party sale. If the recorded net assets of the reporting unit are less than the reporting unit’s estimated fair value, then no impairment is indicated. If the recorded amount of goodwill exceeds the estimated fair value, an impairment charge is recorded for the excess.
IMTT, Atlantic Aviation and the MIC Hawaii businesses are separate reporting units for purposes of this analysis. The impairment test for trademarks, which are not amortized, requires the determination of the fair value of such assets. If the fair value of the trademarks is less than their carrying value, an impairment loss is recognized in an amount equal to the difference. We cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill and/or intangible assets. Such events include, but are not limited to, strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on our customer base, or a material negative change in relationship with significant customers.

67

We test for goodwill impairment at the reporting unit level on an annual basis on October 1st of each year and between annual tests if a triggering event indicates the possibility of an impairment. We monitor changing business conditions as well as industry and economic factors, among others, for events which could trigger the need for an interim impairment analysis. We have experienced a sustained decline in its market capitalization over the 18-months ended September 30, 2019. The decline reflects, in part, the sales of smaller and non-core businesses during that period. However, we concluded that the decline in our market capitalization also reflected a reduced contribution from our IMTT segment as a result of lower bulk liquid storage utilization levels and storage rates and determined that these constituted a triggering event.
We performed an interim impairment analysis based on financial results through September 30, 2019. For IMTT, we used both the market and income approaches and weighting them based on their applicability to the segment. The income approach used forecasted cash flows developed as part of our annual update of our 5-year business plan. For Atlantic Aviation and Hawaii Gas, we used only the market approach given that the fair value of these businesses substantially exceeded the book value noted in 2018. The analysis concluded that fair value of each of our reporting units exceeded their carrying value and no impairment was recorded.
At September 30, 2019, the fair value of our reporting units exceeded their aggregate book value by $2.2 billion, or 33%. Approximately $1.9 billion of the excess was attributed to Atlantic Aviation, approximately $280 million to Hawaii Gas and approximately $20 million to IMTT.
Unfavorable fluctuations in the discount rate or declines in forecasted storage revenues and margins could result in an impairment to IMTT in the future. For example, a 0.25% increase to the discount rate would decrease the value of IMTT by approximately $70 million. Any increase in the discount rate, in conjunction with any decrease in the projected cash flows for IMTT, would negatively affect the current valuations. Due to the inherent uncertainties in the estimates and assumptions used in the fair value analysis, our actual results may differ. These differences could alter the fair value of the reporting units and may result in impairment charges in future periods. At December 31, 2019, there were no new triggering events that indicated impairment.
Property, Plant and Equipment and Intangible Assets
Property and equipment is initially stated at cost. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the property and equipment after consideration of historical results and anticipated results based on our current plans. Our estimated useful lives represent the period the asset remains in service assuming normal routine maintenance. We review the estimated useful lives assigned to property and equipment when our business experience suggests that they do not properly reflect the consumption of economic benefits embodied in the property and equipment nor result in the appropriate matching of cost against revenue. Factors that lead to such a conclusion may include physical observation of asset usage, examination of realized gains and losses on asset disposals and consideration of market trends such as technological obsolescence or change in market demand.
Significant intangibles, including contractual arrangements, customer relationships, non-compete agreements and technology are amortized using the straight-line method over the estimated useful lives of the intangible asset after consideration of historical results and anticipated results based on our current plans. With respect to contractual arrangements at Atlantic Aviation, the useful lives will generally match the remaining lease terms plus extensions under the business’ control.
We perform impairment reviews of property and equipment and intangibles subject to amortization when events or circumstances indicate that fair value of the assets are less than their carrying amount and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. In this circumstance, the impairment charge is determined based upon the amount by which the net book value of the assets exceeds their fair market value. Any impairment is measured by comparing the fair value of the asset to its carrying value.
The estimated fair value of reporting units and fair value of property and equipment and intangible assets is determined by our management and is generally based upon future cash flow projections for the acquired assets, discounted to present value. We use outside valuation experts when management considers that it is appropriate to do so.
We test for goodwill and indefinite-lived intangible assets annually as of October 1st or when there is an indicator of impairment. See Note 7, “Property, Equipment, Land and Leasehold Improvements”, and Note 8, “Intangible Assets and Goodwill”, in our consolidated financial statements in “Financial Statements and Supplementary Data” in Part II, Item 8, of this Form 10-K for financial information and further discussions.
Accounting Policies, Accounting Changes and Future Application of Accounting Standards
See Note 2, “Summary of Significant Accounting Policies” in our consolidated financial statements in “Financial Statements and Supplementary Data” in Part II, Item 8, of this Form 10-K for financial information and further discussions, for a summary of the Company’s significant accounting policies, including a discussion of recently adopted and issued accounting pronouncements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The discussion that follows describes our exposure to market risks and the use of derivatives to address those risks. See Note 10, “Derivative Instruments and Hedging Activities” in Part II, Item 8, of this Form 10-K for further discussions.
Interest Rate Risk
We are exposed to interest rate risk in relation to the borrowings of our businesses. Our current policy is to enter into derivative financial instruments to fix variable-rate interest payments covering a portion of the interest rate risk associated with the borrowings of our businesses, subject to the requirements of our lenders. As of December 31, 2019, our continuing businesses had $2,722 million of current and long-term debt, of which $946 million was economically hedged with interest rate contracts, $1,103 million was fixed rate debt and $673 million was unhedged.
Changes in interest rates impact our interest expense on both the hedged and unhedged portion of our debt. Interest expense on the unhedged portion of our debt changes by the variation in interest rates applied to the outstanding balance of the debt. This has a corresponding impact on the amount of cash interest we pay and our effective cash interest rate. Interest expense on the hedged portion of our debt changes by the variation in the fair value of the underlying interest rate contracts. This has no impact on the amount of cash interest we pay or our effective cash interest rate.
IMTT
At December 31, 2019, IMTT had $509 million in Tax-Exempt Bonds outstanding, of which $451 million is fixed with an interest rate swap contract and the remainder of the balance of $58 million is unhedged. At December 31, 2019, the interest rate swap fixes the interest rate at 2.90% through June 2021, prior to the mandatory tender of the Tax-Exempt Bonds in December 2025. A 10% decrease in interest rates would result in a $512,000 decrease in the fair market value of the interest rate swaps and a corresponding 10% increase would result in a $569,000 increase in the fair market value.
For the portion of the Tax-Exempt Bonds that is not hedged, a 10% decrease or increase in interest rates would result in an insignificant change in interest expense per year.
Atlantic Aviation
At December 31, 2019, Atlantic Aviation had $1,015 million of term loan debt outstanding. At December 31, 2019, the interest rate on the term loan floats at LIBOR plus 3.75%. A 10% decrease in interest rates would result in approximately $2 million decrease in interest expense per year and a corresponding 10% increase would result in approximately $2 million increase in interest expense per year.
The business has an interest rate cap agreement with a notional of $400 million with a strike price of 1.00% through September 2021 that partially hedges the term loan debt prior to the maturity of the cap. A 10% decrease in interest rates would result in an approximately $1 million decrease in the fair market value of the interest rate cap and a corresponding 10% increase would result in an approximately $1 million increase in the fair market value.
MIC Hawaii
At December 31, 2019, MIC Hawaii had $95 million of term loan debt outstanding. At December 31, 2019, the interest rate on Hawaii Gas' $80 million term loan facility floats at LIBOR plus 1.50%, which is fixed at 2.49% using an interest rate swap contract through February 2020. The interest rate on the solar facilities' $15 million term loan facility floats at LIBOR plus 2.00%, which is fixed at 3.38% using an interest rate swap contract through June 2026. A 10% decrease or increase in interest rates would result in an insignificant change in the fair market value of the interest rate swaps.
Commodity Price Risk
The risk associated with fluctuations in the prices that Hawaii Gas pays for LPG is principally a result of market forces reflecting changes in supply and demand for LPG and other energy commodities. Hawaii Gas’ gross margin is sensitive to changes in LPG supply costs and Hawaii Gas may not always be able to pass through product cost increases fully or on a timely basis, particularly when product costs rise rapidly. In order to reduce the volatility of the business’ LPG market price risk, Hawaii Gas has used and expects to continue to use over-the-counter commodity derivative instruments including price swaps. Hawaii Gas does not use commodity derivative instruments for speculative or trading purposes. Over-the-counter derivative commodity instruments utilized by Hawaii Gas to hedge forecasted purchases of LPG are generally settled at expiration of the contract. The fair value of unsettled commodity price risk sensitive instruments at December 31, 2019 was a liability of approximately $7 million. A 10% increase in the market price of LPG would result in an increase in such fair value of approximately $2 million. A 10% decrease in the market price of LPG would result in a decrease in such fair value of approximately $2 million.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MACQUARIE INFRASTRUCTURE CORPORATION
INDEX TO FINANCIAL STATEMENTS

70

Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Macquarie Infrastructure Corporation:

Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Macquarie Infrastructure Corporation and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 25, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 3 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-2, Leases (Topic 842).
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Evaluation of the carrying value of goodwill for the IMTT reporting unit
As discussed in Note 8 to the consolidated financial statements, the goodwill balance as of December 31, 2019 was $2,043 million, of which $1,428 million related to the International-Matex Tank Terminals (IMTT) reporting unit. The Company performs goodwill impairment testing on an annual basis and between annual tests if a triggering event indicates the possibility of impairment.
We identified the evaluation of the carrying value of goodwill for the IMTT reporting unit as a critical audit matter because specialized skills and a high degree of auditor judgment were required to evaluate certain assumptions used in the Company’s estimate of the fair value of the IMTT reporting unit. Specifically, the forecasted cash flows and discount rate used required

71

subjective and challenging auditor judgment, as minor changes to those assumptions had a significant effect on the Company’s assessment of the carrying value of goodwill.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s goodwill impairment process, including controls related to the determination of forecasted cash flows and the discount rate. We compared the Company’s historical cash flow forecasts for IMTT to actual results to assess the Company’s ability to accurately forecast. We evaluated the Company’s forecasted cash flows for IMTT by comparing the forecasts to historical financial data. We performed sensitivity analyses over the forecasted cash flows and discount rate assumptions to assess their impact on the Company’s determination that the fair value of the IMTT reporting unit exceeded its carrying value. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in (1) assessing the model used by the Company and (2) evaluating the discount rate by comparing it to a discount rate range that was independently developed using publicly available data for a group of comparable entities.
Evaluation of the lease terms and the incremental borrowing rates used to determine the ROU assets and lease liabilities
As discussed in Note 3 to the consolidated financial statements, the Company implemented ASU No. 2016-2, Leases (Topic 842), effective January 1, 2019. Upon adoption of ASU No. 2016-2, the Company recorded right-of-use (ROU) assets and corresponding lease liabilities of $351 million and $358 million, respectively.
We identified the evaluation of the lease terms and the incremental borrowing rates used to determine the ROU assets and lease liabilities as a critical audit matter. The evaluation of the lease terms was challenging due to the non-standardized, long-term nature of the underlying lease agreements. In addition, evaluation of the incremental borrowing rates required subjective and challenging auditor judgment due to the varying terms of the lease agreements and underlying assets being leased. Minor changes to the incremental borrowing rates could have a significant effect on the amounts of the ROU assets and lease liabilities.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s ASU No. 2016-2 implementation process, including controls related to the evaluation of the lease terms and the incremental borrowing rates. We selected a sample of lease agreements and compared the inputs used by the Company to determine the ROU assets and lease liabilities to the terms of the lease agreement. In addition, we involved valuation professionals with specialized skills and knowledge who assisted in (1) assessing the methodology used by the Company in determining the incremental borrowing rates and (2) evaluating the assumptions used to determine the incremental borrowing rates by comparing the assumptions to publicly available data such as credit ratings and yield curves.


/s/ KPMG LLP
We have served as the Company’s auditor since 2004.
Dallas, Texas
February 25, 2020


72
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in Millions, Except Share Data)


 
As of December 31,
 
2019
 
2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
357

 
$
589

Restricted cash
1

 
23

Accounts receivable, net of allowance for doubtful accounts
97

 
95

Inventories
31

 
29

Prepaid expenses
13

 
13

Other current assets
30

 
23

Current assets held for sale(1)
—

 
648

Total current assets
529

 
1,420

Property, equipment, land and leasehold improvements, net
3,202

 
3,141

Operating lease assets, net
336

 
—

Investment in unconsolidated business
9

 
8

Goodwill
2,043

 
2,043

Intangible assets, net
729

 
789

Other noncurrent assets
13

 
43

Total assets
$
6,861

 
$
7,444

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Due to Manager-related party
$
3

 
$
3

Accounts payable
67

 
38

Accrued expenses
86

 
86

Current portion of long-term debt
12

 
361

Operating lease liabilities - current
20

 
—

Other current liabilities
42

 
33

Current liabilities held for sale(1)
—

 
317

Total current liabilities
230

 
838

Long-term debt, net of current portion
2,654

 
2,653

Deferred income taxes
679

 
681

Operating lease liabilities - noncurrent
320

 
—

Other noncurrent liabilities
167

 
155

Total liabilities
4,050

 
4,327

Commitments and contingencies
—

 
—


See accompanying notes to the consolidated financial statements.
73
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED BALANCE SHEETS – (continued)
($ in Millions, Except Share Data)

 
As of December 31,
 
2019
 
2018
Stockholders’ equity (2):
 
 
 
Additional paid in capital
$
1,198

 
$
1,510

Accumulated other comprehensive loss
(37
)
 
(30
)
Retained earnings
1,641

 
1,485

Total stockholders’ equity
2,802

 
2,965

Noncontrolling interests(3)
9

 
152

Total equity
2,811

 
3,117

Total liabilities and equity
$
6,861

 
$
7,444

_____________
(1)
See Note 5, “Discontinued Operations and Dispositions”, for further discussions on assets and liabilities held for sale.
(2)
The Company is authorized to issue the following classes of stock: (i) 500,000,000 shares of common stock, par value $0.001 per share. At December 31, 2019 and 2018, the Company had 86,600,302 shares and 85,800,303 shares of common stock issued and outstanding, respectively; (ii) 100,000,000 shares of preferred stock, par value $0.001 per share. At December 31, 2019 and 2018, no preferred stocks were issued or outstanding; and (iii) 100 shares of special stock, par value $0.001 per share, issued and outstanding to its Manager as at December 31, 2019 and 2018. See Note 11, “Stockholders’ Equity”, for further discussions.
(3)
Includes $141 million of noncontrolling interest related to discontinued operations at December 31, 2018. See Note 5, “Discontinued Operations and Dispositions”, for further discussions.

See accompanying notes to the consolidated financial statements.
74

MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in Millions, Except Share and Per Share Data)
 
Year Ended December 31,
 
2019
 
2018
 
2017
Revenue
 
 
 
 
 
Service revenue
$
1,484

 
$
1,515

 
$
1,446

Product revenue
243

 
246

 
223

Total revenue
1,727

 
1,761

 
1,669

Costs and expenses
 
 
 
 
 
Cost of services
653

 
712

 
624

Cost of product sales
165

 
179

 
144

Selling, general and administrative
334

 
327

 
306

Fees to Manager-related party
32

 
45

 
71

Goodwill impairment
—

 
3

 
—

Depreciation
195

 
193

 
178

Amortization of intangibles
59

 
68

 
64

Total operating expenses 
1,438

 
1,527

 
1,387

Operating income
289

 
234

 
282

Other income (expense)
 
 
 
 
 
Interest income
7

 
1

 
—

Interest expense(1)
(154
)
 
(113
)
 
(87
)
Other (expense) income, net
(2
)
 
(7
)
 
9

Net income from continuing operations before income taxes
140

 
115

 
204

(Provision) benefit for income taxes
(39
)
 
(50
)
 
230

Net income from continuing operations
101

 
65

 
434

Discontinued Operations(2)
 
 
 
 
 
Net income from discontinued operations before income taxes
85

 
32

 
18

(Provision) benefit for income taxes
(33
)
 
(2
)
 
4

Net income from discontinued operations
52

 
30

 
22

Net income
153

 
95

 
456

 
 
 
 
 
 
Net income from continuing operations
101

 
65

 
434

Less: net loss attributable to noncontrolling interests
—

 
(3
)
 
—

Net income from continuing operations attributable to MIC
101

 
68

 
434

Net income from discontinued operations
52

 
30

 
22

Less: net (loss) income attributable to noncontrolling interests
(3
)
 
(39
)
 
5

Net income from discontinued operations attributable to MIC
55

 
69

 
17

Net income attributable to MIC
$
156

 
$
137

 
$
451
















See accompanying notes to the consolidated financial statements.
75

MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS – (continued)
($ in Millions, Except Share and Per Share Data)

 
Year Ended December 31,
 
2019
 
2018
 
2017
Basic income per share from continuing operations attributable to MIC
$
1.17

 
$
0.80

 
$
5.22

Basic income per share from discontinued operations attributable to MIC
0.65

 
0.80

 
0.20

Basic income per share attributable to MIC
$
1.82

 
$
1.60

 
$
5.42

Weighted average number of shares outstanding: basic
86,178,212

 
85,233,989

 
83,204,404

Diluted income per share from continuing operations attributable to MIC
$
1.17

 
$
0.80

 
$
4.94

Diluted income per share from discontinued operations attributable to MIC
0.65

 
0.80

 
0.19

Diluted income per share attributable to MIC
$
1.82

 
$
1.60

 
$
5.13

Weighted average number of shares outstanding: diluted
86,204,301

 
85,249,865

 
91,073,362

Cash dividends declared per share
$
4.00

 
$
4.00

 
$
5.56

_____________
(1)
Interest expense includes losses on derivative instruments of $13 million and gains on derivative instruments of $8 million and $2 million in 2019, 2018 and 2017, respectively.
(2)
See Note 5, “Discontinued Operations and Dispositions”, for discussions on businesses classified as held for sale.

See accompanying notes to the consolidated financial statements.
76

MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in Millions)
 
Year Ended December 31,
 
2019
 
2018
 
2017
Net income
$
153

 
$
95

 
$
456

Other comprehensive (loss) income, net of taxes:
 
 
 
 
 
Change in post-retirement benefit plans(1)
(9
)
 
9

 
(4
)
Translation adjustment(2)
2

 
(5
)
 
3

Other comprehensive (loss) income
(7
)
 
4

 
(1
)
Comprehensive income
146

 
99

 
455

Less: comprehensive (loss) income attributable to noncontrolling interests
(3
)
 
(42
)
 
5

Comprehensive income attributable to MIC
$
149

 
$
141

 
$
450

_____________
(1)
Change in post-retirement benefit plans is presented net of tax benefit of $3 million in both 2019 and 2017 and net of tax expense of $3 million in 2018. See Note 11, “Stockholders’ Equity”, for further discussions.
(2)
Translation adjustment is presented net of tax expense of $1 million and $2 million in 2019 and 2017, respectively, and net of tax benefit of $2 million in 2018. See Note 11, “Stockholders’ Equity”, for further discussions.

See accompanying notes to the consolidated financial statements.
77
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
($ in Millions, Except Share Data)

 
In Shares
 
Additional
Paid In
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Total
Stockholders’
Equity
 
Noncontrolling
Interests(2)
 
Total
Equity
Special
Stock
 
Common Stock(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016
100

 
82,047,526

 
$
2,089

 
$
(29
)
 
$
893

 
$
2,953

 
$
195

 
$
3,148

Issuance of shares to Manager
—

 
948,147

 
72

 
—

 
—

 
72

 
—

 
72

Issuance of shares, net of offering costs
—

 
78,343

 
6

 
—

 
—

 
6

 
—

 
6

Issuance of shares pursuant to acquisition
—

 
1,650,104

 
125

 
—

 
—

 
125

 
—

 
125

Issuance of shares to independent directors
—

 
9,595

 
1

 
—

 
—

 
1

 
—

 
1

Issuance of shares pursuant to conversion of convertible senior notes
—

 
242

 
—

 
—

 
—

 
—

 
—

 
—

Dividends to common stockholders(3)
—

 
—

 
(453
)
 
—

 
—

 
(453
)
 
—

 
(453
)
Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
(4
)
 
(4
)
Net adjustment to noncontrolling interest from acquisition
—

 
—

 
—

 
—

 
—

 
—

 
1

 
1

Comprehensive (loss) income, net of taxes
—

 
—

 
—

 
(1
)
 
451

 
450

 
5

 
455

Balance at December 31, 2017
100

 
84,733,957

 
$
1,840

 
$
(30
)
 
$
1,344

 
$
3,154

 
$
197

 
$
3,351

Issuance of shares to Manager
—

 
1,054,896

 
48

 
—

 
—

 
48

 
—

 
48

Issuance of shares, net of offering costs
—

 
1,916

 
—

 
—

 
—

 
—

 
—

 
—

Issuance of shares to independent directors
—

 
9,435

 
1

 
—

 
—

 
1

 
—

 
1

Issuance of shares pursuant to conversion of convertible senior notes
—

 
99

 
—

 
—

 
—

 
—

 
—

 
—

Dividends to common stockholders(3)
—

 
—

 
(379
)
 
—

 
—

 
(379
)
 
—

 
(379
)
Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
(4
)
 
(4
)
Contributions from noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
1

 
1

Cumulative effect of change in accounting principle(4)
—

 
—

 
—

 
(4
)
 
4

 
—

 
—

 
—

Comprehensive income (loss), net of taxes
—

 
—

 
—

 
4

 
137

 
141

 
(42
)
 
99

Balance at December 31, 2018
100

 
85,800,303

 
$
1,510

 
$
(30
)
 
$
1,485

 
$
2,965

 
$
152

 
$
3,117

Issuance of shares to Manager
—

 
776,353

 
31

 
—

 
—

 
31

 
—

 
31

Issuance of shares to independent directors
—

 
23,646

 
1

 
—

 
—

 
1

 
—

 
1

Dividends to common stockholders(3)
—

 
—

 
(344
)
 
—

 
—

 
(344
)
 
—

 
(344
)
Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
(3
)
 
(3
)
Net adjustment to noncontrolling interest from dispositions
—

 
—

 
—

 
—

 
—

 
—

 
(137
)
 
(137
)
Comprehensive (loss) income, net of taxes
—

 
—

 
—

 
(7
)
 
156

 
149

 
(3
)
 
146

Balance at December 31, 2019
100

 
86,600,302

 
$
1,198

 
$
(37
)
 
$
1,641

 
$
2,802

 
$
9

 
$
2,811


_____________
(1)
The Company is authorized to issue 500,000,000 shares of common stock with a par value $0.001 per share.
(2)
Includes $141 million and $184 million of noncontrolling interest related to discontinued operations at December 31, 2018 and 2017, respectively. See Note 5, “Discontinued Operations and Dispositions”, for further discussions.
(3)
See Note 11, “Stockholder's Equity”, for discussion on cash dividends paid on shares for each period.
(4)
In 2018, the Company adopted ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, and made a $4 million adjustment to reclassify stranded tax effects in Accumulated Other Comprehensive Loss to Retained Earnings.

