Report of Independent Registered Public Accounting Firm
To the Unitholders and Board of Directors
Macquarie Infrastructure Holdings, LLC:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Macquarie Infrastructure Holdings, LLC and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), unitholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Notes 2 and 9 to the consolidated financial statements, the Company has changed its method of accounting for convertible instruments as of January 1, 2021 due to the adoption of Accounting Standards Update (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).
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of the sufficiency of audit evidence obtained over revenue
As discussed in Note 12 to the consolidated financial statements, and disclosed in the consolidated statements of operations, the Company recorded $236 million of product revenue from continuing operations for the year ended December 31, 2021. As discussed in Note 4 to the consolidated financial statements, the Company recorded $678 million of service revenue from discontinued operations. We identified the evaluation of the sufficiency of audit evidence obtained over revenue as a critical audit matter. A higher degree of auditor judgment was required to determine the revenue streams over which procedures would be performed and to evaluate the nature and extent of audit evidence obtained over each revenue stream due to the multiple revenue streams and the use of multiple processes to record revenue. The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the
nature and extent of procedures to be performed over revenue, including the determination of the revenue streams over which those procedures were performed. For each revenue stream where procedures were performed, we evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to record revenue. For certain revenue streams, we assessed the recorded revenue by:
•selecting a sample of transactions and comparing the revenue recorded for consistency with underlying documentation.
•comparing recorded revenue to an expectation of revenue developed using volumes and regulatory rates, including evaluating the relevance and reliability of the inputs to the expectation.
•comparing the total cash received during the year to the revenue recorded, including evaluating the relevance and reliability of total cash received.
In addition, we evaluated the sufficiency of audit evidence obtained over revenue by assessing the results of procedures performed, including the appropriateness of the nature and extent of such evidence.
/s/ KPMG LLP
We have served as the Company’s auditor since 2004.
Dallas, Texas
February 22, 2022
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
CONSOLIDATED BALANCE SHEETS
($ in Thousands, Except Unit Data)
| | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 47,259 | | | $ | 1,518,108 | |
Restricted cash | 1,051 | | | 1,036 | |
Accounts receivable, net of allowance for doubtful accounts | 27,824 | | | 23,113 | |
Inventories | 11,658 | | | 9,564 | |
Prepaid expenses | 1,813 | | | 2,212 | |
| | | |
Other current assets | 3,164 | | | 1,715 | |
Current assets held for sale(1) | — | | | 2,185,002 | |
Total current assets | 92,769 | | | 3,740,750 | |
Property, equipment, land, and leasehold improvements, net | 297,190 | | | 297,375 | |
Operating lease assets, net | 12,591 | | | 9,878 | |
| | | |
Goodwill | 120,193 | | | 120,193 | |
Intangible assets, net | 4,498 | | | 4,923 | |
Other noncurrent assets | 9,210 | | | 5,520 | |
Total assets | $ | 536,451 | | | $ | 4,178,639 | |
LIABILITIES AND UNITHOLDERS' EQUITY | | | |
Current liabilities: | | | |
Due to Manager-related party | $ | 260 | | | $ | 1,203 | |
Accounts payable | 6,169 | | | 13,082 | |
Accrued expenses | 18,449 | | | 17,798 | |
Current portion of long-term debt | 1,107 | | | 1,060 | |
Distribution payable | — | | | 960,981 | |
Operating lease liabilities - current | 1,794 | | | 2,019 | |
| | | |
Other current liabilities | 5,223 | | | 9,591 | |
Current liabilities held for sale(1) | — | | | 1,613,830 | |
Total current liabilities | 33,002 | | | 2,619,564 | |
Long-term debt, net of current portion | 97,655 | | | 578,169 | |
Deferred income taxes | 38,540 | | | 26,453 | |
Operating lease liabilities - noncurrent | 10,810 | | | 7,869 | |
Other noncurrent liabilities | 53,062 | | | 53,278 | |
Total liabilities | 233,069 | | | 3,285,333 | |
Commitments and contingencies | — | | | — | |
See accompanying notes to the consolidated financial statements.
46
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
CONSOLIDATED BALANCE SHEETS – (continued)
($ in Thousands, Except Unit Data)
| | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 |
Unitholders’ equity (2): | | | |
Common units paid in capital (500,000,000 authorized; 88,343,762 and 87,361,929 units issued and outstanding on December 31, 2021 and 2020, respectively) | $ | 193,471 | | | $ | 178,062 | |
Accumulated other comprehensive loss | (5,106) | | | (6,175) | |
Retained earnings | 106,539 | | | 713,129 | |
Total unitholders’ equity | 294,904 | | | 885,016 | |
Noncontrolling interests | 8,478 | | | 8,290 | |
Total equity | 303,382 | | | 893,306 | |
Total liabilities and equity | $ | 536,451 | | | $ | 4,178,639 | |
(1)See Note 4, “Discontinued Operations and Dispositions”, for further discussions on assets and liabilities held for sale.
(2)The Company is authorized to issue 100,000,000 preferred units. On December 31, 2021 and 2020, no preferred units were issued or outstanding. The Company had 100 special units issued and outstanding to its Manager on December 31, 2021 and 2020, respectively. See Note 11, “Unitholders' Equity”, for further discussions.
See accompanying notes to the consolidated financial statements.
47
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in Thousands, Except Unit and Per Unit Data)
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Revenue | | | | | |
| | | | | |
Product revenue | $ | 235,984 | | | $ | 180,411 | | | $ | 242,637 | |
Total revenue | 235,984 | | | 180,411 | | | 242,637 | |
Costs and expenses | | | | | |
| | | | | |
Cost of product sales | 165,927 | | | 112,283 | | | 165,504 | |
| | | | | |
Selling, general and administrative | 97,893 | | | 72,704 | | | 38,596 | |
Disposition payment to manager | 228,570 | | | 28,174 | | | — | |
Total Selling, general and administrative | 326,463 | | | 100,878 | | | 38,596 | |
Fees to Manager - related party | 21,857 | | | 21,063 | | | 32,103 | |
Depreciation | 15,313 | | | 15,463 | | | 14,985 | |
Amortization of intangibles | 425 | | | 425 | | | 425 | |
Total operating expenses | 529,985 | | | 250,112 | | | 251,613 | |
Operating loss | (294,001) | | | (69,701) | | | (8,976) | |
Other income (expense) | | | | | |
Interest income | 27 | | | 26 | | | 17 | |
Interest expense(1) | (14,381) | | | (21,103) | | | (22,609) | |
Other income (expense), net | 234 | | | (1,690) | | | (5,324) | |
Net loss from continuing operations before income taxes | (308,121) | | | (92,468) | | | (36,892) | |
Benefit (provision) for income taxes | 7,827 | | | (4,177) | | | 11,640 | |
Net loss from continuing operations | (300,294) | | | (96,645) | | | (25,252) | |
Discontinued Operations(2) | | | | | |
Net income (loss) from discontinued operations before income taxes | 3,050,811 | | | (684,660) | | | 261,451 | |
Provision for income taxes | (66,458) | | | (146,419) | | | (83,046) | |
Net income (loss) from discontinued operations | 2,984,353 | | | (831,079) | | | 178,405 | |
Net income (loss) | 2,684,059 | | | (927,724) | | | 153,153 | |
| | | | | |
Net loss from continuing operations | (300,294) | | | (96,645) | | | (25,252) | |
Less: net income (loss) attributable to noncontrolling interests | 191 | | | 137 | | | (246) | |
Net loss from continuing operations attributable to MIH | (300,485) | | | (96,782) | | | (25,006) | |
Net income (loss) from discontinued operations | 2,984,353 | | | (831,079) | | | 178,405 | |
Less: net loss attributable to noncontrolling interests | — | | | — | | | (3,109) | |
Net income (loss) from discontinued operations attributable to MIH | 2,984,353 | | | (831,079) | | | 181,514 | |
Net income (loss) attributable to MIH | $ | 2,683,868 | | | $ | (927,861) | | | $ | 156,508 | |
See accompanying notes to the consolidated financial statements.
48
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS – (continued)
($ in Thousands, Except Unit and Per Unit Data)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
Basic loss per unit from continuing operations attributable to MIH | $ | (3.42) | | | $ | (1.11) | | | $ | (0.29) | |
Basic income (loss) per unit from discontinued operations attributable to MIH | 33.99 | | | (9.56) | | | 2.11 | |
Basic income (loss) per unit attributable to MIH | $ | 30.57 | | | $ | (10.67) | | | $ | 1.82 | |
Weighted average number of units outstanding: basic | 87,791,951 | | | 86,951,642 | | | 86,178,212 | |
| | | | | |
Diluted loss per unit from continuing operations attributable to MIH | $ | (3.42) | | | $ | (1.11) | | | $ | (0.29) | |
Diluted income (loss) per unit from discontinued operations attributable to MIH | 33.99 | | | (9.56) | | | 2.11 | |
Diluted income (loss) per unit attributable to MIH | $ | 30.57 | | | $ | (10.67) | | | $ | 1.82 | |
Weighted average number of units outstanding: diluted | 87,791,951 | | | 86,951,642 | | | 86,178,212 | |
Cash distribution declared per unit | $ | 37.386817 | | | $ | 11.00 | | | $ | 4.00 | |
(1)Interest expense includes non-cash gains on derivative instruments of $333,000 in 2021 and non-cash losses on derivative instruments of $912,000 and $875,000 in 2020 and 2019, respectively.
(2)See Note 4, “Discontinued Operations and Dispositions”, for further discussions on businesses classified as held for sale.
See accompanying notes to the consolidated financial statements.
49
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
($ in Thousands)
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Net income (loss) | $ | 2,684,059 | | | $ | (927,724) | | | $ | 153,153 | |
Other comprehensive income (loss), net of taxes: | | | | | |
Change in post-retirement benefit plans(1) | 1,075 | | | (15,723) | | | (8,533) | |
Translation adjustment(2) | — | | | 1,141 | | | 1,932 | |
Reclassification to net income (loss) due to sale of business(3) | (6) | | | 45,279 | | | — | |
Other comprehensive income (loss) | 1,069 | | | 30,697 | | | (6,601) | |
Comprehensive income (loss) | 2,685,128 | | | (897,027) | | | 146,552 | |
Less: comprehensive income (loss) attributable to noncontrolling interests | 191 | | | 137 | | | (3,355) | |
Comprehensive income (loss) attributable to MIH | $ | 2,684,937 | | | $ | (897,164) | | | $ | 149,907 | |
(1)Change in post-retirement benefit plans is presented net of tax benefit of $375,000, $6.1 million, and $3.4 million in 2021, 2020, and 2019, respectively. See Note 11, “Unitholders’ Equity”, for further discussions.
(2)Translation adjustment is presented net of tax expense of $444,000 and $751,000 in 2020 and 2019, respectively. See Note 11, “Unitholders’ Equity”, for further discussions.
(3)Reclassified to discontinued operations in the consolidated statement of operations in connection with the AA transaction in 2021 and the IMTT Transaction in 2020. See Note 4, "Discontinued Operations and Dispositions", for further discussions.
See accompanying notes to the consolidated financial statements.
50
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY
($ in Thousands, Except Unit Data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| In Units | | Common Units Paid In Capital | | Accumulated Other Comprehensive Loss | | Retained Earnings | | Total Unitholders’ Equity | | Noncontrolling Interests(2) | | Total Equity |
Special Units | | Common Units(1) |
| | | | | | | | | | | | | | | |
Balance on December 31, 2018 | 100 | | | 85,800,303 | | | $ | 1,510,391 | | | $ | (30,271) | | | $ | 1,484,482 | | | $ | 2,964,602 | | | $ | 151,725 | | | $ | 3,116,327 | |
Issuance of units to Manager | — | | | 776,353 | | | 31,367 | | | — | | | — | | | 31,367 | | | — | | | 31,367 | |
Units vested under compensation plans(3) | — | | | 23,646 | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | |
Unit-based compensation expense | — | | | — | | | 958 | | | — | | | — | | | 958 | | | — | | | 958 | |
Registration costs | — | | | — | | | (95) | | | — | | | — | | | (95) | | | — | | | (95) | |
Distributions to common unitholders(4) | — | | | — | | | (344,689) | | | — | | | — | | | (344,689) | | | — | | | (344,689) | |
Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | (2,492) | | | (2,492) | |
Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | 166 | | | 166 | |
Deconsolidation of noncontrolling interest | — | | | — | | | — | | | — | | | — | | | — | | | (137,888) | | | (137,888) | |
Comprehensive (loss) income, net of taxes | — | | | — | | | — | | | (6,601) | | | 156,508 | | | 149,907 | | | (3,355) | | | 146,552 | |
Balance on December 31, 2019 | 100 | | | 86,600,302 | | | $ | 1,197,932 | | | $ | (36,872) | | | $ | 1,640,990 | | | $ | 2,802,050 | | | $ | 8,156 | | | $ | 2,810,206 | |
Issuance of units to Manager | — | | | 701,030 | | | 22,905 | | | — | | | — | | | 22,905 | | | — | | | 22,905 | |
Units vested under compensation plans(3) | — | | | 81,366 | | | — | | | — | | | — | | | — | | | — | | | — | |
Units withheld for taxes on vested units(3) | — | | | (20,769) | | | — | | | — | | | — | | | — | | | — | | | — | |
Unit-based compensation expense | — | | | — | | | 4,948 | | | — | | | — | | | 4,948 | | | — | | | 4,948 | |
Dividends to common unitholders(4) | — | | | — | | | (1,047,723) | | | — | | | — | | | (1,047,723) | | | — | | | (1,047,723) | |
Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | (3) | | | (3) | |
| | | | | | | | | | | | | | | |
Comprehensive income (loss), net of taxes | — | | | — | | | — | | | 30,697 | | | (927,861) | | | (897,164) | | | 137 | | | (897,027) | |
Balance on December 31, 2020 | 100 | | | 87,361,929 | | | $ | 178,062 | | | $ | (6,175) | | | $ | 713,129 | | | $ | 885,016 | | | $ | 8,290 | | | $ | 893,306 | |
Issuance of units to Manager | — | | | 764,602 | | | 22,799 | | | — | | | — | | | 22,799 | | | — | | | 22,799 | |
Units vested under compensation plans(3) | — | | | 281,206 | | | — | | | — | | | — | | | — | | | — | | | — | |
Units withheld for taxes on vested units(3) | — | | | (63,975) | | | — | | | — | | | — | | | — | | | — | | | — | |
Unit-based compensation expense | — | | | — | | | 6,731 | | | — | | | — | | | 6,731 | | | — | | | 6,731 | |
Distributions to common unitholders(4) | — | | | — | | | — | | | — | | | (3,297,420) | | | (3,297,420) | | | — | | | (3,297,420) | |
Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | (3) | | | (3) | |
Impact of ASU 2020-06 adoption(5) | — | | | — | | | (14,121) | | | — | | | 6,962 | | | (7,159) | | | — | | | (7,159) | |
Comprehensive income, net of taxes | — | | | — | | | — | | | 1,069 | | | 2,683,868 | | | 2,684,937 | | | 191 | | | 2,685,128 | |
Balance on December 31, 2021 | 100 | | | 88,343,762 | | | $ | 193,471 | | | $ | (5,106) | | | $ | 106,539 | | | $ | 294,904 | | | $ | 8,478 | | | $ | 303,382 | |
(1)The Company is authorized to issue 500,000,000 common units.
(2)Includes $141.5 million of noncontrolling interest related to discontinued operations on December 31, 2019. See Note 4, “Discontinued Operations and Dispositions”, for further discussions.
