Macquarie Infrastructure Company Reports 2012 Financial Results, Highlights Increase in Free Cash Fl

Macquarie Infrastructure Company Reports 2012 Financial Results, Highlights Increase in Free Cash Flow

• Reports 9.3% growth in proportionately combined free cash flow per share

• Announces early Q4 distribution from IMTT, successful refinance of IMTT revolving credit facility and amendment of Shareholders' Agreement

• Intends to seek refinance of Atlantic Aviation in the first half of 2013

• Announces introduction of Direct Stock Purchase Plan

• Adds solar power generation to portfolio of operating companies

• Forecasts 13% growth in proportionately combined free cash flow in 2013

NEW YORK--(BUSINESS WIRE)-- Macquarie Infrastructure Company LLC (NYS: MIC) reported improved financial results for 2012 including a 9.3% year on year increase in proportionately combined free cash flow per share. Including the effect of refinancing and acquisition related expenses proportionately combined free cash flow totaled $3.45 per share in 2012 compared with $3.16 per share in 2011.

Underlying proportionately combined free cash flow improved to $3.66, reflecting improved operating results at each of MIC's businesses. The improvement was partially offset by $0.19 per share of refinancing related expenses incurred by Hawaii Gas in the third quarter of 2012, and $0.02 per share of costs associated with the acquisition of two solar power generating facilities in the fourth quarter.

"Operations at each of our businesses produced financial performance in line with our expectations for the year. At $3.66 per share in underlying proportionately combined free cash flow, we ended the year just about where we expected to given that the impact of Hurricane Sandy was at least $0.10 per share," said James Hooke, Chief Executive Officer of MIC.

MIC regards free cash flow as an important tool in assessing the performance of its capital intensive, cash generative businesses. Proportionately combined free cash flow refers to the sum of the free cash flow generated by MIC's businesses and investments in proportion to its equity interest in each and after holding company costs.

MIC notes that free cash flow does not fully reflect its ability to freely deploy generated cash, as it does not reflect required principal payments on indebtedness, payments of dividends, potential growth capital expenditures and other fixed obligations or the other cash items excluded when calculating free cash flow. Free cash flow may be calculated differently by other companies which limits its usefulness as a comparative measure. Free cash flow, as defined by MIC, should be used as a supplemental measure and not in lieu of financial results reported under GAAP. See "Cash Generation" below for MIC's definition of free cash flow and further information.

MIC has a 50% stake in IMTT, one of the largest bulk liquid storage terminalling businesses in the U.S. The Company received a distribution of $12.0 million from IMTT in December 2012. The distribution for the fourth quarter would ordinarily have been paid in early 2013 but was accelerated into 2012 in light of the legislative stalemate in Washington, D.C. late in the year. All of the distributions due MIC and its co-investor in IMTT through and including the fourth quarter of 2012 have been paid.

The Company facilitated the successful closing of a refinancing of IMTT's revolving credit facility on February 15, 2013. Under the terms of the refinancing, IMTT's debt maturity was extended to February 2018 from June 2014 and the size of the facility was increased to $1.04 billion. At closing the drawn balance on the facility was $752.2 million.

MIC shares ownership and control of IMTT with a trust representing the family of the founder of the business. The joint ownership is subject to a Shareholders' Agreement between the parties. In February the parties agreed to amend the Shareholders' Agreement and replaced a provision that required the maintenance of reserves equal to the "normal requirements of the business and approved unexpended capital expenditures" with one that specifies reserves of $185.0 million.

The Shareholders' Agreement was also amended to grant either party the right to seek injunctive relief to enforce the payment of a dividend consistent with the requirements of the Shareholders' Agreement.

MIC owns and operates Atlantic Aviation, a nationwide network of 62 fixed based operations, or FBOs, that provide primarily fuel services to owners and operators of private jet aircraft. Atlantic Aviation is capitalized in part with a debt package that matures in October of 2014. Prior to the maturity or earlier refinance of the debt, a significant portion of the excess cash generated by Atlantic Aviation is being applied to the repayment of debt principal.

MIC anticipates seeking to refinance the Atlantic Aviation debt package in the first half of 2013. The Company expects that, following the refinancing of the debt package, it will have access to the excess cash generated by Atlantic Aviation. A portion of the excess cash is expected to be used to supplement MIC's quarterly cash dividend.

