UNITED STATES
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, 1999
[ ] 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 January 26, 2000, the registrant had a total of 12,129,000 shares
of common stock, par value $0.01 per share, issued and outstanding.
Page 1 of 19
<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. Adjustments to the
interim financial statements are of a normal recurring nature, except for the
restatement of discontinued operations discussed in Note 2 to the unaudited
condensed consolidated financial statements. Results of operations for the nine
months ended December 31, 1999, will not be necessarily indicative of the
results for the entire fiscal year ending March 31, 2000.
Page 2 of 19
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WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1999 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 10,772,000 $ 16,527,000
Accounts and notes receivable, net of allowance
for bad debts of $8,625,000 and $6,709,000
at December 31 and March 31, 1999, respectively 140,441,000 95,436,000
Inventories 13,675,000 5,318,000
Prepaid expenses and other current assets 4,628,000 5,344,000
Current net assets of discontinued operations 20,043,000 3,203,000
------------ ------------
Total current assets 189,559,000 125,828,000
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Leasehold improvements 343,000 223,000
Office equipment and furniture 9,576,000 8,004,000
------------ ------------
9,919,000 8,227,000
Less accumulated depreciation
and amortization 4,643,000 3,511,000
------------ ------------
5,276,000 4,716,000
------------ ------------
OTHER ASSETS:
Unamortized cost in excess of net
assets of acquired companies, net of
accumulated amortization 23,180,000 15,148,000
Non-current net assets of discontinued operations -- 16,677,000
Other 1,507,000 2,368,000
------------ ------------
$219,522,000 $164,737,000
============ ============
</TABLE>
(Continued)
Page 3 of 19
<PAGE>
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1999 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 1,428,000 $ 28,000
Accounts payable and accrued expenses 92,110,000 48,855,000
Customer deposits 1,890,000 4,074,000
Accrued salaries and wages 1,507,000 2,167,000
Income taxes payable 1,862,000 1,617,000
------------ ------------
Total current liabilities 98,797,000 56,741,000
------------ ------------
LONG-TERM LIABILITIES 19,052,000 7,199,000
------------ ------------
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 shares authorized; 12,537,000 and
12,534,000 shares issued and outstanding at
December 31 and March 31, 1999, respectively 125,000 125,000
Capital in excess of par value 26,800,000 26,769,000
Retained earnings 79,374,000 78,000,000
Less treasury stock, at cost; 408,000 and 346,000 shares
at December 31 and March 31, 1999, respectively 4,626,000 4,097,000
------------ ------------
101,673,000 100,797,000
------------ ------------
$219,522,000 $164,737,000
============ ============
</TABLE>
The accompanying notes to the consolidated financial statements are
an integral part of these consolidated balance sheets (unaudited).
Page 4 of 19
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WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31,
---------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Revenue $ 848,268,000 $ 543,003,000
Cost of sales 801,189,000 503,854,000
------------- -------------
Gross profit 47,079,000 39,149,000
------------- -------------
Operating expenses:
Salaries and wages 15,977,000 14,386,000
Provision for bad debts 6,632,000 2,328,000
Special provision for bad debts in aviation segment 2,122,000 --
Other 12,116,000 10,583,000
------------- -------------
36,847,000 27,297,000
------------- -------------
Income from operations 10,232,000 11,852,000
------------- -------------
Other (expense) income:
Special provision for bad debts in aviation joint venture (1,593,000) --
Non-recurring charge in aviation segment (953,000) --
Non-recurring charge in marine segment (3,092,000) --
Other (expense) income, net (350,000) 1,119,000
------------- -------------
(5,988,000) 1,119,000
------------- -------------
Income from continuing operations before income taxes 4,244,000 12,971,000
Provision for income taxes 2,664,000 2,486,000
------------- -------------
Net income from continuing operations 1,580,000 10,485,000
Net income from discontinued operations 1,619,000 1,095,000
------------- -------------
Net income $ 3,199,000 $ 11,580,000
============= =============
Basic earnings per share:
Continuing operations $ 0.13 $ 0.84
Discontinued operations 0.13 0.09
------------- -------------
Net income $ 0.26 $ 0.93
============= =============
Weighted average shares 12,177,000 12,432,000
============= =============
Diluted earnings per share:
Continuing operations $ 0.13 $ 0.83
Discontinued operations 0.13 0.09
------------- -------------
Net income $ 0.26 $ 0.92
============= =============
Weighted average shares - diluted 12,248,000 12,611,000
============= =============
</TABLE>
The accompanying notes to the consolidated financial statements are
an integral part of these consolidated financial statements (unaudited).