(3)Units vested and issued under the 2016 Omnibus Employee Incentive Plan and 2014 Independent Directors Equity Plan. Under the 2016 Omnibus Employee Incentive Plan, units are withheld for the employee portion of taxes on vested awards and are available for future grants. See Note 11, "Unitholders' Equity," for further discussions.
(4)See Note 11, “Unitholders' Equity”, for discussion on distributions declared and paid on units for each period.
(5)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 $7.0 million, net of taxes. See Note 9, “Long-Term Debt”, for further discussions.
See accompanying notes to the consolidated financial statements.
51
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in Thousands)
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Operating activities | | | | | |
Net loss from continuing operations | $ | (300,294) | | | $ | (96,645) | | | $ | (25,252) | |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities from continuing operations: | | | | | |
Depreciation | 15,313 | | | 15,463 | | | 14,985 | |
Amortization of intangibles | 425 | | | 425 | | | 425 | |
Write-off of debt financing cost | 4,170 | | | — | | | — | |
Amortization of debt discount and financing costs | 738 | | | 5,744 | | | 5,626 | |
Adjustments to derivative instruments | (943) | | | (6,598) | | | 6,009 | |
Fees to Manager - related party | 21,857 | | | 21,063 | | | 32,103 | |
Deferred taxes | (2,612) | | | 3,376 | | | (15,169) | |
Other non-cash expense, net | 4,887 | | | 6,634 | | | 9,947 | |
Changes in other assets and liabilities, net of acquisitions: | | | | | |
Accounts receivable | (4,741) | | | 2,529 | | | 3,694 | |
Inventories | (3,489) | | | 1,764 | | | (1,869) | |
Prepaid expenses and other current assets | (1,704) | | | (168) | | | (280) | |
Accounts payable and accrued expenses | (7,904) | | | 2,492 | | | 4,746 | |
Income taxes payable | (6,611) | | | (3,842) | | | 440 | |
Other, net | (7,279) | | | 1,405 | | | (4,235) | |
Net cash (used in) provided by operating activities from continuing operations | (288,187) | | | (46,358) | | | 31,170 | |
Investing activities | | | | | |
Acquisitions of businesses and investments, net of cash, cash equivalents, and restricted cash acquired | — | | | — | | | (94) | |
Purchases of property and equipment | (14,261) | | | (14,471) | | | (19,791) | |
| | | | | |
| | | | | |
| | | | | |
Other, net | 186 | | | 44 | | | 34 | |
Net cash used in investing activities from continuing operations | (14,075) | | | (14,427) | | | (19,851) | |
Financing activities | | | | | |
| | | | | |
Payment of long-term debt | (496,629) | | | (1,260) | | | (727) | |
| | | | | |
Distributions paid to common unitholders | (4,258,401) | | | (86,742) | | | (344,689) | |
Distributions paid to noncontrolling interests | (3) | | | (3) | | | (5) | |
Debt financing costs paid | (293) | | | — | | | — | |
Net cash used in financing activities from continuing operations | (4,755,326) | | | (88,005) | | | (345,421) | |
Net change in cash, cash equivalents, and restricted cash from continuing operations | (5,057,588) | | | (148,790) | | | (334,102) | |
See accompanying notes to the consolidated financial statements.
52
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
($ in Thousands)
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Cash flows provided by (used in) discontinued operations: | | | | | |
Net cash provided by operating activities | $ | 28,965 | | | $ | 386,983 | | | $ | 389,966 | |
Net cash provided by investing activities | 3,242,836 | | | 1,253,261 | | | 10,797 | |
Net cash used in financing activities | (5,123) | | | (10,700) | | | (337,095) | |
Net cash provided by discontinued operations | 3,266,678 | | | 1,629,544 | | | 63,668 | |
Effect of exchange rate changes on cash and cash equivalents | — | | | (99) | | | 255 | |
Net change in cash, cash equivalents, and restricted cash | (1,790,910) | | | 1,480,655 | | | (270,179) | |
Cash, cash equivalents, and restricted cash, beginning of period | 1,839,220 | | | 358,565 | | | 628,744 | |
Cash, cash equivalents, and restricted cash, end of period | $ | 48,310 | | | $ | 1,839,220 | | | $ | 358,565 | |
| | | | | |
Supplemental disclosures of cash flow information: | | | | | |
Non-cash investing and financing activities: | | | | | |
Accrued purchases of property and equipment from continuing operations | $ | 614 | | | $ | 761 | | | $ | 1,074 | |
Accrued purchases of property and equipment from discontinued operations | 4,201 | | | 28,081 | | | 30,853 | |
Leased assets obtained in exchange for new operating lease liabilities from continuing operations | — | | | — | | | 1,522 | |
Leased assets obtained in exchange for new operating lease liabilities from discontinued operations | 14,666 | | | 20,393 | | | 19,115 | |
Cash distribution declared, but not yet paid | — | | | 960,981 | | | — | |
Taxes received, net, from continuing operations | (195) | | | — | | | (1,500) | |
Taxes paid (received), net, from discontinued operations | 143,906 | | | (10,686) | | | 66,056 | |
Interest paid, net, from continuing operations | 13,688 | | | 14,699 | | | 15,132 | |
Interest paid, net, from discontinued operations | 29,616 | | | 95,670 | | | 122,890 | |
The following table provides a reconciliation of cash, cash equivalents, and restricted cash from both continuing and discontinued operations reported within the consolidated balance sheets that is presented in the consolidated statements of cash flows:
| | | | | | | | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 | | 2019 |
Cash and cash equivalents | $ | 47,259 | | | $ | 1,518,108 | | | $ | 57,230 | |
Restricted cash - current | 1,051 | | | 1,036 | | | 1,165 | |
Cash, cash equivalents, and restricted cash included in assets held for sale(1) | — | | | 320,076 | | | 300,170 | |
Total of cash, cash equivalents, and restricted cash shown in the consolidated statement of cash flows | $ | 48,310 | | | $ | 1,839,220 | | | $ | 358,565 | |
(1)Represents cash, cash equivalents, and restricted cash related to businesses classified as held for sale. See Note 4, "Discontinued Operations and Dispositions", for further discussions.
See accompanying notes to the consolidated financial statements.
53
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Description of Business
Macquarie Infrastructure Holdings, LLC ("MIH") is a Delaware limited liability company formed on February 5, 2021 and the registrant since September 22, 2021. MIH is the successor to Macquarie Infrastructure Corporation ("MIC"), 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-K to "MIH" or the "Company" refers to Macquarie Infrastructure Holdings, LLC and its subsidiaries, or as necessary when referring to previous reporting periods or the period prior to September 22, 2021, MIC and its subsidiaries.
MIH 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 and operates businesses that provide products to corporations, government agencies, and individual customers in Hawaii. The Company's operations consist of businesses comprising an energy company that processes and distributes gas and provides related services, Hawaii Gas, and several smaller operations collectively engaged in efforts to reduce the cost and improve the reliability and sustainability of energy in Hawaii.
In October 2019, along with actively managing its existing portfolio of businesses, the Board resolved to pursue strategic alternatives including potentially a sale of the Company or its then three operating businesses as a means of unlocking additional value for equity holders.
During the quarter ended September 30, 2020, the Company's International-Matex Tank Terminals ("IMTT") business 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 (the "IMTT Transaction"). For additional information, see Note 4, “Discontinued Operations and Dispositions”.
On June 7, 2021, the Company entered into an agreement for the sale of its Atlantic Aviation business to KKR Apple Bidco, LLC, a Delaware limited liability company controlled by funds affiliated with Kohlberg Kravis Roberts & Co. L.P. (“KKR”), for $4.475 billion including cash and the assumption of debt and other transaction and reorganization related obligations (the "AA Transaction").
On June 14, 2021, the Company entered into a merger agreement (the "Merger Agreement") with AMF Hawaii Holdings, LLC ("AMF Parent"), a Delaware limited liability company affiliated with Argo Infrastructure Partners, LP ("Argo"), and AMF Hawaii Merger Sub, LLC ("AMF Merger Sub"), a recently formed Delaware limited liability company and wholly-owned direct subsidiary of AMF Parent (the "Merger"). Upon the completion of the Merger, each of the MIH common units (excluding common units held by AMF Parent or AMF Merger Sub or common units held by MIH in treasury and common units held by any subsidiary of MIH or AMF Parent (other than AMF Merger Sub)), will be converted into the right to receive $3.83 in cash, without interest; or, if the Merger is consummated after July 1, 2022, then each such unit will be converted into the right to receive $4.11 in cash, without interest.
Under the terms of the Merger Agreement, at closing, AMF Parent will pay the merger consideration to unitholders, and fund transaction costs and fund a disposition payment to MIH’s Manager of $81.7 million if the Merger closes on or before July 1, 2022 or $56.7 million if the Merger closes after this date.
On September 21, 2021, the Company conducted a Special Meeting of Shareholders during which shareholders voted on and approved the AA Transaction and the Merger. As a result, MIH classified its Atlantic Aviation business as a discontinued operation.
On September 22, 2021, shareholders of Macquarie Infrastructure Corporation became unitholders of Macquarie Infrastructure Holdings, LLC, a limited liability company treated as a partnership for tax purposes, on a one-for-one basis without an exchange of certificates. Commencing September 23, 2021, units of Macquarie Infrastructure Holdings, LLC traded on the New York Stock Exchange ("NYSE") under the same symbol (NYSE: MIC) and with the same CUSIP number (55608B105) as previously associated with shares of Macquarie Infrastructure Corporation.
As part of the reorganization, the entity holding the businesses comprising MIC's MIC Hawaii segment was distributed to and became a direct subsidiary of Macquarie Infrastructure Holdings, LLC. For tax purposes, the distribution was deemed to be
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Description of Business – (continued)
a sale of MIC Hawaii by MIC and unitholders were deemed to have received a distribution of the fair market value of the equity of that segment.
On September 23, 2021, MIH completed the AA Transaction, and received $3.525 billion at the closing. The MIH Board elected to return certain proceeds from the AA Transaction to unitholders, declaring a one-time distribution of $37.386817 per common unit of the Company, paid on October 7, 2021 to unitholders of record as of the close of trading on October 4, 2021. The Company's common units traded with due-bills attached from October 1, 2021 through October 7, 2021 pursuant to relevant NYSE rules. In addition, MIH made a disposition payment to the Manager of $228.6 million. See Note 4, “Discontinued Operations and Dispositions” for further information.
The Merger is expected to be completed in the first half of 2022 subject to the approval by the Hawaii Public Utilities Commission ("HPUC") and the satisfaction of customary closing conditions for this type of transaction. Upon the closing of the Merger, the Company will no longer be a publicly traded entity.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company consolidates investments where it has a controlling financial interest. The general condition for a controlling financial interest is ownership of a majority of the voting interest and, therefore, as a general rule, ownership, directly or indirectly, of over 50% of the outstanding voting shares is a condition for consolidation. In addition, if the Company demonstrates that it has the ability to direct policies and management, this may be also an indication for consolidation. For investments in variable interest entities, the Company consolidates when it is determined to be the primary beneficiary of the variable interest entity. The Company is the primary beneficiary in the solar facilities in Hawaii and consolidated these projects accordingly.
Use of Estimates
The preparation of the consolidated financial statements, which are in conformity with generally accepted accounting principles ("GAAP"), requires the Company to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company evaluates these estimates and judgments on an ongoing basis and the estimates are based on experience, current and expected future conditions, third-party evaluations, and various other assumptions that the Company believes are reasonable under the circumstances. Significant items subject to such estimates and assumptions include the carrying amount of property, equipment, land, and leasehold improvements, intangibles, and goodwill; assets and obligations related to employee benefits; and valuation of derivative instruments. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Actual results may differ from the estimates and assumptions used in the financial statements and related notes.
Business Combinations
Acquisitions of businesses that the Company controls are accounted for under the purchase method of accounting. The amounts assigned to the identifiable assets acquired and liabilities assumed in connection with acquisitions are based on estimated fair values as of the date of the acquisition, with the remainder, if any, recorded as goodwill. The fair values are determined by the Company’s management, taking into consideration information supplied by the management of acquired entities and other relevant information. Such information includes valuations supplied by independent appraisal experts for significant business combinations. The valuations are generally based upon future cash flow projections for the acquired assets, discounted to a present value. The determination of fair value requires significant judgment both by management and outside experts engaged to assist in this process.
Cash and Cash Equivalents
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 investments in commercial paper on December 31, 2021 and 2020.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
Restricted Cash
On December 31, 2021 and 2020, restricted cash consists primarily of deposits held by banks to fund certain obligations under its agreements in place at the solar facilities in Hawaii.
Allowance for Doubtful Accounts
The Company uses estimates to determine the amount of allowance for doubtful accounts necessary to reduce accounts receivable to its net realizable value. The Company estimates the required allowance by reviewing the status of past-due receivables and analyzing historical bad debt trends. Actual collection experience has not varied significantly from estimates primarily due to credit policies and a lack of concentration of accounts receivable. The Company writes-off receivables deemed to be uncollectible to the allowance for doubtful accounts.
Inventory
Inventory consists principally of gas purchased from various third-party vendors and materials and supplies. Gas inventory is stated at the lower of cost or market and materials and supplies inventory are valued at the lower of average cost or market. Inventory sold is recorded using an average cost method at the businesses in Hawaii. Cash flows related to the sale of inventory are classified in net cash provided by operating activities in the consolidated statements of cash flows.
The Company’s inventory balance on December 31, 2021 comprised $4.6 million of inventory for sale and $7.1 million of materials and supplies compared with $2.3 million of inventory for sale and $7.3 million of materials and supplies on December 31, 2020.
Property, Equipment, Land, and Leasehold Improvements
Property, equipment, land, and leasehold improvements are initially recorded at cost. Major renewals and improvements are capitalized while repair and maintenance expenditures are expensed when incurred. Interest expense relating to construction in progress is capitalized as an additional cost of the asset. The Company depreciates property, equipment, and leasehold improvements over their estimated useful lives on a straight-line basis. The estimated economic useful lives range is up to 68 years for buildings, leasehold and land improvements, machinery and equipment, and furniture and fixtures.
Goodwill and Intangible Assets
Goodwill consists of costs in excess of the aggregate purchase price over the fair value of tangible and identifiable intangible net assets acquired in business combinations. The cost of intangible assets with determinable useful lives is amortized over their estimated useful lives of 20 years.
Impairment of Long-lived Assets, Excluding Goodwill
Long-lived assets, including amortizable intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be fully recoverable. These events or changes in circumstances may include a significant deterioration of operating results, changes in business plans, or changes in anticipated future cash flows. If an impairment indicator is present, the Company evaluates recoverability by comparing the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the assets are impaired, the impairment recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets. Fair value is generally determined by estimates of discounted cash flows or value expected to be realized in a third-party sale. The discount rate used in any estimate of discounted cash flows would be the rate required for a similar investment of like risk.
Impairment of Goodwill
Goodwill is tested for impairment at least annually on October 1 or when there is a triggering event that indicates the possibility of an impairment. For the annual impairment test, an entity can make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before performing a quantitative goodwill impairment test, as discussed below. If an entity concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not perform the quantitative impairment test.
If an entity concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if there is a triggering event that indicates impairment, the entity needs to perform a quantitative impairment test. This requires management to make judgments in determining what assumptions to use in the calculation.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
The Company estimates the fair value by estimating the present value of the future discounted cash flows or value expected to be realized in a third-party sale. If the recorded net assets are less than the estimated fair value, then no impairment is indicated. If the recorded amount of goodwill exceeds the estimated fair value, an impairment charge is recorded for the excess. See Note 8, “Intangible Assets and Goodwill”, for further discussions on goodwill impairment testing.
