World Fuel Services Corporation (NYSE: INT) today reported
second quarter net income of $30.0 million or $0.43 diluted
earnings per share compared to $30.5 million or $0.43 diluted
earnings per share in the second quarter of 2015. Excluding the
impact of certain non-recurring expenses, adjusted second quarter
net income was $34.8 million or $0.50 adjusted diluted earnings per
share. Non-GAAP net income and diluted earnings per share for the
second quarter, excluding share-based compensation and amortization
of acquired intangible assets were $44.0 million and $0.63,
respectively, compared to $38.5 million and $0.54 in 2015.
“During the quarter, our aviation segment posted strong results
in their core resale operations and our land segment generated
solid growth in retail and wholesale distribution,” stated Michael
J. Kasbar, chairman and chief executive officer of World Fuel
Services Corporation. “The recent acquisitions of PAPCO on the east
coast and Associated Petroleum Products on the west coast have
significantly expanded our U.S. commercial and industrial
distribution platform. We are poised to execute on numerous
development opportunities as our organic initiatives and strategic
investments should emerge as meaningful growth drivers in
2017.”
The company’s aviation segment generated gross profit of $98.6
million, an increase of $13.6 million or 16% year-over-year. The
company’s land segment posted gross profit of $80.2 million, an
increase of $16.6 million or 26% year-over-year. The company’s
marine segment generated gross profit of $39.7 million, a decrease
of $2.1 million or 5% year-over-year.
“Consistent cash flow generation and prudent balance sheet
management has enabled us to aggregate $1.2 billion of operating
cash flow over the past four years,” said Ira M. Birns, executive
vice president and chief financial officer. “The two strategic
acquisitions we completed to start the third quarter and the
ExxonMobil transaction expected to be fully completed by early next
year, will be almost entirely funded with cash flow generated over
the past twelve months, preserving our strong and liquid balance
sheet.”
Correction of Previously Issued Financial
Statements
During the second quarter of 2016, we identified a correction to
our provision for income taxes for certain prior periods, due to
the accounting for the tax effects of foreign currency translation
changes on intercompany loans that are considered to be of a
long-term investment nature. The Company determined that it had
incorrectly recorded a deferred tax asset related to foreign
currency translation losses in the provision for income taxes,
resulting in the Company reporting a lower provision for income
taxes in the affected periods.
Management evaluated the materiality of the error from
qualitative and quantitative perspectives, and concluded
the error was not material to its previously issued
annual and interim financial statements. The cumulative amounts of
the corrections were approximately $20.0 million, of which
approximately $12.5 million was attributable to the year ended
December 31, 2015. The cumulative amount of the prior period
adjustments would have been material to our current Statements of
Income and Comprehensive Income had we made the correction in the
current period and, accordingly we will revise our previously
issued financial statements prospectively to correct these errors.
Please refer to Item 8.01 of the Company’s Current Report on Form
8-K and the Company’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2016 to be filed with the Securities and Exchange
Commission for further information and details on the affected
periods.
Non-GAAP Financial Measures
The non-GAAP financial measures exclude costs associated with
share-based compensation, amortization of acquired intangible
assets, expenses related to acquisitions and other related charges,
deferred revenue purchase accounting adjustments, and termination
of employment agreement primarily because we do not believe they
are reflective of the Company’s core operating results. We believe
the exclusion of share-based compensation from operating expenses
is useful given the variation in expense that can result from
changes in the fair value of our common stock, the effect of which
is unrelated to the operational conditions that give rise to
variations in the components of our operating costs. Also, we
believe the exclusion of the amortization of acquired intangible
assets, the expenses related to acquisitions and other related
charges, and termination of employment agreement expenses are
useful for purposes of evaluating operating performance of our core
operating results and comparing them period over period. In
accordance with the fair value provisions applicable to the
accounting for business combinations, acquired deferred revenue is
often recorded on the opening balance sheet at an amount that is
lower than the historical carrying value. Although this acquisition
accounting requirement has no impact on our business or cash flows,
it adversely impacts our reported GAAP revenue in the reporting
periods following an acquisition. We believe that the exclusion of
the deferred revenue purchase accounting adjustment is useful to
investors as an additional means to reflect trends of our business
and provides investors with financial information that facilitates
comparison of both historical and future results. We believe that
these non-GAAP financial measures, when considered in conjunction
with our financial information prepared in accordance with GAAP,
are useful to investors to further aid in evaluating the ongoing
financial performance of the Company and to provide greater
transparency as supplemental information to our GAAP results.
