Macquarie Infrastructure Company's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Macquarie Infrastructure Company Trust (MIC)

Q2 2012 Earnings Call

August 02, 2012 08:00 a.m. ET

Executives

Jay A. Davis - Investor Relations

James Hooke - Chief Executive Officer

Todd Weintraub - Chief Financial Officer

Analysts

Andrew Gadlin

Ian Zaffino – Oppenheimer & Co

Brendan Maiorana – Wells Fargo Securities

Presentation

Operator

Good day ladies and gentlemen and welcome to the Macquarie Infrastructure Company second quarter 2012 earnings conference call. Today’s call is being recorded. At this time I would like to turn the conference over to Mr. Jay Davis, Managing Director, Investor Relations.

Jay A. Davis

Thank you J.J. and good morning everyone. Welcome once again to Macquarie Infrastructure Company’s earnings conference call, this one covering the second quarter of 2012. Our call today is being webcast and is open to the media. In addition to discussing our quarterly financial performance eon this call, we have published a press release summarizing our results and file the financial report on Form 10-Q with the Securities and Exchange Commission. These materials were released last evening and may be downloaded from our website, www.macquarie.com/mic.

To help illustrate some of the key points in our results we have again produced supplemental materials that will be referenced during the call. The materials are also available on our website. A link to the materials is located under the Events portion of the home page. If you have not already done so, I would encourage you to download these items.

Before turning to proceedings over to Macquarie Infrastructure Company’s Chief Executive Officer, James Hooke, let me remind you that this presentation is proprietary and all rights are reserved. Any recording, rebroadcast, or other use of this presentation in whole or in part without the prior written consent of Macquarie Infrastructure Company is prohibited.

This presentation is based on information generally available to the public and does not contain any material non-public information. The presentation has been prepared solely for information purposes and it’s not a solicitation of an offer to buy or sell any security or instrument.

This presentation contains forward-looking statements. We may, in some cases, use words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements in this presentation are subject to a number of risks and uncertainties. A description of known risks that could cause our actual results to differ appears under the caption “Risk Factors” in our Form 10-K.

Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. Additional risks of which we are not currently aware could also cause our actual results to differ. These forward-looking events discussed in this presentation may not occur. These forward-looking statements are made as of the date of this presentation and we undertake no obligation to publicly update or revise any forward-looking statements after the completion of this presentation whether as a result of new information, future events, or otherwise, except as required by law.

With that, it is my pleasure to introduce Macquarie Infrastructure Company’s Chief Executive Officer, James Hooke.

James Hooke

Thank you, Jack. Good morning to everyone and thank you all for participating in our earnings conference call this morning. I’ll focus on two key areas in my prepared remarks this morning. These are, firstly, our announced dividend increase and the prospects of additional increases in the future. Secondly, an update on the continued good performance of our businesses throughout the first half of 2012 and our updated guidance for the full year.

As always, we’ll answer any questions you might have about MIC following my prepared remarks. First things first however. For those of you with limited time and multiple earnings calls this morning I’ll begin with a very short summary of our results for the quarter. Once again each of our four businesses delivered financial performance during the quarter that was consistently better than our expectations. The gas company generated strong growth in contribution margin on a 5.4% increase in volume of total debt sold including a 10% growth in the non-utility volume and continued strength in non-utility margins.

Free cash flow increased by more than 37% even with a larger tax provision stemming from the improved results. The gas company’s federal income tax liability will of course be absorbed by MIC’s federal NOL in consolidation. With a strong first half in the books, we are looking for the gas company to exceed our prior guidance for EBITDA for the full year and generate between $55 million and $57.5 million of EBITDA for the full year 2012.

IMTT’s results reflected continued growth in terminal revenue and gross profit and a softer quarter for the Oil Mop environmental services business. Expenses were lower than the second quarter of last year on lower fuel costs, and without the unusual healthcare costs and unusual repair and maintenance costs incurred in 2011. In addition, we recalculated IMTT’s tax provision for the first and second quarters in accordance with GAAP. In doing so, we reduced IMTT’s provision for the first quarter and now provide for a federal income tax liability of $12 million and a state income tax liability of $5.2 million for 2012.

IMTT’s actual federal income tax liability could be higher or lower, depending on whether or not sufficient capital assets are placed in service during the year to provide IMTT with a tax shield from the resulting bonus depreciation.

Free cash flow at IMTT increased to $37.1 million from $26.9 million in the second quarter of last year. We’ve updated our EBITDA guidance for 2012 at IMTT, and increased the expected range of results from between $220 million to $235 million to narrow our expected range of results is to between $230 million and $240 million.

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