Macquarie Infrastructure Company Reports Full Year 2007 Financial Results
biz.yahoo.com
Thursday February 28, 7:30 am ET
- Cash Available for Distribution Increases 46.5% to $105 Million
- Quarterly Dividend Increased to $0.635 Per Share
- Performance Fees, Non-Cash Expenses Contribute to Net Loss
NEW YORK, Feb. 28 /PRNewswire-FirstCall/ -- Macquarie Infrastructure Company (NYSE: MIC - News), a leader in the ownership and operation of U.S. infrastructure businesses, reported consolidated revenue for the fourth quarter and full year 2007 of $263.7 million and $831.4 million, respectively. Revenue for the full year increased 60% over 2006.
MIC reported gross profit for 2007 of $351.5 million or an increase of 59% over 2006. Gross profit is an important measure of the profitability of the Company and its ability to maintain and, where possible, improve margins in its businesses.
The Company successfully refinanced the debt of two of its consolidated businesses during 2007. The improved terms of the refinanced facilities resulted in an increase in the average maturity of all operating company debt to 5.8 years at January 30, 2008. The weighted average cost of MIC's operating company level debt decreased to 6.6%.
Expenses incurred in connection with the debt refinancing contributed to a net loss for the year ended December 31, 2007 of $52.1 million. In addition to $27.5 million of refinancing-related expenses, the Company also recorded a net $66.7 million of non-cash depreciation and amortization expenses and performance fees payable to its manager of $44.0 million.
Refinancing expenses other than the non-cash write-down of deferred financing costs were funded from proceeds of new debt facilities and did not impact distributable cash. Performance fees were reinvested in MIC LLC interests and did not impact distributable cash. For 2006 MIC reported net income of $49.9 million including $60.1 million in gains from the sale of certain assets, $65.2 million of non-cash depreciation and amortization expenses, and $4.1 million of performance fees payable to our manager that were reinvested in MIC LLC interests.
MIC's estimated cash available for distribution ("CAD") increased 46% to $105.0 million in 2007 from $71.7 million in 2006. CAD is a non-GAAP measure used by the Company to assess its ability to sustain and increase its quarterly dividends. MIC distributes substantially all CAD to investors, subject to maintaining prudent reserves in its businesses. CAD exceeded the sum of cash distributions made during 2007 by 7.2%.
On February 25, MIC's board of directors approved a dividend of $0.635 per share for the fourth quarter of 2007. The dividend will be payable on March 10, 2008 to shareholders of record on March 5, 2008. The increase is the Company's seventh consecutive step-up in quarterly dividends and is 11.4% more than the dividend paid in the fourth quarter of 2006.
"MIC's businesses are providers of basic, everyday services. Their strong performance in both the fourth quarter and full year 2007, and our ability to once again increase our cash dividend, reflects the stable, defensive nature of the asset class" said Peter Stokes, Chief Executive Officer of Macquarie Infrastructure Company.
Operating Businesses Performance Highlights
MIC reports EBITDA and contribution margin, both of which are non-GAAP financial measures, as it considers them to be important indicators of overall performance. The attached tables provide a reconciliation of EBITDA to net income, and contribution margin to revenue. The Company believes that EBITDA, net of other non-cash and non-recurring items, also provides insight into the performance of certain of its operating companies and their ability to generate distributable cash. The reporting of contribution margin by the gas production and distribution business provides additional insight into the performance of that business net of changes in synthetic natural gas feedstock prices that typically are recovered in revenue.
-- Gross profit in the Company's airport services business was $90.1
million and $276.7 million for the fourth quarter and full year 2007,
respectively. Gross profit from all locations increased by 66% over
the full year 2006. Gross profit generated at sites owned for more
than 12 months increased by 11% for the full year.
-- Fuel sales and fuel-related services are the primary drivers of
gross profit in the business. The airport services business
reported increases in both the volume of general aviation fuel sold
and the average margin on fuel sales. Margin improvement was driven
by an increased proportion of transient customers who typically pay
a higher margin on fuel relative to base tenants.
-- EBITDA generated by the airport services business increased to $26.1
million and $108.9 million in the fourth quarter and for the full
year, respectively. The improvement is an increase of 54% over the
full year 2006. Reported EBITDA for 2007 included a $9.8 million
expense, "loss on extinguishment of debt," incurred in connection
with refinancing of the business' debt facility in the fourth
quarter. The expense was a non-cash write down of deferred
financing costs and had no impact on distributable cash. EBITDA
also included a $1.7 million non-cash loss stemming from the change
in the value of interest rate hedges. Excluding the losses on
derivatives and the write down of deferred financing costs, both of
which are non-cash, EBITDA from existing locations would have
increased by 14%.
-- In the December 2007 quarter the business completed the sale of its
fixed based operation ("FBO") at the airport at South Lake Tahoe and
the acquisition of the sole FBO at the airport at Rifle, Colorado.