Page 5 of 19
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WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
---------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Revenue $ 323,063,000 $ 181,912,000
Cost of sales 307,779,000 169,321,000
------------- -------------
Gross profit 15,284,000 12,591,000
------------- -------------
Operating expenses:
Salaries and wages 5,480,000 4,761,000
Provision for bad debts 3,948,000 282,000
Other 4,107,000 3,532,000
------------- -------------
13,535,000 8,575,000
------------- -------------
Income from operations 1,749,000 4,016,000
------------- -------------
Other (expense) income:
Non-recurring charge in aviation segment (953,000) --
Other (expense) income, net 97,000 562,000
------------- -------------
(856,000) 562,000
------------- -------------
Income from continuing operations before income taxes 893,000 4,578,000
Provision for income taxes 224,000 921,000
------------- -------------
Net income from continuing operations 669,000 3,657,000
Net income from discontinued operations 530,000 322,000
------------- -------------
Net income $ 1,199,000 $ 3,979,000
============= =============
Basic earnings per share:
Continuing operations $ 0.06 $ 0.30
Discontinued operations 0.04 0.02
------------- -------------
Net income $ 0.10 $ 0.32
============= =============
Weighted average shares 12,152,000 12,304,000
============= =============
Diluted earnings per share:
Continuing operations $ 0.06 $ 0.30
Discontinued operations 0.04 0.02
------------- -------------
Net income $ 0.10 $ 0.32
============= =============
Weighted average shares - diluted 12,178,000 12,399,000
============= =============
</TABLE>
The accompanying notes to the consolidated financial statements are
an integral part of these consolidated financial statements (unaudited).
Page 6 of 19
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WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,199,000 $ 11,580,000
------------ ------------
Adjustments to reconcile net income
to net cash used in operating activities -
Provision for bad debts 8,754,000 2,328,000
Non-recurring charge in aviation segment 953,000 --
Non-recurring charge in marine segment 3,092,000 --
Depreciation and amortization 1,820,000 1,288,000
Equity in losses (earnings) of aviation joint venture, net 1,963,000 (123,000)
Deferred income tax provision 31,000 185,000
Other non-cash operating charges 21,000 8,000
Changes in assets and liabilities:
(Increase) decrease in -
Accounts and notes receivable (60,783,000) (13,722,000)
Inventories (8,357,000) 47,000
Prepaid expenses and other current assets (944,000) (1,273,000)
Other assets 355,000 (958,000)
Net assets of discontinued operations (163,000) (1,296,000)
Increase (decrease) in -
Accounts payable and accrued expenses 42,927,000 1,155,000
Customer deposits (2,184,000) 270,000
Accrued salaries and wages (711,000) 552,000
Income taxes payable 227,000 (1,506,000)
Deferred compensation (444,000) (272,000)
------------ ------------
Total adjustments (13,443,000) (13,317,000)
------------ ------------
Net cash used in operating activities (10,244,000) (1,737,000)
------------ ------------
Cash flows from investing activities:
Additions to property, plant and equipment (1,604,000) (2,390,000)
Payment for acquisition of business, net of cash acquired (4,189,000) --
Proceeds from notes receivable 4,256,000 913,000
Advances to aviation joint venture, net (895,000) (885,000)
Issuance of notes receivable -- (300,000)
------------ ------------
Net cash used in investing activities $ (2,432,000) $ (2,662,000)
------------ ------------
</TABLE>
(Continued)
Page 7 of 19
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WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Continued)
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from financing activities:
Borrowings under revolving credit facility, net $ 8,771,000 $ 3,460,000
Dividends paid on common stock (1,828,000) (1,873,000)
Repayment of other long-term debt (32,000) (16,000)
Proceeds from issuance of common stock 10,000 296,000
------------ ------------
Net cash provided by financing activities 6,921,000 1,867,000
------------ ------------
Net decrease in cash and cash equivalents (5,755,000) (2,532,000)
Cash and cash equivalents, at beginning of period 16,527,000 14,679,000
------------ ------------
Cash and cash equivalents, at end of period $ 10,772,000 $ 12,147,000
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 434,000 $ 147,000
============ ============
Income taxes $ 3,565,000 $ 4,577,000
============ ============
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Cash dividends declared, but not yet paid, totaling $606,000 and $613,000 are
included in accounts payable and accrued expenses as of December 31, 1999 and
1998, respectively.
