World Fuel Services Corporation Reports Second Quarter 2016 Earnings
“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
The company’s aviation segment generated gross profit of
“Consistent cash flow generation and prudent balance sheet management
has enabled us to aggregate
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
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
About
Headquartered in
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
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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) |
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| 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. | ||||||||||||||||
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WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited - In millions) |
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| 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 | ||||
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WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (Unaudited - In millions, except per share data) |
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| 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. | |||||||||||||
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WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES BUSINESS SEGMENTS INFORMATION (Unaudited - In millions) |
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| 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 |
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| $ | 45.6 | $ | 41.6 | $ | 106.6 | $ |
109.2 |
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SALES VOLUME SUPPLEMENTAL INFORMATION (Unaudited - In millions) |
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| 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 | ||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20160727006596/en/
Source:
World Fuel Services Corporation
Ira M. Birns, Executive Vice
President &
Chief Financial Officer
or
Glenn Klevitz
Vice
President, Assistant Treasurer
305-428-8000
