MIC Reports 2016 Financial Results In Line With Guidance, Increases Dividend

NEW YORK, Feb. 21, 2017 /PRNewswire/ -- Macquarie Infrastructure Corporation (NYSE: MIC) today reported its financial results for fourth quarter and full year 2016.

"The performance of our businesses in the fourth quarter and the full year 2016 resulted in the generation of a better than expected amount of Adjusted Free Cash Flow," said James Hooke, chief executive officer of MIC.

MIC reported full year 2016 net income of $154.9 million, compared with a net loss of $113.8 million in 2015. Included in the full year figure was net income of $71.1 million in the fourth quarter of 2016 compared with $31.9 million in the prior comparable period. The Company also reported generation of cash from operating activities of $123.3 million and $560.3 million in the quarter and full-year periods ended December 31, 2016, respectively, compared with $126.2 million and $381.2 million in the comparable periods in 2015.

MIC's businesses produced $118.6 million and $510.2 million of Adjusted Free Cash Flow in the fourth quarter and full year periods in 2016, respectively, up from $94.0 million and from $445.5 million in the comparable periods in 2015. The nominal increase in the full year amount of 14.5% was partially offset by a 3.7% increase in MIC's weighted average number of shares outstanding in 2016 versus 2015 resulting in a 10.5% real increase including the impact of the incremental share issuance.

Performance highlights for the reported periods included:

• Atlantic Aviation: volume growth driven by market share gains, increased flight activity and contributions from acquisitions and investments
• IMTT: high utilization rates, stable storage pricing
• Contracted Power: improved solar and wind resources
• MIC Hawaii: successful acquisitions, increased gas sales
• Implementation of shared services center with cost savings expected in 2017 and beyond

"We were also pleased that the continued improvement in our underlying business performance, particularly the growth in cash generation, allowed us to meaningfully increase our quarterly cash dividend," said Hooke.

The MIC board of directors authorized a cash dividend of $1.31 per share, or $5.24 annualized, for the fourth quarter of 2016. The dividend will be payable March 8, 2017 to shareholders of record on March 3, 2017. The payment represents a 13.9% increase over the dividend paid for the fourth quarter of 2015. Inclusive of the $1.31, MIC will have distributed approximately 80.0% of its 2016 Adjusted Free Cash Flow to shareholders.

On February 3, 2017, MIC provided the market with initial guidance regarding the expected performance of its businesses in 2017 and 2018. "We expect that MIC's operations will continue to perform well and generate increases in Free Cash Flow of between 10% and 15% per year," Hooke said. "Based on the anticipated performance improvement, we are also initiating guidance for growth in our cash dividend of 10% in 2017."

MIC expects effective deployment of capital to drive approximately one third of its anticipated annual growth in Free Cash Flow. The Company exceeded its targeted level for capital deployment into growth projects and bolt-on acquisitions in 2016. "Having successfully deployed over $335.0 million during the year, up from an average of $250.0 million historically, we are positioned to potentially exceed our growth capital deployment target of $350.0 million in 2017," Hooke said.

Capital deployment highlights for 2016 included:

• Acquisitions of Fixed Base Operations assets
• Acquisition or development of 87 MW of solar facilities in Utah and Hawaii
• Acquisition of a design/build mechanical contractor in Hawaii
• Acquisition of a jet fuel storage and handling development company
• Investment in a US renewable power facility developer

MIC reported a backlog of approved growth projects of $300.0 million at year-end, and expects to deploy capital on projects including:

• The substantial majority of construction works at BEC II, MIC's development of a 130 MW addition to its power facility in Bayonne, NJ
• Ramp development and hangar construction at various Atlantic Aviation sites
• Storage tank and new dock construction at IMTT

Consistent with past performance, MIC also expects to complete bolt-on acquisitions that, together with growth projects, would result in the deployment of in excess of $350.0 million during the coming year.

"We are excited by the growth prospects we see emerging as a result of both the potential for tax reform as well as the focus on infrastructure redevelopment here in the U.S. We have the financial and human capital to deploy in the construction or acquisition of quality, cash generative opportunities in each of our four businesses and look forward to making the most of these trends for the benefit of our shareholders," said Hooke.

Summary Financial Information

Conference Call and Webcast

When:  Management has scheduled a conference call for 8:00 a.m. Eastern Time on Wednesday, February 22, 2017 during which it will review and comment on MIC's results for the fourth quarter and full year 2016.

How:  To listen to the conference call please dial +1(650) 521-5252 or +1(877) 852-2928 at least 10 minutes prior to the scheduled start time. A webcast of the call will be accessible via the Company's website at www.macquarie.com/mic. Please allow extra time prior to the call to visit the site and download the necessary software to listen to the webcast.

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

Replay:  For interested individuals unable to participate in the live conference call, a replay will be available after 2:00 p.m. on February 22, 2017 through midnight on February 28, 2017, at +1(404) 537-3406 or +1(855) 859-2056, Passcode: 48638082. An online archive of the webcast will be available on the Company's website for one year following the call.

About MIC

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

Use of Non-GAAP Measures

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

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

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

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

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

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

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

Free Cash Flow/Adjusted Free Cash Flow do not take into consideration required payments on indebtedness and other fixed obligations or other cash items that are excluded from MIC's definition of Free Cash Flow. Examples of other cash items that may be excluded in the calculation of Adjusted Free Cash Flow include, but are not limited to, interest rate swap breakage costs, certain transaction-related expenses and reorganization costs. Management notes that Free Cash Flow and Adjusted Free Cash Flow may be calculated differently by other companies thereby limiting its usefulness as a comparative measure. Both Free Cash Flow and Adjusted Free Cash Flow should be used as a supplemental measure to help understand MIC's financial performance and not in lieu of its financial results reported under GAAP.

See tables below for a reconciliation of EBITDA excluding non-cash items to net income (loss) —most comparable GAAP measure — and a reconciliation of Free Cash Flow and Adjusted Free Cash Flow to cash from operating activities — most comparable GAAP measure.

Classification of Maintenance Capital Expenditures and Growth Capital Expenditures

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

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

Forward-Looking Statements

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

MIC's actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. Additional risks of which MIC is not currently aware could also cause its actual results to differ. In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements. The forward-looking events discussed in this release may not occur. These forward-looking statements are made as of the date of this release. MIC undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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