Market Overview

World Fuel Services Corporation Reports Second Quarter 2018 Results

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World Fuel Services Corporation (NYSE:INT):

Second-Quarter 2018 Highlights

  • GAAP net income of $28.7 million or $0.42 per diluted share
  • Adjusted net income of $31.7 million, or $0.47 per diluted share
  • Total of 5.1 billion gallons of fuel sold
  • Total gross profit of $246.2 million, up 7% year-over-year
  • Adjusted EBITDA of $84.2 million, up 8% year-over-year

"During the second quarter, our aviation segment posted record
profitability," stated Michael J. Kasbar, chairman and chief executive
officer of World Fuel Services Corporation. "Our focus on operating
efficiencies, portfolio refinement and organic growth initiatives should
position the company for improved operating performance in 2018 and
2019."

For the quarter, the company's aviation segment generated gross profit
of $127.4 million, an increase of 15% year-over-year, primarily driven
by strong government-related sales and international core resale
operations. The company's marine segment generated gross profit of $30.2
million, a decrease of 8% year-over-year, primarily due to exiting low
return activities. The company's land segment generated gross profit of
$88.6 million, up 2% year-over-year, driven by growth in our payment
solutions business and natural gas and power operations, partially
offset by our continued reduction of certain non-core activities in
North America.

"Our business performed well and recent cost management initiatives have
contributed to a 170 basis point improvement in operating leverage
during the first half of the year compared to 2017. These actions
contributed to year-over-year adjusted EBITDA improvement for the fifth
consecutive quarter," said Ira M. Birns, executive vice president and
chief financial officer. "We remain committed to improving our operating
leverage by 250 basis points in 2018 and 2019, which will aid us in
growing future profitability and free cash flow."

Liquidity and Capital

Cash flow generated from operating activities was $0.3 million for the
second quarter of 2018. This reflects the impact of a change in
classification of $121.8 million of cash proceeds received from the
beneficial interest of receivables sold from cash flow from operating
activities to cash flow from investing activities due to a recently
adopted accounting standard beginning in 2018. Strong working capital
management contributed to a reduction of our net debt to adjusted EBITDA
ratio to 1.9x at June 30, 2018 from 2.2x at March 31, 2018.

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 acquisition-related charges and severance and
restructuring charges primarily because we do not believe they are
reflective of the Company's core operating results. 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 with respect to our
focus on operating efficiencies, portfolio refinement and organic growth
initiatives and its impact on operating performance in 2018 and 2019, as
well as our expectations about improvements to our operating leverage
and growing future profitability and free cash flow. 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, unanticipated tax liabilities or adverse results of tax
audits, assessments, or disputes, 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, our
ability to retain and attract senior management and other key employees
and other risks detailed from time to time in our 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
CONSOLIDATED BALANCE SHEETS

(Unaudited - In millions, except per share data)

 
  As of
June 30,   December 31,
  2018 2017
Assets:
Current assets:
Cash and cash equivalents $ 187.6 $ 372.3
Accounts receivable, net 2,951.9 2,705.6
Inventories 559.2 505.0
Prepaid expenses 59.8 64.4
Short-term derivative assets, net 70.6 51.1
Other current assets 247.8   241.9  
Total current assets 4,076.8 3,940.4
Property and equipment, net 335.0 329.8
Goodwill 856.7 845.5
Identifiable intangible and other non-current assets 488.6   472.1  
Total assets $ 5,757.0   $ 5,587.8  
Liabilities:
Current liabilities:
Current maturities of long-term debt and capital leases $ 33.7 $ 25.6
Accounts payable 2,536.0 2,239.7
Customer deposits 95.0 108.3
Accrued expenses and other current liabilities 348.8   344.9  
Total current liabilities 3,013.5 2,718.6
Long-term debt 731.6 884.6
Non-current income tax liabilities, net 187.2 202.4
Other long-term liabilities 49.5   44.2  
Total liabilities 3,981.7   3,849.8  
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, 67.8 and
67.7 issued and outstanding as of

June 30, 2018 and December 31, 2017, respectively

0.7 0.7
Capital in excess of par value 359.3 354.9
Retained earnings 1,546.3 1,492.8
Accumulated other comprehensive loss (146.3 ) (126.5 )
Total World Fuel shareholders' equity 1,760.0 1,721.9
Noncontrolling interest 15.3   16.0  
Total equity 1,775.3   1,738.0  
Total liabilities and equity $ 5,757.0   $ 5,587.8  
 
WORLD FUEL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited – In millions, except per share data)

