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, 2020 and 2019, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, 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, 2020, 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 17, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 2 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 Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates 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 a critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of the sufficiency of audit evidence obtained over revenue
As discussed in Note 12 to the consolidated financial statements, and disclosed in the consolidated statements of operations, the Company recorded $847 million of revenue from continuing operations for the year ended December 31, 2020, of which $667 million and $180 million related to service revenue and product revenue, respectively. As discussed in Note 4 to the consolidated financial statements, the Company recorded $488 million of service revenue from discontinued operations.
We identified the evaluation of the sufficiency of audit evidence obtained over revenue as a critical audit matter. A higher degree of auditor judgment was required to determine the revenue streams over which procedures would be performed and to evaluate the nature and extent of audit evidence obtained over each revenue stream due to the multiple revenue streams and the use of multiple processes to record revenue.
The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over revenue, including the determination of the revenue streams over which those procedures were performed. For each revenue stream where procedures were performed, we evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to record revenue. For certain revenue streams, we assessed the recorded revenue by:
•selecting a sample of transactions and comparing the revenue recorded for consistency with underlying documentation.
•comparing recorded revenue to an expectation of revenue developed using volumes and regulatory rates, including evaluating the relevance and reliability of the inputs to the expectation.
•comparing the total cash received during the year to the revenue recorded, including evaluating the relevance and reliability of total cash received.
In addition, we evaluated the sufficiency of audit evidence obtained over revenue by assessing the results of procedures performed, including the appropriateness of the nature and extent of such evidence.
/s/ KPMG LLP
We have served as the Company’s auditor since 2004.
Dallas, Texas
February 17, 2021
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in Millions, Except Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2020
|
|
2019
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
1,828
|
|
|
$
|
260
|
|
Restricted cash
|
11
|
|
|
1
|
|
Accounts receivable, net of allowance for doubtful accounts
|
47
|
|
|
66
|
|
Inventories
|
17
|
|
|
22
|
|
Prepaid expenses
|
8
|
|
|
9
|
|
|
|
|
|
Other current assets
|
9
|
|
|
21
|
|
Assets held for sale(1)
|
—
|
|
|
4,172
|
|
Total current assets
|
1,920
|
|
|
4,551
|
|
Property, equipment, land, and leasehold improvements, net
|
854
|
|
|
879
|
|
Operating lease assets, net
|
323
|
|
|
317
|
|
|
|
|
|
Goodwill
|
616
|
|
|
615
|
|
Intangible assets, net
|
458
|
|
|
488
|
|
Other noncurrent assets
|
8
|
|
|
11
|
|
Total assets
|
$
|
4,179
|
|
|
$
|
6,861
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
Current liabilities:
|
|
|
|
Due to Manager-related party
|
$
|
1
|
|
|
$
|
3
|
|
Accounts payable
|
30
|
|
|
38
|
|
Accrued expenses
|
46
|
|
|
43
|
|
Current portion of long-term debt
|
11
|
|
|
12
|
|
Dividend payable
|
961
|
|
|
—
|
|
Operating lease liabilities - current
|
17
|
|
|
18
|
|
Income taxes payable
|
132
|
|
|
—
|
|
Other current liabilities
|
23
|
|
|
23
|
|
Liabilities held for sale(1)
|
—
|
|
|
1,872
|
|
Total current liabilities
|
1,221
|
|
|
2,009
|
|
Long-term debt, net of current portion
|
1,555
|
|
|
1,554
|
|
Deferred income taxes
|
127
|
|
|
120
|
|
Operating lease liabilities - noncurrent
|
312
|
|
|
303
|
|
Other noncurrent liabilities
|
70
|
|
|
64
|
|
Total liabilities
|
3,285
|
|
|
4,050
|
|
Commitments and contingencies
|
—
|
|
|
—
|
|
See accompanying notes to the consolidated financial statements.
66
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED BALANCE SHEETS – (continued)
($ in Millions, Except Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2020
|
|
2019
|
Stockholders’ equity (2):
|
|
|
|
Additional paid in capital
|
$
|
178
|
|
|
$
|
1,198
|
|
Accumulated other comprehensive loss
|
(6)
|
|
|
(37)
|
|
Retained earnings
|
713
|
|
|
1,641
|
|
Total stockholders’ equity
|
885
|
|
|
2,802
|
|
Noncontrolling interests
|
9
|
|
|
9
|
|
Total equity
|
894
|
|
|
2,811
|
|
Total liabilities and equity
|
$
|
4,179
|
|
|
$
|
6,861
|
|
(1)See Note 4, “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. On December 31, 2020 and 2019, the Company had 87,361,929 shares and 86,600,302 shares of common stock issued and outstanding, respectively; (ii) 100,000,000 shares of preferred stock, par value $0.001 per share authorized. On December 31, 2020 and 2019, no preferred stocks were issued or outstanding; and (iii) 100 shares of special stock, par value $0.001 per share, issued and outstanding to its Manager as on December 31, 2020 and 2019. See Note 11, “Stockholders’ Equity”, for further discussions.
See accompanying notes to the consolidated financial statements.
67
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in Millions, Except Share and Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Revenue
|
|
|
|
|
|
Service revenue
|
$
|
667
|
|
|
$
|
969
|
|
|
$
|
1,005
|
|
Product revenue
|
180
|
|
|
243
|
|
|
246
|
|
Total revenue
|
847
|
|
|
1,212
|
|
|
1,251
|
|
Costs and expenses
|
|
|
|
|
|
Cost of services
|
239
|
|
|
449
|
|
|
511
|
|
Cost of product sales
|
112
|
|
|
165
|
|
|
179
|
|
Selling, general and administrative
|
350
|
|
|
301
|
|
|
295
|
|
Fees to Manager-related party
|
21
|
|
|
32
|
|
|
45
|
|
Goodwill impairment
|
—
|
|
|
—
|
|
|
3
|
|
Depreciation
|
79
|
|
|
78
|
|
|
76
|
|
Amortization of intangibles
|
37
|
|
|
44
|
|
|
53
|
|
Total operating expenses
|
838
|
|
|
1,069
|
|
|
1,162
|
|
Operating income
|
9
|
|
|
143
|
|
|
89
|
|
Other income (expense)
|
|
|
|
|
|
Interest income
|
1
|
|
|
6
|
|
|
1
|
|
Interest expense(1)
|
(87)
|
|
|
(106)
|
|
|
(67)
|
|
Other expense, net
|
(2)
|
|
|
(3)
|
|
|
(7)
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations before income taxes
|
(79)
|
|
|
40
|
|
|
16
|
|
Provision for income taxes
|
(127)
|
|
|
(15)
|
|
|
(15)
|
|
Net (loss) income from continuing operations
|
(206)
|
|
|
25
|
|
|
1
|
|
Discontinued Operations(2)
|
|
|
|
|
|
Net (loss) income from discontinued operations before income taxes
|
(699)
|
|
|
185
|
|
|
131
|
|
Provision for income taxes
|
(23)
|
|
|
(57)
|
|
|
(37)
|
|
Net (loss) income from discontinued operations
|
(722)
|
|
|
128
|
|
|
94
|
|
Net (loss) income
|
(928)
|
|
|
153
|
|
|
95
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations
|
(206)
|
|
|
25
|
|
|
1
|
|
Less: net loss attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(3)
|
|
Net (loss) income from continuing operations attributable to MIC
|
(206)
|
|
|
25
|
|
|
4
|
|
Net (loss) income from discontinued operations
|
(722)
|
|
|
128
|
|
|
94
|
|
Less: net loss attributable to noncontrolling interests
|
—
|
|
|
(3)
|
|
|
(39)
|
|
Net (loss) income from discontinued operations attributable to MIC
|
(722)
|
|
|
131
|
|
|
133
|
|
Net (loss) income attributable to MIC
|
$
|
(928)
|
|
|
$
|
156
|
|
|
$
|
137
|
|
See accompanying notes to the consolidated financial statements.
68
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS – (continued)
($ in Millions, Except Share and Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Basic (loss) income per share from continuing operations
attributable to MIC
|
$
|
(2.36)
|
|
|
$
|
0.31
|
|
|
$
|
0.02
|
|
Basic (loss) income per share from discontinued operations
attributable to MIC
|
(8.31)
|
|
|
1.51
|
|
|
1.58
|
|
Basic (loss) income per share attributable to MIC
|
$
|
(10.67)
|
|
|
$
|
1.82
|
|
|
$
|
1.60
|
|
Weighted average number of shares outstanding: basic
|
86,951,642
|
|
|
86,178,212
|
|
|
85,233,989
|
|
|
|
|
|
|
|
Diluted (loss) income per share from continuing operations
attributable to MIC
|
$
|
(2.36)
|
|
|
$
|
0.31
|
|
|
$
|
0.02
|
|
Diluted (loss) income per share from discontinued operations
attributable to MIC
|
(8.31)
|
|
|
1.51
|
|
|
1.58
|
|
Diluted (loss) income per share attributable to MIC
|
$
|
(10.67)
|
|
|
$
|
1.82
|
|
|
$
|
1.60
|
|
Weighted average number of shares outstanding: diluted
|
86,951,642
|
|
|
86,204,301
|
|
|
85,249,865
|
|
Cash dividends declared per share(3)
|
$
|
11.00
|
|
|
$
|
4.00
|
|
|
$
|
4.00
|
|
(1)Interest expense includes non-cash losses on derivative instruments of $5 million and $8 million in 2020 and 2019, respectively, and non-cash gains on derivative instruments of $5 million in 2018.
(2)See Note 4, “Discontinued Operations and Dispositions”, for discussions on businesses classified as held for sale.
(3)Special dividend declared and paid out of the net proceeds from the IMTT Transaction on January 8, 2021. Shares of MIC traded with “due-bills” attached through January 8, 2021 and traded ex-dividend on January 11, 2021.
See accompanying notes to the consolidated financial statements.
69
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
($ in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Net (loss) income
|
$
|
(928)
|
|
|
$
|
153
|
|
|
$
|
95
|
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
Change in post-retirement benefit plans(1)
|
(16)
|
|
|
(9)
|
|
|
9
|
|
Translation adjustment(2)
|
1
|
|
|
2
|
|
|
(5)
|
|
Reclassification to net (loss) income due to sale of business(3)
|
46
|
|
|
—
|
|
|
—
|
|
Other comprehensive income (loss)
|
31
|
|
|
(7)
|
|
|
4
|
|
Comprehensive (loss) income
|
(897)
|
|
|
146
|
|
|
99
|
|
Less: comprehensive loss attributable to noncontrolling interests
|
—
|
|
|
(3)
|
|
|
(42)
|
|
Comprehensive (loss) income attributable to MIC
|
$
|
(897)
|
|
|
$
|
149
|
|
|
$
|
141
|
|
(1)Change in post-retirement benefit plans is presented net of tax benefit of $6 million and $3 million in 2020 and 2019, respectively, 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 that was insignificant in 2020 and $1 million in 2019 and net of tax benefit of $2 million in 2018. See Note 11, “Stockholders’ Equity”, for further discussions.
(3)Reclassified to discontinued operations in the consolidated statement of operations in connection with the IMTT Transaction. See Note 4, "Discontinued Operations and Dispositions", for further discussions.
See accompanying notes to the consolidated financial statements.
70
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
($ 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 on 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
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Stock vested under compensation plans(3)
|
—
|
|
|
9,435
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Issuance of shares pursuant to conversion of
convertible senior notes
|
—
|
|
|
99
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Dividends to common stockholders(4)
|
—
|
|
|
—
|
|
|
(379)
|
|
|
—
|
|
|
—
|
|
|
(379)
|
|
|
—
|
|
|
(379)
|
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
(4)
|
|
Contributions from noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
Cumulative effect of change in accounting
principle(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Comprehensive income (loss), net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
137
|
|
|
141
|
|
|
(42)
|
|
|
99
|
|
Balance on 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
|
|
Stock vested under compensation plans(3)
|
—
|
|
|
23,646
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Dividends to common stockholders(4)
|
—
|
|
|
—
|
|
|
(344)
|
|
|
—
|
|
|
—
|
|
|
(344)
|
|
|
—
|
|
|
(344)
|
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
(3)
|
|
Deconsolidation of noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(137)
|
|
|
(137)
|
|
Comprehensive (loss) income, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
(7)
|
|
|
156
|
|
|
149
|
|
|
(3)
|
|
|
146
|
|
Balance on December 31, 2019
|
100
|
|
|
86,600,302
|
|
|
$
|
1,198
|
|
|
$
|
(37)
|
|
|
$
|
1,641
|
|
|
$
|
2,802
|
|
|
$
|
9
|
|
|
$
|
2,811
|
|
Issuance of shares to Manager
|
—
|
|
|
701,030
|
|
|
22
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
—
|
|
|
22
|
|
Stock vested under compensation plans(3)
|
—
|
|
|
81,366
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Stock withheld for taxes on vested stock(3)
|
—
|
|
|
(20,769)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
Dividends to common stockholders(4)
|
—
|
|
|
—
|
|
|
(1,048)
|
|
|
—
|
|
|
—
|
|
|
(1,048)
|
|
|
—
|
|
|
(1,048)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss), net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
31
|
|
|
(928)
|
|
|
(897)
|
|
|
—
|
|
|
(897)
|
|
Balance on December 31, 2020
|
100
|
|
|
87,361,929
|
|
|
$
|
178
|
|
|
$
|
(6)
|
|
|
$
|
713
|
|
|
$
|
885
|
|
|
$
|
9
|
|
|
$
|
894
|
|
(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 on December 31, 2018 and 2017, respectively. See Note 4, “Discontinued Operations and Dispositions”, for further discussions.