Leases
The Company accounts for leases in accordance with ASC 842, Leases, which requires a lessee to recognize on its balance sheet the right-of-use ("ROU") assets and lease liabilities with lease terms of more than 12 months. The substantial population of the Company’s ROU assets and lease liabilities related to Atlantic Aviation’s operating leases of land, buildings, and certain equipment, which are included in assets and liabilities held for sale as of December 31, 2020. ROU assets represent the Company’s right to use an underlying asset for the lease term and the lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company has made an accounting policy election to keep leases with an initial term of 12 months or less off the balance sheet and has elected the practical expedient whereby the Company will not separate a qualifying contract into its lease and non-lease components. See Note 5, "Leases", for further disclosure on operating leases.
Impairment of Indefinite-lived Intangibles, Excluding Goodwill
Indefinite-lived intangibles, which consist of trademarks, are considered impaired when the carrying amount of the asset exceeds its estimated fair value. The Company estimates the fair value of each trademark using the relief from royalty method that discounts the estimated net cash flows the Company would have to pay to license the trademark under an arm’s length licensing agreement. If the recorded indefinite-lived intangible is less than its estimated fair value, then no impairment is indicated. Alternatively, if the recorded intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
Debt Financing Costs
The Company capitalizes all direct costs incurred in connection with the issuance of debt as debt financing costs. On December 31, 2021, these costs are amortized over the contractual term of the debt instrument which ranges from 4 to 10 years with a weighted average remaining life of 2.9 years.
Derivative Instruments
From time to time the Company enters into interest rate derivative agreements to minimize potential variations in cash flows resulting from fluctuations in interest rates and their impact on its variable-rate debt. Hawaii Gas enters into commodity cost hedges to mitigate the impact of fluctuations in liquefied petroleum gas ("LPG") prices on its cash flows.
The Company accounts for derivatives and hedging activities in accordance with Accounting Standard Codification ("ASC") 815, Derivatives and Hedging, which requires that all derivative instruments be recorded on the balance sheet at their respective fair values. All movements in the fair value of derivative contracts are recorded directly through earnings. See Note 10, “Derivative Instruments and Hedging Activities”, for further discussions.
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.
Concentrations of Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with financial institutions and its balances may exceed federally insured limits. The Company’s accounts receivable balances are mainly derived from gas sales rendered under contract terms with commercial and private customers located in the United States. On December 31, 2021 and 2020, there were no outstanding accounts receivable due from a single customer that accounted for more than 10% of the total accounts receivable. Additionally, no single customer accounted for more than 10% of the Company’s revenue in 2021, 2020, and 2019.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
Foreign Currency Translation
The assets and liabilities of IMTT’s Newfoundland and Quebec locations were translated from their local currency (Canadian dollars) to U.S. dollars at exchange rates in effect at the end of the reporting period and consolidated statement of operations accounts are translated at average exchange rates for the reporting period. Translation gains or losses as a result of changes in the exchange rate were recorded as a component of other comprehensive income (loss) through the date of sale.
Accrued Expenses
Accrued expenses of $18.4 million and $17.8 million on December 31, 2021 and 2020, respectively, primarily consisted of payroll and related liabilities, interest, non-income related taxes, insurance, purchase of property and equipment, and other individually insignificant balances.
Income per Unit
The Company calculates income per unit using the weighted average number of common units outstanding during the period. Diluted income per unit is computed using the weighted average number of dilutive common equivalent units outstanding during the period. Common equivalent units may consist of (i) units issuable upon conversion of the Company’s convertible senior notes (using the if-converted method); (ii) director share units granted to the Company’s independent directors under the 2014 Independent Directors Equity Plan; (iii) stock units granted to certain employees of the Company's operating businesses under the 2016 Omnibus Employee Incentive Plan; and (iv) fees payable to the Manager that will be reinvested in common units by the Manager in a future period, if any. Common equivalent units are excluded from the calculation if their effect is anti-dilutive.
Comprehensive Income (Loss)
The Company follows the requirements of ASC 220, Comprehensive Income, for the reporting and presentation of comprehensive income (loss) and its components, net of taxes. For the Company, the guidance requires unrealized gains or losses on foreign currency translation adjustments and minimum pension liability adjustments to be included in other comprehensive income (loss), net of taxes.
Regulatory Assets and Liabilities
The utility operations of Hawaii Gas are subject to regulation with respect to rates, service, maintenance of accounting records, and various other matters by the HPUC. The established accounting policies recognize the financial effects of the rate-making and accounting practices and policies of the HPUC. Regulated utility operations are subject to the provisions of ASC 980, Regulated Operations. This guidance requires regulated entities to disclose in their financial statements the authorized recovery of costs associated with regulatory decisions. Accordingly, certain costs that otherwise would normally be charged to expense may, in certain instances, be recorded as an asset in a regulatory entity’s balance sheet. The Hawaii Gas business records regulatory assets as costs that have been deferred for which future recovery through customer rates may be approved by the HPUC in a future proceeding. Regulatory liabilities represent amounts included in rates and collected from customers for costs expected to be incurred in the future.
ASC 980 may, at some future date, be deemed inapplicable because of changes in the regulatory and competitive environments or other factors. If the Company were to discontinue the application of this guidance, the Company would be required to write-off its regulatory assets and regulatory liabilities and would be required to adjust the carrying amount of any other assets, including property, plant, and equipment, that would be deemed not recoverable related to these affected operations. The Company believes its regulated operations in the Hawaii Gas business continue to meet the criteria of ASC 980 and that the carrying value of its regulated property, plant, and equipment is recoverable in accordance with established HPUC rate-making practices.
Income Taxes
MIH is a limited liability company treated as a partnership for tax purposes. Taxable income/losses reported by MIH will be passed-through to the unitholders and reported on a Schedule K-1. MIH does not pay a state or federal income tax. As a partnership, MIH itself will not pay income tax on the gain from the AA Transaction.
As part of the reorganization, the entity holding the businesses comprising MIC's MIC Hawaii segment was distributed to and became directly owned by MIH. For tax purposes, the distribution was deemed to be a sale and unitholders were deemed to have received a distribution of the fair market value of the equity of MIC's MIC Hawaii segment.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
Following the reorganization, the subsidiaries of the Company are owned by an intermediate holding company organized as a limited liability company and classified as a corporation for tax purposes. The intermediate holding company files a combined Hawaii state income tax return and will file a consolidated federal income tax return for the periods after the reorganization.
The intermediate holding company accounts for income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The intermediate holding company and its more than 80% owned subsidiaries will file a consolidated U.S. federal income tax return.
In assessing the need for a valuation allowance, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.
Reclassifications
Certain reclassifications were made to the consolidated financial statements for the prior periods to conform to current year presentation.
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 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 financial statements and disclosures related to the Company's convertible debt instruments. See Note 9, "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
Visitor arrivals to Hawaii, the primary driver of increases in demand for gas in Hawaii, improved sequentially in the fourth quarter of 2021 as increased visitor confidence levels due to the availability of COVID-19 vaccines and a relatively low level of infections in the islands combined to create an attractive environment for visitors from the U.S. mainland. The rate of recovery in the number of visitors to Hawaii in the future remains uncertain. COVID-19 continues to negatively affect the performance of the Hawaii businesses, although the effects have diminished relative to this time last year. The easing of travel restrictions has resulted in an increase in economic activity and the number of primarily domestic visitors to Hawaii, but not to pre-COVID-19 levels. A significant surge in COVID-19 rates could negatively impact the number of visitors to Hawaii, which would adversely impact our operating results.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Impact of COVID-19 – (continued)
Trends in the number of visitors to Hawaii and demand for gas were positive in the fourth quarter of 2021, although the financial performance of the Company continues to be adversely affected relative to pre-COVID-19 periods. The number of visitors to Hawaii increased to 1.9 million and 6.8 million for the quarter and year ended December 31, 2021, respectively, from 497,000 and 2.7 million for the quarter and year ended December 31, 2020, respectively. The resulting improvement in hotel occupancy, restaurants patronage, and use of commercial laundry services contributed to an increase in gas consumption of 29% and 21% during the quarter and year ended December 31, 2021, respectively, versus the comparable periods in 2020. The number of visitors to Hawaii was lower by 25% and 35% in the quarter and year ended December 31, 2021, respectively, and overall gas consumption was lower by 6% and 11% versus the comparable periods in 2019.
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 statements 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.
AA Transaction
On September 23, 2021, MIH completed the AA Transaction for $4.475 billion including cash and the assumption of debt and other transaction and reorganization related obligations. The Company received $3.525 billion from KKR at the closing of the AA Transaction.
The MIH Board elected to return certain proceeds from the AA Transaction to unitholders in a one-time distribution, after a disposition payment by MIH to the Manager of $228.6 million. The Board declared a one-time distribution of $37.386817 per common unit of the Company, paid on October 7, 2021 to unitholders of record as of the close of trading on October 4, 2021.
The sale of Atlantic Aviation was part of the Company's efforts to unlock value for its unitholders. On September 21, 2021, the shareholders of MIC approved the AA Transaction at the Special Meeting and therefore 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 Atlantic Aviation. It was additionally determined that the sale of Atlantic Aviation is considered a strategic shift for the Company that will have a major effect on operations. Accordingly, Atlantic Aviation was classified as a discontinued operation and the Atlantic Aviation segment was eliminated. All prior periods have been restated to reflect these changes.
The Company recognized a book gain on sale of approximately $2.95 billion as a result of the AA Transaction. The Company incurred $50.2 million in transaction costs and a disposition payment of $228.6 million to its Manager, both of which are included in Selling, general and administrative expenses in the consolidated statement of operations.
A summary of assets and liabilities held for sale included in the Company's consolidated balance sheet related to the Atlantic Aviation business ("AA Business") as of December 31, 2020 are as follows ($ in thousands):
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Discontinued Operations and Dispositions – (continued)
| | | | | | | | | | |
| | | | |
| | | | As of December 31, 2020 |
Assets | | | | |
Cash and cash equivalents | | | | $ | 309,955 | |
Restricted cash | | | | 10,121 | |
Accounts receivable, net of allowance for doubtful accounts | | | | 23,749 | |
Other current assets | | | | 20,583 | |
Total current assets | | | | 364,408 | |
Property, equipment, land, and leasehold improvements, net | | | | 556,825 | |
Operating lease assets, net | | | | 313,014 | |
Goodwill | | | | 496,746 | |
Intangible assets, net | | | | 452,664 | |
Other noncurrent assets | | | | 1,345 | |
Total assets | | | | $ | 2,185,002 | |
Liabilities | | | | |
Accounts payable and accrued expenses | | | | $ | 45,702 | |
Current portion of long-term debt | | | | 10,250 | |
Operating lease liabilities - current | | | | 15,138 | |
Income taxes payable, net | | | | 132,113 | |
Other current liabilities | | | | 13,270 | |
Total current liabilities | | | | 216,473 | |
Long-term debt, net of current portion | | | | 976,190 | |
Deferred income taxes | | | | 100,405 | |
Operating lease liabilities - noncurrent | | | | 303,728 | |
Other noncurrent liabilities | | | | 17,034 | |
Total liabilities | | | | $ | 1,613,830 | |
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Discontinued Operations and Dispositions – (continued)
Summarized financial information for discontinued operations included in the Company's consolidated statement of operations related to the AA Business for the years ended December 31, 2021, 2020 and 2019, respectively, are as follows ($ in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
Service revenue | | $ | 678,485 | | | $ | 667,070 | | | $ | 969,198 | |
Cost of services | | (286,078) | | | (238,599) | | | (448,136) | |
Selling, general and administrative expenses | | (195,677) | | | (249,879) | | | (263,255) | |
Depreciation and amortization | | (69,792) | | | (100,112) | | | (106,255) | |
Interest expense, net | | (32,036) | | | (64,987) | | | (76,856) | |
Gain on sale of business | | 2,953,873 | | | — | | | — | |
Other income, net | | 2,036 | | | 323 | | | 3,005 | |
Net income from discontinued operations before income taxes | | 3,050,811 | | | 13,816 | | | 77,701 | |
Provision for income taxes | | (66,458) | | | (122,642) | | | (26,377) | |
| | | | | | |
Net income (loss) from discontinued operations attributable to MIH | | $ | 2,984,353 | | | $ | (108,826) | | | $ | 51,324 | |
IMTT Transaction
On December 23, 2020, the Company completed the sale of IMTT 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 used to: (i) pay a special dividend of $11.00 per unit 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 a portion of its 2.00% Convertible Senior Notes.
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 related to IMTT. It was additionally determined that the sale of IMTT was considered a strategic shift for the Company that had a major effect on operations. Accordingly, IMTT was classified as a discontinued operation and the IMTT segment was eliminated. All prior periods were 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 were 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 $126.2 million. The reduction primarily reflected the tax benefit of the Disposition Payment and the final determination of the tax basis of its investment in IMTT, which increased due to higher than forecasted taxable income generated prior to completion of the IMTT Transaction, as fewer assets were placed in service for tax purposes resulting in lower bonus tax depreciation during the Company’s ownership period.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Discontinued Operations and Dispositions – (continued)
Summarized financial information for discontinued operations included in the Company’s consolidated statement of operations related to the IMTT segment for the years ended December 31, 2020 and 2019 are as follows ($ in thousands):
| | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2020 | | 2019 |
Service revenue | | $ | 488,284 | | | $ | 515,102 | |
Cost of services | | (192,884) | | | (204,146) | |
Selling, general and administrative expenses | | (38,094) | | | (33,158) | |
Impairment | | (750,000) | | | — | |
Depreciation and amortization | | (102,193) | | | (132,768) | |
Interest expense, net | | (42,715) | | | (47,930) | |
Other (expense) income, net(1) | | (60,874) | | | 1,116 | |
Net (loss) income from discontinued operations before income taxes | | (698,476) | | | 98,216 | |
Provision for income taxes | | (23,777) | | | (23,866) | |
Net (loss) income from discontinued operations attributable to MIH | | $ | (722,253) | | | $ | 74,350 | |
(1)Other income, net, includes loss of approximately $69.6 million from the sale of IMTT in 2020.
Renewable Businesses Sale
During the fourth quarter of 2018, the Company commenced a sale process involving its portfolios of 142 megawatts ("MW") (gross) of solar generation assets and 203 MW (gross) of wind generation assets. In July 2019, the Company completed the sales of its wind power generating portfolio and all but one of the assets in its solar power generating portfolio. The sale of the remaining solar facility closed during September 2019. Upon closing of the transactions involving the portfolios of operating solar and wind assets, the Company deconsolidated $295.1 million of long-term debt. In July 2019, the Company also completed the sale of its majority interest in a renewable power development business. The Company may be entitled to a deferred purchase price from the sale of its interest in the renewable power development business based on the sale of certain projects by the purchaser in the future.
The aggregate gross proceeds to the Company from the above sales were $275.2 million, or $223.8 million net of taxes and transaction related expenses. Upon closing of the transactions, the Company recorded a pre-tax gain of $81.7 million excluding any transaction costs. The Company incurred $9.7 million in professional fees in relation to these transactions, which is included in Selling, general and administrative expenses in the consolidated statement of operations. In 2019, the Company recorded approximately $41.7 million in current tax expense primarily related to the gain on sale.
The combination of the disposal of Bayonne Energy Center in 2018 and the commencement of the sale process of substantially all of its portfolio of solar and wind facilities represented a strategic shift for the Company which will have a major effect on operations. Accordingly, beginning in the fourth quarter of 2018, these businesses were classified as discontinued operations and the Contracted Power segment was eliminated. There was no write-down of the carrying amount of the solar and wind facility assets as a result of this change in classification. The assets and liabilities of the solar and wind facilities have been classified as held for sale in the consolidated balance sheets up until the date those assets were disposed.