In connection with the acquisition of the Bunkerfuels group of companies, the
Company issued $4,250,000 in notes payable. See Note 2, in the Notes to the
Consolidated Financial Statements, for additional information.
During the nine months ended December 31, 1999 and 1998, the Company borrowed
$529,000 and $3,540,000, respectively, for the repurchase of 62,200 and 289,600
shares, respectively, of the Company's common stock. The repurchased common
stock is shown in the treasury stock section of the balance sheet. The stock
purchases were made pursuant to an August 1998 Board of Directors authorization
to repurchase up to $6,000,000 of the Company's common stock. During the nine
months ended December 31, 1998, the Company also received 10,754 shares of the
Company's common stock from the escrowed shares related to the acquisition of
the Baseops group, in settlement for $138,000 of uncollectible accounts
receivable.
The accompanying notes to the consolidated financial statements are
an integral part of these consolidated financial statements (unaudited).
Page 8 of 19
<PAGE>
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF 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, 1999.
(2) ACQUISITIONS AND DISPOSITIONS
In April 1999, the Company acquired substantially all of the operations
of the privately held Bunkerfuels group of companies. The acquisition was
accounted for as a purchase. Accordingly, the results of operations of the
Bunkerfuels group ("Bunkerfuels") are included with the results of the Company
from April 1, 1999. The aggregate purchase price of the acquisition was
approximately $8,647,000, including an estimated $78,000 in acquisition costs.
The Company paid approximately $4,189,000 in cash, net of cash acquired,
$4,250,000 in the form of 7 3/4% promissory notes, payable over three years, of
which $1,410,000 is due within one year, and $208,000 in short term payables due
to the sellers. The promissory notes are collateralized by letters of credit.
The difference between the purchase price and the $67,000 fair value of the net
assets of the acquired companies, which amounted to approximately $8,580,000,
was allocated to goodwill, and is being amortized using the straight-line method
over 35 years. The Company determined that no other intangible assets exist.
On January 10, 2000, the Company's Board of Directors authorized the
sale of the Company's oil recycling segment. Accordingly, as of December 31,
1999, the Company reported its oil recycling segment as a discontinued
operation. The consolidated financial statements of the Company have been
restated to report separately the net assets and operating results of these
discontinued operations for all periods presented. Financial results for periods
prior to the dates of discontinuance have been restated to reflect continuing
operations. On January 12, 2000, the Company signed a definitive agreement to
sell its oil recycling segment, the International Petroleum group of companies,
to Dallas-based EarthCare Company. The Company will receive total consideration
of $33,000,000, of which $28,000,000 is in cash and the balance is in EarthCare
common stock subject to certain restrictions and price protection. The Company
expects to close and record a gain from the sale of the oil recycling segment in
the fourth quarter of fiscal 2000. The Company anticipates substantial
completion of its plan of discontinuance by the end of fiscal 2000 subject to
the anticipated completion of the sale to EarthCare Company. The Company does
not expect to incur significant operating losses during the phase-out period. A
potential cost which could not be reasonably estimated is the remediation of the
various facilities, as may be required by the respective environmental agencies.