(3)Stocks vested and issued under the 2016 Omnibus Employee Incentive Plan and 2014 Independent Directors Equity Plan. Under the 2016 Omnibus Employee Incentive Plan, shares are withheld for the employee portion of taxes on vested awards and are available for future grants.
(4)See Note 11, “Stockholder's Equity”, for discussion on cash dividends declared and paid on shares for each period.
(5)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 $4 million adjustment to reclassify stranded tax effects in Accumulated Other Comprehensive Loss to Retained Earnings.
See accompanying notes to the consolidated financial statements.
71
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Operating activities
|
|
|
|
|
|
Net (loss) income from continuing operations
|
$
|
(206)
|
|
|
$
|
25
|
|
|
$
|
1
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities from continuing operations:
|
|
|
|
|
|
Goodwill impairment
|
—
|
|
|
—
|
|
|
3
|
|
Depreciation
|
79
|
|
|
78
|
|
|
76
|
|
Amortization of intangibles
|
37
|
|
|
44
|
|
|
53
|
|
|
|
|
|
|
|
Amortization of debt discount and financing costs
|
12
|
|
|
12
|
|
|
13
|
|
|
|
|
|
|
|
Adjustments to derivative instruments
|
(2)
|
|
|
18
|
|
|
14
|
|
Fees to Manager- related party
|
21
|
|
|
32
|
|
|
45
|
|
Deferred taxes
|
(5)
|
|
|
9
|
|
|
8
|
|
Other non-cash expense, net(1)
|
14
|
|
|
13
|
|
|
22
|
|
Changes in other assets and liabilities, net of acquisitions:
|
|
|
|
|
|
Accounts receivable
|
17
|
|
|
3
|
|
|
8
|
|
Inventories
|
5
|
|
|
(3)
|
|
|
(2)
|
|
Prepaid expenses and other current assets
|
2
|
|
|
(5)
|
|
|
(1)
|
|
Accounts payable and accrued expenses
|
(1)
|
|
|
4
|
|
|
1
|
|
Income taxes payable
|
143
|
|
|
(10)
|
|
|
(1)
|
|
Other, net
|
11
|
|
|
(5)
|
|
|
(6)
|
|
Net cash provided by operating activities from continuing operations
|
127
|
|
|
215
|
|
|
234
|
|
Investing activities
|
|
|
|
|
|
Acquisitions of businesses and investments, net of cash, cash
equivalents, and restricted cash acquired
|
(13)
|
|
|
—
|
|
|
(18)
|
|
Purchases of property and equipment
|
(54)
|
|
|
(84)
|
|
|
(114)
|
|
Loan to project developer
|
—
|
|
|
(1)
|
|
|
(19)
|
|
Loan repayment from project developer
|
—
|
|
|
16
|
|
|
17
|
|
Proceeds from sale of business, net of cash divested
|
—
|
|
|
—
|
|
|
27
|
|
Other, net
|
(4)
|
|
|
—
|
|
|
—
|
|
Net cash used in investing activities from continuing operations
|
(71)
|
|
|
(69)
|
|
|
(107)
|
|
Financing activities
|
|
|
|
|
|
Proceeds from long-term debt
|
874
|
|
|
—
|
|
|
1,390
|
|
Payment of long-term debt
|
(885)
|
|
|
(361)
|
|
|
(1,158)
|
|
Contributions received from noncontrolling interests
|
—
|
|
|
—
|
|
|
1
|
|
Dividends paid to common stockholders
|
(87)
|
|
|
(344)
|
|
|
(379)
|
|
|
|
|
|
|
|
Debt financing costs paid
|
(1)
|
|
|
(1)
|
|
|
(29)
|
|
Net cash used in financing activities from continuing operations
|
(99)
|
|
|
(706)
|
|
|
(175)
|
|
Net change in cash, cash equivalents, and restricted cash from continuing operations
|
(43)
|
|
|
(560)
|
|
|
(48)
|
|
See accompanying notes to the consolidated financial statements.
72
MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
($ in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Cash flows provided by discontinued operations:
|
|
|
|
|
|
Net cash provided by operating activities
|
$
|
214
|
|
|
$
|
205
|
|
|
$
|
285
|
|
Net cash provided by investing activities
|
1,310
|
|
|
60
|
|
|
567
|
|
Net cash provided by (used in) financing activities
|
—
|
|
|
24
|
|
|
(246)
|
|
Net cash provided by discontinued operations
|
1,524
|
|
|
289
|
|
|
606
|
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
(1)
|
|
Net change in cash, cash equivalents, and restricted cash
|
1,481
|
|
|
(271)
|
|
|
557
|
|
Cash, cash equivalents, and restricted cash, beginning of period
|
358
|
|
|
629
|
|
|
72
|
|
Cash, cash equivalents, and restricted cash, end of period
|
$
|
1,839
|
|
|
$
|
358
|
|
|
$
|
629
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
Accrued purchases of property and equipment from continuing
operations
|
$
|
5
|
|
|
$
|
7
|
|
|
$
|
12
|
|
Accrued purchases of property and equipment from discontinued
operations
|
24
|
|
|
25
|
|
|
14
|
|
Leased assets obtained in exchange for new operating lease liabilities
from continuing operations
|
20
|
|
|
14
|
|
|
—
|
|
Leased assets obtained in exchange for new operating lease liabilities
from discontinued operations
|
1
|
|
|
7
|
|
|
—
|
|
Cash dividend declared, but not yet paid
|
961
|
|
|
—
|
|
|
—
|
|
Taxes (refund) paid, net, from continuing operations
|
(14)
|
|
|
4
|
|
|
8
|
|
Taxes paid, net, from discontinued operations
|
3
|
|
|
61
|
|
|
13
|
|
Interest paid, net, from continuing operations
|
71
|
|
|
90
|
|
|
50
|
|
Interest paid, net, from discontinued operations
|
40
|
|
|
48
|
|
|
71
|
|
(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.
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,
|
|
2020
|
|
2019
|
|
2018
|
Cash and cash equivalents
|
$
|
1,828
|
|
|
$
|
260
|
|
|
$
|
561
|
|
Restricted cash - current
|
11
|
|
|
1
|
|
|
23
|
|
Cash, cash equivalents, and restricted cash included in assets held for sale(2)
|
—
|
|
|
97
|
|
|
45
|
|
Total of cash, cash equivalents, and restricted cash shown in the consolidated statement of cash flows
|
$
|
1,839
|
|
|
$
|
358
|
|
|
$
|
629
|
|
(2)Represents cash, cash equivalents, and restricted cash related to businesses classified as held for sale. See Note 4, “Discontinued Operations and Dispositions”, for further discussions.
See accompanying notes to the consolidated financial statements.
73
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. Six of the eight members of the Board, and all members of each of the Company's Audit, Compensation, and Nominating and Governance 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 businesses that provide products and services to corporations, government agencies, and individual customers in the United States (U.S.). The Company's operations are organized into three segments:
•Atlantic Aviation: a provider of jet fuel, terminal, aircraft hangaring, and other services primarily to owners and operators of general aviation (GA) jet aircraft at 69 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 a holding company headquartered in New York City, MIC Corporate, and a shared services center in Plano, Texas, MIC Global Services.
During the quarter ended September 30, 2020, International-Matex Tank Terminals (IMTT) was classified as a discontinued operation and eliminated as a reportable segment. All periods reported herein reflect this change. In December 2020, the Company completed the sale of IMTT (IMTT Transaction). For additional information, see Note 4, “Discontinued Operations and Dispositions”.
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 periods reported herein reflect this change. In September 2019, the Company completed the last of the sales of its solar and wind power generation businesses including its majority interest in a renewable power development business. A relationship with a third-party developer of renewable power facilities was reported as a component of Corporate and Other through the expiration of the relationship in July 2019. For additional information, see Note 4, “Discontinued Operations and Dispositions”.
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.
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
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
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. On December 31, 2020, the Company did not have any commercial paper. On December 31, 2019, the Company had $40 million of commercial paper issued by counterparties with a Standard & Poor's rating of A1+.
Restricted Cash
On December 31, 2020, restricted cash consists primarily of deposits held by banks to secure certain letters of credit primarily supporting Atlantic Aviation's lease and insurance obligations. See Note 9, “Long-Term Debt”, for further discussions.
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 and materials and supplies. Fuel inventory is stated at the lower of cost or market and 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 at Atlantic Aviation and an average cost method at MIC Hawaii. 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 on December 31, 2020 comprised $10 million of inventory for sale and $7 million of materials and supplies compared with $15 million of inventory for sale and $7 million of materials and supplies on December 31, 2019.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
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:
|
|
|
|
|
|
|
|
|
|
|
|
Leasehold and land improvements
|
|
8 to 20 years
|
Machinery and equipment
|
|
3 to 25 years
|
Furniture and fixtures
|
|
5 to 7 years
|
The estimated economic useful lives for the regulated business at MIC Hawaii ranges up to 68 years for buildings, leasehold and land improvements, machinery and equipment, and furniture and fixtures.
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 9 years
|
Contractual arrangements
|
|
14 to 57 years
|
Non-compete agreements
|
|
10 years
|
Trade names
|
|
20 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 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.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
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 quarter ended March 31, 2018, the Company adopted Accounting Standards Number (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 2020.
Adoption of ASU No. 2016-2, Leases (Topic 842)
As of January 1, 2019, the Company adopted ASU No. 2016-2 which requires a lessee to recognize on its balance sheet the right-of-us (ROU) assets and lease liabilities with lease terms of more than 12 months. The substantial population of the Company’s 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 Company also served as a lessor primarily through operating leases, which has not fundamentally changed except for changes to conform and align with ASC 606, Revenue from Contracts with Customers.
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 was 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. See Note 5, "Leases", for further disclosure on operating leases.
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. On December 31, 2020, these costs are amortized over the contractual term of the debt instrument which ranges from 4 to 10 years with a weighted average remaining life of 4.4 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.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
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. On December 31, 2020 and 2019, there were no outstanding accounts receivable due from a single customer that accounted for more than 10% of the total accounts receivable. Additionally, no single customer accounted for more than 10% of the Company’s revenue in 2020, 2019, and 2018.
Foreign Currency Translation
The assets and liabilities of IMTT’s Newfoundland and Quebec locations were translated from their local currency (Canadian dollars) to U.S. dollars at exchange rates in effect at the end of the reporting period and consolidated statement of operations accounts are translated at average exchange rates for the reporting period. Translation gains or losses as a result of changes in the exchange rate were recorded as a component of other comprehensive income (loss) through the date of sale.
Accrued Expenses
Accrued expenses of $46 million and $43 million on December 31, 2020 and 2019, respectively, 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 2014 Independent Directors 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 may be approved by the HPUC in a future proceeding. Regulatory liabilities represent amounts included in rates and collected from customers for costs expected to be incurred in the future.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
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 facilities where the Company does not own 100% of the investment within the MIC Hawaii segment are held in LLCs, which are treated as partnerships for income tax purposes.