See accompanying notes to the consolidated financial statements.
78
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in Millions)

 
Year Ended December 31,
 
2019
 
2018
 
2017
Operating activities
 
 
 
 
 
Net income from continuing operations
$
101

 
$
65

 
$
434

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

 
3

 
—

Depreciation and amortization of property and equipment
195

 
193

 
178

Amortization of intangible assets
59

 
68

 
64

Amortization of debt financing costs
9

 
11

 
7

Amortization of debt discount
4

 
4

 
3

Adjustments to derivative instruments
25

 
12

 
(4
)
Fees to Manager- related party
32

 
45

 
71

Deferred taxes
27

 
36

 
(240
)
Other non-cash expense, net(1)
22

 
31

 
14

Changes in other assets and liabilities, net of acquisitions:
 
 
 
 
 
Accounts receivable
(2
)
 
14

 
(32
)
Inventories
(3
)
 
(2
)
 
(6
)
Prepaid expenses and other current assets
(5
)
 
(2
)
 
(5
)
Accounts payable and accrued expenses
14

 
—

 
(7
)
Income taxes payable
(10
)
 
1

 
—

Other, net
—

 
(6
)
 
(13
)
Net cash provided by operating activities from continuing operations
468

 
473

 
464

Investing activities
 
 
 
 
 
Acquisitions of businesses and investments, net of cash, cash
equivalents and restricted cash acquired
—

 
(18
)
 
(201
)
Purchases of property and equipment
(260
)
 
(177
)
 
(214
)
Loan to project developer
(1
)
 
(19
)
 
(23
)
Loan repayment from project developer
16

 
17

 
17

Proceeds from sale of business, net of cash divested
—

 
41

 
—

Other, net
(3
)
 
—

 
—

Net cash used in investing activities from continuing operations
(248
)
 
(156
)
 
(421
)
Financing activities
 
 
 
 
 
Proceeds from long-term debt
—

 
1,407

 
931

Payment of long-term debt
(361
)
 
(1,385
)
 
(413
)
Proceeds from the issuance of shares
—

 
—

 
6

Contributions received from noncontrolling interests
—

 
1

 
—

Dividends paid to common stockholders
(344
)
 
(379
)
 
(453
)
Debt financing costs paid
(1
)
 
(34
)
 
(1
)
Net cash (used in) provided by financing activities from continuing operations
(706
)
 
(390
)
 
70

Net change in cash, cash equivalents and restricted cash from continuing operations
(486
)
 
(73
)
 
113



See accompanying notes to the consolidated financial statements.
79
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS – (continued)
($ in Millions)

 
Year Ended December 31,
 
2019
 
2018
 
2017
Cash flows (used in) provided by discontinued operations:
 
 
 
 
 
Net cash (used in) provided by operating activities
$
(48
)
 
$
46

 
$
65

Net cash provided by (used in) investing activities
239

 
616

 
(136
)
Net cash provided by (used in) financing activities
24

 
(31
)
 
(32
)
Net cash provided by (used in) discontinued operations
215

 
631

 
(103
)
Effect of exchange rate changes on cash and cash equivalents
—

 
(1
)
 
1

Net change in cash, cash equivalents and restricted cash
(271
)
 
557

 
11

Cash, cash equivalents and restricted cash, beginning of period
629

 
72

 
61

Cash, cash equivalents and restricted cash, end of period
$
358

 
$
629

 
$
72

Supplemental disclosures of cash flow information from continuing
operations:
 
 
 
 
 
Non-cash investing and financing activities:
 
 
 
 
 
Accrued purchases of property and equipment
$
32

 
$
23

 
$
22

Issuance of shares to Manager
31

 
48

 
72

Issuance of shares to independent directors
1

 
1

 
1

Issuance of shares for acquisition of business
—

 
—

 
125

Leased assets obtained in exchange for new operating lease liabilities
21

 
—

 
—

Taxes paid, net(2)
65

 
21

 
11

Interest paid, net
131

 
98

 
85


_____________
(1)
Other non-cash expense, net, includes the write-down of the Company’s investment in the mechanical contractor business at MIC Hawaii in 2018.
(2)
Taxes paid, net, includes taxes paid for discontinued operations of $54 million and $8 million in 2019 and 2018, respectively.
The following table provides a reconciliation of cash, cash equivalents and restricted cash from both continuing and discontinued operations reported within the consolidated balance sheets that is presented in the consolidated statements of cash flows:
 
As of December 31,
 
2019
 
2018
 
2017
Cash and cash equivalents
$
357

 
$
589

 
$
46

Restricted cash - current
1

 
23

 
10

Cash, cash equivalents and restricted cash included in assets held for sale(3)
—

 
17

 
16

Total of cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows
$
358

 
$
629

 
$
72

_____________
(3)
Represents cash, cash equivalents and restricted cash related to businesses classified as held for sale. See Note 5, “Discontinued Operations and Dispositions”, for further discussions.

See accompanying notes to the consolidated financial statements.
80
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Organization and Description of Business
Macquarie Infrastructure Corporation (MIC) is a Delaware corporation formed on May 21, 2015. MIC’s predecessor, Macquarie Infrastructure Company LLC, was formed on April 13, 2004. Macquarie Infrastructure Corporation, both on an individual entity basis and together with its consolidated subsidiaries, is referred to in these financial statements as the “Company” or “MIC”.
MIC is externally managed by Macquarie Infrastructure Management (USA) Inc. (the Manager) pursuant to the terms of a Management Services Agreement, subject to the oversight and supervision of the Board. The majority of the members of the Board, and the members of all Board committees, are independent and have no affiliation with Macquarie. The Manager is a member of the Macquarie Group of companies comprising Macquarie Group Limited and its subsidiaries and affiliates worldwide. Macquarie Group Limited is headquartered in Australia and is listed on the Australian Securities Exchange.
The Company owns its businesses through its direct wholly-owned subsidiary MIC Ohana Corporation, the successor to Macquarie Infrastructure Company Inc. The Company owns and operates a portfolio of infrastructure and infrastructure-like businesses that provide services to corporations, government agencies and individual customers primarily in the United States (U.S.). The Company's operations are organized into four segments:
•
International-Matex Tank Terminals (IMTT):  a business providing bulk liquid storage and handling services to third-parties at 17 terminals in the U.S. and two in Canada;
•
Atlantic Aviation:  a provider of fuel, terminal, aircraft hangaring and other services primarily to owners and operators of general aviation (GA) jet aircraft at 70 airports throughout the U.S.;
•
MIC Hawaii:  comprising an energy company that processes and distributes gas and provides related services (Hawaii Gas) and several smaller businesses collectively engaged in efforts to reduce the cost and improve the reliability and sustainability of energy in Hawaii; and
•
Corporate and Other:  comprising MIC Corporate (holding company headquarters in New York City) and a shared services center in Plano, Texas.
Effective October 1, 2018, the Bayonne Energy Center (BEC) and substantially all of the Company’s portfolio of solar and wind power generation businesses were classified as discontinued operations and the Company’s Contracted Power segment was eliminated. All prior comparable periods have been restated to reflect this change. In July 2019, the Company completed the sales of its wind power generating portfolio and all but one of the assets in its solar power generating portfolio. The sale of the remaining solar facility closed during September 2019. On January 1, 2019, the Company also classified its majority interest in a renewable power development business as a discontinued operation, the sale of which closed in July 2019. The Company did not restate the prior period as the disposition was deemed insignificant. A remaining relationship with a third-party developer of renewable power facilities has been reported as a component of Corporate and Other through the expiration of the relationship in July 2019.  For additional information, see Note 5, “Discontinued Operations and Dispositions”.
In October 2019, in addition to the active management of the existing portfolio of businesses, the Board resolved to simultaneously pursue strategic alternatives including potentially a sale of the Company or its operating businesses as a means of unlocking additional value for stockholders. The Company has not set a timetable for completing any transaction and there can be no assurance that any transaction(s) will occur on favorable terms or at all.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company consolidates investments where it has a controlling financial interest. The general condition for a controlling financial interest is ownership of a majority of the voting interest and, therefore, as a general rule, ownership, directly or indirectly, of over 50% of the outstanding voting shares is a condition for consolidation. In addition, if the Company demonstrates that it has the ability to direct policies and management, this may be also an indication for consolidation. For investments in variable interest entities, the Company consolidates when it is determined to be the primary beneficiary of the variable interest entity. The Company is the primary beneficiary in the solar facilities at MIC Hawaii segment and consolidated these projects accordingly.

81
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies  – (continued)

Investments
Investment in unconsolidated business of $9 million and $8 million at December 31, 2019 and 2018, respectively, represent primarily a 20% ownership interest in a joint venture acquired in conjunction with the IMTT acquisition in July 2014. This investment is accounted for at cost on the consolidated balance sheet. Dividend income from this investment is recorded in Other (Expense) Income, net, on the consolidated statements of operations.
Use of Estimates
The preparation of the consolidated financial statements, which are in conformity with generally accepted accounting principles (GAAP), requires the Company to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company evaluates these estimates and judgments on an ongoing basis and the estimates are based on experience, current and expected future conditions, third-party evaluations and various other assumptions that the Company believes are reasonable under the circumstances. Significant items subject to such estimates and assumptions include the carrying amount of property, equipment, land and leasehold improvements, intangibles and goodwill; assets and obligations related to employee benefits; and valuation of derivative instruments. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Actual results may differ from the estimates and assumptions used in the financial statements and related notes.
Business Combinations
Acquisitions of businesses that the Company controls are accounted for under the purchase method of accounting. The amounts assigned to the identifiable assets acquired and liabilities assumed in connection with acquisitions are based on estimated fair values as of the date of the acquisition, with the remainder, if any, recorded as goodwill. The fair values are determined by the Company’s management, taking into consideration information supplied by the management of acquired entities and other relevant information. Such information includes valuations supplied by independent appraisal experts for significant business combinations. The valuations are generally based upon future cash flow projections for the acquired assets, discounted to a present value. The determination of fair value requires significant judgment both by management and outside experts engaged to assist in this process.
Cash and Cash Equivalents
The Company considers all highly liquid investments, including commercial paper issued by counterparties with Standard & Poor's rating of A1+ or higher, with maturity of three months or less when purchased to be cash and cash equivalents. At December 31, 2019, the Company had $40 million of commercial paper issued by counterparties with a Standard & Poor's rating of A1+. The Company did not have any commercial paper at December 31, 2018.
Restricted Cash
Restricted cash consists primarily of deposits held by banks to secure certain letters of credit supporting the purchase of equipment for solar projects and other deposits designated for the construction and operation of solar projects as well as the payment of amounts related to project specific debt financings. Restricted cash is classified into current and non-current portions based on the terms of the deposits and the expiration date of the underlying restrictions, such as the maturity date of the corresponding letter of credit. In addition, restricted cash for project construction, operation and financing is classified as current or noncurrent based on the intended use of the restricted funds.
Allowance for Doubtful Accounts
The Company uses estimates to determine the amount of allowance for doubtful accounts necessary to reduce accounts receivable to its net realizable value. The Company estimates the required allowance by reviewing the status of past-due receivables and analyzing historical bad debt trends. Actual collection experience has not varied significantly from estimates primarily due to credit policies and a lack of concentration of accounts receivable. The Company writes-off receivables deemed to be uncollectible to the allowance for doubtful accounts.
Inventory
Inventory consists principally of fuel purchased from various third-party vendors at Atlantic Aviation and Hawaii Gas and materials and supplies at all of the operating businesses. Fuel inventory is stated at the lower of cost or market. Materials and supplies inventory are valued at the lower of average cost or market. Inventory sold is recorded using the first-in-first-out method

82
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies  – (continued)

at Atlantic Aviation and an average cost method at Hawaii Gas. Cash flows related to the sale of inventory are classified in net cash provided by operating activities in the consolidated statements of cash flows.
The Company’s inventory balance at December 31, 2019 comprised $15 million of inventory for sale and $16 million of materials and supplies. The Company’s inventory balance at December 31, 2018 comprised $13 million of inventory for sale and $16 million of materials and supplies.
Property, Equipment, Land and Leasehold Improvements
Property, equipment, land and leasehold improvements are initially recorded at cost. Major renewals and improvements are capitalized while repair and maintenance expenditures are expensed when incurred. Interest expense relating to construction in progress is capitalized as an additional cost of the asset. The Company depreciates property, equipment and leasehold improvements over their estimated useful lives on a straight-line basis. Excluding the regulated business at MIC Hawaii, the estimated economic useful lives range is summarized in the table below:
Buildings
 
20 to 30 years
Leasehold and land improvements
 
8 to 30 years
Machinery and equipment
 
3 to 30 years
Furniture and fixtures
 
5 to 15 years

The estimated economic useful lives for the regulated business at MIC Hawaii ranges up to 68 years for buildings, leasehold and land improvements and machinery and equipment.
Goodwill and Intangible Assets
Goodwill consists of costs in excess of the aggregate purchase price over the fair value of tangible and identifiable intangible net assets acquired in business combinations. The cost of intangible assets with determinable useful lives is amortized over their estimated useful lives ranging as follows:
Customer relationships
 
5 to 30 years
Contractual arrangements
 
8 to 57 years
Non-compete agreements
 
3 to 10 years
Trade names
 
20 years
Technology
 
5 years

Contractual arrangements primarily relate to airport contract rights at Atlantic Aviation. The useful lives generally match the lease terms plus extensions under the business’ control.
Impairment of Long-lived Assets, Excluding Goodwill
Long-lived assets, including amortizable intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be fully recoverable. These events or changes in circumstances may include a significant deterioration of operating results, changes in business plans, or changes in anticipated future cash flows. If an impairment indicator is present, the Company evaluates recoverability by comparing the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the assets are impaired, the impairment recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets. Fair value is generally determined by estimates of discounted cash flows or value expected to be realized in a third-party sale. The discount rate used in any estimate of discounted cash flows would be the rate required for a similar investment of like risk.
Impairment of Goodwill
Goodwill is tested for impairment at least annually on October 1st or when there is a triggering event that indicates the possibility of an impairment. For the annual impairment test, the Company can make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before performing a quantitative goodwill impairment test, as discussed below. If an entity concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not perform the quantitative impairment test.
If an entity concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if there is a triggering event that indicates impairment, the Company needs to perform a quantitative impairment test. This requires

83
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies  – (continued)

management to make judgments in determining what assumptions to use in the calculation. The first step is to determine the estimated fair value of each reporting unit with goodwill. The reporting units of the Company, for purposes of the impairment test, are those components of operating segments for which discrete financial information is available and segment management regularly reviews the operating results of that component. When determining reporting units, components with similar economic characteristics are combined.
The Company estimates the fair value of each reporting unit by estimating the present value of the reporting unit’s future discounted cash flows or value expected to be realized in a third-party sale. If the recorded net assets of the reporting unit are less than the reporting unit’s estimated fair value, then no impairment is indicated. If the recorded amount of goodwill exceeds the estimated fair value, an impairment charge is recorded for the excess.
During the first quarter of 2018, the Company adopted ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU No. 2017-04 simplifies the measurement of goodwill and no longer requires an entity to perform a hypothetical purchase price allocation when computing the estimated fair value to measure goodwill impairment. Instead, impairment will be assessed by quantifying the difference between the fair value of a reporting unit and its carrying amount. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, on condition that the charge doesn’t exceed the total amount of goodwill allocated to that reporting unit. See Note 8, “Intangible Assets and Goodwill”, for further discussions on goodwill impairment testing performed in 2019.
Impairment of Indefinite-lived Intangibles, Excluding Goodwill
Indefinite-lived intangibles, which consist of trademarks, are considered impaired when the carrying amount of the asset exceeds its estimated fair value. The Company estimates the fair value of each trademark using the relief from royalty method that discounts the estimated net cash flows the Company would have to pay to license the trademark under an arm’s length licensing agreement. If the recorded indefinite-lived intangible is less than its estimated fair value, then no impairment is indicated. Alternatively, if the recorded intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
Deferred Financing Costs
The Company capitalizes all direct costs incurred in connection with the issuance of debt as deferred financing costs. These costs are amortized over the contractual term of the debt instrument, which ranges from 4 to 12 years. At December 31, 2019, the weighted average remaining life of deferred financing costs was 5.3 years.
Derivative Instruments
From time to time the Company enters into interest rate derivative agreements to minimize potential variations in cash flows resulting from fluctuations in interest rates and their impact on its variable-rate debt. Hawaii Gas, a business within the MIC Hawaii reportable segment, enters into commodity price hedges to mitigate the impact of fluctuations in liquefied petroleum gas (LPG) prices on its cash flows.
The Company accounts for derivatives and hedging activities in accordance with Accounting Standard Codification (ASC) 815, Derivatives and Hedging, which requires that all derivative instruments be recorded on the balance sheet at their respective fair values. All movements in the fair value of derivative contracts are recorded directly through earnings. See Note 10, “Derivative Instruments and Hedging Activities”, for further discussions.
Financial Instruments
The Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and variable-rate senior debt, are carried at cost, which approximates their fair value because of either the short-term maturity, or competitive interest rates assigned to these financial instruments. The fair values of the Company’s other debt instruments fall within level 1 or level 2 of the fair value hierarchy.
Concentrations of Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with financial institutions and its balances may exceed federally insured limits. The Company’s accounts receivable balances are mainly derived from fuel and gas sales and services rendered under contract terms with commercial and private customers located primarily in the United States. At December 31, 2019 and 2018, there were no outstanding accounts receivable due from a single customer that accounted for more

84
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies  – (continued)

than 10% of the total accounts receivable. Additionally, no single customer accounted for more than 10% of the Company’s revenue in 2019, 2018 and 2017.
Foreign Currency Translation
The assets and liabilities of IMTT’s Newfoundland and Quebec locations are translated from their local currency (Canadian dollars) to U.S. dollars at exchange rates in effect at the end of the year and consolidated statement of operations accounts are translated at average exchange rates for the year. Translation gains or losses as a result of changes in the exchange rate are recorded as a component of other comprehensive income (loss).
Accrued Expenses
Accrued expenses of $86 million at December 31, 2019 and 2018 primarily consisted of payroll and related liabilities, purchase of property and equipment, interest, non-income related taxes, insurance and other individually insignificant balances.
Income per Share
The Company calculates income per share using the weighted average number of common shares outstanding during the period. Diluted income per share is computed using the weighted average number of dilutive common equivalent shares outstanding during the period. Common equivalent shares may consist of (i) shares issuable upon conversion of the Company’s convertible senior notes (using the if-converted method); (ii) stock units granted to the Company’s independent directors under the Independent Director Equity Plan; (iii) stock units granted to certain employees of the Company's operating businesses under the 2016 Omnibus Employee Incentive Plan; and (iv) fees payable to the Manager that will be reinvested in shares by the Manager in a future period, if any. Common equivalent shares are excluded from the calculation if their effect is anti-dilutive.
Comprehensive Income (Loss)
The Company follows the requirements of ASC 220, Comprehensive Income, for the reporting and presentation of comprehensive income (loss) and its components, net of taxes. For the Company, the guidance requires unrealized gains or losses on foreign currency translation adjustments and minimum pension liability adjustments to be included in other comprehensive income (loss), net of taxes.
Regulatory Assets and Liabilities
The utility operations of the Hawaii Gas business are subject to regulation with respect to rates, service, maintenance of accounting records, and various other matters by the Hawaii Public Utilities Commission (HPUC). The established accounting policies recognize the financial effects of the rate-making and accounting practices and policies of the HPUC. Regulated utility operations are subject to the provisions of ASC 980, Regulated Operations. This guidance requires regulated entities to disclose in their financial statements the authorized recovery of costs associated with regulatory decisions. Accordingly, certain costs that otherwise would normally be charged to expense may, in certain instances, be recorded as an asset in a regulatory entity’s balance sheet. The Hawaii Gas business records regulatory assets as costs that have been deferred for which future recovery through customer rates has been approved by the HPUC. Regulatory liabilities represent amounts included in rates and collected from customers for costs expected to be incurred in the future.
ASC 980 may, at some future date, be deemed inapplicable because of changes in the regulatory and competitive environments or other factors. If the Company were to discontinue the application of this guidance, the Company would be required to write-off its regulatory assets and regulatory liabilities and would be required to adjust the carrying amount of any other assets, including property, plant and equipment, that would be deemed not recoverable related to these affected operations. The Company believes its regulated operations in the Hawaii Gas business continue to meet the criteria of ASC 980 and that the carrying value of its regulated property, plant and equipment is recoverable in accordance with established HPUC rate-making practices.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company and its more than 80% owned subsidiaries file a consolidated U.S. federal income tax return, including its allocated share of the taxable income from its solar and wind facilities through the date of sale. The investments in solar and wind facilities where the Company does not own 100% of the investment within discontinued operations and the MIC Hawaii segment are held in various LLCs, which are treated as partnerships for income tax purposes.