Net assets of discontinued operations were $20,043,000 and $19,880,000
at December 31, 1999 and March 31, 1999, respectively. These amounts consist of
current assets; property, plant and equipment; other noncurrent assets; and
current and noncurrent liabilities. Revenues for discontinued operations were
$20,189,000 and $18,157,000 for the nine months ended December 31, 1999 and
1998, respectively.
Page 9 of 19
<PAGE>
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Continued)
(3) COMMITMENTS AND CONTINGENCIES
On January 12, 2000, the Company exercised its options to purchase the leased
properties in New Orleans, Louisiana and Plant City, Florida from Trusts
established for the benefit of the children of Jerrold Blair, the President and
a Director of the Company. Mr. Blair and Myles Klein, a Director of the Company,
serve as co-trustees of the Trusts. The purchase price of the properties, which
in the aggregate amounts to $2,000,000, was determined through negotiation
between Mr. Blair and management of the Company, and was approved by two
independent members of the Company's Board of Directors: John Benbow and Ralph
Feuerring. The purchase of the properties will be completed on the earlier of
the closing date of the sale to EarthCare or February 29, 2000. According to the
definitive stock purchase agreement between the Company and EarthCare, the cost
of the properties will be funded by EarthCare and is in addition to the
$33,000,000 purchase price to be paid to the Company.
Page 10 of 19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
In April 1999, the Company acquired substantially all of the operations
of the privately held Bunkerfuels group of companies. Bunkerfuels forms part of
the Company's worldwide marine fuel marketing segment. Through the nine months
ended December 31, 1999, Bunkerfuels contributed $89,568,000 in revenue, and a
combined 4,645,000 in metric tons brokered and traded. Total metric tons for the
segment during the same period were 10,707,000.
In January 2000, the Company's Board of Directors authorized and the
Company signed a definitive agreement to sell its oil recycling segment to
Dallas-based EarthCare Company. Accordingly, as of December 31, 1999, the
Company reported its oil recycling segment as a discontinued operation.
During the nine months ended December 31, 1999, the Company experienced
a rapid increase in revenue and accounts receivable, as a result of
significantly higher world oil prices. The Company's profitability during the
nine months ended December 31, 1999 was adversely affected by charges to the
provision for bad debts, primarily in the aviation segment, both special and
otherwise. Earnings were additionally affected by a non-recurring charge in the
marine segment pertaining to the theft by diversion of product off the coast of
Nigeria and in the aviation segment for the write-down of the Company's
investment in and advances to its aviation joint venture based in Ecuador. The
catastrophic political and economic conditions in Ecuador caused the charge in
the third quarter.
THE NINE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THE NINE MONTHS ENDED
DECEMBER 31, 1998
The Company's revenue for the nine months ended December 31, 1999 was
$848,268,000, an increase of $305,265,000, or 56%, as compared to revenue of
$543,003,000 for the corresponding period of the prior year. The revenue
increase is due largely to an increase in world oil prices and the Bunkerfuels
acquisition. The Company's revenue during these periods was attributable to the
following segments:
NINE MONTHS ENDED DECEMBER 31,
1999 1998
------------- -------------
Aviation Fueling $ 314,236,000 $ 243,999,000
Marine Fueling $ 534,032,000 299,004,000
------------- -------------
Total Revenue $ 848,268,000 $ 543,003,000
============= =============
The aviation fueling segment contributed $314,236,000 in revenue for
the nine months ended December 31, 1999. This represented an increase in revenue
of $70,237,000, or 28.8%, as compared to the same period of the prior year. The
increase in revenue was due mostly to an increase in the average price per
gallon sold. The aviation segment also exhibited an increase in volume of
product sold. The marine fueling segment contributed $534,032,000 in revenue for
the nine months ended December 31, 1999, an
Page 11 of 19
<PAGE>
increase of $235,028,000, or 78.6%, over the corresponding period of the prior
year. The increase in revenue was related primarily to the acquisition of
Bunkerfuels and an increase in the average price per metric ton sold, as well as
an increase in the volume of metric tons sold.