Non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, financial information
prepared in accordance with GAAP. In addition, our presentation of
non-GAAP net income and non-GAAP diluted earnings per common share
may not be comparable to the presentation of such metrics by other
companies. Non-GAAP diluted earnings per common share is computed
by dividing non-GAAP net income attributable to World Fuel and
available to common shareholders by the sum of the weighted average
number of shares of common stock, stock units, restricted stock
entitled to dividends not subject to forfeiture and vested RSUs
outstanding during the period and the number of additional shares
of common stock that would have been outstanding if our outstanding
potentially dilutive securities had been issued. Investors are
encouraged to review the reconciliation of these non-GAAP measures
to their most directly comparable GAAP financial measures.
Information Relating to Forward-Looking
Statements
This release includes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including statements regarding our expectations about development
opportunities and growth drivers, as well as our ability to fund
acquisitions through cash flows. These forward-looking statements
are qualified in their entirety by cautionary statements and risk
factor disclosures contained in the company’s Securities and
Exchange Commission (“SEC”) filings, including the company’s Annual
Report on Form 10-K filed with the SEC on February 16, 2016. Actual
results may differ materially from any forward-looking statements
due to risks and uncertainties, including, but not limited to: our
ability to effectively integrate and derive benefits from acquired
businesses, our ability to capitalize on new market opportunities,
potential liabilities and the extent of any insurance coverage, the
outcome of pending litigation and other proceedings, the impact of
quarterly fluctuations in results, the creditworthiness of our
customers and counterparties and our ability to collect accounts
receivable, fluctuations in world oil prices or foreign currency,
changes in political, economic, regulatory, or environmental
conditions, adverse conditions in the markets or industries in
which we or our customers and suppliers operate, our failure to
effectively hedge certain financial risks associated with the use
of derivatives, non-performance by counterparties or customers on
derivatives contracts, loss of, or reduced sales, to a significant
government customer, uninsured losses, the impact of natural
disasters, adverse results in legal disputes, unanticipated tax
liabilities, our ability to retain and attract senior management
and other key employees and other risks detailed from time to time
in the company’s SEC filings. New risks emerge from time to time
and it is not possible for management to predict all such risk
factors or to assess the impact of such risks on our business.
Accordingly, we undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, changes in expectations, future events, or
otherwise.
About World Fuel Services
Corporation
Headquartered in Miami, Florida, World Fuel Services is a global
fuel logistics, transaction management and payment processing
company, principally engaged in the distribution of fuel and
related products and services in the aviation, marine and land
transportation industries. World Fuel Services sells fuel and
delivers services to its clients at more than 8,000 locations in
more than 200 countries and territories worldwide.
The company's global team of market makers provides deep domain
expertise in all aspects of aviation, marine and land fuel
management. Aviation customers include commercial airlines, cargo
carriers, private aircraft and fixed base operators (FBOs), as well
as the United States and foreign governments. World Fuel Services'
marine customers include international container and tanker fleets,
cruise lines and time-charter operators, as well as the United
States and foreign governments. Land customers include petroleum
distributors, retail petroleum operators, and industrial,
commercial, residential and government accounts. The company also
offers transaction management services which consist of card
payment solutions and merchant processing services to customers in
the aviation, marine and land transportation industries. For more
information, call 305-428-8000 or visit www.wfscorp.com.
