UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the Quarterly Period Ended June 30, 20202021

OR

Commission File Number: 001-32384

125 West 55th Street

New York, New York 10019

(212) 231-1000

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Macquarie Infrastructure Corporation (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 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of MIC.

Cautionary Note Regarding Forward-Looking Statements

In addition to historical information, this quarterly report on Form 10-Q (Quarterly Report) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. Forward-looking statements may appear throughout this Quarterly Report, including without limitation, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section. We may, in some cases, use words such as “believe”“project”, “intend”, “expect”“believe”, “anticipate”, “plan”, “may”“expect”, “will”“estimate”, “intend”, “should”, “estimate”“would”, “potential”“could”, “project” and similar expressions“potentially”, “may”, or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, statements regarding sales of our businesses (including our previously approved reorganization), the ability to complete such sales and the anticipated uses of any proceeds therefrom, statements regarding the anticipated specific and overall impacts of COVID-19 and any related recovery, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the risks identified in our Annual Report on the Form 10-K for the year ended December 31, 2019,2020, this Quarterly Report on Form 10-Q, and in other reports we file from time to time with the Securities and Exchange Commission (SEC).

Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. Many of these factors are beyond our ability to control or predict. Our forward-looking statements speak only as of the date of this Quarterly Report. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the financial condition and results of operations of Macquarie Infrastructure Corporation (MIC) should be read in conjunction with the consolidated condensed financial statements and the notes to those statements included elsewhere herein.

MIC is a Delaware corporation formed on May 21, 2015. MIC’s predecessor, Macquarie Infrastructure Company LLC, was formed on April 13, 2004. Except as otherwise specified, all references in this Form 10-Q to “MIC”, “we”, “us”, and “our” refer to Macquarie Infrastructure Corporation and its subsidiaries.

MIC is externally managed by Macquarie Infrastructure Management (USA) Inc. (our Manager), pursuant to the terms of a Management Services Agreement, subject to the oversight and supervision of our Board. Six of the eight members of our Board, and all of the members of each of our Audit, Compensation, and Nominating and Governance Committees, are independent and have no affiliation with Macquarie. Our Manager is a member of the Macquarie Group of companies comprising Macquarie Group Limited and its subsidiaries and affiliates worldwide. Macquarie Group Limited is headquartered in Australia and is listed on the Australian Securities Exchange.

We currently own and operate a portfolio of infrastructure and infrastructure-like businesses that provide products and services to corporations, government agencies, and individual customers primarily in the United States (U.S.). Our businessesoperations are organized into fourthree segments:

On June 7, 2021, we entered into a Purchase Agreement with KKR Apple Bidco, LLC (Purchaser), a Delaware limited liability company controlled by funds affiliated with Kohlberg Kravis Roberts & Co. L.P. (KKR). The Purchase Agreement provides that Purchaser will acquire all outstanding shares of the common stock of our Company which, following the previously approved Reorganization described below, will hold our Atlantic Aviation business (the AA Business), for $4.475 billion, including cash and the assumption of debt and other transaction and reorganization related obligations (the AA Transaction). We expect to receive $3.525 billion at closing following the Reorganization of MIC into a limited liability company, Macquarie Infrastructure Holdings, LLC (MIH), a recently formed Delaware limited liability company and a direct wholly-owned subsidiary of MIC. We intend to complete the Reorganization promptly after the Special Meeting of Shareholders, if the AA Transaction proposal is approved, and complete the AA Transaction within two business days after the Reorganization is completed (subject to the satisfaction or waiver of all other conditions contained in the Purchase Agreement).

The AA Transaction is expected to result in cash proceeds of approximately $3.296 billion being available for distribution to our majority interest inunitholders after a renewable power development business. A relationshipdisposition payment by MIH to our Manager of $228.6 million. The MIH Board is expected to authorize a cash distribution of approximately $37.35 per unit following closing of the transaction. The AA Transaction is expected to close at the end of the third quarter of 2021, subject to customary regulatory approvals and approval from our shareholders.

On June 14, 2021, we entered into a Merger Agreement with AMF Hawaii Holdings, LLC (AMF Parent), a third-party developerDelaware limited liability company affiliated with Argo Infrastructure Partners, LP (Argo), and AMF Hawaii Merger Sub, LLC (AMF Merger Sub), a recently formed Delaware limited liability company and direct wholly-owned subsidiary of renewable power facilities was reportedAMF Parent. The Merger Agreement provides that AMF Merger Sub will be merged with and into MIH, with MIH surviving as a componentwholly-owned subsidiary of CorporateAMF Parent (the MH Merger). Following the previously approved Reorganization and Other through the expirationAA Transaction, MIH will hold our MIC Hawaii business. Upon the completion of the relationshipMH Merger, each of the MIH common units (excluding common units held by AMF Parent or AMF Merger Sub or common units held by MIH in treasury and common units held by any subsidiary of MIH or AMF Parent (other than AMF Merger Sub)), will be converted into the right to receive $3.83 in cash, without interest; or, if the MH Merger is consummated after July 2019.1, 2022, then each such unit will be converted into the right to receive $4.11 in cash, without interest.