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 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). The amendments in this ASU impact the accounting for convertible instruments by reducing the number of accounting models used to account for these instruments and amending diluted earnings per share calculations. It also simplifies the requirements for contracts indexed to and potentially settled in an entity's own equity. The amendments in this update are effective for fiscal years ending after December 15, 2021. Early adoption is permitted. The Company is currently evaluating the impact of adoption on its financial statements and related disclosures.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting, which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (LIBOR) or another reference rate expected to be discontinued as a result of reference rate reform. In January 2021, the FASB also issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. These amendments are elective and apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. These amendments are not applicable to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. ASU No. 2020-04 and ASU No. 2021-01 are effective as of March 12, 2020 and through December 31, 2022, and may be applied to contract modifications and hedging relationships from the beginning of an interim period that includes or is subsequent to March 12, 2020. The Company is currently evaluating the impact of adoption on its financial statements and related disclosures.
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 and are effective for fiscal years ending after December 15, 2020. The Company adopted this ASU in December 2020 and included the appropriate disclosures related to defined benefit plans in accordance with the standard. See Note 16, "Employee Benefit Plans", for additional disclosures adopted.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Impact of COVID-19
Impact to MIC Businesses
In light of the ongoing impacts of the pandemic on the Company, the reduced level of economic activity and uncertainty around the timing of any recovery from the impact of the pandemic, the Company withdrew the financial guidance it had provided to the market on February 25, 2020. COVID-19 continues to negatively affect the performance of its remaining operating businesses. Federal, state, and local governments have implemented pandemic response measures including social distancing, quarantines, travel restrictions, prohibitions on public gatherings, and stay-at-home orders that have significantly reduced business-related and international GA flight activity and the demand for fuel and ancillary services provided by Atlantic Aviation and resulted in a significant decline in economic activity and the number of visitors to Hawaii.
While GA flight activity recovered significantly in the second half of 2020 from the low levels recorded in late March and April, the financial performance of the business has yet to recover to pre-COVID levels. While the increases in positive cases and infection rates in the fourth quarter appear to have had a limited effect on overall flight activity relative to levels in the third quarter, there can be no certainty that this trend will continue if the severity of the pandemic continues or worsens. The near absence of tourism in Hawaii from April through mid-October significantly reduced gas sales during that period. The reopening of Hawaii to tourism in mid-October has resulted in an increase in demand for gas on the part of resorts and restaurants, although both tourism and gas sales remain well below pre-COVID levels. In general, the travel and tourism industries, and the businesses reliant on them, have been negatively affected by the pandemic.
Continued stability or further increases in GA flight activity that benefits Atlantic Aviation will depend upon the duration of the pandemic, any governmental response including renewed travel restrictions, and the state of the U.S. and global economies, as well as increases in business, international, and event-driven activity all of which are uncertain. Visitor arrivals to Hawaii, the primary driver of increases in demand for gas in Hawaii, improved gradually during the fourth quarter over the third quarter following quarantine exemption for visitors with evidence of a negative COVID-19 test prior to arrival in the islands, however further improvement is uncertain. The approval of multiple COVID-19 vaccines may reduce the duration of the pandemic, however, the availability, distribution, and willingness of the public to accept the vaccines is also uncertain. Further, changes in consumer travel preferences, the availability of commercial flights, and other factors remain unknown.
The Federal Aviation Administration reported that U.S. domestic GA flight activity in the fourth quarter of 2020 increased versus the third quarter of 2020, but decreased 12% compared with the prior comparable period. Continued stability or further increases in flight activity levels will depend upon the duration of the pandemic, any governmental response including renewed travel restrictions, and the state of the U.S. and global economies, as well as increases in business, international, and event-driven activity, all of which are uncertain.
Visitor arrivals to Hawaii declined by 81% in the fourth quarter of 2020 versus the prior comparable period, driven largely by a 14-day quarantine requirement. The decline in visitors has resulted in a significant reduction in hotel occupancy, demand for services provided by restaurants and commercial laundries, and reduced the amount of gas sold by Hawaii Gas by 27% compared with the prior comparable period.
Despite these challenges, each of Atlantic Aviation and MIC Hawaii has benefited from the generation of stable revenue from tenants leasing hangars in the case of Atlantic Aviation and primarily residential consumption of gas in the case of MIC Hawaii.
Impact to Liquidity and Balance Sheet
In light of the disruption in the global markets and the unpredictability of the sustained impact to its businesses caused by COVID-19, during March 2020 and April 2020, the Company took certain measures to preserve financial flexibility and increased the strength of its balance sheet and its liquidity position.
In March 2020, the Company suspended its cash dividend and drew down a total of $874 million on revolving credit facilities including $599 million on its MIC holding company level revolving credit facility and $275 million on the Atlantic Aviation revolving credit facility. The proceeds were additive to the approximately $300 million of cash on hand in mid-March 2020. During the second half of 2020, the Company fully repaid the drawn balance of $599 million on its holding company revolving credit facility.
On April 30, 2020, Atlantic Aviation fully repaid the outstanding balance on its revolving credit facility. Effective May 4, 2020, the revolving credit facility commitments were reduced to $10 million, and further to $1 million by December 31, 2020, solely with respect to letters of credit then outstanding. In connection with the repayment of the revolving credit facility and
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Impact of COVID-19 – (continued)
reduction in commitments, Atlantic Aviation and its lenders amended the credit agreement to remove the covenant requiring the Company to maintain a ratio of net debt/EBITDA at or below 5.5x over a trailing twelve-month period. Such financial covenant will not be applicable so long as letters of credit issued under the credit facility are cash collateralized and rolled over to stand-alone letter of credit facilities upon renewal.
With the steps taken to strengthen its financial position summarized above, the Company has no immediate need for additional capital. Subsequent to the repayment and reduction in commitments related to the Atlantic Aviation revolving credit facility and the full repayment on the drawn balance on its holding company revolving credit facility, the Company has $388 million of liquidity available comprised of cash on hand and undrawn balance on a revolving credit facility. Cash on hand on December 31, 2020 totaled $328 million, which is net of amounts reserved for: (i) the payment of the special dividend of $11.00 per share in January 2021; (ii) the payment of capital gains taxes and transaction costs related to the IMTT Transaction; and (iii) the retirement of holding company debt.
Over the next twelve months, the Company currently expects to fund its operations, service and/or repay its debt, make required tax payments, fund essential maintenance capital expenditures, and deploy growth capital using cash generated from the operations of its ongoing businesses and cash on hand on December 31, 2020. On December 31, 2020, there has been no material deterioration in accounts receivable at any of the remaining operating businesses. If the economic impact of the pandemic is protracted, collection times and the value of uncollectible accounts could increase.
Impact to Long-Lived Assets
Due to the potential impact and uncertainty of COVID-19 on the Company's operations, the Company performed a triggering event analysis on its property, equipment, land, and leasehold improvements and intangible assets at a reportable segment level during each of the quarters ended for 2020. The Company determined that there were no triggering events that required an impairment analysis of its property, equipment, land, and leasehold improvements and intangible assets.
See Note 8, "Intangible Assets and Goodwill", for discussions on the Company's interim impairment analysis on its continuing businesses and Note 4, "Discontinued Operations and Dispositions", for discussion on the impairment recorded at IMTT.
4. 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.
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. On December 23, 2020, the Company completed the IMTT Transaction to an affiliate of Riverstone Holdings, LLC for $2.67 billion, net of closing adjustments, and including assumed debt including interest accrued of approximately $1.11 billion. The net proceeds of $1.55 billion were or are expected to be used to: (i) pay a special dividend of $11.00 per share on January 8, 2021; (ii) settle capital gains taxes expected to be paid by April 2021; (iii) pay transaction costs; (iv) pay a disposition payment under the Disposition Agreement, dated October 30, 2019, to its Manager (Disposition Payment) in December 2020 (currently in escrow); and (v) retire holding company level debt.
The sale of IMTT is part of the Company's pursuit of its strategic alternatives to maximize value for its shareholders. During the quarter ended September 30, 2020, the Company determined that each of the criteria to be classified as held for sale under ASC 205-20, Presentation of Financial Statements — Discontinued Operations, had been met as it relates to IMTT. It was additionally determined that the sale of IMTT is considered a strategic shift for the Company that will have a major effect on operations. Accordingly, IMTT was classified as a discontinued operation, the IMTT segment was eliminated, and the assets and liabilities of IMTT have been classified as held for sale on the consolidated balance sheets. All prior periods have been restated to reflect these changes.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Discontinued Operations and Dispositions – (continued)
Upon completion of the IMTT Transaction on December 23, 2020, the Company recognized a book loss on sale of approximately $25 million. The Company incurred $28 million in transaction costs and a Disposition Payment of $28 million to its Manager (currently in escrow), which are included in Selling, General and Administrative Expenses in the consolidated statement of operations. As part of classifying IMTT as held for sale, the Company recognized an impairment of the IMTT disposal group of $750 million, which includes a goodwill impairment of $725 million, reported in discontinued operations for the quarter ended September 30, 2020.
During the quarter ended September 30, 2020, the Company increased its deferred tax liability by $158 million as it became probable that IMTT would be sold in a taxable transaction. The increase represented the tax expense on the difference between the Company's book and tax basis in its investment in IMTT. Subsequent to the close of the IMTT Transaction in December 2020, the Company reclassified the liability to current and reduced the tax to $126 million. The reduction primarily reflected the tax benefit of the Disposition Payment and the final determination of the tax basis of its investment in IMTT, which increased due to higher than forecasted taxable income generated prior to completion of the IMTT Transaction, as fewer assets were placed in service for tax purposes resulting in lower bonus tax depreciation during the Company’s ownership period.
Summary of the assets and liabilities held for sale included in the Company’s consolidated balance sheet related to IMTT segment as of December 31, 2019 ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2019
|
Assets
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
97
|
|
Accounts receivable, net of allowance for doubtful accounts
|
|
|
|
31
|
|
Other current assets
|
|
|
|
22
|
|
Total current assets
|
|
|
|
150
|
|
Property, equipment, land, and leasehold improvements, net
|
|
|
|
2,323
|
|
Goodwill
|
|
|
|
1,428
|
|
Intangible assets, net
|
|
|
|
241
|
|
Other noncurrent assets
|
|
|
|
30
|
|
|
|
|
|
|
Total assets
|
|
|
|
$
|
4,172
|
|
Liabilities
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
|
$
|
72
|
|
|
|
|
|
|
Other current liabilities
|
|
|
|
21
|
|
Total current liabilities
|
|
|
|
93
|
|
Long-term debt
|
|
|
|
1,100
|
|
Deferred income taxes
|
|
|
|
559
|
|
Other noncurrent liabilities
|
|
|
|
120
|
|
Total liabilities
|
|
|
|
$
|
1,872
|
|
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Discontinued Operations and Dispositions – (continued)
Summarized financial information for discontinued operations included in the Company’s consolidated statement of operations related to IMTT segment for 2020, 2019, and 2018 are as follows ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
Service revenue
|
|
$
|
488
|
|
|
$
|
515
|
|
|
$
|
510
|
|
Cost of services
|
|
(193)
|
|
|
(204)
|
|
|
(201)
|
|
Selling, general and administrative expenses
|
|
(38)
|
|
|
(33)
|
|
|
(32)
|
|
Impairment
|
|
(750)
|
|
|
—
|
|
|
—
|
|
Depreciation and amortization
|
|
(102)
|
|
|
(132)
|
|
|
(132)
|
|
Interest expense, net
|
|
(43)
|
|
|
(47)
|
|
|
(46)
|
|
Other (expense) income, net(1)
|
|
(61)
|
|
|
1
|
|
|
—
|
|
Net (loss) income from discontinued operations before income taxes
|
|
$
|
(699)
|
|
|
$
|
100
|
|
|
$
|
99
|
|
Provision for income taxes
|
|
(23)
|
|
(24)
|
|
|
(35)
|
|
|
|
|
|
|
|
|
Net (loss) income from discontinued operations attributable to MIC
|
|
$
|
(722)
|
|
|
$
|
76
|
|
|
$
|
64
|
|
(1)Other (expense) income, net, includes the reclassification of $46 million of accumulated other comprehensive loss primarily related to post-retirement and defined benefit plans in connection with the IMTT Transaction, as well as a book loss on sale of approximately $25 million.
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 $275 million, or $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.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Discontinued Operations and Dispositions – (continued)
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.