WORLD FUEL SERVICES CORPORATION AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited - In millions, except per share
data)
As of June 30, December 31,
2016 2015 Assets: Current assets: Cash
and cash equivalents $ 737.2 $ 582.5 Accounts receivable, net
2,030.7 1,812.6 Inventories 373.5 359.1 Prepaid expenses 46.0 57.9
Short-term derivative assets, net 44.7 220.4 Other current assets
282.7 208.0 Current assets held for sale —
5.5 Total current assets 3,514.8 3,246.0
Property and equipment, net 220.9 225.6 Goodwill 672.2 675.8
Identifiable intangible and other non-current assets 340.8 341.4
Non-current assets held for sale —
36.5 Total assets $ 4,748.7 $
4,525.3 Liabilities: Current liabilities: Short-term
debt $ 28.8 $ 25.5 Accounts payable 1,520.1 1,349.6 Customer
deposits 102.3 118.3 Accrued expenses and other current liabilities
260.5 255.2 Current liabilities held for sale —
5.6 Total current liabilities 1,911.7
1,754.2 Long-term debt 767.7 746.7 Non-current income tax
liabilities, net 93.1 87.7 Other long-term liabilities 22.9 25.8
Non-current liabilities held for sale —
5.0 Total liabilities 2,795.3
2,619.4 Commitments and contingencies
Equity: World Fuel shareholders' equity: Preferred stock,
$1.00 par value; 0.1 shares authorized, none issued — — Common
stock, $0.01 par value; 100 shares authorized, 70.4 and 70.8 issued
and outstanding as of June 30, 2016 and December 31, 2015,
respectively 0.7 0.7 Capital in excess of par value 404.9 435.3
Retained earnings 1,642.9 1,569.4 Accumulated other comprehensive
loss (112.6 ) (109.5 ) Total World Fuel
shareholders' equity 1,935.9 1,895.9 Noncontrolling interest equity
17.5 10.0 Total equity
1,953.5 1,905.9 Total
liabilities and equity $ 4,748.7 $ 4,525.3
(1) Certain prior period amounts have been revised to
reflect the impact of adjustments made to the Company's provision
for income taxes and to correct the timing of previously recorded
out-of-period adjustments.
WORLD FUEL SERVICES CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
INCOME
(Unaudited – In millions, except per share
data)
For the Three Months ended For the Six Months
ended June 30, June 30, 2016
2015 2016 2015 Revenue $ 6,633.0 $
8,496.4 $ 11,823.9 $ 15,837.1 Cost of revenue 6,414.5
8,306.0 11,383.9
15,433.1 Gross profit 218.5
190.4 440.0 404.0
Operating expenses: Compensation and employee benefits 103.7
87.5 199.6 176.2 Provision for bad debt 2.5 2.3 3.9 3.6 General and
administrative 66.8 59.0
129.9 115.0
173.0 148.8 333.4
294.8 Income from operations 45.6
41.6 106.6
109.2 Non-operating expenses, net: Interest expense and
other financing costs, net (8.1 ) (6.4 ) (15.7 ) (13.7 ) Other
income (expense), net (0.6 ) (1.6 )
0.7 (1.3 ) (8.7 )
(8.0 ) (15.0 ) (15.0 ) Income
before income taxes 36.9 33.6 91.6 94.2 Provision for income taxes
7.1 4.6 10.3
15.9 Net income including
noncontrolling interest 29.8 29.0 81.3 78.3 Net loss attributable
to noncontrolling interest (0.2 ) (1.5
) (0.3 ) (2.6 ) Net income attributable to
World Fuel $ 30.0 $ 30.5 $ 81.6
$ 80.9 Basic earnings per common share
$ 0.43 $ 0.43 $ 1.17 $ 1.14
Basic weighted average common shares
69.5 70.7 69.5
70.7 Diluted earnings per common share
$ 0.43 $ 0.43 $ 1.17 $ 1.13
Diluted weighted average common shares
70.0 71.2 70.0
71.3 Comprehensive income: Net income
including noncontrolling interest $ 29.8 $ 29.0 $ 81.3 $ 78.3 Other
comprehensive income (loss): Foreign currency translation
adjustments (10.7 ) 21.4 (8.2 ) (10.6 ) Derivative instruments, net
of income tax expense of $4.0 and $3.4 for the three and six months
ended June 30, 2016, respectively 5.2
— 3.5 — Other
comprehensive income (loss) (5.5 ) 21.4
(4.7 ) (10.6 ) Comprehensive income
including noncontrolling interest 24.3 50.4 76.6 67.7 Comprehensive
income (loss) attributable to noncontrolling interest
(6.9 ) (1.2 ) (5.3 ) (0.1 )
Comprehensive income attributable to World Fuel $ 31.2
$ 51.6 $ 81.9 $ 67.8
(2) Certain prior period amounts have been revised to
reflect the impact of adjustments made to the Company's provision
for income taxes and to correct the timing of previously recorded
out-of-period adjustments.