In addition to our results under U.S. GAAP, we use certain non-GAAP measures including EBITDA excluding non-cash items and Free Cash Flow to assess the performance and prospects of our businesses.

We measure EBITDA excluding non-cash items as it reflects our businesses’ ability to effectively manage the amount of products sold or services provided, the operating margin earned on those transactions, and the management of operating expenses independent of the capitalization and tax attributes of those businesses.

In analyzing the financial performance of our businesses, we focus primarily on cash generation and Free Cash Flow in particular. We believe investors use Free Cash Flow to assess our ability to fund acquisitions, invest in growth projects, reduce or repay indebtedness, and/or return capital to shareholders.

Since January 1, 2019,2020, MIC has paid or declared the following dividends:

We intend to provide investors with the benefits of access to a portfolio of infrastructure and infrastructure-like businesses that we believe will generate growing amounts of distributable cash flow over time asAs a result of their positive correlation with inflation and provision of basic services to customers. Given the uncertainty stemming from COVID-19, however, we are working to increase our balance sheet strength and liquidity by, among other things, retaining any excess cash flow. Therefore, on April 2, 2020, we suspended our quarterly cash dividend.

In addition to standard operating procedures designed to maintain safe operations, our businesses have implemented additional measures including: (i) a work from home policy; (ii) enhanced cleaning and disinfecting of facilities; (iii) limited interactions between employees and customers through social distancing; (iv) mandated the use of personal protective equipment by employees; and (v) education of customers on alternative payment and customer care options as a means of limiting interactions with employees at MIC Hawaii. The MIC businesses are engaged in late Marchongoing communications with employees, customers, vendors, lenders, and April,other stakeholders apprising them of the near absencebusiness' response to the pandemic. We believe our staff and customers can access our facilities safely and in compliance with relevant directives.

Visitor arrivals to Hawaii, the primary driver of tourismincreases in demand for gas in Hawaii, continues to limit gas sales. Our businesses are not unique in these respects. The petroleum storage industry has, in general, performed well during the pandemic while the travel and tourism industries, and the businesses reliant on them, have been negatively affected.

As federal, state, and local governments' pandemic response measures including social distancing, quarantines, travel restrictions, prohibitions on public gatherings, and stay-at-home orders contributed to the partial recovery inhave been rolled back, GA flight activity and the performance ofdemand for jet fuel and ancillary services provided by Atlantic Aviation has recovered to levels above the comparable periods in the second quarter.2019. The Federal Aviation Administration (FAA) reported that U.S. domesticwidespread availability of COVID-19 vaccines is expected to have a positive effect on activity levels. The level of GA flight activity in June was approximately 82%the future will depend upon the continued effectiveness of levels achievedCOVID-19 vaccines, the impact of COVID-19 variants and any significant surge in COVID-19 cases, the roll-back of various pandemic response measures, and the state of the U.S. and global economies among other factors. Changes in the prior comparable period, up from approximately 28% in April. Further recovery is likely to depend onlevel of flight activity may also reflect the continued rollbacknumber of lockdown measures leading to a pickup in business, international, and event-driven activity. Tourismflights, all of which are uncertain, and the potential reversion of leisure oriented flight activity to pre-COVID-19 trends.

In addition to fund these using the approximately $275cash generated by our operating businesses, our sources of funding included the $285.7 million of cash we had on hand aton June 30, 2020,2021, which excludeswas net of amounts reserved for the $599 million prior drawdown on our revolving credit facility,repurchase of any and the cash we expect our operating businesses to generate over the remainder of the year.If, however, significant portions of the U.S. undergo new or renewed lockdowns for a protracted period, our resources may not be sufficient to meet all of our objectives.

Our consolidated results of operations are as follows:

NM — Not meaningful.

Consolidated revenues increased for the quarter and renewing contracts at IMTT. The decrease was partially offset by an increase insix months ended June 30, 2021 compared with the proportion of storage capacity under contract (utilization) at IMTT.

Selling, general and administrative expenses decreasedincreased for the quarter ended June 30, 2021 compared with the quarter ended June 30, 2020 primarily due to higher (i) costs incurred in connection with efforts to sell our businesses; (ii) salaries and increasedbenefits; and (iii) insurance costs. These increases to selling, general and administrative expenses were partially offset by the absence of a $7.2 million provision for estimated costs (in excess of insurance recoveries) related to remediation of certain environmental matters at Atlantic Aviation.

