SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM___________TO__________
COMMISSION FILE NUMBER 1-9533
WORLD FUEL SERVICES CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-2459427
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 SOUTH ROYAL POINCIANA BLVD., SUITE 800
MIAMI SPRINGS, FLORIDA 33166
------------------------------------------ ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code: (305) 884-2001
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of December 31, 1997, the registrant had a total of 12,163,152
shares of common stock, par value $0.01 per share, issued and outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited, condensed consolidated financial statements of World
Fuel Services Corporation (the "Company") have been prepared in accordance with
the instructions to Form 10-Q and, therefore, omit or condense certain footnotes
and other information normally included in financial statements prepared in
accordance with generally accepted accounting principles. In the opinion of
management, all adjustments necessary for a fair presentation of the financial
information for the interim periods reported have been made. Results of
operations for the nine months ended December 31, 1997, will not be necessarily
indicative of the results for the entire fiscal year ending March 31, 1998.
Page 2 of 17
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<TABLE>
<CAPTION>
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
DECEMBER 31, 1997 MARCH 31, 1997
----------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 17,464,000 $ 11,035,000
Accounts receivable, net of allowance for
bad debts of $4,409,000 and $4,360,000 at
at December 31 and March 31, 1997, respectively 81,007,000 70,819,000
Inventories 8,126,000 6,449,000
Prepaid expenses and other current assets 6,662,000 5,133,000
------------ ------------
Total current assets 113,259,000 93,436,000
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 601,000 601,000
Buildings and improvements 3,063,000 2,998,000
Office equipment and furniture 4,458,000 3,331,000
Plant, machinery and equipment 17,190,000 16,310,000
Construction in progress 222,000 135,000
------------ ------------
25,534,000 23,375,000
Less accumulated depreciation
and amortization 8,384,000 7,094,000
------------ ------------
17,150,000 16,281,000
------------ ------------
OTHER ASSETS:
Unamortized cost in excess of net
assets of acquired companies, net of
accumulated amortization 11,514,000 11,785,000
Other 1,087,000 1,637,000
------------ ------------
$143,010,000 $123,139,000
============ ============
</TABLE>
(Continued)
Page 3 of 17
<PAGE>
<TABLE>
<CAPTION>
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31, 1997 MARCH 31, 1997
----------------- --------------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,162,000 $ 2,191,000
Accounts payable and accrued expenses 45,641,000 37,950,000
Customer deposits 1,931,000 2,241,000
Accrued salaries and wages 2,395,000 2,187,000
Income taxes payable 1,944,000 282,000
------------ ------------
Total current liabilities 54,073,000 44,851,000
------------ ------------
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities 329,000 396,000
Deferred compensation 2,122,000 2,166,000
Deferred income taxes 976,000 468,000
------------ ------------
3,427,000 3,030,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value;
100,000 shares authorized, none issued - -
Common stock, $0.01 par value;
25,000,000 and 10,000,000 shares authorized
at December 31 and March 31, 1997, respectively;
12,163,000 shares issued and outstanding at
December 31 and March 31, 1997 (See Note 2) 122,000 122,000
Capital in excess of par value 23,234,000 23,234,000
Retained earnings 62,211,000 51,959,000
Less treasury stock, at cost 57,000 57,000
------------ ------------
85,510,000 75,258,000
------------ ------------
$143,010,000 $123,139,000
============ ============
</TABLE>
The accompanying notes to the consolidated financial statements are an
integral part of these consolidated balance sheets (unaudited).
