31 October 2019
Macquarie Infrastructure Corporation (NYSE: MIC) today announced its third quarter 2019 financial results including the generation of net income from continuing operations of $15 million compared with net income of $2 million in the third quarter of 2018 (the prior comparable period). The increase primarily reflects the impact of a write-down in the prior comparable period of a business that was sold in the fourth quarter of 2018.
MIC’s consolidated revenue declined to $405 million from $421 million in the prior comparable period reflecting primarily the absence of revenue from smaller businesses sold during the past year partially offset by an increase in the volume of fuel sold and services provided by Atlantic Aviation as well as an increase in storage utilization at International-Matex Tank Terminals (IMTT).
Expenses (cost of services/product sales and selling, general and administrative combined) incurred in the quarter declined by 2% primarily as a result of the absence of costs related to businesses sold during the past year and a lower average wholesale price of jet fuel. These gains were partially offset by anticipated increases in labor costs and property taxes at IMTT and unfavorable movements (non-cash) in the value of commodity hedges.
MIC’s reported Adjusted EBITDA excluding non-cash items from continuing operations of $131 million was down 7% versus the prior comparable period. The decline reflects primarily expected higher labor costs and property taxes at IMTT.
Cash generated by MIC’s operating activities during the third quarter increased 30% to $157 million versus the prior comparable period primarily as a result of current taxes payable as a result of the sale of the Company’s portfolio of renewable power businesses.
Adjusted Free Cash Flow from continuing operations totaled $82 million, down 17% versus the prior comparable period reflecting the decrease in Adjusted EBITDA together with higher maintenance capital expenditures, interest expense and cash taxes.
MIC’s Chief Executive Officer, Christopher Frost, said: “MIC’s results for the third quarter of 2019 were consistent with our guidance and commentary previously provided to the market. Utilization at IMTT continued to recover and, although a portion of the recovery was offset by an expected increase in operating costs, the trajectory for the business remains positive over the medium term.
"Atlantic Aviation recorded an increase in both the volume of fuel sold and hangar rental services provided to our customers, driven in part by an increase in general aviation flight activity."
"I am pleased with the strength of MIC’s balance sheet, which reflects the progress we have made to complete the sales of smaller and non-core businesses in our portfolio. These transactions have increased our financial flexibility and we expect to use the net proceeds to fund additional growth projects,” Frost added.
MIC expects to deploy between $200 and $220 million in support of growth projects across its businesses in 2019. The Company deployed $52 million in the third quarter as work commenced on projects that had been delayed by high water on the Lower Mississippi River, bringing total deployment of growth capital to $143 million through the end of the third quarter.
The Company completed the sale of its portfolio of wind and solar power businesses in the third quarter, generating approximately $210 million net of taxes and transaction fees. The deconsolidation of debt associated with the renewables businesses and the repayment of $350 million of convertible notes in July reduced MIC’s overall indebtedness by $625 million.
Reflecting the reduction in debt, MIC’s leverage (net debt / EBITDA) was 3.6x at the end of the third quarter. The Company expects leverage to be approximately 4.1x at the end of 2019 as it funds growth projects and pays capital gains taxes resulting from the sale of the renewables businesses.
MIC reaffirmed its full-year 2019 guidance for the generation of Adjusted EBITDA excluding non-cash items of between $600 and $625 million.
|IMTT||$287 - $297 million|
|Atlantic Aviation||$275 - $285 million|
|MIC Hawaii||$60 - $65 million|
|Total||$600 - $625 million|
MIC also reaffirmed its guidance for the generation of Adjusted Free Cash Flow in a range of $390 to $435 million in 2019.
With respect to the Company’s guidance for EBITDA and Free Cash Flow in 2019, a reconciliation of EBITDA to net income (loss), the most comparable GAAP measure and a reconciliation of Free Cash Flow to cash from operating activities, the most comparable GAAP measure, are not available without unreasonable effort due to the Company’s limited visibility into and an inability to make accurate projections and estimates of items including management fees, hedging agreements, depreciation and any (benefit) provision for income taxes. These items may vary greatly from year to year and could significantly impact MIC’s results as reported in accordance with GAAP.
The MIC board of directors authorized a cash dividend of $1.00 per share, or $4.00 annualized, for the third quarter consistent with guidance provided in February 2019. The dividend will be paid November 14, 2019 to shareholders of record on November 11, 2019. MIC reaffirmed its guidance for the payment of dividend of $1.00 per share in the fourth quarter of 2019.
Including the dividend for the third quarter, MIC will have distributed approximately 79% of its Adjusted Free Cash Flow from continuing operations generated year to date. For the full year MIC expects to distribute approximately 84% of its Adjusted Free Cash Flow as dividends.
MIC intends to pay a dividend of $1.00 per share, per quarter, in 2020 as well. The payment of a dividend is predicated on, 1) the composition of the MIC portfolio of businesses remaining unchanged, 2) the businesses and operations performing as expected and at levels that support the dividend, and 3) general economic conditions and stability in the broader market.
In a separate press release, MIC today announced its intention to pursue strategic alternatives including the sale of the Company or its operating businesses as a part of ongoing efforts to unlock shareholder value. To facilitate the pursuit of strategic alternatives, MIC also announced that it has entered into a disposition agreement with Macquarie Infrastructure Management (USA) Inc. (“MIMUSA”), the external manager of the Company. The agreement was filed with the Securities and Exchange Commission this morning. A copy of the release can be found on MIC’s website.
MIC has appointed Lazard as its lead financial advisor and White & Case as its legal counsel in connection with its pursuit of strategic alternatives.
When: MIC has scheduled a conference call for 8:00 a.m. Eastern Time on Thursday, October 31, 2019 during which management will review and comment on the third quarter 2019 results.
How: To listen to the conference call dial +1(650) 521-5252 or +1(877) 852-2928 at least ten 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. Allow extra time prior to the call to visit the site and download the software needed to listen to the webcast.
Supplemental Materials: MIC will prepare slides in support of its conference call. The materials will be available for downloading from the Company’s website prior to the call.
Replay: For interested individuals unable to participate in the live conference call, a replay will be available after 2:00 p.m. on October 31, 2019 through midnight on November 6, 2019, at +1(404) 537-3406 or +1(855) 859-2056, Passcode: 9578278. An online archive of the webcast will be available on the Company’s website for one year following the call.