85
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies  – (continued)

In assessing the need for a valuation allowance, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
Reclassifications
Certain reclassifications were made to the financial statements for the prior periods to conform to current year presentation.
Recently Issued Accounting Standards
In August 2018, the FASB issued ASU No. 2018-14, Compensation — Retirement Benefits — Defined Benefit Plans — General (Subtopic 715-20): Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in ASU 2018-14 update disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendments in this update are effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The Company will include appropriate disclosures related to defined benefit plans in accordance with the standard when it adopts the provisions of this ASU.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in ASU 2018-13 update the disclosure requirements on fair value measurements, including the consideration of costs and benefits. The disclosure modifications focused on Level 3 fair value measurements, and also eliminate the minimum disclosure requirements. The amendments in this update are effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company will adopt this ASU in 2020 and will make the required disclosures to the notes to the consolidated financial statements, as needed.
3. Implementation of ASU No. 2016-2
On February 25, 2016, FASB issued ASU No. 2016-2, Leases (Topic 842), which requires a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike existing GAAP, which requires only capital leases to be recognized on the balance sheet, ASU 2016-2 requires all leases with an initial term greater than one year to be recognized on the balance sheet as a right-of-use (ROU) asset and a lease liability. The Company also serves as a lessor primarily through operating leases. The accounting for lessors has not fundamentally changed except for changes to conform and align existing guidance to the lessee guidance under ASU 2016-2, as well as to the revenue recognition guidance in ASC 606, Revenue from Contracts with Customers.
The substantial population of the Company’s newly recognized ROU assets and lease liabilities relate to Atlantic Aviation’s operating leases of land, buildings and certain equipment. ROU assets represent the Company’s right to use an underlying asset for the lease term and the lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The considerations given for the incremental borrowing rate used in determining the present value of lease payments were the Company’s recent debt refinancing and amendment during 2018 and the Company’s credit rating.
The Company adopted the standard effective January 1, 2019 utilizing the modified retrospective method, which allowed the Company, where it was the lessee or lessor to recognize and measure leases at the beginning of the period of adoption without modifying the comparative period financial statements. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carryforward the historical lease classification. The Company also made an accounting policy election to keep leases with an initial term of 12 months or less off the balance sheet. Further, the standard did not have a material impact on the accounting and reporting requirements for existing operating leases where the Company is the lessor as it has elected the practical expedient whereby the Company will not separate a qualifying contract into its lease and non-lease components. The Company also determined that the accounting for sales taxes, certain lessor costs and certain requirements related to variable payments in contracts did not have a material effect on the consolidated balance sheet, statement of operations or statement of cash flows.
Upon adoption of ASU No. 2016-2, the Company recorded ROU assets and corresponding lease liabilities of $351 million and $358 million, respectively, of which $19 million and $21 million related to asset and liabilities held for sale, respectively. The

86
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Implementation of ASU No. 2016-2 – (continued)

adoption of this ASU did not have a material impact on the Company's consolidated statements of operations, liquidity or debt covenant compliance under its current agreements.
4. Leases
The Company has operating leases primarily for land, equipment and machinery, buildings, office space and certain office equipment under non-cancellable lease agreements. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. Some leases include one or more options to renew, with renewal terms that can extend the lease term from one to 10 years or more. The exercise of these lease renewal options is at the Company’s sole discretion. Cash paid for operating leases is reported in operating activities on the consolidated statement of cash flows. At December 31, 2019, the Company did not have any finance leases.
In 2019, the Company’s operating lease expenses recorded within the consolidated statement of operations were as follows ($ in millions):
Income Statement Classification
 
Year Ended December 31, 2019
Cost of services
 
$
2

Cost of product sales
 
1

Selling, general and administrative
 
51
Total operating lease expense(1)
 
$
54

_____________
(1)
Includes leases less than one year and variable totaling $6 million and $2 million, respectively.
At December 31, 2019, the weighted-average remaining operating lease term was 18.7 years and the weighted average discount rate was 8.5%. The following table represents the future maturities of lease liabilities at December 31, 2019 ($ in millions):
2020
 
$
46

2021
 
44
2022
 
43
2023
 
42
2024
 
42
Thereafter
 
513
Total lease payment
 
730

Less: interest
 
(390
)
Present value of lease liability
 
$
340


Future minimum lease commitments at December 31, 2018 ($ in millions):
2019
 
$
48

2020
 
44

2021
 
41

2022
 
40

2023
 
39

Thereafter
 
461

Total
 
$
673



87

MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. Discontinued Operations and Dispositions
The Company accounts for disposals that represent a strategic shift that should have or will have a major effect on operations as discontinued operations in the consolidated statement of operations for current and prior periods commencing in the period in which the business or group of businesses meets the criteria of a discontinued operation. These results include any gain or loss recognized on disposal or adjustment of the carrying amount to fair value less cost to sell.
Bayonne Energy Center (BEC) Sale
On October 12, 2018, the Company concluded the sale of BEC and received cash of $657 million, net of the assumption of the outstanding debt balance of $244 million by the buyer and subject to post-closing working capital adjustments, resulting in a loss of approximately $17 million (excluding any transaction costs). During 2018, the Company incurred $9 million in professional fees in relation to this transaction, which was included in Selling, General and Administrative Expenses in the consolidated statement of operations.
Renewable Businesses Sale
During the fourth quarter of 2018, the Company commenced a sale process involving its portfolios of 142 megawatts (MW) (gross) of solar generation assets and 203 MW (gross) of wind generation assets. In July 2019, the Company completed the sales of its wind power generating portfolio and all but one of the assets in its solar power generating portfolio. The sale of the remaining solar facility closed during September 2019. Upon closing of the transactions involving the portfolios of operating solar and wind assets, MIC deconsolidated $295 million of long-term debt. In July 2019, the Company also completed the sale of its majority interest in a renewable power development business. The Company may be entitled to a deferred purchase price from the sale of its interest in the renewable power development business based on the sale of certain projects by the purchaser in the future.
The aggregate gross proceeds to the Company from the above sales are approximately $275 million, or approximately $223 million net of taxes and transaction related expenses. Upon closing of the transactions, the Company recorded a pre-tax gain of approximately $80 million excluding any transaction costs. The Company incurred approximately $10 million in professional fees in relation to these transactions, which is included in Selling, General and Administrative Expenses in the consolidated statement of operations. In 2019, the Company recorded approximately $42 million in current tax expense primarily related to the gain on sale.
The combination of the disposal of BEC and the commencement of the sale process of substantially all of its portfolio of solar and wind facilities represented a strategic shift for the Company that will have a major effect on operations. Accordingly, beginning in the fourth quarter of 2018, these businesses were classified as discontinued operations and the Contracted Power segment was eliminated. There was no write-down of the carrying amount of the solar and wind facility assets as a result of this change in classification. The assets and liabilities of the solar and wind facilities have been classified as held for sale in the consolidated balance sheets up until the date those assets were disposed. All prior periods have been restated to reflect these changes.
During the first quarter of 2019, the Company also commenced the sale of its majority interest in its renewable power development business that was reported as part of the Company’s Corporate and Other segment in the fourth quarter of 2018. Accordingly, beginning in the first quarter of 2019, the results of this business were classified as discontinued operations and the assets and liabilities of this business have been classified as held for sale in the consolidated balance sheets through the date of sale. The Company did not restate the prior period related to the commencement of the sale process involving its majority interest in a renewable power development business as the disposition was insignificant. A remaining relationship with a third-party developer of renewable power facilities has been reported as a component of Corporate and Other through the expiration of the relationship in July 2019.

88
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Discontinued Operations and Dispositions  – (continued)


The following is a summary of the assets and liabilities held for sale included in the Company’s consolidated balance sheet related to its former Contracted Power segment as of December 31, 2018 ($ in millions):
 
 
December 31, 2018
Assets
 
 
Cash and cash equivalents
 
$
3

Restricted cash
 
14

Accounts receivable, net
 
9

Other current assets
 
5

Total current assets
 
31

Property, equipment, land and leasehold improvements, net
 
606

Intangible assets, net
 
9

Other noncurrent assets
 
2

Total assets
 
$
648

Liabilities
 
 
Accounts payable and accrued expenses
 
$
7

Current portion of long-term debt
 
20

Other current liabilities
 
1

Total current liabilities
 
28

Long term debt, net of current portion
 
283

Other noncurrent liabilities
 
6

Total liabilities
 
$
317

Noncontrolling interests
 
$
141

Summarized financial information for discontinued operations included in the Company’s consolidated statement of operations in 2019, 2018 and 2017 are as follows ($ in millions):
 
Year Ended December 31,
2019
 
2018
 
2017
Product revenue
$
44

 
$
150

 
$
146

Cost of product sales
(7
)
 
(24
)
 
(21
)
Selling, general & administrative expenses
(19
)
 
(25
)
 
(25
)
Depreciation and amortization
—

 
(38
)
 
(60
)
Interest expense, net
(13
)
 
(17
)
 
(23
)
Other income (expense), net(1)
80

 
(14
)
 
1

Net income from discontinued operations before income taxes
85

 
32

 
18

(Provision) benefit for income taxes
(33
)
 
(2
)
 
4

Net income from discontinued operations
52

 
30

 
22

Less: net (loss) income attributable to noncontrolling interests
(3
)
 
(39
)
 
5

Net income from discontinued operations attributable to MIC
$
55

 
$
69

 
$
17

_____________
(1)
Other income (expense), net, includes gain of approximately $80 million from the sale of renewable businesses in 2019 and loss of $17 million from the sale of BEC in 2018.

89
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Discontinued Operations and Dispositions  – (continued)


Other Dispositions
The Company reviews strategic options available, including with respect to certain other, smaller businesses in its portfolio in an effort to rationalize its portfolio and enhance the infrastructure characteristics of its businesses. Consistent with this, the Company sold (i) an environmental services business by IMTT in April 2018; (ii) its equity interests in projects involving two properties in May 2018; and (iii) the mechanical contractor business within MIC Hawaii in November 2018. Collectively, the sale of these businesses is insignificant and do not qualify for discontinued operations.
Prior to the execution of the sale agreement for the mechanical contractor business, the Company wrote-down the value of its investment in this business to reflect its underperformance during the third quarter of 2018. In total, the Company wrote-down approximately $30 million, including fixed assets and intangible assets of approximately $9 million, as well as reserving for certain contract related amounts recorded in other current liabilities and other expenses.
6. Income per Share
Following is a reconciliation of the basic and diluted income per share computations ($ in millions, except share and per share data):
 
Year Ended December 31,
2019
 
2018
 
2017
Numerator:
  

 
  

 
  

Net income from continuing operations attributable to MIC
$
101

 
$
68

 
$
434

Interest expense attributable to 2.875% Convertible Senior Notes due July 2019, net of taxes
—

 
—

 
8

Interest expense attributable to 2.00% Convertible Senior Notes due October 2023, net of taxes
—

 
—

 
8

Diluted net income from continuing operations attributable to MIC
$
101

 
$
68

 
$
450

Basic and diluted net income from discontinued operations
attributable to MIC
$
55

 
$
69

 
$
17

Denominator:
 
 
 
 
 
Weighted average number of shares outstanding: basic
86,178,212

 
85,233,989

 
83,204,404

Dilutive effect of restricted stock unit grants(1)
26,089

 
15,876

 
9,495

Dilutive effect of 2.875% Convertible Senior Notes due July 2019
—

 
—

 
4,252,609

Dilutive effect of 2.00% Convertible Senior Notes due October 2023
—

 
—

 
3,606,854

Weighted average number of shares outstanding: diluted
86,204,301

 
85,249,865

 
91,073,362

_____________
(1) Dilutive effect of restricted stock unit grants includes grants to independent directors under the 2014 Independent Director Equity Plan and certain employees of the Company's operating businesses under the 2016 Omnibus Employee Incentive Plan.
 
Year Ended December 31,
2019
 
2018
 
2017
Income per share:
  

 
  

 
  

Basic income per share from continuing operations attributable to MIC
$
1.17

 
$
0.80

 
$
5.22

Basic income per share from discontinued operations attributable to MIC
0.65

 
0.80

 
0.20

Basic income per share attributable to MIC
$
1.82

 
$
1.60

 
$
5.42

Diluted income per share from continuing operations attributable to MIC
$
1.17

 
$
0.80

 
$
4.94

Diluted income per share from discontinued operations attributable to MIC
0.65

 
0.80

 
0.19

Diluted income per share attributable to MIC
$
1.82

 
$
1.60

 
$
5.13



90
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Income per Share  – (continued)

The following represents the weighted average potential dilutive shares of common stock that were excluded from the diluted income per share calculation:
 
Year Ended December 31,
2019
 
2018
 
2017
2.875% Convertible Senior Notes due July 2019(1)
1,321,243

 
4,368,725

 
—

2.00% Convertible Senior Notes due October 2023
3,634,173

 
3,631,850

 
—

Total
4,955,416

 
8,000,575

 
—


_____________
(1) On July 15, 2019, the Company fully repaid the outstanding balance on the 2.875% Convertible Senior Notes due July 2019 at maturity using cash on hand. In 2019, the weighted average shares reflect the “if-converted” impact to dilutive common stock through the maturity date of the Note.
7. Property, Equipment, Land and Leasehold Improvements
Property, equipment, land and leasehold improvements at December 31, 2019 and 2018 consist of the following ($ in millions):
 
As of December 31,
2019
 
2018
Land
$
319

 
$
319

Buildings
40

 
40

Leasehold and land improvements
813

 
770

Machinery and equipment
2,951

 
2,783

Furniture and fixtures
52

 
45

Construction in progress
143

 
113

 
4,318

 
4,070

Less: accumulated depreciation
(1,116
)
 
(929
)
Property, equipment, land and leasehold improvements, net
$
3,202

 
$
3,141


8. Intangible Assets and Goodwill
Intangible assets at December 31, 2019 and 2018 consist of the following ($ in millions):
 
As of December 31,
2019
 
2018
Contractual arrangements
$
921

 
$
921

Non-compete agreements
14

 
14

Customer relationships
352

 
353

Trade names
16

 
16

Technology
9

 
9

 
1,312

 
1,313

Less: accumulated amortization
(583
)
 
(524
)
Intangible assets, net
$
729

 
$
789


At December 31, 2019, the Company had $12 million in trade names net of accumulated amortization, of which $7 million relates to Atlantic Aviation and are considered to be indefinite-lived. The remaining balance of $5 million relates to “The Gas Company” trade name and is being amortized over its estimated useful life.

91
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Intangible Assets and Goodwill  – (continued)

Amortization expense of intangible assets in 2019, 2018 and 2017 totaled $59 million, $68 million and $64 million, respectively. The estimated future amortization expense for amortizable intangible assets to be recognized are ($ in millions):
2020
$
50

2021
45

2022
43

2023
42

2024
37

Thereafter
505

Total
$
722


The goodwill balance by reportable segments as of December 31, 2019 are comprised of the following ($ in millions):
 
IMTT
 
Atlantic Aviation
 
MIC Hawaii
 
Total
Goodwill acquired in business combinations, net of disposals, at December 31, 2018
$
1,430

 
$
619

 
$
123

 
$
2,172

Accumulated impairment charges
—

 
(123
)
 
(3
)
 
(126
)
Other
(3
)
 
—

 
—

 
(3
)
Balance at December 31, 2018
1,427

 
496

 
120

 
2,043

Other
1

 
(1
)
 
—

 
—

Balance at December 31, 2019
$
1,428

 
$
495

 
$
120

 
$
2,043


The Company tests for goodwill impairment at the reporting unit level on an annual basis on October 1st of each year and between annual tests if a triggering event indicates the possibility of an impairment. The Company monitors changing business conditions as well as industry and economic factors, among others, for events which could trigger the need for an interim impairment analysis. The Company has experienced a sustained decline in its market capitalization over the 18-months ended September 30, 2019. The decline reflects, in part, the sales of smaller and non-core businesses during that period. However, the Company concluded that the decline in its market capitalization also reflected a reduced contribution from its IMTT segment as a result of lower bulk liquid storage utilization levels and storage rates and determined that these constituted a triggering event.
The Company performed an interim impairment analysis based on financial results through September 30, 2019. For IMTT, the Company used both the market and income approaches and weighting them based on their applicability to the segment. The income approach used forecasted cash flows developed as part of the Company’s annual update of its 5-year business plan. For Atlantic Aviation and Hawaii Gas, the Company used only the market approach given that the fair value of these businesses substantially exceeded the book value noted in 2018. The analysis concluded that fair value of each of the Company’s reporting units exceeded their carrying value and no impairment was recorded.
At September 30, 2019, the fair value of the Company's reporting units exceeded their aggregate book value by $2.2 billion, or 33%. Approximately $1.9 billion of the excess was attributed to Atlantic Aviation, approximately $280 million to Hawaii Gas and approximately $20 million to IMTT.
Unfavorable fluctuations in the discount rate or declines in forecasted storage revenues and margins could result in an impairment to IMTT in the future. For example, a 0.25% increase to the discount rate would decrease the value of IMTT by approximately $70 million. Any increase in the discount rate, in conjunction with any decrease in the projected cash flows for IMTT, would negatively affect the current valuations. Due to the inherent uncertainties in the estimates and assumptions used in the fair value analysis, the Company's actual results may differ. These differences could alter the fair value of the Company's reporting units and may result in impairment charges in future periods. At December 31, 2019, there were no new triggering events that indicated impairment.
9. Long-Term Debt
The Company capitalizes its businesses in part using floating rate bank debt with medium-term maturities generally between four and seven years. In general, the Company hedges the floating rate exposure for the majority of the term of these facilities. The Company also uses longer dated private placement debt and other forms of capital including bond or hybrid debt instruments to capitalize its businesses. In general, the debt facilities at the businesses are non-recourse to the holding company and there are

92
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-Term Debt  – (continued)

no cross-collateralization or cross-guarantee provisions in these facilities. All of the term debt facilities of the Company’s operating businesses described below contain customary financial covenants, including maintaining or exceeding certain financial ratios, and limitations on capital expenditures and additional debt. The facilities include events of default, representations and warranties and other covenants that are customary for facilities of this type, including change of control, which will occur if the Macquarie Group, or any fund or entity managed by the Macquarie Group, fails to control a majority of the Borrower. For a description of related party transactions associated with the Company’s long-term debt, see Note 13, “Related Party Transactions”.
At December 31, 2019 and 2018, the Company’s consolidated long-term debt comprised the following ($ in millions):
  
As of December 31,
2019
 
2018
IMTT
$
1,109

 
$
1,109

Atlantic Aviation
1,015

 
1,025

MIC Hawaii
195

 
196

MIC Corporate
388

 
734

Total
2,707

 
3,064

Current portion
(12
)
 
(361
)
Long-term portion
2,695

 
2,703

Unamortized deferred financing costs(1)
(41
)
 
(50
)
Long-term portion less unamortized debt discount and deferred financing costs
$
2,654

 
$
2,653

_____________
(1)
The weighted average remaining life of the deferred financing costs at December 31, 2019 was 5.3 years.
At December 31, 2019, the total undrawn capacity on the revolving credit facilities was $1,610 million excluding letters of credits outstanding of $13 million.
The following table represents the future maturities of long-term debt balances at December 31, 2019 and includes the unamortized debt discount of $15 million related to the 2.00% Convertible Senior Notes due October 2023 ($ in millions).
2020
$
12

2021
11

2022
111

2023
494

2024
11

Thereafter
2,083

Total
$
2,722


MIC Corporate
Senior Secured Revolving Credit Facility
In July 2014, the Company entered into a five-year, $250 million senior secured revolving credit facility with a syndicate of banks and subsequently increased the aggregate commitments under its revolving credit facility to $410 million, with all terms remaining the same. On January 3, 2018, the Company completed the refinancing and upsizing of its senior secured revolving credit facility to $600 million and extended the maturity through January 3, 2022. At December 31, 2019 and 2018, the senior secured revolving credit facility was undrawn.
The revolving credit facility is guaranteed by MIC Ohana Corporation and is secured by a pledge of the Company’s directly held equity interests and all intercompany debt owed to the Company (the security may fall away when certain conditions are met). The revolving credit facility includes customary negative covenants and a financial covenant based on a ratio of cash flow available for debt service to net cash interest expense.

93
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-Term Debt  – (continued)

2.875% Convertible Senior Notes due July 2019
In July 2014, the Company completed an underwritten public offering of a five-year, $350 million aggregate principal amount of 2.875% Convertible Senior Notes due July 2019 to partially fund the IMTT acquisition and for general corporate purposes. The notes are convertible, at the holder’s option, into the Company’s shares, initially at a conversion rate of 11.7942 shares per $1,000 principal amount (equivalent to an initial conversion price of approximately $84.79 per share, subject to adjustment), at any time on or prior to the close of business on the second scheduled trading day immediately preceding the maturity date.
At December 31, 2018, the Company had $350 million aggregate principal outstanding, which was fully repaid by the Company using cash on hand at maturity.
2.00% Convertible Senior Notes due October 2023
In October 2016, the Company completed an underwritten public offering of a seven year, $403 million aggregate principal amount of 2.00% Convertible Senior Notes due October 2023. The net proceeds of $392 million were used to repay a portion of the drawn balance under the revolving credit facility under the prior AA Credit Agreement and to fully repay the outstanding balances on both the MIC senior secured and IMTT revolving credit facilities. The remaining proceeds were used for general corporate purposes. The notes are convertible, at the holder’s option, only upon satisfaction of one or more conditions set forth in the indenture governing the notes. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Company’s common stock or a combination thereof, at the Company’s election. The initial conversion rate was 8.9364 shares per $1,000 principal amount (equivalent to an initial conversion price of approximately $111.90 per share, subject to adjustment).
The $403 million of 2.00% Convertible Senior Notes due October 2023 had an initial value of the principal amount recorded as a liability of $376 million, using an effective interest rate of 3.1%. The remaining $27 million of principal amount was allocated to the conversion feature and recorded in Additional Paid in Capital as a component of stockholders’ equity. This amount represents a discount to the debt to be amortized through interest expense using the effective interest method through the maturity of the convertible senior notes. The Company also recorded $11 million in deferred financing costs from the issuance of the convertible senior notes, of which approximately $1 million was recorded as equity issuance costs as a component of stockholders’ equity.
At December 31, 2019 and 2018, the outstanding balance on the Notes were $388 million and $384 million, respectively, which had a fair value of the liability component of approximately $370 million and $335 million, respectively. The conversion rate was 9.0290 shares of common stock per $1,000 principal amount at December 31, 2019 and 2018.
The 2.00% Convertible Senior Notes due October 2023 consisted of the following ($ in millions):
 
As of December 31,
2019
 
2018
Liability Component:
  

 
  

Principal
$
403

 
$
403

Unamortized debt discount
(15
)
 
(19
)
Long-term debt, net of unamortized debt discount
388

 
384

Unamortized deferred financing costs
(6
)
 
(7
)
Net carrying amount
$
382

 
$
377

Equity Component
$
27

 
$
27


In 2019, 2018 and 2017, total interest expense recognized related to the 2.00% Convertible Senior Notes due October 2023 consisted of the following ($ in millions):
 
Year Ended December 31,
2019
 
2018
 
2017
Contractual interest expense
$
8

 
$
8

 
$
8

Amortization of debt discount
4

 
4

 
3

Amortization of deferred financing costs
1

 
1

 
2

Total interest expense
$
13

 
$
13

 
$
13


The key terms of the senior secured revolving credit facility and the 2.00% Convertible Senior Notes due October 2023 are summarized in the table below.