Page 4 of 17
<PAGE>
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
NINE MONTHS ENDED DECEMBER 31,
------------------------------
1997 1996
------------ ------------
Revenue $600,978,000 $558,708,000
Cost of sales 565,216,000 523,734,000
------------ ------------
Gross profit 35,762,000 34,974,000
------------ ------------
Operating expenses:
Salaries and wages 12,301,000 10,859,000
Provision for bad debts 217,000 3,636,000
Other 9,075,000 8,238,000
------------ ------------
21,593,000 22,733,000
------------ ------------
Income from operations 14,169,000 12,241,000
------------ ------------
Other income, net:
Equity in earnings of aviation joint venture 860,000 1,436,000
Other, net 842,000 237,000
------------ ------------
1,702,000 1,673,000
------------ ------------
Income before income taxes 15,871,000 13,914,000
Provision for income taxes 3,795,000 4,162,000
------------ ------------
Net income $ 12,076,000 $ 9,752,000
============ ============
Basic earnings per share $ 0.99 $ 0.81
============ ============
Weighted average shares outstanding 12,163,000 12,062,000
============ ============
Diluted earnings per share $ 0.97 $ 0.79
============ ============
Diluted number of shares 12,445,000 12,283,000
============ ============
The accompanying notes to the consolidated financial statements are an
integral part of these consolidated financial statements (unaudited).
Page 5 of 17
<PAGE>
<TABLE>
<CAPTION>
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
1997 1996
------------- ------------
<S> <C> <C>
Revenue $208,879,000 $207,665,000
Cost of sales 196,424,000 195,949,000
------------ ------------
Gross profit 12,455,000 11,716,000
------------ ------------
Operating expenses:
Salaries and wages 4,402,000 3,987,000
Provision for bad debts 203,000 1,102,000
Other 3,246,000 2,653,000
------------ ------------
7,851,000 7,742,000
------------ ------------
Income from operations 4,604,000 3,974,000
------------ ------------
Other income, net:
Equity in earnings of aviation joint venture 324,000 556,000
Other, net 249,000 39,000
------------ ------------
573,000 595,000
------------ ------------
Income before income taxes 5,177,000 4,569,000
Provision for income taxes 1,029,000 1,174,000
------------ ------------
Net income $ 4,148,000 $ 3,395,000
============ ============
Basic earnings per share $ 0.34 $ 0.28
============ ============
Weighted average shares outstanding 12,163,000 12,064,000
============ ============
Diluted earnings per share $ 0.33 $ 0.27
============ ============
Diluted number of shares 12,501,000 12,314,000
============ ============
</TABLE>
The accompanying notes to the consolidated financial statements are an
integral part of these consolidated financial statements (unaudited).
Page 6 of 17
<PAGE>
<TABLE>
<CAPTION>
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED DECEMBER 31,
--------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 12,076,000 $ 9,752,000
------------ ------------
Adjustments to reconcile net income
to net cash provided by operating activities -
Depreciation and amortization 1,769,000 1,401,000
Provision for bad debts 217,000 3,636,000
Deferred income tax provision (benefit) 508,000 (492,000)
Equity in earnings of aviation joint venture, net (424,000) (416,000)
Changes in assets and liabilities:
(Increase) decrease in -
Accounts receivable (9,605,000) (14,780,000)
Inventories (1,677,000) (1,485,000)
Prepaid expenses and other current assets (1,919,000) (3,545,000)
Other assets 80,000 415,000
Increase (decrease) in -
Accounts payable and accrued expenses 7,691,000 2,765,000
Customer deposits (310,000) 1,167,000
Accrued salaries and wages 208,000 (150,000)
Income taxes payable 1,662,000 1,113,000
Deferred compensation (44,000) 94,000
------------ ------------
Total adjustments (1,844,000) (10,277,000)
------------ ------------
Net cash provided by (used in) operating activities 10,232,000 (525,000)
------------ ------------
Cash flows from investing activities:
Additions to property, plant and equipment (2,279,000) (2,099,000)
Advances to aviation joint venture, net (259,000) -
Proceeds from notes receivable 655,000 380,000
------------ ------------
Net cash used in investing activities $ (1,883,000) $ (1,719,000)
------------ ------------
</TABLE>
(Continued)
Page 7 of 17
<PAGE>
<TABLE>
<CAPTION>
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Continued)
NINE MONTHS ENDED DECEMBER 31,
---------------------------------
1997 1996
------------ -------------
<S> <C> <C>
Cash flows from financing activities:
Dividends paid on common stock $ (1,824,000) $ (1,608,000)
Borrowings under revolving credit facility - 7,000,000
Repayment of long-term debt (96,000) (52,000)
Proceeds from issuance of common stock - 38,000
------------ ------------
Net cash (used in) provided by financing activities (1,920,000) 5,378,000
------------ ------------
Net increase in cash and cash equivalents 6,429,000 3,134,000
Cash and cash equivalents, at beginning of period 11,035,000 12,856,000
------------ ------------
Cash and cash equivalents, at end of period $ 17,464,000 $ 15,990,000
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 87,000 $ 52,000
============ ============
Income taxes $ 1,583,000 $ 3,617,000
============ ============
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Cash dividends declared, but not yet paid, totaling $608,000 and $603,000
are included in accounts payable and accrued expenses as of December 31, 1997
and 1996, respectively.