During the first quarter of 2019, the Company also commenced the sale of its majority interest in its renewable power development business that was reported as part of the Company’s Corporate and Other segment in the fourth quarter of 2018. Accordingly, beginning in the first quarter of 2019, the results of this business were classified as discontinued operations and the assets and liabilities of this business were classified as held for sale in the consolidated balance sheets through the date of sale. The Company did not restate the prior period related to the commencement of the sale process involving its majority interest in a renewable power development business as the disposition was insignificant. A remaining relationship with a third-party developer of renewable power facilities had been reported as a component of Corporate and Other through the expiration of the relationship in July 2019.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Discontinued Operations and Dispositions – (continued)
Summarized financial information for discontinued operations included in the Company’s consolidated statement of operations related to its former Contracted Power segment for 2019 is as follows ($ in thousands):
| | | | | |
| Year ended December 31, |
2019 |
Product revenue | $ | 44,411 | |
Cost of product sales | (7,389) | |
Selling, general and administrative expenses | (19,148) | |
Depreciation and amortization | (608) | |
Interest expense, net | (12,888) | |
Other income, net(1) | 81,156 | |
Net income from discontinued operations before income taxes | 85,534 | |
Provision for income taxes | (32,803) | |
Net income from discontinued operations | 52,731 | |
Less: net loss attributable to noncontrolling interests | (3,109) | |
Net income from discontinued operations attributable to MIH | $ | 55,840 | |
(1)Other income, net, includes gains of approximately $80.2 million from the sale of renewable businesses in 2019.
5. Leases
The Company has operating leases primarily for land, buildings, office space, and certain office equipment under non-cancellable lease agreements. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. Some leases include one or more options to renew, with renewal terms that can extend the lease term from one to 10 years or more. The exercise of these lease renewal options is at the Company’s sole discretion. Cash paid for operating leases is reported in operating activities on the consolidated statement of cash flows. On December 31, 2021, 2020 and 2019, the Company did not have any finance leases.
The Company’s operating lease expenses recorded within the consolidated statement of operations for 2021, 2020 and 2019 were as follows ($ in thousands):
| | | | | | | | | | | | | | | | | | | | |
Income Statement Classification | | Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| | | | | | |
Cost of product sales | | $ | 2,267 | | | $ | 2,301 | | | $ | 2,295 | |
Selling, general and administrative | | 244 | | 248 | | 240 |
Total operating lease expense(1) | | $ | 2,511 | | | $ | 2,549 | | | $ | 2,535 | |
(1)Includes expense related to leases less than one year of $105,000 for both 2021 and 2020, and $179,000 for 2019. Includes variable lease expense of $323,000, $345,000 and $330,000 in 2021, 2020 and 2019, respectively.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Leases – (continued)
On December 31, 2021, 2020 and 2019, the weighted-average remaining operating lease term was 10.0 years, 9.7 years and 9.8 years, respectively, with a weighted average discount rate of 5.3%, 4.8% and 4.7%, respectively. The following table represents the future maturities of lease liabilities on December 31, 2021 ($ in thousands):
| | | | | | | | |
2022 | | $ | 2,350 | |
2023 | | 2,230 |
2024 | | 1,990 |
2025 | | 1,731 |
2026 | | 1,672 |
Thereafter | | 6,936 |
Total lease payment | | 16,909 | |
Less: interest | | (4,305) | |
Present value of lease liability | | $ | 12,604 | |
6. Income per Unit
Following is a reconciliation of the basic and diluted (loss) income per unit computations ($ in thousands, except unit and per unit data):
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
2021 | | 2020 | | 2019 |
Numerator: | | | | | |
| | | | | |
| | | | | |
| | | | | |
Basic and diluted net loss from continuing operations attributable to MIH | $ | (300,485) | | | $ | (96,782) | | | $ | (25,006) | |
Basic and diluted net income (loss) from discontinued operations attributable to MIH | $ | 2,984,353 | | | $ | (831,079) | | | $ | 181,514 | |
Denominator: | | | | | |
Weighted average number of units outstanding: basic | 87,791,951 | | | 86,951,642 | | | 86,178,212 | |
| | | | | |
| | | | | |
| | | | | |
Weighted average number of units outstanding: diluted | 87,791,951 | | | 86,951,642 | | | 86,178,212 | |
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
2021 | | 2020 | | 2019 |
Income per unit: | | | | | |
Basic loss per unit from continuing operations attributable to MIH | $ | (3.42) | | | $ | (1.11) | | | $ | (0.29) | |
Basic income (loss) per unit from discontinued operations attributable to MIH | 33.99 | | | (9.56) | | | 2.11 | |
Basic income (loss) per unit attributable to MIH | $ | 30.57 | | | $ | (10.67) | | | $ | 1.82 | |
| | | | | |
Diluted loss per unit from continuing operations attributable to MIH | $ | (3.42) | | | $ | (1.11) | | | $ | (0.29) | |
Diluted income (loss) per unit from discontinued operations attributable to MIH | 33.99 | | | (9.56) | | | 2.11 | |
Diluted income (loss) per unit attributable to MIH | $ | 30.57 | | | $ | (10.67) | | | $ | 1.82 | |
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Income per Unit – (continued)
The following represents the weighted average potential dilutive common units that were excluded from the diluted income per unit calculation:
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
2021 | | 2020 | | 2019 |
Restricted unit grants | 109,185 | | | 108,760 | | | 26,089 | |
2.875% Convertible Senior Notes due July 2019(1) | — | | | — | | | 1,321,243 | |
2.00% Convertible Senior Notes due October 2023(2) | 1,689,203 | | | 3,634,173 | | | 3,634,173 | |
Total | 1,798,388 | | | 3,742,933 | | | 4,981,505 | |
(1) On July 15, 2019, the Company fully repaid the outstanding balance on the 2.875% Convertible Senior Notes due July 2019 at maturity using cash on hand. The weighted average units reflect the “if-converted” impact to dilutive common units through the maturity date of the Notes.
(2) During 2021, the Company repurchased $395.7 million in aggregate principal amount of the 2.00% Convertible Senior Notes, of which $358.6 million and $26.9 million were repurchased in tender offers on March 16, 2021 and October 22, 2021, respectively. For 2021, the weighted average units reflect the “if-converted” dilutive impact to common units for the repurchased Notes for the period that the Notes were outstanding and the impact of the increase to the conversion rate following the special dividend pertaining to the IMTT Transaction and the one-time distribution pertaining to the AA Transaction paid on January 8, 2021 and October 7, 2021, respectively. See Note 9, “Long-Term Debt”, for further discussions.
7. Property, Equipment, Land, and Leasehold Improvements
Property, equipment, land, and leasehold improvements on December 31, 2021 and 2020 consist of the following ($ in thousands):
| | | | | | | | | | | |
| As of December 31, |
2021 | | 2020 |
Land | $ | 10,710 | | | $ | 10,710 | |
Buildings | 4,427 | | | 4,142 | |
Leasehold and land improvements | 20,003 | | | 19,824 | |
Machinery and equipment | 376,924 | | | 363,379 | |
Furniture and fixtures | 3,740 | | | 3,664 | |
Construction in progress | 11,313 | | | 11,524 | |
| 427,117 | | | 413,243 | |
Less: accumulated depreciation | (129,927) | | | (115,868) | |
Property, equipment, land, and leasehold improvements, net | $ | 297,190 | | | $ | 297,375 | |
8. Intangible Assets and Goodwill
Intangible assets on December 31, 2021 and 2020 consist of the following ($ in thousands):
| | | | | | | | | | | |
| As of December 31, |
2021 | | 2020 |
| | | |
| | | |
Customer relationships | $ | 7,400 | | | $ | 7,400 | |
Trade names | 8,500 | | | 8,500 | |
Leasehold rights | 100 | | | 100 | |
| | | |
| 16,000 | | | 16,000 | |
Less: accumulated amortization | (11,502) | | | (11,077) | |
Intangible assets, net | $ | 4,498 | | | $ | 4,923 | |
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Intangible Assets and Goodwill – (continued)
On December 31, 2021, the Company had $4.5 million in trade names net of accumulated amortization related to "The Gas Company", which is being amortized over its estimated useful life.
Amortization expense of intangible assets totaled $425,000 in 2021, 2020, and 2019, respectively. The estimated future amortization expense for amortizable intangible assets to be recognized are ($ in thousands):
| | | | | |
| |
| |
2022 | $ | 425 | |
2023 | 425 | |
2024 | 425 | |
2025 | 425 | |
2026 | 425 | |
Thereafter | 2,373 | |
Total | $ | 4,498 | |
The goodwill balance on December 31, 2021 comprised the following ($ in thousands):
| | | | | | | | | | | | | | | | | |
| Atlantic Aviation | | 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) | |
Transfer to asset held for sale | (496,746) | | | — | | | (496,746) | |
Balance on December 31, 2020 | — | | | 120,193 | | | 120,193 | |
| | | | | |
Balance on December 31, 2021 | $ | — | | | $ | 120,193 | | | $ | 120,193 | |
The Company tests for goodwill impairment annually on October 1 of each year and between annual tests if a triggering event indicates the possibility of an impairment. With the signing of the Merger, the Company will evaluate goodwill for impairment having regard to the Merger transaction value. See Note 1, "Organization and Description of Business" for discussions on the Merger. On December 31, 2021 and 2020, there were no new triggering events that indicated impairment.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-Term Debt
The Company is capitalized in part using floating rate bank debt with medium-term maturities generally between four and seven years. The Company may hedge the floating rate exposure for these facilities. The Company has also used longer dated private placement debt and other forms of capital including bond or hybrid debt instruments to capitalize its operations. In general, the debt facilities are non-recourse to the Company and there are no cross-collateralization or cross-guarantee provisions in these facilities. All of the term debt facilities described below contain customary financial covenants, including maintaining certain financial ratios, and limitations on capital expenditures and additional debt. The facilities include events of default, representations and warranties, and other covenants that are customary for facilities of this type. For a description of related party transactions associated with the Company’s long-term debt, see Note 13, “Related Party Transactions”.
On December 31, 2021 and 2020, the Company’s consolidated long-term debt comprised of the following ($ in thousands):
| | | | | | | | | | | |
| As of December 31, |
2021 | | 2020 |
| | | |
Term Loan - Hawaii Gas | $ | 80,000 | | | $ | 180,000 | |
Term Loan - Solar Facilities in Hawaii | 12,698 | | | 13,758 | |
2.00% Convertible Senior Notes | 6,821 | | | 391,252 | |
Total | 99,519 | | | 585,010 | |
Current portion | (1,107) | | | (1,060) | |
Long-term portion | 98,412 | | | 583,950 | |
Unamortized debt financing costs(1) | (757) | | | (5,781) | |
Long-term portion less unamortized debt discount and debt financing costs | $ | 97,655 | | | $ | 578,169 | |
(1)The weighted average remaining life of the debt financing costs on December 31, 2021 was 2.9 years.
The following table represents the future maturities of long-term debt balances on December 31, 2021 ($ in thousands).
| | | | | |
2022 | $ | 1,107 | |
2023 | 7,976 | |
2024 | 81,204 | |
2025 | 1,258 | |
2026 | 7,974 | |
Thereafter | — | |
Total | $ | 99,519 | |
2.00% Convertible Senior Notes due October 2023 (2.00% Convertible Senior Notes)
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, common units of the Company, 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 Common Units 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 debt 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 Unitholders’ 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
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-Term Debt – (continued)
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 that date, net of taxes.
During 2021, the Company repurchased $395.7 million in aggregate principal amount of the 2.00% Convertible Senior Notes, of which $358.6 million and $26.9 million were repurchased in tender offers on March 16, 2021 and October 22, 2021, respectively. In connection with the repurchases, the Company incurred $1.2 million of transaction costs and wrote-off $3.7 million of debt financing costs recorded in Selling, general and administrative expenses and Interest Expense, respectively, in the consolidated statements of operations.
On December 31, 2021, the outstanding balance of the liability component of the 2.00% Convertible Senior Notes was $6.8 million which approximated its fair value. The conversion rate was 162.9223 common units per $1,000 principal amount on December 31, 2021.
The 2.00% Convertible Senior Notes consisted of the following ($ in thousands):
| | | | | | | | | | | |
| As of December 31, |
2021(1) | | 2020 |
Liability Component: | | | |
Principal | $ | 6,821 | | | $ | 402,500 | |
Unamortized debt discount | — | | | (11,248) | |
Long-term debt, net of unamortized debt discount | 6,821 | | | 391,252 | |
Unamortized debt financing costs | — | | | (4,134) | |
Net carrying amount | $ | 6,821 | | | $ | 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 2021, 2020, and 2019, total interest expense recognized related to the 2.00% Convertible Senior Notes consisted of the following ($ in thousands):
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
2021 | | 2020 | | 2019 |
Contractual interest expense | $ | 2,171 | | | $ | 8,050 | | | $ | 8,050 | |
Amortization of debt discount | — | | | 3,858 | | | 3,741 | |
Amortization of debt financing cost | 413 | | | 1,503 | | | 1,503 | |
Write-off of debt financing cost | 4,016 | | | — | | | — | |
Total interest expense | $ | 6,600 | | | $ | 13,411 | | | $ | 13,294 | |
The key terms of the 2.00% Convertible Senior Notes are summarized in the table below.
| | | | | | | | | | |
Facility Terms | | | | 2.00% Convertible Senior Notes |
| | | | |
Amount outstanding on December 31, 2021 | | | | $6.8 million |
Maturity | | | | October 2023 |
Amortization | | | | Payable at maturity or convertible at the holder’s option into cash, the Company’s units, or a combination thereof, only upon satisfaction of one or more conditions set forth in the indenture |
Interest Rate | | | | 2.00% payable on April 1st and October 1st of each year |
| | | | |
Security | | | | Unsecured |
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Long-Term Debt – (continued)
Hawaii Gas
On February 10, 2016, Hawaii Gas completed the refinancing of its existing $80.0 million term loan and $60.0 million revolving credit facility. The $80.0 million term loan bears interest at a variable rate of LIBOR plus an applicable margin between 1.00% and 1.75%. The variable rate component of the debt was fixed at 0.99% using an interest rate swap contract, that expired upon maturity in February 2020. The revolving credit facility bears interest at a variable rate of LIBOR plus an applicable margin between 1.00% and 1.75% and is unhedged. In February 2018, Hawaii Gas exercised the second of two one-year extensions related to its $80.0 million secured term loan facility and its $60.0 million revolving credit facility extending their respective maturities to February 2023. During the quarter ended June 30, 2021, Hawaii Gas extended the maturity on its term loan and revolving credit facility from February 2023 to February 2024. The $60.0 million revolving credit facility was undrawn on December 31, 2021 and 2020.
On December 31, 2020, Hawaii Gas also had $100.0 million of fixed rate senior notes outstanding that had a fair value of approximately $105.0 million. On April 19, 2021, Hawaii Gas fully repaid all of its $100.0 million senior secured notes outstanding and incurred a $4.7 million 'make-whole' payment and wrote-off $154,000 of debt financing costs both recorded in Interest Expense in the consolidated statement of operations.
The key terms of the term loan and revolving credit facility of Hawaii Gas are summarized in the table below.
| | | | | | | | | | | | | | | | |
Facility Terms | | Holding Company Debt | | | Operating Company Debt |
Borrowers | | HGC Holdings LLC ("HGC") | | | | The Gas Company, LLC ("TGC") |
Facilities | | $80.0 million term loan (fully drawn at December 31, 2021) | | | | $60.0 million revolving credit facility (undrawn at December 31, 2021) |
Maturity | | February 2024 | | | | February 2024 |
Amortization | | Payable at maturity | | | | Revolving, payable at maturity |
Interest Rate | | LIBOR plus 1.25% on December 31, 2021 | | | | LIBOR plus 1.00% on December 31, 2021 |
Commitment Fees | | — | | | | 0.175% on the undrawn portion |
Collateral | | First lien on all assets of HGC and its subsidiaries | | | | First lien on all assets of TGC and its subsidiaries |
Solar Facilities
In July 2016, the solar facilities in Hawaii entered into a ten year, $18.0 million amortizing term loan facility. The interest rate on this term loan facility floats at LIBOR plus 2.00%. The interest rate was fixed at 3.38% using an interest rate swap contract through June 30, 2026. On December 31, 2021 and 2020, the outstanding balance on the term loan was $12.7 million and $13.8 million, respectively.
