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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
_____________________________

FORM 10-Q
_____________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from             to           
Commission File Number: 001-32384
_____________________________

MACQUARIE INFRASTRUCTURE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
_____________________________
Delaware 43-2052503
(State or Other Jurisdiction of
Incorporation or Organization)
(IRS Employer
Identification No.)
125 West 55th Street
New York, New York 10019
(Address of Principal Executive Offices) (Zip Code)
(212) 231-1000
(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year if Changed Since Last Report): N/A
_____________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share MIC New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No
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.
Large Accelerated Filer Accelerated Filer   
Non-accelerated Filer Smaller Reporting Company Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes No
There were 87,593,632 shares of common stock, with $0.001 par value, outstanding on April 30, 2021.


MACQUARIE INFRASTRUCTURE CORPORATION
TABLE OF CONTENTS
Page
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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.
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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 “project”, “believe”, “anticipate”, “plan”, “expect”, “estimate”, “intend”, “should”, “would”, “could”, “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 potential sales of our businesses (including our proposed reorganization) 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, 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.
ii

PART I
FINANCIAL INFORMATION
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 businesses that provide products and services to corporations, government agencies, and individual customers in the United States (U.S.). Our operations are organized into three segments:
Atlantic Aviation: a provider of fuel, terminal, aircraft hangaring, and other services primarily to owners and operators of general aviation (GA) jet aircraft at 69 airports throughout the U.S.;
MIC Hawaii: comprising an energy company that processes and distributes gas and provides related services (Hawaii Gas) and several smaller businesses collectively engaged in efforts to reduce the cost and improve the reliability and sustainability of energy in Hawaii; and
Corporate and Other: comprising a holding company headquartered in New York City, MIC Corporate, and a shared services center in Plano, Texas, MIC Global Services.
On October 31, 2019, in addition to the active management of our existing portfolio of businesses, we announced our intention to pursue strategic alternatives and have since been engaged in processes that could result in the sale of our Company or one or more of our operating businesses. During the quarter ended September 30, 2020, International-Matex Tank Terminals (IMTT) was classified as a discontinued operation and eliminated as a reportable segment. All periods reported herein reflect this change. In December 2020, we completed the sale of IMTT (IMTT Transaction).
On March 30, 2021, MIC entered into an agreement and plan of merger (the Merger Agreement) with Macquarie Infrastructure Holdings, LLC (Holdings LLC), a recently formed Delaware limited liability company and a direct wholly-owned subsidiary of MIC, and Plum Merger Sub, Inc., a recently formed Delaware corporation and a direct wholly owned subsidiary of Holdings LLC (Merger Sub), providing for Merger Sub to merge with and into MIC (the Merger), resulting in MIC becoming a direct wholly-owned subsidiary of Holdings LLC, which will become publicly-traded, subject to the satisfaction of certain closing conditions (including the approval of the Company’s shareholders). Upon the effectiveness of the Merger, each share of the Company’s common stock will be converted into one Holdings LLC common unit. Following the consummation of the Merger, it is anticipated that a direct subsidiary of MIC will distribute all of the limited liability company interests in MIC Hawaii Holdings, LLC (MIC Hawaii) to MIC and MIC will in turn distribute such limited liability company interests to Holdings LLC (such distributions, together with the merger, the “Reorganization”). MIC Hawaii holds the businesses comprising the Company’s MIC Hawaii business segment. MIC believes that the Reorganization will provide flexibility to pursue the sale or sales of the Company’s remaining operating businesses in any sequence without altering the after-tax net proceeds to shareholders. Following receipt of shareholder approval of the Merger, the Board intends to evaluate the status of efforts to sell MIC or its remaining operating businesses, and complete the Reorganization at such time as it determines will be in the best interests of the Company and its shareholders. The Board currently anticipates implementing the Reorganization following execution of a definitive agreement for, and prior to completing, the sale of the Atlantic Aviation business. The Board may abandon or postpone the Merger at any time prior to its effective time.
Overview
Use of Non-GAAP measures
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.
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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.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Consolidated — Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow” for further information on our calculation of EBITDA excluding non-cash items and Free Cash Flow and for reconciliations of these non-GAAP measures to the most comparable GAAP measures.
Recent Developments
2.00% Convertible Senior Notes Tender
On February 17, 2021, we initiated a tender offer for any and all of our 2.00% Convertible Senior Notes outstanding. On March 16, 2021, we repurchased $358.6 million in aggregate principal amount of the Notes in the tender offer. In April 2021, we repurchased an additional $5.7 million resulting in an outstanding balance of $38.2 million.
Hawaii Gas Senior Secured Notes
On April 19, 2021, The Gas Company, LLC (d.b.a. Hawaii Gas) fully repaid all of its $100.0 million senior secured notes outstanding and incurred a $4.7 million 'make-whole' payment.
MIC Global Services
In connection with sales processes for our businesses, we are allocating personnel and costs associated with our shared services center in Plano, TX, other than functions supporting the public company, to Atlantic Aviation and adding resources to our MIC Hawaii business such that it can operate on a stand-alone basis.
Historical Dividends
Since January 1, 2020, MIC has paid or declared the following dividends:
Declared Period Covered $ per Share Record Date Payable Date
December 23, 2020
(1)
$ 11.00  January 5, 2021 January 8, 2021
February 14, 2020 Fourth quarter 2019 1.00  March 6, 2020 March 11, 2020
___________
(1)Special dividend declared and paid out of the net proceeds from the IMTT Transaction. Shares of MIC traded with “due-bills” attached through January 8, 2021 and traded ex-dividend on January 11, 2021.
We intend to provide investors with the benefits of investing in infrastructure and infrastructure-like businesses that we believe will generate growing amounts of cash flow over time as a result of their positive correlation with inflation and provision of basic services to customers. Historically, we have used most of the distributable cash flow to support the payment of quarterly dividends. On April 2, 2020, in response to the effects of COVID-19 on the performance and prospects of our businesses, we suspended our quarterly cash dividend. On December 23, 2020, following the successful completion of the IMTT Transaction, our Board authorized the payment of a special dividend of $11.00 per share in cash comprising the net proceeds from the IMTT Transaction after paying or reserving for capital gains taxes, transaction costs, a Disposition Payment, and the retirement of holding company level debt. As a result of the IMTT Transaction, our ability to generate distributable cash flow in the future has been reduced.
Consistent with our focus on preparing our businesses for and completing a sale or sales of our operating businesses, it is likely that the majority of any Free Cash Flow in 2021 will be deployed completing projects to which we have committed and reducing indebtedness generally. Although our Board regularly reviews our dividend policy, it is unlikely that it will authorize the payment of a regular dividend in 2021 while the sale of the Company or its operating businesses is being actively pursued. Consistent with the outcome of the IMTT Transaction, we expect that the net proceeds from any future sale would also be distributed to stockholders.
In determining whether to pay dividends in the future, our Board will take into account such matters as the ability of our businesses to generate Free Cash Flow, our progress with respect to a sale or sales of our operating businesses, the state of the capital markets and general business and economic conditions, the short and long term impacts of, and disruptions in our businesses, and/or in the business or economic environment due to COVID-19, or other non-economic events, the Company’s
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financial condition, results of operations, indebtedness levels, capital requirements, capital opportunities, and any contractual, legal, and regulatory restrictions on the payment of dividends by the Company to its stockholders or by its subsidiaries to the Company, and any other factors that it deems relevant, subject to maintaining a prudent level of reserves.
Results of Operations: Consolidated
Impact of COVID-19
We continue to closely monitor the effects of COVID-19 and are actively managing our response by placing a priority on the health and safety of our employees, contractors, their families, customers, and the broader communities in which our businesses operate. Both Atlantic Aviation and the MIC Hawaii businesses are classified as essential services businesses and remain fully operational. The businesses are adhering to pandemic response plans and are following guidance from the Centers for Disease Control and Prevention (CDC) as well as federal, state, and local governments with respect to conducting operations safely. To the extent possible, and as permitted by local guidelines, our businesses are facilitating vaccination of their employees against COVID-19.
In addition to standard operating procedures designed to maintain safe operations, our businesses have implemented additional measures including: (i) a work from home policy for all employees that are able to do so; (ii) enhancing cleaning and disinfecting of facilities; (iii) limiting interactions between employees and customers through social distancing; (iv) mandating the use of personal protective equipment by employees; (v) modifying shift schedules to reduce exposure between shifts; and (vi) educating customers on alternative payment and customer care options as a means of limiting interactions with employees at MIC Hawaii. All of the MIC businesses are engaged in ongoing communications with employees, customers, vendors, lenders, and other stakeholders apprising them of the business' response to the pandemic. We believe our staff and customers can access our facilities safely and in compliance with relevant directives.
COVID-19 continues to negatively affect the performance of our businesses, although the effects have diminished relative to this time last year. Some of the federal, state, and local governments' pandemic response measures including social distancing, quarantines, travel restrictions, prohibitions on public gatherings, and stay-at-home orders have been rolled back. Despite the roll back, GA flight activity and the demand for jet fuel and ancillary services provided by Atlantic Aviation continues to be affected by COVID-19. The easing of travel restrictions has resulted in an increase in economic activity and the number of visitors to Hawaii, but not to pre-COVID-19 levels. The widespread availability of COVID-19 vaccines is expected to have a positive effect on activity levels at our businesses.
Changes in GA flight activity relative to the levels achieved in the first quarter of 2021 will depend upon the duration of the pandemic, any governmental response including renewed travel restrictions, and the state of the U.S. and global economies, as well as increases in business, international, and event-driven activity all of which are uncertain. Visitor arrivals to Hawaii, the primary driver of increases in demand for gas in Hawaii, improved gradually during the first quarter of 2021 over the fourth quarter of 2020 following the implementation of a quarantine exemption for visitors with evidence of a negative COVID-19 test prior to arrival in the islands and increased visitor confidence levels due to the availability of COVID-19 vaccines. The rate of recovery in the number of visitors to Hawaii going forward is uncertain.
Cost saving initiatives implemented over the past year including hiring freezes, reductions in regular hours and overtime, furloughs, deferral of maintenance and repair work have been eased as demand for services has increased. While management of our businesses remain focused on conducting operations as efficiently as possible, we believe that the cash generated by their ongoing operations will be sufficient to fund our businesses, including committed growth projects.
In addition to the cash generated by our operating businesses, our sources of funding include the $359.5 million of cash we had on hand on March 31, 2021. The $359.5 million is net of amounts used or reserved for capital gains taxes paid in April 2021 in relation to the IMTT Transaction and the repurchase of any and all of our 2.00% Convertible Senior Notes outstanding. In April 2021, we repaid all of the $100.0 million senior secured notes outstanding at MIC Hawaii and incurred a $4.7 million 'make-whole' payment. See Recent Developments above.
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Results of Operations: Consolidated – (continued)
Our consolidated results of operations are as follows:
Quarter Ended March 31, Change
Favorable/(Unfavorable)
2021 2020 $ %
($ In Thousands, Except Share and Per Share Data) (Unaudited)
Revenue
Service revenue $ 209,604  $ 223,997  (14,393) (6)
Product revenue 54,587  60,462  (5,875) (10)
Total revenue 264,191  284,459  (20,268) (7)
Costs and expenses
Cost of services 82,233  94,663  12,430  13 
Cost of product sales 34,756  41,934  7,178  17 
Selling, general and administrative 77,012  87,583  10,571  12 
Fees to Manager - related party 5,552  7,356  1,804  25 
Depreciation and amortization 27,519  30,531  3,012  10 
Total operating expenses 227,072  262,067  34,995  13 
Operating income 37,119  22,392  14,727  66 
Other income (expense)
Interest income 161  468  (307) (66)
Interest expense(1)
(18,619) (26,705) 8,086  30 
Other income (expense), net 502  (146) 648  NM
Net income (loss) from continuing operations before income taxes 19,163  (3,991) 23,154  NM
Provision for income taxes (5,366) (2,997) (2,369) (79)
Net income (loss) from continuing operations 13,797  (6,988) 20,785  NM
Discontinued Operations
Net income from discontinued operations before income taxes —  24,545  (24,545) (100)
Provision for income taxes —  (6,330) 6,330  100 
Net income from discontinued operations —  18,215  (18,215) (100)
Net income 13,797  11,227  2,570  23 
Net income (loss) from continuing operations 13,797  (6,988) 20,785  NM
Less: net income (loss) attributable to noncontrolling interests 597  (75) (672) NM
Net income (loss) from continuing operations attributable to MIC 13,200  (6,913) 20,113  NM
Net income from discontinued operations —  18,215  (18,215) (100)
Net income from discontinued operations attributable to MIC —  18,215  (18,215) (100)
Net income attributable to MIC $ 13,200  $ 11,302  1,898  17 
Basic income (loss) per share from continuing operations attributable to MIC $ 0.15  $ (0.08) 0.23  NM
Basic income per share from discontinued operations attributable to MIC —  0.21  (0.21) (100)
Basic income per share attributable to MIC $ 0.15  $ 0.13  0.02  15 
Weighted average number of shares outstanding: basic 87,411,455  86,686,972  724,483 
___________
NM — Not meaningful.
(1)Interest expense includes non-cash gains on derivative instruments of $281,000 and non-cash losses of $4.3 million for the quarters ended March 31, 2021 and 2020, respectively.
Revenue
Consolidated revenues decreased for the quarter ended March 31, 2021 compared with the quarter ended March 31, 2020 primarily due to (i) a decrease in the amount of jet fuel sold by Atlantic Aviation and gas sold by MIC Hawaii; and (ii) a lower wholesale cost of jet fuel, attributable to the impact of COVID-19.
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Results of Operations: Consolidated – (continued)
Cost of Services and Product Sales
Consolidated cost of services and cost of product sales decreased for the quarter ended March 31, 2021 compared with the quarter ended March 31, 2020 primarily due to (i) a decrease in the amount of jet fuel sold by Atlantic Aviation and gas sold by MIC Hawaii; and (ii) a lower wholesale cost of jet fuel, attributable to the impact of COVID-19. In addition, the decrease in cost of product sales reflects a favorable mark-to-market adjustment of the value of the commodity hedge contracts for its wholesale liquified petroleum gas (LPG) purchases on MIC Hawaii's balance sheet (see “Results of Operations — MIC Hawaii” below).
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased for the quarter ended March 31, 2021 compared with the quarter ended March 31, 2020 primarily due to lower costs incurred in connection with efforts to sell our businesses and decreases in salary and benefits and professional services. The decrease in selling, general and administrative expenses was partially offset by costs incurred related to the tender offer for our 2.00% Convertible Senior Notes and higher insurance costs.
Fees to Manager
Our Manager is entitled to a monthly base management fee based on our market capitalization and potentially a quarterly performance fee based on total stockholder returns relative to a U.S. utilities index. For the quarters ended March 31, 2021 and 2020, we incurred base management fees of $5.6 million and $7.4 million, respectively. The decrease in base management fees reflects a reduction in our average market capitalization (primarily as a result of the IMTT Transaction) and the increase in our average holding company cash balance during the quarter ended March 31, 2021. No performance fees were incurred in either of the current or prior comparable period. The unpaid portion of base management fees and performance fees, if any, at the end of each reporting period is included in the line item Due to Manager-related party in our consolidated condensed balance sheets.
In accordance with the Management Services Agreement, our Manager elected to reinvest any fees to which it was entitled in new primary shares in the periods shown below and has currently elected to reinvest future base management fees and performance fees, if any, in new primary shares.