The accompanying notes to the consolidated financial statements are an
integral part of these consolidated financial statements (unaudited).
Page 8 of 17
<PAGE>
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed for quarterly financial reporting are the
same as those disclosed in Note 1 of the Notes to the Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K for the year
ended March 31, 1997.
(2) STOCKHOLDERS' EQUITY
Effective October 30, 1997, the Board of Directors approved a three-for-two
stock split for all shares of common stock held by shareholders of record as of
November 17, 1997. The shares were distributed on December 1, 1997. The split
has been retroactively reflected in the consolidated financial statements for
all periods presented.
(3) EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
The Company adopted this standard as of December 31, 1997. As a result, the
Company's reported comparative earnings per share for fiscal year 1997 were
restated.
Basic earnings per share were computed by dividing net income by the
weighted average number of shares outstanding. Diluted earnings per share were
determined on the assumption that all potentially dilutive outstanding stock
options were exercised applying the treasury stock method. The effect of this
accounting change on previously reported earnings per share ("EPS") data was as
follows:
FOR THE NINE FOR THE THREE
MONTHS ENDED MONTHS ENDED
Per share amounts DECEMBER 31, 1996 DECEMBER 31, 1996
----------------- -----------------
Primary EPS as reported $ 0.79 $ 0.27
Effect of SFAS No. 128 0.02 0.01
-------- --------
Basic EPS as restated $ 0.81 $ 0.28
======== ========
Fully Diluted EPS $ 0.79 $ 0.27
Effect of SFAS No. 128 - -
-------- --------
Diluted EPS as restated $ 0.79 $ 0.27
======== ========
Page 9 of 17
<PAGE>
(4) SUBSEQUENT EVENT
In January 1998, the Company purchased all of the outstanding stock of
Baseops International, Inc. and its affiliates ("Baseops"). Baseops provides a
sophisticated array of aviation services to a diversified clientele of
corporate, government, and private aircraft worldwide. The acquisition of
Baseops by the Company has been accounted for as a purchase. The aggregate
purchase price of the acquisition was approximately $2,988,000. The Company paid
approximately $898,000 in cash and 150,000 shares of the Company's common stock
valued at $2,090,000 ($13.93 per share, or approximately 65% of the quoted
market price) in the Company's restricted stock. The newly issued shares of the
Company's common stock issued in connection with the acquisition were valued by
the Company's Board of Directors. In accordance with the acquisition agreement,
75,000 shares are being held in escrow until the second anniversary of the
closing date. The escrow shares are pledged to the Company to secure the
seller's obligation to indemnify the Company pursuant to the acquisition
agreement.