Reflecting a heightened level of interest from shareholders, MIC is preparing to implement a direct stock purchase plan. The Company anticipates making the program available to investors around the end of the first quarter. "We're listening to our investors and providing them with an economical means of reinvesting our quarterly cash dividend. We hope that this will improve the attractiveness of MIC to retail shareholders," said Hooke.

Commenting on trading to date in 2013 and the Company's forecast for the full year Hooke said, "Our businesses, generally, have been and continue to be remarkably stable performers. We expect this to continue to be the case in 2013 and to supplement our results with the contribution from our MIC Solar operations."

Hooke said that he expects year on year growth in proportionately combined free cash flow, excluding the Hawaii Gas refinancing costs and costs related to the solar acquisitions, to be approximately 13% in 2013. MIC has provided guidance on proportionately combined free cash flow per share in 2013 of between $4.10 and $4.20 per share.

MIC invested $9.4 million in two solar power generating (photovoltaic) facilities in the fourth quarter of 2012 in partnership with Chevron Energy Solutions. The facilities have a combined generating capacity of approximately 30 megawatts. Located in the U.S. southwest, in Tucson, Arizona and Presidio, Texas, the operations are capable of producing enough clean electricity to power 6,200 homes. The power being produced has been sold to regional utilities pursuant to 20 and 25 year power purchase agreements.

MIC reported consolidated revenue of $1.03 billion for 2012 compared with $988.8 million in 2011. The 4.6% growth in revenue reflects primarily higher energy prices, such as the cost of jet fuel and gas feedstock that typically are passed through to customers of MIC's businesses and a higher volume of products sold.

Reported gross profit - defined as revenue less cost of goods sold - removes the volatility in revenue associated with fluctuations in energy prices that typically are passed through to customers. MIC's consolidated gross profit totaled $397.0 million in 2012, an increase of 3.8% over 2011. The year on year growth is the result of increases in both the volume of product sold, and the margins on sales, generally, at each of MIC's businesses.

MIC's net income from continuing operations, after tax, was $14.3 million and $28.9 million for years ended December 31, 2012 and 2011, respectively. The Company's net income declined in 2012 compared with 2011 primarily as a result of its incurring pre-tax performance fees of $67.3 million. The performance fees were generated as a result of MIC having produced a total shareholder return significantly in excess of its benchmark index. The fee is recorded as an expense even though it was reinvested in additional shares of MIC. The reinvestment renders the payment a non-cash expense.

MIC's accumulated net operating loss carry forward (NOL) was used to offset its consolidated federal income tax liability for 2012. At year-end 2012 MIC's federal NOL balance was $192.2 million. The Company expects utilization of this NOL balance will offset any current federal income tax liability, other than Alternative Minimum Tax, through the 2015 tax year and into 2016.

Cash Generation

MIC reports EBITDA excluding non-cash items on a consolidated and operating segment basis and reconciles each to consolidated net income (loss). EBITDA excluding non-cash items is a measure relied upon by management in evaluating the performance of its businesses and investments. EBITDA excluding non-cash items is defined as earnings before interest, taxes, depreciation and amortization and non-cash items, which include impairments, gains and losses on derivatives and adjustments for certain other non-cash items reflected in the statement of operations including base and performance fees settled in shares.

MIC believes that EBITDA excluding non-cash items provides additional insight into the performance of its operating businesses, relative to each other and to similar businesses, without regard to capital structure, their ability to service or reduce debt, fund capital expenditures and/or support distributions to the holding company.

MIC also reports free cash flow, as defined below, on both a consolidated and operating segment basis as a means of assessing the amount of cash generated by its businesses and as a supplement to other information provided in accordance with GAAP, and reconciles each to cash from operating activities. MIC believes that reporting free cash flow provides additional insight into its ability to deploy cash, as GAAP measures, such as net income (loss) and cash from operating activities, do not reflect all of the items that management considers in estimating the amount of cash generated by its operating businesses. MIC defines free cash flow as cash from operating activities, less maintenance capital expenditures and changes in working capital except with respect to MIC Solar for which free cash flow is defined as distributions received from the business.