94
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-Term Debt  – (continued)

Facility Terms
 
Senior Secured Revolving
Credit Facility
 
2.00% Convertible Senior Notes
due October 2023
Total Committed Amount
 
$600 million
 
—
Amount Outstanding at December 31, 2019
 
Undrawn
 
$388 million, net of unamortized discount of $15 million
Maturity
 
January 2022
 
October 2023
Amortization
 
Revolving, payable at maturity
 
Payable at maturity or convertible at the holder’s option into cash, the Company’s shares or a combination thereof, only upon satisfaction of one or more conditions set forth in the indenture
Interest Rate
 
LIBOR plus 2.00% at December 31, 2019
 
2.00% payable on April 1st and October 1st of each year
Commitment Fees
 
0.350% at December 31, 2019
 
—
Security
 
Secured (may fall away if certain ratings and other conditions are met)
 
Unsecured

IMTT
On December 5, 2018, ITT Holdings LLC (ITT LLC), a wholly owned direct subsidiary of IMTT Holdings LLC and a wholly owned indirect subsidiary of the Company, entered into the Second Amendment to Credit Agreement (the Amendment), among ITT LLC, IMTT-Quebec Inc. and IMTT-NTL, Ltd. as Canadian borrowers, the guarantors party thereto, SunTrust Bank, as administrative agent, and the lenders party thereto, to the Credit Agreement, dated as of May 21, 2015, as amended (the IMTT Credit Agreement). The Amendment provides for (i) a $550 million revolving credit facility for ITT LLC, (ii) the Canadian dollar equivalent of a $50 million revolving credit facility for the Canadian borrowers and (iii) a $509 million bond purchase facility.
The Amendment extends the maturity date of the revolving credit facilities from May 21, 2020 to December 5, 2023 and extends the maturity date of the bond purchase facility from May 21, 2022 to December 5, 2025. The Amendment also increases certain baskets under the covenants in the IMTT Credit Agreement and modifies certain related definitions in a manner generally favorable to the borrowers. In connection with the Amendment, supplemental indentures were entered into with respect to the $509 million of outstanding Gulf Opportunity Zone Bonds, Louisiana Public Facilities Authority Revenue Bonds, Industrial Development Board of the Parish of Ascension Revenue Bonds and New Jersey Economic Development Authority Bonds (collectively, the Tax-Exempt Bonds). The Tax-Exempt Bonds were reissued and sold to certain lenders under the IMTT Credit Agreement pursuant to the bond purchase facility. The supplemental indentures provide for (i) an interest rate on the Tax-Exempt Bonds of 80% of one-month LIBOR plus applicable margin plus 0.45% and (ii) an extension of the date on which holders have the right to require repurchase of the Tax-Exempt Bonds from May 21, 2022 to December 5, 2025.
On June 1, 2015, IMTT, as part of the IMTT refinancing in May 2015, entered into interest rate swap contracts, maturing in June 2021, with a total notional amount of $361 million. These swaps partially hedged the floating LIBOR interest rate risk associated with the Tax-Exempt Bonds for six years at 1.677%.
On May 21, 2015, ITT LLC entered into a Note Purchase Agreement for the issuance of $325 million aggregate principal amount of 3.92% Guaranteed Senior Notes, Series A due 2025, and $275 million aggregate principal amount of 4.02% of Guaranteed Senior Notes, Series B due 2027 (together the senior notes). In March 2019, ITT LLC amended the Note Purchase Agreement to mirror the changes made to the covenants and related definitions to the Amendment described above. At December 31, 2019 and 2018, the fair value of the senior notes was approximately $635 million and $575 million, respectively.
Revolving Credit Facilities
At December 31, 2019 and 2018, IMTT's $600 million revolving credit facilities were undrawn. The key terms of IMTT’s U.S. dollar and Canadian dollar denominated revolving credit facilities are summarized in the table below.

95
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-Term Debt  – (continued)

Facility Terms
 
USD Revolving Credit Facility
 
CAD Revolving Credit Facility
Total Committed Amount
 
$550 million
 
$50 million
Amount Outstanding at December 31, 2019
 
Undrawn
 
Undrawn
Maturity
 
December 2023
 
December 2023
Amortization
 
Revolving, payable at maturity
 
Revolving, payable at maturity
Interest Rate
 
LIBOR plus 1.50% at December 31, 2019
 
Bankers' Acceptances Rate plus 1.50% at December 31, 2019
Commitment Fees
 
0.20% at December 31, 2019
 
0.20% at December 31, 2019
Security
 
Unsecured
 
Unsecured

Senior Notes
The key terms of the senior notes are summarized in the table below.
Facility Terms
 
Senior Notes, Series A
 
Senior Notes, Series B
Amount Outstanding at December 31, 2019
 
$325 million
 
$275 million
Maturity
 
May 2025
 
May 2027
Amortization
 
Payable at maturity
 
Payable at maturity
Interest Rate
 
3.92%
 
4.02%
Security
 
Unsecured
 
Unsecured

IMTT Tax-Exempt Bonds
The key terms of the IMTT Tax-Exempt Bonds are summarized in the table below.
Facility Terms
 
Tax-Exempt Bonds
Amount Outstanding at December 31, 2019
 
$509 million
Maturity
 
December 2027 to August 2046
Amortization
 
Payable at maturity, subject to mandatory tender in December 2025
Interest Rate
 
One-month LIBOR plus revolving credit facility margin plus 0.45% multiplied by 80%
Security
 
Unsecured

Atlantic Aviation
On December 6, 2018, Atlantic Aviation FBO Inc. (AA FBO), a wholly-owned indirect subsidiary of the Company, entered into a credit agreement (the New AA Credit Agreement), among AA FBO, Atlantic Aviation FBO Holdings LLC (Holdings), the direct parent of AA FBO, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent and several lenders party thereto. The New AA Credit Agreement provides for a seven-year, $1,025 million senior secured first lien term loan facility and a five-year, $350 million senior secured first lien revolving credit facility that was undrawn at December 31, 2019 and 2018. The New AA Credit Agreement is guaranteed on a senior secured first lien basis by Holdings and certain subsidiaries of AA FBO. As part of the refinancing, Atlantic Aviation wrote-off approximately $3 million in deferred financing costs associated with the October 2016 debt.
The additional proceeds from the Atlantic Aviation refinancing were used to repay the Company’s 2.875% Convertible Senior Notes due July 2019 and for general corporate purposes.
The key terms of the term loan and revolving credit facilities are summarized in the table below.

96
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-Term Debt  – (continued)

Facility Terms
 
Term Loan Facility
 
Revolving Credit Facility
Facilities
 
$1,025 million senior secured first lien term loan ($1,015 million outstanding at December 31, 2019)
 
$350 million senior secured first lien revolving credit facility (undrawn at December 31, 2019)
Maturity
 
December 2025

December 2023
Amortization
 
1.00% of the initial principal balance per annum
 
Revolving, payable at maturity
Interest Rate
 
LIBOR plus 3.75% at December 31, 2019
 
LIBOR plus 2.00% at December 31, 2019
Commitment Fees
 
—
 
0.30% at December 31, 2019
Security
 
Secured
 
Secured

MIC Hawaii
Hawaii Gas
On February 10, 2016, Hawaii Gas completed the refinancing of its existing $80 million term loan and $60 million revolving credit facility. The $80 million term loan bears interest at a variable rate of LIBOR plus an applicable margin between 1.00% and 1.75%. The variable rate component of the debt is fixed at 0.99% at December 31, 2019 using an interest rate swap contract through February 2020. The revolving credit facility bears interest at a variable rate of LIBOR plus an applicable margin between 1.00% and 1.75% and is unhedged. In February 2018, Hawaii Gas exercised the second of two one-year extensions related to its $80 million secured term loan facility and its $60 million revolving credit facility extending their respective maturities to February 2023. The $60 million revolving credit facility was undrawn at December 31, 2019 and 2018.
At December 31, 2019 and 2018, Hawaii Gas also had $100 million of fixed rate senior notes outstanding that had a fair value of approximately $105 million and $100 million, respectively.
The key terms of the term loan, senior secured notes and revolving credit facility of Hawaii Gas are summarized in the table below.
Facility Terms
 
Holding Company Debt
 
Operating Company Debt
Borrowers
 
HGC Holdings LLC (HGC)
 
The Gas Company, LLC (TGC)
Facilities
 
$80 million term loan (fully drawn at December 31, 2019)
 
$100 million senior secured notes (fully drawn at December 31, 2019)
 
$60 million revolving credit facility (undrawn at December 31, 2019)
Maturity
 
February 2023
 
August 2022
 
February 2023
Amortization
 
Payable at maturity
 
Payable at maturity
 
Revolving, payable at maturity
Interest Rate
 
LIBOR plus 1.50% at December 31, 2019
 
4.22% payable semi-annually
 
LIBOR plus 1.25% at December 31, 2019
Commitment Fees
 
___
 
___
 
0.225% on the undrawn portion
Collateral
 
First lien on all assets of HGC and its subsidiaries
 
First lien on all assets of TGC and its subsidiaries
 
First lien on all assets of TGC and its subsidiaries

Solar Facilities
In July 2016, the solar facilities in Hawaii entered into a ten year, $18 million amortizing term loan facility. The interest rate on this term loan facility floats at LIBOR plus 2.00%. The interest rate was fixed at 3.38% using an interest rate swap contract through June 30, 2026. At December 31, 2019, the outstanding balance on the term loan was $15 million.
10. Derivative Instruments and Hedging Activities
From time to time, the Company enters into interest rate agreements to minimize potential variations in cash flows resulting from fluctuations in interest rates and their impact on its variable-rate debt. The Company does not enter into derivative instruments for any purpose other than economic interest rate hedging. That is, the Company does not speculate using derivative instruments. In addition, Hawaii Gas, a business within the Company’s MIC Hawaii reportable segment, enters into commodity price hedges to mitigate the impact of fluctuations in LPG prices on its cash flows.

97
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Derivative Instruments and Hedging Activities  – (continued)

By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. Conversely, when the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, it does not possess credit risk. The Company minimizes the credit risk in derivative instruments by entering into transactions with creditworthy counterparties.
Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. The market risk associated with interest rates is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.
Interest Rate Contracts
The Company and certain of its businesses have in place variable-rate debt. Management believes that it is prudent to limit the variability of a portion of the business’ interest payments. To meet this objective, the Company enters into interest rate agreements, primarily using interest rate swaps and from time to time using interest rate caps, to manage fluctuations in cash flows resulting from interest rate risk on a portion of its debt with a variable-rate component. Interest rate swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the interest rate swaps, the Company receives variable interest rate payments and makes fixed interest rate payments, thereby creating the equivalent of fixed-rate debt for the portion of the debt that is swapped.
At December 31, 2019, the Company had $2,722 million of current and long-term debt, of which $946 million was economically hedged with interest rate contracts, $1,103 million was fixed rate debt and $673 million was unhedged. At December 31, 2018, the Company had $3,083 million of current and long-term debt, of which $947 million was economically hedged with interest rate contracts, $1,453 million was fixed rate debt and $683 million was unhedged. The Company does not use hedge accounting. All movements in the fair value of the interest rate derivatives are recorded directly through earnings.
IMTT
On June 1, 2015, IMTT, as part of the IMTT refinancing in May 2015, entered into interest rate swap contracts maturing in June 2021 with a total notional amount of $361 million. These swaps partially hedged the floating LIBOR interest rate risk associated with the Tax-Exempt Bonds for six years at 1.677%.
On December 5, 2018, IMTT entered into the Amendment on its Tax-Exempt Bonds. The Amendment provided for the change in interest rate to 80% of one-month LIBOR plus an applicable margin plus 0.45% and an extension of maturity from May 2022 to December 2025. The interest rate swap was not amended and therefore increased the unhedged component of the Tax-Exempt Bonds by approximately $58 million. See Note 9, “Long-Term Debt”, for further details on the Amendment.
Atlantic Aviation
In October 2016, Atlantic Aviation entered into $400 million notional interest rate caps with a strike price of 1.00% to hedge the one-month LIBOR floating rate interest exposure on the business’ term loan or revolving credit facility. The notional amount on the interest rate cap will remain at $400 million through its maturity in September 2021.
On December 6, 2018, Atlantic Aviation refinanced its term loan and revolving credit facility under the New AA Credit Agreement. The existing interest rate cap will remain in place and will be used to partially hedge the Atlantic Aviation term loan facility under the New AA Credit Agreement. See Note 9, “Long-Term Debt”, for further details on the New AA Credit Agreement.
MIC Hawaii
In February 2016, in conjunction with a refinancing, Hawaii Gas entered into a new interest rate swap contract for an $80 million notional that took effect on August 8, 2016, upon the maturity of the existing interest rate swap, and expires on February 8, 2020. At December 31, 2019, the interest rate swap fixes the interest rate on the $80 million term loan at 2.49%.
In July 2016, the solar facilities in MIC Hawaii entered into a ten year, $18 million amortizing term loan facility. The interest rate on this term loan facility floats at LIBOR plus 2.00%. Concurrently, it entered into an amortizing interest rate swap contract with an original notional value of $18 million. The contract is scheduled to amortize concurrently with the term loan and fixes the interest rate at 3.38% as of December 31, 2019.

98
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Derivative Instruments and Hedging Activities  – (continued)

Commodity Price Hedges
The risks associated with fluctuations in the prices that Hawaii Gas, a business within the MIC Hawaii reportable segment, pays for LPG is principally a result of market forces reflecting changes in supply and demand for LPG and other energy commodities. Hawaii Gas’ gross margin (revenue less cost of product sales excluding depreciation and amortization) is sensitive to changes in LPG costs and Hawaii Gas may not always be able to pass through product cost increases fully or on a timely basis, particularly when product costs rise rapidly. In order to reduce the volatility of the business’ LPG market price risk, Hawaii Gas has used and expects to continue to use over-the-counter commodity derivative instruments including price swaps. Hawaii Gas does not use commodity derivative instruments for speculative or trading purposes. Over-the-counter derivative commodity instruments used by Hawaii Gas to hedge forecasted purchases of LPG are generally settled at expiration of the contract. At December 31, 2019, Hawaii Gas had 38 million gallons of LPG hedged that expire in March 2021.
Financial Statement Location Disclosure for Derivative Instruments
The Company measures derivative instruments at fair value using the income approach which discounts the future net cash settlements expected under the derivative contracts to a present value. These valuations use primarily observable (level 2) inputs, including contractual terms, interest rates and yield curves observable at commonly quoted intervals.
The Company’s fair value measurements of its derivative instruments and the related location of the assets and liabilities within the consolidated balance sheets at December 31, 2019 and 2018 were ($ in millions):
Balance Sheet Classification
 
Assets (Liabilities) at Fair Value as of December 31,
 
2019
 
2018
Fair value of derivative instruments - other current assets
 
$
3

 
$
11

Fair value of derivative instruments - other noncurrent assets
 
2

 
15

Total derivative contracts - assets
 
$
5

 
$
26

Fair value of derivative instruments - other current liabilities
 
$
(7
)
 
$
(3
)
Fair value of derivative instruments - other noncurrent liabilities
 
—

 
—

Total derivative contracts - liabilities
 
$
(7
)
 
$
(3
)

The Company’s hedging activities in 2019, 2018 and 2017 and the related location within the consolidated statement of operations were ($ in millions):
Income Statement Classification
 
Amount of (Loss) Gain Recognized in
Consolidated Statements of Operations
Year ended December 31,
 
2019
 
2018
 
2017
Interest expense – interest rate caps
 
$
(7
)
 
$
4

 
$
—

Interest expense – interest rate swaps
 
(6
)
 
4

 
2

Cost of product sales – commodity swaps
 
(10
)
 
(5
)
 
7

Total
 
$
(23
)
 
$
3

 
$
9


All of the Company’s derivative instruments are collateralized by the assets of the respective businesses.

99

MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. Stockholders’ Equity
Classes of Stock
The Company is authorized to issue (i) 500,000,000 shares of common stock, par value $0.001 per share, (ii) 100 shares of special stock, par value $0.001 per share and (iii) 100,000,000 shares of preferred stock, par value $0.001 per share. At December 31, 2019, the Company had 86,600,302 shares of common stock issued and outstanding and 100 shares of special stock issued to its Manager and outstanding. There was no preferred stock issued or outstanding at December 31, 2019. Each outstanding share of common stock of the Company is entitled to one vote on any matter with respect to which holders of shares are entitled to vote.
The sole purpose for the special stock was to preserve the Manager’s right to appoint one director to serve as the chairman of the Board. The special stock is not listed on any stock exchange and is non-transferable. Holders of special stock are not entitled to any dividends or to share in any distribution of assets upon the liquidation or dissolution of the Company.
Dividends
The Company’s Board have made or declared the following dividends in 2019, 2018 and 2017:
Declared
 
Period
Covered
 
$
per Share
 
Record
Date
 
Payable
Date
February 14, 2020
 
Fourth quarter 2019
 
$
1.00

 
March 6, 2020
 
March 11, 2020
October 29, 2019
 
Third quarter 2019
 
1.00

 
November 11, 2019
 
November 14, 2019
July 30, 2019
 
Second quarter 2019
 
1.00

 
August 12, 2019
 
August 15, 2019
April 29, 2019
 
First quarter 2019
 
1.00

 
May 13, 2019
 
May 16, 2019
February 14, 2019
 
Fourth quarter 2018
 
1.00

 
March 4, 2019
 
March 7, 2019
October 30, 2018
 
Third quarter 2018
 
1.00

 
November 12, 2018
 
November 15, 2018
July 31, 2018
 
Second quarter 2018
 
1.00

 
August 13, 2018
 
August 16, 2018
May 1, 2018
 
First quarter 2018
 
1.00

 
May 14, 2018
 
May 17, 2018
February 19, 2018
 
Fourth quarter 2017
 
1.44

 
March 5, 2018
 
March 8, 2018
October 30, 2017
 
Third quarter 2017
 
1.42

 
November 13, 2017
 
November 16, 2017
August 1, 2017
 
Second quarter 2017
 
1.38

 
August 14, 2017
 
August 17, 2017
May 2, 2017
 
First quarter 2017
 
1.32

 
May 15, 2017
 
May 18, 2017
February 17, 2017
 
Fourth quarter 2016
 
1.31

 
March 3, 2017
 
March 8, 2017

The Board regularly reviews the Company’s dividend policy and payout ratio. In determining whether to adjust the amount of the quarterly dividend, the Board will take into account such matters as the state of the capital markets and general business and economic conditions, the impact of any acquisitions or dispositions related to its pursuit of strategic alternatives, the Company’s financial condition, results of operations, indebtedness levels, capital requirements, capital opportunities and any contractual, legal and regulatory restrictions on the payment of dividends by the Company to its stockholders or by its subsidiaries to the Company, and any other factors that it deems relevant, subject to maintaining a prudent level of reserves and without creating undue volatility in the amount of such dividends where possible. Moreover, the Company's senior secured credit facility and the debt commitments at its businesses contain restrictions that may limit the Company's ability to pay dividends. Although historically the Company has declared cash dividends on its shares, any or all of these or other factors could result in the modification of its dividend policy, or the reduction, modification or elimination of its dividend in the future.
The dividends paid have been recorded as a reduction to Additional Paid in Capital in the stockholders’ equity section of the consolidated balance sheets.
Independent Director Equity Plan (2014 Plan)
In 2014, MIC adopted, and MIC’s stockholders approved, the 2014 Plan to replace the 2004 Independent Directors Equity Plan, which expired in December 2014. The purpose of this plan is to promote the long-term growth and financial success of the Company by attracting, motivating and retaining independent directors of outstanding ability. Only the Company’s independent directors may participate in the 2014 Plan. The only type of award that may be granted under the 2014 Plan is an award of director shares. Each share is an unsecured promise to transfer one share on the settlement date, subject to satisfaction of the applicable terms and conditions. The maximum number of shares available for issuance under the 2014 Plan is 300,000 shares, of which 227,274 shares remained available for issuance at December 31, 2019. The aggregate grant date fair value of awards granted to an independent director during any single fiscal year (excluding awards made at the election of the independent director in lieu of all or a portion of annual and committee cash retainers) may not exceed $350,000. The 2014 Plan does not provide a formula for

100
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Stockholders’ Equity  – (continued)

the determination of awards and the Compensation Committee will have the authority to determine the size of all awards under the 2014 Plan, subject to the limits on the number of shares that may be granted annually.
Since 2017, the Company has granted and issued the following stock to the Board under the Plans:
Date of
Grant
 
Stock Units
Granted
 
Price of Stock Units
Granted
 
Date of
Vesting
May 17, 2017
 
9,435
 
$
79.51

 
May 15, 2018
June 7, 2018
 
19,230
 
39.00
 
May 14, 2019
September 5, 2018(1)
 
4,416
 
47.03
 
May 14, 2019
May 15, 2019
 
21,390
 
42.08
 
(2)
_____________
(1)
Represents additional restricted stock unit grants to new independent directors.
(2)
Date of vesting will be the day immediately preceding the 2020 annual meeting of the Company’s stockholders.
2016 Omnibus Employee Incentive Plan (2016 Plan)
On May 18, 2016, the Company adopted the 2016 Plan. The 2016 Plan provides for the issuance of equity awards to attract, retain, and motivate employees, consultants and others who perform services for the Company and its subsidiaries. Under the 2016 Plan, the Compensation Committee determines the persons who will receive awards, the time at which they are granted and the terms of the awards. Type of awards include stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, cash-based awards and other stock-based awards. Shares of common stock underlying forfeited awards are available for future grants. On March 28, 2019, the Company’s Board adopted Amendment No. 1 to the 2016 Plan (the Amendment), which was approved in May 2019 by the Company’s stockholders at the 2019 Annual Meeting of Shareholders. The Amendment, among other things, increased the number of shares of common stock available for grant under the 2016 Plan from 500,000 to 1,500,000.
Macquarie Infrastructure Corporation Short-Term Incentive Plan (STIP) for MIC Operating Businesses —  Restricted Stock Units (RSUs)
During the first quarter of 2019, the Company established the STIP to provide cash and stock-based incentives to eligible employees of its operating businesses under the Company’s 2016 Plan. In general, the cash component comprises approximately 75% of any incentive award and is paid in a lump-sum. The remaining 25% of any incentive award is in the form of RSUs representing an interest in the common stock of the Company. RSUs are granted following assessment of performance against Key Performance Indicators post the one-year performance period and vest in two equal annual installments following the grant date. Through December 31, 2019, no grants of RSUs under the STIP had been made.
From time to time, the Company can issue RSUs to award or retain employees, or to attract new employees, or other reasons by providing special grants of RSUs. Vesting dates and terms can vary for each award at the discretion of the Company.
The following represents unvested Special RSUs granted through 2019:
 
2019 Special Grants
 
Number of RSUs
(in units)
 
Weighted Average Grant-Date Fair Value
(per share)
Unvested at December 31, 2018
—

 
$
—

Granted
6,067
 
40.30

Unvested at December 31, 2019
6,067
 
$
40.30


Compensation expense related to the Special RSU grants in 2019 was not significant. At December 31, 2019, the cost is expected to be recognized over a weighted-average period of 1.1 years.
Macquarie Infrastructure Corporation Long-Term Incentive Plan (LTIP) for MIC Operating Businesses —  Performance Stock Units (PSUs)
During the first quarter of 2019, the Company established the LTIP pursuant to which it may make stock-based incentive awards to eligible employees of its operating businesses. The awards would take the form of PSUs convertible into common stock

101
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Stockholders’ Equity  – (continued)

of the Company as authorized under its 2016 Plan. The number of PSUs a participant may be awarded reflects a target level of performance by the participant. The participant may be awarded more (over performance limit) or less (threshold limit) than the target number of PSUs based on their achievements relative to Key Performance Indicators during the three-year performance period. Following finalization of the participant’s performance review at the end of the third year of the program, the Company may award the PSUs.
The following represents unvested LTIP grants through December 31, 2019 at the target level of performance:
 
2019 LTIP (at Target)
 
Number of PSUs
(in units)
 
Weighted Average Grant-Date Fair Value
(per share)
Unvested at December 31, 2018
—

 
$
—

Granted
134,671
 
39.59
Forfeited
(9,477)
 
39.26
Unvested at December 31, 2019
125,194
 
$
39.62


At December 31, 2019, depending upon actual performance, the number of PSUs to be issued will vary from zero to 230,566, net of forfeitures. At December 31, 2019, the grant date fair value of the unvested awards was approximately $5 million, reflecting target performance by all participants. In 2019, the Company recognized approximately $1 million of compensation expense related to the LTIP. At December 31, 2019, the unrecognized compensation cost related to unvested PSU awards was approximately $4 million at target level performance. If target level performance is achieved, the unrecognized cost is expected to be recognized over a weighted-average period of 2.0 years.
Accumulated Other Comprehensive Loss, net of taxes
The following represents the changes and balances to the components of accumulated other comprehensive loss, net of taxes, in 2019, 2018 and 2017 ($ in millions):
 
Post-Retirement Benefit Plans, net of taxes(1)
 
Translation Adjustment, net of taxes(2)
 
Total Stockholders’ Accumulated Other Comprehensive Loss, net of taxes
Balance at December 31, 2016
$
(17
)
 
$
(12
)
 
$
(29
)
Change in post-retirement benefit plans
(4
)
 
—

 
(4
)
Translation adjustment
—

 
3

 
3

Balance at December 31, 2017
$
(21
)
 
$
(9
)
 
$
(30
)
Cumulative effect of change in accounting principle(3)
(4
)
 
—

 
(4
)
Change in post-retirement benefit plans
9

 
—

 
9

Translation adjustment
—

 
(5
)
 
(5
)
Balance at December 31, 2018
$
(16
)
 
$
(14
)
 
$
(30
)
Change in post-retirement benefit plans
(9
)
 
—

 
(9
)
Translation adjustment
—

 
2

 
2

Balance at December 31, 2019
$
(25
)
 
$
(12
)
 
$
(37
)
____________
(1)
Change in post-retirement benefit plans is presented net of tax benefit of $3 million in both 2019 and 2017 and net of tax expense of $3 million in 2018.
(2)
Translation adjustment is presented net of tax expense of $1 million and $2 million in 2019 and 2017, respectively, and net of tax benefit of $2 million in 2018.
(3)
In 2018, the Company adopted ASU No. 2018-02 and made a $4 million adjustment to reclassify stranded tax effects in Accumulated Other Comprehensive Loss to Retained Earnings.