Summarized financial information for discontinued operations included in the Company’s consolidated statement of operations related to its former Contracted Power segment for 2019 and 2018 are as follows ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2019
|
|
2018
|
Product revenue
|
$
|
44
|
|
|
$
|
150
|
|
Cost of product sales
|
(7)
|
|
|
(24)
|
|
Selling, general and administrative expenses
|
(19)
|
|
|
(25)
|
|
Depreciation and amortization
|
—
|
|
|
(38)
|
|
Interest expense, net
|
(13)
|
|
|
(17)
|
|
Other income (expense), net(1)
|
80
|
|
|
(14)
|
|
Net income from discontinued operations before income taxes
|
85
|
|
|
32
|
|
Provision for income taxes
|
(33)
|
|
|
(2)
|
|
Net income from discontinued operations
|
52
|
|
|
30
|
|
Less: net loss attributable to noncontrolling interests
|
(3)
|
|
|
(39)
|
|
Net income from discontinued operations attributable to MIC
|
$
|
55
|
|
|
$
|
69
|
|
(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.
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 were 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 $9 million, as well as reserving for certain contract related amounts recorded in other current liabilities and other expenses.
5. Leases
The Company has operating leases primarily for land, equipment and machinery, buildings, office space, and certain office equipment under non-cancellable lease agreements. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. Some leases include one or more options to renew, with renewal terms that can extend the lease term from one to 10 years or more. The exercise of these lease renewal options is at the Company’s sole discretion. Cash paid for operating leases is reported in operating activities on the consolidated statement of cash flows. On December 31, 2020 and 2019, the Company did not have any finance leases.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Leases – (continued)
The Company’s operating lease expenses recorded within the consolidated statement of operations for 2020 and 2019 were as follows ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement Classification
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
|
|
|
|
Cost of product sales
|
|
$
|
2
|
|
|
$
|
1
|
|
Selling, general and administrative
|
|
52
|
|
51
|
Total operating lease expense(1)
|
|
$
|
54
|
|
|
$
|
52
|
|
(1)Includes leases less than one year of $5 million for both 2020 and 2019 and variable leases of $4 million and $2 million in 2020 and 2019, respectively.
On December 31, 2020 and 2019, the weighted-average remaining operating lease term was 19.9 years and 18.6 years, respectively, with a weighted average discount rate of 8.8% and 8.7%, respectively. The following table represents the future maturities of lease liabilities on December 31, 2020 ($ in millions):
|
|
|
|
|
|
|
|
|
2021
|
|
$
|
44
|
|
2022
|
|
42
|
2023
|
|
42
|
2024
|
|
41
|
2025
|
|
40
|
Thereafter
|
|
538
|
Total lease payment
|
|
747
|
|
Less: interest
|
|
(418)
|
|
Present value of lease liability
|
|
$
|
329
|
|
6. Income per Share
Following is a reconciliation of the basic and diluted (loss) income per share computations ($ in millions, except share and per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2020
|
|
2019
|
|
2018
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net (loss) income from continuing operations
attributable to MIC
|
$
|
(206)
|
|
|
$
|
25
|
|
|
$
|
4
|
|
Basic and diluted net (loss) income from discontinued operations
attributable to MIC
|
$
|
(722)
|
|
|
$
|
131
|
|
|
$
|
133
|
|
Denominator:
|
|
|
|
|
|
Weighted average number of shares outstanding: basic
|
86,951,642
|
|
|
86,178,212
|
|
|
85,233,989
|
|
Dilutive effect of restricted stock unit grants(1)
|
—
|
|
|
26,089
|
|
|
15,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding: diluted
|
86,951,642
|
|
|
86,204,301
|
|
|
85,249,865
|
|
(1) Dilutive effect of restricted stock unit grants includes grants to independent directors under the 2014 Independent Directors Equity Plan and certain employees of the Company's operating businesses under the 2016 Omnibus Employee Incentive Plan.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Income per Share – (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2020
|
|
2019
|
|
2018
|
Income per share:
|
|
|
|
|
|
Basic (loss) income per share from continuing operations
attributable to MIC
|
$
|
(2.36)
|
|
|
$
|
0.31
|
|
|
$
|
0.02
|
|
Basic (loss) income per share from discontinued operations
attributable to MIC
|
(8.31)
|
|
|
1.51
|
|
|
1.58
|
|
Basic (loss) income per share attributable to MIC
|
$
|
(10.67)
|
|
|
$
|
1.82
|
|
|
$
|
1.60
|
|
Diluted (loss) income per share from continuing operations
attributable to MIC
|
$
|
(2.36)
|
|
|
$
|
0.31
|
|
|
$
|
0.02
|
|
Diluted (loss) income per share from discontinued operations
attributable to MIC
|
(8.31)
|
|
|
1.51
|
|
|
1.58
|
|
Diluted (loss) income per share attributable to MIC
|
$
|
(10.67)
|
|
|
$
|
1.82
|
|
|
$
|
1.60
|
|
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,
|
2020
|
|
2019
|
|
2018
|
Restricted stock unit grants
|
108,760
|
|
|
—
|
|
|
—
|
|
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
|
|
|
3,634,173
|
|
|
3,631,850
|
|
Total
|
3,742,933
|
|
|
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. 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 on December 31, 2020 and 2019 consist of the following ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
2020
|
|
2019
|
Land
|
$
|
11
|
|
|
$
|
11
|
|
Buildings
|
4
|
|
|
4
|
|
Leasehold and land improvements
|
779
|
|
|
755
|
|
Machinery and equipment
|
556
|
|
|
532
|
|
Furniture and fixtures
|
37
|
|
|
35
|
|
Construction in progress
|
38
|
|
|
43
|
|
|
1,425
|
|
|
1,380
|
|
Less: accumulated depreciation
|
(571)
|
|
|
(501)
|
|
Property, equipment, land, and leasehold improvements, net
|
$
|
854
|
|
|
$
|
879
|
|
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Intangible Assets and Goodwill
Intangible assets on December 31, 2020 and 2019 consist of the following ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
2020
|
|
2019
|
Contractual arrangements
|
$
|
915
|
|
|
$
|
908
|
|
Non-compete agreements
|
10
|
|
|
10
|
|
Customer relationships
|
66
|
|
|
66
|
|
Trade names
|
16
|
|
|
16
|
|
|
|
|
|
|
1,007
|
|
|
1,000
|
|
Less: accumulated amortization
|
(549)
|
|
|
(512)
|
|
Intangible assets, net
|
$
|
458
|
|
|
$
|
488
|
|
On December 31, 2020, 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.
Amortization expense of intangible assets in 2020, 2019, and 2018 totaled $37 million, $44 million, and $53 million, respectively. The estimated future amortization expense for amortizable intangible assets to be recognized are ($ in millions):
|
|
|
|
|
|
2021
|
$
|
32
|
|
2022
|
31
|
|
2023
|
30
|
|
2024
|
25
|
|
2025
|
25
|
|
Thereafter
|
308
|
|
Total
|
$
|
451
|
|
The goodwill balance by reportable segments on December 31, 2020 are comprised of the following ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IMTT
|
|
Atlantic Aviation
|
|
MIC
Hawaii
|
|
Total
|
Goodwill acquired in business combinations, net of disposals, on December 31, 2019
|
$
|
1,430
|
|
|
$
|
619
|
|
|
$
|
123
|
|
|
$
|
2,172
|
|
Accumulated impairment charges
|
—
|
|
|
(123)
|
|
|
(3)
|
|
|
(126)
|
|
Other
|
(2)
|
|
|
(1)
|
|
|
—
|
|
|
(3)
|
|
Transfer to asset held for sale
|
(1,428)
|
|
|
—
|
|
|
—
|
|
|
(1,428)
|
|
Balance on December 31, 2019
|
—
|
|
|
495
|
|
|
120
|
|
|
615
|
|
Goodwill related to 2020 acquisition
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Balance on December 31, 2020
|
$
|
—
|
|
|
$
|
496
|
|
|
$
|
120
|
|
|
$
|
616
|
|
The Company tests for goodwill impairment at the reporting unit level 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. During 2020, the Company has experienced a sustained decline in its market capitalization largely triggered by the impact of COVID-19 on its businesses and economic activity.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Intangible Assets and Goodwill – (continued)
The Company performed an interim impairment analysis based on its financial results through September 30, 2020. The Company used both the market and income approaches, weighting them based on their applicability to the segment. The income approach used forecasted cash flows reflecting the impact of COVID-19 to its remaining operating businesses and the expected recovery therefrom in the short to medium term. The analysis concluded that fair value of its remaining operating businesses exceeded their carrying value and no impairment was recorded. See Note 4, "Discontinued Operations and Dispositions", for discussion on the impairment recorded at IMTT. On December 31, 2020, 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 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”.
On December 31, 2020 and 2019, the Company’s consolidated long-term debt comprised of the following ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
2020
|
|
2019
|
|
|
|
|
Atlantic Aviation
|
$
|
1,005
|
|
|
$
|
1,015
|
|
MIC Hawaii
|
194
|
|
|
195
|
|
MIC Corporate
|
391
|
|
|
388
|
|
Total
|
1,590
|
|
|
1,598
|
|
Current portion
|
(11)
|
|
|
(12)
|
|
Long-term portion
|
1,579
|
|
|
1,586
|
|
Unamortized deferred financing costs(1)
|
(24)
|
|
|
(32)
|
|
Long-term portion less unamortized debt discount and deferred financing costs
|
$
|
1,555
|
|
|
$
|
1,554
|
|
(1)The weighted average remaining life of the deferred financing costs on December 31, 2020 was 4.4 years.
The following table represents the future maturities of long-term debt balances on December 31, 2020 and includes the unamortized debt discount of $12 million related to the 2.00% Convertible Senior Notes due October 2023 ($ in millions).
|
|
|
|
|
|
2021
|
$
|
11
|
|
2022
|
111
|
|
2023
|
494
|
|
2024
|
12
|
|
2025
|
965
|
|
Thereafter
|
9
|
|
Total
|
$
|
1,602
|
|
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-Term Debt – (continued)
MIC Corporate
Senior Secured Revolving Credit Facility
On December 31, 2020 and 2019, MIC Corporate had a $600 million senior secured revolving credit facility that was undrawn. During 2020, the Company borrowed $599 million on its revolving credit facility and subsequently repaid the amount in full using cash on hand.
The IMTT Transaction resulted in the termination of commitments under the senior secured revolving credit facility on January 19, 2021, in accordance with the terms of that agreement.
2.875% Convertible Senior Notes due July 2019 (2.875% Convertible Senior Notes)
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 to partially fund the IMTT acquisition and for general corporate purposes. On maturity, the Company fully repaid the outstanding balance using cash on hand.
2.00% Convertible Senior Notes due October 2023 (2.00% Convertible Senior Notes)
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. 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 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.
On December 31, 2020 and 2019, the outstanding balance on the Notes were $391 million and $388 million, respectively, which had a fair value of the liability component of approximately $390 million and $370 million, respectively. The conversion rate was 9.0290 shares of common stock per $1,000 principal amount on December 31, 2020 and 2019. On January 11, 2021, due to the impact of the special dividend paid by the Company on January 8, 2021, the conversion rate increased to 12.6572 shares of common stock per $1,000 principal amount.
The 2.00% Convertible Senior Notes consisted of the following ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
2020
|
|
2019
|
Liability Component:
|
|
|
|
Principal
|
$
|
403
|
|
|
$
|
403
|
|
Unamortized debt discount
|
(12)
|
|
|
(15)
|
|
Long-term debt, net of unamortized debt discount
|
391
|
|
|
388
|
|
Unamortized deferred financing costs
|
(4)
|
|
|
(6)
|
|
Net carrying amount
|
$
|
387
|
|
|
$
|
382
|
|
Equity Component
|
$
|
27
|
|
|
$
|
27
|
|
The Company recognized $13 million in interest expense related to the 2.00% Convertible Senior Notes during 2020, 2019, and 2018, of which $8 million related to the principal portion. The remaining portion of the interest expense related to the amortization of debt discount and deferred financing costs.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-Term Debt – (continued)
The key terms of the 2.00% Convertible Senior Notes are summarized in the table below.
|
|
|
|
|
|
|
|
|
|
|
Facility Terms
|
|
|
|
2.00% Convertible Senior Notes
|
|
|
|
|
|
Amount outstanding on December 31, 2020
|
|
|
|
$391 million, net of unamortized discount of $12 million
|
Maturity
|
|
|
|
October 2023
|
Amortization
|
|
|
|
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
|
|
|
|
2.00% payable on April 1st and October 1st of each year
|
|
|
|
|
|
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 on December 31, 2019. The New AA Credit Agreement is guaranteed on a senior secured first lien basis by Holdings and certain subsidiaries of AA FBO. The additional proceeds from the Atlantic Aviation refinancing were used to repay the Company’s 2.875% Convertible Senior Notes and for general corporate purposes.
