MIC First Quarter 2017 Earnings Conference Call Support Slides May 2017
Disclaimer This presentation by Macquarie Infrastructure Corporation (MIC) is proprietary and all rights are reserved. Any reproduction, in whole or in part, without the prior written consent of MIC is prohibited. This presentation is being provided to support the MIC conference call regarding earnings scheduled for May 4, 2017, and the information contained herein is qualified in its entirety by, and should be read in conjunction with, the MIC Form 10-Q covering the quarter ended March 31, 2017. This presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes. It is not a solicitation of any offer to buy or sell any security or instrument. This presentation contains forward-looking statements. Forwardlooking statements in this presentation are subject to a number of risks and uncertainties, some of which are beyond our control. Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. A description of known risks that could cause our actual results to differ appears under the caption Risk Factors in our Form 10-K filed with the SEC on February 21, 2017, and other materials filed with the SEC subsequently. Additional risks of which we are not currently aware could also cause our actual results to differ. These forward-looking statements are made as of the date of this presentation. We undertake 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 consists of Macquarie Group Limited and its worldwide subsidiaries and affiliates. MIC is not an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) and its obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542. Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MIC. Use of Non-GAAP Metrics In addition to our results under U.S. GAAP, we use certain non- GAAP measures to assess the performance and prospects of our businesses. In particular, we use EBITDA excluding non-cash items, Free Cash Flow and certain proportionately combined financial metrics. Proportionately combined financial metrics reflect MIC Corporate and our ownership interest in each of our businesses. We define EBITDA excluding non-cash items as net income (loss) or earnings the most comparable GAAP measure before interest, taxes, depreciation and amortization and non-cash items including impairments, unrealized derivative gains and losses, adjustments for other non-cash items and pension expense reflected in the statements of operations. EBITDA excluding noncash items also excludes base management fees and performance fees, if any, whether paid in cash or stock. We define 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. Please review our Form 10-Q and press release, filed on May 3, 2017, for a complete discussion of our use of non-gaap metrics. PAGE 2
MIC Results Consolidated Net Income, EBITDA Excluding Non-Cash Items, Cash From Operating Activities and Free Cash Flow $ Millions 1Q 2017 (1) 1Q 2016 Net Income 32.6 20.2 EBITDA ex Non-cash Items 180.3 176.0 Cash from Operating Activities 128.6 148.6 Free Cash Flow Consolidated 146.2 135.7 Proportionately Combined 2 Net Income, EBITDA Excluding Non-Cash Items, Cash From Operating Activities and Free Cash Flow $ Millions 1Q 2017 (1) 1Q 2016 Net Income 32.6 21.0 EBITDA ex Non-cash Items 177.8 172.8 Cash from Operating Activities 126.6 146.1 Free Cash Flow Proportionately Combined 144.6 133.4 1. Includes approximately $2.4 million of expenses related to the implementation of the shared service initiative during the quarter ended March 31, 2017. 2. Includes only MIC s proportionate interest in its solar and wind power assets within the Contracted Power and MIC Hawaii segments. PAGE 3
MIC 1Q 17 Financial Performance EBITDA excluding non-cash items (Consolidated) 1 $185 $175 $176.0 $0.9 $5.4 $1.9 $1.4 $2.5 $180.3 $165 $MM $155 $145 $135 $125 EBITDA - 1Q'16 IMTT Atlantic Aviation CP MIC Hawaii Corporate EBITDA - 1Q'17 1. Includes approximately $2.4 million of expenses related to the implementation of the shared service initiative during the quarter ended March 31, 2017. PAGE 4
