Impact of COVID-19 Impact of COVID-19

3 Months Ended

Mar. 31, 2020

Unusual or Infrequent Items, or Both [Abstract]

Impact of COVID-19

Impact of COVID-19

Impact to MIC Businesses

The impact of COVID-19 has varied across the Company’s businesses. The reduction in consumption of refined petroleum products associated with the slowing of economic activity, together with increased production of crude oil, has for the time being resulted in increased demand for storage of these products and driven improved performance at IMTT. Conversely, stay-at-home orders and limitations on travel have abruptly reduced demand for the products and services provided by Atlantic Aviation and MIC Hawaii. The petroleum storage industry has, in general, performed well during the pandemic while the travel and tourism industries, and the businesses reliant on them, have been significantly negatively affected.

The Company continues to closely monitor the effects of COVID-19 and is actively managing its response placing a priority on the health and safety of its employees, contractors, their families, customers and the broader communities in which it operates. MIC businesses are classified as essential services and remain operational and there have been no service disruptions related to the pandemic. The Company has implemented a pandemic response plan and has taken actions that allow it to continue to provide services in a safe and effective manner. Procedures implemented include: (i) a work from home policy for all employees that are able to do so; (ii) limiting operations to only those required to meet safety, regulatory or customer needs; (iii) enhanced cleaning and disinfection of facilities; (iv) limiting interactions between employees through social distancing; (v) increased usage of personal protective equipment; (vi) modification of shift schedules to reduce exposure between shifts; (vii) limiting IMTT terminals access to essential personnel; and (viii) requiring all individuals who enter the IMTT terminals submit to temperature scans.

The Company is also reviewing the benefits that may be available under the CARES Act. The Act includes provisions for federal grants or government-backed loans to businesses, employee benefits and retention credits, easing of certain income tax rules and a payroll tax deferral, among others. Several of these provisions may be applicable to the Company or to its operating businesses. Initial indications are that these are likely to be immaterial to the business’ results of operations.

In light of the ongoing impacts of the pandemic on the Company, the reduced level of economic activity and uncertainty around the timing of any recovery from the impact of the pandemic, the Company withdrew its financial guidance it had provided to the market on February 25, 2020. The Company has visibility into the financial performance of IMTT given the contracted nature of its storage revenue although these may be partially offset by reduction in revenue related to the provision of ancillary services including blending, packaging or throughput. The uncontracted nature of the majority of the revenue generated by each of Atlantic Aviation and MIC Hawaii means that the Company has extraordinarily limited visibility into the prospects for these businesses over the short to medium term. A relaxation of travel restrictions and stay-at-home orders will likely be an early indication that the Company could expect improved performance from Atlantic Aviation and MIC Hawaii, although the rate of any improvement is highly unpredictable given the inability to forecast the consumer response in a post-COVID-19 environment. Given the significant decline in jet fuel sales at Atlantic Aviation and gas sales at MIC Hawaii in April 2020, the Company does not currently anticipate meaningful improvement during the second quarter of 2020.

Impact to Liquidity and Balance Sheet

In light of the disruption in the global markets and the unpredictability of the sustained impact to its businesses caused by COVID-19, during March and April 2020, the Company took certain measures to preserve financial flexibility and increase the strength of its balance sheet and its liquidity position.

In March 2020, the Company suspended its cash dividend. The suspension will result in the retention of approximately $260 million should it remain in place through the end of 2020. In addition, in March 2020, the Company drew down a total of $874 million on revolving credit facilities including $599 million on its MIC holding company level revolving credit facility and $275 million on the Atlantic Aviation revolving credit facility. The proceeds were additive to the approximately $300 million of cash already on hand. Although the Company has and continues to have no immediate need for the additional liquidity, the drawdowns were deemed prudent to preserve financial flexibility.

On April 30, 2020, Atlantic Aviation fully repaid the outstanding balance on its revolving credit facility and effective May 4, 2020, reduced the commitments on this facility to $10 million. The $10 million revolving commitments are in place solely with respect to letters of credit currently outstanding (and such commitments will be reduced after each existing letter of credit expires or otherwise terminates). In connection with the repayment of the revolving credit facility and reduction in commitments, Atlantic Aviation and its lenders amended the credit agreement to remove the covenant requiring the Company to maintain a ratio of net debt/EBITDA at or below 5.5x over a trailing twelve-month period. Such financial covenant will not be applicable so long as letters of credit issued under the credit facility are cash collateralized and rolled over to stand-alone letter of credit facilities upon renewal.

With the steps taken to strengthen its financial position summarized above, the Company has no immediate need for additional capital. Subsequent to the repayment and reduction in commitments related to the Atlantic revolving credit facility, the Company has approximately $1,530 million of liquidity available comprised of cash on hand and undrawn balances on its revolving credit facilities. Over the next twelve months, the Company currently expects to fund its operations, service its debt, make state tax payments, fund essential maintenance capital expenditures, deploy growth capital and make required principal repayments using cash generated from the operations of its businesses and cash on hand.

At March 31, 2020, each of the operating businesses and MIC Corporate were in compliance with their financial covenants in accordance with its debt agreements.

Impact to Goodwill and Long-Lived Assets

Due to the decline in the Company’s market capitalization and the impact and uncertainty around COVID-19, the Company performed a triggering event analysis on its goodwill, property, equipment, land and leasehold improvements and intangible assets at a reportable segment level during the quarter ended March 31, 2020. Based on the Company’s interim assessment as of March 31, 2020, the Company determined that there were no triggering events that required an interim impairment analysis of its goodwill, property, equipment, land and leasehold improvements and intangible assets.