The Company's gross profit of $47,079,000 for the nine months ended
December 31, 1999 increased $7,930,000, or 20.3%, as compared to the same period
of the prior year. The Company's gross margin decreased from 7.2% for the nine
months ended December 31, 1998, to 5.6% for the nine months ended December 31,
1999. The Company's aviation fueling business achieved a 8.9% gross margin for
the nine months ended December 31, 1999, as compared to 9.1% achieved for the
same period during the prior year. This resulted from a 21.6% increase in the
average sales price per gallon sold, despite a 18.7% increase in the average
gross profit per gallon sold. The Company's marine fueling segment achieved a
3.6% gross margin for the nine months ended December 31, 1999, as compared to a
5.6% gross margin for the same period of the prior year, the result of a 64.8%
increase in the average price per metric ton traded, and a lower gross profit
per metric ton sold and brokered.
Total operating expenses for the nine months ended December 31, 1999
were $36,847,000, an increase of $9,550,000, or 35.0%, as compared to the same
period of the prior year. The increase was mostly due to a $6,426,000 higher
provision for bad debts principally attributed to the Company's aviation
segment, which included a $2,122,000 special charge related to certain customers
based in Ecuador. Also contributing to the increase were the operating expenses
associated with the Bunkerfuels operations and the newly implemented financial
systems.
The Company's income from operations for the nine months ended December
31, 1999 was $10,232,000, a decrease of $1,620,000, or 13.7%, 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,
1999 1998
----------- -----------
Aviation Fueling $ 8,923,000 $ 9,999,000
Marine Fueling 5,024,000 5,878,000
Corporate Overhead (3,715,000) (4,025,000)
----------- -----------
Total Income from Operations $10,232,000 $11,852,000
=========== ===========
The aviation fueling segment's income from operations was $8,923,000
for the nine months ended December 31, 1999, a decrease of $1,076,000, or 10.8%,
as compared to the nine months ended December 31, 1998. This resulted from an
increase in operating expenses due to a higher provision for bad debts,
partially offset by an increase in gross profit. The marine fueling segment
earned $5,024,000 in income from operations for the nine months ended December
31, 1999, a decrease of $854,000, or 14.5%, over the corresponding period of the
prior year. This decrease resulted from a lower income from operations in the
Company's core business, partially offset by the contribution of Bunkerfuels.
During the nine months ended December 31, 1999, the Company reported
$5,988,000 in other expense, net, compared to other income, net, of $1,119,000,
for the same period a year ago. This
Page 12 of 19
<PAGE>
$7,107,000 change was the result of the non-recurring charges in the aviation
and marine segments. The aviation charge relates to a substantial write-down of
the Company's investment in and advances to its aviation joint venture in
Ecuador, the result of catastrophic political and economic conditions in that
country. The marine charge was due to the theft of product in Nigeria. Also
contributing to the change was a special charge to the provision for bad debts
in the Company's aviation joint venture in Ecuador related to certain customers
based in Ecuador and an increase in interest expense due to borrowings on the
Company's line of credit. The increase in fuel prices, the acquisition of
Bunkerfuels, the Company's stock repurchase program and the investment in the
new financial system, increased the Company's borrowing requirements. The
Company's tax provision for the nine months ended December 31, 1999 reflects the
impact of the non-recurring charges and the special provisions, for which the
Company does not receive a tax benefit.
Net income from continuing operations for the nine months ended
December 31, 1999 was $1,580,000, a decrease of $8,905,000, or 84.9%, as
compared to net income from continuing operations of $10,485,000 for the nine
months ended December 31, 1998. Diluted earnings per share on income from
continuing operations was $0.13 for the nine months ended December 31, 1999, a
decrease of $0.70, or 84.3%, as compared to the $0.83 achieved during the same
period of the prior year. In the aggregate, the product loss in Nigeria, the
write-down of the Company's investment in and advances to its aviation joint
venture, and the charges related to the Ecuador based customers had a $0.54
impact on diluted earnings per share for the nine months of fiscal 2000.
