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 and related products and services, today reported second quarter net income of $48.2 million or $0.68 diluted earnings per share. Excluding expenses related to an executive non-renewal charge, net income was $51.2 million or $0.72 diluted earnings per share. This compares to $51.0 million or $0.71 diluted earnings per share in the second quarter of 2013. Non-GAAP net income and diluted earnings per share for the second quarter, excluding share-based compensation, amortization of acquired intangible assets and an executive non-renewal charge were $57.9 million and $0.81, respectively, compared to $57.5 million and $0.80 in 2013.

“Our quarterly results demonstrated the strength of our diversified business model and our continued commitment to executing on our business plan,” stated Michael J. Kasbar, chairman and chief executive officer. “We remain well positioned to capitalize on a growing set of strategic opportunities worldwide.”

The company’s aviation segment generated gross profit of $81.8 million, an increase of $12.9 million or 19% sequentially and $5.8 million or 8% year-over-year. The company’s marine segment generated gross profit of $48.8 million, an increase of $1.0 million or 2% sequentially, but a decrease of $3.5 million or 7% year-over-year. The company’s land segment posted gross profit of $60.9 million, a decrease of $10.4 million or 15% sequentially, but an increase of $0.8 million or 1% year-over-year.

“Our effective balance sheet management and strong cash flow generation has allowed us to continue to invest in both organic and acquisition related opportunities as evidenced by the Colt International acquisition,” said Ira M. Birns, executive vice president and chief financial officer. “Our solid liquidity profile provides a platform for growth as we look to maximize value for our customers, suppliers and 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, amortization of acquired intangible assets, expenses related to the acquisition of Watson Petroleum Limited and the executive non-renewal charge 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, as well as the expenses related to the acquisition of Watson Petroleum Limited and the executive non-renewal charge, are useful for purposes of evaluating operating performance of our core operating results and comparing them period-over-period. 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 opportunities for growth and our ability to maximize value. 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 14, 2014. 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 BALANCE SHEETS
(UNAUDITED - IN THOUSANDS)
 
        As of
June 30,   December 31,
2014 2013
 
Assets:
Current assets:
Cash and cash equivalents $ 396,591 $ 292,061
Accounts receivable, net 2,921,830 2,538,642
Inventories 702,617 655,046
Prepaid expenses and other current assets   386,068   329,752
 
Total current assets 4,407,106 3,815,501
 
Property and equipment, net 197,357 129,685
 
Goodwill, identifiable intangible and other non-current assets   934,067   794,091
 
Total assets $ 5,538,530 $ 4,739,277
 
Liabilities and equity:
Liabilities:
Current liabilities:
Short-term debt $ 14,940 $ 14,647
Accounts payable 2,567,656 2,210,427
Accrued expenses and other current liabilities   389,314   289,441
 
Total current liabilities 2,971,910 2,514,515
 
Long-term debt 678,592 449,064
Other long-term liabilities   103,248   96,804
Total liabilities   3,753,750   3,060,383
 
Equity:
World Fuel shareholders' equity 1,779,892 1,673,898
Noncontrolling interest equity   4,888   4,996
Total equity   1,784,780   1,678,894
 
Total liabilities and equity $ 5,538,530 $ 4,739,277
 

WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED - IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)
 
      For the Three Months ended   For the Six Months ended
June 30, June 30,
  2014       2013     2014       2013  
 
 
Revenue $ 11,342,475 $ 10,479,604 $ 21,893,371 $ 20,663,633
Cost of revenue   11,150,959     10,291,146     21,513,823     20,292,796  
 
Gross profit   191,516     188,458     379,548     370,837  
 
Operating expenses:
Compensation and employee benefits 77,363 72,745 148,438 142,174
Provision for bad debt 1,186 2,709 2,340 3,812
General and administrative   53,155     44,268     104,654     89,174  
 
Total operating expenses   131,704     119,722     255,432     235,160  
 
Income from operations 59,812 68,736 124,116 135,677
Non-operating expenses, net   (3,205 )   (4,771 )   (5,703 )   (8,310 )
 
Income before income taxes 56,607 63,965 118,413 127,367
Provision for income taxes   10,223     11,608     21,523     23,899  
 
Net income including noncontrolling interest 46,384 52,357 96,890 103,468
Net (loss) income attributable to noncontrolling interest   (1,842 )   1,341     (2,063 )   3,727  
 
Net income attributable to World Fuel $ 48,226   $ 51,016   $ 98,953   $ 99,741  
 
Basic earnings per common share $ 0.68   $ 0.71   $ 1.40   $ 1.40  
 
Basic weighted average common shares   70,842     71,516     70,768     71,483  
 
Diluted earnings per common share $ 0.68   $ 0.71   $ 1.39   $ 1.38  
 
Diluted weighted average common shares   71,419     72,018     71,380     72,099  
 

WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - IN THOUSANDS)
                   
For the Three Months ended For the Six Months ended
June 30, June 30,
  2014     2013     2014     2013  
 