Selling, general and administrative expenses decreased for the six months ended June 30, 2020 versus2021 compared with the prior comparable periods. The decrease in the quarter wassix months ended June 30, 2020 primarily due to (i) lower salaries and benefits at IMTT and Atlantic Aviation; (ii) a decline in costs incurred in connection with the evaluation of various investment and acquisition and disposition opportunities; (iii) the absence of consulting expenses incurred during the first half of 2019 in connection with our evaluation of opportunities to improve efficiencies; and (iv) lower professional services fees, primarily in connection with ongoing litigation. These decreases were partially offset by a $7$7.2 million provision offor estimated costs (in excess of insurance recoveries) for remediatingrelated to remediation of certain environmental matters at Atlantic Aviation and lower costs incurred associated with COVID-19 response.

In accordance with the Management Services Agreement, our Manager elected to reinvest any fees to which it was entitled in new primary shares in all of the periods shown below and has currently elected to reinvest future base management fees and performance fees, if any, in new primary shares.

The increasedecrease in depreciation and amortization expense for the quarter and six months ended June 30, 2021 compared with the quarter and six months ended June 30, 2020 compared with the six months ended June 30, 2019 primarily reflects assets placed in service, partially offset by the full amortization of certain airport contract rights at Atlantic Aviation.Aviation, partially offset by assets placed in service.

Interest expense net, includes non-cash losses on derivative instruments of $1 million$78,000 and $10non-cash gains of $203,000 for the quarter and six months ended June 30, 2021, respectively, compared with non-cash losses of $172,000 and $4.4 million for the quarter and six months ended June 30, 2020, respectively, compared with non-cash lossesand amortization of $8 milliondebt financing costs and $12 million for the quarter and six months ended June 30, 2019, respectively.debt discount. Gains (losses) on derivatives recorded in interest expense are attributable to the change in fair value of interest rate hedging instruments. hedges. For the quarter and six months ended June 30, 2021, interest expense also includes non-cash write-offs of debt financing costs of $251,000 and $4.6 million, respectively, related to the repurchase of our 2.00% Convertible Senior Notes, the cancellation of the holding company revolving credit facility, and the full repayment of the Hawaii Gas $100.0 million senior secured notes.

Excluding the derivativethese non-cash adjustments and write-offs, cash interest expense was $30totaled $15.3 million and $59$28.4 million for the quarter and six months ended June 30, 2021, respectively, and $19.2 million and $37.8 million for the quarter and six months ended June 30, 2020, respectively, compared with $31 million and $59 million for the quarter and six months ended June 30, 2019, respectively.

OtherThe increase in other income (expense), net, primarily includes federal grants received as reimbursement for capital expenditures incurred in prior periods at IMTT for the quarter and six months ended June 30, 2020. For2021 compared with the quarter and six months ended June 30, 2019, other income (expense), net, includes losses on disposal of assets at MIC Hawaii, which is partially offset by fee2020 primarily reflects income from a third-party developer of renewable power facilities for the six month period ended June 30, 2019. The relationshipTransition Services Agreement with the developer concluded during July 2019.IMTT.

We recorded no income from discontinued operations forFor the quarter and six months ended June 30, 2020, as we completed the sale of the last of any businesses characterized as discontinued operations in September 2019.reflects the operating results of IMTT. The IMTT Transaction closed on December 23, 2020.

We file a consolidated federal income tax return that includes the financial results of IMTT,our operating businesses, Atlantic Aviation and MIC Hawaii. Pursuant to a tax sharing agreement, these businesses pay MIC an amount equal to the federal income tax each would pay on a standalone basis as if they were not part of the consolidated group. WeFor 2021, we expect our current federal income tax liability to incur a federal taxable loss for the year ended December 31, 2020. Under the CARES Act, any net operating loss (NOL) generated in 2020 may be carried back five years.approximately $8.3 million.

In addition, our businesses file income tax returns and may pay taxes in the statestates and local jurisdictions in which they operate. We expect the totalaggregate current year state income tax liability of our businesses to be approximately $5$9.0 million. In calculating our state income tax provision, we have provided a valuation allowance for certain state income tax NOL carryforwards, the use of which is uncertain.

In addition to our results under U.S. GAAP, we use certainthe non-GAAP measures including EBITDA excluding non-cash items and Free Cash Flow to assess the performance and prospects of our businesses.