Page 10 of 17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE NINE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THE NINE MONTHS ENDED
DECEMBER 31, 1996
The Company's revenue for the nine months ended December 31, 1997 was
$600,978,000, an increase of $42,270,000, or 7.6%, as compared to revenue of
$558,708,000 for the corresponding period of the prior year. The Company's
revenue during these periods was attributable to the following segments:
NINE MONTHS ENDED DECEMBER 31,
1997 1996
------------ ------------
Aviation Fueling $291,852,000 $276,228,000
Marine Fueling 289,367,000 264,887,000
Oil Recycling 19,759,000 17,593,000
------------ ------------
Total Revenue $600,978,000 $558,708,000
============ ============
The aviation fueling segment contributed $291,852,000 in revenue for the
nine months ended December 31, 1997. This represented an increase in revenue of
$15,624,000, or 5.7%, as compared to the same period of the prior year. The
increase in revenue was due to a higher volume of gallons sold, partially offset
by a decrease in the average price per gallon sold. The marine fueling segment
contributed $289,367,000 in revenue for the nine months ended December 31, 1997,
an increase of $24,480,000, or 9.2%, over the corresponding period of the prior
year. The increase in revenue was related primarily to an increase in the volume
of metric tons traded, partially offset by a decrease in the average sales price
of metric tons traded. The oil recycling segment contributed $19,759,000 in
revenue for the nine months ended December 31, 1997, an increase of $2,166,000,
or 12.3%, as compared to the same period of the prior year. The increase in
revenue was due to an increase in volume of recycled oil sold and higher used
oil and waste water collection revenue, partially offset by a decrease in the
average sales price per gallon of recycled oil sold.
The Company's gross profit of $35,762,000 for the nine months ended
December 31, 1997 increased $788,000, or 2.3%, as compared to the same period of
the prior year. The Company's gross margin decreased from 6.3% for the nine
months ended December 31, 1996, to 6.0% for the nine months ended December 31,
1997. The Company's aviation fueling business achieved a 5.6% gross margin for
the nine months ended December 31, 1997, as compared to 6.3% achieved for the
same period during the prior year. This resulted from a decrease in the average
gross profit per gallon sold. The Company's marine fueling segment achieved a
4.6% gross margin for the nine months ended December 31, 1997, as compared to a
4.3% gross margin for the corresponding period of the prior year. This resulted
from an increase in the average gross margin per metric ton traded. The gross
margin in the Company's oil recycling segment decreased from 34.8% for the nine
months ended December 31, 1996, to 30.3% for the nine months ended December 31,
1997. This decrease resulted from a lower gross profit per gallon of recycled
oil sold.
Total operating expenses for the nine months ended December 31, 1997
were $21,593,000, a decrease of $1,140,000, or 5.0%, as compared to the same
period of the prior year. The decrease resulted
Page 11 of 17
<PAGE>
from a $3,419,000 lower provision for bad debts over the corresponding period
during the prior year, partially offset by higher salaries and wages related
principally to staff additions and performance bonuses, and higher operating
expenses in the marine segment related to business expansion. In relation to
revenue, total operating expenses decreased from 4.1% to 3.6%.
The Company's income from operations for the nine months ended December 31,
1997 was $14,169,000, an increase of $1,928,000, or 15.8%, as compared to the
same period of the prior year. Income from operations during these periods was
attributable to the following segments:
NINE MONTHS ENDED DECEMBER 31,
1997 1996
------------ ------------
Aviation Fueling $ 10,023,000 $ 8,146,000
Marine Fueling 4,359,000 3,558,000
Oil Recycling 3,773,000 4,159,000
Corporate Overhead (3,986,000) (3,622,000)
------------ ------------
Total Income from
Operations $ 14,169,000 $ 12,241,000
============ ============
The aviation fueling segment's income from operations was $10,023,000 for
the nine months ended December 31, 1997, an increase of $1,877,000, or 23.0%, as
compared to the nine months ended December 31, 1996. This resulted from a higher
volume of gallons sold and a decrease in operating expenses, principally in the
provision for bad debts, partially offset by a decrease in average gross profit
per gallon sold. The marine fueling segment earned $4,359,000 in income from
operations for the nine months ended December 31, 1997, an increase of $801,000,
or 22.5%, over the corresponding period of the prior year. This increase was due
to a higher volume and average gross profit per metric ton sold, partially
offset by an increase in operating expenses. Income from operations of the oil
recycling segment was $3,773,000 for the nine months ended December 31, 1997, a
decrease of $386,000, or 9.3%, as compared to the nine months ended December 31,
1996. The decrease is primarily the result of lower oil prices, which caused a
decrease in gross profit per recycled gallon sold. Corporate overhead costs not
charged to the business segments totaled $3,986,000 for the nine months ended
December 31, 1997, an increase of $364,000, or 10.0%, as compared to the same
period of the prior year.
