World Fuel Services Corporation (NYSE: INT)
Fourth-Quarter 2017
- GAAP net loss of $193.1 million or
$2.86 per diluted share, including a tax charge attributable to the
enactment of the Tax Cuts and Jobs Act (“U.S. Tax Reform”),
impairment and restructuring charges
- Adjusted net income was $17.0 million,
or $0.25 per diluted share
- Generated operating cash flow of $160.0
million
Full-Year 2017
- Record total of 20.9 billion gallons of
fuel sold
- Record total gross profit of $932.2
million
- Impairment charges of $91.9 million
primarily related to our marine segment
- Restructuring charges of $59.6 million
related to exiting non-core business lines and improving operating
efficiencies
- One-time transition tax of $144 million
related to U.S. Tax Reform
- GAAP net loss of $170.2 million, or
$2.50 per diluted share
- Adjusted EBITDA of $295.9 million
- Adjusted net income of $126.6 million
or $1.86 per diluted share
Fiscal Year 2017 Highlights
“We generated $932 million in gross profit representing modest
growth over 2016. Strength in our aviation segment was meaningfully
offset by challenging market conditions in marine and parts of our
land segment,” stated Michael J. Kasbar, chairman and chief
executive officer of World Fuel Services Corporation. “We are
optimistic about 2018 as we have begun executing on an
organizational redesign to drive greater operating efficiencies. We
continue to sharpen our portfolio of business activities while
executing on a solid pipeline of initiatives to accelerate organic
growth across the business, with opportunity for selective
strategic investments, as well.”
For the full year, the company’s aviation segment generated
gross profit of $441 million, an increase of $40 million or 10%
year-over-year, primarily driven by our government business and
increased volume and profitability in our international fueling
operations. The company’s marine segment generated gross profit of
$126 million, a decrease of 16% year-over-year, primarily driven by
the continued weakness in the maritime environment. The company’s
land segment generated gross profit of $366 million, up 5%
year-over-year, primarily driven by the benefit derived from recent
acquisitions offset in part by pressures in supply and trading
activities in North America.
In conjunction with our annual goodwill and intangible asset
impairment tests, we recorded a non-cash impairment charge of $91.9
million, in the fourth quarter, primarily related to our marine
segment. This was primarily a result of growing weakness in
maritime markets over the last year, along with a further decline
in demand for price risk management products and our decision to
exit our marine business in certain international markets. The
goodwill impairment is a non-cash charge and does not impact our
current financial flexibility, and we believe our overall cash
generating capabilities remain strong.
As a result of our continuing efforts to sharpen our portfolio
of business activities, we recorded a restructuring charge of $59.6
million in the fourth quarter, relating to the exit of two specific
business activities. As we heighten our focus on sharpening our
portfolio, we expect to identify additional opportunities to
restructure our operations, exit non-core assets or
under-performing lines of business in an effort to more effectively
allocate resources to drive improved profitability.
Our fourth quarter results reflect an income tax charge of
approximately $157 million, which includes a $144 million one-time
transition tax payable over eight years, as a result of U.S. Tax
Reform. As we intend to utilize our U.S. net operating losses, we
expect to only pay approximately $100 million over the eight-year
payment period. Looking ahead, the new 21% domestic corporate tax
rate should offer the potential for improved returns related to our
large pipeline of strategic investment opportunities in the
U.S.
“We are committed to restructuring all relevant parts of the
company, in terms of size and organizational design, to
maximize our market competitiveness and operational agility. We are
focused on achieving a more efficient operating model measured by
the disciplined execution of fundamentals to drive improvement in
long-term operational and financial performance,” said Ira M.
Birns, executive vice president and chief financial officer.
“Organic and strategic growth opportunities combined with the
benefit from recent restructuring activities and ongoing efforts to
identify additional cost saving opportunities, should drive
improved results in 2018, delivering greater value to our
shareholders.”
LIQUIDITY AND CAPITAL
Operating cash flow amounted to $205 million for fiscal year
2017. Our net debt to adjusted EBITDA ratio stood at 1.8x at
December 31, 2017 down from 2.1x at September 30, 2017.
We repurchased 1.73 million shares for $61.9 million in 2017 and
we have $100.0 million remaining under the share repurchase program
approved by our Board of Directors in October 2017.