102

MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Reportable Segments
At December 31, 2019, the Company’s businesses consist of four reportable segments: IMTT, Atlantic Aviation, MIC Hawaii and Corporate and Other.
Effective October 1, 2018, BEC and substantially all of the Company’s portfolio of solar and wind power generation businesses were classified as discontinued operations and the Company’s Contracted Power segment was eliminated. All prior comparable periods have been restated to reflect this change. In July 2019, the Company completed the sales of its wind power generating portfolio and all but one of the assets in its solar power generating portfolio. The sale of the remaining solar facility closed during September 2019. On January 1, 2019, the Company also classified its majority interest in a renewable power development business as a discontinued operation, the sale of which closed in July 2019. The Company did not restate the prior period as the disposition was deemed insignificant. A remaining relationship with a third-party developer of renewable power facilities has been reported as a component of Corporate and Other through the expiration of the relationship in July 2019. For additional information, see Note 5, “Discontinued Operations and Dispositions”.
IMTT
IMTT provides bulk liquid storage, handling and other services in North America through 17 terminals located in the U.S., one terminal in Quebec, Canada and one partially owned terminal in Newfoundland, Canada. IMTT derives the majority of its revenue from storage and handling of refined petroleum products, various chemicals, renewable fuels, and vegetable and tropical oils. Based on storage capacity, IMTT operates one of the largest third-party bulk liquid terminals businesses in the U.S.
Revenue from IMTT is generated from the following sources and recorded in service revenue.
Lease.  These are contracts with predominantly non-cancelable terms for access to and the use of storage capacity at the various terminals owned and operated by the business. At December 31, 2019 these contracts had a revenue weighted average remaining contract life of 2.0 years. These contracts generally require payments in exchange for the provision of storage capacity and product movement (throughput) throughout their term based on a fixed rate per barrel of capacity leased. A majority of the contracts include terms that adjust the fixed rate annually for inflation. These contracts are accounted for as operating leases and the related lease income is recognized in service revenue over the term of the contract based upon the rate specified. Revenue is recognized in accordance with ASC 842, Leases.
Terminal services.  Revenue from the provision of ancillary services includes activities such as heating, mixing and blending, and is recognized as the related services are performed (point in time) based on contract rates. Other terminal services also include payments received prior to the related services being performed or as a reimbursement for specific fixed asset additions or improvements related to a customer’s contract and are recorded as deferred revenue and ratably recognized as revenues over the contract term.
Other.  Other revenue is comprised primarily of environmental response service activities through the date of sale in April 2018 and railroad operations. These revenues are generally recognized at a point in time as services are performed.
Atlantic Aviation
Atlantic Aviation derives the majority of its revenue from fuel delivery services and from other airport services, including de-icing and aircraft hangar rental. All of the revenue of Atlantic Aviation is generated at airports in the U.S. The business currently operates at 70 airports.
Revenue from Atlantic Aviation is recorded in service revenue. Services provided by Atlantic Aviation include:
Fuel.  Revenue from fuel sales is recognized at a point in time as services are performed. Fuel services are recorded net of discounts and rebates.
Hangar.  Hangar rentals includes both month-to-month rentals and rentals from longer term contracts. Hangar rental revenue excludes transient customer overnight hangar usage (see Other FBO services below).
Other FBO services.  Other fixed based operation (FBO) services consist principally of de-icing services, landing, concession, transient overnight hangar usage, terminal use and fuel distribution fees that are recognized as sales of services. Revenue from these transactions is recorded based on the service fee earned.

103
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Reportable Segments – (continued)


MIC Hawaii
MIC Hawaii comprises of (i) Hawaii Gas, Hawaii’s only government-franchised gas utility and an unregulated LPG distribution business providing gas and related services to commercial, residential and governmental customers; and (ii) controlling interests in two solar facilities on Oahu.
Revenue from the Hawaii Gas business is generated from the distribution and sales of synthetic natural gas (SNG), LPG, liquefied natural gas (LNG) and renewable natural gas (RNG). Revenue is primarily a function of the amount of SNG, LPG, LNG and RNG consumed by customers and the price per British Thermal Unit or gallon charged to customers. Revenue levels, without organic growth, will generally track global commodity prices, namely petroleum and natural gas, as its products are derived from these commodities.
Revenue from Hawaii Gas is recorded in product revenue. Hawaii Gas recognizes revenue when products are delivered. Sales of gas to customers are billed on a monthly-cycle basis. Earned but unbilled revenue is accrued and included in accounts receivable and revenue. This is based on the amount of gas that has been delivered but not billed to customers from the latest meter reading or billed delivery date to the end of an accounting period. The related costs are charged to expense.
The renewables projects within MIC Hawaii sell substantially all of the electricity generated at a fixed price to primarily electric utility customers pursuant to long-term power purchase agreements (PPAs) of 20 years. Substantially all of the PPAs are accounted for as operating leases and have no minimum lease payments and all of the lease income under these leases is recorded within product revenue when the electricity is delivered.
Corporate and Other
Corporate and Other comprises MIC Corporate (holding company headquarters in New York City) and a shared services center in Plano, Texas.
All of the MIC business segments are managed separately and management has chosen to organize the Company around the distinct products and services offered. Selected information by segment is presented in the following tables.
Revenue from external customers for the Company’s consolidated reportable segments were ($ in millions):
 
Year Ended December 31, 2019
IMTT
 
Atlantic
Aviation
 
MIC
Hawaii
 
Intercompany
Adjustments
 
Total Reportable Segments
Service revenue
  

 
  

 
  

 
  

 
  

Terminal services
$
90

 
$
—

 
$
—

 
$
—

 
$
90

Lease
419

 
—

 
—

 
(3
)
 
416

Fuel
—

 
695

 
—

 
—

 
695

Hangar
—

 
95

 
—

 
—

 
95

Other
6

 
182

 
—

 
—

 
188

Total service revenue
$
515

 
$
972

 
$
—

 
$
(3
)
 
$
1,484

Product revenue
 
 
 
 
 
 
 
 
 
Lease
$
—

 
$
—

 
$
5

 
$
—

 
$
5

Gas
—

 
—

 
226

 
—

 
226

Other
—

 
—

 
12

 
—

 
12

Total product revenue
$
—

 
$
—

 
$
243

 
$
—

 
$
243

Total revenue
$
515

 
$
972

 
$
243

 
$
(3
)
 
$
1,727


104
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Reportable Segments – (continued)


 
Year Ended December 31, 2018
IMTT
 
Atlantic
Aviation
 
MIC
Hawaii
 
Corporate and Other
 
Intercompany
Adjustments
 
Total Reportable Segments
Service revenue
  

 
  

 
  

 
 
 
  

 
  

Terminal services
$
89

 
$
—

 
$
—

 
$
—

 
$
—

 
$
89

Lease
402

 
—

 
—

 
—

 
(4
)
 
398

Fuel
—

 
704

 
—

 
—

 
—

 
704

Hangar
—

 
88

 
—

 
—

 
—

 
88

Construction
—

 
—

 
43

 
—

 
—

 
43

Other
19

 
170

 
4

 
—

 
—

 
193

Total service revenue
$
510

 
$
962

 
$
47

 
$
—

 
$
(4
)
 
$
1,515

Product revenue
 
 
 
 
 
 
 
 
 
 
 
Lease
$
—

 
$
—

 
$
5

 
$
—

 
$
—

 
$
5

Gas
—

 
—

 
229

 
—

 
—

 
229

Other
—

 
—

 
11

 
1

 
—

 
12

Total product revenue
$
—

 
$
—

 
$
245

 
$
1

 
$
—

 
$
246

Total revenue
$
510

 
$
962

 
$
292

 
$
1

 
$
(4
)
 
$
1,761

 
Year Ended December 31, 2017
IMTT
 
Atlantic
Aviation
 
MIC
Hawaii
 
Intercompany
Adjustments
 
Total Reportable Segments
Service revenue
 
 
 
 
 
 
 
 
 
Terminal services
$
85

 
$
—

 
$
—

 
$
—

 
$
85

Lease
431

 
—

 
—

 
(5
)
 
426

Fuel
—

 
615

 
—

 
—

 
615

Hangar
—

 
78

 
—

 
—

 
78

Construction
—

 
—

 
54

 
—

 
54

Other
33

 
154

 
1

 
—

 
188

Total service revenue
$
549

 
$
847

 
$
55

 
$
(5
)
 
$
1,446

Product revenue
 
 
 
 
 
 
 
 
 
Lease
$
—

 
$
—

 
$
3

 
$
—

 
$
3

Gas
—

 
—

 
209

 
—

 
209

Other
—

 
—

 
11

 
—

 
11

Total product revenue
$
—

 
$
—

 
$
223

 
$
—

 
$
223

Total revenue
$
549

 
$
847

 
$
278

 
$
(5
)
 
$
1,669


In accordance with FASB ASC 280, Segment Reporting, the Company has disclosed earnings before interest, taxes, depreciation and amortization (EBITDA) excluding non-cash items as a key performance indicator for the businesses. EBITDA excluding non-cash items is reflective of the businesses’ ability to effectively manage the amount 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 its businesses. The Company 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 for the Company’s consolidated reportable segments from continuing operations is shown in the tables below ($ in millions). Allocations of corporate expenses, intercompany fees and the tax effect have been excluded as they are eliminated in consolidation.

105
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Reportable Segments – (continued)


  
Year Ended December 31, 2019
IMTT
 
Atlantic
Aviation
 
MIC
Hawaii
 
Corporate
and Other
 
Total Reportable Segments
Net income (loss)
$
71

 
$
69

 
$
13

 
$
(52
)
 
$
101

Interest expense, net
47

 
74

 
10

 
16

 
147

Provision (benefit) for income taxes
29

 
24

 
9

 
(23
)
 
39

Depreciation
117

 
62

 
16

 
—

 
195

Amortization of intangibles
15

 
44

 
—

 
—

 
59

Fees to Manager - related party
—

 
—

 
—

 
32

 
32

Other non-cash expense, net
9

 
3

 
12

 
2

 
26

EBITDA excluding non-cash items
$
288

 
$
276

 
$
60

 
$
(25
)
 
$
599


  
Year Ended December 31, 2018
IMTT
 
Atlantic
Aviation
 
MIC
Hawaii
 
Corporate
and Other
 
Total Reportable Segments
Net income (loss)
$
63

 
$
96

 
$
(12
)
 
$
(82
)
 
$
65

Interest expense, net
46

 
25

 
8

 
33

 
112

Provision (benefit) for income taxes
36

 
35

 
(6
)
 
(15
)
 
50

Goodwill impairment
—

 
—

 
3

 
—

 
3

Depreciation
117

 
60

 
16

 
—

 
193

Amortization of intangibles
15

 
46

 
7

 
—

 
68

Fees to Manager - related party
—

 
—

 
—

 
45

 
45

Other non-cash expense, net(1)
9

 
1

 
22

 
1

 
33

EBITDA excluding non-cash items
$
286

 
$
263

 
$
38

 
$
(18
)
 
$
569

_____________
(1)
Other non-cash expense, net, includes the write-down of the Company’s investment in the mechanical contractor business at MIC Hawaii.
  
Year Ended December 31, 2017
IMTT
 
Atlantic
Aviation
 
MIC
Hawaii
 
Corporate
and Other
 
Total Reportable
Segments
Net income (loss)
$
363

 
$
124

 
$
26

 
$
(79
)
 
$
434

Interest expense, net
38

 
15

 
7

 
27

 
87

(Benefit) provision for income taxes
(209
)
 
6

 
9

 
(36
)
 
(230
)
Depreciation
113

 
51

 
14

 
—

 
178

Amortization of intangibles
13

 
49

 
2

 
—

 
64

Fees to Manager - related party
—

 
—

 
—

 
71

 
71

Other non-cash expense, net
8

 
2

 
3

 
1

 
14

EBITDA excluding non-cash items
$
326

 
$
247

 
$
61

 
$
(16
)
 
$
618


106
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Reportable Segments – (continued)


Reconciliation of total reportable segments’ EBITDA excluding non-cash items to consolidated net income from continuing operations before income taxes were ($ in millions):
  
Year Ended December 31,
2019
 
2018
 
2017
Total reportable segments EBITDA excluding non-cash items
$
599

 
$
569

 
$
618

Interest income
7

 
1

 
—

Interest expense
(154
)
 
(113
)
 
(87
)
Goodwill impairment
—

 
(3
)
 
—

Depreciation
(195
)
 
(193
)
 
(178
)
Amortization of intangibles
(59
)
 
(68
)
 
(64
)
Fees to Manager - related party
(32
)
 
(45
)
 
(71
)
Other expense, net
(26
)
 
(33
)
 
(14
)
Total consolidated net income from continuing operations
   before income taxes
$
140

 
$
115

 
$
204


Capital expenditures, on a cash basis, for the Company’s reportable segments were ($ in millions):
  
Year Ended December 31,
2019
 
2018
 
2017
IMTT
$
176

 
$
63

 
$
74

Atlantic Aviation
61

 
67

 
82

MIC Hawaii
20

 
23

 
29

Corporate and Other
3

 
24

 
29

Total capital expenditures of reportable segments
$
260

 
$
177

 
$
214


Property, equipment, land and leasehold improvements, net, and total assets for the Company’s reportable segments and its reconciliation to consolidated total assets as of December 31st were ($ in millions):
 
Property, Equipment,
Land and Leasehold
Improvements, net
 
Total Assets
  
2019
 
2018
 
2019
 
2018
IMTT
$
2,323

 
$
2,249

 
$
4,172

 
$
4,020

Atlantic Aviation
567

 
565

 
2,060

 
1,676

MIC Hawaii
301

 
300

 
537

 
501

Corporate and Other
11

 
27

 
92

 
599

Total assets of reportable segments
$
3,202

 
$
3,141

 
$
6,861

 
$
6,796

Assets held for sale
—

 
—

 
—

 
648

Total consolidated assets
$
3,202

 
$
3,141

 
$
6,861

 
$
7,444


13. Related Party Transactions
Management Services
At December 31, 2019 and 2018, the Manager held 13,253,791 shares and 12,477,438 shares, respectively, of the Company’s common stock. Pursuant to the terms of the Third Amended and Restated Management Agreement (Management Services Agreement), the Manager may sell these shares at any time. Under the Management Services Agreement, the Manager, at its option, may reinvest base management fees and performance fees, if any, in shares of the Company. From May 2018 through September 2018, the Manager bought 5,987,100 shares in the open market. The Manager’s holdings at December 31, 2019 represented 15.30% of the Company's outstanding common stock.

107
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Related Party Transactions  – (continued)

Since January 1, 2017, the Company paid the Manager cash dividends on shares held for the following periods:
Declared
 
Period
Covered
 
$
per Share
 
Record
Date
 
Payable
Date
 
Cash Paid to
Manager
(in millions)
February 14, 2020
 
Fourth quarter 2019
 
$
1.00

 
March 6, 2020
 
March 11, 2020
 
(1) 
October 29, 2019
 
Third quarter 2019
 
1.00

 
November 11, 2019
 
November 14, 2019
 
$
13

July 30, 2019
 
Second quarter 2019
 
1.00

 
August 12, 2019
 
August 15, 2019
 
13

April 29, 2019
 
First quarter 2019
 
1.00

 
May 13, 2019
 
May 16, 2019
 
13

February 14, 2019
 
Fourth quarter 2018
 
1.00

 
March 4, 2019
 
March 7, 2019
 
13

October 30, 2018
 
Third quarter 2018
 
1.00

 
November 12, 2018
 
November 15, 2018
 
12

July 31, 2018
 
Second quarter 2018
 
1.00

 
August 13, 2018
 
August 16, 2018
 
11

May 1, 2018
 
First quarter 2018
 
1.00

 
May 14, 2018
 
May 17, 2018
 
6

February 19, 2018
 
Fourth quarter 2017
 
1.44

 
March 5, 2018
 
March 8, 2018
 
8

October 30, 2017
 
Third quarter 2017
 
1.42

 
November 13, 2017
 
November 16, 2017
 
7

August 1, 2017
 
Second quarter 2017
 
1.38

 
August 14, 2017
 
August 17, 2017
 
7

May 2, 2017
 
First quarter 2017
 
1.32

 
May 15, 2017
 
May 18, 2017
 
6

February 17, 2017
 
Fourth quarter 2016
 
1.31

 
March 3, 2017
 
March 8, 2017
 
6

_____________
(1)
The amount of dividend payable to the Manager for the fourth quarter of 2019 will be determined on March 6, 2020, the record date.
Under the Management Services Agreement, subject to the oversight and supervision of the Company’s Board, the Manager is responsible for and oversees the management of the Company’s operating businesses. In addition, the Manager has the right to appoint the Chairman of the Board, subject to minimum equity ownership, and to assign, or second, to the Company, two of its employees to serve as chief executive officer and chief financial officer of the Company and seconds or makes other personnel available as required.
In accordance with the Management Services Agreement, the Manager is entitled to a monthly base management fee based primarily on the Company’s market capitalization, and potentially a quarterly performance fee based on total stockholder returns relative to a U.S. utilities index. Currently, the Manager has elected to reinvest the future base management fees and performance fees, if any, in additional shares. In 2019, 2018 and 2017, the Company incurred base management fees of $32 million, $45 million and $71 million, respectively. The Company did not incur any performance fees in 2019, 2018 and 2017.
Effective November 1, 2018, the Manager waived two portions of the base management fee to which it was entitled under the terms of the Management Services Agreement. In effect, the waivers cap the base management fee at 1% of the Company’s equity market capitalization less any cash balances at the holding company. The waiver applies only to the calculation of the base management fees and not to the remainder of the Management Services Agreement. The Manager reserves the right to revoke the waivers and revert to the prior terms of the Management Services Agreement, subject to providing the Company with not less than a one year notice. A revocation of the waiver would not trigger a recapture of previously waived fees. As part of the Disposition Agreement entered into between the Company and its Manager, discussed below, the Manager has agreed not to revoke the waiver during the term of the Disposition Agreement.
To facilitate the Company’s pursuit of strategic alternatives, the Company announced that it has entered into a Disposition Agreement (Disposition Agreement) with the Manager on October 30, 2019 (see Exhibit 10.3 of this Form 10-K). Outside of this agreement, the Company has limited ability to terminate the Management Services Agreement. With this agreement, the Company’s Management Services Agreement with the Manager will terminate as to any businesses, or substantial portions thereof, that are sold and, in connection therewith, the Company will make payments to the Manager calculated in accordance with the Disposition Agreement. The Disposition Agreement will terminate on the earlier to occur of (i) the termination of the Management Services Agreement and (ii) the sixth anniversary, subject to extension under certain circumstances if a transaction is pending.