10. Derivative Instruments and Hedging Activities
From time to time, the Company enters into interest rate agreements to minimize potential variations in cash flows resulting from fluctuations in interest rates and their impact on its variable-rate debt. The Company does not enter into derivative instruments for any purpose other than economic interest rate hedging. That is, the Company does not speculate using derivative instruments. In addition, Hawaii Gas enters into commodity hedge contracts to mitigate the impact of fluctuations in LPG prices on its cash flows.
By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. Conversely, when the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, it does not pose a credit risk. The Company minimizes the credit risk in derivative instruments by entering into transactions with creditworthy counterparties.
Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. The market risk associated with interest rates is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Derivative Instruments and Hedging Activities – (continued)
Interest Rate Contracts
The Company has in place variable-rate debt. 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 currently in place, the Company receives variable interest rate payments and makes fixed rate interest payments, thereby creating the equivalent of fixed-rate debt for the portion of the debt that is swapped.
The Company does not use hedge accounting. All movements in the fair value of the interest rate derivatives are recorded directly through earnings.
Hawaii Gas had an $80.0 million interest rate swap that fully hedged its term loan. The interest rate swap expired in February 2020. To finance its solar facilities, the Company entered into a ten year, amortizing term loan facility that floats at LIBOR plus 2.00%. This term loan facility is fully hedged with an amortizing interest rate swap contract that is scheduled to amortize concurrently with the term loan and fixes the interest rate at 3.38%.
Commodity Price Hedges
The risks associated with fluctuations in the prices that Hawaii Gas pays for LPG is principally a result of market forces reflecting changes in supply and demand. 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 its exposure to the volatility of the business’ LPG wholesale market price, 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 a portion of forecasted purchases of LPG are generally settled at expiration of the contract. On December 31, 2021, Hawaii Gas had 60.7 million gallons of LPG hedged through May 2024.
Financial Statement Location Disclosure for Derivative Instruments
The Company measures derivative instruments at fair value using the income approach which discounts the future net cash settlements expected under the derivative contracts to a present value. These valuations use primarily observable (level 2) inputs, including contractual terms, interest rates, and yield curves observable at commonly quoted intervals.
The Company’s fair value measurements of its derivative instruments and the related location of the assets and liabilities within the consolidated balance sheets on December 31, 2021 and 2020 were ($ in thousands):
| | | | | | | | | | | | | | |
Balance Sheet Classification | | Assets (Liabilities) at Fair Value as of December 31, |
| 2021 | | 2020 |
Fair value of derivative instruments - other current assets | | $ | 909 | | | $ | 935 | |
Fair value of derivative instruments - other noncurrent assets | | 470 | | | — | |
Total derivative contracts - assets | | $ | 1,379 | | | $ | 935 | |
| | | | |
Fair value of derivative instruments - other current liabilities | | $ | (122) | | | $ | (172) | |
Fair value of derivative instruments - other noncurrent liabilities | | — | | | (449) | |
Total derivative contracts - liabilities | | $ | (122) | | | $ | (621) | |
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Derivative Instruments and Hedging Activities – (continued)
The Company’s hedging activities during 2021, 2020, and 2019 and its related location within the consolidated statement of operations were ($ in thousands):
| | | | | | | | | | | | | | | | | | | | |
Income Statement Classification | | Gain (Loss) Recognized for the Year ended December 31, |
| 2021 | | 2020 | | 2019 |
| | | | | | |
Interest expense – interest rate swaps | | $ | 333 | | | $ | (912) | | | $ | (875) | |
Cost of product sales – commodity swaps | | 5,946 | | | 883 | | | (10,082) | |
Total | | $ | 6,279 | | | $ | (29) | | | $ | (10,957) | |
All of the Company’s derivative instruments are collateralized by the assets of the respective businesses.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Unitholders’ Equity
Classes of Equity
The Company is authorized to issue (i) 500,000,000 common units, (ii) 100 special units, and (iii) 100,000,000 preferred units. On December 31, 2021, the Company had 88,343,762 common units issued and outstanding and 100 special units issued to its Manager and outstanding. There was no preferred units issued or outstanding on December 31, 2021. Each outstanding common unit of the Company is entitled to one vote on any matter with respect to which holders of units are entitled to vote.
The sole purpose for the special units was to preserve the Manager’s right to appoint one director to serve as the chairman of the Board. The special units is not listed on any stock exchange and is non-transferable. Holders of special units are not entitled to any dividends or to share in any distribution of assets upon the liquidation or dissolution of the Company.
Distributions
The Company’s Board have made or declared the following distributions during 2021, 2020, and 2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Declared | | Period Covered | | $ per Unit | | Record Date | | Payable Date |
September 23, 2021 | | (1) | | $ | 37.386817 | | | October 4, 2021 | | October 7, 2021 |
December 23, 2020 | | (2) | | 11.00 | | | January 5, 2021 | | January 8, 2021 |
February 14, 2020 | | Fourth quarter 2019 | | 1.00 | | | March 6, 2020 | | March 11, 2020 |
October 29, 2019 | | Third quarter 2019 | | 1.00 | | | November 11, 2019 | | November 14, 2019 |
July 30, 2019 | | Second quarter 2019 | | 1.00 | | | August 12, 2019 | | August 15, 2019 |
April 29, 2019 | | First quarter 2019 | | 1.00 | | | May 13, 2019 | | May 16, 2019 |
February 14, 2019 | | Fourth quarter 2018 | | 1.00 | | | March 4, 2019 | | March 7, 2019 |
(1)One-time distribution declared and paid out of the proceeds from the AA Transaction. Units of MIH traded with "due bills" attached through October 7, 2021 and traded ex-distribution on October 8, 2021.
(2)Special dividend declared and paid out of the proceeds from the IMTT Transaction. Units of MIH traded with “due-bills” attached through January 8, 2021 and traded ex-dividend on January 11, 2021.
As a result of the completion of and distribution of certain proceeds from the AA Transaction in September 2021 and the signing of the Merger in June 2021, the Company does not expect to pay further distributions.
The distributions paid have been recorded as a reduction to Common Units Paid in Capital in the unitholders’ equity section of the consolidated balance sheets. The one-time distribution declared and paid out of the proceeds from the AA Transaction was recorded as a reduction to Retained Earnings in the unitholders' equity section of the consolidated balance sheets.
2014 Independent Directors Equity Plan ("2014 Plan")
In 2014, MIC adopted, and MIC’s stockholders approved, the 2014 Plan to replace the 2004 Independent Directors Equity Plan, which expired in December 2014. The purpose of this plan is to promote the long-term growth and financial success of the Company by attracting, motivating, and retaining independent directors of outstanding ability. Only the Company’s independent directors may participate in the 2014 Plan. The only type of award that may be granted under the 2014 Plan is an award of director shares. Each share is an unsecured promise to transfer one share on the settlement date, subject to satisfaction of the applicable terms and conditions. During the quarter ended June 30, 2021, the number of units available under the 2014 Plan was increased by 70,668 in accordance with the terms of the Plan as a result of the special dividend paid in connection with the IMTT Transaction. The maximum number of units available for issuance under the 2014 Plan is 370,668 units, of which 227,832 units remained available for issuance on December 31, 2021. Subsequent to December 31, 2021, the number of units available under the 2014 Plan was increased to 2,481,999 in accordance with the terms of the Plan as a result of the one-time distribution paid in connection with the AA Transaction. The aggregate grant date fair value of awards granted to an independent director during any single fiscal year (excluding awards made at the election of the independent director in lieu of all or a portion of annual and committee cash retainers) may not exceed $350,000. The 2014 Plan does not provide a formula
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Unitholders’ Equity – (continued)
for the determination of awards and the Compensation Committee will have the authority to determine the size of all awards under the 2014 Plan, subject to the limits on the number of director share units that may be granted annually.
Since 2019, the Company has granted and issued the following stock to the Board under the 2014 Plan:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Date of Grant | | Units Granted | | Grant Date Fair Value ($ per unit) | | Date of Vesting | | | | | | |
May 15, 2019 | | 21,390 | | $ | 42.01 | | | May 13, 2020 | | | | | | |
May 14, 2020 | | 32,112 | | 27.43 | | | May 11, 2021 | | | | | | |
March 9, 2021(1) | | 12,024 | | 30.48 | | | May 11, 2021 | | | | | | |
May 19, 2021 | | 25,974 | | 34.90 | | | September 23, 2021(2) | | | | | | |
(1)Represents additional restricted stock unit grants to independent directors to preserve the economic value of the unvested grants after giving effect to the special dividend made in connection with the IMTT Transaction.
(2)These director share units fully vested as a result of the AA Transaction, which constituted a change in control as defined in the 2014 Plan.
Compensation expense related to the director share units was $1.3 million, $880,000, and $963,000 in 2021, 2020 and 2019, respectively.
2016 Omnibus Employee Incentive Plan ("2016 Plan")
On May 18, 2016, the Company adopted the 2016 Plan. The 2016 Plan provides for the issuance of equity awards to attract, retain, and motivate employees, consultants, and others who perform services for the Company and its subsidiaries. Under the 2016 Plan, the Compensation Committee determines the persons who will receive awards, the time at which they are granted, and the terms of the awards. Type of awards include stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, cash-based awards, and other stock-based awards. Common units underlying forfeited awards are available for future grants. On March 28, 2019, the Company’s Board adopted Amendment No. 1 to the 2016 Plan (the "Amendment"), which was approved in May 2019 by the Company’s unitholders at the 2019 Annual Meeting of Shareholders. The Amendment, among other things, increased the number of common units available for grant under the 2016 Plan from 500,000 to 1,500,000. Subsequent to December 31, 2021, the number of units available increased to 19,259,340 in accordance with the term of the 2016 Plan as a result of the special dividend paid in connection with the IMTT Transaction and the one-time distribution in connection with the AA Transaction.
In connection with the reorganization, MIH assumed all obligations under MIC’s stock incentive plans. All rights of participants to acquire shares of common stock of MIC under the stock incentive plans converted into rights to acquire common units of MIH in accordance with the terms of the Stock Incentive Plans.
Short-Term Incentive Plan ("STIP") for MIH Operating Businesses — Restricted Stock Units ("RSUs")
During the quarter ended March 31, 2019, the Company established the STIP to provide cash and stock-based incentives to eligible employees of its operating businesses under the Company’s 2016 Plan. In general, the cash component comprises approximately 75% of any incentive award and is paid in a lump-sum. The remaining 25% of any incentive award is in the form of RSUs representing an interest in the common units of the Company. RSUs are granted following assessment of performance against Key Performance Indicators post the one-year performance period and vest in two equal annual installments following the grant date.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Unitholders’ Equity – (continued)
The following represents unvested STIP RSU grants through December 31, 2021:
| | | | | | | | | | | |
| STIP Grants |
| Number of RSUs (in units) | | Weighted Average Grant-Date Fair Value (per unit) |
Unvested balance on December 31, 2019 | — | | | $ | — | |
Granted | 55,661 | | 24.50 | |
Forfeited | (1,468) | | 24.50 | |
Vested(1) | (19,566) | | 32.57 | |
Unvested balance on December 31, 2020 | 34,627 | | $ | 24.50 | |
Granted(2) | 286,013 | | 4.89 | |
Forfeited | (215) | | 24.92 | |
Vested(3) | (68,776) | | | 31.03 | |
Unvested balance on December 31, 2021 | 251,649 | | $ | 2.49 | |
(1)As a result of the IMTT Transaction, the Company's Compensation Committee and Board approved the accelerated vesting of the STIP RSU grants for eligible employees of IMTT.
(2)During the quarter ended March 31, 2021, the Company granted an additional 12,614 RSUs to preserve the economic value of the unvested RSUs after giving effect to the special dividend made in connection with the IMTT Transaction. During the quarter ended December 31, 2021, the Company granted an additional 228,943 RSUs to preserve the economic value of the unvested RSUs after giving effect to the one-time distribution made in connection with the AA Transaction.
(3)As a result of the AA Transaction, the Company's Compensation Committee and Board approved the accelerated vesting of the STIP RSU grants for eligible employees of Atlantic Aviation and MIC Global Services ("MGS"). These RSUs were fully vested on September 23, 2021.
On December 31, 2021, the grant date fair value of the unvested awards was $628,000, and is expected to be recognized over a weighted-average period of 1.0 year. Compensation expense related to the STIP RSUs was $2.1 million and $1.1 million for 2021 and 2020, respectively (which includes the former eligible participants of IMTT, Atlantic Aviation, and MGS). No compensation expense related to the STIP RSUs was recorded in 2019.
As a result of the IMTT Transaction, the Company's Compensation Committee and Board of Directors approved an accelerated vesting of STIP RSU grants relating to former eligible employees of IMTT. These RSUs were fully vested in common units on December 23, 2020. This acceleration changed the terms of the vesting conditions and are therefore treated as modifications in accordance with ASC 718, Stock Based Compensation. This resulted in $398,000 of additional compensation expense recorded in discontinued operations during 2020.
As a result of the AA Transaction, the Company's Compensation Committee and Board of Directors approved an accelerated vesting of STIP RSU grants relating to former eligible employees of Atlantic Aviation and MGS. These RSUs were fully vested in common units on September 23, 2021. This acceleration changed the terms of the vesting conditions and are therefore treated as modifications in accordance with ASC 718, Stock Based Compensation. This resulted in $965,000 of additional compensation expense recorded in discontinued operations during 2021.
From time to time, the Company can issue RSUs to award or retain employees, or to attract new employees, or other reasons by providing special grants of RSUs. Vesting dates and terms can vary for each award at the discretion of the Company.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Unitholders’ Equity – (continued)
The following represents unvested Special RSUs granted through December 31, 2021:
| | | | | | | | | | | |
| Special RSU Grants |
| Number of RSUs (in units) | | Weighted Average Grant-Date Fair Value (per unit) |
Unvested balance on December 31, 2019 | 6,067 | | | $ | 40.30 | |
Granted | 4,602 | | | 23.50 | |
Vested | (5,702) | | | 26.74 | |
Unvested balance on December 31, 2020 | 4,967 | | | $ | 40.30 | |
Granted(1) | 1,860 | | — | |
Vested | (6,827) | | 29.32 | |
Unvested balance on December 31, 2021 | — | | $ | — | |
(1)During the quarter ended March 31, 2021, the Company granted an additional 1,860 RSUs to preserve the economic value of the unvested RSUs after giving effect to the special dividend made in connection with the IMTT Transaction.
Compensation expense related to the Special RSU grants was $200,000, $152,000, and insignificant for 2021, 2020, and 2019, respectively.
Long-Term Incentive Plan ("LTIP") for MIH Operating Businesses — Performance Stock Units ("PSUs")
During the quarter ended March 31, 2019, the Company established the LTIP pursuant to which it may make stock-based incentive awards to eligible employees of its operating businesses. The awards would take the form of PSUs convertible into common units of the Company as authorized under its 2016 Plan. The number of PSUs a participant may be awarded reflects a target level of performance by the participant. The participant may be awarded more (over performance limit) or less (threshold limit) than the target number of PSUs based on their achievements relative to Key Performance Indicators during the three-year performance period. Following finalization of the participant’s performance review at the end of the third year of the program, the Company may award the PSUs.