MIC Cash Generation Adjusted Free Cash Flow (Proportionately Combined) 1 $MM $160 $140 $120 $100 $80 $60 $40 $20 $0 $133.4 1Q'16 $146.9 1Q'17 Adjusted Free Cash Flow 1 was $146.9 million in 1Q 17, reflecting an increase of 10.1% from $133.4 million in 1Q 16 Segment results for 1Q 17 include: High storage utilization rates and improved performance at OMI; Gross margin growth at Atlantic Aviation where volume increases were supported by flight activity growth and market share capture; Warmer than average weather in the northeast and reduced wind resources; and Stable performance at Hawaii Gas coupled with contributions from acquisitions completed in 2016. Weighted average shares outstanding increased to 82.1 million for 1Q 17 compared to 80.1 million in 1Q 16 Dividend declared of $1.32 per share, reflecting a 10% increase over 1Q 16 1. For the quarter ended March 31, 2017, Adjusted Free Cash Flow excludes $2.4 million of expenses associated with the implementation of MIC s shared services initiative. PAGE 5
MIC Dividend History MIC has steadily increased its dividend since 2Q 13 1 $1.40 $1.20 $1.20 10% y/y $1.32 $1.00 $0.875 $0.80 $0.60 $0.40 $0.20 $0.00 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 1. Reflects the quarter during which the Company resumed a normalized dividend payout following the successful refinancing of Atlantic Aviation s credit facilities. Past performance is not necessarily indicative of future results. PAGE 6
MIC FY 17 Dividend Guidance Dividend Growth FY 17 Dividend Guidance 1 $6.00 $5.00 $4.00 $3.00 $3.35 $3.89 13.5% p.a. 2 $4.46 $5.05 Guidance for 10% dividend growth in FY 17 Expect 2017 payout ratio to be within a range of 75-85% of adjusted free cash flow $2.00 $1.00 $0.00 2013 2014 2015 2016 2017 Guidance 1. Subject to the continued stable performance of MIC s businesses, no material deterioration in the condition of the broader U.S. economy, and authorization of the Company s Board of Directors. 2. Forecast CAGR for the period from 2013-2017 based on guidance for 10% dividend growth in FY 17. PAGE 7
MIC Credit Profile Holding company rated BBB- Proportionately combined leverage ratio of 4.3x, and 4.2x excluding renewable assets Business Debt 1 Weighted Average Remaining Life (in Years) Balance Outstanding ($ 000) 2 Weighted Average Rate 3 MIC Corporate Convertible Senior Notes 4.5 752,454 2.41% IMTT Atlantic Aviation 4 CP MIC Hawaii 5 Senior Notes Tax-Exempt Bonds Revolving Facility Term Loan Revolving Facility Renewables Project Finance BEC Term Loan Term Loan Senior Notes 9.0 5.1 3.1 4.4 4.4 15.1 5.3 5.6 5.3 600,000 508,975 90,000 397,500 99,500 273,209 258,500 97,175 100,000 3.97% 2.70% 2.50% 3.00% 3.00% 4.80% 3.91% 2.85% 4.22% Total 6.4 3,177,313 3.24% 1. As of May 2, 2017. 2. Proportionate to MIC s ownership interest. 3. Reflects annualized interest rate on all facilities including interest rate hedges. 4. Excludes $1.6 million of stand-alone debt facility used to fund construction of a certain FBO. 5. Excludes $3.0 million of equipment loans at MIC Hawaii business. PAGE 8
MIC Liquidity Profile Liquidity Position $MM Cash and cash equivalents 29.6 Undrawn Revolving Credit Facility Capacity 1 1,275.5 MIC Corporate 410.0 Operating Companies 865.5 Total Liquidity $1,305.1 $1.3 billion of total available liquidity across MIC and its operating companies 1 No bullet maturities until 2019 Weighted average remaining life of debt facilities of 6.4 years 1 1. As of May 2, 2017. PAGE 9
MIC Growth Capital Update Deployed approximately $117 million of growth capital year-to-date, including approximately $66 million for bolt-on M&A Key Updates and Developments: Acquired FBO in Oxford, CT to complement Atlantic locations serving the Greater New York City region Acquired 5 MW solar facility in Minnesota Completed TETCO lateral expansion Exited quarter with growth project backlog of approximately $280 million Growth Capex & M&A YTD 17 Approved Project Backlog $140 $120 $100 $80 $60 $40 $51 $66 $117 $MM $400 $350 $300 $250 $200 $150 $100 $200 $370 $340 $300 $280 $20 $50 $0 Growth Capex Bolt-On M&A Total $0 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 PAGE 10
MIC Total Return vs. MSCI Total Return Indexed for the period from June 30, 2015 through May 2, 2017 1 140 130 120 110 100 90 80 70 60 MIC MSCI US Utilities Index 1. Source: MSCI. As of May 2, 2017. MIC last generated a Performance Fee during the quarter ended June 30, 2015. PAGE 11
APPENDIX