108
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Related Party Transactions  – (continued)

The unpaid portion of the base management fees and performance fees, if any, at the end of each reporting period is included in Due to Manager-related party in the consolidated balance sheets. The following table shows the Manager’s reinvestment of its base management fees and performance fees, if any, in shares:
Period
 
Base Management
Fee Amount
($ in millions)
 
Performance
Fee Amount
($ in millions)
 
Shares
Issued
2019 Activities:
 
 
 
 
 
 
 
 
Fourth quarter 2019
 
$
9

 
$
—
 
208,881

(1) 
Third quarter 2019
 
8

 
 
—
 
201,827

 
Second quarter 2019
 
7

 
 
—
 
192,103

 
First quarter 2019
 
8

 
 
—
 
184,448

 
2018 Activities:
 
 
 
 
 
 
 
 
Fourth quarter 2018
 
$
9

 
$
—
 
220,208

 
Third quarter 2018
 
12

 
 
—
 
269,286

 
Second quarter 2018
 
11

 
 
—
 
277,053

 
First quarter 2018
 
13

 
 
—
 
265,002

 
2017 Activities:
 
 
 
 
 
 
 
 
Fourth quarter 2017
 
$
17

 
$
—
 
248,162

 
Third quarter 2017
 
18

 
 
—
 
240,674

 
Second quarter 2017
 
18

 
 
—
 
233,394

 
First quarter 2017
 
18

 
 
—
 
232,398

 
_____________
(1)
The Manager elected to reinvest all of the monthly base management fees for the fourth quarter of 2019 in new primary shares. The Company issued 208,881 shares for the quarter ended December 31, 2019, including 70,954 shares that were issued in January 2020 for the December 2019 monthly base management fee.
The Manager is not entitled to any other compensation and all costs incurred by the Manager, including compensation of seconded staff, are paid by the Manager out of its base management fee. However, the Company is responsible for other direct costs including, but not limited to, expenses incurred in the administration or management of the Company and its subsidiaries, income taxes, audit and legal fees, acquisitions and dispositions and its compliance with applicable laws and regulations. The Manager charged the Company approximately $1 million in each of the years ended December 31, 2019, 2018 and 2017 for reimbursement of out-of-pocket expenses. The unpaid portion of the out-of-pocket expenses at the end of the reporting period is included in Due to Manager-related party in the consolidated balance sheets. In 2019, the Company also incurred $294,000 in legal fees incurred by the Manager related to the Shareholder Litigation. For additional information, see Note 17, "Legal Proceedings and Contingencies", for further discussions.
Macquarie Group - Other Services
The Company uses the resources of the Macquarie Group with respect to a range of advisory, procurement, insurance, hedging, lending and other services. Engagements involving members of the Macquarie Group are reviewed and approved by the Audit Committee of the Company’s Board. Macquarie Group affiliates are engaged on an arm’s length basis and frequently as a member of syndicate of providers whose other members establish the terms of the interaction.
Advisory Services
The Macquarie Group, and wholly-owned subsidiaries within the Macquarie Group, including Macquarie Bank Limited (MBL) and Macquarie Capital (USA) Inc. (MCUSA) have provided various advisory and other services and incurred expenses in connection with the Company’s equity raising activities, acquisitions and debt structuring for the Company and its businesses. Underwriting fees are recorded in stockholders’ equity as a direct cost of equity offerings. Advisory fees and out-of-pocket expenses relating to acquisitions are expensed as incurred. Debt arranging fees are deferred and amortized over the term of the credit facility.

109
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Related Party Transactions  – (continued)

Long-Term Debt
In January 2018, the Company completed the refinancing and upsizing of its senior secured revolving credit facility to $600 million from $410 million and extended the maturity through January 3, 2022. As part of the refinancing and upsizing, MIHI LLC’s $50 million commitment was replaced by a $40 million commitment from Macquarie Capital Funding LLC. As part of the closing, the Company paid Macquarie Capital Funding LLC $80,000 in closing fees.
       
Prior to the refinancing in January 2018, the Company incurred $285,000 in interest expense in 2017 related to MIHI LLC’s portion of the MIC senior secured revolving credit facility. Subsequent to the refinancing in January 2018, the Company incurred $155,000 and $454,000 in interest expense related to Macquarie Capital Funding LLC’s portion of the MIC senior secured revolving credit facility in 2019 and 2018, respectively.
Other Transactions
In May 2018, the Company sold its equity interest in projects involving two properties to Macquarie Infrastructure and Real Assets, Inc. (MIRA Inc.), an affiliate of the Manager, for their cost of $27 million. The Company retained the right to 20% of any gain on a subsequent sale by MIRA Inc. to a third-party of a more than 50% interest in either or both of the projects.
From time to time, indirect subsidiaries within Macquarie Group may enter into contracts with IMTT to lease capacity. The revenue from these contracts were approximately $2 million and $1 million in 2019 and 2017, respectively, and were insignificant in 2018.
Other Related Party Transactions
In 2019, the Company incurred $125,000 for advisory services from a former Board member.
14. Income Taxes
The Company and its subsidiaries are subject to income taxes. The Company files a consolidated U.S. income tax return with its wholly owned domestic subsidiaries, including its allocated share of the taxable income from the solar and wind facilities through the date of sale. The Company and its subsidiaries file separate and combined state income tax returns.
On December 22, 2017, the Tax Cuts and Jobs Act was signed into law and included provisions that have an impact on the Company’s federal taxable income. The most significant of these are 100% bonus depreciation on qualifying assets (which is scheduled to phase down ratably to 0% between 2023 and 2027) and a reduction in the federal corporate tax rate from 35% to 21%.
The Tax Cuts and Jobs Act also includes a new limitation on the deductibility of net interest expense that generally limits the deduction to 30% of “adjusted taxable income”. For years before 2022, adjusted taxable income is defined as taxable income computed without regard to certain items, including net business interest expense, the amount of any NOL deduction, tax depreciation and tax amortization. The Company does not expect to incur net interest expense that is greater than 30% of adjusted taxable income prior to 2022.
Components of the Company’s income tax provision (benefit) related to the income from continuing operations in 2019, 2018 and 2017 were ($ in millions):
  
Year Ended December 31,
2019
 
2018
 
2017
Current taxes:
  

 
  

 
  

State
$
12

 
$
14

 
$
10

Total current tax provision
12

 
14

 
10

Deferred taxes:
 
 
 
 
 
Federal
28

 
31

 
(247
)
State
(1
)
 
9

 
6

Total deferred tax provision (benefit)
27

 
40

 
(241
)
Change in valuation allowance
—

 
(4
)
 
1

Total tax provision (benefit)
$
39

 
$
50

 
$
(230
)


110
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Income Taxes – (continued)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities from continuing operations at December 31, 2019 and 2018 were ($ in millions):
  
At December 31,
2019
 
2018
Deferred tax assets:
 
 
 
Net operating loss carryforwards
$
30

 
$
26

Operating lease liabilities
91

 
—

Deferred revenue
9

 
7

Accrued expenses
34

 
28

Investment and foreign tax credits
1

 
4

Total gross deferred tax assets
165

 
65

Less: valuation allowance
—

 
(1
)
Net deferred tax assets
165

 
64

Deferred tax liabilities:
 
 
 
Intangible assets
(99
)
 
(93
)
Investment basis difference
(19
)
 
(19
)
Operating lease assets, net
(90
)
 
—

Property and equipment
(633
)
 
(624
)
Unrealized loss (gains) on derivative instruments, net
4

 
(2
)
Equity component of convertible senior notes
(5
)
 
(6
)
Prepaid expenses
(2
)
 
(1
)
Total deferred tax liabilities
(844
)
 
(745
)
Net deferred tax liabilities
$
(679
)
 
$
(681
)


At December 31, 2018, the Company had $152 million in federal income tax net operating loss (NOL) carryforwards. During 2019, the Company fully utilized all of its NOL carryforwards to offset income generated from continuing operations and a portion of the taxable gain from the sale of the solar and wind facilities. In addition, the Company and its subsidiaries have state NOL carryforwards. State NOL carryforwards are specific to the state in which the NOL was generated and various states impose limitations on the utilization of NOL carryforwards.
In assessing the need for a valuation allowance, management considers whether it is more likely than not that some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. In 2019, there were no significant change in the valuation allowance.
At December 31, 2019, the Company had $679 million in noncurrent deferred tax liabilities from continuing operations. A significant portion of the Company’s deferred tax liabilities relates to tax basis temporary differences of both property and equipment and intangible assets. The Company records the acquisitions of consolidated businesses under the purchase method of accounting and accordingly recognizes a significant increase to the value of the property and equipment and to intangible assets. For tax purposes, the Company may assume the existing tax basis of the acquired businesses, in which case the Company records a deferred tax liability to reflect the increase in the purchase accounting basis of the assets acquired over the carryover income tax basis. This liability will reduce in future periods as these temporary differences reverse.
In 2019, 2018 and 2017, the Company recorded an income tax expense of $39 million, $50 million and an income tax benefit of $230 million, respectively, from continuing operations. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Cuts and Jobs Act, the Company revalued its ending net deferred tax liabilities at December 31, 2017 and recognized a $316 million tax benefit from continuing operations in the Company’s consolidated statement of income for the year ended December 31, 2017. These amounts are different from the amounts computed by applying the U.S. federal income tax rate for the period to pretax income as a result of the following ($ in millions):

111
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Income Taxes – (continued)

 
Year Ended December 31,
2019
 
2018
 
2017
Tax provision at U.S. statutory rate
$
29

 
$
24

 
$
71

Permanent differences and other
1

 
4

 
10

State income taxes, net of federal benefit
9

 
19

 
11

Income attributable to noncontrolling interest
—

 
1

 
1

Change in investment and foreign tax credits
—

 
6

 
(8
)
Change in U.S. tax law
—

 
—

 
(316
)
Change in valuation allowance
—

 
(4
)
 
1

Total tax provision (benefit)
$
39

 
$
50

 
$
(230
)

Uncertain Tax Positions
The amount of unrecognized tax benefits at December 31, 2019 and 2018 are not significant. The Company does not expect that the amount of unrecognized tax benefits will change in the next 12 months. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense in the statements of operations, which is consistent with the recognition of these items in prior reporting periods.
The federal statute of limitations on the assessment of additional income tax liabilities has lapsed for all returns filed on or before December 31, 2016. The various state statutes of limitations on the assessment of additional income taxes have lapsed on all returns filed on or before December 31, 2015.
15. Long-Term Contracted Revenue
Long-term contracted revenue consists of revenue from future minimum lease revenue accounted for in accordance with ASC 842, Leases, and estimated revenue to be recognized in the future related to performance conditions that are unsatisfied or partially unsatisfied accounted for in accordance with ASC 606, Revenue from Contracts with Customers. The recognition pattern for contracts that are considered leases is generally consistent with the recognition pattern that would apply if such contracts were not accounted for as leases and were instead accounted for under ASC Topic 606. Accordingly, the Company has combined the required lessor disclosures for future lease income with the disclosures for contracted revenue in the table below. The following long-term contracted revenue were in existence at December 31, 2019 ($ in millions):
 
Lease Revenue
(ASC 842)
 
Contract
Revenue
(ASC 606)
 
Total
Long-Term
Revenue
2020
$
285

 
$
64

 
$
349

2021
155

 
35

 
190

2022
98

 
29

 
127

2023
66

 
22

 
88

2024
25

 
8

 
33

Thereafter
90

 
18

 
108

Total
$
719

 
$
176

 
$
895


The above table does not include the future minimum rental revenue from the renewable business within the MIC Hawaii reportable segment. The payments from these leases are considered variable as they are based on the output of the underlying assets (i.e. energy generated).
16. Employee Benefit Plans
401(k) Savings Plan
IMTT, Atlantic Aviation and the Hawaii Gas business each have a defined contribution plan under Section 401(k) of the Internal Revenue Code, allowing eligible employees to contribute a percentage of their annual compensation up to an annual amount as set by the IRS.

112
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Employee Benefit Plans  – (continued)

The employer contribution to these plans ranges from 0% to 7% of eligible compensation. Employer contributions were $5 million in both 2019 and 2018 and $4 million in 2017.
IMTT DB Plan
Except for a plan covering certain employees covered by a collective-bargaining agreement at IMTT-Illinois (see below), substantially all employees of IMTT are eligible to participate in a defined benefit pension plan (IMTT DB Plan). Benefits under the IMTT DB Plan are based on years of service and the employees’ highest average compensation for a consecutive five year period. IMTT’s contributions to the plan are based on the recommendations of its consulting actuary.
On January 1, 2017, the IMTT DB Plan was frozen to new participants, except for the union employees of Bayonne, for whom it was subsequently frozen on January 1, 2018.
Hawaii Gas Union Pension Plan
Hawaii Gas has a defined benefit pension plan for Classified Employees of GASCO, Inc. (HG DB Plan) that accrues benefits pursuant to the terms of a collective-bargaining agreement. The plan was frozen to new participants in 2008 in connection with an agreement to increase participant benefits over a three year period after which there will be no further increases to the flat rate as described herein. The HG DB Plan is non-contributory and covers all bargaining unit employees who have met certain service and age requirements. The benefits are based on a flat rate per year of service through the date of employment termination or retirement. Future contributions will be made to meet ERISA funding requirements. The HG DB Plan’s trustee handles the plan assets and, as an investment manager, invests them in a diversified portfolio of primarily equity and fixed-income securities.
Other Plan Benefits
IMTT, Hawaii Gas and Atlantic Aviation have other insignificant plans that are comprised of the following. These plans are shown below collectively as “Other Plan Benefits”.
IMTT
IMTT is the sponsor of a defined benefit plan covering union employees at IMTT-Illinois (IMTT-Illinois Union Plan). Monthly benefits under this plan are computed based on a benefit rate in effect at the date of the participant’s termination multiplied by the number of years of service. IMTT’s contributions to the plan are based on the recommendations of its consulting actuary. On January 1, 2018, the IMTT-Illinois Union Plan was frozen to new participants.
IMTT provides post-retirement life insurance (coverage equal to 25% of final year compensation not to exceed $25,000) and health benefits (coverage for early retirees at least 62 years old on early retirement to age 65, reimbursement of Medicare premiums for the Bayonne terminal employees and some smaller health benefits no longer offered) to retired employees.
Hawaii Gas
Hawaii Gas has a postretirement plan. The GASCO, Inc. Hourly Postretirement Medical and Life Insurance Plan (the PMLI Plan) covers all bargaining unit participants who were employed by Hawaii Gas on April 30, 1999 and who retire after the attainment of age 62 with 15 years of service. Under the provisions of the PMLI Plan, Hawaii Gas pays for medical premiums of the retirees and spouses through the age of 64. After age 64, Hawaii Gas pays for medical premiums up to a maximum of $150 per month. The retirees are also provided $1,000 of life insurance benefits.
Hawaii Gas also has a retiree life insurance program for certain nonunion retirees. This plan is closed to future participants.
Atlantic Aviation
Atlantic Aviation sponsors a retiree medical and life insurance plan available to certain employees. Currently, the plan is funded as required to pay benefits and the plan has no assets. The Company accounts for postretirement healthcare and life insurance benefits in accordance with ASC 715, Compensation — Retirement Benefits, which requires the accrual of the cost of providing postretirement benefits during the active service period of the employee.
Additional information about the fair value of the benefit plan assets, the components of net periodic cost and the projected benefit obligation as of and for the years ended December 31, 2019 and 2018 are ($ in millions).

113
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Employee Benefit Plans  – (continued)

 
HG DB
Plan Benefits
 
IMTT DB
Plan Benefits
 
Other
Plan Benefits
 
Total
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Change in benefit obligation:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Benefit obligation – beginning of year
$
49

 
$
53

 
$
143

 
$
162

 
$
28

 
$
29

 
$
220

 
$
244

Service cost
1

 
1

 
5

 
6

 
1

 
1

 
7

 
8

Interest cost
2

 
2

 
6

 
6

 
1

 
1

 
9

 
9

Actuarial losses (gains)
5

 
(4
)
 
23

 
(22
)
 
2

 
(2
)
 
30

 
(28
)
Benefits paid
(3
)
 
(3
)
 
(9
)
 
(9
)
 
(2
)
 
(1
)
 
(14
)
 
(13
)
Benefit obligation – end of year
$
54

 
$
49

 
$
168

 
$
143

 
$
30

 
$
28

 
$
252

 
$
220

Change in plan assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of plan assets - beginning of year
$
46

 
$
51

 
$
88

 
$
102

 
$
9

 
$
9

 
$
143

 
$
162

Actual return on plan assets
9

 
(2
)
 
15

 
(5
)
 
1

 
—

 
25

 
(7
)
Employer contributions
—

 
—

 
—

 
—

 
1

 
1

 
1

 
1

Benefits paid
(3
)
 
(3
)
 
(9
)
 
(9
)
 
(2
)
 
(1
)
 
(14
)
 
(13
)
Fair value of plan assets – end of year
$
52

 
$
46

 
$
94

 
$
88

 
$
9

 
$
9

 
$
155

 
$
143


In 2019 and 2018, there were no contributions made to the IMTT DB Plan or the HG DB Plan. As of December 31, 2019, IMTT is not expected to make any cash contribution to the IMTT DB Plan until 2021 and Hawaii Gas is not expected to make any cash contribution to the HG DB Plan until 2027. The annual amount of any cash contributions will be dependent upon a number of factors such as market conditions and changes to regulations.
The funded status at December 31, 2019 and 2018, are presented in the following table ($ in millions):
 
HG DB
Plan Benefits
 
IMTT DB
Plan Benefits
 
Other Plan
Benefits
 
Total
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Funded status
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Funded status at end of year
$
(2
)
 
$
(3
)
 
$
(74
)
 
$
(55
)
 
$
(21
)
 
$
(19
)
 
$
(97
)
 
$
(77
)
Net amount recognized in balance sheet
$
(2
)
 
$
(3
)
 
$
(74
)
 
$
(55
)
 
$
(21
)
 
$
(19
)
 
$
(97
)
 
$
(77
)
Amounts recognized in balance sheet consisting of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
$
—

 
$
—

 
$
—

 
$
—

 
$
(1
)
 
$
(1
)
 
$
(1
)
 
$
(1
)
Noncurrent liabilities
(2
)
 
(3
)
 
(74
)
 
(55
)
 
(20
)
 
(18
)
 
(96
)
 
(76
)
Net amount recognized in balance sheet
$
(2
)
 
$
(3
)
 
$
(74
)
 
$
(55
)
 
$
(21
)
 
$
(19
)
 
$
(97
)
 
$
(77
)


114
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Employee Benefit Plans  – (continued)

Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive loss in 2019 and 2018 are presented in the following table ($ in millions):
 
HG DB
Plan Benefits
 
IMTT DB
Plan Benefits
 
Other
Plan Benefits
 
Total
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Accumulated loss
$
(8
)
 
$
(10
)
 
$
(20
)
 
$
(7
)
 
$
(5
)
 
$
(4
)
 
$
(33
)
 
$
(21
)
Accumulated other comprehensive loss
(8
)
 
(10
)
 
(20
)
 
(7
)
 
(5
)
 
(4
)
 
(33
)
 
(21
)
Net periodic benefit cost in excess (deficit) of cumulative employer contributions
6

 
7

 
(54
)
 
(48
)
 
(16
)
 
(15
)
 
(64
)
 
(56
)
Net amount recognized in balance sheet
$
(2
)
 
$
(3
)
 
$
(74
)
 
$
(55
)
 
$
(21
)
 
$
(19
)
 
$
(97
)
 
$
(77
)

The components of net periodic benefit cost and other changes in other comprehensive loss (income) for the plans are shown below ($ in millions):
 
HG DB
Plan Benefits
 
IMTT DB
Plan Benefits
 
Other
Plan Benefits
 
Total
2019
 
2018
 
2017
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Components of net periodic benefit cost:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
1

 
$
1

 
$
1

 
$
5

 
$
6

 
$
5

 
$
1

 
$
1

 
$
1

 
$
7

 
$
8

 
$
7

Interest cost
2

 
2

 
2

 
6

 
6

 
6

 
1

 
1

 
1

 
9

 
9

 
9

Expected return on plan assets
(3
)
 
(3
)
 
(3
)
 
(5
)
 
(6
)
 
(6
)
 
—

 
(1
)
 
—

 
(8
)
 
(10
)
 
(9
)
Recognized actuarial loss
1

 
1

 
1

 
—

 
—

 
—

 
—

 
—

 
—

 
1

 
1

 
1

Special termination
benefits
—

 
—

 
—

 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
1

Net periodic benefit cost
$
1

 
$
1

 
$
1

 
$
6

 
$
6

 
$
6

 
$
2

 
$
1

 
$
2

 
$
9

 
$
8

 
$
9

Other changes recognized in other comprehensive loss (income):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (gain) loss arising during the year
$
(1
)
 
$
1

 
$
(2
)
 
$
13

 
$
(11
)
 
$
9

 
$
1

 
$
(1
)
 
$
1

 
$
13

 
$
(11
)
 
$
8

Amortization of loss
(1
)
 
(1
)
 
(1
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(1
)
 
(1
)
 
(1
)
Total recognized in other comprehensive (income) loss
$
(2
)
 
$
—

 
$
(3
)
 
$
13

 
$
(11
)
 
$
9

 
$
1

 
$
(1
)
 
$
1

 
$
12

 
$
(12
)
 
$
7


115
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Employee Benefit Plans  – (continued)

The assumptions used in accounting for the HG DB Plan Benefits, IMTT DB Plan Benefits and Other Plan Benefits are:
  
HG DB Plan Benefits
 
IMTT DB Plan Benefits
 
Other Plan Benefits
2019
 
2018
 
2017
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Weighted average assumptions to determine benefit obligations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate
3.20
%
 
4.25
%
 
3.60
%
 
3.25
%
 
4.35
%
 
3.70
%
 
2.82% to 3.35%

 
 
3.91% to 4.35%

 
 
3.25% to 3.70%

 
Rate of compensation increase
N/A

 
N/A

 
N/A

 
4.57
%
 
4.57
%
 
4.57
%
 
4.57
%
(1) 
 
4.57
%
(1) 
 
4.57
%
(1) 
Measurement date
December 31
 
December 31
 
December 31
 
December 31
 
December 31
 
December 31
 
December 31
 
 
December 31
 
 
December 31
 
Weighted average assumptions to determine net cost:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate
4.25
%
 
3.60
%
 
4.00
%
 
4.35
%
 
3.70
%
 
4.30
%
 
3.91% to 4.35%

 
 
3.25% to 3.70%

 
 
3.56% to 4.25%

 
Expected long-term rate of return on plan assets during fiscal year
4.90
%
 
5.90
%
 
5.90
%
 
5.50
%
 
5.60
%
 
6.25
%
 
5.50
%
(2) 
 
5.75
%
(2) 
 
5.75
%
(2) 
Rate of compensation increase
N/A

 
N/A

 
N/A

 
4.57
%
 
4.57
%
 
4.57
%
 
4.57
%
(1) 
 
4.57
%
(1) 
 
4.57
%
(1) 
Assumed healthcare cost trend rates:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Initial health care cost trend rate
 
 
 
 
 
 
 
 
 
 
 
 
7.25% to 7.75%

 
 
8.00% to 8.50%

 
 
6.98% to 7.00%

 
Ultimate rate
 
 
 
 
 
 
 