The Rifle FBO was acquired for $15.5 million in cash. The sale of
South Lake Tahoe resulted in a non-cash loss on disposal of $760,000
in the fourth quarter. The business also entered into an agreement
to acquire a portfolio of three FBOs for a total of $42.0 million
including transaction related costs. The acquisition includes sites
at Sun Valley, Idaho, and Farmington and Albuquerque, New Mexico.
The Company expects the acquisition to close in the first quarter of
2008 and to be funded using proceeds drawn on the MIC Inc. level
acquisition-related revolving credit facility.
-- In May, 2006, MIC acquired a 50% interest in the company that owns the
fourth largest bulk liquid storage terminal business in the country.
The business generated gross profit of $32.9 million and $120.1 million
in the fourth quarter and for the full year 2007, respectively. The
largest component, terminal gross profit or gross profit generated by
storage related activities, increased by 21% over the full year 2006.
Excluding the results of the IMTT-Quebec operations that were not
consolidated in the business' accounts in 2006, terminal gross profit
increased by 16%. MIC does not consolidate the financial results of the
bulk liquid storage terminal business with those of its controlled
businesses.
-- The improved performance in the bulk liquid storage business was
primarily the result of a 9.1% increase in average storage rental
rates. Continued strong demand for storage allowed the business to
increase rates in storage contracts that renewed during the year.
-- The bulk liquid storage terminal business paid MIC a total of $28.0
million in dividends in 2007 including a dividend of $7.0 million
for the December quarter. MIC expects to receive cash dividends of
$7.0 million per quarter from the business during 2008.
-- Cash flow from operations in the bulk liquid storage business
increased to $91.4 million in 2007 or by 37% over 2006. Maintenance
and environmental capital expenditures for the year totaled $31.6
million.
-- The bulk liquid storage business generated EBITDA of $14.2 million
and $67.1 million in the fourth quarter and for the full year 2007.
Reported EBITDA decreased by 20% compared to the full year 2006.
The decrease reflects non-cash losses of $21.0 million on changes in
the value of interest rate hedges and a $12.3 million non-recurring
"make whole" payment (net present value of future interest and
principal payments foregone by the lender) incurred in connection
with refinancing the business' debt. The refinancing expense was
funded using a portion of the proceeds of a new debt facility and
had no impact on distributable cash. Excluding these items, EBITDA
for the full year would have increased by 21%.
-- The business has completed or committed to expansion projects having
a total value of $322.0 million. Through year end the business had
completed construction of and was generating revenue from 18 of 31
new tanks that are a part of the expansion at existing sites. A
substantial portion of a new chemicals logistics center at Geismar,
LA has also been completed. In addition, the business acquired a
small facility at Joliet, IL for total consideration of $18.5
million. Including the acquisition, management expects that the
expansion projects will produce an annualized incremental $48.3
million of gross profit and EBITDA beginning in 2009.
-- The Company's gas production and distribution business generated a
combined utility and non-utility contribution margin of $16.0 million
and $61.1 million in the fourth quarter and for the full year 2007,
respectively. Total contribution margin for the full year increased 6%
over 2006. The increase was primarily the result of $4.1 million of
customer credits that reduced revenue in 2006, offset by higher fuel
cost adjustments. Utility therms (gas volume) sold and non-utility
gallons sold both increased slightly compared to 2006.
-- The business generated full year EBITDA of $23.9 million, a 38%
increase over 2006, on the increased contribution margin, partially
offset by higher operating expenses. The increased expenses
included primarily higher employee benefits costs and costs
associated with a pipeline inspection program. Excluding non-cash
losses on changes in the value of interest rate hedges, and the 2006
customer credits recovered from an acquisition-related escrow
account, EBITDA would have decreased by 3% compared to 2006.
-- Gas products are used primarily for cooking, laundry (hot water,
steam) and environmental lighting in Hawaii. As a result, demand
and gross profit remain quite constant throughout both market cycles
and seasons.
-- MIC's district energy business reported gross profit of $3.1 million
and $16.4 million in the quarter and for the full year 2007,
respectively. Gross profit increased 16% over the full year 2006. The
combination of inflation-based rate increases and warmer summer
temperatures in Chicago in 2007 compared to 2006 contributed to the
improved results.
-- EBITDA generated in the fourth quarter and for the full year was
$3.6 million and $1.4 million, respectively. Reported EBITDA
decreased 91% compared to 2006 as a result of a "make-whole" payment
(net present value of future interest and principal payments
foregone by the lender) and non-cash write-down of deferred
financing costs together totaling $17.7 million. The expenses were
incurred in connection with the successful refinancing of the long-
term debt of the business in the third quarter. The make-whole
expense of $14.7 million was funded with a portion of the proceeds
of a new debt facility and had no impact on distributable cash
generated by the business. Excluding these non-cash and non-
recurring items, EBITDA would have increased by 24%.
-- During 2007 and year to date in 2008 the district energy business
increased its net tons of cooling under contract by 6.5%. Delivery
of the cooling will commence over a period of several years as the
new buildings are completed.