Period Base Management
Fee Amount
($ in Thousands)
Performance
Fee Amount
($ in Thousands)
Shares
Issued
2021 Activities:
First quarter 2021 $ 5,552  $ —  176,296 
(1)
2020 Activities:
Fourth quarter 2020 $ 4,903  $ —  162,791 
Third quarter 2020 4,980  —  172,976 
Second quarter 2020 3,824  —  146,452 
First quarter 2020 7,356  —  181,617 
___________
(1)Our Manager elected to reinvest all monthly base management fees for the first quarter of 2021 in new primary shares. We issued 176,296 shares for the quarter ended March 31, 2021, including 67,120 shares that were issued in April 2021 for the March 2021 monthly base management fee.
Depreciation and Amortization
The decrease in depreciation and amortization expense for the quarter ended March 31, 2021 compared with the quarter ended March 31, 2020 primarily reflects the full amortization of certain airport contract rights at Atlantic Aviation, partially offset by assets placed in service.
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Results of Operations: Consolidated – (continued)
Interest Expense, net, and Gains (Losses) on Derivative Instruments
Interest expense, net, includes non-cash gains on derivative instruments of $281,000 and non-cash losses of $4.3 million for the quarters ended March 31, 2021 and 2020, respectively, and amortization of deferred financing costs and debt discount. Gains (losses) on derivatives recorded in interest expense are attributable to the change in fair value of interest rate hedges. For the quarter ended March 31, 2021, interest expense also includes non-cash write-offs of deferred financing costs of $4.3 million related to the repurchase of our 2.00% Convertible Senior Notes and the cancellation of the holding company revolving credit facility.
Excluding these non-cash adjustments and write-offs, cash interest expense totaled $13.1 million and $18.6 million for the quarters ended March 31, 2021 and 2020, respectively. The decrease in cash interest expense primarily reflects a lower weighted average debt balance and a lower weighted average interest rate. See discussions of interest expense for each of our operating businesses below.
Other Income (Expense), net
For the quarter ended March 31, 2021, other income (expense), net, primarily includes income in relation to a Transition Services Agreement with IMTT.
Discontinued Operations
For the quarter ended March 31, 2020, discontinued operations reflects the operating results of IMTT. The IMTT Transaction closed on December 23, 2020.
Income Taxes
We file a consolidated federal income tax return that includes the financial results of 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 if they were not part of the consolidated group. For 2021, we expect our current federal income tax liability to be approximately $1.5 million.
In addition, our businesses file income tax returns and may pay taxes in the states and local jurisdictions in which they operate. We expect the aggregate current year state income tax liability to be approximately $7.0 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.
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Results of Operations: Consolidated – (continued)
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow
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 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.
We believe investors use EBITDA excluding non-cash items primarily as a measure of the operating performance of MIC’s businesses and to make comparisons with the operating performance of other businesses whose depreciation and amortization expense may vary from ours, particularly where acquisitions and other non-operating factors are involved. We define EBITDA excluding non-cash items as net income (loss) or earnings — the most comparable GAAP measure — before interest, taxes, depreciation and amortization, and non-cash items including impairments, unrealized derivative gains and losses, adjustments for other non-cash items, and pension expense reflected in the statements of operations. Other non-cash items, net, excludes the adjustment to bad debt expense related to the specific reserve component, net of recoveries. EBITDA excluding non-cash items also excludes base management fees and performance fees, if any, whether paid in cash or stock.
Our businesses are characteristically owners of high-value, long-lived assets capable of generating substantial Free Cash Flow. We define Free Cash Flow as cash from operating activities — the most comparable GAAP measure — less maintenance capital expenditures and adjusted for changes in working capital.
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 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 to assess the Company's ability to fund acquisitions, invest in 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.
Classification of Maintenance Capital Expenditures and Growth Capital Expenditures
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.
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Results of Operations: Consolidated – (continued)
A reconciliation of net income (loss) from continuing operations to EBITDA excluding non-cash items from continuing operations and a reconciliation from cash 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.
Quarter Ended March 31, Change
Favorable/(Unfavorable)
2021 2020 $ %
($ In Thousands) (Unaudited)
Net income (loss) from continuing operations $ 13,797  $ (6,988)
Interest expense, net(1)
18,458  26,237 
Provision for income taxes 5,366  2,997 
Depreciation and amortization 27,519  30,531 
Fees to Manager - related party 5,552  7,356 
Other non-cash expense, net(2)
1,958  4,331 
EBITDA excluding non-cash items - continuing operations
$ 72,650  $ 64,464  8,186  13 
EBITDA excluding non-cash items - continuing operations
$ 72,650  $ 64,464 
Interest expense, net(1)
(18,458) (26,237)
Non-cash interest expense, net(1)
5,403  7,667 
Provision for current income taxes (3,209) (4,820)
Changes in working capital (16,393) 10,466 
Cash provided by operating activities - continuing operations
39,993  51,540 
Changes in working capital 16,393  (10,466)
Maintenance capital expenditures (3,664) (5,714)
Free cash flow - continuing operations $ 52,722  $ 35,360  17,362  49 
___________

(1)    Interest expense, net, includes adjustments to derivative instruments, non-cash amortization of deferred financing fees, and non-cash amortization of debt discount related to our 2.00% Convertible Senior Notes. For the quarter ended March 31, 2021, interest expense also includes non-cash write-offs of deferred financing costs related to the repurchase of our 2.00% Convertible Senior Notes and the cancellation of the holding company revolving credit facility.
(2) Other non-cash expense, net, includes primarily non-cash mark-to-market adjustment of the value of the commodity hedge contracts, non-cash compensation expense incurred in relation to the incentive plans for senior management of our operating businesses, and non-cash gains (losses) related to the write-off or disposal of assets or liabilities. Other non-cash expense, net, excludes the adjustment to bad debt expense related to the specific reserve component, net of recoveries, for which this adjustment is reported in working capital in the above table. See “Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow” above for further discussion.
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Results of Operations: Atlantic Aviation
At Atlantic Aviation, our focus is on the sale of jet fuel and other services to operators of GA aircraft through our 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. Over the long-term, the rate of growth in GA flight movements has tended to be positively correlated with the level of economic activity in the U.S.
GA flight activity continues to recover from the effects of COVID-19. Based on data reported by the Federal Aviation Administration (FAA), industry-wide domestic GA flight movements for the quarter ended March 31, 2021 increased 8% compared with the quarter ended March 31, 2020 and decreased 3% compared with the quarter ended March 31, 2019.
Based on data reported by the FAA, the total number of GA flight movements at airports on which Atlantic Aviation operates for the first quarter ended March 31, 2021 increased 5% compared with the quarter ended March 31, 2020 and decreased by 6% compared with the quarter ended March 31, 2019. As compared with 2019, the decrease in activity at these airports was greater than the decline in overall domestic U.S. flight activity for the same periods primarily due to Atlantic Aviation's exposure to centers of business and economic activity such as New York, Los Angeles, and Chicago where the rate of recovery in economic activity has been slower than average. Atlantic Aviation has experienced stronger performance in other markets including the Intermountain West and Florida which saw GA flight activity in excess of 2019 levels.
In response to the downturn in flight activity that commenced in March of 2020, Atlantic Aviation engaged in a thorough review of its operational and capital expenditures to ensure it was prudently managing its liquidity. As activity levels have recovered, certain of the cost reductions previously implemented have been reversed. Expenses are being carefully managed to prudent levels for current activity.
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 impact of acquisitions, dispositions, and lease extensions was 21.8 years and 19.6 years on March 31, 2021 and 2020, respectively. A portion of the increase reflects potentially temporary changes in the contribution to EBITDA excluding non-cash items from certain FBOs due to COVID-19. Based on the EBITDA excluding non-cash items weighting in 2019, the remaining lease life on March 31, 2021 would have been 19.9 years.
9