The following represents unvested LTIP grants through December 31, 2021 at the target level of performance:
| | | | | | | | | | | |
| LTIP Grants (at Target) |
| Number of PSUs (in units) | | Weighted Average Grant-Date Fair Value (per unit) |
Unvested balance on December 31, 2019 | 125,194 | | $ | 39.62 | |
| | | |
Forfeited | (18,965) | | 39.70 |
Vested(1) | (34,708) | | | 39.88 | |
Unvested balance on December 31, 2020 | 71,521 | | $ | 39.47 | |
Granted(2) | 1,205,242 | | | 5.73 | |
Forfeited(3) | (86,384) | | 31.39 |
Vested(3) | (135,493) | | | 37.93 | |
Unvested balance on December 31, 2021 | 1,054,886 | | $ | 2.76 | |
(1)As a result of the IMTT Transaction, the Company's Compensation Committee and Board approved the accelerated vesting of the LTIP PSU grants for former eligible employees of IMTT.
(2)During the quarter ended March 31, 2021, the Company granted an additional 26,004 PSUs to preserve the economic value of the unvested PSUs after giving effect to the special dividend made in connection with the IMTT Transaction. During the quarter ended December 31, 2021, the Company granted an additional 959,700 PSUs to preserve the economic value of the unvested PSUs after giving effect to the one-time distribution made in connection with the AA Transaction.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Unitholders’ Equity – (continued)
(3)As a result of the AA Transaction, the Company's Compensation Committee and Board approved the accelerated vesting of the LTIP PSU grants for former eligible employees of Atlantic Aviation and MGS. These PSUs were fully vested on September 23, 2021.
On December 31, 2021, depending upon actual performance, the number of PSUs to be issued will vary from zero to 1,846,051, net of forfeitures. On December 31, 2021, the grant date fair value of the unvested awards was $2.9 million, reflecting target performance by all participants. In 2021, 2020, and 2019, the Company recognized $5.7 million, $2.1 million and $911,000 (which includes the former eligible participants of IMTT, Atlantic Aviation, and MGS), respectively, of compensation expense related to the LTIP. On December 31, 2021, the unrecognized compensation cost related to unvested PSU awards was approximately $1.3 million at target level performance. If target level performance is achieved, the unrecognized cost is expected to be recognized over a weighted-average period of 1.4 years.
As a result of the IMTT Transaction, the Company's Compensation Committee and Board of Directors approved an accelerated vesting of LTIP PSU grants relating to former eligible employees of IMTT. These PSUs were vested prorated in shares on December 23, 2020. This acceleration changed the terms of the vesting conditions and are therefore treated as modifications in accordance with ASC 718. As a result, the participants forfeited 13,549 shares and decreased future compensation expense by $540,000.
As a result of the AA Transaction, the Company's Compensation Committee and Board of Directors approved an accelerated vesting of LTIP PSU grants relating to former eligible employees of Atlantic Aviation and MGS. These PSUs were fully vested in common units on September 23, 2021. This acceleration changed the terms of the vesting conditions and are therefore treated as modifications in accordance with ASC 718, Stock Based Compensation. As a result, the participants forfeited 85,962 shares and decreased future compensation expense by $1.7 million.
Accumulated Other Comprehensive Loss, net of taxes
The following represents the changes and balances to the components of accumulated other comprehensive loss, net of taxes, during 2021, 2020, and 2019 ($ in thousands):
| | | | | | | | | | | | | | | | | |
| Post-Retirement Benefit Plans, net of taxes(1) | | Translation Adjustment, net of taxes(2) | | Total Unitholders’ Accumulated Other Comprehensive Loss, net of taxes |
Balance on December 31, 2018 | $ | (15,622) | | | $ | (14,649) | | | $ | (30,271) | |
Change in post retirement benefit plans | (8,533) | | | — | | | (8,533) | |
Translation adjustment | — | | | 1,932 | | | 1,932 | |
Balance on December 31, 2019 | $ | (24,155) | | | $ | (12,717) | | | $ | (36,872) | |
Change in post-retirement benefit plans | (15,723) | | | — | | | (15,723) | |
Translation adjustment | — | | | 1,141 | | | 1,141 | |
Reclassification to net income (loss) due to sale of business(3) | 33,703 | | | 11,576 | | | 45,279 | |
Balance on December 31, 2020 | $ | (6,175) | | | $ | — | | | $ | (6,175) | |
Change in post-retirement benefit plans | 1,075 | | | — | | | 1,075 | |
| | | | | |
Reclassification to net income (loss) due to sale of business(3) | (6) | | | — | | | (6) | |
Balance on December 31, 2021 | $ | (5,106) | | | $ | — | | | $ | (5,106) | |
(1)Change in post-retirement benefit plans is presented net of tax benefit of $375,000, $6.1 million, and $3.4 million in 2021, 2020 and 2019, respectively.
(2)Translation adjustment is presented net of tax expense of $444,000 and $751,000 in 2020 and 2019, respectively.
(3)Reclassified to discontinued operations in the consolidated statement of operations in connection with the AA Transaction in 2021 and the IMTT Transaction in 2020, respectively. See Note 4, "Discontinued Operations and Dispositions", for further discussions.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Revenue Recognition
The Company's business comprises: (i) Hawaii Gas, Hawaii’s only government-franchised gas utility and an unregulated LPG distribution business providing gas and related services to industrial, commercial, residential, and governmental customers; (ii) controlling interests in two solar facilities on Oahu, and (iii) smaller projects collectively engaged in efforts to reduce the cost and improve the reliability and sustainability of energy in Hawaii.
Revenue from Hawaii Gas is generated from the distribution and sales of synthetic natural gas ("SNG"), LPG, liquefied natural gas ("LNG"), and renewable natural gas ("RNG"). Revenue is primarily a function of the amount of product consumed by customers and the price per British Thermal Unit or gallon charged to customers. Revenue levels, without organic growth, will generally track global commodity prices, namely petroleum and natural gas, as its products are derived from these commodities.
Revenue from Hawaii Gas is recorded in product revenue. Hawaii Gas recognizes revenue when products are delivered. Sales of gas to customers are billed on a monthly-cycle basis. Earned but unbilled revenue is accrued and included in accounts receivable and revenue. This is based on the amount of gas that has been delivered but not billed to customers from the latest meter reading or billed delivery date to the end of an accounting period. The related costs are charged to expense.
The renewables projects in Hawaii sell substantially all of the electricity generated at a fixed price to primarily electric utility customers pursuant to long-term power purchase agreements ("PPAs") of 20 years. The PPAs are accounted for as operating leases and have no minimum lease payments. Lease income is recorded within product revenue when the electricity is delivered.
Revenues from external customers were ($ in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
2021 | | 2020 | | 2019 |
Product revenue | | | | | |
Lease | $ | 4,726 | | | $ | 3,355 | | | $ | 5,139 | |
Gas | 220,564 | | | 162,926 | | | 225,618 | |
Other | 10,694 | | | 14,130 | | | 11,880 | |
Total revenue | $ | 235,984 | | | $ | 180,411 | | | $ | 242,637 | |
13. Related Party Transactions
Management Services
On December 31, 2021 and 2020, the Manager held 14,719,423 units and 13,954,821 units, respectively, of the Company’s common units. Pursuant to the terms of the Fourth Amended and Restated Management Agreement ("MSA"), the Manager may sell these units at any time. Under the MSA, the Manager, at its option, may reinvest base management fees and performance fees, if any, in units of the Company. The Manager’s holdings on December 31, 2021 represented 16.66% of the Company's outstanding common units.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Related Party Transactions – (continued)
Since January 1, 2019, the Company paid the Manager cash dividends and/or distributions on units held for the following periods:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Declared | | Period Covered | | $ per Unit | | Record Date | | Payable Date | | Cash Paid to Manager ($ in thousands) |
September 23, 2021 | | (1) | | $ | 37.386817 | | | October 4, 2021 | | October 7, 2021 | | $ | 544,841 | |
December 23, 2020 | | (2) | | 11.00 | | | January 5, 2021 | | January 8, 2021 | | 153,503 | |
February 14, 2020 | | Fourth quarter 2019 | | 1.00 | | | March 6, 2020 | | March 11, 2020 | | 13,396 | |
October 29, 2019 | | Third quarter 2019 | | 1.00 | | | November 11, 2019 | | November 14, 2019 | | 13,116 | |
July 30, 2019 | | Second quarter 2019 | | 1.00 | | | August 12, 2019 | | August 15, 2019 | | 12,914 | |
April 29, 2019 | | First quarter 2019 | | 1.00 | | | May 13, 2019 | | May 16, 2019 | | 12,722 | |
February 14, 2019 | | Fourth quarter 2018 | | 1.00 | | | March 4, 2019 | | March 7, 2019 | | 12,598 | |
(1)One-time distribution declared and paid out of the proceeds from the AA Transaction. Units of MIH traded with "due bills" attached through October 7, 2021 and traded ex-distribution on October 8, 2021.
(2)Special dividend declared and paid out of the proceeds from the IMTT Transaction. Units of MIH traded with “due-bills” attached through January 8, 2021 and traded ex-dividend on January 11, 2021.
Under the MSA, subject to the oversight and supervision of the Company’s Board, the Manager is responsible for and oversees the management of the Company’s business. In addition, the Manager has the right to appoint the Chairman of the Board, subject to minimum equity ownership, and to assign, or second, to the Company, two of its employees to serve as chief executive officer and chief financial officer of the Company and seconds or makes other personnel available as required.
In accordance with the MSA, the Manager is entitled to a monthly base management fee based primarily on the Company’s market capitalization, and potentially a quarterly performance fee based on total unitholder returns relative to a U.S. utilities index. Currently, the Manager has elected to reinvest future base management fees and performance fees, if any, in additional units. In 2021, 2020, and 2019, the Company incurred base management fees of $21.9 million, $21.1 million, and $32.1 million, respectively. The Company did not incur any performance fees in 2021, 2020, and 2019.
Effective November 1, 2018, the Manager waived two portions of the base management fee to which it was entitled under the terms of the MSA. In effect, the waivers cap the base management fee at 1% of the Company’s equity market capitalization less any cash balances at the holding company. The waiver applies only to the calculation of the base management fees and not to the remainder of the MSA. The Manager reserves the right to revoke the waivers and revert to the prior terms of the MSA, subject to providing the Company with not less than a one year notice. A revocation of the waiver would not trigger a recapture of previously waived fees. As part of the Disposition Agreement entered into between the Company and its Manager, discussed below, the Manager has agreed not to revoke the waiver during the term of the Disposition Agreement. The amendment to the Disposition Agreement, described below, provides for the payment of the waived fees upon the consummation of the Merger.
Disposition Agreement
To facilitate the Company’s pursuit of strategic alternatives, the Company announced that it has entered into a Disposition Agreement with its Manager on October 30, 2019 (see Exhibit 10.3 of this Form 10-K). Outside of the Disposition Agreement, the Company has limited ability to terminate the Management Services Agreement. The Disposition Agreement provides for the termination of the Company’s external management relationship with its Manager as to any businesses, or substantial portions thereof, that are sold (including if the Company itself is sold). In connection therewith, the Company will make a payment to its Manager of approximately 2.9% to 6.1% of the net proceeds generated in the event of such sales, subject to a minimum amount of payments for all sales in the aggregate in the event of a Qualifying Termination Event ("QTE") of (i) $50.0 million plus (ii) 1.5% multiplied by proceeds in excess of $500.0 million in the aggregate. A ‘‘QTE’’ means (i) the sale of the Company or (ii) a transaction or series of transactions resulting in a third party or parties acquiring all the assets of the Company. The Disposition Agreement provides that the Management Services Agreement will terminate upon the occurrence of a QTE or upon mutual agreement of the parties. If the Management Services Agreement has not been terminated prior to the sixth anniversary of the Disposition Agreement, its Manager and its independent directors will engage in reasonable, good faith discussions regarding a potential internalization or other framework for a termination of the MSA.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Related Party Transactions – (continued)
The Disposition Agreement provides that if a QTE occurs on or prior to January 1, 2022 (subject to extension under certain circumstances for up to six months thereafter), then the Company will pay its Manager an additional payment of $25.0 million. The Disposition Agreement further provides that its Manager will receive a make-whole payment following a QTE, to the extent that the aggregate management fees paid to its Manager through the date of the QTE were less than (i) $20.0 million per year for the two years following the date of the Disposition Agreement and (ii) $10.0 million per year for any period thereafter. In addition, following a QTE, the Manager will be paid in cash all accrued and unpaid management fees, including fees of $8.5 million waived in accordance with the Limited Waiver, which waived fees would have been payable through October 31, 2019. The Manager has agreed not to exercise its right to retract the Limited Waiver for periods after October 31, 2019 and prior to the termination of the Disposition Agreement. The Disposition Agreement will terminate on the earlier to occur of (i) the termination of the Management Services Agreement and (ii) the sixth anniversary of the Disposition Agreement, subject to extension under certain circumstances if a transaction is pending.
In connection with the IMTT Transaction and pursuant to the Disposition Agreement, as amended by the Amendment noted above, the Company deposited a disposition payment of $28.2 million to its Manager in an escrow account in December 2020 and subsequently released the payment from escrow in March 2021.
In connection with the execution of the Merger, and in order to provide AMF Parent with the fixed amount of the Disposition Payment (as defined in the Disposition Agreement) payable to the Manager with respect to the Merger, on June 14, 2021, the Company and the Manager entered into an amendment (the "Amendment") to the Disposition Agreement. The Amendment provides that the Disposition Payment payable to the Manager with respect to the Merger will be $56.7 million (which amount includes the waived fees pursuant to the Manager's limited waiver described above). These amounts were calculated in accordance with the Disposition Agreement dated as of October 30, 2019 (assuming a March 31, 2022 closing date), do not include the $25.0 million additional payment to the Manager if the final sale of the Company occurs on or prior to July 1, 2022. The Amendment also provides that the Disposition Payments with respect to the Merger will be paid concurrently with the relevant transaction closing, and that the Company’s MSA with the Manager will terminate concurrent with the closing of the Merger and payment of all amounts payable to the Manager under the Disposition Agreement.
In connection with the AA Transaction and pursuant to the Disposition Agreement, the Company paid the Manager $228.6 million in September 2021 concurrent with the closing of the transaction.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Related Party Transactions – (continued)
The unpaid portion of the base management fees and performance fees, if any, at the end of each reporting period is included in Due to Manager-related party in the consolidated balance sheets. The following table shows the Manager’s reinvestment of its base management fees and performance fees, if any, in units:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Base Management Fee Amount ($ in thousands) | | Performance Fee Amount ($ in thousands) | | Units Issued |
2021 Activities: | | | | | | | | |
Fourth quarter 2021 | | $ | 1,056 | | | | $ | — | | | 217,273 | | (1) |
Third quarter 2021 | | 7,698 | | | | — | | | 195,556 | | |
Second quarter 2021 | | 7,551 | | | | — | | | 214,040 | | |
First quarter 2021 | | 5,552 | | | | — | | | 176,296 | | |
| | | | | | | | |
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 | | |
| | | | | | | | |
2019 Activities: | | | | | | | | |
Fourth quarter 2019 | | $ | 8,712 | | | | $ | — | | | 208,881 | | |
Third quarter 2019 | | 7,987 | | | | — | | | 201,827 | | |
Second quarter 2019 | | 7,876 | | | | — | | | 192,103 | | |
First quarter 2019 | | 7,528 | | | | — | | | 184,448 | | |
(1)The Manager elected to reinvest all of the monthly base management fees for the quarter ended December 31, 2021 in new primary units. The Company issued 217,273 units for the quarter ended December 31, 2021, including 72,323 units that were issued in January 2022 for the December 2021 monthly base management fee.
