UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the Quarterly Period Ended SeptemberJune 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”“potentially”, and similar expressions“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 potential transactions relatedsales of our businesses (including our previously approved reorganization), the ability to the pursuit of strategic alternativescomplete 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 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 ongoing businessesoperations are organized into three 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 thecertain 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:

As a result of their positive correlation with inflation and provision of basic services to customers. Historically, we have used the majority of that distributable cash flow to support the payment of quarterly dividends. On April 2, 2020, we suspended our quarterly cash dividend.

In addition to standard operating procedures designed to maintain safe operations, theour businesses have implemented additional measures including: (i) a work from home policy for all employees that are able to do so;policy; (ii) enhancingenhanced cleaning and disinfecting of facilities; (iii) limitinglimited interactions between employees and customers through social distancing; (iv) mandatingmandated the use of personal protective equipment by employees; and (v) modifying shift schedules to reduce exposure between shifts; and (vi) educatingeducation of customers on alternative payment and customer care options as a means of limiting interactions with employees at MIC Hawaii. Both Atlantic Aviation andThe MIC Hawaiibusinesses are engaged in ongoing communications with employees, customers, vendors, lenders, and other stakeholders to keepapprising them apprised of theirthe business' response to the pandemic. Consistent with recommendations of federal, state, and local authorities,We believe our businesses have developed protocols and plans that we believe will allow staff and customers tocan access theirour facilities safely and effectively. We are implementing thesein compliance with relevant directives.

Visitor arrivals to Hawaii, the primary driver of increases in demand for gas in Hawaii, improved sequentially in the second quarter of 2021 as local conditions permit.

Our consolidated results of operations are as follows:

NM — Not meaningful.

Selling, general and administrative expenses decreasedincreased for the quarter ended SeptemberJune 30, 2020 and increased for the nine months ended September 30, 2020 versus the prior comparable periods. The decrease in2021 compared with the quarter wasended June 30, 2020 primarily due to a reduction in salaries and benefits at Atlantic Aviation and a reduction in professional service fees. These were partially offset by higher expenses(i) costs incurred in connection with efforts to sell our pursuit of strategic alternativesbusinesses; (ii) salaries and costs incurred with our 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 decrease in depreciation and amortization expense for the quarter and ninesix months ended SeptemberJune 30, 20202021 compared with the quarter and ninesix months ended SeptemberJune 30, 20192020 primarily reflects the full amortization of certain airport contract rights at Atlantic Aviation, partially offset by assets placed in service.

Interest expense net, includes non-cash losses on derivative instruments of an insignificant amount$78,000 and non-cash gains of $203,000 for the quarter ended September 30, 2020 and $4 million for the ninesix months ended SeptemberJune 30, 2020,2021, respectively, compared with $1 millionnon-cash losses of $172,000 and $8$4.4 million for the quarter and ninesix months ended SeptemberJune 30, 2019, respectively.2020, respectively, and amortization of debt financing costs and 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 $16totaled $15.3 million and $55$28.4 million for the quarter and ninesix months ended SeptemberJune 30, 2020,2021, respectively, compared with $18and $19.2 million and $57$37.8 million for the quarter and ninesix months ended SeptemberJune 30, 2019,2020, respectively.

OtherThe increase in other income (expense) income,, net, reflects the write-offs of fixed assets no longer viable recorded during for the quarter and ninesix months ended SeptemberJune 30, 2020. For2021 compared with the ninequarter and six months ended SeptemberJune 30, 2019, other (expense) income, net, includes fee2020 primarily reflects income from a third-party developer of renewable power facilities, partially offset by losses on disposal of assets. The relationshipTransition Services Agreement with the developer concluded during July 2019.IMTT.

We file a consolidated federal income tax return that includes the financial results of our ongoingoperating businesses, Atlantic Aviation and MIC Hawaii, and our discontinued operations, IMTT, through the date of sale.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. If the IMTT sale is not concluded before December 31, 2020,For 2021, we expect our current federal income tax liability to incur a federal taxable loss for the year ended December 31, 2020. Under the U.S. Coronavirus Aid, Relief and Economic Security (CARES) Act, any net operating losses (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 ongoing businesses and IMTT to be approximately $7$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.

During the quarter ended SeptemberJune 30, 2020,2021, we increased our deferred tax liability by $158$7.3 million as it became probableon the assumption that IMTTMIC Hawaii would be solddisposed of by MIC in a taxable transaction.transaction as part of the Reorganization. The increase represents the deferred tax expense on the difference between our book and tax basis in our investment in IMTT.MIC Hawaii.

In addition to our results under U.S. GAAP, we use the non-GAAP measures 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 mark-to-market adjustment of the value of derivative instruments; (v) gains (losses) related to the write-off or disposal of 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 various 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.

At Atlantic Aviation, our focus is on the sale of jet fuel and other services to operators of GA aircraft through our fixed based operations (FBOs).network of 69 FBOs. The financial performance of the business is positively correlated with the number of GA flight movements (take-offs and landings) in the U.S. and the business’ ability to service a portion of the aircraft involved in those operations.