During the year ended December 31, 2020, Atlantic Aviation drew $275 million on its revolving credit facility on March 17, 2020. On April 30, 2020, Atlantic Aviation fully repaid the outstanding balance on its revolving credit facility and effective May 4, 2020, reduced the commitments on this facility to $10 million, and further reduced to $1 million by December 31, 2020, solely with respect to letters of credit then outstanding. The amendment of the facility eliminates any leverage-based maintenance covenant on the Atlantic Aviation term loan as long as the letters of credit issued under the facility are cash collateralized and rolled over to standalone letters of credit facilities upon renewal. On December 31, 2020 and 2019, Atlantic Aviation had $10 million in letters of credit outstanding.
The key terms of the term loan are summarized in the table below.
|
|
|
|
|
|
|
|
|
|
|
Facility Terms
|
|
Term Loan Facility
|
|
|
Facilities
|
|
$1,025 million senior secured first lien term loan ($1,005 million outstanding on December 31, 2020)
|
|
|
Maturity
|
|
December 2025
|
|
|
Amortization
|
|
1.00% of the initial principal balance per annum
|
|
|
Interest Rate
|
|
LIBOR plus 3.75% on December 31, 2020
|
|
|
|
|
|
|
|
Security
|
|
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 was fixed at 0.99% using an interest rate swap contract, that expired upon maturity in 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 on December 31, 2020 and 2019.
On December 31, 2020 and 2019, Hawaii Gas also had $100 million of fixed rate senior notes outstanding that had a fair value of approximately $105 million, respectively.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-Term Debt – (continued)
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 on December 31, 2020)
|
|
$100 million senior secured notes (fully drawn on December 31, 2020)
|
|
$60 million revolving credit facility (undrawn on December 31, 2020)
|
Maturity
|
|
February 2023
|
|
August 2022
|
|
February 2023
|
Amortization
|
|
Payable at maturity
|
|
Payable at maturity
|
|
Revolving, payable at maturity
|
Interest Rate
|
|
LIBOR plus 1.50% on December 31, 2020
|
|
4.22% payable semi-annually
|
|
LIBOR plus 1.25% on December 31, 2020
|
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. On December 31, 2020 and 2019, the outstanding balance on the term loan was $14 million and $15 million, respectively.
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 enters into commodity price hedges to mitigate the impact of fluctuations in LPG prices on its cash flows.
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.
On December 31, 2020, the Company had $1,602 million of current and long-term debt, excluding the adjustment for unamortized debt discount, of which $414 million was economically hedged with interest rate contracts, $503 million was fixed rate debt, and $685 million was unhedged. On December 31, 2019, the Company had $1,613 million of current and long-term debt, of which $495 million was economically hedged with interest rate contracts, $503 million was fixed rate debt, and $615
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Derivative Instruments and Hedging Activities – (continued)
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.
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
Hawaii Gas had an $80 million interest rate swap that fully hedged its term loan. The interest rate swap expired in February 2020. To finance its solar facilities, MIC Hawaii entered into a ten year, amortizing term loan facility that floats at LIBOR plus 2.00%. This term loan facility is fully hedged with an amortizing interest rate swap contract that is scheduled to amortize concurrently with the term loan and fixes the interest rate at 3.38%.
Commodity Price Hedges
The risks 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 (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. 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. 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. On December 31, 2020, Hawaii Gas had 9 million gallons of LPG hedged that expires throughout 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 on December 31, 2020 and 2019 were ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Classification
|
|
Assets (Liabilities) at Fair Value as of December 31,
|
|
2020
|
|
2019
|
Fair value of derivative instruments - other current assets
|
|
$
|
1
|
|
|
$
|
3
|
|
Fair value of derivative instruments - other noncurrent assets
|
|
—
|
|
|
2
|
|
Total derivative contracts - assets
|
|
$
|
1
|
|
|
$
|
5
|
|
Fair value of derivative instruments - other current liabilities
|
|
$
|
—
|
|
|
$
|
(6)
|
|
|
|
|
|
|
Total derivative contracts - liabilities
|
|
$
|
—
|
|
|
$
|
(6)
|
|
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Derivative Instruments and Hedging Activities – (continued)
The Company’s hedging activities during 2020, 2019, and 2018 and its related location within the consolidated statement of operations were ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement Classification
|
|
(Loss) Gain Recognized for the Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Interest expense – interest rate caps
|
|
$
|
(4)
|
|
|
$
|
(7)
|
|
|
$
|
4
|
|
Interest expense – interest rate swaps
|
|
(1)
|
|
|
(1)
|
|
|
1
|
|
Cost of product sales – commodity swaps
|
|
1
|
|
|
(10)
|
|
|
(5)
|
|
Total
|
|
$
|
(4)
|
|
|
$
|
(18)
|
|
|
$
|
—
|
|
All of the Company’s derivative instruments are collateralized by the assets of the respective businesses.
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. On December 31, 2020, the Company had 87,361,929 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 on December 31, 2020. 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 during 2020, 2019, and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declared
|
|
Period
Covered
|
|
$
per Share
|
|
Record
Date
|
|
Payable
Date
|
December 23, 2020
|
|
(1)
|
|
$
|
11.00
|
|
|
January 5, 2021
|
|
January 8, 2021
|
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
|
(1)Special dividend declared and paid out of the net proceeds from the IMTT Transaction. Shares of MIC traded with “due-bills” attached through January 8, 2021 and traded ex-dividend on January 11, 2021.
The Board regularly reviews the Company’s dividend policy. In determining whether to pay or adjust the amount of any quarterly dividend, the Board will take into account such matters as the ability of the Company's businesses to generate Free Cash Flow, its progress with respect to a sale or sales of the operating businesses, the state of the capital markets and general business and economic conditions, the short and long term impacts of, and disruptions in the businesses, and/or in the business or economic environment due to COVID-19, or other non-economic events, the Company’s financial condition, results of
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Stockholders’ Equity – (continued)
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.
The dividends paid have been recorded as a reduction to Additional Paid in Capital in the stockholders’ equity section of the consolidated balance sheets.
2014 Independent Directors 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 195,162 shares remained available for issuance on December 31, 2020. 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 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 2018, the Company has granted and issued the following stock to the Board under the 2014 Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of
Grant
|
|
Stock Units
Granted
|
|
Price of Stock Units
Granted
|
|
Date of
Vesting
|
|
|
|
|
|
|
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
|
|
May 13, 2020
|
|
|
|
|
|
|
May 14, 2020
|
|
32,112
|
|
28.03
|
|
(2)
|
|
|
|
|
|
|
(1)Represents additional restricted stock unit grants to new independent directors.
(2)Date of vesting will be the day immediately preceding the 2021 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 quarter ended March 31, 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.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Stockholders’ Equity – (continued)
The following represents unvested STIP RSU grants through December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
STIP RSU Grants
|
|
Number of RSUs
(in units)
|
|
Weighted Average Grant-Date Fair Value
(per share)
|
Unvested balance on December 31, 2019
|
—
|
|
|
$
|
—
|
|
Granted
|
55,661
|
|
24.50
|
|
Forfeited
|
(1,468)
|
|
24.50
|
|
Vested
|
(19,566)
|
|
|
32.57
|
|
Unvested balance on December 31, 2020
|
34,627
|
|
$
|
24.50
|
|
On December 31, 2020, the grant date fair value of the unvested awards was $848,000, of which $424,000 of compensation expense was recorded during 2020. On December 31, 2020, the unrecognized compensation cost related to unvested RSU awards is expected to be recognized over a weighted-average period of 1.0 year.
As a result of the IMTT Transaction, the Company's Compensation Committee and Board of Directors approved an accelerated vesting of STIP RSU grants relating to former eligible employees of IMTT. These RSUs were fully vested in shares on December 23, 2020. This acceleration changed the terms of the vesting conditions and are therefore treated as modifications in accordance with ASC 718, Stock Based Compensation. This resulted in $398,000 of additional compensation expense recorded in discontinued operations during 2020.
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 December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Grants
|
|
Number of RSUs
(in units)
|
|
Weighted Average Grant-Date Fair Value
(per share)
|
Unvested balance on December 31, 2018
|
—
|
|
|
$
|
—
|
|
Granted
|
6,067
|
|
|
40.30
|
|
Unvested balance on December 31, 2019
|
6,067
|
|
|
40.30
|
|
Granted
|
4,602
|
|
23.50
|
|
Vested
|
(5,702)
|
|
26.74
|
|
Unvested balance on December 31, 2020
|
4,967
|
|
$
|
40.30
|
|
Compensation expense related to the Special RSU grants in 2020 and 2019 were not significant and is expected to be recognized over a weighted-average period of 0.3 years.
Macquarie Infrastructure Corporation Long-Term Incentive Plan (LTIP) for MIC Operating Businesses — Performance Stock Units (PSUs)
During the quarter ended March 31, 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 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.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Stockholders’ Equity – (continued)
The following represents unvested LTIP grants through December 31, 2020 at the target level of performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
LTIP Grants (at Target)
|
|
Number of PSUs
(in units)
|
|
Weighted Average Grant-Date Fair Value
(per share)
|
Unvested balance on December 31, 2018
|
—
|
|
$
|
—
|
|
Granted
|
134,671
|
|
39.59
|
Forfeited
|
(9,477)
|
|
39.26
|
Unvested balance on December 31, 2019
|
125,194
|
|
39.62
|
|
Forfeited
|
(18,965)
|
|
39.70
|
Vested
|
(34,708)
|
|
|
39.88
|
|
Unvested balance on December 31, 2020
|
71,521
|
|
$
|
39.47
|
|
On December 31, 2020, depending upon actual performance, the number of PSUs to be issued will vary from zero to 125,165, net of forfeitures. On December 31, 2020, the grant date fair value of the unvested awards was $2.8 million, reflecting target performance by all participants. In 2020 and 2019, the Company recognized $471,000 and $571,000, respectively, of compensation expense related to the LTIP. On December 31, 2020, the unrecognized compensation cost related to unvested PSU awards was approximately $1.8 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 1.0 year.
As a result of the IMTT Transaction, the Company's Compensation Committee and Board of Directors approved an accelerated vesting of LTIP PSU grants relating to former eligible employees of IMTT. These PSUs were vested prorated in shares on December 23, 2020. This acceleration changed the terms of the vesting conditions and are therefore treated as modifications in accordance with ASC 718. As a result, the participants forfeited 13,549 shares and decreased future compensation expense by $540,000.
Accumulated Other Comprehensive Loss, net of taxes
The following represents the changes and balances to the components of accumulated other comprehensive loss, net of taxes, during 2020, 2019, and 2018 ($ 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 on 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 on December 31, 2018
|
$
|
(16)
|
|
|
$
|
(14)
|
|
|
$
|
(30)
|
|
Change in post-retirement benefit plans
|
(9)
|
|
|
—
|
|
|
(9)
|
|
Translation adjustment
|
—
|
|
|
2
|
|
|
2
|
|
Balance on December 31, 2019
|
$
|
(25)
|
|
|
$
|
(12)
|
|
|
$
|
(37)
|
|
Change in post-retirement benefit plans
|
(16)
|
|
|
—
|
|
|
(16)
|
|
Translation adjustment
|
—
|
|
|
1
|
|
|
1
|
|
Reclassification to net (loss) income due to sale of business(4)
|
35
|
|
|
11
|
|
|
46
|
|
Balance on December 31, 2020
|
$
|
(6)
|
|
|
$
|
—
|
|
|
$
|
(6)
|
|
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Stockholders’ Equity – (continued)
(1)Change in post-retirement benefit plans is presented net of tax benefit of $6 million and $3 million in 2020 and 2019, respectively, and net of tax expense of $3 million in 2018.
(2)Translation adjustment is presented net of tax expense that was insignificant in 2020 and $1 million in 2019 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.
(4)Reclassified to discontinued operations in the consolidated statement of operations in connection with the IMTT Transaction. See Note 4, "Discontinued Operations and Dispositions", for further discussions.
12. Reportable Segments
On December 31, 2020, the Company’s businesses consist of three reportable segments: Atlantic Aviation, MIC Hawaii, and Corporate and Other.
During the quarter ended September 30, 2020, IMTT was classified as a discontinued operation and eliminated as a reportable segment. All periods reported herein reflect this change. In December 2020, the Company completed the sale of IMTT.