WORLD FUEL SERVICES CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited - In millions)
For the Six Months ended June 30, 2016
2015 Cash flows from operating activities: Net income
including noncontrolling interest $ 81.3 $
78.3 Adjustments to reconcile net income including
noncontrolling interest to net cash provided by operating
activities: Depreciation and amortization 36.7 28.5 Provision for
bad debt 3.9 3.6 Gain on sale of held for sale assets and
liabilities (3.8 ) Share-based payment award compensation costs 8.8
8.4 Deferred income tax provision (benefit) 1.6 (0.4 )
Extinguishment of liabilities (1.7 ) (5.3 ) Foreign currency
losses, net (3.6 ) 14.6 Other 2.8 1.4 Changes in assets and
liabilities, net of acquisitions: Accounts receivable, net (230.1 )
(51.9 ) Inventories (5.5 ) (17.2 ) Prepaid expenses 12.6 6.6
Short-term derivative assets, net 174.6 165.5 Other current assets
(52.3 ) (117.8 ) Cash collateral with financial counterparties
113.0 149.2 Other non-current assets 8.5 7.9 Accounts payable 185.7
50.8 Customer deposits (15.9 ) (42.0 ) Accrued expenses and other
current liabilities (109.6 ) (91.0 ) Non-current income tax, net
and other long-term liabilities (5.8 )
(16.0 ) Total adjustments 119.9
94.9 Net cash provided by operating activities
201.2 173.2 Cash flows from investing
activities: Acquisition of businesses, net of cash acquired and
other investments (49.7 ) (6.5 ) Proceeds from sale of business
29.3 — Capital expenditures (23.3 ) (21.9 ) Other investing
activities, net 6.9 4.4
Net cash used in investing activities (36.8 )
(24.0 ) Cash flows from financing activities: Borrowings of
debt 1,577.5 2,601.0 Repayments of debt (1,557.3 ) (2,520.5 )
Payments of senior revolving credit facility and senior term loan
facility loan costs — (3.4 ) Dividends paid on common stock (8.3 )
(6.9 ) Purchases of common stock (18.4 ) (30.0 ) Federal and state
tax benefits resulting from tax deductions in excess of the
compensation cost recognized for share-based payment awards — 1.5
Purchases of common stock tendered by employees to satisfy the
required withholding taxes related to share-based payment awards
(3.9 ) (7.0 ) Other financing activities, net (0.2 )
— Net cash provided by financing activities
(10.6 ) 34.7 Effect of exchange
rate changes on cash and cash equivalents 1.1
(1.1 ) Net increase in cash and cash equivalents
154.9 182.8 Cash and cash equivalents, as of beginning of period
582.5 302.3 Cash and cash
equivalents, as of end of period $ 737.4 $
485.1
WORLD FUEL SERVICES CORPORATION AND
SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES
(Unaudited - In millions, except per share
data)
For the Three Months ended For the Six Months
ended June 30, June 30, Non-GAAP financial
measures and reconciliation: 2016 2015
2016 2015 GAAP net income attributable to World Fuel
$ 30.0 $ 30.5 $ 81.6 $ 80.9 Expenses related to the acquisitions
and other related charges, net of income taxes (1) 4.8 — 6.0 —
Deferred revenue purchase accounting adjustment, net of income
taxes (2) — — — 1.1 Termination of employment agreement, net of
income taxes (3) — — — 2.3 Adjusted net income attributable to
World Fuel 34.8 30.5 87.6 84.3 Share-based compensation expense,