Summary Financial Information Quarter Ended Change March 31, Favorable/(Unfavorable) 2017 2016 $ % ($ In Thousands, Except Share and Per Share Data) (Unaudited) GAAP Metrics Net income $ 32,638 $ 20,176 12,462 61.8 Weighted average number of shares outstanding: basic 82,138,168 80,113,011 2,025,157 2.5 Net income per share attributable to MIC $ 0.44 $ 0.28 0.16 57.1 Cash provided by operating activities 128,568 148,566 (19,998) (13.5) MIC Non-GAAP Metrics EBITDA excluding non-cash items (1) $ 180,315 $ 175,975 4,340 2.5 Cash interest (2) (25,874) (27,378) 1,504 5.5 Cash taxes (3,721) (2,506) (1,215) (48.5) Maintenance capital expenditures (4,476) (10,413) 5,937 57.0 Noncontrolling interest (3) (1,671) (2,283) 612 26.8 Proportionately Combined Free Cash Flow (4) $ 144,573 $ 133,395 11,178 8.4 Shared service implementation costs 2,354-2,354 100.0 Adjusted Proportionately Combined Free Cash Flow $ 146,927 $ 133,395 13,532 10.1 (1) EBITDA excluding non-cash items is calculated as net income before interest expense, taxes, depreciation and amortization expense, management fees, pension expense and other non-cash (income) expense recorded in the consolidated statement of operations. See below for reconciliation of net income (loss) to EBITDA excluding non-cash items. (2) Cash interest is calculated as interest expense excluding the impact of non-cash adjustments for unrealized (gains) losses from derivative instruments, amortization of deferred financing costs and the amortization of debt discount recorded in the consolidated statement of operations. (3) Noncontrolling interest adjustment represents the portion of Free Cash Flow not attributable to MIC's ownership interest. (4) Proportionately Combined Free Cash Flow is calculated as cash from operating activities, which includes EBITDA excluding non-cash items less cash paid for interest, taxes, pension contribution, maintenance capital expenditures, which includes principal repayment of capital lease obligations used to fund maintenance capital expenditures, excludes the changes in working capital and adjusted for noncontrolling interest. PAGE 13
Reconciliation from Consolidated Free Cash Flow to Proportionately Combined Free Cash Flow Change Quarter Ended March 31, Favorable/(Unfavorable) 2017 2016 $ % ($ In Thousands) (Unaudited) Free Cash Flow - Consolidated basis $ 146,244 $ 135,678 10,566 7.8 100% of CP Free Cash Flow included in consolidated Free Cash Flow (9,839) (11,943) MIC's share of CP Free Cash Flow 8,171 9,660 100% of MIC Hawaii Free Cash Flow included in consolidated Free Cash Flow (14,936) (10,862) MIC's share of MIC Hawaii Free Cash Flow 14,933 10,862 Free Cash Flow - Proportionately Combined basis $ 144,573 $ 133,395 11,178 8.4 PAGE 14
Proportionately Combined Free Cash Flow Quarter Ended March 31, 2017 For the Quarter Ended March 31, 2017 IMTT Atlantic Aviation Contracted Power (1) MIC Hawaii (1) MIC Corporate Proportionately Combined (2) Contracted Power 100% MIC Hawaii 100% ($ In Thousands, Except Share and Per Share Data) (Unaudited) Net income (loss) 23,816 21,826 (1,954) 4,875 (15,938) 32,625 (1,939) 4,873 Interest expense, net (3) 8,757 3,446 4,790 1,710 6,151 24,854 5,383 1,711 Provision (benefit) for income taxes 16,548 14,550 27 3,379 (12,431) 22,073 27 3,379 Depreciation and amortization of intangibles 31,520 25,033 13,461 3,476-73,490 15,340 3,481 Fees to Manager-related party - - - - 18,223 18,223 - - Pension expense (4) 2,416 5-273 - 2,694-273 Other non-cash expense (income), net (5) 68 62 (2,003) 5,571 188 3,886 (2,024) 5,571 EBITDA excluding non-cash items 83,125 64,922 14,321 19,284 (3,807) 177,845 16,787 19,288 EBITDA excluding non-cash items 83,125 64,922 14,321 19,284 (3,807) 177,845 16,787 19,288 Interest expense, net (3) (8,757) (3,446) (4,790) (1,710) (6,151) (24,854) (5,383) (1,711) Convertible senior notes interest (6) - (1,744) - - 1,744 - - - Adjustments to derivative instruments recorded in interest expense, net (3) (1,320) 133 (1,614) (226) - (3,027) (1,834) (226) Amortization of deferred finance charges (3) 411 314 364 105 993 2,187 379 105 Amortization of debt discount (3) - - - - 619 619 - - Provision/benefit for income taxes, net of changes in deferred taxes (2,258) (2,872) (88) (1,451) 2,948 (3,721) (88) (1,451) Changes in working capital 736 (6,116) (148) (8,482) (8,434) (22,444) 142 (8,480) Cash provided by (used in) operating activities 71,937 51,191 8,045 7,520 (12,088) 126,605 10,003 7,525 Changes in working capital (736) 6,116 148 8,482 8,434 22,444 (142) 8,480 Maintenance capital expenditures (2,460) (925) (22) (1,069) - (4,476) (22) (1,069) Proportionately Combined Free Cash Flow 68,741 56,382 8,171 14,933 (3,654) 144,573 9,839 14,936 PAGE 15