Principally as a result of U.S. Tax Reform, we repaid $242
million of borrowings outstanding under our credit facility and
term loan in the fourth quarter. We also amended our credit
facility in January 2018 to facilitate additional repayments.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures,
including adjusted net income, adjusted diluted earnings per share,
adjusted earnings before interest, taxes, depreciation and
amortization (“EBITDA”) and net debt (collectively, the “Non-GAAP
Measures”). The Non-GAAP measures exclude costs associated with
goodwill and other impairments, severance and restructuring
charges, the tax impact of the Tax Cuts and Jobs Act of 2017, the
valuation allowance against the net U.S. deferred tax assets and
acquisition-related charges, primarily because we do not believe
they are reflective of the Company’s core operating results. We
used a combination of qualitative and quantitative factors to
review goodwill and identifiable intangible assets for impairment
for all of our reporting units and as a result of performing
these assessments, we recorded an impairment charge
primarily attributable to the write-off of goodwill in our marine
segment and intangible assets, mostly consisting of customer
relationships in both the marine and land segments. Restructuring
charges are related to an enterprise-wide restructuring plan that
is designed to streamline the organization, and reallocate
resources to better align our organizational structure and costs
with our strategy. These non-recurring items are excluded because,
by their nature, they are not indicative of our business or
economic trends. We believe that the Non-GAAP 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
the Non-GAAP Measures 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 Services 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 restricted stock units
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 in this
press release and on our website.
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 beliefs and expectations to
accelerate organic growth, execute on our long-term growth
strategy, our expectations regarding our restructuring activities
and additional cost saving opportunities, our future operating
results and its contributing factors, our belief regarding our cash
generating capabilities, our intentions regarding use of our net
operating losses and its impact on future tax payment amounts, and
the impact of the new corporate tax rate on our investment returns.
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 most recent Annual Report on Form 10-K
filed with the SEC. Actual results may differ materially from any
forward-looking statements due to risks and uncertainties,
including, but not limited to: our ability to effectively leverage
technology and operating systems and realize the anticipated
benefits, our ability to successfully execute and achieve
efficiencies and other benefits related to our transformation
initiatives, our ability to achieve the expected level of benefit
from our restructuring activities and cost reduction initiatives,
the impact of impairments to goodwill or intangible assets, our
ability to successfully implement our growth strategy, our ability
to effectively integrate acquired businesses and recognize the
anticipated benefits, risks related to the complexity of U.S. Tax
Reform and our ability to accurately predict its impact on our
returns, our ability to capitalize on new market opportunities and
changes in supply and other market dynamics in the regions where we
operate, potential liabilities and the extent of any insurance
coverage, the outcome of pending litigation and other proceedings,
risks related to the complexity of U.S. Tax Reform and our ability
to accurately predict its impact on our future earnings, the impact
of quarterly fluctuations in results, particularly as a result of
seasonality, 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, except as
required by law.
About World Fuel Services
Corporation
Headquartered in Miami, Florida, World Fuel Services is a global
energy management company involved in providing energy procurement
advisory services, supply fulfillment and transaction and payment
management solutions to commercial and industrial customers,
principally 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.
For more information, call 305-428-8000 or visit www.wfscorp.com.