Results of Operations: Atlantic Aviation – (continued)
Quarter Ended March 31, Change
Favorable/(Unfavorable)
2021 2020
$ $ $ %
($ In Thousands) (Unaudited)
Service revenue 209,604  223,997  (14,393) (6)
Cost of services (exclusive of depreciation and amortization shown separately below)
82,233 94,663  12,430  13 
Gross margin 127,371 129,334  (1,963) (2)
Selling, general and administrative expenses 61,586  64,140  2,554 
Depreciation and amortization 23,300  26,579  3,279  12 
Operating income 42,485  38,615  3,870  10 
Interest expense, net(1)
(10,730) (18,876) 8,146  43 
Other expense, net (18) (72) 54  75 
Provision for income taxes (8,596) (5,479) (3,117) (57)
Net income 23,141  14,188  8,953  63 
Reconciliation of net income to EBITDA excluding
non-cash items and a reconciliation of cash provided
by operating activities to Free Cash Flow:
Net income 23,141  14,188 
Interest expense, net(1)
10,730  18,876 
Provision for income taxes 8,596  5,479 
Depreciation and amortization 23,300  26,579 
Other non-cash expense, net(2)
1,569  813 
EBITDA excluding non-cash items 67,336  65,935  1,401 
EBITDA excluding non-cash items 67,336  65,935 
Interest expense, net(1)
(10,730) (18,876)
Non-cash interest expense, net(1)
943  5,159 
Provision for current income taxes (4,480) (8,577)
Changes in working capital 1,916  15,667 
Cash provided by operating activities 54,985  59,308 
Changes in working capital (1,916) (15,667)
Maintenance capital expenditures (2,550) (3,045)
Free cash flow 50,519  40,596  9,923  24 
___________
(1)Interest expense, net, includes non-cash adjustments to derivative instruments and non-cash amortization of deferred financing fees.
(2)Other non-cash expense, net, includes primarily non-cash compensation expense incurred in relation to incentive plans and non-cash gains (losses) related to the write-off or disposal of assets or liabilities. Other non-cash expense, net, excludes the adjustment to bad debt expense related to the specific reserve component, net of recoveries, for which this adjustment is reported in working capital in the above table. See “Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow” above for further discussion.
Atlantic Aviation generates most of its revenue from sales of jet fuel at facilities located on the 69 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 jet fuel and not an increase in the amount of jet
10

Results of Operations: Atlantic Aviation – (continued)
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.
Gross margin, which we define as revenue less cost of services, excluding depreciation and amortization, is the effective “top line” for Atlantic Aviation as it reflects the business’ ability to drive growth in the amount of products and services sold and the margins earned on those sales over time. We believe that our investors view gross margin as reflective of our ability to manage the amount and price of jet fuel sold, notwithstanding variances in the wholesale cost of jet fuel through the commodity cycle. Gross margin can be reconciled to operating income — the most comparable GAAP measure — by subtracting selling, general and administrative expenses and depreciation and amortization in the table above.
Revenue and Gross Margin
Revenue and gross margin decreased for the quarter ended March 31, 2021 compared with the quarter ended March 31, 2020 due to a reduction in the amount of jet fuel sold and a decrease in ancillary services provided, attributable to the effects of COVID-19. The reduced amount of revenue also reflects the lower wholesale cost of jet fuel in the quarter ended March 31, 2021 versus the prior comparable period. In general, the decrease in the wholesale cost of jet fuel is typically reflected in a corresponding decrease in cost of services, resulting in no impact to gross margin.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased for the quarter ended March 31, 2021 versus the prior comparable period primarily due to lower salaries and benefits, credit card fees, and professional services.
Depreciation and Amortization
Depreciation and amortization decreased for the quarter ended March 31, 2021 versus the prior comparable period primarily due to the full amortization of certain airport contract rights, partially offset by assets placed in service.
Operating Income
Operating income increased in the quarter ended March 31, 2021 compared with the quarter ended March 31, 2020 due to the decrease in depreciation and amortization and selling, general and administrative expenses, partially offset by the decrease in gross margin.
Interest Expense, Net
Interest expense, net, includes non-cash losses on derivative instruments of an insignificant amount for the quarter ended March 31, 2021 compared with non-cash losses of $3.4 million for the quarter ended March 31, 2020, and amortization of deferred financing costs. Excluding the non-cash adjustments, cash interest expense totaled $9.8 million and $13.7 million for the quarters ended March 31, 2021 and 2020, respectively. The decrease in cash interest expense primarily reflects a lower weighted average interest rate and lower weighed average debt balance.
Income Taxes
The taxable income generated by Atlantic Aviation is reported on our consolidated federal income tax return. The business files standalone state income tax returns in most of the states in which it operates. The tax expense in the table above includes both state income taxes and the portion of the consolidated federal income tax liability attributable to the business. For the year ended December 31, 2021, the business expects to pay state income taxes of approximately $6.5 million. The Provision for Current Income Taxes of $4.5 million for the quarter ended March 31, 2021 in the above table includes primarily $2.4 million of federal income tax expense and $2.1 million of state income tax expense.
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.
Maintenance Capital Expenditures
For the quarter ended March 31, 2021, Atlantic Aviation incurred maintenance capital expenditures of $2.6 million and $3.4 million on an accrual basis and cash basis, respectively, compared with $3.0 million and $5.6 million on an accrual basis and cash basis, respectively, for the quarter ended March 31, 2020.

11

Results of Operations: MIC Hawaii
MIC Hawaii comprises Hawaii Gas and several smaller businesses collectively engaged in efforts to reduce the cost and improve the reliability and sustainability of energy in Hawaii. The businesses of MIC Hawaii generate revenue primarily from the provision of gas to commercial, residential, and governmental customers and the generation of power.
The financial performance of MIC Hawaii is a function of the number of customers served, their consumption of energy and the prices achieved on sales by each of Hawaii Gas’s utility and non-utility operations and under power purchase agreements. The amount of gas consumed is correlated with visitor arrivals and general economic activity over the long term. Consumption trends and rates are a function of, among other factors, energy efficiency, weather, the range of competitive energy sources, and MIC Hawaii’s input commodity costs.
The financial performance of MIC Hawaii continues to be affected by a reduction in the demand for gas resulting from the 60% and 67% decline in the number of visitors to Hawaii during the quarter ended March 31, 2021 compared with the quarters ended March 31, 2020 and 2019, respectively. A corresponding decline in hotel occupancy, restaurants patronage, and use of commercial laundry services resulted in an overall reduction in gas consumption of 18% and 21% during the quarter ended March 31, 2021 compared with the quarters ended March 31, 2020 and 2019, respectively.
Hawaii Gas enters into commodity hedge contracts in an effort to reduce financial risks of commodity price fluctuations associated with its wholesale LPG purchases. The business has entered into such contracts with varying maturities through December 2023 with respect to a portion of its expected LPG sales during that time.
Hawaii Gas is in regular communication with key counterparties including its supplier of naphtha feedstock for its utility operations and its LPG supplier. A new naphtha feedstock agreement effective through December 2023 was approved on an interim basis by the Hawaii Public Utilities Commission (HPUC) in December 2020.
The HPUC issued an order on April 9, 2021 establishing a procedural schedule to govern the remanded 2018 rate case proceeding and directed Hawaii Gas to update its 2018 test year data to reflect a 2022 test year and submit certain analysis related to greenhouse gas lifecycle emissions associated with two small scale liquefied natural gas (LNG) projects. The HPUC order also expanded the scope of participation of certain parties and established a modified statement of issues. The ultimate impact of the HPUC order on the approved revenue requirement is unclear; however, the remanded proceeding is not expected to be adjudicated completely in 2021, which would result in no anticipated financial impact in 2021.

12

Results of Operations: MIC Hawaii – (continued)
Quarter Ended March 31, Change
Favorable/(Unfavorable)
2021 2020
$ $ $ %
($ In Thousands) (Unaudited)
Product revenue 54,587  60,462  (5,875) (10)
Cost of product sales (exclusive of depreciation and amortization shown separately below)
34,756  41,934  7,178  17 
Gross margin 19,831  18,528  1,303 
Selling, general and administrative expenses 5,677  6,322  645  10 
Depreciation and amortization 3,748  3,624  (124) (3)
Operating income 10,406  8,582  1,824  21 
Interest expense, net(1)
(1,304) (2,775) 1,471  53 
Other expense, net (336) (112) (224) (200)
Provision for income taxes (2,367) (1,775) (592) (33)
Net income 6,399  3,920  2,479  63 
Less: net income (loss) attributable to noncontrolling interests 597  (75) (672) NM
Net income attributable to MIC 5,802  3,995  1,807  45 
Reconciliation of net income to EBITDA excluding non-cash items and a reconciliation of cash provided by operating activities to Free Cash Flow:
Net income 6,399  3,920 
Interest expense, net(1)
1,304  2,775 
Provision for income taxes 2,367  1,775 
Depreciation and amortization 3,748  3,624 
Other non-cash (income) expense, net(2)
(256) 3,113 
EBITDA excluding non-cash items 13,562  15,207  (1,645) (11)
EBITDA excluding non-cash items 13,562  15,207 
Interest expense, net(1)
(1,304) (2,775)
Non-cash interest (income) expense, net(1)
(231) 1,003 
Provision for current income taxes (1,516) (2,123)
Changes in working capital (1,696) (5,086)
Cash provided by operating activities 8,815  6,226 
Changes in working capital 1,696  5,086 
Maintenance capital expenditures (1,114) (2,669)
Free cash flow 9,397  8,643  754 
___________
NM — Not meaningful.
(1)Interest expense, net, includes non-cash adjustments to derivative instruments related to interest rate swaps and non-cash amortization of deferred financing fees.
(2)Other non-cash (income) expense, net, includes primarily non-cash mark-to-market adjustment of the value of the commodity hedge contracts, non-cash compensation expense incurred in relation to incentive plans, and non-cash gains (losses) related to the write-off or disposal of assets or liabilities. Other non-cash (income) expense, net, excludes the adjustment to bad debt expense related to the specific reserve component, net of recoveries, for which this adjustment is reported in working capital in the above table. See “Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow” above for further discussion.