IMTT

MIC has a 50% equity interest in IMTT, the operator of one of the largest independent bulk liquid storage terminal businesses in the U.S. IMTT owns and operates 10 marine storage terminals in the U.S. and is the part owner and operator of two terminals in Canada. The terminals store and handle a wide variety of petroleum grades, chemicals and vegetable and animal oils. To aid in meaningful analysis of the performance of IMTT across periods, the discussion below refer to results for 100% of the business, not MIC's 50% interest.

For the quarter and year ended December 31, 2012 compared with the comparable periods in 2011:

• Terminal revenue increased 9.7% and 7.8% respectively, primarily as a result of growth in average storage rates and an increase in storage capacity.

• Average storage rental rates increased 7.6% and 7.0% respectively - the increase was at the higher end of the forecast range primarily as a result of strong demand in the Lower Mississippi River and New York Harbor markets.

• Terminal operating costs increased 4.5% and 1.9% respectively, with the majority of the increase attributable to $4.2 million in repairs and maintenance related to the effects of Hurricanes Isaac and Sandy (largely property insurance deductibles) in the second half of the year as well as the planned conversion of certain tanks in Bayonne from residual to distillate service.

• Terminal gross profit increased 14.0% and 12.6% respectively, reflecting the construction of additional storage capacity during the year, the full year effect of rate increases implemented in the prior year and the part-year effect of rate increases implemented in 2012.

Capacity utilization was 92.8% and 94.1% in the fourth quarter and full year periods, respectively. Capacity utilization for the full year 2011 was 94.3%. A larger portion of total capacity, including a 500,000 barrel tank taken offline for cleaning and inspection, was out of service in the fourth quarter of 2012.

"IMTT's results for 2012 highlight the strength of its position in its two key markets, New York Harbor and the Lower Mississippi River, and the supply/demand imbalance in those markets in particular," said Hooke.

EBITDA excluding non-cash items grew by 12.4% and 12.3% in each of the fourth quarter and full year ended December 31, 2012, respectively, compared with the same periods in 2011. The improvement was principally the result of growth in terminal gross profit in 2012 compared with 2011, partially offset by an increase in selling, general and administrative expenses.

Free cash flow generated by IMTT decreased 36.1% in the fourth quarter of 2012 compared with the fourth quarter of 2011. The decline reflects primarily an increase in taxes and costs incurred in connection with repairs and maintenance at the business' Bayonne, New Jersey facility. These relate principally to the effects of hurricane Sandy and expenses not yet reimbursed by property insurance coverage and planned tank cleaning and conversions at the same location.

For the full year IMTT's free cash flow increased 9.7% compared with 2011. The growth in free cash flow year on year reflects the business' improved operating results, primarily increased terminal gross profit, partially offset by increases in taxes, higher maintenance capital expenditures and a smaller contribution from IMTT's environmental response subsidiary.

Hawaii Gas

Hawaii Gas is the owner and operator of the only regulated ("utility") gas processing and pipeline transmission and distribution network on the islands of Hawaii. The business is also the owner and operator of the largest unregulated ("non-utility") gas distribution operation on the islands.

The performance of Hawaii Gas during 2012 reflects the ongoing recovery of the Hawaiian economy, notably the tourism industry. Aggregate gas sales increased 1.9% for the full-year period compared with 2011. Aggregate sales of gas decreased 2.0% for the fourth quarter of 2012 compared with the comparable period in 2011. The decline in the fourth quarter was primarily attributable to a single commercial customer of the non-utility business being off-line for repairs for most of the period.

Aggregate gross profit at Hawaii Gas - revenue less the cost of feedstock, production and transmission, and distribution - increased 13.1% and 15.0%, respectively, for the fourth quarter and full-year periods ended December 31, 2012 compared with the same periods in 2011. The improvement reflects the growth in the volume of gas sold as noted above, and improvement in the margins on sales in the non-utility portion of the business. The growth was partially offset by higher costs, particularly overtime, those related to medical and benefits programs and costs associated with re-branding the business as Hawaii Gas.