-- Some amounts in this press release may not
add due to rounding. All percentages have been calculated using
unrounded amounts --
WORLD FUEL SERVICES CORPORATION AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited - In millions, except per share
data)
As of December 31, December 31,
2017 2016 Assets: Current assets: Cash and
cash equivalents $ 372.3 $ 698.6 Accounts receivable, net 2,705.6
2,344.0 Inventories 505.0 458.0 Prepaid expenses 64.4 46.5
Short-term derivative assets, net 51.1 58.9 Other current assets
241.9 230.6 Total current assets 3,940.4 3,836.6
Property and equipment, net 329.8 311.2 Goodwill 845.5 835.8
Identifiable intangible and other non-current assets 472.1
429.1 Total assets $ 5,587.8 $ 5,412.6
Liabilities: Current liabilities: Current maturities of long-term
debt and capital leases $ 25.6 $ 15.4 Accounts payable 2,239.7
1,770.4 Customer deposits 108.3 90.8 Accrued expenses and other
current liabilities 344.9 306.0 Total current
liabilities 2,718.6 2,182.7 Long-term debt 884.6 1,170.8
Non-current income tax liabilities, net 202.4 84.6 Other long-term
liabilities 44.2 34.5 Total liabilities 3,849.8
3,472.6 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;
100.0 shares authorized, 67.7 and 69.9 issued and outstanding as of
December 31, 2017 and December 31, 2016, respectively 0.7 0.7
Capital in excess of par value 354.9 399.9 Retained earnings
1,492.8 1,679.3 Accumulated other comprehensive loss (126.5 )
(154.8 ) Total World Fuel shareholders' equity 1,721.9 1,925.0
Noncontrolling interest 16.0 15.0 Total equity
1,738.0 1,940.0 Total liabilities and equity $
5,587.8 $ 5,412.6
WORLD FUEL SERVICES CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
(Unaudited – In millions, except per share
data)
For the Three Months Ended For the Twelve Months
Ended December 31, December 31,
2017 2016 2017 2016
Revenue $ 8,872.0 $ 7,792.1 $ 33,695.5 $ 27,015.8 Cost of revenue
8,642.1 7,569.9 32,763.3 26,116.8 Gross
profit 229.9 222.3 932.2 899.0
Operating expenses: Compensation and employee benefits 113.8 107.1
428.2 413.3 General and administrative 81.9 91.1 306.9 296.8
Goodwill and other impairments 91.9 — 91.9 — Restructuring charges
59.6 — 59.6 — 347.2 198.2
886.6 710.1 Income from operations (117.2 )
24.0 45.6 188.9 Non-operating expenses, net:
Interest expense and other financing costs, net (18.1 ) (13.3 )
(60.3 ) (39.2 ) Other income (expense), net (1.3 ) (8.7 ) (6.4 )
(7.5 ) (19.4 ) (22.0 ) (66.7 ) (46.7 ) Income (loss) before
income taxes (136.7 ) 2.1 (21.1 ) 142.1 Provision for income taxes
57.0 — 149.2 15.7 Net income (loss)
including noncontrolling interest (193.7 ) 2.1 (170.3 ) 126.4 Net
(loss) attributable to noncontrolling interest (0.6 ) (0.1 ) (0.1 )
— Net income (loss) attributable to World Fuel $ (193.1 ) $
2.2 $ (170.2 ) $ 126.5 Basic earnings (loss)
per common share $ (2.86 ) $ 0.03 $ (2.50 ) $ 1.82
Basic weighted average common shares 67.4 69.1
68.1 69.3 Diluted earnings (loss) per common
share $ (2.86 ) $ 0.03 $ (2.50 ) $ 1.81
Diluted weighted average common shares 67.4 69.5 68.1
69.8 Comprehensive income: Net income (loss)
including noncontrolling interest $ (193.7 ) $ 2.1 $ (170.3 ) $
126.4 Other comprehensive income (loss): Foreign currency
translation adjustments 0.3 (27.1 ) 30.1 (40.4 ) Cash Flow hedges,
net of income tax benefit of $0.3 for 2017 (2.1 ) (3.8 ) (0.3 )
(6.6 ) Other comprehensive income (loss): (1.8 ) (30.9 ) 29.8
(47.0 ) Comprehensive income (loss) including noncontrolling
interest (195.5 ) (28.9 ) (140.5 ) 79.5 Comprehensive income (loss)
attributable to noncontrolling interest (0.1 ) 1.1 1.5
1.6 Comprehensive income (loss) attributable to World
Fuel $ (195.4 ) $ (30.0 ) $ (142.0 ) $ 77.9
WORLD FUEL SERVICES CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited - In millions)
For the Three Months Ended For the Twelve Months
Ended December 31, December 31, 2017
2016 2017 2016 Cash flows from
operating activities: Net income (loss) including noncontrolling
interest $ (193.7 ) $ 2.1 $ (170.3 ) $ 126.4