13

Results of Operations: MIC Hawaii – (continued)
Hawaii Gas generates most of its revenue from the sale of gas. Accordingly, revenue can fluctuate based on the wholesale cost of gas and/or feedstock to Hawaii Gas and may not reflect the business’ ability to effectively manage the amount of gas sold and the margins achieved on those sales. For example, an increase in revenue may be attributable to an increase in the wholesale cost of gas passed through to Hawaii Gas’ customers and not an increase in the amount of gas sold or margin achieved. Conversely, a decline in revenue may be attributable to a decrease in the wholesale cost of gas passed through to Hawaii Gas’ customers and not a reduction in the amount of gas sold or margin achieved.
Gross margin, which we define as revenue less cost of product sales, excluding depreciation and amortization, is the effective “top line” for Hawaii Gas as it is reflective of the business’ ability to drive growth in the amount of products sold and the margins earned on those sales over time. We believe that investors use gross margin to evaluate the business as it is reflective of our performance in managing volume and price throughout the commodity cycle. Gross margin is reconciled to operating income — the most comparable GAAP measure — by subtracting selling, general and administrative expenses and depreciation and amortization in the table above.
Revenue and Gross Margin
Revenue declined for the quarter ended March 31, 2021 compared with the quarter ended March 31, 2020 primarily due to a decrease in the amount of gas sold by Hawaii Gas. The decrease in the amount of gas sold reflects a decrease in consumption of gas, mainly by commercial and industrial customers, as a result of a reduction in the number of visitors to Hawaii and reduced commercial activity due to the impact of COVID-19.
Gross margin increased to $19.8 million for the quarter ended March 31, 2021 from $18.5 million for the quarter ended March 31, 2020. The increase in gross margin was primarily due to favorable changes in the mark-to-market adjustment of the value of the commodity hedge contracts on MIC Hawaii's balance sheet, partially offset by a decrease in the amount of gas sold due to the impact of COVID-19. The business recorded favorable adjustments of $1.1 million in the mark-to-market adjustment of the value of the commodity hedge contracts for the quarter ended March 31, 2021 compared with an unfavorable adjustment of $2.4 million for the quarter ended March 31, 2020. The change in the mark-to-market adjustment of the value of the commodity hedge contracts during the quarter ended March 31, 2021 reflects higher forecast wholesale prices of LPG relative to the hedged price.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased for the quarter ended March 31, 2021 compared with the prior comparable period primarily due to decreases in salaries and benefits and professional fees, partially offset by an increase in insurance costs.
Operating Income
Operating income increased for the quarter ended March 31, 2021 compared with the quarter ended March 31, 2020 primarily due to the increase in gross margin and lower selling, general and administrative expenses, partially offset by an increase in depreciation and amortization.
Interest Expense, Net
Interest expense, net, includes non-cash gains on derivative instruments of $283,000 and non-cash losses of $833,000 for the quarters ended March 31, 2021 and 2020, respectively, and amortization of deferred financing costs. Excluding the non-cash adjustments, cash interest expense totaled $1.5 million and $1.8 million for the quarters ended March 31, 2021 and 2020, respectively. The decrease in cash interest expense primarily reflects a lower weighted average interest rate.
Income Taxes
The taxable income generated by the MIC Hawaii businesses is reported on our consolidated federal income tax return. The businesses file a consolidated Hawaii state income tax return. The tax expense in the table above includes both the state income tax and the portion of the consolidated federal income tax liability attributable to the businesses. For the year ended December 31, 2021, the business expects to pay state income taxes of approximately $500,000. The Provision for Current Income Taxes of $1.5 million for the quarter ended March 31, 2021 in the above table includes primarily $1.2 million of federal income tax expense and $342,000 of state income tax expense.
Maintenance Capital Expenditures
For the quarter ended March 31, 2021, MIC Hawaii incurred maintenance capital expenditures of $1.1 million and $1.4 million on an accrual and cash basis, respectively, compared with $2.7 million and $2.4 million on an accrual and cash basis, respectively, for the quarter ended March 31, 2020.
14

Results of Operations: Corporate and Other
Our Corporate and Other segment comprises primarily results from MIC Corporate in New York City and our shared services center in Plano, Texas.
Quarter Ended March 31, Change
Favorable/(Unfavorable)
2021 2020
$ $ $ %
($ In Thousands) (Unaudited)
Selling, general and administrative expenses 9,749  17,121  7,372  43 
Fees to Manager - related party 5,552  7,356  1,804  25 
Depreciation and amortization 471  328  (143) (44)
Operating loss (15,772) (24,805) 9,033  36 
Interest expense, net(1)
(6,424) (4,586) (1,838) (40)
Other income, net 856  38  818  NM
Benefit for income taxes 5,597  4,257  1,340  31 
Net loss (15,743) (25,096) 9,353  37 
Reconciliation of net loss to EBITDA excluding non-cash items and a reconciliation of cash used in operating activities to Free Cash Flow:
Net loss (15,743) (25,096)
Interest expense, net(1)
6,424  4,586 
Benefit for income taxes (5,597) (4,257)
Fees to Manager - related party 5,552  7,356 
Depreciation and amortization 471  328 
Other non-cash expense, net(2)
645  405 
EBITDA excluding non-cash items (8,248) (16,678) 8,430  51 
EBITDA excluding non-cash items (8,248) (16,678)
Interest expense, net(1)
(6,424) (4,586)
Non-cash interest expense, net(1)
4,691  1,505 
Benefit for current income taxes 2,787  5,880 
Changes in working capital (16,613) (115)
Cash used in operating activities (23,807) (13,994)
Changes in working capital 16,613  115 
Free cash flow (7,194) (13,879) 6,685  48 
___________
NM — Not meaningful.
(1)Interest expense, net, includes, non-cash amortization of deferred financing fees and non-cash amortization of debt discount related to our 2.00% Convertible Senior Notes. For the quarter ended March 31, 2021, interest expense also includes non-cash write-offs of deferred financing costs related to the repurchase of our 2.00% Convertible Senior Notes and the cancellation of the holding company revolving credit facility.
(2)Other non-cash expense, net, includes primarily non-cash adjustments related to non-cash compensation expense incurred in relation to incentive plans and non-cash gains (losses) related to the write-off or disposal of assets or liabilities. See “Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow” above for further discussion.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased for the quarter ended March 31, 2021 compared with the quarter ended March 31, 2020 primarily due to lower costs incurred in connection with efforts to sell our businesses, partially offset by costs incurred related to the repurchase of our 2.00% Convertible Senior Notes.
15

Results of Operations: Corporate and Other – (continued)
Fees to Manager
Fees to Manager comprise base management fees of $5.6 million and $7.4 million for the quarters ended March 31, 2021 and 2020, respectively. The decrease in base management fees reflects a reduction in our average market capitalization (primarily as a result of the IMTT Transaction) and the increase in our average holding company cash balance during the quarter ended March 31, 2021. No performance fees were incurred in either of the current or prior comparable period.
Interest Expense, net
Interest expense, net, includes non-cash amortization of deferred financing costs and debt discounts. For the quarter ended March 31, 2021, interest expense also includes non-cash write-offs of deferred financing costs of $4.3 million related to the repurchase of our 2.00% Convertible Senior Notes and the cancellation of the holding company revolving credit facility.
Excluding these non-cash adjustments and write-offs, cash interest expense totaled $1.7 million and $3.1 million for the quarters ended March 31, 2021 and 2020, respectively. The decrease in cash interest expense primarily reflects a lower weighted average debt balance and a lower weighted average interest rate.
Other Income, net
For the quarter ended March 31, 2021, other income, net, primarily includes income in relation to a Transition Services Agreement with IMTT.
Income Taxes
The Benefit for Current Income Taxes of $2.8 million for the quarter ended March 31, 2021 in the above table primarily reflects the consolidated adjustment to the current federal income tax expense recorded by Atlantic Aviation and MIC Hawaii with the losses generated by Corporate and Other. This results in a consolidated current federal tax liability of $581,000.
16

Liquidity and Capital Resources
General
Cash requirements of our operating businesses include primarily normal operating expenses, debt service, debt principal payments, payments of dividends to our holding company, and capital expenditures. Their source of cash has been primarily operating activities although we have drawn on and may in the future draw on credit facilities, have issued and may in the future issue new equity or debt, and have sold and may in the future sell assets to generate cash.
We may from time to time seek to purchase or retire our outstanding debt in open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, could be material and will depend on market conditions, our liquidity needs, and other factors.
2.00% Convertible Senior Notes Tender
On February 17, 2021, we initiated a tender offer for any and all of our 2.00% Convertible Senior Notes outstanding. On March 16, 2021, we repurchased $358.6 million in aggregate principal amount of the Notes in the tender offer. In April 2021, we repurchased an additional $5.7 million resulting in an outstanding balance of $38.2 million.
Hawaii Gas Senior Secured Notes
On April 19, 2021, The Gas Company, LLC (d.b.a. Hawaii Gas) fully repaid all of its $100.0 million senior secured notes outstanding and incurred a $4.7 million 'make-whole' payment.
Cancellation of Holding Company Revolving Credit Facility
The IMTT Transaction resulted in the termination of all commitments under our holding company level revolving credit facility on January 19, 2021, in accordance with the terms of that agreement. All drawings on the revolving credit facility were fully repaid as of December 31, 2020.
Ongoing Operations
We currently expect to fund our operations, service and/or repay our debt, make required tax payments, fund maintenance capital expenditures, and deploy growth capital during 2021 using cash generated from the operations of our operating businesses and our $359.5 million of cash on hand on March 31, 2021. The $359.5 million is net of amounts used or reserved for capital gains taxes paid in April 2021 and the repurchase of any and all of our 2.00% Convertible Senior Notes outstanding. As noted above, in April 2021, we repaid all of the $100.0 million senior secured notes outstanding at MIC Hawaii and incurred a $4.7 million 'make-whole' payment.
On March 31, 2021, the consolidated debt outstanding at our operating businesses and at our holding company totaled $1.2 billion. We had access to an undrawn revolving credit facility at MIC Hawaii of $60.0 million. The ratio of net debt/EBITDA for our operating businesses was 3.8x on March 31, 2021.
The following table shows MIC’s debt obligations on April 30, 2021 ($ in thousands):
Business Debt Weighted Average Remaining Life
(in years)
Balance Outstanding
Weighted
Average Rate(1)
MIC Corporate Convertible Senior Notes 2.4  $ 38,220  2.00  %
Atlantic Aviation
Term Loan(2)
4.6  1,001,938  4.21  %
MIC Hawaii(3)
Term Loan(2)
2.3  93,495  1.86  %
Total 4.3  $ 1,133,653  3.94  %
___________
(1)Reflects annualized interest rate on all facilities including interest rate hedges.
(2)The weighted average remaining life does not reflect the scheduled amortization on these facilities.
(3)MIC Hawaii also has a $60.0 million revolving credit facility that was undrawn. The revolving credit facility floats at LIBOR plus 1.25% and matures in February 2023.
We generally capitalize our businesses in part using floating rate debt with medium-term maturities of between four and seven years. We also use longer dated private placement debt and other forms of capital including bond or hybrid debt instruments to capitalize our businesses. In general, the debt facilities of our businesses are non-recourse to the holding company and there are no cross-collateralization or cross-guarantee provisions in these facilities.
17

TABLE OF CONTENTS

Liquidity and Capital Resources – (continued)