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 its Contracted Power segment was eliminated. All periods reported herein reflect this change. In September 2019, the Company completed the last of the sales of its solar and wind power generation businesses including its majority interest in a renewable power development business. A relationship with a third-party developer of renewable power facilities was reported as a component of Corporate and Other through the expiration of the relationship in July 2019.
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 69 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.
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 industrial, 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.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Reportable Segments – (continued)
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. The PPAs are accounted for as operating leases and have no minimum lease payments. Lease income is recorded within product revenue when the electricity is delivered.
Corporate and Other
Corporate and Other comprises a holding company headquarters in New York City, MIC Corporate, and a shared services center in Plano, Texas, MIC Global Services.
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, 2020
|
Atlantic
Aviation
|
|
MIC
Hawaii
|
|
|
|
Total Reportable Segments
|
Service revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
$
|
424
|
|
|
$
|
—
|
|
|
|
|
$
|
424
|
|
Hangar
|
99
|
|
|
—
|
|
|
|
|
99
|
|
Other
|
144
|
|
|
—
|
|
|
|
|
144
|
|
Total service revenue
|
667
|
|
|
—
|
|
|
|
|
667
|
|
Product revenue
|
|
|
|
|
|
|
|
Lease
|
—
|
|
|
3
|
|
|
|
|
3
|
|
Gas
|
—
|
|
|
163
|
|
|
|
|
163
|
|
Other
|
—
|
|
|
14
|
|
|
|
|
14
|
|
Total product revenue
|
—
|
|
|
180
|
|
|
|
|
180
|
|
Total revenue
|
$
|
667
|
|
|
$
|
180
|
|
|
|
|
$
|
847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
Atlantic
Aviation
|
|
MIC
Hawaii
|
|
Consolidation Adjustment
|
|
Total Reportable Segments
|
Service revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
$
|
695
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
695
|
|
Hangar
|
95
|
|
|
—
|
|
|
—
|
|
|
95
|
|
Other
|
182
|
|
|
—
|
|
|
(3)
|
|
|
179
|
|
Total service revenue
|
972
|
|
|
—
|
|
|
(3)
|
|
|
969
|
|
Product revenue
|
|
|
|
|
|
|
|
Lease
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
Gas
|
—
|
|
|
226
|
|
|
—
|
|
|
226
|
|
Other
|
—
|
|
|
12
|
|
|
—
|
|
|
12
|
|
Total product revenue
|
—
|
|
|
243
|
|
|
—
|
|
|
243
|
|
Total revenue
|
$
|
972
|
|
|
$
|
243
|
|
|
$
|
(3)
|
|
|
$
|
1,212
|
|
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Reportable Segments – (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2018
|
Atlantic
Aviation
|
|
MIC
Hawaii
|
|
Corporate and Other
|
|
Consolidation
Adjustments
|
|
Total Reportable Segments
|
Service revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
$
|
704
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
704
|
|
Hangar
|
88
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
88
|
|
Construction
|
—
|
|
|
43
|
|
|
—
|
|
|
—
|
|
|
43
|
|
Other
|
170
|
|
|
4
|
|
|
—
|
|
|
(4)
|
|
|
170
|
|
Total service revenue
|
962
|
|
|
47
|
|
|
—
|
|
|
(4)
|
|
|
1,005
|
|
Product revenue
|
|
|
|
|
|
|
|
|
|
Lease
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
5
|
|
Gas
|
—
|
|
|
229
|
|
|
—
|
|
|
—
|
|
|
229
|
|
Other
|
—
|
|
|
11
|
|
|
1
|
|
|
—
|
|
|
12
|
|
Total product revenue
|
—
|
|
|
245
|
|
|
1
|
|
|
—
|
|
|
246
|
|
Total revenue
|
$
|
962
|
|
|
$
|
292
|
|
|
$
|
1
|
|
|
$
|
(4)
|
|
|
$
|
1,251
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
Atlantic
Aviation
|
|
MIC
Hawaii
|
|
Corporate
and Other
|
|
Total Reportable Segments
|
Net income (loss)
|
$
|
28
|
|
|
$
|
12
|
|
|
$
|
(246)
|
|
|
$
|
(206)
|
|
Interest expense, net
|
55
|
|
|
8
|
|
|
23
|
|
|
86
|
|
Provision for income taxes
|
11
|
|
|
6
|
|
|
110
|
|
|
127
|
|
Depreciation and amortization
|
99
|
|
|
16
|
|
|
1
|
|
|
116
|
|
Fees to Manager - related party
|
—
|
|
|
—
|
|
|
21
|
|
|
21
|
|
|
|
|
|
|
|
|
|
Other non-cash expense (income), net
|
2
|
|
|
(1)
|
|
|
5
|
|
|
6
|
|
EBITDA excluding non-cash items
|
$
|
195
|
|
|
$
|
41
|
|
|
$
|
(86)
|
|
|
$
|
150
|
|
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Reportable Segments – (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
Atlantic
Aviation
|
|
MIC
Hawaii
|
|
Corporate
and Other
|
|
Total Reportable Segments
|
Net income (loss)
|
$
|
69
|
|
|
$
|
13
|
|
|
$
|
(57)
|
|
|
$
|
25
|
|
Interest expense, net
|
74
|
|
|
10
|
|
|
16
|
|
|
100
|
|
Provision (benefit) for income taxes
|
24
|
|
|
9
|
|
|
(18)
|
|
|
15
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
106
|
|
|
16
|
|
|
—
|
|
|
122
|
|
Fees to Manager - related party
|
—
|
|
|
—
|
|
|
32
|
|
|
32
|
|
Other non-cash expense, net
|
3
|
|
|
12
|
|
|
2
|
|
|
17
|
|
EBITDA excluding non-cash items
|
$
|
276
|
|
|
$
|
60
|
|
|
$
|
(25)
|
|
|
$
|
311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2018
|
Atlantic
Aviation
|
|
MIC
Hawaii
|
|
Corporate
and Other
|
|
Total Reportable Segments
|
Net income (loss)
|
$
|
96
|
|
|
$
|
(12)
|
|
|
$
|
(83)
|
|
|
$
|
1
|
|
Interest expense, net
|
25
|
|
|
8
|
|
|
33
|
|
|
66
|
|
Provision (benefit) for income taxes
|
35
|
|
|
(6)
|
|
|
(14)
|
|
|
15
|
|
Goodwill impairment
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
Depreciation and amortization
|
106
|
|
|
23
|
|
|
—
|
|
|
129
|
|
Fees to Manager - related party
|
—
|
|
|
—
|
|
|
45
|
|
|
45
|
|
Other non-cash expense, net(1)
|
1
|
|
|
22
|
|
|
1
|
|
|
24
|
|
EBITDA excluding non-cash items
|
$
|
263
|
|
|
$
|
38
|
|
|
$
|
(18)
|
|
|
$
|
283
|
|
(1)Other non-cash expense, net, includes the write-down of the Company’s investment in the mechanical contractor business at MIC Hawaii.
Reconciliation of total reportable segments’ EBITDA excluding non-cash items to consolidated net (loss) income from continuing operations before income taxes were ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2020
|
|
2019
|
|
2018
|
Total reportable segments EBITDA excluding non-cash items
|
$
|
150
|
|
|
$
|
311
|
|
|
$
|
283
|
|
Interest expense
|
(86)
|
|
|
(100)
|
|
|
(66)
|
|
Goodwill impairment
|
—
|
|
|
—
|
|
|
(3)
|
|
Depreciation and amortization
|
(116)
|
|
|
(122)
|
|
|
(129)
|
|
Fees to Manager - related party
|
(21)
|
|
|
(32)
|
|
|
(45)
|
|
|
|
|
|
|
|
Other expense, net
|
(6)
|
|
|
(17)
|
|
|
(24)
|
|
Total consolidated net (loss) income from continuing operations
before income taxes
|
$
|
(79)
|
|
|
$
|
40
|
|
|
$
|
16
|
|
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Reportable Segments – (continued)
Capital expenditures, on a cash basis, for the Company’s reportable segments were ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
Atlantic Aviation
|
$
|
39
|
|
|
$
|
61
|
|
|
$
|
67
|
|
MIC Hawaii
|
14
|
|
|
20
|
|
|
23
|
|
Corporate and Other
|
1
|
|
|
3
|
|
|
24
|
|
Total capital expenditures of reportable segments
|
$
|
54
|
|
|
$
|
84
|
|
|
$
|
114
|
|
Property, equipment, land, and leasehold improvements, net, and total assets for the Company’s reportable segments were ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, Equipment,
Land, and Leasehold
Improvements, net
|
|
Total Assets
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
Atlantic Aviation
|
$
|
550
|
|
|
$
|
567
|
|
|
$
|
1,989
|
|
|
$
|
2,060
|
|
MIC Hawaii
|
297
|
|
|
301
|
|
|
510
|
|
|
537
|
|
Corporate and Other
|
7
|
|
|
11
|
|
|
1,680
|
|
|
92
|
|
Total assets of reportable segments
|
$
|
854
|
|
|
$
|
879
|
|
|
$
|
4,179
|
|
|
$
|
2,689
|
|
Assets held for sale
|
—
|
|
|
—
|
|
|
—
|
|
|
4,172
|
|
Total consolidated assets
|
$
|
854
|
|
|
$
|
879
|
|
|
$
|
4,179
|
|
|
$
|
6,861
|
|
13. Related Party Transactions
Management Services
On December 31, 2020 and 2019, the Manager held 13,954,821 shares and 13,253,791 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. The Manager’s holdings on December 31, 2020 represented 15.97% of the Company's outstanding common stock.
Since January 1, 2018, 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)
|
December 23, 2020
|
|
(1)
|
|
$
|
11.00
|
|
|
January 5, 2021
|
|
January 8, 2021
|
|
$
|
154
|
|
February 14, 2020
|
|
Fourth quarter 2019
|
|
1.00
|
|
|
March 6, 2020
|
|
March 11, 2020
|
|
13
|
|
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
|
|
(1)Special dividend declared and paid out of the net proceeds from the IMTT Transaction. Shares of MIC traded with “due-bills” attached through January 8, 2021 and traded ex-dividend on January 11, 2021.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Related Party Transactions – (continued)
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 2020, 2019, and 2018, the Company incurred base management fees of $21 million, $32 million, and $45 million, respectively. The Company did not incur any performance fees in 2020, 2019, and 2018.
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.
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 its Manager on October 30, 2019 (see Exhibit 10.3 of this Form 10-K). Outside of the Disposition Agreement, the Company has limited ability to terminate the Management Services Agreement. The Disposition Agreement provides for the termination of the Company’s external management relationship with its Manager as to any businesses, or substantial portions thereof, that are sold (including if the Company itself is sold). In connection therewith, the Company will make a payment to its Manager of approximately 2.9% to 6.1% of the net proceeds generated in the event of such sales, subject to a minimum amount of payments for all sales in the aggregate in the event of a Qualifying Termination Event (QTE) of (i) $50 million plus (ii) 1.5% multiplied by proceeds in excess of $500 million in the aggregate. A ‘‘QTE’’ means (i) the sale of the Company or (ii) a transaction or series of transactions resulting in a third party or parties acquiring all the assets of the Company. The Disposition Agreement provides that the Management Services Agreement will terminate upon the occurrence of a QTE or upon mutual agreement of the parties. If the Management Services Agreement has not been terminated prior to the sixth anniversary of the Disposition Agreement, its Manager and its independent directors will engage in reasonable, good faith discussions regarding a potential internalization or other framework for a termination of the Management Services Agreement.
The Disposition Agreement provides that if a QTE occurs on or prior to January 1, 2022 (subject to extension under certain circumstances for up to six months thereafter), then the Company will pay its Manager an additional payment of $25 million. The Disposition Agreement further provides that its Manager will receive a make-whole payment following a QTE, to the extent that the aggregate management fees paid to its Manager through the date of the QTE were less than (i) $20 million per year for the two years following the date of the Disposition Agreement and (ii) $10 million per year for any period thereafter. In addition, following a QTE, its Manager will be paid in cash all accrued and unpaid management fees, including fees of $8.5 million waived in accordance with the Limited Waiver, which waived fees would have been payable through October 31, 2019. The Manager has agreed not to exercise its right to retract the Limited Waiver for periods after October 31, 2019 and prior to the termination of 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 of the agreement, subject to extension under certain circumstances if a transaction is pending.
In connection with the IMTT Transaction, the Company made a Disposition Payment of $28 million to its Manager in December 2020 (currently in escrow).
