MIC Reports Fourth Quarter And Full Year 2018 Results

EBITDA excluding non-cash items from continuing operations decreased to $569.5 million in 2018 from $618.5 million in 2017 reflecting primarily:

• a reduction in storage capacity utilization at IMTT;
• the previously disclosed write-down of a business in the MIC Hawaii segment and the operating losses related to that business;
• higher costs related to the evaluation of various investment and acquisition/disposition opportunities, primarily the sale of BEC; and,
• approximately $4.0 million of costs incurred for advisory services in connection with addressing various shareholder matters.

The above items were partially offset by an increased contribution from Atlantic Aviation and the absence of costs incurred during 2017 related to the implementation of a shared services center.

Adjusted EBITDA excluding non-cash items from continuing operations totaled $601.9 million in 2018 compared with $636.3 million in 2017. Adjustments exclude items such as transaction related costs and the write-down of an investment in a business that was sold. Adjusted EBITDA excluding non-cash items, together with MIC's proportionate interest in the businesses reported in Discontinued Operations, totaled $688.6 million.

MIC reported Adjusted Free Cash Flow from continuing operations of $439.5 million, down 13.9% from $510.3 million in 2017, on higher interest expense, higher maintenance capital expenditures and higher taxes. Adjusted Free Cash Flow, including MIC's proportionate interest in the businesses reported in Discontinued Operations, totaled $498.5 million.

See Summary Financial Information below.

Dividend

The MIC Board of Directors authorized a cash dividend of $1.00 per share, or $4.00 annualized, for the fourth quarter of 2018. The dividend will be payable on March 7, 2019 to shareholders of record on March 4, 2019. The Company initiated guidance for a quarterly cash dividend of $1.00 per share in 2019.

Full Year 2018 Results and Strategic Initiatives

International-Matex Tank Terminals

IMTT generated EBITDA excluding non-cash items of $286.6 million in 2018, down 12.1% versus 2017, primarily as a result of a previously disclosed decline in capacity utilization and slightly lower average storage rates. Free Cash Flow produced by IMTT declined 23.2% to $200.5 million as a result of the reduction in earnings together with higher interest expense, taxes and maintenance capital expenditures including those related to repurposing storage capacity.

Bulk liquid storage capacity utilization was 82.0% in the fourth quarter of 2018 and averaged 84.6% in 2018, consistent with guidance for "mid 80s percent" utilization provided early in the year.

MIC announced that its IMTT subsidiary has entered into agreements for the development of new storage capacity and capabilities that will significantly enhance the operations of two of the business' terminals on the Lower Mississippi River. The agreements will see IMTT deploy approximately $75.0 million of growth capital over the upcoming 12 to 24-month period.

At its Avondale, LA terminal, IMTT will construct storage capacity and related infrastructure including a new ship dock in support of a palm oil processing facility being developed on land leased by IMTT to Fuji Vegetable Oil ("Fuji"). The project features 87,000 barrels of new capacity being built pursuant to a 30-year use agreement with Fuji and 100,000 barrels of existing capacity that is expected to be used by a feedstock supplier. The facility is expected to be in service in late 2020.

IMTT has leased 442,000 barrels of capacity, including 80,000 barrels of capacity to be constructed, at its terminal in Gretna, LA to a customer who will market highly refined oils through the terminal. As a part of the long-term agreement IMTT will also construct a truck loading facility in support of the customer. The project is expected to be in service in early 2020.

Both the Avondale and Gretna projects are a part of ongoing efforts to invest in the infrastructure of IMTT and are subject to customary pre-construction permitting.

Atlantic Aviation

Atlantic Aviation generated EBITDA excluding non-cash items of $264.7 million in 2018, an increase of 7.0% compared with 2017, driven by full-year contributions from acquisitions of fixed base operations in 2017, increased hangar rental income and ancillary services fees.

Free Cash Flow produced by Atlantic Aviation increased slightly with the higher earnings substantially offset by higher taxes and interest expense. Excluding airports at which traffic was restricted as a result of runway closures for portions of the year, flight activity at the airports on which Atlantic Aviation operates increased by 0.6% in 2018 based on data reported by the Federal Aviation Administration.

MIC Hawaii

MIC Hawaii generated EBITDA excluding non-cash items of $37.3 million in 2018, down 38.5% versus 2017, including $17.1 million of write-downs and approximately $5.5 million of negative EBITDA, both related to a mechanical contracting business that was sold in November. These were partially offset by increased utility margins at Hawaii Gas resulting from a rate increase implemented in July 2018.

Free Cash Flow produced by MIC Hawaii declined 42.3% to $22.4 million as a result of the losses generated by the mechanical contractor, and higher maintenance capital expenditures and interest expense, partially offset by a decrease in cash taxes.

Corporate and Other

MIC's Corporate and Other segment generated EBITDA excluding non-cash items of $(19.1) million in 2018, compared with $(15.5) million in 2017, primarily as a result of higher transaction expenses and professional fees related to addressing various shareholder matters, partially offset by the absence of costs associated with the implementation of a shared services center. Free Cash Flow produced by Corporate and Other declined 80.9% to $(20.5) million as a result of higher interest expense and a reduced tax benefit.

The Corporate and Other segment includes primarily fees payable to MIC's Manager, professional fees and expenses associated with being a public company and any revenue or expense associated with smaller businesses that individually or collectively do not constitute a reportable segment. MIC also reports transaction related expenses, any profit-share income to which MIC was entitled related to the sale of renewable power generation projects by a third-party developer and shared services costs not otherwise allocated to operating companies, in its Corporate and Other segment.