 
  For the Three Months Ended   For the Six Months Ended
June 30, June 30,
  2018   2017 2018   2017
Revenue $ 10,150.8 $ 8,086.2 $ 19,332.2 $ 16,280.4
Cost of revenue 9,904.7   7,855.2   18,842.6   15,818.0  
Gross profit 246.2   231.0   489.6   462.4  
Operating expenses:
Compensation and employee benefits 110.2 102.3 224.1 206.8
General and administrative 74.9   77.4   147.2   154.0  
  185.1   179.7   371.3   360.9  
Income from operations 61.1   51.2   118.3   101.6  
Non-operating expenses, net:
Interest expense and other financing costs, net (17.9 ) (13.8 ) (34.2 ) (26.5 )
Other expense, net (1.6 ) (2.6 ) (3.9 ) (4.1 )
  (19.5 ) (16.4 ) (38.1 ) (30.6 )
Income before income taxes 41.6 34.9 80.2 70.9
Provision for income taxes 12.4   4.6   19.7   9.6  
Net income including noncontrolling interest 29.2 30.3 60.5 61.3
Net income attributable to noncontrolling interest 0.5   0.2   0.6    
Net income attributable to World Fuel $ 28.7   $ 30.0   $ 59.9   $ 61.4  
 
Basic earnings per common share $ 0.42   $ 0.44   $ 0.89   $ 0.90  
 
Basic weighted average common shares 67.7   68.4   67.6   68.5  
 
Diluted earnings per common share $ 0.42   $ 0.44   $ 0.88   $ 0.89  
 
Diluted weighted average common shares 68.0   68.7   67.9   68.9  
 
Comprehensive income:
Net income including noncontrolling interest $ 29.2 $ 30.3 $ 60.5 $ 61.3
Other comprehensive income (loss):
Foreign currency translation adjustments (28.6 ) 11.2 (18.3 ) 17.6

Cash flow hedges, net of income tax expense of $3.1 for the three
months

ended June 30, 2018 and net of income tax benefit of $1.1 and
income tax

expense of $6.6 for the six months ended June 30, 2018 and 2017,
respectively

6.9     (2.8 ) 10.5  
Other comprehensive income (loss): (21.7 ) 11.2   (21.1 ) 28.1  
Comprehensive income including noncontrolling interest 7.5 41.5 39.3 89.4
Comprehensive (loss) income attributable to noncontrolling interest (1.1 ) 1.1   (1.3 ) 1.0  
Comprehensive income attributable to World Fuel $ 8.6   $ 40.3   $ 40.7   $ 88.4  
 
WORLD FUEL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - In millions)

   
For the Three Months Ended For the Six Months Ended
June 30, June 30,
  2018   2017 2018   2017
Cash flows from operating activities:
Net income (loss) including noncontrolling interest $ 29.2   $ 30.3   $ 60.5   $ 61.3  

Adjustments to reconcile net income including noncontrolling
interest to net cash

provided by operating activities:

Depreciation and amortization 19.6 20.8 38.4 43.3
Provision for bad debt 2.3 1.5 4.0 3.9
Share-based payment award compensation costs 2.2 5.2 6.4 9.2
Deferred income tax provision (benefit) 6.0 (1.7 ) (1.0 ) (8.0 )
Foreign currency gains, net (5.0 ) (3.4 ) (2.5 ) (6.5 )
Other (0.3 ) (0.8 ) 0.4 (1.8 )
Changes in assets and liabilities, net of acquisitions:

Accounts receivable, net (reduced by beneficial interests received
in exchange

for accounts receivables sold of $122.5 million and $83.2 million
for the three

months ended June 30, 2018 and 2017, respectively, and $241.5
million and

$157.1 million for the six months ended June 30, 2018 and 2017,
respectively.)

(428.5 ) (104.4 ) (499.7 ) (47.7 )
Inventories 28.0 14.5 (56.7 ) 15.2
Prepaid expenses (3.9 ) 0.5 2.1 0.3
Short-term derivative assets, net (19.3 ) 4.0 (22.0 ) 14.2
Other current assets (6.7 ) (18.0 ) (32.2 ) 3.1
Cash collateral with financial counterparties 20.5 (21.7 ) 41.7 (5.9 )
Other non-current assets (4.4 ) (16.4 ) (32.8 ) (12.4 )
Accounts payable 351.8 57.4 301.0 12.8
Customer deposits (6.9 ) (8.3 ) (12.2 ) (1.0 )
Accrued expenses and other current liabilities 7.7 (18.1 ) (22.5 ) (72.7 )
Non-current income tax, net and other long-term liabilities 7.9   (6.0 ) (1.4 ) (8.1 )
Total adjustments (28.9 ) (95.0 ) (289.1 ) (61.9 )
Net cash provided by (used in) operating activities 0.3   (64.7 ) (228.6 ) (0.6 )
Cash flows from investing activities:
Cash receipts of retained beneficial interests in receivable sales 121.8 83.5 241.9 156.4
Acquisition of businesses, net of cash acquired 1.0 (0.4 ) (21.0 ) (88.4 )
Capital expenditures (13.4 ) (21.4 ) (28.9 ) (31.5 )
Other investing activities, net 4.1   (0.6 ) 7.6   (0.4 )
Net cash provided by investing activities 113.4   61.1   199.5   36.0  
Cash flows from financing activities:
Borrowings of debt 1,406.1 1,173.0 2,875.0 1,991.8
Repayments of debt (1,474.5 ) (1,188.6 ) (3,019.5 ) (2,111.1 )
Dividends paid on common stock (4.0 ) (4.1 ) (8.1 ) (8.2 )