Based on data reported by the FAA, the total number of GA flight movements at airports on which Atlantic Aviation operates decreased by 19%increased 137% and 27% during49% for the quarter and ninesix months ended SeptemberJune 30, 2021, respectively, compared with the quarter and six months ended June 30, 2020 and increased by 11% and 2%, respectively, versuscompared with the prior comparable periods. Activity at these airports was reduced by more than the decline in overall domestic U.S. flight activity primarily duequarter and six months ended June 30, 2019. The Intermountain West and Florida continued to Atlantic Aviation's exposure to centersexperience very high levels of activity. Centers of business and economic activity such as New York, Los Angeles, and Chicago. Additionally, an increase in the proportion of shorter, domestic flights, together with a reduction in the size of the average aircraft in use, disproportionately reduced jet fuel sales relative to flight activity at Atlantic Aviation throughout the third quarter.

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. BasedThe 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 impact of acquisitions, dispositions, and lease extensions the weighted average remaining lifewas 21.6 years and 19.8 years on June 30, 2021 and 2020, respectively. A portion of the leasesincrease reflects potentially temporary changes in the Atlantic Aviation portfolio was 19.9 years and 19.2 years on September 30, 2020 and 2019, respectively. During the quarter, Atlantic Aviation was notified that it was unsuccessful in its bid to renew its lease at John Wayne airport in Orange County, CA, and will cease FBO operations there on December 31, 2020. The absence of any contribution to Atlantic Aviation’s resultsEBITDA excluding non-cash items from certain FBOs due to COVID-19. Based on the Orange County FBO will notEBITDA excluding non-cash items weighting in 2019, the remaining lease life on June 30, 2021 would have a material impact on its financial performance in 2021.been 19.7 years.

Atlantic Aviation generates most of its revenue from sales of jet fuel at facilitiesFBOs located on the 7069 U.S. airports on which the business operates. Increases and decreases in the wholesale cost of jet fuel are generally passed through to customers. Atlantic Aviation seeks to maintain and, where appropriate, increase dollar-based margins on jet fuel sales.

Accordingly, reported revenue will fluctuate based on the wholesale cost of jet fuel to Atlantic Aviation and may not reflect the business’ ability to effectively manage the amount of jet fuel sold and the margin achieved on those sales. For example, an increase in revenue may be attributable to an increase in the wholesale cost of the jet fuel and not an increase in the amount of jet fuel sold or margin per gallon. Conversely, a decline in revenue may be attributable to a decrease in the wholesale cost of jet fuel and not a reduction in the amount of jet fuel sold or margin per gallon.

Revenue decreasedand gross margin increased for the quarter and ninesix months ended SeptemberJune 30, 20202021 compared with the quarter and ninesix months ended SeptemberJune 30, 20192020 due to a reductionan increase in the amount of jet fuel sold a decrease inand ancillary services provided and, to a lesser extent, a reductionprovided. The increase in transient hangar rental revenue. The decrease in rental revenue was attributable to a reduced number of short-term and overnight hangar rentals, partially offset by revenue from base tenants that was consistent with prior periods. The reduced amount of revenue also reflects the lowerhigher wholesale cost of jet fuel in the quarter and ninesix months ended SeptemberJune 30, 20202021 versus the prior comparable periods.period. In general, the decreaseincrease in the wholesale cost of jet fuel is typically reflected in a corresponding decreaseincrease in cost of services, resulting in no impact to gross margin.

Selling, general and administrative expenses decreasedincreased for the quarter and ninesix months ended SeptemberJune 30, 20202021 versus the prior comparable periods,period primarily due to lowerhigher salaries and benefits and maintenance and repair costs, and credit card fees. The decrease in selling, general and administrative expenses for the nine months ended September 30, 2020 was partially offset by the absence of a $7$7.2 million provision offor estimated costs (in excess of insurance recoveries) for remediatingrelated to remediation of certain environmental matters. Excludingliabilities recorded during the provision, selling, general and administrative expenses would have been approximately $15 million lower for the nine monthsquarter ended SeptemberJune 30, 2020 versus the prior comparable period.2020.

Depreciation and amortization decreased for the quarter and ninesix months ended SeptemberJune 30, 20202021 versus the prior comparable periodsperiod primarily due to the full amortization of certain airport contract rights.rights, partially offset by assets placed in service.

Operating income decreasedincreased in the quarter and ninesix months ended SeptemberJune 30, 20202021 compared with the quarter and ninesix months ended SeptemberJune 30, 20192020 due to the decreaseincrease in gross margin and the decrease in depreciation and amortization, partially offset by the decreaseincrease in selling, general and administrative expenses and depreciation and amortization.expenses.

Interest expense, net, includes non-cash losses on derivative instruments of an insignificant amount for the quarter ended September 30, 2020 and $3 million for the ninesix months ended SeptemberJune 30, 2020,2021 compared with non-cash losses of $1 million$49,000 and $7$3.5 million for the quarter and ninesix months ended SeptemberJune 30, 2019, respectively.2020, respectively, and amortization of debt financing costs. Excluding the derivativethese non-cash adjustments, cash interest expense was $10totaled $9.8 million and $36$19.6 million for the quarter and ninesix months ended SeptemberJune 30, 2020,2021, respectively, compared with $15and $11.7 million and $44$25.4 million for the quarter and ninesix months ended SeptemberJune 30, 2019,2020, respectively. The decrease in cash interest expense primarily reflects a lower weighted average interest rate.rate and lower weighed average debt balance.

Atlantic Aviation has state NOL carryforwards that are specific to the state in which they were generated. The utilization of NOL carryforwards may reduce or eliminate state taxable income in the future.