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Related Party Transactions – (continued)
The unpaid portion of the base management fees and performance fees, if any, at the end of each reporting period is included in Due to Manager-related party in the consolidated balance sheets. The following table shows the Manager’s reinvestment of its base management fees and performance fees, if any, in shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Base Management
Fee Amount
($ in millions)
|
|
Performance
Fee Amount
($ in millions)
|
|
Shares
Issued
|
2020 Activities:
|
|
|
|
|
|
|
|
|
Fourth quarter 2020
|
|
$
|
5
|
|
|
$
|
—
|
|
162,791
|
|
(1)
|
Third quarter 2020
|
|
5
|
|
|
|
—
|
|
172,976
|
|
|
Second quarter 2020
|
|
4
|
|
|
|
—
|
|
146,452
|
|
|
First quarter 2020
|
|
7
|
|
|
|
—
|
|
181,617
|
|
|
2019 Activities:
|
|
|
|
|
|
|
|
|
Fourth quarter 2019
|
|
$
|
9
|
|
|
$
|
—
|
|
208,881
|
|
|
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)The Manager elected to reinvest all of the monthly base management fees for the quarter ended December 31, 2020 in new primary shares. The Company issued 162,791 shares for the quarter ended December 31, 2020, including 33,760 shares that were issued in January 2021 for the December 2020 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 $314,000 in 2020 and approximately $1 million in each of the years in 2019 and 2018 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 2020 and 2019, the Company also incurred $60,000 and $294,000, respectively, 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.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Related Party Transactions – (continued)
Long-Term Debt
The Company had a $600 million senior secured revolving credit facility at the holding company level where Macquarie Capital Funding LLC had a $40 million commitment. The Company incurred $648,000, $155,000, and $454,000 in interest expense related to Macquarie Capital Funding LLC’s portion of the senior secured revolving credit facility in 2020, 2019, and 2018, respectively. On January 19, 2021, the commitments on the senior secured revolving credit facility were terminated in accordance with the terms of that agreement. All outstanding balances were repaid as of December 31, 2020.
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.
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 in 2020 and 2019, respectively, and were insignificant in 2018.
Other Related Party Transactions
In 2020 and 2019, the Company incurred $25,000 and $125,000, respectively, for advisory services from a former Board member.
14. Income Taxes
The Company files a consolidated federal income tax return that includes the financial results of its ongoing businesses, Atlantic Aviation and MIC Hawaii, and its discontinued operations, IMTT, through the date of sale. In addition, the businesses file income tax returns and may pay taxes in state and local jurisdictions in which they operate.
The Company’s income tax provision (benefit) related to the income from continuing operations in 2020, 2019, and 2018 were ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2020
|
|
2019
|
|
2018
|
Current taxes:
|
|
|
|
|
|
Federal
|
$
|
129
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
3
|
|
|
6
|
|
|
7
|
|
Total current tax provision
|
132
|
|
|
6
|
|
|
7
|
|
Deferred taxes:
|
|
|
|
|
|
Federal
|
(8)
|
|
|
8
|
|
|
9
|
|
State
|
3
|
|
|
1
|
|
|
3
|
|
Total deferred tax (benefit) provision
|
(5)
|
|
|
9
|
|
|
12
|
|
Change in valuation allowance
|
—
|
|
|
—
|
|
|
(4)
|
|
Total tax provision
|
$
|
127
|
|
|
$
|
15
|
|
|
$
|
15
|
|
For 2020, current federal income taxes included $126 million related to the tax expense on the difference between the Company's book and tax basis in its investment in IMTT.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Income Taxes – (continued)
The following represents the tax impact of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities from continuing operations on December 31, 2020 and 2019 ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
2020
|
|
2019
|
Deferred tax assets:
|
|
|
|
Net operating loss carryforwards
|
$
|
17
|
|
|
$
|
18
|
|
Operating lease liabilities
|
87
|
|
|
85
|
|
Deferred revenue
|
5
|
|
|
4
|
|
Accrued expenses
|
8
|
|
|
6
|
|
|
|
|
|
Other
|
1
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
118
|
|
|
114
|
|
Deferred tax liabilities:
|
|
|
|
Intangible assets
|
(108)
|
|
|
(103)
|
|
|
|
|
|
Operating lease assets, net
|
(86)
|
|
|
(84)
|
|
Property and equipment
|
(45)
|
|
|
(41)
|
|
|
|
|
|
Equity component of convertible senior notes
|
(4)
|
|
|
(5)
|
|
Prepaid expenses and other
|
(2)
|
|
|
(1)
|
|
Total deferred tax liabilities
|
(245)
|
|
|
(234)
|
|
Net deferred tax liabilities
|
$
|
(127)
|
|
|
$
|
(120)
|
|
On December 31, 2019, the Company fully utilized all of its federal NOL carryforwards to offset income generated from continuing operations and a portion of the taxable gain from the sale of its solar and wind power generation facilities. The Company and its subsidiaries have state NOL carryforwards which are specific to the state in which the NOL was generated. Various states impose limitations on the utilization of NOL carryforwards.
In assessing the need for a valuation allowance, the Company 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. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In 2020, there were no significant change in the valuation allowance.
On December 31, 2020, the Company had $127 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 intangible assets and property and equipment. 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.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Income Taxes – (continued)
In 2020, 2019, and 2018, the Company recorded total tax provision of $127 million, $15 million, and $15 million, respectively, from continuing operations. These amounts are different from the amounts computed by applying the U.S. federal income tax rate for the period to pretax income as a result of the following ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
2020
|
|
2019
|
|
2018
|
Tax (benefit) provision at U.S. statutory rate
|
$
|
(17)
|
|
|
$
|
8
|
|
|
$
|
3
|
|
Permanent differences and other
|
2
|
|
|
2
|
|
|
7
|
|
State income taxes, net of federal benefit
|
4
|
|
|
5
|
|
|
8
|
|
Income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
1
|
|
Gain on sale of business
|
138
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
—
|
|
|
—
|
|
|
(4)
|
|
Total tax provision
|
$
|
127
|
|
|
$
|
15
|
|
|
$
|
15
|
|
Uncertain Tax Positions
The amount of unrecognized tax benefits on December 31, 2020 and 2019 were 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 Provision for Income Taxes in the consolidated statements of operations.
The federal statute of limitations on the assessment of additional income tax liabilities has lapsed for all returns filed on or before December 31, 2017. The various state statutes of limitations on the assessment of additional income taxes have lapsed on all returns filed on or before December 31, 2016.
15. Long-Term Contracted Revenue
Long-term contracted revenue consists of 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 following long-term contracted revenue were in existence on December 31, 2020 ($ in millions):
|
|
|
|
|
|
|
|
|
|
2021
|
|
|
$
|
55
|
|
|
|
2022
|
|
|
18
|
|
|
|
2023
|
|
|
13
|
|
|
|
2024
|
|
|
7
|
|
|
|
2025
|
|
|
4
|
|
|
|
Thereafter
|
|
|
10
|
|
|
|
Total
|
|
|
$
|
107
|
|
|
|
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.
The employer contribution to these plans ranges from 0% to 7% of eligible compensation. Employer contributions were $6 million in 2020 and $5 million in both 2019 and 2018, respectively.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Employee Benefit Plans – (continued)
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. On December 23, 2020, the IMTT DB Plan was sold in connection with the IMTT Transaction. See Note 4, "Discontinued Operations and Dispositions”, for further discussions.
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.
On December 23, 2020, the IMTT-Illinois Union Plan and the post-retirement life insurance plan was sold in connection with the IMTT Transaction. See Note 4, "Discontinued Operations and Dispositions”, for further discussions.
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 $1,000 of life insurance benefits.
Hawaii Gas also has a retiree life insurance program for certain nonunion retirees. This plan is closed to future participants.
Atlantic Aviation
Atlantic Aviation sponsors a retiree medical and life insurance plan available to certain employees. Currently, the plan is funded as required to pay benefits and the plan has no assets. The Company accounts for postretirement healthcare and life insurance benefits in accordance with ASC 715, Compensation — Retirement Benefits, which requires the accrual of the cost of providing postretirement benefits during the active service period of the employee.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Employee Benefit Plans – (continued)
Additional information about the fair value of the benefit plan assets, the components of net periodic cost, and the projected benefit obligation as of and during 2020 and 2019 are ($ in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HG DB
Plan Benefits
|
|
IMTT DB
Plan Benefits
|
|
Other
Plan Benefits
|
|
Total
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation – beginning of year
|
$
|
54
|
|
|
$
|
49
|
|
|
$
|
168
|
|
|
$
|
143
|
|
|
$
|
30
|
|
|
$
|
28
|
|
|
$
|
252
|
|
|
$
|
220
|
|
Service cost
|
1
|
|
|
1
|
|
|
5
|
|
|
5
|
|
|
1
|
|
|
1
|
|
|
7
|
|
|
7
|
|
Interest cost
|
2
|
|
|
2
|
|
|
5
|
|
|
6
|
|
|
1
|
|
|
1
|
|
|
8
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial losses
|
5
|
|
|
5
|
|
|
21
|
|
|
23
|
|
|
2
|
|
|
2
|
|
|
28
|
|
|
30
|
|
Benefits paid
|
(3)
|
|
|
(3)
|
|
|
(11)
|
|
|
(9)
|
|
|
(1)
|
|
|
(2)
|
|
|
(15)
|
|
|
(14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposition of benefit obligation due to
sale of business
|
—
|
|
|
—
|
|
|
(188)
|
|
|
—
|
|
|
(30)
|
|
|
—
|
|
|
(218)
|
|
|
—
|
|
Benefit obligation – end of year
|
$
|
59
|
|
|
$
|
54
|
|
|
$
|
—
|
|
|
$
|
168
|
|
|
$
|
3
|
|
|
$
|
30
|
|
|
$
|
62
|
|
|
$
|
252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets - beginning of year
|
$
|
52
|
|
|
$
|
46
|
|
|
$
|
94
|
|
|
$
|
88
|
|
|
$
|
9
|
|
|
$
|
9
|
|
|
$
|
155
|
|
|
$
|
143
|
|
Actual return on plan assets
|
7
|
|
|
9
|
|
|
6
|
|
|
15
|
|
|
1
|
|
|
1
|
|
|
14
|
|
|
25
|
|
Employer contributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Benefits paid
|
(3)
|
|
|
(3)
|
|
|
(11)
|
|
|
(9)
|
|
|
(1)
|
|
|
(2)
|
|
|
(15)
|
|
|
(14)
|
|
Disposition of plan asset due to sale of business
|
—
|
|
|
—
|
|
|
(89)
|
|
|
—
|
|
|
(10)
|
|
|
—
|
|
|
(99)
|
|
|
—
|
|
Fair value of plan assets – end of year
|
$
|
56
|
|
|
$
|
52
|
|
|
$
|
—
|
|
|
$
|
94
|
|
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
56
|
|
|
$
|
155
|
|
Collectively for the HG DB Plan, IMTT DB Plan, and IMTT – Illinois Union Plan, both accumulated and projected benefit obligations were $59 million and were in excess of the fair value of plan assets of $56 million on December 31, 2020. This compares with collective accumulated and projected benefit obligations of $205 million and $233 million, respectively, which were also in excess of the collective fair value of plan assets of $155 million on December 31, 2019. The variance in the accumulated and projected benefit obligations is primarily due to using projected salary assumptions through assumed termination of employment for active participants of the IMTT DB Plan as required under ASC 715. The remaining postretirement plans collectively resulted in accumulated postretirement benefit obligations of $3 million on December 31, 2020 and $19 million on December 31, 2019. Fair value of plan assets on these plans were zero for both periods.
Actuarial losses in the changes in benefit obligations for 2020 and 2019 resulted primarily due to the decrease in discount rate (see assumptions used in table below).