Other income for the nine months ended December 31, 1997 increased $29,000,
or 1.7% over the corresponding period of the prior year, as a result of higher
interest income from improved liquidity and interest earned on receivables,
largely offset by lower equity in earnings from the Company's aviation joint
venture. The Company's effective income tax rate for the nine months ended
December 31, 1997 was 23.9%, as compared to 29.9% for the same period of the
prior year. This decrease is primarily the result of an overall decline in
foreign taxes.
Net income for the nine months ended December 31, 1997 was $12,076,000, an
increase of $2,324,000, or 23.8%, as compared to net income of $9,752,000 for
the nine months ended December 31, 1996. Basic earnings per share of $0.99 for
the nine months ended December 31, 1997 exhibited a $0.18, or 22.2% increase
over the $0.81 achieved during the same period of the prior year. Per share
amounts reflect a three-for-two stock split declared October 30, 1997, with a
record date of November 17, 1997, and the implementation of FASB No. 128.
Page 12 of 17
<PAGE>
THE THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THE THREE MONTHS ENDED
DECEMBER 31, 1996
The Company's revenue for the three months ended December 31, 1997 was
$208,879,000, an increase of $1,214,000, or 0.6%, as compared to revenue of
$207,665,000 for the corresponding period of the prior year. Revenue in all
three business segments was adversely impacted by lower world oil prices. The
Company's revenue during the periods presented was attributable to the following
segments:
THREE MONTHS ENDED DECEMBER 31,
1997 1996
------------ ------------
Aviation Fueling $ 96,398,000 $ 97,743,000
Marine Fueling 105,656,000 103,965,000
Oil Recycling 6,825,000 5,957,000
------------ ------------
Total Revenue $208,879,000 $207,665,000
============ ============
The aviation fueling segment contributed $96,398,000 in revenue for the
three months ended December 31, 1997. This represented a decrease in revenue of
$1,345,000, or 1.4%, as compared to the same period of the prior year. The
decrease in revenue was due to a decrease in the average price per gallon sold,
largely offset by a higher volume of gallons sold. The marine fueling segment
contributed $105,656,000 in revenue for the three months ended December 31,
1997, an increase of $1,691,000, or 1.6%, over the corresponding period of the
prior year. The increase in revenue was related primarily to an increase in the
volume of metric tons traded, partially offset by a decrease in the average
sales price of metric tons traded. The oil recycling segment contributed
$6,825,000 in revenue for the three months ended December 31, 1997, an increase
of $868,000, or 14.6%, as compared to the same period of the prior year. The
increase in revenue was due to an increase in volume of recycled oil sold,
partially offset by a decrease in the average sales price per gallon of recycled
oil sold.
The Company's gross profit of $12,455,000 for the three months ended
December 31, 1997, increased $739,000, or 6.3%, as compared to the same period
of the prior year. The Company's gross margin increased from 5.6% for the three
months ended December 31, 1996, to 6.0% for the three months ended December 31,
1997. The Company's aviation fueling business achieved a 5.8% gross margin for
the three months ended December 31, 1997, a slight increase compared to 5.7%
achieved for the same period during the prior year. The Company's marine fueling
segment achieved a 4.8% gross margin for the three months ended December 31,
1997, compared to a gross margin of 3.9% for the same period of the prior year.
This was due to an increase in the average gross margin per metric ton traded.
The gross margin in the Company's oil recycling segment decreased from 35.1% for
the three months ended December 31, 1996, to 26.0% for the three months ended
December 31, 1997. This decrease resulted from a lower gross profit per gallon
of recycled oil sold.