Analysis of Consolidated Historical Cash Flows from Continuing Operations
The following section discusses our sources and uses of cash on a consolidated basis from continuing operations. All intercompany activities such as corporate allocations, capital contributions to our businesses, and distributions from our businesses have been excluded from the table as these transactions are eliminated on consolidation.
($ In Thousands) Quarter Ended March 31, Change
Favorable/(Unfavorable)
2021 2020
$ $ $ %
Cash provided by operating activities 39,993 51,540 (11,547) (22)
Cash used in investing activities (15,839) (30,402) 14,563  48 
Cash (used in) provided by financing activities (1,322,386) 784,199 (2,106,585) NM
___________
NM — Not meaningful.
Operating Activities from Continuing Operations
Cash provided by (used in) operating activities is generally comprised of EBITDA excluding non-cash items (as defined by us), less cash interest, cash taxes, and pension payments, and changes in working capital. See “Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations” for discussions around the components of EBITDA excluding non-cash items on a consolidated basis from continuing operations and for each of our operating businesses and Corporate and Other above.
The decrease in consolidated cash provided by operating activities for the quarter ended March 31, 2021 compared with the quarter ended March 31, 2020 was primarily due to:
an unfavorable change to accounts receivable and inventory and favorable change to accounts payable resulting from the decline in business activity and cost of jet fuel and gas from the initial impact of COVID-19 in March 2020; and
payment of expenses related to the IMTT Transaction in the first quarter of 2021; partially offset by
an increase in EBITDA excluding non-cash items; and
decrease in cash interest expense and current taxes.
Investing Activities from Continuing Operations
Cash provided by investing activities include proceeds from divestitures of businesses and disposal of fixed assets. Cash used in investing activities include acquisitions of businesses in existing segments and capital expenditures.
The decrease in cash used in investing activities for the quarter ended March 31, 2021 compared with the quarter ended March 31, 2020 is primarily attributable to the absence of an acquisition of an FBO during 2020 at an airport on which Atlantic Aviation already operated and the decrease in capital expenditures.
Capital Deployment
Capital deployment includes growth capital expenditures and “bolt-on” acquisitions, the majority of which are expected to generate incremental earnings. For the quarters ended March 31, 2021 and 2020, growth capital deployed from continuing operations totaled $11.1 million and $22.4 million, respectively. We continuously evaluate opportunities to prudently deploy capital in bolt-on acquisitions and growth projects across our existing businesses.
Financing Activities from Continuing Operations
Cash provided by financing activities includes new equity and debt issuance primarily to fund acquisitions and capital expenditures. Cash used in financing activities includes dividends paid to our stockholders and the repayment of debt principal balances.
The change from cash provided by financing activities for the quarter ended March 31, 2020 to cash used in financing activities for the quarter ended March 31, 2021 is primarily attributable to a special dividend paid in January 2021 and the repurchase of our 2.00% Convertible Senior Notes in March 2021. For the quarter ended March 31, 2020, the Company drew down on its available revolving credit facilities in response to the outbreak of COVID-19.
18

Liquidity and Capital Resources – (continued)

Atlantic Aviation
On March 31, 2021, Atlantic Aviation had $1.0 billion outstanding on its senior secured first lien term loan facility. Cash interest expense totaled $9.8 million and $13.7 million for the quarters ended March 31, 2021 and 2020, respectively.
MIC Hawaii
On March 31, 2021, MIC Hawaii had total debt outstanding of $193.5 million consisting of $100.0 million of senior secured notes and $93.5 million of term loans. The senior secured notes were fully repaid in April 2021. MIC Hawaii also had a $60.0 million revolving credit facility that was undrawn on March 31, 2021. Cash interest expense totaled $1.5 million and $1.8 million for the quarters ended March 31, 2021 and 2020, respectively. On March 31, 2021, MIC Hawaii was in compliance with its financial covenants.
MIC Corporate
On March 31, 2021, MIC had $43.9 million of the 2.00% Convertible Senior Notes outstanding, of which $5.7 million was repurchased in April 2021. Cash interest expense totaled $1.7 million and $3.1 million for the quarters ended March 31, 2021 and 2020, respectively.
For a description of the material terms of MIC and its businesses' debt facilities, see Note 9, “Long-Term Debt”, in Part II, Item 8, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Commitments and Contingencies
Except as noted above, on March 31, 2021, there were no material changes in our commitments and contingencies compared with those on December 31, 2020. On March 31, 2021, we did not have any material purchase obligations. For a discussion of our other future obligations, due by period, under the various contractual obligations, off-balance sheet arrangements, and commitments, please see “Liquidity and Capital Resources — Commitments and Contingencies” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 17, 2021.
On March 31, 2021, we did not have any material reserves for contingencies. We have other contingencies occurring in the normal course of business, including pending legal and administrative proceedings that are not reflected at this time as they are not ascertainable.
Our sources of cash to meet these obligations include:
cash generated from our operations (see “Operating Activities” in “Liquidity and Capital Resources”);
the issuance of shares (see “Financing Activities” in “Liquidity and Capital Resources”);
cash available from our undrawn credit facilities (see “Financing Activities” in “Liquidity and Capital Resources”); and
if advantageous, sales of all or parts of any of our businesses (see “Investing Activities” in “Liquidity and Capital Resources”).
Critical Accounting Policies and Estimates
For critical accounting policies and estimates, see “Critical Accounting Policies and Estimates” in Part II, Item 7 and Note 2, “Summary of Significant Accounting Policies”, in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and see Note 2, “Basis of Presentation”, in our Notes to Consolidated Condensed Financial Statements in Part I of this Form 10-Q for recently issued accounting standards. Our critical accounting policies and estimates have not changed materially from the description contained in our Annual Report.

19

Quantitative and Qualitative Disclosures About Market Risk
For quantitative and qualitative disclosures about market risk, see Part II, Item 7A “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Our exposure to market risk has not changed materially since February 17, 2021, the filing date for our Annual Report on Form 10-K, except for the impact of higher wholesale LPG prices on our commodity hedge contracts.
Interim Goodwill Review
We test for goodwill impairment at the reporting unit level on October 1st of each year and between annual tests if a triggering event indicates the possibility of an impairment. We monitor changing business conditions as well as industry and economic factors, among others, for events which could trigger the need for an interim impairment analysis. During the quarter ended March 31, 2021, there were no triggering events indicating goodwill impairment.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the direction and with the participation of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures (as such term is defined under Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. The purpose of disclosure controls is to ensure that information required to be disclosed in our reports filed with or submitted to the SEC under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of March 31, 2021.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) that occurred during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
20

MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
($ in Thousands, Except Share Data)
March 31,
2021
December 31, 2020
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 529,639  $ 1,828,063 
Restricted cash 11,349  11,157 
Accounts receivable, net of allowance for doubtful accounts 53,802  46,862 
Inventories 16,933  16,551 
Prepaid expenses 10,180  8,326 
Other current assets 10,306  9,197 
Total current assets 632,209  1,920,156 
Property, equipment, land and leasehold improvements, net 849,670  854,200 
Operating lease assets, net 323,948  322,892 
Goodwill 617,072  616,939 
Intangible assets, net 449,299  457,587 
Other noncurrent assets 7,040  6,865 
Total assets $ 2,879,238  $ 4,178,639 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Due to Manager-related party $ 2,106  $ 1,203 
Accounts payable 30,310  30,470 
Accrued expenses 40,583  46,112 
Current portion of long-term debt 117,021  11,310 
Dividend payable —  960,981 
Operating lease liabilities - current 17,032  17,157 
Income taxes payable 133,768  132,113 
Other current liabilities 22,270  22,861 
Total current liabilities 363,090  1,222,207 
Long-term debt, net of current portion 1,103,924  1,554,359 
Deferred income taxes 125,220  126,858 
Operating lease liabilities - noncurrent 312,927  311,597 
Other noncurrent liabilities 67,308  70,312 
Total liabilities 1,972,469  3,285,333 
Commitments and contingencies —  — 
See accompanying notes to the consolidated condensed financial statements.
21

MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS – (continued)
($ in Thousands, Except Share Data)
March 31,
2021
December 31, 2020
(Unaudited)
Stockholders’ equity(1):
Common Stock ($0.001 par value; 500,000,000 authorized; 87,505,452 shares issued and
   outstanding on March 31, 2021 and 87,361,929 shares issued and outstanding on
   December 31, 2020)
$ 88  $ 87 
Additional paid in capital 170,678  177,975 
Accumulated other comprehensive loss (6,175) (6,175)
Retained earnings 733,291  713,129 
Total stockholders’ equity 897,882  885,016 
Noncontrolling interests 8,887  8,290 
Total equity 906,769  893,306 
Total liabilities and equity $ 2,879,238  $ 4,178,639 
___________
(1)The Company is authorized to issue 100,000,000 shares of preferred stock, par value $0.001 per share authorized. On March 31, 2021 and December 31, 2020, no preferred stocks were issued or outstanding. The Company had 100 shares of special stock, par value $0.001 per share, issued and outstanding to its Manager on March 31, 2021 and December 31, 2020.
See accompanying notes to the consolidated condensed financial statements.
22

MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS    
(Unaudited)
($ in Thousands, Except Share and Per Share Data)
Quarter Ended March 31,
2021 2020
Revenue
Service revenue $ 209,604  $ 223,997 
Product revenue 54,587  60,462 
Total revenue 264,191  284,459 
Costs and expenses
Cost of services 82,233  94,663 
Cost of product sales 34,756  41,934 
Selling, general and administrative 77,012  87,583 
Fees to Manager-related party 5,552  7,356 
Depreciation 19,231  19,526 
Amortization of intangibles 8,288  11,005 
Total operating expenses 227,072  262,067 
Operating income 37,119  22,392 
Other income (expense)
Interest income 161  468 
Interest expense(1)
(18,619) (26,705)
Other income (expenses), net 502  (146)
Net income (loss) from continuing operations before income taxes 19,163  (3,991)
Provision for income taxes (5,366) (2,997)
Net income (loss) from continuing operations 13,797  (6,988)
Discontinued Operations(2)
Net income from discontinued operations before income taxes —  24,545 
Provision for income taxes —  (6,330)
Net income from discontinued operations —  18,215 
Net income 13,797  11,227 
Net income (loss) from continuing operations 13,797  (6,988)
Less: net income (loss) attributable to noncontrolling interests 597  (75)
Net income (loss) from continuing operations attributable to MIC 13,200  (6,913)
Net income from discontinued operations —  18,215 
Net income from discontinued operations attributable to MIC —  18,215 
Net income attributable to MIC $ 13,200  $ 11,302 
See accompanying notes to the consolidated condensed financial statements.
23

MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS – (continued)
(Unaudited)
($ in Thousands, Except Share and Per Share Data)
Quarter Ended March 31,
2021 2020
Basic income (loss) per share from continuing operations attributable to MIC $ 0.15  $ (0.08)
Basic income per share from discontinued operations attributable to MIC —  0.21 
Basic income per share attributable to MIC $ 0.15  $ 0.13 
Weighted average number of shares outstanding: basic 87,411,455  86,686,972 
Diluted income (loss) per share from continuing operations attributable to MIC $ 0.15  $ (0.08)
Diluted income per share from discontinued operations attributable to MIC —  0.21 
Diluted income per share attributable to MIC $ 0.15  $ 0.13 
Weighted average number of shares outstanding: diluted 87,495,298  86,686,972 
___________
(1)Interest expense includes non-cash gains on derivative instruments of $281,000 and non-cash losses of $4.3 million for the quarters ended March 31, 2021 and 2020, respectively.
(2)See Note 4, “Discontinued Operations and Dispositions”, for discussions on businesses classified as held for sale.