The Manager is not entitled to any other compensation and all costs incurred by the Manager, including compensation of seconded staff, are paid by the Manager out of its base management fee. However, the Company is responsible for other direct costs including, but not limited to, expenses incurred in the administration or management of the Company and its subsidiaries, income taxes, audit and legal fees, acquisitions and dispositions, and its compliance with applicable laws and regulations. The Manager charged the Company $5,000, $314,000 and $810,000 in the years 2021, 2020, and 2019, respectively, for reimbursement of out-of-pocket expenses. The unpaid portion of the out-of-pocket expenses at the end of the reporting period is included in Due to Manager-related party in the consolidated balance sheets. In 2021, the Company paid $38,000 in legal fees incurred by the Manager related to the MIC Shareholder Litigation. The payment reflects a credit of $30,000 of legal fees incurred by the Manager in 2020. During 2020 and 2019, the Company also incurred $60,000 and $294,000, respectively, in legal fees incurred by the Manager related to certain MIC shareholder litigation.
Macquarie Group - Other Services
The Company uses the resources of the Macquarie Group with respect to a range of advisory, procurement, insurance, hedging, lending, and other services. Engagements involving members of the Macquarie Group are reviewed and approved by the Audit Committee of the Company’s Board. Macquarie Group affiliates are engaged on an arm’s length basis and frequently as a member of syndicate of providers whose other members establish the terms of the interaction.
Advisory Services
The Macquarie Group, and wholly-owned subsidiaries within the Macquarie Group, including Macquarie Bank Limited ("MBL") and Macquarie Capital (USA) Inc. ("MCUSA"), have provided various advisory and other services and incurred expenses in connection with the Company’s equity raising activities, acquisitions, and debt structuring for the Company and its businesses. Underwriting fees are recorded in unitholders’ equity as a direct cost of equity offerings. Advisory fees and out-of-
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Related Party Transactions – (continued)
pocket expenses relating to acquisitions are expensed as incurred. Debt arranging fees are deferred and amortized over the term of the credit facility.
Long-Term Debt
The Company had a $600.0 million senior secured revolving credit facility at the holding company level to which Macquarie Capital Funding LLC had a $40.0 million commitment. On January 19, 2021, the commitments on the senior secured revolving credit facility were terminated in accordance with the terms of that agreement. The Company incurred $8,000, $648,000, and $155,000 in interest expense related to Macquarie Capital Funding LLC’s portion of the senior secured revolving credit facility in 2021, 2020, and 2019, respectively. All outstanding balances were repaid as of December 31, 2020.
Other Related Party Transactions
In 2020 and 2019, the Company incurred $25,000 and $125,000, respectively, for advisory services from a former independent Board member.
14. Income Taxes
MIH is a limited liability company treated as a partnership for income tax purposes. As such, MIH is not subject to federal or state income taxes. The intermediate holding company will file a consolidated federal income tax return that includes the financial results of its Hawaii businesses. In addition, the intermediate holding company files a combined state return in Hawaii.
The Company’s income tax (benefit) provision related to the income from continuing operations in 2021, 2020, and 2019 were ($ in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
2021 | | 2020 | | 2019 |
Current taxes: | | | | | |
Federal | $ | (5,578) | | | $ | 804 | | | $ | 4,590 | |
State | 363 | | | (3) | | | (1,061) | |
Total current tax (benefit) provision | (5,215) | | | 801 | | | 3,529 | |
Deferred taxes: | | | | | |
Federal | 1,094 | | | 1,523 | | | (10,281) | |
State | (3,706) | | | 1,853 | | | (4,888) | |
Total deferred tax (benefit) provision | (2,612) | | | 3,376 | | | (15,169) | |
| | | | | |
Total tax (benefit) provision | $ | (7,827) | | | $ | 4,177 | | | $ | (11,640) | |
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Income Taxes – (continued)
The following represents the tax impact of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities from continuing operations on December 31, 2021 and 2020 ($ in thousands):
| | | | | | | | | | | |
| As of December 31, |
2021 | | 2020 |
Deferred tax assets: | | | |
Net operating loss carryforwards | $ | — | | | $ | 11,201 | |
| | | |
Deferred revenue | 32 | | | 34 | |
Accrued compensation | 2,257 | | | 1,918 | |
Accrued expense | 338 | | | 316 | |
Intangible assets | 3,654 | | | 3,432 | |
Other | 2,919 | | | 3,796 | |
| | | |
| | | |
Net deferred tax assets | 9,200 | | | 20,697 | |
Deferred tax liabilities: | | | |
| | | |
Investment basis difference | (414) | | | (414) | |
| | | |
Property and equipment | (46,536) | | | (45,995) | |
Unrealized gain on derivative instruments, net | (358) | | | (244) | |
| | | |
Prepaid expenses and other | (432) | | | (497) | |
Total deferred tax liabilities | (47,740) | | | (47,150) | |
Net deferred tax liabilities | $ | (38,540) | | | $ | (26,453) | |
In assessing the need for a valuation allowance, the Company considers whether it is more likely than not that some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In 2021, there was no valuation allowance.
On December 31, 2021, the Company had $38.5 million in noncurrent deferred tax liabilities from continuing operations. A significant portion of the Company’s deferred tax liabilities relates to tax basis temporary differences of both intangible assets and property and equipment. The Company records the acquisitions of consolidated businesses under the purchase method of accounting and accordingly recognizes a significant increase to the value of the property and equipment and to intangible assets. For tax purposes, the Company may assume the existing tax basis of the acquired businesses, in which case the Company records a deferred tax liability to reflect the increase in the purchase accounting basis of the assets acquired over the carryover income tax basis. This liability will reduce in future periods as these temporary differences reverse.
In 2021 and 2019, the Company recorded a total tax benefit of $7.8 million and $11.6 million, respectively, from continuing operations. In 2020, the Company recorded a total tax provision of $4.2 million from continuing operations. These amounts are different from the amounts computed by applying the U.S. federal income tax rate for the period to pre-tax income as a result of the following ($ in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
2021 | | 2020 | | 2019 |
Tax benefit at U.S. statutory rate | $ | (64,705) | | | $ | (19,418) | | | $ | (7,747) | |
Permanent differences and other | 10,980 | | | 21,565 | | | 853 | |
State income taxes, net of federal benefit | (2,641) | | | 1,463 | | | (4,705) | |
Income attributable to noncontrolling interest | 95 | | | 95 | | | (41) | |
Partnership expenses, not subject to tax | 48,444 | | | — | | | — | |
Change in investment and foreign tax credits | — | | | 472 | | | — | |
| | | | | |
| | | | | |
Total tax (benefit) provision | $ | (7,827) | | | $ | 4,177 | | | $ | (11,640) | |
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Income Taxes – (continued)
Uncertain Tax Positions
There were no uncertain tax positions on December 31, 2021 and 2020. The Company does not expect that the amount of unrecognized tax benefits will change in the next 12 months. The Company recognizes interest and penalties related to unrecognized tax benefits in Provision for Income Taxes in the consolidated statements of operations.
The federal statute of limitations on the assessment of additional income tax liabilities has lapsed for all returns filed on or before December 31, 2018. The various state statutes of limitations on the assessment of additional income taxes have lapsed on all returns filed on or before December 31, 2017.
15. Employee Benefit Plans
401(k) Savings Plan
Hawaii Gas, IMTT and Atlantic Aviation each have a defined contribution plan under Section 401(k) of the Internal Revenue Code, allowing eligible employees to contribute a percentage of their annual compensation up to an annual amount as set by the IRS.
The employer contribution of eligible compensation to these plans ranges from 0% to 6% for Hawaii Gas and 0% to 7% for discontinued operations. Employer contributions for Hawaii Gas were $927,000, $907,000 and $910,000 in 2021, 2020 and 2019, respectively. Employer contributions for discontinued operations were $1.7 million, $4.7 million, and $4.5 million in 2021, 2020, and 2019, respectively. For additional information, see Note 4, "Discontinued Operations and Dispositions", for further discussions.
Hawaii Gas Union Pension Plan
Hawaii Gas has a defined benefit pension plan for Classified Employees of GASCO, Inc. ("HG DB Plan") that accrues benefits pursuant to the terms of a collective-bargaining agreement. The plan was frozen to new participants in 2008 in connection with an agreement to increase participant benefits over a three year period after which there will be no further increases to the flat rate as described herein. The HG DB Plan is non-contributory and covers all bargaining unit employees who have met certain service and age requirements. The benefits are based on a flat rate per year of service through the date of employment termination or retirement. Future contributions will be made to meet ERISA funding requirements. The HG DB Plan’s trustee handles the plan assets and, as an investment manager, invests them in a diversified portfolio of primarily equity and fixed-income securities.
IMTT DB Plan
Except for a plan covering certain employees covered by a collective-bargaining agreement at IMTT-Illinois (see below), substantially all employees of IMTT are eligible to participate in a defined benefit pension plan ("IMTT DB Plan"). Benefits under the IMTT DB Plan are based on years of service and the employees’ highest average compensation for a consecutive five year period. IMTT’s contributions to the plan are based on the recommendations of its consulting actuary.
On January 1, 2017, the IMTT DB Plan was frozen to new participants, except for the union employees of Bayonne, for whom it was subsequently frozen on January 1, 2018. On December 23, 2020, the IMTT DB Plan was sold in connection with the IMTT Transaction and was assumed by the buyer. See Note 4, "Discontinued Operations and Dispositions”, for further discussions.
Other Plan Benefits
Hawaii Gas, IMTT and Atlantic Aviation have other insignificant plans that are comprised of the following. These plans are shown below collectively as “Other Plan Benefits”.
Hawaii Gas
Hawaii Gas has a postretirement plan. The GASCO, Inc. Hourly Postretirement Medical and Life Insurance Plan (the "PMLI Plan") covers all bargaining unit participants who were employed by Hawaii Gas on April 30, 1999 and who retire after the attainment of age 62 with 15 years of service. Under the provisions of the PMLI Plan, Hawaii Gas pays for medical premiums of the retirees and spouses through the age of 64. After age 64, Hawaii Gas pays for medical premiums up to a maximum of $150 per month. The retirees are also provided $1,000 of life insurance benefits.
Hawaii Gas also has a retiree life insurance program for certain nonunion retirees. This plan is closed to future participants.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Employee Benefit Plans – (continued)
IMTT
IMTT is the sponsor of a defined benefit plan covering union employees at IMTT-Illinois ("IMTT-Illinois Union Plan"). Monthly benefits under this plan are computed based on a benefit rate in effect at the date of the participant’s termination multiplied by the number of years of service. IMTT’s contributions to the plan are based on the recommendations of its consulting actuary. On January 1, 2018, the IMTT-Illinois Union Plan was frozen to new participants.
IMTT provides post-retirement life insurance (coverage equal to 25% of final year compensation not to exceed $25,000) and health benefits (coverage for early retirees at least 62 years old on early retirement to age 65, reimbursement of Medicare premiums for the Bayonne terminal employees and some smaller health benefits no longer offered) to retired employees.
On December 23, 2020, the IMTT-Illinois Union Plan and the post-retirement life insurance plan was sold in connection with the IMTT Transaction and was assumed by the buyer. See Note 4, "Discontinued Operations and Dispositions”, for further discussions.
Atlantic Aviation
Atlantic Aviation sponsors a retiree medical and life insurance plan available to certain employees. Currently, the plan is funded as required to pay benefits and the plan has no assets. The Company accounts for postretirement healthcare and life insurance benefits in accordance with ASC 715, Compensation — Retirement Benefits, which requires the accrual of the cost of providing postretirement benefits during the active service period of the employee.
On September 23, 2021, the Atlantic Aviation retiree medical and life insurance plan was sold in connection with the AA Transaction and was assumed by the buyer. See Note 4, "Discontinued Operations and Dispositions", for further discussions.
Additional information about the fair value of the benefit plan assets, the components of net periodic cost, and the projected benefit obligation as of and during 2021 and 2020 are ($ in thousands).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| HG DB Plan Benefits | | IMTT DB Plan Benefits | | Other Plan Benefits | | Total |
2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
Change in benefit obligation: | | | | | | | | | | | | | | | |
Benefit obligation – beginning of year | $ | 58,740 | | | $ | 54,211 | | | $ | — | | | $ | 168,186 | | | $ | 3,149 | | | $ | 30,071 | | | $ | 61,889 | | | $ | 252,468 | |
Service cost | 790 | | | 711 | | | — | | | 4,778 | | | 28 | | | 1,052 | | | 818 | | | 6,541 | |
Interest cost | 1,421 | | | 1,692 | | | — | | | 5,172 | | | 65 | | | 944 | | | 1,486 | | | 7,808 | |
| | | | | | | | | | | | | | | |
Participant contributions | — | | | — | | | — | | | — | | | 151 | | | 238 | | | 151 | | | 238 | |
Actuarial (gains) losses | (1,563) | | | 4,845 | | | — | | | 21,362 | | | (79) | | | 2,127 | | | (1,642) | | | 28,334 | |
Benefits paid | (2,830) | | | (2,719) | | | — | | | (10,909) | | | (313) | | | (1,154) | | | (3,143) | | | (14,782) | |
| | | | | | | | | | | | | | | |
Disposition of benefit obligation due to sale of business | — | | | — | | | — | | | (188,589) | | | (235) | | | (30,129) | | | (235) | | | (218,718) | |
Benefit obligation – end of year | $ | 56,558 | | | $ | 58,740 | | | $ | — | | | $ | — | | | $ | 2,766 | | | $ | 3,149 | | | $ | 59,324 | | | $ | 61,889 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Change in plan assets: | | | | | | | | | | | | | | | |
Fair value of plan assets - beginning of year | $ | 55,976 | | | $ | 52,059 | | | $ | — | | | $ | 93,982 | | | $ | — | | | $ | 9,698 | | | $ | 55,976 | | | $ | 155,739 | |
Actual return on plan assets | 1,846 | | | 6,636 | | | — | | | 5,743 | | | — | | | 729 | | | 1,846 | | | 13,108 | |
Employer contributions | — | | | — | | | — | | | — | | | 162 | | | 562 | | | 162 | | | 562 | |
Participant contributions | — | | | — | | | — | | | — | | | 151 | | | 238 | | | 151 | | | 238 | |
Benefits paid | (2,830) | | | (2,719) | | | — | | | (10,909) | | | (313) | | | (1,154) | | | (3,143) | | | (14,782) | |
Disposition of plan asset due to sale of business | — | | | — | | | — | | | (88,816) | | | — | | | (10,073) | | | — | | | (98,889) | |
Fair value of plan assets – end of year | $ | 54,992 | | | $ | 55,976 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 54,992 | | | $ | 55,976 | |
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Employee Benefit Plans – (continued)
For the HG DB Plan, both accumulated and projected benefit obligations were $56.6 million and were in excess of the fair value of plan assets of $55.0 million on December 31, 2021. This compares with aggregate accumulated and projected benefit obligations of $58.7 million, which were also in excess of the aggregate fair value of plan assets of $56.0 million on December 31, 2020. The remaining postretirement plans resulted in accumulated postretirement benefit obligations of $2.8 million on December 31, 2021 and $3.2 million on December 31, 2020. Fair value of plan assets on these plans were zero for both periods.
Actuarial gains in the changes in benefit obligations for 2021 resulted primarily due to increase in discount rate. For 2020 actuarial losses resulted primarily due to decrease in discount rate (see assumptions used in table below).
In 2021 and 2020, there were no contributions made to the HG DB Plan. As of December 31, 2021, Hawaii Gas is not expected to make any cash contribution to the HG DB Plan through 2031. The annual amount of any cash contributions will be dependent upon a number of factors such as market conditions and changes to regulations.