In December, MIC announced that it had completed the refinancing of the primary debt facility of Atlantic Aviation and extended the maturity dates of two of three facilities at IMTT. These actions extended the weighted average maturity of MIC's debt to 5.7 years and provided the capital to fund the repayment of $349.9 million of convertible notes due in July 2019. Following the repayment of the convertible notes, MIC does not currently have any debt facilities that mature prior to 2022.

Discontinued Operations

In October 2018 MIC completed the sale of the Bayonne Energy Center (BEC) and commenced a sale process involving its solar and wind power generation facilities. These businesses, all of which had been reported as components of MIC's Contracted Power segment, were classified as Discontinued Operations and the Contracted Power segment was eliminated. The Company's financial results for 2018 and the prior years have been restated to reflect the impact of these changes.

The Discontinued Operations generated net income of $29.6 million in 2018, an increase of 32.6% compared with 2017, and EBITDA excluding non-cash items of $98.9 million, up 5.9% versus 2017. The increases were driven by contributions from the expansion of BEC and improved wind resources. Free Cash Flow produced by the Discontinued Operations increased 3.8% to $67.9 million.

2019 Guidance

MIC initiated guidance with respect to EBITDA and Free Cash Flow from continuing operations, and EBITDA by segment, for 2019. The Company expects a modest contribution from its discontinued operations (solar and wind power generation) will be additive to its guidance through the anticipated date of sale of these assets in the second quarter.

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 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.

International-Matex Tank Terminals

Storage utilization at IMTT is expected to average in a mid-80s percent range in 2019 and to end the year in a high-80s percent range, subject to market conditions. The Company expects the improvement to be more pronounced in the second half of the year. The 2019 utilization rate estimates assume that only a portion of the storage related to a now idle refinery (owned by a third party) is leased during 2019 and that demand for bulk liquid storage increases as market participants prepare for the scheduled implementation of new rules instituted by the International Maritime Organization concerning reductions in the sulphur content of bunker fuel in January of 2020. The contribution to EBITDA associated with the recovery in utilization is expected to be partially offset by a further decline in average storage rates and higher operating costs.

In the first quarter of 2019, IMTT is expected to receive approximately $39.0 million in proceeds related to the termination of an agreement with the owner of a refinery at IMTT's terminal in St. Rose, LA. The proceeds have been incorporated into the Company's guidance for IMTT EBITDA in 2019 of between $287.0 and $297.0 million. Excluding the termination fee, EBITDA is therefore be expected to be between $248.0 and $258.0 million. The forecast decline of approximately 12% reflects primarily the loss of revenue associated with storage related to the refinery, increased expenses and lower storage rates, primarily related to the renewal of older, out of market contracts, all partially offset by improved utilization including of repurposed capacity.

Atlantic Aviation

MIC's guidance for EBITDA from Atlantic Aviation of between $275.0 and $285.0 million in 2019 assumes historically normal growth in general aviation flight activity of approximately 2.5%. The guidance does not contemplate acquisitions of additional FBOs.

MIC Hawaii

Guidance for the Company's MIC Hawaii segment for EBITDA of between $60.0 and $65.0 million in 2019 assumes a full year benefit of the rate increase implemented in the regulated portion of Hawaii Gas in July of 2018, and the absence of write-downs and losses attributable to a business that was sold in 2018, partially offset by increases in the cost of propane hedges in the unregulated portion of that business.

Growth Investments

Growth capital expenditures across the MIC portfolio are expected to total between $275.0 and $300.0 million in 2019. Of this, the Company reports having already committed to expenditures with an aggregate value of $247.0 million. Given the attractiveness of the opportunities at IMTT and the tax benefits associated with investment in high-value, physical asset backed projects, the Company estimates that the majority of its 2019 growth capital expenditures will be made in support of IMTT.

Maintenance Capital Expenditures

MIC expects the amount of capital deployed in maintaining its businesses will be between $65.0 and $70.0 million in 2019. The expected spend is higher than the long-term average for the Company primarily as a result of planned expenditures related to the refurbishment of a pier at IMTT in Bayonne, NJ. Maintenance capital expenditures are expected to remain elevated for two to three years depending of the pace of the refurbishment.

EBITDA Guidance by Segment Summarized

Free Cash Flow

MIC expects Free Cash Flow from continuing operations in 2019 to be in a range between $400.0 and $445.0 million. The guidance contemplates higher cash interest related to an increase in the interest rate on debt at Atlantic Aviation, partially offset by the anticipated repayment of $349.9 million of holding company convertible notes in July of 2019 using a portion of the proceeds raised in the Atlantic Aviation refinancing. Free Cash Flow is also expected to be reduced by higher maintenance capital expenditures in 2019 compared with 2018 primarily in relation to increased spending at IMTT associated with the refurbishment of a pier at its facility in Bayonne, NJ.

Summary Financial Information

		Quarter Ended December 31,								Change Favorable/ (Unfavorable)								Year Ended December 31,								Change Favorable/ (Unfavorable)
		2018				2017				$				%				2018				2017				$				%
		($ In Thousands, Except Share and Per Share Data) (Unaudited)
GAAP Metrics
Continuing Operations
Net (loss) income (100%)		$	(3,848)			$	354,312				(358,160)				(101.1)			$	64,628			$	433,770				(369,142)				(85.1)
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