World Fuel Services Corporation Reports Third Quarter Results

World Fuel Services Corporation (NYSE: INT), a leading global fuel logistics company, principally engaged in the marketing, sale and distribution of aviation, marine and land fuel products and related services, today reported third quarter net income of $51.5 million or $0.72 diluted earnings per share compared to $51.5 million or $0.72 diluted earnings per share in the third quarter of 2012. Non-GAAP net income and diluted earnings per share for the third quarter, which exclude share-based compensation and amortization of acquired intangible assets, were $57.9 million and $0.81, respectively, compared to $57.9 million and $0.81 in 2012.

“Considering current market conditions, our overall performance in the third quarter was strong,” said Michael J. Kasbar, president and chief executive officer of World Fuel Services Corporation. “Our global team remains focused on growing our value proposition in the fuel, services and billing and payment sectors, across all three of our business segments, driving greater value for our customers and suppliers.”

The company’s aviation segment generated gross profit of $89.8 million, an increase of $13.7 million or 18% sequentially and $5.6 million or 7% year-over-year. The company’s marine segment generated gross profit of $40.2 million, a decrease of $12.1 million or 23% sequentially and $13.7 million or 25% year-over-year. The company’s land segment posted gross profit of $56.4 million, a decrease of $3.7 million or 6% sequentially, but an increase of $13.8 million or 32% year-over-year.

"We repurchased $20 million of our common stock in the open market during the third quarter," said Ira M. Birns, executive vice president and chief financial officer of World Fuel Services Corporation. "Our strong cash flow combined with the recently announced expansion of our banking facility further enhances our liquidity profile, increasing our capacity to fund both organic and strategic growth opportunities as well as opportunistic repurchases of our stock, all driving additional value for our shareholders."

Non-GAAP Financial Measures

This press release includes selected financial information that has not been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). This information includes non-GAAP net income and non-GAAP diluted earnings per share. The non-GAAP financial measures exclude costs associated with share-based compensation and amortization of acquired intangible assets, primarily because we do not believe they are reflective of the company’s core operating results. We believe that these non-GAAP financial measures, when considered in conjunction with our financial information prepared in accordance with GAAP, are useful for investors to evaluate our core operating results and trends.

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 share may not be comparable to the presentation of such metrics by other companies. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measure. A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included in this press release.

Information Relating to Forward-Looking Statements

With the exception of historical information in this news release, this document includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our expectations of funding opportunities, our ability to drive value, as well as our expectation about our liquidity. 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 21, 2013. 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 leading global fuel logistics company, principally engaged in the marketing, sale and distribution of aviation, marine and land fuel products and related services on a worldwide basis. 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, 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 STATEMENTS OF INCOME
(UNAUDITED - IN THOUSANDS, EXCEPT PER SHARE DATA)
       
For the Three Months ended For the Nine Months ended
September 30, September 30,
2013 2012 2013 2012
 
 
Revenue $ 10,493,661 $ 9,911,673 $ 31,157,294 $ 29,009,525
Cost of revenue   10,307,320     9,730,921     30,600,116     28,499,415  
 
Gross profit   186,341     180,752     557,178     510,110  
 
Operating expenses:
Compensation and employee benefits 72,184 65,843 214,358 176,553
Provision for bad debt 1,863 3,631 5,675 4,413
General and administrative   48,091     40,230     137,265     126,482  
 
Total operating expenses   122,138     109,704     357,298     307,448  
 
Income from operations 64,203 71,048 199,880 202,662
Non-operating expenses, net   (5,715 )   (3,467 )   (14,025 )   (13,087 )
 
Income before income taxes 58,488 67,581 185,855 189,575
Provision for income taxes   8,191     14,683     32,090     33,249  
 
Net income including noncontrolling interest 50,297 52,898 153,765 156,326
Net (loss) income attributable to noncontrolling interest   (1,175 )   1,404     2,552     9,817  
 
Net income attributable to World Fuel $ 51,472   $ 51,494   $ 151,213   $ 146,509  
 
Basic earnings per common share $ 0.72   $ 0.72   $ 2.12   $ 2.06  
 
Basic weighted average common shares   71,371     71,216     71,387     71,128  
 
Diluted earnings per common share $ 0.72   $ 0.72   $ 2.10   $ 2.04  
 
Diluted weighted average common shares   71,877     71,816     71,970     71,791  
 

 
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED - IN THOUSANDS)
   
As of
September 30, December 31,
2013 2012
 
Assets:
Current assets:
Cash and cash equivalents $ 333,223 $ 172,740
Accounts receivable, net 2,514,683 2,193,866
Inventories 614,293 572,313
Prepaid expenses and other current assets   313,590   342,458
 
Total current assets 3,775,789 3,281,377
 
Property and equipment, net 153,013 112,525
 
Goodwill, identifiable intangible and other non-current assets   727,598   713,849
 
Total assets $ 4,656,400 $ 4,107,751
 
Liabilities and equity:
Liabilities:
Current liabilities:
Short-term debt $ 28,642 $ 26,065
Accounts payable 2,154,129 1,814,794
Accrued expenses and other current liabilities   302,875   308,439
 
Total current liabilities 2,485,646 2,149,298
 
Long-term debt 430,003 354,253
Other long-term liabilities   78,495   62,576
Total liabilities   2,994,144   2,566,127
 