The funded status on December 31, 2021 and 2020 are presented in the following table ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| HG DB Plan Benefits | | IMTT DB Plan Benefits | | Other Plan Benefits | | Total |
2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
Funded status | | | | | | | | | | | | | | | |
Funded status at end of year | $ | (1,566) | | | $ | (2,764) | | | $ | — | | | $ | — | | | $ | (2,766) | | | $ | (3,149) | | | $ | (4,332) | | | $ | (5,913) | |
Net amount recognized in balance sheet | $ | (1,566) | | | $ | (2,764) | | | $ | — | | | $ | — | | | $ | (2,766) | | | $ | (3,149) | | | $ | (4,332) | | | $ | (5,913) | |
Amounts recognized in balance sheet consisting of: | | | | | | | | | | | | | | | |
Current liabilities | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (243) | | | $ | (248) | | | $ | (243) | | | $ | (248) | |
Noncurrent liabilities | (1,566) | | | (2,764) | | | — | | | — | | | (2,523) | | | (2,901) | | | (4,089) | | | (5,665) | |
Net amount recognized in balance sheet | $ | (1,566) | | | $ | (2,764) | | | $ | — | | | $ | — | | | $ | (2,766) | | | $ | (3,149) | | | $ | (4,332) | | | $ | (5,913) | |
Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive loss in 2021 and 2020 are presented in the following table ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| HG DB Plan Benefits | | IMTT DB Plan Benefits | | Other Plan Benefits | | Total |
2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
Prior service cost | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 18 | | | $ | (157) | | | $ | 18 | | | $ | (157) | |
Accumulated loss | (6,482) | | | (7,836) | | | — | | | (40,496) | | | (436) | | | (6,540) | | | (6,918) | | | (54,872) | |
Accumulated other comprehensive loss | (6,482) | | | (7,836) | | | — | | | (40,496) | | | (418) | | | (6,697) | | | (6,900) | | | (55,029) | |
Net periodic benefit cost in excess (deficit) of cumulative employer contributions | 4,916 | | | 5,072 | | | — | | | (59,277) | | | (2,583) | | | (16,508) | | | 2,333 | | | (70,713) | |
Disposition of net periodic benefit cost in deficit of cumulative employer contributions due to sale of business | — | | | — | | | — | | | 59,277 | | | 240 | | | 13,873 | | | 240 | | | 73,150 | |
Reclassification to net income (loss) due to sale of business(1) | — | | | — | | | — | | | 40,496 | | | (5) | | | 6,183 | | | (5) | | | 46,679 | |
Net amount recognized in balance sheet | $ | (1,566) | | | $ | (2,764) | | | $ | — | | | $ | — | | | $ | (2,766) | | | $ | (3,149) | | | $ | (4,332) | | | $ | (5,913) | |
(1)Reclassified to discontinued operations in the consolidated statement of operations in connection with the IMTT and AA Transaction. See Note 4, "Discontinued Operations and Dispositions", for further discussions.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Employee Benefit Plans – (continued)
The components of net periodic benefit cost and other changes in other comprehensive (income) loss for the plans are shown below ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| HG DB Plan Benefits | | IMTT DB Plan Benefits | | Other Plan Benefits | | Total |
2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 |
Components of net periodic benefit cost: | | | | | | | | | | | | | | | | | | | | | | | |
Service cost | $ | 790 | | | $ | 711 | | | $ | 619 | | | $ | — | | | $ | 4,778 | | | $ | 4,512 | | | $ | 28 | | | $ | 1,052 | | | $ | 1,063 | | | $ | 818 | | | $ | 6,541 | | | $ | 6,194 | |
Interest cost | 1,421 | | | 1,692 | | | 2,032 | | | — | | | 5,172 | | | 6,000 | | | 65 | | | 944 | | | 1,145 | | | 1,486 | | | 7,808 | | | 9,177 | |
Expected return on plan assets | (2,426) | | | (2,280) | | | (2,189) | | | — | | | (4,755) | | | (4,605) | | | — | | | (508) | | | (460) | | | (2,426) | | | (7,543) | | | (7,254) | |
Recognized actuarial loss | 371 | | | 306 | | | 705 | | | — | | | 443 | | | — | | | 33 | | | 193 | | | 99 | | | 404 | | | 942 | | | 804 | |
Amortization of prior service (cost) credit | — | | | — | | | — | | | — | | | — | | | — | | | (16) | | | 2 | | | 2 | | | (16) | | | 2 | | | 2 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Net periodic benefit cost | $ | 156 | | | $ | 429 | | | $ | 1,167 | | | $ | — | | | $ | 5,638 | | | $ | 5,907 | | | $ | 110 | | | $ | 1,683 | | | $ | 1,849 | | | $ | 266 | | | $ | 7,750 | | | $ | 8,923 | |
Other changes recognized in other comprehensive (income) loss: | | | | | | | | | | | | | | | | | | | | | | | |
Net (gain) loss arising during the year | $ | (983) | | | $ | 488 | | | $ | (1,439) | | | $ | — | | | $ | 20,374 | | | $ | 13,419 | | | $ | (79) | | | $ | 1,907 | | | $ | 736 | | | $ | (1,062) | | | $ | 22,769 | | | $ | 12,716 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Amortization of prior service cost (credit) | — | | | — | | | — | | | — | | | — | | | — | | | 16 | | | (2) | | | (2) | | | 16 | | | (2) | | | (2) | |
Amortization of loss | (371) | | | (306) | | | (705) | | | — | | | (443) | | | — | | | (33) | | | (193) | | | (99) | | | (404) | | | (942) | | | (804) | |
Total recognized in other comprehensive (income) loss | $ | (1,354) | | | $ | 182 | | | $ | (2,144) | | | $ | — | | | $ | 19,931 | | | $ | 13,419 | | | $ | (96) | | | $ | 1,712 | | | $ | 635 | | | $ | (1,450) | | | $ | 21,825 | | | $ | 11,910 | |
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Employee Benefit Plans – (continued)
The estimated amounts that will be amortized from accumulated other comprehensive loss over the next year are presented in the following table ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| HG DB Plan Benefits | Other Plan Benefits | | Total |
2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
Amortization of prior service cost | $ | — | | | $ | — | | | $ | (16) | | | $ | (15) | | | $ | (16) | | | $ | (15) | |
Amortization of net loss | 126 | | | 282 | | | 15 | | | 22 | | | 141 | | | 304 | |
The assumptions used in accounting for the HG DB Plan Benefits, IMTT DB Plan Benefits, and Other Plan Benefits are:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| HG DB Plan Benefits | | IMTT DB Plan Benefits | | Other Plan Benefits |
2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 |
Weighted average assumptions to determine benefit obligations: | | | | | | | | | | | | | | | | | | | | |
Discount rate | 2.80 | % | | 2.45 | % | | 3.20 | % | | N/A | | 2.60 | % | | 3.25 | % | | 1.73% to 2.55% | | | 1.73% to 2.75% | | | 2.82% to 3.35% | |
Rate of compensation increase | N/A | | N/A | | N/A | | N/A | | 4.57 | % | | 4.57 | % | | N/A | | | 4.57 | % | (1) | | 4.57 | % | (1) |
Measurement date | Dec 31 | | Dec 31 | | Dec 31 | | N/A | | Dec 23 | | Dec 31 | | Sep 23 - Dec 31 | (2) | | Dec 23 - Dec 31 | (3) | | Dec 31 | |
Weighted average assumptions to determine net cost: | | | | | | | | | | | | | | | | | | | | |
Discount rate | 2.45 | % | | 3.20 | % | | 4.25 | % | | N/A | | 3.25 | % | | 4.35 | % | | 1.73% to 2.15% | | | 2.82% to 3.35% | | | 3.91% to 4.35% | |
Expected long-term rate of return on plan assets during fiscal year | 4.45 | % | | 4.50 | % | | 4.90 | % | | N/A | | 5.50 | % | | 5.50 | % | | N/A | | | 5.50 | % | (4) | | 5.50 | % | (4) |
Rate of compensation increase | N/A | | N/A | | N/A | | N/A | | 4.57 | % | | 4.57 | % | | N/A | | | 4.57 | % | (1) | | 4.57 | % | (1) |
Assumed healthcare cost trend rates: | | | | | | | | | | | | | | | | | | | | |
Initial health care cost trend rate | | | | | | | | | | | | | 7.00 | % | | | 7.25 | % | | | 7.25% to 7.75% | |
Ultimate rate | | | | | | | | | | | | | 4.50 | % | | | 4.50 | % | | | 4.50% to 5.00% | |
Year ultimate rate is reached | | | | | | | | | | | | | 2030 | | | 2029 | | | 2027 to 2028 | |
(1)Only applies to IMTT post-retirement life insurance plan.
(2)Measurement date related to the AA post-retirement welfare benefits was September 23, 2021.
(3)Measurement date related to the IMTT post-retirement life insurance plan and IMTT-Illinois Union Plan was December 23, 2020.
(4)Only applies to IMTT-Illinois Union Plan.
Pension asset investment decisions are made with assistance of an outside paid advisor to achieve the multiple goals of high rate of return, diversification, and safety. The business has instructed the trustee, the investment manager, to maintain the allocation of the defined benefit plans’ assets with fixed income securities, equity securities, real estate fund investments, and cash. The asset allocation on December 31, 2021 and 2020 were:
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Employee Benefit Plans – (continued)
| | | | | | | | | | | | | | | | | | | |
| HG DB Plan Benefits | | | | |
2021 | | 2020 | | | | | | | | |
Equity securities | 37 | % | | 25 | % | | | | | | | | |
Fixed income securities | 57 | % | | 70 | % | | | | | | | | |
| | | | | | | | | | | |
Global real estate fund | 5 | % | | 4 | % | | | | | | | | |
Cash | 1 | % | | 1 | % | | | | | | | | |
Total | 100 | % | | 100 | % | | | | | | | | |
The expected returns on plan assets were estimated based on the allocation of assets and management’s expectations regarding future performance of the investments held in the investment portfolios. The asset allocations as of December 31, 2021 and 2020 measurement dates were ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurement on December 31, 2021 Pension Benefits - Plan Assets |
Total | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | |
Asset category: | | | | | | | | | |
Cash and money market | $ | 725 | | | $ | 725 | | | $ | — | | | $ | — | | | |
Equity securities | 20,114 | | | — | | | 20,114 | | | — | | | |
Fixed income securities | 31,219 | | | — | | | 31,219 | | | — | | | |
Global real estate fund | 2,934 | | | — | | | 2,934 | | | — | | | |
| | | | | | | | | |
Total | $ | 54,992 | | | $ | 725 | | | $ | 54,267 | | | $ | — | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurement on December 31, 2020 Pension Benefits - Plan Assets |
Total | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | |
Asset category: | | | | | | | | | |
Cash and money market | $ | 489 | | | $ | 489 | | | $ | — | | | $ | — | | | |
Equity securities | 14,276 | | | — | | | 14,276 | | | — | | | |
Fixed income securities | 39,115 | | | — | | | 39,115 | | | — | | | |
Global real estate fund | 2,096 | | | — | | | 2,096 | | | — | | | |
| | | | | | | | | |
Total | $ | 55,976 | | | $ | 489 | | | $ | 55,487 | | | $ | — | | | |
The estimated future benefit payments for the next ten years are ($ in thousands):
| | | | | | | | | |
2022 | | | | | $ | 3,299 | |
2023 | | | | | 3,328 | |
2024 | | | | | 3,330 | |
2025 | | | | | 3,370 | |
2026 | | | | | 3,390 | |
Thereafter | | | | | 17,033 | |
Total | | | | | $ | 33,750 | |
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Legal Proceedings and Contingencies
The Company and its subsidiaries are subject to legal proceedings arising in the ordinary course of business. In management’s opinion, the Company has adequate legal defenses and/or insurance coverage with respect to the eventuality of such actions and does not believe the outcome of any pending legal proceedings will be material to the Company’s financial position or result of operations.
MACQUARIE INFRASTRUCTURE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Quarterly Data (Unaudited)
The following table represents the summary of financial data from both continuing and discontinued operations for the quarters related to the years ended December 31, 2021 and 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Quarter ended | | March 31 | | June 30 | | September 30 | | December 31 |
| | (In Thousands, except per unit data) |
2021 | | | | | | | | |
Revenue from continuing operations | | $ | 54,587 | | | $ | 58,740 | | | $ | 60,086 | | | $ | 62,571 | |
Operating loss from continuing operations | | (1,070) | | | (5,628) | | | (282,344) | | | (4,959) | |
Net loss from continuing operations attributable to MIH | | (6,867) | | | (15,124) | | | (274,637) | | | (3,857) | |
Net income (loss) from discontinued operations attributable to MIH | | 20,067 | | | 22,473 | | | 2,954,444 | | | (12,631) | |
| | | | | | | | |
Per unit information attributable to MIH(1): | | | | | | | | |
Basic loss per unit from continuing operations attributable to MIH | | $ | (0.08) | | | $ | (0.18) | | | $ | (3.12) | | | $ | (0.05) | |
Basic income (loss) per unit from discontinued operations attributable to MIH | | 0.23 | | | 0.26 | | | 33.61 | | | (0.14) | |
Basic income (loss) per unit attributable to MIH | | 0.15 | | | 0.08 | | | 30.49 | | | (0.19) | |
Diluted loss per unit from continuing operations attributable to MIH | | $ | (0.08) | | | $ | (0.18) | | | $ | (3.12) | | | $ | (0.05) | |
Diluted income (loss) per unit from discontinued operations attributable to MIH | | 0.23 | | | 0.26 | | | 33.61 | | | (0.14) | |
Diluted income (loss) per unit attributable to MIH | | 0.15 | | | 0.08 | | | 30.49 | | | (0.19) | |
Cash distribution declared per unit | | $ | — | | | $ | — | | | $ | 37.386817 | | | $ | — | |
| | | | | | | | |
2020 | | | | | | | | |
Revenue from continuing operations | | $ | 60,462 | | | $ | 36,795 | | | $ | 39,036 | | | $ | 44,118 | |
Operating (loss) income from continuing operations | | (11,175) | | | 266 | | | (5,960) | | | (52,832) | |
Net loss from continuing operations attributable to MIH | | (18,003) | | | (2,280) | | | (5,368) | | | (71,131) | |
Net income (loss) from discontinued operations attributable to MIH | | 29,305 | | | (5,674) | | | (887,880) | | | 33,170 | |
| | | | | | | | |
Per unit information attributable to MIH(1): | | | | | | | | |
Basic loss per unit from continuing operations attributable to MIH | | $ | (0.21) | | | $ | (0.02) | | | $ | (0.06) | | | $ | (0.82) | |
Basic income (loss) per unit from discontinued operations attributable to MIH | | 0.34 | | | (0.07) | | | (10.20) | | | 0.38 | |
Basic income (loss) per unit attributable to MIH | | 0.13 | | | (0.09) | | | (10.26) | | | (0.44) | |
Diluted loss per unit from continuing operations attributable to MIH | | $ | (0.21) | | | $ | (0.02) | | | $ | (0.06) | | | $ | (0.82) | |
Diluted income (loss) per unit from discontinued operations attributable to MIH | | 0.34 | | | (0.07) | | | (10.20) | | | 0.38 | |
Diluted income (loss) per unit attributable to MIH | | 0.13 | | | (0.09) | | | (10.26) | | | (0.44) | |
Cash distribution declared per unit | | $ | — | | | $ | — | | | $ | — | | | $ | 11.00 | |
(1)Due to averaging of units, quarterly earnings per unit may not sum to the totals reported for the full year.