See accompanying notes to the consolidated condensed financial statements.
24

MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
($ in Thousands)

Quarter Ended March 31,
2021 2020
Net income $ 13,797  $ 11,227 
Other comprehensive loss, net of taxes:
Translation adjustment (1)
—  (2,721)
Other comprehensive loss —  (2,721)
Comprehensive income 13,797  8,506 
Less: comprehensive income (loss) attributable to noncontrolling interests 597  (75)
Comprehensive income attributable to MIC $ 13,200  $ 8,581 
___________
(1)Translation adjustment is presented net of tax benefit of $1.1 million for the quarter ended March 31, 2020. See Note 10, “Stockholders’ Equity”, for further discussions.
See accompanying notes to the consolidated condensed financial statements.
25

MACQUARIE INFRASTRUCTURE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
($ in Thousands, Except Share Data)
In Shares Common Stock Additional
Paid In
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
Stockholders’
Equity
Noncontrolling
Interests
Total
Equity
Special
Stock
Common
Stock(1)
Balance on December 31, 2020 100  87,361,929  $ 87  $ 177,975  $ (6,175) $ 713,129  $ 885,016  $ 8,290  $ 893,306 
Issuance of shares to Manager —  142,936  4,649  —  —  4,650  —  4,650 
Stock vested under compensation
  plans(2)
—  952  —  —  —  —  —  —  — 
Stock withheld for taxes on vested
  stock(2)
—  (365) —  —  —  —  —  —  — 
Stock-based compensation expense —  —  —  2,175  —  —  2,175  —  2,175 
Impact of ASU No. 2020-06 adoption, net of taxes(3)
—  —  —  (14,121) —  6,962  (7,159) —  (7,159)
Comprehensive income, net of taxes —  —  —  —  —  13,200  13,200  597  13,797 
Balance on March 31, 2021 100  87,505,452  $ 88  $ 170,678  $ (6,175) $ 733,291  $ 897,882  $ 8,887  $ 906,769 
Balance on December 31, 2019 100  86,600,302  $ 87  $ 1,197,845  $ (36,872) $ 1,640,990  $ 2,802,050  $ 8,156  $ 2,810,206 
Issuance of shares to Manager —  213,365  —  9,241  —  —  9,241  —  9,241 
Stock vested under compensation
  plans(2)
—  1,100  —  —  —  —  —  —  — 
Stock withheld for taxes on vested
   stock(2)
—  (301) —  —  —  —  —  —  — 
Stock-based compensation expense —  —  —  2,391  —  —  2,391  —  2,391 
Dividends to common stockholders(4)
—  —  —  (86,742) —  —  (86,742) —  (86,742)
Comprehensive (loss) income, net of
taxes
—  —  —  —  (2,721) 11,302  8,581  (75) 8,506 
Balance on March 31, 2020 100  86,814,466  $ 87  $ 1,122,735  $ (39,593) $ 1,652,292  $ 2,735,521  $ 8,081  $ 2,743,602 
___________
(1)The Company is authorized to issue 500,000,000 shares of common stock with a par value $0.001 per share.
(2)Stocks vested and issued under the 2016 Omnibus Employee Incentive Plan and 2014 Independent Directors' Equity Plan. Under the 2016 Omnibus Employee Incentive Plan, shares are withheld for the employee portion of taxes on vested awards and are available for future grants.
(3)On January 1, 2021, the Company adopted ASU No. 2020-06, Debt - Debt with Conversion and Other Options, using the modified retrospective method and made an adjustment to the beginning balance to Retained Earnings of $7.0 million, net of taxes. See Note 8, “Long-Term Debt”, for further discussions.
(4)See Note 13, “Related Party Transactions”, for discussion on cash dividends declared and paid on shares for each period.



See accompanying notes to the consolidated condensed financial statements.
26

MACQUARIE INFRASTRUCTURE CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in Thousands)
Quarter Ended March 31,
2021 2020
Operating activities
Net income (loss) from continuing operations $ 13,797  $ (6,988)
Adjustments to reconcile net income (loss) to net cash provided by operating activities from continuing operations:
Depreciation 19,231  19,526 
Amortization of intangibles 8,288  11,005 
Write-off of debt discount and financing cost 4,311  — 
Amortization of debt discount and financing costs 1,416  2,634 
Adjustments to derivative instruments (1,458) 7,385 
Fees to Manager-related party 5,552  7,356 
Deferred taxes 2,157  (1,823)
Other non-cash expense, net 3,046  1,979 
Changes in other assets and liabilities, net of acquisitions:
Accounts receivable (6,921) 17,490 
Inventories (713) 6,354 
Prepaid expenses and other current assets (2,771) (2,526)
Due to Manager - related party —  150 
Accounts payable and accrued expenses (4,373) (14,740)
Income taxes payable 2,484  3,414 
Other, net (4,053) 324 
Net cash provided by operating activities from continuing operations 39,993  51,540 
Investing activities
Acquisitions of businesses and investments, net of cash, cash equivalents, and
restricted cash acquired
—  (13,495)
Purchases of property and equipment (15,856) (16,910)
Other, net 17 
Net cash used in investing activities from continuing operations (15,839) (30,402)
Financing activities
Proceeds from long-term debt —  874,000 
Payment of long-term debt (361,405) (3,059)
Dividends paid to common stockholders (960,981) (86,742)
Net cash (used in) provided by financing activities from continuing operations (1,322,386) 784,199 
Net change in cash, cash equivalents, and restricted cash from continuing operations (1,298,232) 805,337 
See accompanying notes to the consolidated condensed financial statements.
27

MACQUARIE INFRASTRUCTURE CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS – (continued)
(Unaudited)
($ in Thousands)
Quarter Ended March 31,
2021 2020
Cash flows provided by (used in) discontinued operations:
Net cash provided by operating activities $ —  $ 48,688 
Net cash used in investing activities —  (55,023)
Net cash used in discontinued operations —  (6,335)
Effect of exchange rate changes on cash and cash equivalents —  (792)
Net change in cash, cash equivalents, and restricted cash (1,298,232) 798,210 
Cash, cash equivalents, and restricted cash, beginning of period 1,839,220  358,565 
Cash, cash equivalents, and restricted cash, end of period $ 540,988  $ 1,156,775 
Supplemental disclosures of cash flow information:
Non-cash investing and financing activities:
Accrued purchases of property and equipment from continuing operations $ 3,902  $ 5,081 
Accrued purchases of property and equipment from discontinued operations —  18,583 
  Leased assets obtained in exchange for new operating lease liabilities from
continuing operations
787  4,886 
Taxes paid, net, from continuing operations 660  1,405 
Taxes paid, net, from discontinued operations —  1,410 
Interest paid, net, from continuing operations 16,570  17,308 
Interest paid, net, from discontinued operations —  4,026 

The following table provides a reconciliation of cash, cash equivalents, and restricted cash from both continuing and discontinued operations reported within the consolidated condensed balance sheets that is presented in the consolidated condensed statements of cash flows:
As of March 31,
2021 2020
Cash and cash equivalents $ 529,639  $ 1,131,685 
Restricted cash - current 11,349  926 
Cash, cash equivalents, and restricted cash included in assets held for sale —  24,164 
Total of cash, cash equivalents, and restricted cash shown in the consolidated
condensed statement of cash flows
$ 540,988  $ 1,156,775 
See accompanying notes to the consolidated condensed financial statements.
28

MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

1. Organization and Description of Business
Macquarie Infrastructure Corporation (MIC) is a Delaware corporation formed on May 21, 2015. MIC’s predecessor, Macquarie Infrastructure Company LLC, was formed on April 13, 2004. Macquarie Infrastructure Corporation, both on an individual entity basis and together with its consolidated subsidiaries, is referred to in these financial statements as the “Company” or “MIC”.
MIC is externally managed by Macquarie Infrastructure Management (USA) Inc. (the Manager) pursuant to the terms of a Management Services Agreement, subject to the oversight and supervision of the Board. Six of the eight members of the Board, and all members of each of the Company's Audit, Compensation, and Nominating and Governance Committees, are independent and have no affiliation with Macquarie. The 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.
The Company owns its businesses through its direct wholly-owned subsidiary MIC Ohana Corporation, the successor to Macquarie Infrastructure Company Inc. The Company owns and operates businesses that provide products and services to corporations, government agencies, and individual customers in the United States (U.S.). The Company's operations are organized into three segments:
Atlantic Aviation:  a provider of jet fuel, terminal, aircraft hangaring, and other services primarily to operators of general aviation (GA) jet aircraft at 69 airports throughout the U.S.;
MIC Hawaii: comprising an energy company that processes and distributes gas and provides related services (Hawaii Gas) and several smaller businesses collectively engaged in efforts to reduce the cost and improve the reliability and sustainability of energy in Hawaii; and
Corporate and Other:  comprising a holding company headquartered in New York City, MIC Corporate, and a shared services center in Plano, Texas, MIC Global Services.
On October 31, 2019, in addition to the active management of the Company’s existing portfolio of businesses, the Company announced its intention to pursue strategic alternatives and has since been engaged in processes that could result in the sale of the Company or one or more of its operating businesses. During the quarter ended September 30, 2020, International-Matex Tank Terminals (IMTT) was classified as a discontinued operation and eliminated as a reportable segment. All periods reported herein reflect this change. In December 2020, the Company completed the sale of IMTT (IMTT Transaction). For additional information, see Note 4, “Discontinued Operations and Dispositions”.
On March 30, 2021, MIC entered into an agreement and plan of merger (the Merger Agreement) with Macquarie Infrastructure Holdings, LLC (Holdings LLC), a recently formed Delaware limited liability company and a direct wholly-owned subsidiary of MIC, and Plum Merger Sub, Inc., a recently formed Delaware corporation and a direct wholly owned subsidiary of Holdings LLC (Merger Sub), providing for Merger Sub to merge with and into MIC (the Merger), resulting in MIC becoming a direct wholly-owned subsidiary of Holdings LLC, which will become publicly-traded, subject to the satisfaction of certain closing conditions (including the approval of the Company’s shareholders). Upon the effectiveness of the Merger, each share of the Company’s common stock will be converted into one Holdings LLC common unit. Following the consummation of the Merger, it is anticipated that a direct subsidiary of MIC will distribute all of the limited liability company interests in MIC Hawaii Holdings, LLC (MIC Hawaii) to MIC and MIC will in turn distribute such limited liability company interests to Holdings LLC (such distributions, together with the merger, the “Reorganization”). MIC Hawaii holds the businesses comprising the Company’s MIC Hawaii business segment. MIC believes that the Reorganization will provide flexibility to pursue the sale or sales of the Company’s remaining operating businesses in any sequence without altering the after-tax net proceeds to shareholders. Following receipt of shareholder approval of the Merger, the Board intends to evaluate the status of efforts to sell MIC or its remaining operating businesses, and complete the Reorganization at such time as it determines will be in the best interests of the Company and its shareholders. The Board currently anticipates implementing the Reorganization following execution of a definitive agreement for, and prior to completing, the sale of the Atlantic Aviation business. The Board may abandon or postpone the Merger at any time prior to its effective time.