net of income taxes (4) 3.1 2.9 5.9 5.2 Intangible asset
amortization expense, net of income taxes (5) 6.1 5.1 12.8 8.8
Non-GAAP net income attributable to World Fuel $ 44.0 $ 38.5 $
106.3 $ 98.3 GAAP diluted earnings per common share $ 0.43 $
0.43 $ 1.17 $ 1.13 Expenses related to the acquisitions and other
related charges, net of income taxes (1) 0.07 — 0.09 — Deferred
revenue purchase accounting adjustment, net of income taxes (2) — —
— 0.02 Termination of employment agreement, net of income taxes (3)
— — — 0.03 Adjusted diluted earnings per common share 0.50 0.43
1.26 1.18 Share-based compensation expense, net of income taxes (4)
0.04 0.04 0.08 0.07 Intangible asset amortization expense, net of
income taxes (5) 0.09 0.07 0.18 0.12 Non-GAAP diluted earnings per
common share $ 0.63 $ 0.54 $ 1.52 $ 1.37 (1) The pre-tax
amount of expenses related to acquisitions and other related
charges was $5.9 for the three months ended June 30, 2016, and $7.5
for the six months ended June 30, 2016, respectively. (2) The
pre-tax amount of deferred revenue purchase accounting adjustment
was $1.5 for the six months ended June 30, 2015. (3) The pre-tax
amount of the termination of employment agreement was $3.8 for the
six months ended June 30, 2015. (4) The pre-tax amount of
share-based compensation expense was $4.7 and $4.2 for the three
months ended June 30, 2016 and 2015, respectively, and $8.8 and
$7.6 million for the six months ended June 30, 2016 and 2015,
respectively. (5) The pre-tax amount of intangible asset
amortization expense was $8.1 and $6.8 million for the three months
ended June 30, 2016 and 2015, respectively, and $16.5 and $12.2
million for the six months ended June 30, 2016 and 2015,
respectively.
WORLD FUEL SERVICES CORPORATION AND
SUBSIDIARIES
BUSINESS SEGMENTS INFORMATION
(Unaudited - In millions)
For the Three Months ended For the Six Months
ended June 30, June 30, Revenue:
2016 2015 2016
2015 Aviation segment $ 2,621.6 $ 3,185.3 $ 4,841.0 $
6,082.3 Land segment 2,171.0 2,505.7 3,866.0 4,628.7 Marine segment
1,840.4 2,805.4 3,116.9
5,126.1 $ 6,633.0 $ 8,496.4
$ 11,823.9 $ 15,837.1 Gross profit: Aviation
segment $ 98.6 $ 85.0 $ 187.3 $ 166.1 Land segment 80.2 63.6 173.9
142.2 Marine segment 39.7 41.8
78.8 95.7 $ 218.5 $ 190.4
$ 440.0 $ 404.0 Income from operations:
Aviation segment $ 37.2 $ 26.0 $ 71.2 $ 52.0 Land segment 16.2 16.5
50.1 46.2 Marine segment 11.0 13.6
22.5 39.7 64.4 56.1 143.8 137.9
Corporate overhead - unallocated 18.8
14.5 37.2
28.7
$ 45.6 $ 41.6 $ 106.6 $
109.2
SALES VOLUME SUPPLEMENTAL
INFORMATION
(Unaudited - In millions)
For the Three Months ended For the Six Months
ended June 30,
June 30, Volume (Gallons): 2016
2015 2016
2015 Aviation segment 1,723.2 1,572.3 3,349.6 3,022.1 Land
Segment 1,243.8 1,174.0 2,456.9 2,291.6 Marine Segment
2,168.3 2,216.1 4,190.9
4,237.7 Consolidated Total 5,135.3
4,962.4 9,997.4 9,551.4
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version on businesswire.com: http://www.businesswire.com/news/home/20160727006596/en/
World Fuel Services CorporationIra M. Birns, Executive Vice
President &Chief Financial OfficerorGlenn KlevitzVice
President, Assistant Treasurer305-428-8000
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