Equity:
World Fuel shareholders' equity 1,639,732 1,517,174
Noncontrolling interest equity   22,524   24,450
Total equity   1,662,256   1,541,624
 
Total liabilities and equity $ 4,656,400 $ 4,107,751
 

 
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - IN THOUSANDS)
       
For the Three Months ended For the Nine Months ended
September 30, September 30,
2013 2012 2013 2012
 
Cash flows from operating activities:
Net income including noncontrolling interest $ 50,297   $ 52,898   $ 153,765   $ 156,326  
Adjustments to reconcile net income including
noncontrolling interest to net cash provided by
operating activities:
Depreciation and amortization 10,525 9,132 32,812 26,800
Provision for bad debt 1,863 3,631 5,675 4,413
Share-based payment award compensation costs 4,381 4,384 12,578 10,341
Other (413 ) (6,462 ) (462 ) (7,485 )
Changes in cash collateral with financial counterparties 20,516 134,999 19,793 6,941
Changes in assets and liabilities, net of acquisitions   (25,712 )   (93,388 )   (10,414 )   (149,065 )
Total adjustments   11,160     52,296     59,982     (108,055 )
Net cash provided by operating activities   61,457     105,194     213,747     48,271  
 
Cash flows from investing activities:
Acquisitions and other investments, net of cash acquired (14,997 ) (42,299 ) (40,412 ) (71,337 )
Capital expenditures (25,642 ) (9,170 ) (50,286 ) (18,737 )
Purchase of short-term investments - - (21,588 ) -
Proceeds from the sale of short-term investments - - 21,588 -
Other   (469 )   (386 )   (469 )   (386 )
Net cash used in investing activities   (41,108 )   (51,855 )   (91,167 )   (90,460 )
 
Cash flows from financing activities:
Borrowings (repayments) of debt, net 104,385 (50,453 ) 75,180 (12,860 )
Dividends paid on common stock (2,678 ) (2,669 ) (8,020 ) (8,019 )
Other   (22,025 )   1,335     (28,431 )   (4,612 )
Net cash provided by (used in) financing activities   79,682     (51,787 )   38,729     (25,491 )
 
Effect of exchange rate changes on cash and
cash equivalents   712     1,173     (826 )   1,666  
 
Net increase (decrease) in cash and cash equivalents 100,743 2,725 160,483 (66,014 )
 
Cash and cash equivalents, as of beginning of period   232,480     136,676     172,740     205,415  
 
Cash and cash equivalents, as of end of period $ 333,223   $ 139,401   $ 333,223   $ 139,401  
 

 
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED - IN THOUSANDS, EXCEPT PER SHARE DATA)
       
For the Three Months ended For the Nine Months ended
September 30, September 30,
2013 2012 2013 2012
 
Non-GAAP financial measures and reconciliation:
 
GAAP net income attributable to World Fuel $ 51,472 $ 51,494 $ 151,213 $ 146,509
Share-based compensation expense, net of income taxes (1) 2,909 2,475 8,370 6,583
Intangible asset amortization expense, net of income taxes (2)   3,501   3,953   10,809   10,537
Non-GAAP net income attributable to World Fuel $ 57,882 $ 57,922 $ 170,392 $ 163,629
 
GAAP diluted earnings per common share $ 0.72 $ 0.72 $ 2.10 $ 2.04
Share-based compensation expense, net of income taxes (1) 0.04 0.03 0.12 0.09
Intangible asset amortization expense, net of income taxes (2)   0.05   0.06   0.15   0.15
Non-GAAP diluted earnings per common share $ 0.81 $ 0.81 $ 2.37 $ 2.28
 
 

(1)
The pre-tax amount of share-based compensation expense was $4,381 and $3,592 for the three months ended September 30, 2013 and 2012, respectively, and $12,578 and $9,549 for the nine months ended September 30, 2013 and 2012, respectively.
 

(2)
The pre-tax amount of intangible asset amortization expense was $5,471 and $4,633 for the three months ended September 30, 2013 and 2012, respectively, and $16,910 and $13,177 for the nine months ended September 30, 2013 and 2012, respectively.
 

 
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
BUSINESS SEGMENTS INFORMATION
(UNAUDITED - IN THOUSANDS)
         
For the Three Months ended For the Nine Months ended
September 30, September 30,
2013 2012 2013 2012
Revenue:
Aviation segment $ 4,179,018 $ 3,823,338 $ 11,854,676 $ 10,782,756
Marine segment 3,575,777 3,630,094 11,260,025 11,301,429
Land segment   2,738,866   2,458,241   8,042,593   6,925,340
$ 10,493,661 $ 9,911,673 $ 31,157,294 $ 29,009,525
 
Gross profit:
Aviation segment $ 89,758 $ 84,197 $ 242,783 $ 218,282
Marine segment 40,223 53,960 134,237 160,785
Land segment   56,360   42,595   180,158   131,043
$ 186,341 $ 180,752 $ 557,178 $ 510,110
 
Income from operations:
Aviation segment $ 41,002 $ 39,808 $ 109,755 $ 92,601
Marine segment 17,019 27,296 56,340 82,672
Land segment   15,106   18,185   63,608   62,737
73,127 85,289 229,703 238,010
Corporate overhead - unallocated   8,924   14,241   29,823   35,348
$ 64,203 $ 71,048 $ 199,880 $ 202,662
 

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