-- Gross profit at the Company's airport parking business was $3.0 million
and $17.7 million in the fourth quarter and for the full year 2007,
respectively. Full year gross profit decreased 18% year over year as
improvement in average revenue per car was more than offset by non-cash
expenses (depreciation, rent in excess of lease), higher operating
expenses including for improved staffing and security, and lower
overall customer volume.
-- EBITDA declined to $3.2 million and $15.5 million in the fourth
quarter and for the full year 2007, respectively. Excluding non-
cash losses resulting from the change in value of interest rate
hedges, EBITDA would have been 24% lower than in 2006.
-- Average revenue per car out increased 4.8% in both the fourth
quarter and for the full year 2007. The increase reflects both the
strategic shift away from marketing to airline/Transportation
Security Administration employees and success in attracting higher
margin business and leisure travelers.
Estimated Cash Available for Distribution
The Company believes that it can provide better insight into its ability to support its distributions by making certain adjustments to its "as reported" results. For example, its results under Generally Accepted Accounting Principles ("GAAP") alone do not reflect all of the items that management considers in estimating distributable cash. The table below summarizes MIC's estimated cash available for distribution ("CAD"), beginning with cash from operations and adjusted for certain dividend income and cash expenditures. Estimated cash available for distribution totaled $105.0 million for the year, a 46% increase over the $71.7 million reported for 2006.
($ Millions) Total
Cash from operations 96.55
Cash from operations adjustments 14.25
Cash from investing and financing activities 11.79
Working capital (17.57)
Estimated Cash Available for Distribution 105.03
MIC's consolidated cash from operations more than doubled to $96.6 million in 2007, from $46.4 million in 2006. The increase in cash from operations was attributable to same site growth in the airport services and district energy businesses and contributions from successful acquisitions concluded during 2006 and 2007 by the airport services business. Cash from operations is the starting point for calculating estimated cash available for distribution.
-- Estimated CAD for 2007 is increased by a net $14.5 million of
adjustments to cash from operations including primarily income tax
refunds received by the airport services business, escrow recoveries by
the gas production and distribution business and equity-funded
acquisition integration expenses in the airport services business.
-- Estimated CAD for 2007 is increased by a net $11.8 million in cash from
investing and financing activities. The increase reflects primarily
the $28.0 million dividend received from the Company's bulk liquid
storage business that does not flow through earnings or cash from
operations, offset by a net $14.4 million of capital expenditures paid
in cash or accrued and a net $2.1 million in capital lease/debt
paydowns and restricted cash releases.
-- Estimated CAD is reduced also by $17.6 million of net changes in
working capital movements as normal changes in working capital are not
considered when calculating CAD.
MIC estimates that cash available for distribution exceeded the sum of quarterly cash distributions made during 2007 by $7.1 million.
Business Update and Outlook
Airport services business - The airport services business expects to complete the acquisition of the SevenBar FBOs in the first quarter. The contribution from additional sites at Sun Valley, Idaho and Albuquerque and Farmington, New Mexico is expected to be immediately yield accretive to MIC. The acquisition will be funded with a drawdown from the Company's MIC Inc. level revolving credit facility.
MIC expects continued strong performance from its airport services business. General aviation aircraft manufacturers continue to report strong demand for new planes. The increased number of hours that general aviation aircraft are being flown is expected to continue to drive growth in the volume of fuel sold. Management of the airport services business believes that improved access to general aviation and the challenges facing commercial aviation associated with higher load levels, potential mainline carrier consolidation and security-related delays will result in the business being relatively insensitive to downturns in the broader economy.
Bulk liquid storage terminal business - The bulk liquid storage business is expected to continue to perform well as inflation escalators generate terminal revenue growth from existing contracts, expiring contracts are renewed at higher storage rates and storage tanks currently under construction become operational.
Construction of the Geismar facility remains on pace for completion in the second quarter of 2008. Strong fundamental drivers of growth, combined with the incremental increase in gross profit expected from growth capital expenditures including Geismar, are expected to support dividends in excess of the current fixed level following conversion to a variable dividend. In the first quarter of 2009 and thereafter MIC will receive a dividend equal to 50% of the bulk liquid storage terminal business' cash from operations plus cash from financing activity less maintenance and environmental capital expenditures.
Gas production and distribution business - The fundamental driver of continued growth in the gas production and distribution business is population growth in Hawaii. MIC believes that the business will continue to be a stable source of distributable cash based on the basic nature of the products and services provided.
District energy business - The Company expects continued stable performance from its district energy business, assuming a historically normal level of demand for cooling during the summer of 2008. The business will increase saleable tons of cooling through expansion of chilling and pumping capacity and improvements in system hydrology. System expansion will be undertaken only when contracts for cooling have been signed and not on a speculative basis.
Airport parking business - Yield management strategies, including implementation of lot-level technology for tracking activity, are expected to continue to generate improvement in average revenue per car. The fundamental driver of the volume of cars out, the forecast rate of growth in the number of commercial enplanements nationally, remains intact at approximately 3.5% per year. We expect that effective marketing of the business will result in a comparable level of growth in cars out in the business. |