Proportionately Combined Free Cash Flow Quarter Ended March 31, 2016 IMTT (7) Atlantic Aviation For the Quarter Ended March 31, 2016 Contracted Power (1) MIC Hawaii MIC Corporate Proportionately Combined (2) Contracted Power 100% ($ In Thousands, Except Share and Per Share Data) (Unaudited) Net income (loss) 16,217 14,358 (8,439) 9,069 (10,245) 20,960 (9,223) Interest expense, net (3) 19,871 13,314 15,788 2,424 3,405 54,802 17,848 Provision (benefit) for income taxes 11,229 9,742 (2,304) 5,911 (9,411) 15,167 (2,304) Depreciation and amortization of intangibles 32,621 22,191 11,972 2,350-69,134 13,846 Fees to Manager-related party - - - - 14,796 14,796 - Pension expense (4) 1,831 17-350 - 2,198 - Other non-cash expense (income), net (5) 443 (91) (2,002) (2,752) 188 (4,214) (2,020) EBITDA excluding non-cash items 82,212 59,531 15,015 17,352 (1,267) 172,843 18,147 EBITDA excluding non-cash items 82,212 59,531 15,015 17,352 (1,267) 172,843 18,147 Interest expense, net (3) (19,871) (13,314) (15,788) (2,424) (3,405) (54,802) (17,848) Adjustments to derivative instruments recorded in interest expense, net (3) 9,610 5,608 10,071 119-25,408 11,268 Amortization of deferred finance charges (3) 420 800 369 664 612 2,865 383 Provision/benefit for income taxes, net of changes in deferred taxes (1,230) (1,452) (7) (3,017) 3,200 (2,506) (7) Changes in working capital (2,807) 6,044 2,384 2,937 (6,311) 2,247 2,612 Cash provided by (used in) operating activities 68,334 57,217 12,044 15,631 (7,171) 146,055 14,555 Changes in working capital 2,807 (6,044) (2,384) (2,937) 6,311 (2,247) (2,612) Maintenance capital expenditures (6,297) (2,284) - (1,832) - (10,413) - Proportionately Combined Free Cash Flow 64,844 48,889 9,660 10,862 (860) 133,395 11,943 (1) Represents MIC's proportionately combined interests in the businesses comprising this reportable segment. (2) The sum of the amounts attributable to MIC proportion to its ownership. (3) Interest expense, net, includes adjustments to derivative instruments, non-cash amortization of deferred financing charges and non-cash amortization of debt discount related to the 2.00% Convertible Senior Notes due October 2023. For the quarter ended March 31, 2016, interest expense, net, also includes a non-cash write-off of deferred financing fees related to the February 2016 refinancing at Hawaii Gas. (4) Pension expense primarily consists of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses. (5) Other non-cash expense (income), net, primarily includes non-cash amortization of tolling liabilities, unrealized gains (losses) on commodity hedges and non-cash gains (losses) related to disposal of assets. (6) Represents the cash interest expense reclassified from MIC Corporate to Atlantic Aviation related to the 2.00% Convertible Senior Notes due October 2023, proceeds of which were used to pay down a portion of Atlantic Aviation's credit facility in October 2016. (7) On March 31, 2016, IMTT acquired the remaining 33.3% interest in its Quebec terminal that it did not previously own. IMTT was previously providing management services to this terminal and no operational changes are expected. Prior to the acquisition, IMTT consolidated the results of the Quebec terminal in its financial statements and adjusted for the portion that it did not own through noncontrolling interests. Since the IMTT Acquisition in July 2014 and prior to the acquisition of the noncontrolling interest, MIC reported IMTT s EBITDA excluding non-cash items and Free Cash Flow including the 33.3% portion of the Quebec terminal. The contribution from the minority interest was not significant. Therefore, there were no changes to our historical EBITDA excluding non-cash items, Free Cash Flow or results generally as a function of acquiring this noncontrolling interest. PAGE 16
MIC Contact for additional information Jay Davis Managing Director Mike Hacke Manager 125 W. 55th Street, Level 15 New York, NY 10019 +1 (212) 231-1825 125 W. 55th Street, Level 15 New York, NY 10019 +1 (212) 231-6483 jay.davis@macquarie.com michael.hacke@macquarie.com PAGE 17