29

MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

2. Basis of Presentation
The unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the U.S. and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.
The consolidated balance sheet on December 31, 2020 has been derived from audited financial statements but does not include all the information and notes required by GAAP for complete financial statements. Certain reclassifications were made to the consolidated financial statements for the prior period to conform to current period presentation.
The interim financial information contained herein should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on February 17, 2021. Operating results for the quarter ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or for any future interim periods.
Use of Estimates
The preparation of unaudited consolidated condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures related thereto at the date of the unaudited consolidated condensed financial statements and the reported amounts of revenue and expenses during the reporting period. Management evaluates these estimates and assumptions on an ongoing basis.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited interim consolidated condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.
Financial Instruments
The Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and variable-rate senior debt, are carried at cost, which approximates their fair value because of either the short-term maturity or competitive interest rates assigned to these financial instruments. The fair values of the Company’s other debt instruments fall within level 1 or level 2 of the fair value hierarchy.
The Company considers all highly liquid investments, including commercial paper issued by counterparties with Standard & Poor's rating of A1+ or higher, with maturity of three months or less when purchased to be cash and cash equivalents. The Company did not have any commercial paper on March 31, 2021 or December 31, 2020.
Income Taxes
The Company files a consolidated federal income tax return that includes the financial results of its 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 federal income tax return. In addition, the businesses file income tax returns and may pay taxes in the state and local jurisdictions in which they operate. In calculating its state income tax provision, the Company has provided a valuation allowance for certain state income tax net operating loss (NOL) carryforwards, the use of which is uncertain.
30

MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
2. Basis of Presentation (continued)

Recently Issued Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). The amendments in this ASU impact the accounting for convertible instruments by reducing the number of accounting models used to account for these instruments and amending diluted earnings per share calculations. It also simplifies the requirements for contracts indexed to and potentially settled in an entity's own equity. The amendments in this update are effective for fiscal years ending after December 15, 2021. Early adoption is permitted. The Company early adopted this ASU on January 1, 2021 using the modified retrospective method and made an adjustment to the beginning balance to Retained Earnings. The impact of this ASU has been reflected in the consolidated condensed financial statements and the disclosures related to the Company's convertible debt instruments. See Note 8, "Long-Term Debt", for further discussions.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting, which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (LIBOR) or another reference rate expected to be discontinued as a result of reference rate reform. In January 2021, the FASB also issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. These amendments are elective and apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. These amendments are not applicable to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. ASU No. 2020-04 and ASU No. 2021-01 are effective as of March 12, 2020 and through December 31, 2022, and may be applied to contract modifications and hedging relationships from the beginning of an interim period that includes or is subsequent to March 12, 2020. The Company is currently evaluating the impact of adoption on its financial statements and related disclosures.
3. Impact of COVID-19
Impact to MIC Businesses
COVID-19 continues to negatively affect the performance of the Company's businesses although the effects have diminished relative to this time last year. Some of the federal, state, and local governments' pandemic response measures including social distancing, quarantines, travel restrictions, prohibitions on public gatherings, and stay-at-home orders have been rolled back. Despite the roll back, GA flight activity and the demand for jet fuel and ancillary services provided by Atlantic Aviation continues to be affected by COVID-19. The easing of travel restrictions has resulted in an increase in economic activity and the number of visitors to Hawaii, but not to pre-COVID-19 levels. The widespread availability of COVID-19 vaccines is expected to have a positive effect on activity levels at the businesses.
The Federal Aviation Administration reported that U.S. domestic GA flight activity for the quarter ended March 31, 2021 increased 8% compared with the quarter ended March 31, 2020 and decreased 3% compared with the quarter ended March 31, 2019. Changes in GA flight activity relative to the levels achieved in the quarter ended March 31, 2021 will depend upon the duration of the pandemic, any governmental response including renewed travel restrictions, and the state of the U.S. and global economies, as well as increases in business, international, and event-driven activity all of which are uncertain.
MIC Hawaii continues to be affected by a reduction in the demand for gas resulting from the 60% and 67% decline in the number of visitors to Hawaii during the quarter ended March 31, 2021 compared with the quarters ended March 31, 2020 and 2019, respectively. Visitor arrivals to Hawaii, the primary driver of increases in demand for gas in Hawaii, improved gradually during the first quarter of 2021 over the fourth quarter of 2020 following the implementation of a quarantine exemption for visitors with evidence of a negative COVID-19 test prior to arrival in the islands and increased visitor confidence levels due to the availability of COVID-19 vaccines. The rate of recovery in the number of visitors to Hawaii going forward is uncertain. A corresponding decline in hotel occupancy, restaurants patronage, and use of commercial laundry services resulted in an overall reduction in gas consumption of 18% and 21% during the quarter ended March 31, 2021 compared with the quarters ended March 31, 2020 and 2019, respectively.
31

MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
3. Impact of COVID-19 – (continued)

Impact to Liquidity and Balance Sheet
In March 2020 and April 2020, in light of the disruption in the global markets and the unpredictability of the sustained impact to its businesses caused by COVID-19, the Company took certain measures to preserve financial flexibility and increased the strength of its balance sheet and its liquidity position.
In March 2020, the Company suspended its cash dividend and drew down a total of $874.0 million on revolving credit facilities including $599.0 million on its holding company revolving credit facility and $275.0 million on the Atlantic Aviation revolving credit facility. The proceeds were additive to the approximately $300.0 million of cash on hand in mid-March 2020. On April 30, 2020, Atlantic Aviation fully repaid the outstanding balance on its revolving credit facility. During the second half of 2020, the Company fully repaid the drawn balance of $599.0 million on its holding company revolving credit facility and all commitments under the facility were terminated effective January 19, 2021.
Over the next twelve months, the Company currently expects to fund its operations, service and/or repay its debt, make required tax payments, fund essential maintenance capital expenditures, and deploy growth capital using cash generated from the operations of its ongoing businesses and $359.5 million of cash on hand on March 31, 2021. The $359.5 million is net of amounts used or reserved for capital gains taxes paid in April 2021 and the repurchase of any and all of the 2.00% Convertible Senior Notes outstanding. In April 2021, the Company repaid all of the $100.0 million senior secured notes outstanding at MIC Hawaii and incurred a $4.7 million 'make-whole' payment.
4. Discontinued Operations and Dispositions
The Company accounts for disposals that represent a strategic shift that should have or will have a major effect on operations as discontinued operations in the consolidated condensed statement of operations commencing in the period in which the business or group of businesses meets the criteria of a discontinued operation. These results include any gain or loss recognized on disposal or adjustment of the carrying amount to fair value less cost to sell.
IMTT
On December 23, 2020, the Company completed the IMTT Transaction to an affiliate of Riverstone Holdings, LLC for $2.67 billion, net of closing adjustments, and including assumed debt including accrued interest of approximately $1.11 billion. The net proceeds of $1.55 billion were or are expected to be used to: (i) pay a special dividend of $11.00 per share on January 8, 2021; (ii) pay capital gains taxes in April 2021; (iii) pay transaction costs; (iv) pay a disposition payment under the Disposition Agreement, dated October 30, 2019, to its Manager; and (v) repurchase its 2.00% Convertible Senior Notes.
The sale of IMTT is part of the Company's efforts to maximize value for its shareholders. During the quarter ended September 30, 2020, the Company determined that each of the criteria to be classified as held for sale under ASC 205-20, Presentation of Financial Statements — Discontinued Operations, had been met as it relates to IMTT. It was additionally determined that the sale of IMTT is considered a strategic shift for the Company that will have a major effect on operations. Accordingly, IMTT was classified as a discontinued operation and the IMTT segment was eliminated. All prior periods have been restated to reflect these changes.
Upon completion of the IMTT Transaction on December 23, 2020, the Company recognized a book loss on sale of approximately $25.0 million. The Company incurred $28.5 million in transaction costs and a Disposition Payment of $28.2 million to its Manager, which are included in Selling, General and Administrative Expenses in the consolidated statement of operations. As part of classifying IMTT as held for sale, the Company recognized an impairment of the IMTT disposal group of $750.0 million, which includes a goodwill impairment of $725.0 million, reported in discontinued operations for the quarter ended September 30, 2020.
During the quarter ended September 30, 2020, the Company increased its deferred tax liability by $158.0 million as it became probable that IMTT would be sold in a taxable transaction. The increase represented the deferred tax expense on the difference between the Company's book and tax basis in its investment in IMTT. Subsequent to the close of the IMTT Transaction in December 2020, the Company reclassified the liability to current and reduced the tax to $126.2 million. The reduction primarily reflected the tax benefit of the Disposition Payment and the final determination of the tax basis of its investment in IMTT, which increased due to higher than forecasted taxable income generated prior to completion of the IMTT Transaction, as fewer assets were placed in service for tax purposes resulting in lower bonus tax depreciation during the Company’s ownership period.
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MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
4. Discontinued Operations and Dispositions  – (continued)
Summarized financial information for discontinued operations included in Company's consolidated condensed statement of operations related to IMTT segment for the quarter ended March 31, 2020 are as follows ($ in thousands):
Quarter Ended March 31,
2020
Service revenue $ 132,026 
Cost of services (49,829)
Selling, general and administrative expenses (9,434)
Depreciation and amortization (34,480)
Interest expense, net (15,299)
Other income, net 1,561 
Net income from discontinued operations before income taxes $ 24,545 
Provision for income taxes (6,330)
Net income from discontinued operations attributable to MIC $ 18,215 

5. Income per Share
Following is a reconciliation of the basic and diluted income (loss) per share computations ($ in thousands, except share and per share data):
Quarter Ended March 31,
2021 2020
Numerator:
Basic and diluted net income (loss) from continuing operations attributable to MIC $ 13,200  $ (6,913)
Basic and diluted net income from discontinued operations attributable to MIC $ —  $ 18,215 
Denominator:
Weighted average number of shares outstanding: basic 87,411,455 86,686,972
Dilutive effect of restricted stock unit grants(1)
83,843
Weighted average number of shares outstanding: diluted 87,495,298 86,686,972
___________
(1)Dilutive effect of restricted stock unit grants includes grants to independent directors under the 2014 Independent Directors' Equity Plan and certain employees of the Company's operating businesses under the 2016 Omnibus Employee Incentive Plan.
Quarter Ended March 31,
2021 2020
Income per share:
Basic income (loss) per share from continuing operations attributable to MIC $ 0.15  $ (0.08)
Basic income per share from discontinued operations attributable to MIC —  0.21
Basic income per share attributable to MIC $ 0.15  $ 0.13 
Diluted income (loss) per share from continuing operations attributable to MIC $ 0.15  $ (0.08)
Diluted income per share from discontinued operations attributable to MIC —  0.21
Diluted income per share attributable to MIC $ 0.15  $ 0.13 

33

MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
5. Income per Share  – (continued)
The following represents the weighted average potential dilutive shares of common stock that were excluded from the diluted income per share calculation:
Quarter Ended March 31,
2021 2020
Restricted stock unit grants —  31,095 
2.00% Convertible Senior Notes(1)
4,175,825  3,634,173 
Total 4,175,825  3,665,268 
___________
(1)On March 16, 2021, the Company repurchased $358.6 million in aggregate principal amount of its 2.00% Senior Convertible Notes in the tender offer. For the quarter ended March 31, 2021, the weighted average shares reflect the “if-converted” dilutive impact to common stock for the repurchased Notes for the period that the Notes were outstanding and the impact of the increase to the conversion rate following the special dividend paid on January 8, 2021. See Note 8, “Long-Term Debt”, for further discussion.