The Company's net income from discontinued operations for the nine
months ended December 31, 1999 was $1,619,000, an increase of $524,000, or
47.9%, as compared to $1,095,000 for the same period of the prior year. Diluted
earnings per share on income from discontinued operations was $0.13 for the nine
months ended December 31, 1999, an increase of $0.04, or 44.4%, as compared to
the $0.09 achieved during the same period of the prior year. The increase in the
market price of oil benefited the oil recycling business, while operating
expenses increased moderately during the comparative periods.
THE THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THE THREE MONTHS ENDED
DECEMBER 31, 1998
The Company's revenue for the three months ended December 31, 1999 was
$323,063,000, an increase of $141,151,000, or 77.6%, as compared to revenue of
$181,912,000 for the corresponding period of the prior year. The revenue
increase is due largely to an increase in world oil prices and the Bunkerfuels
acquisition. The Company's revenue during these periods was attributable to the
following segments:
THREE MONTHS ENDED DECEMBER 31,
1999 1998
------------- -------------
Aviation Fueling $ 114,347,000 $ 81,422,000
Marine Fueling 208,716,000 100,490,000
------------- -------------
Total Revenue $ 323,063,000 $ 181,912,000
============= =============
Page 13 of 19
<PAGE>
The aviation fueling segment contributed $114,347,000 in revenue for
the three months ended December 31, 1999. This represented an increase in
revenue of $32,925,000, or 40.4%, as compared to the same period of the prior
year. The increase in revenue was due mostly to an increase in the average price
per gallon sold. The aviation segment also exhibited an increase in volume of
product sold. The marine fueling segment contributed $208,716,000 in revenue for
the three months ended December 31, 1999, an increase of $108,226,000, or
107.7%, over the corresponding period of the prior year. The increase in revenue
was related primarily to the acquisition of Bunkerfuels and an increase in the
average price per metric ton sold.
The Company's gross profit of $15,284,000 for the three months ended
December 31, 1999, increased $2,693,000, or 21.4%, as compared to the same
period of the prior year. The Company's gross margin decreased from 6.9% for the
three months ended December 31, 1998, to 4.7% for the three months ended
December 31, 1999. The Company's aviation fueling business achieved a 7.4% gross
margin for the three months ended December 31, 1999, as compared to 9.3%
achieved for the same period during the prior year. This resulted from a 35.8%
increase in the average sales price per gallon sold, which offset a 7.9%
increase in the average gross profit per gallon sold. The Company's marine
fueling segment achieved a 3.3% gross margin for the three months ended December
31, 1999, as compared to a 5.0% gross margin for the same period of the prior
year, the result of an increase in the average price per metric ton traded and a
lower gross profit per metric ton sold.
Total operating expenses for the three months ended December 31, 1999
were $13,535,000, an increase of $4,960,000, or 57.8%, as compared to the same
period of the prior year. The increase was mostly due to a $3,666,000 higher
provision for bad debts principally attributed to the Company's aviation
segment. Also contributing to the increase were the operating expenses
associated with the Bunkerfuels operations and the newly implemented financial
systems.
The Company's income from operations for the three months ended
December 31, 1999 was $1,749,000, a decrease of $2,267,000, or 56.4%, 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,
1999 1998
----------- -----------
Aviation Fueling $ 1,169,000 $ 3,717,000
Marine Fueling 1,816,000 1,813,000
Corporate Overhead (1,236,000) (1,514,000)
----------- -----------
Total Income from Operations $ 1,749,000 $ 4,016,000
=========== ===========
The aviation fueling segment's income from operations was $1,169,000
for the three months ended December 31, 1999, a decrease of $2,548,000, or
68.5%, as compared to the three months ended December 31, 1998. This resulted
from an increase in operating expenses due to a higher provision for bad debts,
partially offset by an increase in gross profit. The marine fueling segment
earned $1,816,000 in income
Page 14 of 19
<PAGE>
from operations for the three months ended December 31, 1999, consistent with
the same period of the prior year. The decline in the marine core business was
offset by the Bunkerfuels contribution.
During the quarter ended December 31, 1999, the Company reported an
increase of $1,418,000 in other expense, net, over the same period a year ago,
primarily as a result of the non-recurring charge in the Company's aviation
segment.