We use Free Cash Flow as a measure of our ability to fund acquisitions, invest in growth projects, reduce or repay indebtedness, and/or return capital to shareholders. GAAP metrics such as net income (loss) do not provide us with the same level of visibility into our performance and prospects as a result of: (i) the capital intensive nature of our businesses and the generation of non-cash depreciation and amortization; (ii) shares issued to our external Manager under the Management Services Agreement; (iii) our ability to defer all or a portion of current federal income taxes; (iv) non-cash unrealized gains or losses onmark-to-market adjustment of the value of derivative instruments; (v) gains (losses) onrelated to the write-off or disposal of assets;assets or liabilities; (vi) non-cash compensation expense incurred in relation to the incentive plans for senior management of our operating businesses; and (vii) pension expenses. Pension expenses primarily consist of interest cost,expense, expected return on plan assets, and amortization of actuarial and performance gains and losses. Any cash contributions to pension plans are reflected as a reduction to Free Cash Flow and are not included in pension expense. We believe that external consumers of our financial statements, including investors and research analysts, use Free Cash Flow both to assess MIC’s performance and as an indicator of its successthe Company's ability to fund acquisitions, invest in generating an attractive risk-adjusted return.growth projects, reduce or repay indebtedness, and/or return capital to shareholders.

In this Quarterly Report on Form 10-Q, we have disclosed Free Cash Flow on a consolidated basis and for each of our operating segments and for Corporate and Other. We believe that both EBITDA excluding non-cash items and Free Cash Flow support a more complete and accurate understanding of the financial and operating performance of our businesses than would otherwise be achieved using GAAP results alone.

Free Cash Flow does not take into consideration required payments on indebtedness and other fixed obligations or other cash items that are excluded from our definition of Free Cash Flow. We note that Free Cash Flow may be calculated differently by other companies thereby limiting its usefulness as a comparative measure. Free Cash Flow should be used as a supplemental measure to help understand our financial performance and not in lieu of our financial results reported under GAAP.

We categorize capital expenditures as either maintenance capital expenditures or growth capital expenditures. As neither maintenance capital expenditure nor growth capital expenditure is a GAAP term, we have adopted a framework to categorize specific capital expenditures. In broad terms, maintenance capital expenditures primarily maintain our businesses at current levels of operations, capability, profitability or cash flow, while growth capital expenditures primarily provide new or enhanced levels of operations, capability, profitability or cash flow. We consider a number ofvarious factors in determining whether a specific capital expenditure will be classified as maintenance or growth.

We do not bifurcate specific capital expenditures into maintenance and growth components. Each discrete capital expenditure is considered within the above framework and the entire capital expenditure is classified as either maintenance or growth.

A reconciliation of net income (loss) income from continuing operations to EBITDA excluding non-cash items from continuing operations and a reconciliation from cash (used in) provided by operating activities from continuing operations to Free Cash Flow from continuing operations, on a consolidated basis, is provided below. Similar reconciliations for each of our operating businesses and Corporate and Other follow.

During the second quarter, of 2020, these factors created conditions in which the expected future value of certain products was higher than its current value and increased demand for storage of these products. Consequently, a substantial portion of IMTT’s available capacity was leased and utilization is now expected to averageGA flight activity in the mid-90s%U.S. exceeded levels recorded during the comparable quarter in 2019. Based on data reported by the Federal Aviation Administration (FAA), industry-wide domestic GA flight movements for the remainder of the year up from 86.3% at the end of 2019. Atquarter and six months ended June 30, 2020, utilization was 95.7%. With relatively few storage contracts scheduled to renew during the remainder of the year, average storage rates are unlikely to increase materially in 2020 despite the increase in utilization. IMTT believes that its circumstances are not unique,2021 increased 109% and that the broader bulk liquid storage industry has experienced similar increases in demand.

Based on data reported by the FAA, the total number of GA flight movements at airports on which Atlantic Aviation operates increased 137% and 49% for the quarter and six months ended June 30, 2019, respectively. Utilization averaged 85.4%2021, respectively, compared with the quarter and six months ended June 30, 2020 and increased by 11% and 2%, respectively, compared with the quarter and six months ended June 30, 2019. The Intermountain West and Florida continued to experience very high levels of activity. Centers of business and economic activity such as New York, Los Angeles, and Chicago have experienced increased levels of activity, but are still trailing the comparable period in 2019.

Atlantic Aviation seeks to extend FBO leases prior to their maturity to maintain visibility into the cash generating capacity of these assets over the long-term. The weighted average remaining life of the leases in the Atlantic Aviation portfolio, based on EBITDA excluding non-cash items in the prior calendar year adjusted for the quarter ended March 31, 2020. The increase in average utilization primarily reflects the effectimpact of a contango market for refined petroleum products. Demand for storage across IMTT's terminals increased at the endacquisitions, dispositions, and lease extensions was 21.6 years and 19.8 years on June 30, 2021 and 2020, respectively. A portion of the first quarter and beginning of the second quarter and utilization is expected to averageincrease reflects potentially temporary changes in the lowcontribution to mid-90s% for full year 2020.

NM — Not meaningful.