In 2020 and 2019, there were no contributions made to the HG DB Plan. As of December 31, 2020, Hawaii Gas is not expected to make any cash contribution to the HG DB Plan through 2030. The annual amount of any cash contributions will be dependent upon a number of factors such as market conditions and changes to regulations.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Employee Benefit Plans – (continued)
The funded status on December 31, 2020 and 2019 are presented in the following table ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HG DB
Plan Benefits
|
|
IMTT DB
Plan Benefits
|
|
Other Plan
Benefits
|
|
Total
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Funded status
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of year
|
$
|
(3)
|
|
|
$
|
(2)
|
|
|
$
|
—
|
|
|
$
|
(74)
|
|
|
$
|
(3)
|
|
|
$
|
(21)
|
|
|
$
|
(6)
|
|
|
$
|
(97)
|
|
Net amount recognized in balance sheet
|
$
|
(3)
|
|
|
$
|
(2)
|
|
|
$
|
—
|
|
|
$
|
(74)
|
|
|
$
|
(3)
|
|
|
$
|
(21)
|
|
|
$
|
(6)
|
|
|
$
|
(97)
|
|
Amounts recognized in balance sheet consisting of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1)
|
|
|
$
|
—
|
|
|
$
|
(1)
|
|
Noncurrent liabilities
|
(3)
|
|
|
(2)
|
|
|
—
|
|
|
(74)
|
|
|
(3)
|
|
|
(20)
|
|
|
(6)
|
|
|
(96)
|
|
Net amount recognized in balance sheet
|
$
|
(3)
|
|
|
$
|
(2)
|
|
|
$
|
—
|
|
|
$
|
(74)
|
|
|
$
|
(3)
|
|
|
$
|
(21)
|
|
|
$
|
(6)
|
|
|
$
|
(97)
|
|
Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive loss in 2020 and 2019 are presented in the following table ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HG DB
Plan Benefits
|
|
IMTT DB
Plan Benefits
|
|
Other
Plan Benefits
|
|
Total
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Accumulated loss
|
$
|
(8)
|
|
|
$
|
(8)
|
|
|
$
|
(40)
|
|
|
$
|
(20)
|
|
|
$
|
(7)
|
|
|
$
|
(5)
|
|
|
$
|
(55)
|
|
|
$
|
(33)
|
|
Accumulated other comprehensive loss
|
(8)
|
|
|
(8)
|
|
|
(40)
|
|
|
(20)
|
|
|
(7)
|
|
|
(5)
|
|
|
(55)
|
|
|
(33)
|
|
Net periodic benefit cost in excess (deficit) of cumulative employer contributions
|
5
|
|
|
6
|
|
|
(59)
|
|
|
(54)
|
|
|
(16)
|
|
|
(16)
|
|
|
(70)
|
|
|
(64)
|
|
Disposition of net periodic benefit cost in deficit of cumulative employer contributions due to sale of business
|
—
|
|
|
—
|
|
|
59
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
73
|
|
|
—
|
|
Reclassification to net (loss) income due to sale of business(1)
|
—
|
|
|
—
|
|
|
40
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
46
|
|
|
—
|
|
Net amount recognized in balance sheet
|
$
|
(3)
|
|
|
$
|
(2)
|
|
|
$
|
—
|
|
|
$
|
(74)
|
|
|
$
|
(3)
|
|
|
$
|
(21)
|
|
|
$
|
(6)
|
|
|
$
|
(97)
|
|
(1)Reclassified to discontinued operations in the consolidated statement of operations in connection with the IMTT Transaction. See Note 4, "Discontinued Operations and Dispositions", for further discussions.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Employee Benefit Plans – (continued)
The components of net periodic benefit cost and other changes in other comprehensive (income) loss for the plans are shown below ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HG DB
Plan Benefits
|
|
IMTT DB
Plan Benefits
|
|
Other
Plan Benefits
|
|
Total
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
Components of net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
6
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
8
|
|
Interest cost
|
2
|
|
|
2
|
|
|
2
|
|
|
5
|
|
|
6
|
|
|
6
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
8
|
|
|
9
|
|
|
9
|
|
Expected return on plan assets
|
(2)
|
|
|
(3)
|
|
|
(3)
|
|
|
(5)
|
|
|
(5)
|
|
|
(6)
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
(7)
|
|
|
(8)
|
|
|
(10)
|
|
Recognized actuarial loss
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
5
|
|
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
8
|
|
|
$
|
9
|
|
|
$
|
8
|
|
Other changes recognized in other comprehensive (income) loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (gain) loss arising during the year
|
$
|
—
|
|
|
$
|
(1)
|
|
|
$
|
1
|
|
|
$
|
20
|
|
|
$
|
13
|
|
|
$
|
(11)
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
(1)
|
|
|
$
|
22
|
|
|
$
|
13
|
|
|
$
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of loss
|
—
|
|
|
(1)
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
(1)
|
|
Total recognized in other comprehensive (income) loss
|
$
|
—
|
|
|
$
|
(2)
|
|
|
$
|
—
|
|
|
$
|
20
|
|
|
$
|
13
|
|
|
$
|
(11)
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
(1)
|
|
|
$
|
22
|
|
|
$
|
12
|
|
|
$
|
(12)
|
|
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
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Weighted average assumptions to determine benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
2.45
|
%
|
|
3.20
|
%
|
|
4.25
|
%
|
|
2.60
|
%
|
|
3.25
|
%
|
|
4.35
|
%
|
|
1.73% to 2.75%
|
|
|
2.82% to 3.35%
|
|
|
3.91% to 4.35%
|
|
Rate of compensation increase
|
N/A
|
|
N/A
|
|
N/A
|
|
4.57
|
%
|
|
4.57
|
%
|
|
4.57
|
%
|
|
4.57
|
%
|
(2)
|
|
4.57
|
%
|
(2)
|
|
4.57
|
%
|
(2)
|
Measurement date
|
Dec 31
|
|
Dec 31
|
|
Dec 31
|
|
Dec 23
|
|
Dec 31
|
|
Dec 31
|
|
Dec 23 to Dec 31
|
(1)
|
|
Dec 31
|
|
|
Dec 31
|
|
Weighted average assumptions to determine net cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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%
|
|
Expected long-term rate of return on plan assets during fiscal year
|
4.50
|
%
|
|
4.90
|
%
|
|
5.90
|
%
|
|
5.50
|
%
|
|
5.50
|
%
|
|
5.60
|
%
|
|
5.50
|
%
|
(3)
|
|
5.50
|
%
|
(3)
|
|
5.75
|
%
|
(3)
|
Rate of compensation increase
|
N/A
|
|
N/A
|
|
N/A
|
|
4.57
|
%
|
|
4.57
|
%
|
|
4.57
|
%
|
|
4.57
|
%
|
(2)
|
|
4.57
|
%
|
(2)
|
|
4.57
|
%
|
(2)
|
Assumed healthcare cost trend rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial health care cost trend rate
|
|
|
|
|
|
|
|
|
|
|
|
|
7.25%
|
|
|
7.25% to 7.75%
|
|
|
8.00% to 8.50%
|
|
Ultimate rate
|
|
|
|
|
|
|
|
|
|
|
|
|
4.50%
|
|
|
4.50% to 5.00%
|
|
|
4.50% to 5.00%
|
|
Year ultimate rate is reached
|
|
|
|
|
|
|
|
|
|
|
|
|
2029
|
|
|
2027 to 2028
|
|
|
2026 to 2027
|
|
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Employee Benefit Plans – (continued)
(1)Measurement date related to the IMTT post-retirement life insurance plan and IMTT-Illinois Union Plan was December 23, 2020.
(2)Only applies to IMTT post-retirement life insurance plan.
(3)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 with fixed income securities, equity securities, real estate fund investments, and cash. The asset allocation on December 31, 2020 and 2019 were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HG DB
Plan Benefits
|
|
IMTT DB
Plan Benefits
|
|
Other
Plan Benefits
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Equity securities
|
25
|
%
|
|
26
|
%
|
|
—
|
|
|
44
|
%
|
|
—
|
|
|
47
|
%
|
Fixed income securities
|
70
|
%
|
|
69
|
%
|
|
—
|
|
|
40
|
%
|
|
—
|
|
|
43
|
%
|
Private equity
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
%
|
|
—
|
|
|
2
|
%
|
Global real estate fund
|
4
|
%
|
|
4
|
%
|
|
—
|
|
|
4
|
%
|
|
—
|
|
|
5
|
%
|
Cash
|
1
|
%
|
|
1
|
%
|
|
—
|
|
|
4
|
%
|
|
—
|
|
|
3
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
|
—
|
|
|
100
|
%
|
|
—
|
|
|
100
|
%
|
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, 2020 and 2019 measurement dates were ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement on December 31, 2020
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)
|
|
|
Asset category:
|
|
|
|
|
|
|
|
|
|
Cash and money market
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Equity securities
|
14
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
|
Fixed income securities
|
39
|
|
|
—
|
|
|
39
|
|
|
—
|
|
|
|
Global real estate fund
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
56
|
|
|
$
|
1
|
|
|
$
|
55
|
|
|
$
|
—
|
|
|
|
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Employee Benefit Plans – (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement on 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
|
|
The estimated future benefit payments for the next ten years are ($ in millions):
|
|
|
|
|
|
|
|
|
|
2021
|
|
|
|
|
$
|
3
|
|
2022
|
|
|
|
|
3
|
|
2023
|
|
|
|
|
3
|
|
2024
|
|
|
|
|
3
|
|
2025
|
|
|
|
|
3
|
|
Thereafter
|
|
|
|
|
17
|
|
Total
|
|
|
|
|
$
|
32
|
|
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.
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.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Legal Proceedings and Contingencies – (continued)
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.
MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. 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, 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
|
|
(In Millions, except per share data)
|
2020
|
|
|
|
|
|
|
|
|
Revenue from continuing operations
|
|
$
|
284
|
|
|
$
|
141
|
|
|
$
|
202
|
|
|
$
|
220
|
|
Operating income (loss) from continuing operations
|
|
22
|
|
|
(12)
|
|
|
21
|
|
|
(22)
|
|
Net loss from continuing operations attributable to MIC
|
|
(7)
|
|
|
(25)
|
|
|
(158)
|
|
|
(16)
|
|
Net income (loss) from discontinued operations attributable to MIC
|
|
18
|
|
|
17
|
|
|
(735)
|
|
|
(22)
|
|
|
|
|
|
|
|
|
|
|
Per share information attributable to MIC(1):
|
|
|
|
|
|
|
|
|
Basic loss per share from continuing operations attributable to MIC
|
|
$
|
(0.08)
|
|
|
$
|
(0.29)
|
|
|
$
|
(1.82)
|
|
|
$
|
(0.18)
|
|
Basic income (loss) per share from discontinued operations attributable to MIC
|
|
0.21
|
|
|
0.20
|
|
|
(8.44)
|
|
|
(0.26)
|
|
Basic income (loss) per share attributable to MIC
|
|
0.13
|
|
|
(0.09)
|
|
|
(10.26)
|
|
|
(0.44)
|
|
Diluted loss per share from continuing operations attributable to MIC
|
|
$
|
(0.08)
|
|
|
$
|
(0.29)
|
|
|
$
|
(1.82)
|
|
|
$
|
(0.18)
|
|
Diluted income (loss) per share from discontinued operations attributable to MIC
|
|
0.21
|
|
|
0.20
|
|
|
(8.44)
|
|
|
(0.26)
|
|
Diluted income (loss) per share attributable to MIC
|
|
0.13
|
|
|
(0.09)
|
|
|
(10.26)
|
|
|
(0.44)
|
|
Cash dividends declared per share
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11.00
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenue from continuing operations
|
|
$
|
321
|
|
|
$
|
297
|
|
|
$
|
287
|
|
|
$
|
307
|
|
Operating income from continuing operations
|
|
53
|
|
|
27
|
|
|
29
|
|
|
34
|
|
Net income (loss) from continuing operations attributable to MIC
|
|
23
|
|
|
(5)
|
|
|
2
|
|
|
5
|
|
Net income from discontinued operations attributable to MIC
|
|
47
|
|
|
16
|
|
|
59
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
Per share information attributable to MIC(1):
|
|
|
|
|
|
|
|
|
Basic income (loss) per share from continuing operations attributable to MIC
|
|
$
|
0.27
|
|
|
$
|
(0.06)
|
|
|
$
|
0.03
|
|
|
$
|
0.06
|
|
Basic income per share from discontinued operations attributable to MIC
|
|
0.55
|
|
|
0.19
|
|
|
0.68
|
|
|
0.10
|
|
Basic income per share attributable to MIC
|
|
0.82
|
|
|
0.13
|
|
|
0.71
|
|
|
0.16
|
|
Diluted income (loss) per share from continuing operations attributable to MIC
|
|
$
|
0.27
|
|
|
$
|
(0.06)
|
|
|
$
|
0.03
|
|
|
$
|
0.06
|
|
Diluted income per share from discontinued operations attributable to MIC
|
|
0.55
|
|
|
0.19
|
|
|
0.68
|
|
|
0.10
|
|
Diluted income per share attributable to MIC
|
|
0.82
|
|
|
0.13
|
|
|
0.71
|
|
|
0.16
|
|
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.