 
 
 
 
 
4.50% to 5.00%

 
 
4.50% to 5.00%

 
 
4.50% to 5.00%

 
Year ultimate rate is reached
 
 
 
 
 
 
 
 
 
 
 
 
2027 to 2028

 
 
2026 to 2027

 
 
2025 to 2028

 
_____________
(1)
Only applies to IMTT post-retirement life insurance plan.
(2)
Only applies to IMTT-Illinois Union Plan.
Pension asset investment decisions are made with assistance of an outside paid advisor to achieve the multiple goals of high rate of return, diversification and safety. The business has instructed the trustee, the investment manager, to maintain the allocation of the defined benefit plans’ assets between equity mutual fund securities, fixed income mutual fund securities, mixed equity and fixed income mutual fund securities, money market funds and cash within the pre-approved parameters set by the management. The weighted average asset allocation at December 31, 2019 and 2018 was:
 
HG DB
Plan Benefits
 
IMTT DB
Plan Benefits
 
Other
Plan Benefits
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Equity securities
26
%
 
23
%
 
44
%
 
42
%
 
47
%
 
45
%
Fixed income securities
69
%
 
71
%
 
40
%
 
41
%
 
43
%
 
44
%
Private equity
—

 
—

 
8
%
 
7
%
 
2
%
 
1
%
Global real estate fund
4
%
 
4
%
 
4
%
 
6
%
 
5
%
 
6
%
Cash
1
%
 
2
%
 
4
%
 
4
%
 
3
%
 
4
%
Total
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%


116
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Employee Benefit Plans  – (continued)

The expected returns on plan assets were estimated based on the allocation of assets and management’s expectations regarding future performance of the investments held in the investment portfolios. The asset allocations as of December 31, 2019 and 2018 measurement dates were ($ in millions):
 
Fair Value Measurements at December 31, 2019
Pension Benefits – Plan Assets
Total
 
Quoted Prices in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Net
Asset
Value
(NAV)
Asset category:
 
 
 
 
 
 
 
 
 
Cash and money market
$
5

 
$
5

 
$
—

 
$
—

 
$
—

Equity securities
59

 
—

 
59

 
—

 
—

Fixed income securities
77

 
—

 
77

 
—

 
—

Global real estate fund
6

 
—

 
6

 
—

 
—

Domestic private equity
8

 
—

 
—

 
—

 
8

Total
$
155

 
$
5

 
$
142

 
$
—

 
$
8

 
Fair Value Measurements at December 31, 2018
Pension Benefits – Plan Assets
Total
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Net
Asset
Value
(NAV)
Asset category:
 
 
 
 
 
 
 
 
 
Cash and money market
$
5

 
$
5

 
$
—

 
$
—

 
$
—

Equity securities
52

 
—

 
52

 
—

 
—

Fixed income securities
73

 
—

 
73

 
—

 
—

Global real estate fund
7

 
—

 
7

 
—

 
—

Domestic private equity
6

 
—

 
—

 
—

 
6

Total
$
143

 
$
5

 
$
132

 
$
—

 
$
6


The estimated future benefit payments for the next ten years are ($ in millions):
 
HG DB Plan Benefits
 
IMTT DB Plan Benefits
 
Other Plan Benefits
 
Total
2020
$
3

 
$
10

 
$
2

 
$
15

2021
3

 
7

 
2

 
12

2022
3

 
7

 
2

 
12

2023
3

 
8

 
2

 
13

2024
3

 
8

 
2

 
13

Thereafter
16

 
45

 
9

 
70

Total
$
31

 
$
85

 
$
19

 
$
135


17. Legal Proceedings and Contingencies
The Company and its subsidiaries are subject to legal proceedings arising in the ordinary course of business. In management’s opinion, the Company has adequate legal defenses and/or insurance coverage with respect to the eventuality of such actions and does not believe the outcome of any pending legal proceedings will be material to the Company’s financial position or result of operations.

117
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Legal Proceedings and Contingencies – (continued)


IMTT Bayonne — Remediation
The Bayonne, New Jersey terminal, portions of which have been acquired over a 30-year period, have pervasive remediation requirements that were assumed at the time of purchase from the various former owners. One former owner retained environmental remediation responsibilities for a purchased site and shares in other remediation costs. These remediation requirements are documented in two memoranda of agreement and an administrative consent order with the State of New Jersey. Remediation efforts entail removal of free product, soil treatment, repair/replacement of sewer systems, and the implementation of containment and monitoring systems. These remediation activities are estimated to span a period of ten to twenty or more years and cost from $30 million to $65 million over the next 20 years. The cost of the remediation activities at the terminal are estimated based on currently available information, in undiscounted U.S. dollars and is inherently subject to relatively large fluctuation.
Shareholder Litigation
On April 23, 2018, a complaint captioned City of Riviera Beach General Employees Retirement System v. Macquarie Infrastructure Corp., et al., Case 1:18-cv-03608 (VSB), was filed in the United States District Court for the Southern District of New York. A substantially identical complaint captioned Daniel Fajardo v. Macquarie Infrastructure Corporation, et al., Case No. 1:18-cv-03744 (VSB) was filed in the same court on April 27, 2018. Both complaints asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder on behalf of a putative class consisting of all purchasers of MIC common stock between February 22, 2016 and February 21, 2018. The named defendants in both cases were the Company and four current or former officers of MIC and one of its subsidiaries, IMTT Holdings LLC. The complaints in both actions allege that the Company and the individual defendants knowingly made material misstatements and omitted material facts in its public disclosures concerning the Company’s and IMTT’s business and the sustainability of the Company’s dividend to stockholders. On January 30, 2019, the Court issued an opinion and order consolidating the two cases, appointing Moab Partners, L.P. (Moab) as Lead Plaintiff and approving Moab’s selection of lead counsel. On February 20, 2019, Moab filed a consolidated class action complaint. In addition to the claims noted above, the consolidated class action complaint also asserts claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 relating to the Company’s November 2016 secondary public offering of common stock. The consolidated amended complaint also adds Macquarie Infrastructure Management (USA) Inc., Barclays Capital Inc. and seven additional current or former officers or directors of MIC as defendants. On April 22, 2019, the Company and the other defendants filed motions to dismiss the consolidated class action complaint in its entirety, with prejudice. Briefing concluded on July 22, 2019. The Company intends to continue to vigorously contest the claims asserted, which the Company believes are entirely meritless.
On August 9, 2018, a shareholder derivative complaint captioned Phyllis Wright v. Liam Stewart, et al., Case No. 1:18-cv-07174 (VSB), was filed in the United States District Court for the Southern District of New York. A substantially identical complaint captioned Raymond Greenlee v. James Hooke, et al., Case No. 1:18-cv-09339 (VSB) was filed in the same court on October 12, 2018. A third and substantially similar shareholder derivative complaint captioned Kim Johnson v. Liam Stewart, et al., Case No. 1:18-cv-011062 (VSB) was filed in the same court on November 27, 2018. Each of the shareholder derivative complaints assert derivative claims on behalf of the Company against certain of its current and former officers and directors arising out of the same subject matter at issue in the City of Riviera Beach and Fajardo complaints discussed above. The causes of action asserted include violation of Section 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duties, waste of corporate assets, unjust enrichment, and aiding and abetting breach of fiduciary duty. A motion to consolidate the three actions is currently pending. Proceedings in the Wright, Greenlee and Johnson cases are otherwise stayed pending resolution of the motions to dismiss the securities class actions described above. The Company expects that the named defendants will vigorously contest the claims asserted in the Wright, Greenlee and Johnson complaints.
18. Subsequent Events
Dividend
On February 14, 2020, the Board declared a dividend of $1.00 per share for the quarter ended December 31, 2019, which is expected to be paid on March 11, 2020 to holders of record on March 6, 2020.

118
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. Quarterly Data (Unaudited)
The following table represents the summary of financial data from both continuing and discontinued operations for the quarters related to the years ended December 31, 2019 and 2018.
Quarter ended
 
March 31
 
June 30
 
September 30
 
December 31
  
 
(In Millions, except per share data)
2019
 
 
 
 
 
 
 
 
Revenue from continuing operations
 
$
482

 
$
416

 
$
405

 
$
424

Operating income from continuing operations
 
123

 
55

 
56

 
55

Net income from continuing operations attributable to MIC
 
64

 
6

 
15

 
16

Net income (loss) from discontinued operations attributable to MIC
 
6

 
5

 
46

 
(2
)
Per share information attributable to MIC(1):
 
 
 
 
 
 
 
 
Basic income per share from continuing operations attributable to MIC
 
$
0.75

 
$
0.07

 
$
0.18

 
$
0.18

Basic income (loss) per share from discontinued operations attributable to MIC
 
0.07

 
0.06

 
0.53

 
(0.02
)
Basic income per share attributable to MIC
 
0.82

 
0.13

 
0.71

 
0.16

Diluted income per share from continuing operations attributable to MIC
 
$
0.73

 
$
0.07

 
$
0.18

 
$
0.18

Diluted income (loss) per share from discontinued operations attributable to MIC
 
0.06

 
0.06

 
0.53

 
(0.02
)
Diluted income per share attributable to MIC
 
0.79

 
0.13

 
0.71

 
0.16

Cash dividends declared per share
 
$
1.00

 
$
1.00

 
$
1.00

 
$
1.00

2018
 
 
 
 
 
 
 
 
Revenue from continuing operations
 
$
467

 
$
436

 
$
421

 
$
437

Operating income from continuing operations
 
76

 
58

 
53

 
47

Net income (loss) from continuing operations attributable to MIC
 
40

 
27

 
2

 
(1
)
Net income from discontinued operations attributable to MIC
 
37

 
11

 
20

 
1

Per share information attributable to MIC(1):
 
 
 
 
 
 
 
 
Basic income (loss) per share from continuing operations attributable to MIC
 
$
0.47

 
$
0.32

 
$
0.02

 
$
(0.01
)
Basic income per share from discontinued operations attributable to MIC
 
0.44

 
0.13

 
0.23

 
—

Basic income (loss) per share attributable to MIC
 
0.91

 
0.45

 
0.25

 
(0.01
)
Diluted income (loss) per share from continuing operations attributable to MIC
 
$
0.47

 
$
0.32

 
$
0.02

 
$
(0.01
)
Diluted income per share from discontinued operations attributable to MIC
 
0.44

 
0.13

 
0.23

 
—

Diluted income (loss) per share attributable to MIC
 
0.91

 
0.45

 
0.25

 
(0.01
)
Cash dividends declared per share
 
$
1.00

 
$
1.00

 
$
1.00

 
$
1.00

_____________
(1)
Due to averaging of shares, quarterly earnings per share may not sum to the totals reported for the full year.


119

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Management’s Evaluation of Disclosure Controls and Procedures
Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Form 10-K, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(b) Management’s Annual Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2019. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management used the framework set forth in the report entitled ‘‘Internal Control-Integrated Framework (2013)’’ published by the Committee of Sponsoring Organizations of the Treadway Commission (referred to as COSO) to evaluate the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019. As a result of its evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2019 based on those criteria.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2019 has been audited by KPMG LLP, the Company’s independent registered public accounting firm, as stated in their report appearing on page 122, which expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019.
(c) Remediation of Previously Identified Material Weakness in Internal Control Over Financial Reporting
As disclosed in Part II Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2018, we identified a material weakness in our internal controls over financing reporting at Atlantic Aviation due to control deficiencies over the activities designed to ensure the completeness and accuracy of fuel gallons and retail prices used in fuel sales transactions made on account and reported as revenues. During 2019, management implemented our previously disclosed remediation plan including (i) reinforcing the importance of the performance of the fuel gallon and pricing management review procedures and controls; (ii) developing and maintaining documentation to be utilized by FBO personnel in performing revenue procedures and controls; (iii) training control owners on revenue procedures and controls; (iv) re-enforcing accountability for compliance with internal control policies and procedure; and (v) enhancing the existing centralized revenue control review and monitoring function.
During the fourth quarter of 2019, we completed our testing of the operating effectiveness of the implemented controls and found them to be effective. As a result, management has concluded that the material weakness has been remediated as of December 31, 2019.

120

(d) Changes in Internal Control over Financial Reporting
Effective January 1, 2019, we adopted ASC Topic 842, Leases. The adoption of this accounting standard required the implementation of new internal controls over reporting of operating leases. For example, we implemented new controls related to the adoption process and a new IT system to capture, calculate, and account for leases, and gather the necessary data to properly account for leases under ASC 842. Except for the changes in connection with the implementation of the remediation plan described above, there were no other changes in our internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) that occurred during the year ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

121

(e) Attestation Report of Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Macquarie Infrastructure Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Macquarie Infrastructure Corporation and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements), and our report dated February 25, 2020 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Dallas, Texas
February 25, 2020

122

ITEM 9B. OTHER INFORMATION
Not Applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Company will furnish to the Securities and Exchange Commission a definitive proxy statement not later than 120 days after the end of the fiscal year ended December 31, 2019.
The information required by this Item 10 is included under the captions “Election of Directors”, “Governance Information” and “Section 16(A) Beneficial Ownership Reporting Compliance” in our proxy statement for our 2020 annual meeting of stockholders and is incorporated herein by reference.
Our Code of Business Conduct applies to all of our directors, officers and employees as well as all directors, officers and employees of our Manager involved in the management of the Company and its businesses. Our Code of Business Conduct is posted on the Governance page of our website, www.macquarie.com/mic. We will post any amendment to the Code of Business Conduct, and any waivers that are required to be disclosed by the rules of either the SEC or the NYSE, on our website.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is included under the captions “Director Compensation”, “Compensation Discussion and Analysis”, “Executive Compensation”, “Governance Information” and “Compensation Committee Report” in our proxy statement for our 2020 annual meeting of stockholders and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this Item 12 is included under the caption “Share Ownership of Directors, Executive Officers and Principal Stockholders” in our proxy statement for our 2020 annual meeting of stockholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this Item 13 is included under the caption “Certain Relationships and Related Party Transactions” and “Governance Information” in our proxy statement for our 2020 annual meeting of stockholders and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item 14 is included under the caption “Ratification of Selection of Independent Auditor” in our proxy statement for our 2020 annual meeting of stockholders and is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Financial Statements and Schedules
The consolidated financial statements in Part II, Item 8, and schedule listed in the accompanying exhibit index are filed as part of this report.
Exhibits
The exhibits listed on the accompanying exhibit index are filed as a part of this report.
ITEM 16. FORM 10-K SUMMARY
None.

123

EXHIBIT INDEX
3.1
 
3.2
 
4.1
 
4.2
 
4.3
 
4.4
 
 
 
 
 
 
 
 
 
 
 
 
 
 


TABLE OF CONTENTS

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101.INS
 
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

TABLE OF CONTENTS

101.SCH
 
XBRL Taxonomy Extension Schema Document
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
104
 
The cover page from the Registrant's Annual Report on Form 10-K for the year ended December 31, 2019, formatted in XBRL and contained in Exhibit 101.
_________________
*
Management contract, compensatory plan or arrangement.
**
Filed herewith.
***
A signed original of this written statement required by Section 906 has been provided to Macquarie Infrastructure Corporation and will be retained by Macquarie Infrastructure Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
†
The Registrant does not deem this agreement material pursuant to Regulation S-K Item 601(b)(10).

TABLE OF CONTENTS

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Macquarie Infrastructure Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 25, 2020.
 
MACQUARIE INFRASTRUCTURE CORPORATION
(Registrant)
 
By:
/s/ Christopher Frost
 
 
Chief Executive Officer
We, the undersigned directors and executive officers of Macquarie Infrastructure Corporation, hereby severally constitute Christopher Frost and Liam Stewart, and each of them singly, our true and lawful attorneys with full power to them and each of them to sign for us, and in our names in the capacities indicated below, any and all amendments to the Annual Report on Form 10-K filed with the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys to any and all amendments to said Annual Report on Form 10-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Macquarie Infrastructure Corporation and in the capacities indicated on the 25th day of February 2020.
 
 
 
Signature
 
Title
 
 
 
/s/ Christopher Frost
 
Chief Executive Officer and Director
Christopher Frost
 
(Principal Executive Officer)
 
 
 
/s/ Liam Stewart
 
Chief Financial Officer
Liam Stewart
 
(Principal Financial Officer)
 
 
 
/s/ Robert Choi
 
Principal Accounting Officer
Robert Choi
 
 
 
 
 
/s/ Martin Stanley
 
Chairman of the Board of Directors
Martin Stanley
 
 
 
 
 
/s/ Norman H. Brown, Jr.
 
Director
Norman H. Brown, Jr.
 
 
 
 
 
/s/ Amanda Brock
 
Director
Amanda Brock
 
 
 
 
 
/s/ Ronald Kirk
 
Director
Ronald Kirk
 
 
 
 
 
/s/ Maria J. Dreyfus
 
Director
Maria J. Dreyfus
 
 
 
 
 
/s/ Henry E. Lentz
 
Director
Henry E. Lentz
 
 
 
 
 
/s/ Ouma Sananikone
 
Director
Ouma Sananikone
 
 



Exhibit 4.5
DESCRIPTION OF THE REGISTRANTS’ SECURITIES REGISTERED PURUSUANT TO
SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
Macquarie Infrastructure Corporation (“MIC,” the “Company,” “we,” “our” or “us”) has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended: our common stock.
The following description is a summary of the material provisions of our certificate of incorporation and bylaws, in each case to the extent that they relate to shares of our capital stock. This summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all of the provisions of the certificate of incorporation and the bylaws, both of which are filed as exhibits to this Annual Report on Form 10-K. The terms of these securities also may be affected by the General Corporation Law of the State of Delaware (which we refer to below as the “DGCL”).
Authorized Capitalization
Our authorized capital stock consists of (i) 500,000,000 shares of common stock, $0.001, par value per share, (ii) 100 shares of special stock, $0.001, par value per share, and (iii) 100,000,000 shares of preferred stock, par value $0.001 per share. As of December 31, 2019, we had outstanding 86,600,302 shares of common stock, 100 shares of special stock and no shares of preferred stock.
Common Stock
Voting.  Each share of common stock is entitled to one vote on each matter submitted to a vote at a meeting of stockholders. Except as provided in the certificate of incorporation, the holders of common stock and special stock vote separately as different classes. Holders of common stock are not entitled to vote cumulatively for the election of directors. Except as provided in the certificate of incorporation or under the DGCL, all matters to be voted on by holders of common stock must be approved by a majority of the voting power of the shares of common stock present in person or represented by proxy at the meeting of stockholders or, in the case of the election of directors, by a majority of the votes cast unless the election is contested, in which case directors will be elected by a plurality of the votes cast. Any nominee who fails to receive the required number of votes in an uncontested election agrees to promptly tender his or her resignation, and the board of directors will determine whether to accept or reject such resignation following receipt of a recommendation from the nominating and governance committee.
Dividends.  Subject to applicable law and the preference of any other stock ranking prior to the common stock as to the payment of dividends, holders of common stock are entitled to receive dividends in amounts as determined by the board of directors. We may pay dividends consisting of cash, property or shares of our capital stock.
Delaware law allows a corporation to pay dividends only out of surplus, as determined under Delaware law or, if there is no surplus, out of net profits for the fiscal year in which the dividend was declared and for the preceding fiscal year. Under Delaware law, however, a corporation cannot pay dividends out of net profits if, after paying the dividend, the corporation’s capital would be less than the capital represented by the outstanding stock of all classes having a preference upon the distribution of assets.
Transfer Restriction.  The certificate of incorporation and bylaws do not restrict the transfer of shares of common stock but the bylaws provide that we have the power to enter into and perform any agreement with any stockholders to restrict the transfer of shares of our common stock in any manner not prohibited by the DGCL.
Election of Directors.  Under the certificate of incorporation, at any time when the Third Amended and Restated Management Services Agreement (as may be amended from time to time, the “Management Services Agreement”), dated May 21, 2015, among the Company, MIC Ohana Corporation (“MIC Ohana”) and Macquarie Infrastructure Management (USA) Inc. (the “Manager”) is in effect and our Manager or any of its affiliates holds at least 200,000 shares of common stock (which represents the number of shares of common stock with an aggregate value of at least $5 million at a price per share of common stock equal to the per share price of the shares sold in the initial public offering of the predecessor to MIC LLC) (as adjusted to reflect any subsequent equity splits or similar recapitalizations),




holders of common stock, voting separately as a class, will be entitled to elect our directors other than one director who will be elected by the holders of special stock and who will act as the chairman of the board of directors.
At any time when the Management Services Agreement is not in effect or neither our Manager nor any of its affiliates holds at least 200,000 shares of common stock (as adjusted to reflect any subsequent equity splits or similar recapitalizations), the holders of common stock will be entitled to elect all of the directors to be elected at an election.
Other Rights.  Upon our liquidation, dissolution or winding up, all holders of common stock will be entitled to share equally, on a per share basis, in all of our assets of whatever kind available for distribution.
Trading.  Our common stock is listed on the NYSE under the symbol “MIC”. Our transfer agent and registrar is Computershare, Inc.
Special Stock
Concurrently with our conversion from a corporation to a limited liability company, we issued to our Manager 100 shares of special stock. The sole purpose for the issuance of special stock to our Manager was to preserve our Manager’s previously-existing right to appoint one director to serve as the chairman of our board of directors, which right would otherwise have been lost upon consummation of the conversion.
Voting.  Each share of special stock is entitled to one vote on each matter to which holders of special stock are entitled to vote or provide consent.
Holders of special stock are not entitled to vote on or consent to any matter, except those matters explicitly set forth in the certificate of incorporation, which are as follows:
•
any further authorization for issuance of shares of special stock, which issuance will require the prior affirmative vote or written consent of the holders of a majority of the shares outstanding of special stock, voting or consenting separately as a class;
•
any issuance of shares of preferred stock, which issuance will require the prior affirmative or written consent of the holders of a majority of the shares outstanding of special stock, voting or consenting separately as a class;
•
any amendment of any provision of the certificate of incorporation or bylaws that would adversely affect the rights of holders of special stock as a class, which amendment will require the prior affirmative vote or written consent of the holders of a majority of the shares outstanding of special stock, voting or consenting separately as a class;
•
election of one director who will act as the chairman of the board of directors, which election will require the affirmative vote or written consent of the holders of special stock, voting or consenting separately as a class, as discussed immediately below in the section entitled “- Election of One Director”;
•
removal of any director for cause, which removal will require the affirmative vote of the holders of at least 66 2/3% of the voting power of the issued and outstanding shares of common stock and special stock (and any series of preferred stock then entitled to vote at an election of directors), voting together as a single class; and
•
removal of any director elected by the holders of special stock, voting or consenting separately as a class, without cause, which removal will require the affirmative vote or written consent of the holders of at 66 2/3% of the voting power of the issued and outstanding shares of special stock, voting or consenting separately as a class.
Election of One Director.  Under the certificate of incorporation, holders of special stock are entitled to elect one director, who will act as the chairman of the board of directors, at any time when the Management Services Agreement is in effect and our Manager or any of its affiliates holds at least 200,000 shares of common stock (as adjusted to reflect any subsequent equity splits or similar recapitalizations).
Dividends.  The certificate of incorporation provides that holders of special stock are not entitled to any dividends.