Adjustments to reconcile net income including noncontrolling
interest to net cash provided by operating activities: Depreciation
and amortization 21.9 23.9 86.0 82.3 Provision for bad debt 3.0
10.0 9.3 15.4 Goodwill impairment and other chargeoffs 91.9 — 91.9
— Share-based payment award compensation costs 6.0 4.7 21.2 19.2
Deferred income tax (benefit) provision 34.4 (21.5 ) 13.2 (36.0 )
Foreign currency losses (gains), net (9.0 ) 6.5 (0.6 ) (11.8 )
Other (75.8 ) (1.1 ) (1.2 ) (7.5 ) Changes in assets and
liabilities, net of acquisitions: Accounts receivable, net (105.7 )
(294.5 ) (362.0 ) (506.8 ) Inventories 25.6 39.8 (43.9 ) (49.5 )
Prepaid expenses (9.8 ) 7.9 (19.7 ) 7.7 Short-term derivative
assets, net (28.6 ) (28.8 ) (0.2 ) 163.7 Other current assets 56.8
10.0 7.1 (20.4 ) Cash collateral with financial counterparties
(11.2 ) 20.4 (26.7 ) 149.2 Other non-current assets (11.1 ) (9.2 )
(30.3 ) 4.4 Accounts payable 197.5 210.2 451.2 423.4 Customer
deposits 7.1 (15.8 ) 13.4 (26.3 ) Accrued expenses and other
current liabilities 78.4 22.6 78.4 (121.9 ) Non-current income tax,
net and other long-term liabilities 82.5 (2.4 ) 88.4
(6.4 ) Total adjustments 353.7 (17.1 ) 375.5 78.8
Net cash provided by (used in) operating activities
160.0 (15.1 ) 205.2 205.2 Cash flows from
investing activities: Acquisition of businesses, net of cash
acquired and other investments (26.1 ) (164.4 ) (120.7 ) (430.8 )
Capital expenditures (16.1 ) (7.2 ) (54.0 ) (36.1 ) Other investing
activities, net (4.9 ) 2.2 (5.4 ) 38.4
Net cash
used in investing activities (47.1 ) (169.3 ) (180.1 ) (428.5 )
Cash flows from financing activities: Borrowings of debt 972.6
1,877.4 4,472.7 4,688.0 Repayments of debt (1,257.1 ) (1,829.2 )
(4,749.7 ) (4,280.3 ) Dividends paid on common stock (4.0 ) (4.1 )
(16.3 ) (16.6 ) Purchases of common stock — (22.8 ) (61.9 ) (41.2 )
Other financing activities, net (0.3 ) (6.1 ) (6.3 ) (9.0 )
Net
cash provided by (used in) financing activities (288.9 ) 15.2
(361.6 ) 340.9 Effect of exchange rate changes on
cash and cash equivalents 2.4 (4.5 ) 10.3 (1.5 )
Net increase (decrease) in cash and cash equivalents (173.6
) (173.8 ) (326.2 ) 116.1 Cash and cash equivalents, as of
beginning of period 546.0 872.3 698.6 582.5
Cash and cash equivalents, as of end of period $
372.3 $ 698.6 $ 372.3 $ 698.6
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 Twelve Months
Ended December 31, December 31, Non-GAAP
financial measures and reconciliation: 2017
2016 2017 2016 GAAP net income (loss)
attributable to World Fuel $ (193.1 ) $ 2.2 $ (170.2 ) $ 126.5
Goodwill and other impairments, net of income taxes 82.0 — 82.0 —
Severance and restructuring charges, net of income taxes (1) 44.1
7.8 49.1 9.4 Tax impact of the Tax Cuts and Jobs Act of 2017 (2)
157.4 — 157.4 — Valuation allowance against the net U.S. deferred
tax assets (3) (76.9 ) — — — Acquisition related charges, net of
income taxes 3.4 4.4 8.3 11.0 Adjusted net
income attributable to World Fuel $ 17.0 $ 14.3 $ 126.6 $ 146.9
GAAP diluted earnings (loss) per common share $ (2.86 ) $
0.03 $ (2.50 ) $ 1.81 Goodwill and other impairments, net of income
taxes 1.22 — 1.21 — Severance and restructuring charges, net of
income taxes (1) 0.65 0.11 0.72 0.14 Tax impact of the Tax Cuts and
Jobs Act of 2017 (2) 2.33 — 2.31 — Valuation allowance against the
net U.S. deferred tax assets (3) (1.14 ) — — — Acquisition related
charges, net of income taxes 0.05 0.06 0.12
0.16 Adjusted diluted earnings per common share $ 0.25
$ 0.21 $ 1.86 $ 2.11 (1)
The pre-tax amount of restructuring charges, including
severance-related costs, was $59.6 million for the three and twelve
months ended December 31, 2017. The pre-tax amount of
severance-related expenses for the three and twelve months ended
December 31, 2016 was $11.7 million and $13.9 million,
respectively, and $7.1 million for the twelve months ended December
31, 2017, which was not otherwise included in the restructuring
charges. (2) This amount includes the effects of the $143.7 million
one-time transition tax on historical accumulated foreign earnings.