"The strong performance of Hawaii Gas in 2012 can be attributed in part to the recovery in the Hawaiian economy but also to the hard work of the Hawaii Gas team attracting new business based on the many benefits of gas in the Hawaiian energy complex," said Hooke.

EBITDA excluding non-cash items at Hawaii Gas increased 9.1% and 14.8% for the quarter and full-year ended December 31, 2012. The primary driver of the improvement was the increase in gross profit generated by the business, partially offset by an increase in selling, general and administrative expenses and costs associated with rebranding of the business from The Gas Company to Hawaii Gas.

Hawaii Gas generated $18.4 million and $34.6 million in free cash flow for the fourth quarter and full-year periods ended December 31, 2012. The 78.8% and 21.2% increases versus the prior comparable periods, respectively, reflect the improved operating results, a lower tax burden and differences in the timing of certain purchases, particularly shipments of foreign-sourced propane and the refinancing related expenses noted above.

District Energy

MIC's District Energy business produces chilled water that it distributes via underground pipelines to buildings in downtown Chicago. The cold energy is used in air conditioning and process cooling applications. The business also operates a site-specific facility in Las Vegas, Nevada that supplies both cooling and heating services to a resort/casino complex, a condominium and a shopping mall. MIC has a 50.01% interest in District Energy.

District Energy's gross profit declined 11.9% in the fourth quarter of 2012 compared with the fourth quarter in 2011 as a result of relatively cooler weather at the end of 2012 that reduced demand for cooling services. However, full-year gross profit increased 5.0% compared with 2011 primarily as a result of contractual rate increases and the overall warmer temperatures in Chicago in 2012 compared with 2011.

EBITDA excluding non-cash items declined for the fourth quarter and full year periods ending December 31, 2012 by 15.8% and 2.3%, respectively. The decrease in full year EBITDA was the result of higher selling, general and administrative expenses and a reduction in payments under agreements to manage the business' energy consumption during periods of peak demand partially offset by an increase in gross profit.

Free cash flow generated by District Energy in the fourth quarter totaled $2.2 million, down 22.0% compared with 2011 largely as a result of the reduction in gross profit for the period. For the full year 2012, District Energy generated $14.1 million in free cash flow, down 1.9% compared with 2011, principally as a result of the increased maintenance capital expenditures.

From the third quarter of 2012 the free cash flow generated by District Energy is being used to reduce the principal balance on the business' debt facilities in advance of the maturity of these facilities in third quarter of 2014. Including a payment made in January 2013 District Energy has repaid $9.0 million in debt principal.

Atlantic Aviation

Atlantic Aviation owns and operates a network of fixed base operations (FBOs) located at 62 airports in the U.S. Atlantic Aviation's FBOs provide primarily fuel, terminal services, and aircraft hangar services to owners and operators of private (general aviation or GA) jet aircraft. The network is one of the largest of its type in the U.S. air transportation industry.

Atlantic Aviation reported a decrease in gross profit of 3.3% for the fourth quarter of 2012 compared with 2011, but an increase of 1.2% for full year. The full year increase in gross profit reflected an increase in GA fuel gross profit of 1.4% in the aggregate and 2.7% on a same-store basis. The quarterly decline is largely attributable to the interruption of GA activity in the wake of Hurricane Sandy. The same-store basis is adjusted for acquisitions and divestitures of certain facilities during the prior year. Average GA fuel margins increased by 1.2% in 2012 compared with 2011.

Overall gross profit growth was constrained by a 55.2% decrease in de-icing gross profit in 2012 compared with 2011. The decrease was the result of the unseasonably mild winter across the northern tier of the U.S. in 2012.

A portion of the value in Atlantic Aviation is derived from the average length of the leases underlying its portfolio of FBOs. Along with the leasehold from the relevant airport authorities comes the right to sell fuel on those airports and the potential to generate cash flows in the process. The longer Atlantic has that right, the higher the present value of those cash flows, all else being unchanged.

"The management at Atlantic Aviation has done an excellent job extending the average lease maturity of the portfolio. The remaining average lease life increased from 17.8 years at December 2011 to 19.0 years at December 2012 including the passing of another year and this has created substantial value for MIC," said Hooke.

Free cash flow generated by Atlantic Aviation increased to $22.6 million and $74.1million, respectively, in the fourth quarter and full