Total operating expenses for the three months ended December 31, 1997 were
$7,851,000, an increase of $109,000, or 1.4%, as compared to the same period of
the prior year. The increase resulted from
Page 13 of 17
<PAGE>
higher salaries and wages related principally to staff additions and performance
bonuses, and higher operating expenses in the marine segment related to business
expansion, largely offset by a $899,000 lower provision for bad debts over the
corresponding period during the prior year. In relation to revenue, total
operating expenses increased from 3.7% to 3.8%.
The Company's income from operations for the three months ended December
31, 1997 was $4,604,000, an increase of $630,000, or 15.9%, as compared to the
same period of the prior year. Income from operations during these periods was
attributable to the following segments:
THREE MONTHS ENDED DECEMBER 31,
1997 1996
------------ -------------
Aviation Fueling $ 3,155,000 $ 2,437,000
Marine Fueling 1,802,000 1,346,000
Oil Recycling 1,004,000 1,352,000
Corporate Overhead (1,357,000) (1,161,000)
----------- -----------
Total Income from
Operations $ 4,604,000 $ 3,974,000
=========== ===========
The aviation fueling segment's income from operations was $3,155,000 for
the three months ended December 31, 1997, an increase of $718,000, or 29.5%, as
compared to the three months ended December 31, 1996. This resulted from a
higher volume of gallons sold and a decrease in operating expenses, principally
in the provision for bad debts. The marine fueling segment earned $1,802,000 in
income from operations for the three months ended December 31, 1997, an increase
of $456,000, or 33.9%, over the corresponding period of the prior year. This
increase is attributed to a higher gross profit, which was partially offset by
higher operating expenses. Income from operations of the oil recycling segment
decreased by $348,000, or 25.7%, for the three months ended December 31, 1997,
as compared to the same period of the prior year. This related primarily to a
decrease in gross profit per recycled gallon sold. Corporate overhead costs not
charged to the business segments totaled $1,357,000 for the three months ended
December 31, 1997, an increase of $196,000, or 16.9%, as compared to the same
period of the prior year.
Other income decreased $22,000, or 3.7% over the same period a year ago,
primarily as a result of lower earnings from the aviation joint venture, largely
offset by higher interest income due to improved liquidity. The Company's
effective income tax rate for the three months ended December 31, 1997 was
19.9%, as compared to 25.7% for the same period of the prior year. The decrease
is primarily the result of an overall decline in foreign taxes.
Net income for the three months ended December 31, 1997 was $4,148,000, an
increase of $753,000, or 22.2%, as compared to net income of $3,395,000 for the
three months ended December 31, 1996. Basic earnings per share of $0.34 for the
three months ended December 31, 1997 exhibited a $0.06, or 21.4% increase over
the $0.28 achieved during the same period of the prior year. Per share amounts
have been restated to reflect the stock split and the implementation of FASB No.
128.
Page 14 of 17
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents amounted to $17,464,000 at December 31, 1997, as
compared to $11,035,000 at March 31, 1997. The principal sources of cash and
cash equivalents during the nine months of fiscal 1998 were $10,232,000 provided
by operating activities, partially offset by $2,279,000 for capital expenditures
and $1,824,000 in dividends paid on common stock. Other components of changes in
cash and cash equivalents are detailed in the Consolidated Statements of Cash
Flows.
Working capital as of December 31, 1997 was $59,186,000, exhibiting a
$10,601,000 increase from working capital as of March 31, 1997. As of December
31, 1997, the Company's accounts receivable, excluding the allowance for bad
debts, amounted to $85,416,000, an increase of $10,237,000, as compared to the
March 31, 1997 balance. In the aggregate, accounts payable, accrued expenses and
customer deposits increased $7,381,000. The net increase in trade credit of
$2,856,000 was primarily attributable to the marine segment. The allowance for
bad debts as of December 31, 1997 amounted to $4,409,000, an increase of $49,000
compared to the March 31, 1997 balance. During the nine months of fiscal year
1998, the Company charged $217,000 to the provision for bad debts and had
charge-offs in excess of recoveries of $168,000. As of December 31, 1997, the
Company's Inventory and Prepaid Expenses and Other Current Assets increased by
$1,677,000 and $1,529,000, respectively, when compared to March 31, 1997. These
increases were related to the marine business and the reclassification of a note
receivable from other assets to current assets.