Transfer Restriction.  The certificate of incorporation provides that holders of special stock may not offer, sell, pledge, transfer, dispose or distribute shares of special stock or enter into any agreement with respect to the foregoing.
Redemption.  Upon the earlier of (i) the termination of the Management Services Agreement or (ii) the date on which neither our Manager nor any of its affiliates holds at least 200,000 shares of common stock (as adjusted to reflect any subsequent equity splits or similar recapitalizations) (in either case, a “Redemption Event”), all outstanding shares of special stock will be redeemed by us at a price equal to $0.001 per share, within five business days after we become aware of the occurrence of a Redemption Event. If we do not have sufficient funds legally available to redeem all outstanding shares of special stock, we will redeem a pro rata portion of each holder’s redeemable shares out of any legally available funds and redeem the remaining shares as soon as practicable after we have funds legally available thereafter. Any shares of special stock which are redeemed or otherwise acquired by us or any of our subsidiaries will be automatically and immediately canceled and retired and will not be reissued, sold or transferred. Neither we nor any of our subsidiaries may exercise any voting or other rights granted to the holders of special stock following redemption.
Other Rights.  Holders of special stock are not entitled to share in any distribution of assets in the event of any liquidation, dissolution or winding up of our affairs.
Trading.  Our special stock is not listed on any stock exchange.
Preferred Stock
Our board of directors is authorized to fix the designations, rights, preferences, powers and limitations of and to issue each series of the preferred stock. Our board of directors has flexibility to create one or more series of preferred stock, from time to time, and to determine the relative designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions of each series. The consent of our Manager, as holder of shares of special stock, is required for issuances of preferred stock.
Preferred stock may be issued, at the discretion of our board of directors, for any proper corporate purpose, without further action by our stockholders other than as may be required by applicable law. Stockholders do not have preemptive rights with respect to the future issuance of shares of preferred stock and stockholders’ interest in us could be diluted by any such issuance with respect to any of the following: earnings per share, voting, liquidation rights and book and market value.
The issuance of shares of preferred stock could affect the relative rights of holders of common stock. Depending upon the exact terms, limitations and relative rights and preferences, if any of the shares of preferred stock as determined by the board of directors at the time of issuance, the holders of shares of preferred stock may be entitled to a higher dividend rate than that paid on the common stock, a prior claim on funds available for the payment of dividends, a fixed preferential payment in the event of liquidation and dissolution, redemption rights, rights to convert their shares of preferred stock into shares of common stock, and voting rights which would tend to dilute the voting control of the holders of shares of common stock. Any shares of preferred stock could be issued with rights, preferences and privileges that may be superior to those of the common stock.
Our board of directors has represented that it will not, without prior stockholder approval, approve the issuance or use of preferred stock for any defensive or anti-takeover purpose or for the purpose of implementing any stockholder rights plan. Within these limits, as well as others imposed by applicable law and NYSE rules, the board of directors may approve the issuance or use of preferred stock for capital raising, financing and acquisition needs or opportunities that has the effect of making an acquisition of our Company more difficult or costly, as could also be the case if the board of directors were to issue additional common stock.
Forum Selection Clause
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for any stockholder (including any beneficial owner) to bring (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or employees to us or to our stockholders, (iii) any action asserting a claim




arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws, (iv) any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws or (v) any action asserting a claim governed by the internal affairs doctrine, will be the Court of Chancery of the State of Delaware. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock is deemed to have notice of and consented to the foregoing provisions.
Anti-Takeover Provisions in the Certificate of Incorporation and Bylaws and Under Delaware Corporate Law
A number of provisions of our certificate of incorporation, bylaws and the DGCL could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, control of us.
Business Combinations.  The certificate of incorporation prohibits the merger or consolidation of us with or into any limited liability company, corporation, trust or any other unincorporated business or the sale, lease or exchange of all or substantially all of our assets unless the board of directors adopts a resolution by a majority vote approving such action and unless such action is approved by the affirmative vote of a majority of the outstanding shares entitled to vote thereon; provided, however, that any shares held by the Manager or an affiliate or associate of the Manager shall not be entitled to vote to approve any merger or consolidation with or into, or sale, lease or exchange to, the Manager or any affiliate or an associate thereof.
We are subject to the provisions of Section 203 of the DGCL. Section 203 prohibits an “interested stockholder” from engaging in a “business combination” with a Delaware corporation for three years following the date such person became an interested stockholder, unless:
•
prior to the date such person became an interested stockholder, the board of directors of the corporation approved the transaction in which the interested stockholder became an interested stockholder or approved the business combination;
•
upon consummation of the transaction that resulted in the interested stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding stock held by directors who are also officers of the corporation and stock held by certain employee stock plans; or
•
on or subsequent to the date of the transaction in which such person became an interested stockholder, the business combination is approved by the board of directors of the corporation and authorized at a meeting of stockholders by the affirmative vote of the holders of at least two-thirds of the outstanding voting stock of the corporation not owned by the interested stockholder.
Section 203 defines a “business combination” to generally include:
•
any merger or consolidation involving the corporation and an interested stockholder;
•
any sale, transfer, pledge or other disposition involving an interested stockholder of 10% or more of the assets of the corporation;
•
subject to certain exceptions, any transaction which results in the issuance or transfer by the corporation of any stock of the corporation to an interested stockholder;
•
any transaction involving the corporation which has the effect of increasing the proportionate share of any class or series of stock of the corporation beneficially owned by the interested stockholder; or
•
the receipt by an interested stockholder of any loans, guarantees, pledges or other financial benefits provided by or through the corporation.
Section 203 generally defines an “interested stockholder” as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by such entity or person.
The certificate of incorporation also provides that the affirmative vote of at least 66 2/3% of our outstanding shares of stock (excluding shares held by an “interested stockholder” (as defined in the certificate of incorporation) or any of its affiliates or associate) is required to approve any “business combination” (as defined in the certificate of incorporation). Such affirmative vote is required notwithstanding any law or agreement with any securities exchange or otherwise. The “continuing directors” (as defined in the certificate of incorporation) will determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with the provisions




relating to certain business combinations and transactions, including, without limitation, (a) whether a person is an interested stockholder, (b) the number of shares of our stock beneficially owned by any person, (c) whether a person is an affiliate or associate of another and (d) the “fair market value” (as defined in the certificate of incorporation) of our equity securities or any of our subsidiaries.
Vacancies; Acting by Written Consent.  Subject to the right of our Manager as holder of the special stock to elect one director and his or her successor in the event of a vacancy, the certificate of incorporation authorizes only our board of directors to fill vacancies, including for newly created directorships. This provision could prevent a stockholder of ours from effectively obtaining an indirect majority representation on our board of directors by permitting the existing board to increase the number of directors and to fill the vacancies with its own nominees.
Except as otherwise provided in the certificate of incorporation, holders of our shares are not permitted to act by written consent. Instead, stockholders may only take action via proxy, which may be presented at a duly called annual or special meeting of our stockholders. Furthermore, the certificate of incorporation provides that special meetings may only be called by the chairman of our board of directors or by resolution adopted by our board of directors.
Nomination and Proposal Procedures.  Our bylaws provide that stockholders seeking to bring business before an annual meeting of members or to nominate candidates for election as directors at an annual meeting of stockholders of our Company must provide notice thereof in writing to us not less than 120 days and not more than 150 days prior to the anniversary date of our preceding year’s annual meeting. In addition, the stockholder furnishing such notice must be a stockholder of record on both (1) the date of delivering such notice and (2) the record date for the determination of stockholders entitled to vote at such meeting. The bylaws specify certain requirements as to the form and content of a stockholder’s notice. These provisions may preclude stockholders from bringing matters before an annual meeting or from making nominations for directors at an annual or special meeting. To deliver timely notice of a nomination for a special meeting of stockholders, a stockholder must submit such written notice at least 120 days but not more than the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the special meeting date and of the proposed nominees.
Future Issuances of Common Stock.  Authorized but unissued shares of common stock are available for future issuance, without approval of our stockholders. These additional shares may be utilized for a variety of purposes, including acquisitions, compensation and incentive plans and future public or private offerings to raise additional capital. One of the effects of the existence of such unissued shares may be to enable the board of directors to discourage or prevent a potential acquisition or takeover (by means of a tender or exchange offer, proxy contest or otherwise) and thereby to protect the continuity of the management.
Removal Procedures.  Our certificate of incorporation provides that any director may be removed for cause by the affirmative vote of the holders of at least 66 2/3% of the voting power of the issued and outstanding shares of common stock, special stock and preferred stock, if any, voting together as a single class. Any director elected by the holders of common stock, voting separately as a class, may be removed from office at any time, without cause, solely by the affirmative vote of at least 66 2/3% of the voting power of the issued and outstanding shares of common stock voting separately as a separate class. Any director elected by the holders of special stock, voting or consenting separately as a class, may be removed from office at any time, without cause, solely by the affirmative vote or written consent of the holders of at least 66 2/3% of the voting power of the issued and outstanding shares of special stock voting separately as a separate class.
Rights Plan.  Although we do not have a stockholder rights plan, under Delaware law, the board of directors could adopt such a plan without stockholder approval. If adopted, a stockholder rights plan could operate to cause substantial dilution to a person or group that attempts to acquire us on terms not approved by the board of directors.
Amendment of Certificate of Incorporation and Bylaws.  Our board of directors has broad authority, subject to the limitations described below, to amend the certificate of incorporation and bylaws. The board, with stockholder approval if required, could in the future choose to amend the certificate of incorporation or bylaws to include other provisions which have the intention or effect of discouraging takeover attempts. Under the DGCL, the certificate of incorporation may be amended by an affirmative vote of a majority of the directors then in office and a majority of




the outstanding stock and entitled to vote thereon. The certificate of incorporation and the bylaws provide that the board of directors may amend the bylaws by resolution adopted by the affirmative vote of a majority of the total number of directors then in office, subject to limitations under Delaware law. Section 6.6 (Replacement manager) and Section 11.1 (Amendments) of the bylaws may not be amended without the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at a meeting of stockholders. For so long as the Management Services Agreement is in effect, Section 3.7 (Appointment of Chairman of the Board), Article VI (Management), and Article XI (Amendments) of the bylaws may not be amended without the prior written consent of our Manager.
Anti-Takeover Provisions in the Management Services Agreement
The Management Services Agreement specifies limited circumstances under which the Manager may be terminated by the Company. In addition, the Disposition Agreement, dated as of October 30, 2019 (as may be amended from time to time, the “Disposition Agreement”) among the Company, MIC Ohana and the Manager, provides that, during the term of the Disposition Agreement, the Management Services Agreement will terminate with respect to businesses of the Company that are sold, and upon the sale of the Company, and provides for related payments to the Manager.




Exhibit 21.1
 
 
 
Subsidiary
 
Jurisdiction                                          
AA Charter Brokerage LLC
 
Delaware
AAC Subsidiary, LLC
 
Delaware
ACM Property Services, LLC
 
Delaware
Atlantic Aviation - Bridgeport LLC
 
Delaware
Atlantic Aviation - Eagle LLC
 
Delaware
Atlantic Aviation - Opa Locka LLC
 
Delaware
Atlantic Aviation - Oxford LLC
 
Delaware
Atlantic Aviation - Salt Lake City LLC
 
Delaware
Atlantic Aviation Albuquerque Inc.
 
New Mexico
Atlantic Aviation Corporation
 
Delaware
Atlantic Aviation Corporation
 
Pennsylvania
Atlantic Aviation FBO Holdings LLC
 
Delaware
Atlantic Aviation FBO Inc.
 
Delaware
Atlantic Aviation Flight Support, Inc.
 
Delaware
Atlantic Aviation Holding Corporation
 
Delaware
Atlantic Aviation Investors, Inc.
 
California
Atlantic Aviation of Santa Monica, L.P.
 
California
Atlantic Aviation Oklahoma City, Inc.
 
Delaware
Atlantic Aviation Oregon FBO Inc.
 
Oregon
Atlantic Aviation Oregon General Aviation Services Inc.
 
Oregon
Atlantic Aviation Philadelphia, Inc.
 
Delaware
Atlantic Aviation Stewart LLC
 
Delaware
Atlantic Aviation-Boca Raton LLC
 
Delaware
Atlantic Aviation-Florida LLC
 
Delaware
Atlantic Aviation-Kansas City LLC
 
Missouri
Atlantic Aviation-Montrose LLC
 
Delaware
Atlantic Aviation-Orlando Executive LLC
 
Delaware
Atlantic Aviation-Orlando LLC
 
Delaware
Atlantic Aviation-St. Augustine LLC
 
Delaware
Atlantic Aviation-Steamboat-Hayden LLC
 
Delaware
Atlantic Aviation-Stuart LLC
 
Delaware
Atlantic Aviation-West Palm Beach LLC
 
Delaware
Atlantic SMO GP LLC
 
Delaware
Atlantic SMO Holdings LLC
 
Delaware
Aviation Contract Services, Inc.
 
California
BASI Holdings, LLC
 
Delaware
Bayonne Industries, Inc.
 
New Jersey
Bayonne Plant Holding, L.L.C.
 
Delaware
Brainard Airport Services, Inc.
 
Connecticut
Bridgeport Airport Services, Inc.
 
Connecticut
Charter Oak Aviation, Inc.
 
Connecticut
COAI Holdings, LLC
 
Delaware
Corporate Wings - CGF, LLC
 
Ohio
Corporate Wings-Hopkins, LLC
 
Ohio
District Energy Midwest Sub LLC
 
Delaware
DM Petroleum Operations Company
 
Louisiana




Eagle Aviation Resources, LTD.
 
Nevada
East Jersey Railroad and Terminal Company
 
New Jersey
Equuleus CSG Holdings, LLC
 
Delaware
Executive Air Support, Inc.
 
Delaware
FLI Subsidiary, LLC
 
Delaware
Flightways of Long Island, Inc.
 
New York
General Aviation Holdings, LLC
 
Delaware
General Aviation of New Orleans, L.L.C.
 
Louisiana
General Aviation, L.L.C.
 
Louisiana
Gilmerton Energy Center, LLC
 
Delaware
GWE Solar-Storage HI 1, LLC
 
Delaware
Hawaii Clean Energy, LLC
 
Hawaii
HGC Holdings LLC
 
Hawaii
HGC Investment Corporation
 
Delaware
High Horizons, Inc.
 
Louisiana
IEP LLC
 
Louisiana
ILG Avcenter, Inc.
 
Delaware
Imperial Valley Equity Holdings, LLC
 
Delaware
IMTT Epic LLC
 
Delaware
IMTT Holdings LLC
 
Delaware
IMTT-Bayonne LLC
 
Delaware
IMTT-BC LLC
 
Delaware
IMTT-BX LLC
 
Delaware
IMTT-Finco, LLC
 
Delaware
IMTT-Geismar
 
Delaware
IMTT-Gretna LLC
 
Delaware
IMTT-Illinois LLC
 
Delaware
IMTT-NTL, Ltd.
 
Alberta
IMTT-Petroleum Management LLC
 
Delaware
IMTT-Pipeline LLC
 
Delaware
IMTT–Quebec Inc.
 
Quebec
IMTT-Richmond-CA
 
Delaware
IMTT-Virginia LLC
 
Delaware
International Environmental Services, LLC
 
Louisiana
International-Matex Tank Terminals LLC
 
Delaware
ITT Holdings LLC
 
Delaware
ITT-Geismar Storage LLC
 
Louisiana
ITT-Geismar, L.L.C.
 
Louisiana
ITT-NTL, Inc.
 
Louisiana
ITT-Richmond-CA LLC
 
Louisiana
ITT-Richmond-CA Storage LLC
 
Louisiana
ITT-USA, Inc.
 
Louisiana
Jet Center Property Services, LLC
 
Delaware
Jet South, LLC
 
Georgia
JetSouth, LLC
 
Alabama
Keystone Aviation Services, LLC
 
Delaware
Macquarie Airports North America Inc.
 
Delaware
Macquarie Aviation North America 2 Inc.
 
Delaware
Macquarie Aviation North America Inc.
 
Delaware
Macquarie District Energy Holdings III LLC
 
Delaware




Macquarie HGC Investment LLC
 
Hawaii
Macquarie Infrastructure Corporation
 
Delaware
Macquarie Terminal Holdings LLC
 
Delaware
Matex New Jersey Power LLC
 
Delaware
MCT Holdings LLC
 
Delaware
Mercury Air Center - Corpus Christi, Inc.
 
Texas
Mercury Air Center-Addison, Inc.
 
Texas
Mercury Air Center-Bakersfield, Inc.
 
California
Mercury Air Center-Birmingham, LLC
 
Alabama
Mercury Air Center-Burbank, Inc.
 
California
Mercury Air Center-Charleston, LLC
 
South Carolina
Mercury Air Center-Fresno, Inc.
 
California
Mercury Air Center-Ft. Wayne, LLC
 
Indiana
Mercury Air Center-Hartsfield, LLC
 
Georgia
Mercury Air Center-Hopkins, LLC
 
Ohio
Mercury Air Center-Irvine, LLC
 
Delaware
Mercury Air Center-Jackson, LLC
 
Mississippi
Mercury Air Center-Johns Island, LLC
 
South Carolina
Mercury Air Center-Los Angeles, Inc.
 
California
Mercury Air Center-Nashville, LLC
 
Delaware
Mercury Air Center-Newport News, LLC
 
Virginia
Mercury Air Center-Ontario, Inc.
 
California
Mercury Air Center-Peachtree-DeKalb, LLC
 
Georgia
Mercury Air Center-Reno, LLC
 
Nevada
Mercury Air Centers, Inc.
 
Delaware
Mercury Air Center-Santa Barbara, Inc.
 
California
Mercury Air Center-Tulsa, LLC
 
Oklahoma
MIC Airports, LLC
 
Delaware
MIC Global Services, LLC
 
Delaware
MIC Hawaii Holdings, LLC
 
Hawaii
MIC Hawaii Thermal Holdings, LLC
 
Hawaii
MIC Ohana Corporation
 
Delaware
MIC Renewable Energy Holdings LLC
 
Delaware
MIC Thermal Power Holdings, LLC
 
Delaware
MKC Aviation Fuel, LLC
 
Missouri
MREH Idaho Wind A, LLC
 
Delaware
Newfoundland Transshipment Ltd.
 
Quebec
Newport FBO Two LLC
 
Delaware
OTWC HI2 LLC
 
Delaware
Palm Springs FBO Two LLC
 
Delaware
Palomar Airport Center LLC
 
California
Palomar Airport Fuel, LLC
 
California
Pro-Air Aviation Maintenance, LLC
 
Delaware
Rifle Air, LLC
 
Colorado
Rifle Jet Center Maintenance, LLC
 
Colorado
Rifle Jet Center, LLC
 
Colorado
SB Aviation Group, Inc.
 
New Mexico
SBN Inc.
 
Indiana
SEH Bryan Solar Holdings, LLC
 
Delaware
SEH DMAFB Holdings, LLC
 
Delaware




SEH Imperial Valley Holdings, LLC
 
Delaware
SEH Picture Rocks Holdings, LLC
 
Delaware
SEH Ramona Holdings, LLC
 
Delaware
SEH Utah Red Hills Holdings, LLC
 
Delaware
SEH Valley Center Holdings, LLC
 
Delaware
SEH Waihonu Holdings LLC
 
Hawaii
Sierra Aviation, Inc.
 
Oklahoma
SJJC Airline Services, LLC
 
Delaware
SJJC Aviation Services, LLC
 
Delaware
SJJC FBO Services, LLC
 
Delaware
St. Rose Nursery, LLC
 
Louisiana
St. Rose Refinery LLC
 
Delaware
Sun Valley Aviation, Inc.
 
Idaho
SW Cogen Project LLC
 
Hawaii
The Gas Company, LLC
 
Hawaii
Trajen FBO, LLC
 
Delaware
Trajen Flight Support, LP
 
Delaware
Trajen Funding, Inc.
 
Delaware
Trajen Holdings, Inc.
 
Delaware
Trajen Limited, LLC
 
Delaware
Waihonu Equity Holdings LLC
 
Hawaii
Waihonu North LLC
 
Hawaii
Waihonu South LLC
 
Hawaii
Waukesha Flying Services, Inc.
 
Wisconsin
WEH Brahms Holdings, LLC
 
Delaware
WEH Magic Valley Holdings, LLC
 
Delaware




Exhibit 23.1

Consent of Independent Registered Public Accounting Firm
The Board of Directors
Macquarie Infrastructure Corporation:

We consent to the incorporation by reference in the registration statements on Form S-8 (Nos. 333‑213139, 333-204349, and 333-181779) and registration statement on Form S-3 (No. 333-230220) of Macquarie Infrastructure Corporation of our reports dated February 25, 2020, with respect to the consolidated balance sheets of Macquarie Infrastructure Corporation as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes and the effectiveness of internal control over financial reporting as of December 31, 2019, which reports appear in the December 31, 2019 annual report on Form 10‑K of Macquarie Infrastructure Corporation.
Our report refers to a change in the method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-2, Leases (Topic 842).
/s/ KPMG LLP
Dallas, Texas
February 25, 2020




Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a)/15d-14(a)
I, Christopher Frost, certify that:
1.
I have reviewed this annual report on Form 10-K of Macquarie Infrastructure Corporation (the “registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: February 25, 2020
 
 
 
By:
/s/ Christopher Frost
 
 
Christopher Frost
Chief Executive Officer




Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a)/15d-14(a)
I, Liam Stewart, certify that:
1.
I have reviewed this annual report on Form 10-K of Macquarie Infrastructure Corporation (the “registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: February 25, 2020
 
 
 
By:
/s/ Liam Stewart
 
 
Liam Stewart
Chief Financial Officer




Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Macquarie Infrastructure Corporation (the “Company”) on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher Frost, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
By:
/s/ Christopher Frost
 
Christopher Frost
Chief Executive Officer
 
February 25, 2020
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.




Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Macquarie Infrastructure Corporation (the “Company”) on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Liam Stewart, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
By:
/s/ Liam Stewart
 
Liam Stewart
Chief Financial Officer
 
February 25, 2020
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.