(3) This amount represents the reversal of the valuation allowance
recorded during the three months ended September 30, 2017.
For the Three Months Ended For the Twelve Months
Ended December 31, December 31, Non-GAAP
financial measures and reconciliation: 2017
2016 2017 2016 GAAP net income (loss)
attributable to World Fuel $ (193.1 ) $ 2.2 $ (170.2 ) $ 126.5
Provision for income taxes 57.0 — 149.2 15.7 Interest expense and
other financing costs, net 18.1 13.3 60.3 39.2 Depreciation and
amortization 21.8 23.9 86.1 82.3 Goodwill and other impairments
91.9 — 91.9 — Severance and restructuring charges 59.6 11.7 66.7
13.9 Acquisition and other related charges $ 5.2 $ 6.2
$ 12.0 $ 14.0 Adjusted EBITDA(1) $ 60.5 $ 57.3
$ 295.9 $ 291.6 (1) The Company
defines adjusted EBITDA as net income (loss) excluding the impacts
for the provision for income taxes, interest expense and other
financing costs, depreciation and amortization, and non-recurring
charges, including those associated with goodwill and other
impairments, severance, restructuring and acquisition-related
costs.
WORLD FUEL SERVICES CORPORATION AND
SUBSIDIARIES
BUSINESS SEGMENTS INFORMATION
(Unaudited - In millions)
For the Three Months Ended For the Twelve Months
Ended December 31, December 31, Revenue:
2017 2016 2017 2016
Aviation segment $ 4,006.7 $ 3,104.2 $ 14,538.2 $ 10,914.4 Land
segment 2,840.1 2,543.0 10,958.0 8,918.8 Marine segment 2,025.3
2,145.0 8,199.3 7,182.5 $ 8,872.0
$ 7,792.1 $ 33,695.5 $ 27,015.8 Gross
profit: Aviation segment $ 105.7 $ 102.0 $ 440.5 $ 401.0 Land
segment 95.3 86.8 365.8 348.5 Marine segment 29.0 33.5
126.0 149.5 $ 229.9 $ 222.3 $
932.2 $ 899.0 Income from operations: Aviation
segment $ 41.2 $ 36.7 $ 192.9 $ 160.5 Land segment (54.7 ) 6.8 (7.9
) 70.8 Marine segment (77.7 ) (2.5 ) (57.8 ) 30.2 (91.2 )
41.0 127.2 261.5 Corporate overhead - unallocated (26.1 ) (17.0 )
(81.6 ) (72.7 ) $ (117.2 ) $ 24.0 $ 45.6 $
188.9
SALES VOLUME SUPPLEMENTAL
INFORMATION
(Unaudited - In millions)
For the Three Months Ended For the Twelve Months
Ended December 31, December 31, Volume
(Gallons):
2017 2016 2017
2016 Aviation Segment 2,016.6 1,884.4 7,938.3 7,126.9 Land
Segment 1,473.5 1,487.3 5,940.4 5,366.0 Marine Segment (1) 1,619.3
2,015.6 7,007.9 8,278.5 Consolidated Total
5,109.4 5,387.4 20,886.6 20,771.3
(1) Converted from metric tons to gallons at a rate
of 264 gallons per metric ton. Marine segment metric tons were 6.1
and 26.5 for the three and twelve months ended December 31, 2017.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180222006481/en/
World Fuel Services CorporationIra M Birns,
305-428-8000Executive Vice President & Chief Financial
OfficerorGlenn Klevitz, 305-428-8000Vice President, Assistant
Treasurer & Investor Relations
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