Income taxes payable at December 31, 1997 increased $1,662,000, when
compared to March 31, 1997. This increase resulted from foreign income taxes for
the nine months ended December 31, 1997, which are payable in future periods,
and U.S. tax overpayments as of March 31, 1997 applied to the current fiscal
year taxes payable.
Capital expenditures, which amounted to $2,294,000 for the nine months
ended December 31, 1997, consisted primarily of $1,099,000 in office and
computer equipment and $910,000 in plant, machinery and equipment related to the
recycled oil segment. During the balance of fiscal year 1998, the Company
anticipates spending approximately $1,000,000 to upgrade plant, machinery and
equipment. The Company also anticipates spending an estimated $1,000,000 over
the next several years to clean up contamination which was present at one of the
Company's sites when it was acquired by the Company. The clean up costs will be
capitalized as part of the cost of the site, up to the fair market value of the
site.
Stockholders' equity amounted to $85,510,000, or $7.03 per share at
December 31, 1997, compared to $75,258,000, or $6.19 per share at March 31,
1997. This increase of $10,252,000 was due to $12,076,000 in earnings for the
nine months ended December 31, 1997, reduced by $1,824,000 in declared
dividends.
The Company's working capital requirements are not expected to vary
substantially for the balance of fiscal 1998. The Company expects to meet its
cash requirements for the balance of fiscal 1998 from existing cash, operations
and additional borrowings, as necessary, under its existing credit facility. The
Company's business has not been significantly affected by inflation during the
periods discussed in this report.
Page 15 of 17
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
Effective October 30, 1997, the Board of Directors approved a
three-for-two stock split for all shares of common stock held by
shareholders of record as of November 17, 1997. The shares were
distributed on December 1, 1997.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
27 Financial Data Schedule.
(a) During the three months ended December 31, 1997, the Company did
not file any reports on Form 8-K.
Page 16 of 17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: JANUARY 29, 1998 WORLD FUEL SERVICES CORPORATION
/s/ JERROLD BLAIR
----------------------
JERROLD BLAIR
PRESIDENT
/s/ CARLOS A. ABAUNZA
---------------------
CARLOS A. ABAUNZA
CHIEF FINANCIAL OFFICER
(Principal Financial and
Accounting Officer)
Page 17 of 17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S DECEMBER 31, 1997 UNAUDITED FINANCIAL STATEMENTS FILED ON FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Mar-31-1998
<PERIOD-START> Apr-01-1997
<PERIOD-END> Dec-31-1997
<CASH> 17,464,000
<SECURITIES> 0
<RECEIVABLES> 85,416,000
<ALLOWANCES> 4,409,000
<INVENTORY> 8,126,000
<CURRENT-ASSETS> 113,259,000
<PP&E> 25,534,000
<DEPRECIATION> 8,384,000
<TOTAL-ASSETS> 143,010,000
<CURRENT-LIABILITIES> 54,073,000
<BONDS> 0
0
0
<COMMON> 122,000
<OTHER-SE> 85,388,000
<TOTAL-LIABILITY-AND-EQUITY> 143,010,000
<SALES> 600,978,000
<TOTAL-REVENUES> 600,978,000
<CGS> 565,216,000
<TOTAL-COSTS> 565,216,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 217,000
<INTEREST-EXPENSE> 256,000
<INCOME-PRETAX> 15,871,000
<INCOME-TAX> 3,795,000
<INCOME-CONTINUING> 12,076,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,076,000
<EPS-PRIMARY> 0.99
<EPS-DILUTED> 0.97
</TABLE>