6. Property, Equipment, Land and Leasehold Improvements
Property, equipment, land and leasehold improvements on March 31, 2021 and December 31, 2020 consisted of the following ($ in thousands):
March 31,
2021
December 31, 2020
Land $ 10,710  $ 10,710 
Buildings 4,141  4,141 
Leasehold and land improvements 781,843  778,768 
Machinery and equipment 564,723  556,126 
Furniture and fixtures 37,686  37,133 
Construction in progress 40,774  38,696 
1,439,877  1,425,574 
Less: accumulated depreciation (590,207) (571,374)
Property, equipment, land and leasehold improvements, net $ 849,670  $ 854,200 

7. Intangible Assets and Goodwill
Intangible assets on March 31, 2021 and December 31, 2020 consisted of the following ($ in thousands):
March 31,
2021
December 31, 2020
Contractual arrangements $ 914,430  $ 914,430 
Non-compete agreements 9,665  9,665 
Customer relationships 65,915  65,915 
Trade names 15,671  15,671 
Leasehold rights 100  100 
Technology 460  460 
1,006,241  1,006,241 
Less: accumulated amortization (556,942) (548,654)
Intangible assets, net $ 449,299  $ 457,587 
34

MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
7. Intangible Assets and Goodwill – (continued)

The goodwill balance by reportable segments on March 31, 2021 is comprised of the following ($ in thousands):
Atlantic
Aviation
MIC
Hawaii
Total
Goodwill acquired in business combinations, net of
disposals, on December 31, 2020
$ 620,599  $ 123,333  $ 743,932 
Accumulated impairment charges (123,200) (3,215) (126,415)
Other (653) 75  (578)
Balance on December 31, 2020 496,746  120,193  616,939 
Other 133  —  133 
Balance on March 31, 2021 $ 496,879  $ 120,193  $ 617,072 

The Company tests for goodwill impairment at the reporting unit level on October 1st of each year and between annual tests if a triggering event indicates the possibility of an impairment. There were no triggering events that indicated impairment for the quarter ended March 31, 2021.

8. Long-Term Debt
On March 31, 2021 and December 31, 2020, the Company’s consolidated long-term debt balance comprised of the following ($ in thousands):
March 31,
2021
December 31, 2020
Atlantic Aviation $ 1,001,938  $ 1,004,500 
MIC Hawaii 193,495  193,758 
MIC Corporate 43,920  391,252 
Total 1,239,353  1,589,510 
Current portion (117,021) (11,310)
Long-term portion 1,122,332  1,578,200 
Unamortized deferred financing costs(1)
(18,408) (23,841)
Long-term portion less unamortized debt discount and deferred financing costs $ 1,103,924  $ 1,554,359 
___________
(1)The weighted average remaining life of the deferred financing costs on March 31, 2021 was 4.6 years.
MIC Corporate
Senior Secured Revolving Credit Facility
On December 31, 2020, MIC Corporate had a $600.0 million senior secured revolving credit facility that was undrawn. During 2020, the Company borrowed $599.0 million on its revolving credit facility and subsequently repaid the amount in full using cash on hand.
On January 19, 2021, in accordance with the terms of the facility agreement, all commitments under the senior secured revolving credit facility were terminated as a result of the IMTT Transaction. During the quarter ended March 31, 2021, the Company wrote-off $667,000 of unamortized deferred financing costs related to the senior secured revolving credit facility.
35

MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
8. Long-Term Debt  – (continued)
2.00% Convertible Senior Notes due October 2023 (2.00% Convertible Senior Notes)
The 2.00% Convertible Senior Notes consisted of the following ($ in thousands):
March 31,
2021(1)
December 31, 2020
Liability Component:
Principal $ 43,920  $ 402,500 
Unamortized debt discount —  (11,248)
Long-term debt, net of unamortized debt discount 43,920  391,252 
Unamortized deferred financing costs (439) (4,134)
Net carrying amount $ 43,481  $ 387,118 
Equity Component $ —  $ 26,748 
___________
(1)Reflects the repurchase of 2.00% Convertible Senior Notes and the adoption of ASU No. 2020-06 effective January 1, 2021.
In October 2016, the Company completed an underwritten public offering of a seven year, $402.5 million aggregate principal amount of 2.00% Convertible Senior Notes. The Notes are convertible, at the holder’s option, only upon satisfaction of one or more conditions set forth in the indenture governing the Notes. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Company’s common stock, or a combination thereof, at the Company’s election.
The $402.5 million of 2.00% Convertible Senior Notes had an initial value of the principal amount recorded as a liability of $375.8 million, using an effective interest rate of 3.1%. The remaining $26.7 million of principal amount was allocated to the conversion feature and recorded in Additional Paid in Capital. This amount represents a discount to the debt to be amortized through interest expense using the effective interest method through maturity. The Company also recorded $11.2 million in deferred financing costs from the issuance of the 2.00% Convertible Senior Notes, of which $744,000 was recorded as equity issuance costs as a component of Stockholders’ Equity. On December 31, 2020, the outstanding balance of the liability component of the 2.00% Convertible Senior Notes was $391.3 million with a fair value of approximately $390.0 million.
On January 1, 2021, the Company adopted ASU 2020-06 under the modified retrospective method. ASU 2020-06 removes the accounting for cash conversion feature of the notes such that the notes would only be classified as a liability. The adoption of ASU 2020-06 resulted in the reversal of the initial equity component recorded of $26.7 million and made an adjustment to the beginning balance to Retained Earnings of $7.0 million primarily for the reversal of the amortization of debt discount taken through date, net of taxes.
On February 17, 2021, the Company initiated a tender offer for any and all of the 2.00% Convertible Senior Notes outstanding. On March 16, 2021, the Company repurchased $358.6 million in aggregate principal amount of the Notes in the tender offer. In connection with the repurchase, the Company incurred $1.2 million of transaction costs and wrote-off $3.6 million of deferred financing costs, recorded in Selling, General and Administrative Expenses and Interest Expense, respectively, in the consolidated condensed statements of operations. On March 31, 2021, the fair value of the 2.00% Convertible Senior Notes was approximately $45.0 million and the conversion rate was 12.6572 shares of common stock per $1,000 principal amount. In April 2021, the Company repurchased an additional $5.7 million of the 2.00% Convertible Senior Notes.
For quarter ended March 31, 2021, the Company incurred interest expense of $5.7 million related to the 2.00% Convertible Senior Notes which comprised of $3.6 million related to the write-off of deferred financing costs in connection with the repurchase, $1.8 million related to the interest on the principal, and the remaining balance related to the amortization of deferred financing costs. For the quarter ended March 31, 2020, the Company incurred interest expense of $3.3 million related to the 2.00% Convertible Senior Notes, of which $2.0 million related to the interest on the principal and the remaining balance related to the amortization of debt discount and deferred financing cost.

36

MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
8. Long-Term Debt  – (continued)
Atlantic Aviation
On March 31, 2021 and December 31, 2020, Atlantic Aviation had $1.0 billion outstanding on its seven-year senior secured first lien term loan facility.
Atlantic Aviation drew $275.0 million on its revolving credit facility on March 17, 2020. On April 30, 2020, Atlantic Aviation fully repaid the outstanding balance on its revolving credit facility and effective May 4, 2020, reduced the commitments on this facility to $10.0 million, and further to $1.0 million, solely with respect to letters of credit then outstanding. The amendment of the facility eliminates any leverage-based maintenance covenant on the Atlantic Aviation term loan as long as the letters of credit issued under the facility are cash collateralized and rolled over to standalone letters of credit facilities upon renewal. On March 31, 2021 and December 31, 2020, Atlantic Aviation had $9.7 million and $9.6 million, respectively, in letters of credit outstanding.
MIC Hawaii
On March 31, 2021 and December 31, 2020, Hawaii Gas had $100.0 million of fixed rate senior notes, that had a fair value of approximately $105.0 million at both periods, and an $80.0 million term loan outstanding. Hawaii Gas also had a $60.0 million revolving credit facility that remained undrawn on March 31, 2021 and December 31, 2020. On April 19, 2021, The Gas Company, LLC (d.b.a. Hawaii Gas) fully repaid all of its $100.0 million senior secured notes outstanding and incurred a $4.7 million 'make-whole' payment.
In addition, on March 31, 2021 and December 31, 2020, MIC Hawaii's solar facilities had a term loan outstanding of $13.5 million and $13.8 million, respectively.
9. Derivative Instruments and Hedging Activities
Interest Rate Contracts
The Company and certain of its businesses have in place variable-rate debt. Management believes that it is prudent to limit the variability of a portion of the business’ interest payments. To meet this objective, the Company enters into interest rate agreements, primarily using interest rate swaps and from time to time using interest rate caps, to manage fluctuations in cash flows resulting from interest rate risk on a portion of its debt with a variable-rate component. Interest rate swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the interest rate swaps, the Company receives variable interest rate payments and makes fixed interest rate payments, thereby creating the equivalent of fixed-rate debt for the portion of the debt that is swapped.
On March 31, 2021, the Company had $1.2 billion of current and long-term debt, of which $413.5 million was economically hedged with interest rate contracts, $143.9 million was fixed rate debt, and $682.0 million was unhedged. The Company does not use hedge accounting. All movements in the fair value of the interest rate derivatives are recorded directly through earnings.
Commodity Price Contracts
The risks associated with fluctuations in the prices that Hawaii Gas, a business within the MIC Hawaii reportable segment, pays for liquefied petroleum gas (LPG) is principally a result of market forces reflecting changes in supply and demand for LPG and other energy commodities. Hawaii Gas’ gross margin (revenue less cost of product sales excluding depreciation and amortization) is sensitive to changes in LPG supply costs and Hawaii Gas may not always be able to pass through cost increases fully or on a timely basis, particularly when product costs rise rapidly. To reduce the volatility of the business’ LPG wholesale market price risk, Hawaii Gas has used and expects to continue to use over-the-counter commodity derivative instruments. Hawaii Gas does not use commodity derivative instruments for speculative or trading purposes. Over-the-counter derivative instruments used by Hawaii Gas to hedge forecasted purchases of LPG are generally settled at expiration of the contract. On March 31, 2021, Hawaii Gas had 7.3 million gallons of LPG hedged through December 2021. In April 2021, the business entered into additional hedging contracts, increasing the total gallons hedged to 16.5 million and extending maturity through December 2023.

37

MACQUARIE INFRASTRUCTURE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
9. Derivative Instruments and Hedging Activities – (continued)
Financial Statement Location Disclosure for Derivative Instruments
The Company measures derivative in