Cash flows from operating activities:
Net income including noncontrolling interest $ 46,384   $ 52,357   $ 96,890   $ 103,468  
Adjustments to reconcile net income including
noncontrolling interest to net cash provided by
operating activities:
Depreciation and amortization 14,610 11,439 27,067 22,287
Provision for bad debt 1,186 2,709 2,340 3,812
Share-based payment award compensation costs 3,701 4,325 7,669 8,197
Other 4,734 197 9,158 (49 )
Change in cash collateral with financial counterparties 8,906 (1,286 ) (1,190 ) (723 )
Changes in assets and liabilities, net of acquisitions   (69,108 )   (26,961 )   (39,928 )   15,298  
Total adjustments   (35,971 )   (9,577 )   5,116     48,822  
Net cash provided by operating activities   10,413     42,780     102,006     152,290  
 
Cash flows from investing activities:
Acquisitions and other investments, net of cash acquired (10,242 ) (25,415 ) (164,205 ) (25,415 )
Capital expenditures (11,142 ) (11,695 ) (20,014 ) (24,644 )
Escrow payment related to an assumed obligation of an acquired business - - (21,724 ) -
Purchase of investments (1,130 ) (21,588 ) (1,130 ) (21,588 )
Proceeds from the sale of short-term investments - 21,588 - 21,588
Other   288     -     288     -  
Net cash used in investing activities   (22,226 )   (37,110 )   (206,785 )   (50,059 )
 
Cash flows from financing activities:
(Repayments) borrowings of debt, net (35,371 ) 74,446 216,925 (29,205 )
Dividends paid on common stock (2,656 ) (2,675 ) (5,300 ) (5,342 )
Other   (1,135 )   (3,671 )   (3,459 )   (6,406 )
Net cash (used in) provided by financing activities   (39,162 )   68,100     208,166     (40,953 )
 
Effect of exchange rate changes on cash and
cash equivalents   1,067     (890 )   1,143     (1,538 )
 
Net (decrease) increase in cash and cash equivalents (49,908 ) 72,880 104,530 59,740
 
Cash and cash equivalents, as of beginning of period   446,499     159,600     292,061     172,740  
 
Cash and cash equivalents, as of end of period $ 396,591   $ 232,480   $ 396,591   $ 232,480  
 

WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED - IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)
 
        For the Three Months ended   For the Six Months ended
June 30, June 30,
  2014     2013   2014     2013
 
Non-GAAP financial measures and reconciliation:
 
GAAP net income attributable to World Fuel $ 48,226 $ 51,016 $ 98,953 $ 99,741
Share-based compensation expense, net of income taxes (1) 1,785 2,918 4,451 5,461
Intangible asset amortization expense, net of income taxes (2) 4,861 3,576 8,809 7,308
Expenses related to the acquisition of Watson Petroleum
Limited - - 1,140 -
Executive non-renewal charge, net of income taxes (3)   2,994   -   2,994   -
Non-GAAP net income attributable to World Fuel $ 57,866 $ 57,510 $ 116,347 $ 112,510
 
GAAP diluted earnings per common share $ 0.68 $ 0.71 $ 1.39 $ 1.38
Share-based compensation expense, net of income taxes (1) 0.02 0.04 0.06 0.08
Intangible asset amortization expense, net of income taxes (2) 0.07 0.05 0.12 0.10
Expenses related to the acquisition of Watson Petroleum
Limited - - 0.02 -
Executive non-renewal charge, net of income taxes (3)   0.04   -   0.04   -
Non-GAAP diluted earnings per common share $ 0.81 $ 0.80 $ 1.63 $ 1.56
 
 

(1)

 
The pre-tax amount of share-based compensation expense was $2,599 and $4,325 for the three months ended June 30, 2014 and 2013, respectively, and $6,567 and $8,197 for the six months ended June 30, 2014 and 2013, respectively.
 

(2)

 
The pre-tax amount of intangible asset amortization expense was $7,116 and $5,594 for the three months ended June 30, 2014 and 2013, respectively, and $13,091 and $11,439 for the six months ended June 30, 2014 and 2013, respectively.
 

(3)

 
The pre-tax amount of the executive non-renewal charge was $4,751 for the three and six months ended June 30, 2014.
 

WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
BUSINESS SEGMENTS INFORMATION
(UNAUDITED - IN THOUSANDS)
           
For the Three Months ended For the Six Months ended
June 30, June 30,
  2014   2013   2014   2013
Revenue:
Aviation segment $ 4,436,505 3,745,070 $ 8,686,308 $ 7,675,658
Marine segment 3,532,817 3,967,109 7,013,034 7,684,248
Land segment   3,373,153   2,767,425   6,194,029   5,303,727
$ 11,342,475 $ 10,479,604 $ 21,893,371 $ 20,663,633
 
Gross profit:
Aviation segment $ 81,824 $ 76,041 $ 150,745 $ 153,025
Marine segment 48,841 52,332 96,683 94,014
Land segment   60,851   60,085   132,120   123,798
$ 191,516 $ 188,458 $ 379,548 $ 370,837
 
Income from operations:
Aviation segment $ 37,152 $ 33,873 $ 67,223 $ 68,753
Marine segment 20,945 24,062 41,970 39,321
Land segment   14,382   21,122   40,912   48,502
72,479 79,057 150,105 156,576
Corporate overhead - unallocated   12,667   10,321   25,989   20,899
$ 59,812 $ 68,736 $ 124,116 $ 135,677

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