Net income from continuing operations for the three months ended
December 31, 1999 was $669,000, a decrease of $2,988,000, or 81.7%, as compared
to net income from continuing operations of $3,657,000 for the three months
ended December 31, 1998. Diluted earnings per share on income from continuing
operations was $0.06 for the three months ended December 31, 1999, a decrease of
$0.24, or 80.0%, as compared to the $0.30 achieved during the same period of the
prior year. The impact on diluted earnings per share associated with the
write-down of the Company's investment in and advances to its aviation joint
venture was $0.07 for the third quarter of fiscal 2000.
The Company's net income from discontinued operations for the three
months ended December 31, 1999 was $530,000, an increase of $208,000, or 64.6%,
as compared to $322,000 for the same period of the prior year. Diluted earnings
per share on income from discontinued operations was $0.04 for the three months
ended December 31, 1999, an increase of $0.02, or 100.0%, as compared to the
$0.02 achieved during the same period of the prior year. The increase in the
market price of oil benefited the oil recycling business, while operating
expenses remained constant during the comparative periods.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents amounted to $10,772,000 at December 31, 1999,
as compared to $16,527,000 at March 31, 1999. The principal uses of cash and
cash equivalents during the nine months of fiscal year 2000 were $15,110,000 to
fund the increase in net trade credit and inventory, mainly the result of higher
world oil prices, $4,189,000 for the acquisition of Bunkerfuels, $2,867,000 for
capital expenditures (including $1,263,000 for the oil recycling business), and
$1,828,000 in dividends paid on common stock. These uses of funds were partially
funded through earnings, net borrowings of $8,771,000 under the line of credit,
and the repayment of notes receivable. Other components of changes in cash and
cash equivalents are detailed in the Consolidated Statements of Cash Flows.
Working capital as of December 31, 1999 was $90,762,000, exhibiting a
$21,675,000 increase from working capital as of March 31, 1999. As of December
31, 1999, the Company's accounts receivable and the current portion of the notes
receivable, excluding the allowance for bad debts, amounted to $149,066,000, an
increase of $46,921,000, as compared to the March 31, 1999 balance. In the
aggregate, accounts payable, accrued expenses and customer deposits increased
$41,071,000. The allowance for bad debts as of December 31, 1999 amounted to
$8,625,000, an increase of $1,916,000 compared to the March 31, 1999 balance.
During the nine months of fiscal year 2000, the Company charged $8,754,000 to
the provision for bad debts and had charge-offs in excess of recoveries of
$6,838,000. Also increasing working capital was the net assets of discontinued
operations, which the Company intends to sell pursuant to a definitive agreement
signed with EarthCare Company, mentioned previously in this report. As of March
31, 1999, the net assets of discontinued operations are segregated between
current and non-current. As of December 31, 1999 the net assets of discontinued
operations are all included in the Company's current assets.
Page 15 of 19
<PAGE>
Capital expenditures for the nine months ended December 31, 1999
consisted primarily of $894,000 to complete the implementation of the new
financial system, $610,000 to upgrade computer equipment, and $548,000 in trucks
and $606,000 in plant equipment related to the Company's oil recycling business.
The Company also anticipates spending an estimated $1,000,000 sometime in the
future, if required, to clean up contamination which was present at one of the
Company's sites when it was acquired by the Company. This property is included
in the Company's discontinued operations. The clean up costs will be capitalized
as part of the cost of the site, up to the fair market value of the site. Other
assets, excluding the net assets of discontinued operations, increased by
$7,171,000 as a result of the $8,580,000 in goodwill related to the acquisition
of Bunkerfuels, partially offset by a $953,000 non-recurring write-down of the
Company's investment in and advances to its aviation joint venture.
Stockholders' equity amounted to $101,673,000, or $8.38 per share at
December 31, 1999, compared to $100,797,000, or $8.27 per share at March 31,
1999. This increase of $876,000 was due to $3,199,000 in earnings for the nine
months ended December 31, 1999, partially offset by $1,825,000 in declared
dividends and $529,000 of treasury stock associated with the Company's stock
repurchase program.