Purchases of common stock tendered by employees to satisfy the
required

withholding taxes related to share-based payment awards

(1.6 ) (2.7 ) (2.1 ) (3.9 )
Purchases of common stock (20.8 ) (31.9 )
Other financing activities, net   (0.3 )   (0.4 )
Net cash used in financing activities (73.9 ) (43.5 ) (154.7 ) (163.7 )
Effect of exchange rate changes on cash and cash equivalents (5.1 ) 3.4   (1.1 ) 5.2  
Net increase (decrease) in cash and cash equivalents 34.7 (43.7 ) (184.8 ) (123.0 )
Cash and cash equivalents, as of beginning of period 152.9   619.3   372.3   698.6  
Cash and cash equivalents, as of end of period $ 187.6   $ 575.6   $ 187.6   $ 575.6  

* The adoption of ASU 2016-15 resulted in operating cash flow decreases
and investing cash flow increases of $121.8 million and $83.5 million
for the three months ended June 30, 2018 and 2017, respectively, and
$241.9 million and $156.4 million for the six months ended June 30, 2018
and 2017, respectively.

WORLD FUEL SERVICES CORPORATION
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: 2018   2017 2018   2017
Net income attributable to World Fuel $ 28.7 $ 30.0 $ 59.9 $ 61.4
Acquisition related charges 0.8 2.6 1.4 5.5
Severance and other restructuring-related costs 2.7 3.1 7.0 5.0
Income tax impacts (0.6 ) (1.5 ) (1.7 ) (3.0 )
Adjusted net income attributable to World Fuel $ 31.7 $ 34.2 $ 66.7 $ 68.8
 
Diluted earnings per common share $ 0.42 $ 0.44 $ 0.88 $ 0.89
Acquisition related charges 0.01 0.04 0.02 0.08
Severance and other restructuring-related costs 0.04 0.05 0.10 0.07
Income tax impacts (0.01 ) (0.02 ) (0.02 ) (0.04 )
Adjusted diluted earnings per common share $ 0.47   $ 0.50   $ 0.98   $ 1.00  
 
  For the Three Months Ended   For the Six Months Ended
  June 30, June 30,
Non-GAAP financial measures and reconciliation: 2018   2017 2018   2017
Income from operations $ 61.1 $ 51.2 $ 118.3 $ 101.6
Depreciation and amortization 19.6 20.8 38.4 43.3
Acquisition-related charges 0.8 2.6 1.4 5.5
Severance and other restructuring-related costs 2.7   3.1   7.0   4.4
Adjusted EBITDA(1) $ 84.2   $ 77.7   $ 165.1   $ 154.8
 

(1) The Company defines adjusted EBITDA as income from operations,
excluding the impact of depreciation and amortization, and items that
are considered to be non-operational and are not representative of our
core business, including those associated with severance, restructuring
and acquisition-related costs.

WORLD FUEL SERVICES CORPORATION
BUSINESS SEGMENTS INFORMATION
(Unaudited - In millions)
 
  For the Three Months Ended   For the Six Months Ended
  June 30, June 30,
Revenue: 2018   2017 2018   2017
Aviation segment $ 4,900.7 $ 3,508.4 $ 9,193.6 $ 6,825.8
Land segment 2,960.2 2,564.0 5,820.9 5,347.4
Marine segment 2,289.9   2,013.8   4,317.7   4,107.3  
  $ 10,150.8   $ 8,086.2   $ 19,332.2   $ 16,280.4  
Gross profit:
Aviation segment $ 127.4 $ 110.9 $ 237.3 $ 210.8
Land segment 88.6 87.2 190.8 185.0
Marine segment 30.2   32.9   61.5   66.6  
  $ 246.2   $ 231.0   $ 489.6   $ 462.4  
Income from operations:
Aviation segment $ 64.2 $ 49.7 $ 112.0 $ 90.2
Land segment 10.2 12.2 29.9 33.6
Marine segment 7.9   7.2   16.4   15.5  
82.3 69.2 158.3 139.3
Corporate overhead - unallocated (21.2 ) (17.9 ) (40.0 ) (37.7 )
  $ 61.1   $ 51.2   $ 118.3   $ 101.6  
 
SALES VOLUME SUPPLEMENTAL INFORMATION

(Unaudited - In millions)

 
  For the Three Months Ended     For the Six Months Ended
  June 30,   June 30,
Volume (Gallons): 2018   2017   2018   2017
Aviation Segment 2,090.3 2,031.5 4,057.4 3,862.5
Land Segment (1) 1,432.4 1,472.3 2,890.7 2,969.4
Marine Segment (2) 1,554.3   1,785.4     3,078.9   3,589.1
Consolidated Total 5,077.0   5,289.3     10,027.0   10,421.0

(1) Includes gallons and gallon equivalents of British Thermal Units
(BTU) for our natural gas sales and Kilowatt Hours (KwH) for our Kinect
power business.

(2) Converted from metric tons to gallons at a rate of 264 gallons per
metric ton. Marine segment metric tons were 5.9 and 11.7 for the three
and six months ended June 30, 2018.

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