The Company's working capital requirements are not expected to vary
substantially for the balance of fiscal year 2000. The Company expects to meet
its cash requirements for the balance of fiscal year 2000 from existing cash,
operations and additional borrowings, as necessary, under its existing credit
facility. On October 8, 1999, the Company's credit facility was increased to $40
million in response to the higher market fuel prices. The additional $10 million
facility is for a period of 364 days, and increases the letter of credit
sublimit to $20 million, with other terms and conditions consistent with the
existing credit facility. The Company's business has not been significantly
affected by inflation during the periods discussed in this report.
YEAR 2000 READINESS DISCLOSURE
The Company has not experienced significant systems problems at the
turn of the millennium nor has it experienced any material effects on its
financial operations.
Ultimately, the potential impact of Year 2000 issues will depend not
only on the corrective measures taken by the Company, but also on the way in
which Year 2000 issues are addressed by governmental agencies, third party fuel
service providers and other businesses which provide goods and services to the
Company, and provide data to, or receive data from the Company. There can be no
assurance that significant foreign or domestic vendors, customers and other
third parties have adequately addressed their Year 2000 issues. Also, risks
associated with some foreign third parties may be greater since there is a
general concern that some entities operating outside the United States may not
have addressed the Year 2000 issues.
Page 16 of 19
<PAGE>
The Company is also subject to additional credit and performance risks
to the extent that customers and suppliers, respectively, fail to adequately
address Year 2000 issues. Although it is not possible to quantify the potential
impact of these risks at this time, there may be increases in accounts
receivable write-offs, as well as the risk of litigation and potential losses
from litigation related to the foregoing.
Forward-looking statements contained in this Year 2000 Readiness
Disclosure subsection should be read in conjunction with the cautionary
statements included elsewhere in this Report.
FORWARD-LOOKING STATEMENTS
Except for the historical information contained herein, this document
includes forward-looking statements that involve risk and uncertainties,
including, but not limited to quarterly fluctuations in results; the management
of growth; fluctuations in world oil prices or foreign currency; major changes
in political, economic, regulatory or environmental conditions; the loss of key
customers, suppliers or members of senior management; uninsured losses;
competition; credit risk associated with accounts and notes receivable; and
other risks detailed in this Form 10-Q and in the Company's other Securities and
Exchange Commission filings. Actual results may differ materially from any
forward-looking statements set forth herein.
Page 17 of 19
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
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
(a) During the three months ended December 31, 1999, the
Company did not file any reports on Form 8-K.
Page 18 of 19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: February 2, 2000 WORLD FUEL SERVICES CORPORATION
By: /s/ JERROLD BLAIR
-------------------------------
JERROLD BLAIR
PRESIDENT
By: /s/ CARLOS A. ABAUNZA
-------------------------------
CARLOS A. ABAUNZA
CHIEF FINANCIAL OFFICER
(Principal Financial and
Accounting Officer)
Page 19 of 19
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S DECEMBER 31, 1999 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-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 10,772,000
<SECURITIES> 0
<RECEIVABLES> 149,066,000
<ALLOWANCES> 8,625,000
<INVENTORY> 13,675,000
<CURRENT-ASSETS> 189,559,000
<PP&E> 9,919,000
<DEPRECIATION> 4,643,000
<TOTAL-ASSETS> 219,522,000
<CURRENT-LIABILITIES> 98,797,000
<BONDS> 0
0
0
<COMMON> 125,000
<OTHER-SE> 101,548,000
<TOTAL-LIABILITY-AND-EQUITY> 219,522,000
<SALES> 848,268,000
<TOTAL-REVENUES> 848,268,000
<CGS> 801,189,000
<TOTAL-COSTS> 801,189,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,754,000
<INTEREST-EXPENSE> 767,000
<INCOME-PRETAX> 4,244,000
<INCOME-TAX> 2,664,000
<INCOME-CONTINUING> 1,580,000
<DISCONTINUED> 1,619,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,199,000
<EPS-BASIC> 0.13
<EPS-DILUTED> 0.13
</TABLE>
