<PAGE>
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 SEPTEMBER 30, 2000
[_] 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 October 25, 2000, the registrant had a total of 10,617,000 shares of
common stock, par value $0.01 per share, issued and outstanding.
Page 1 of 19
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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 six months ended September 30, 2000, will not be
necessarily indicative of the results for the entire fiscal year ending March
31, 2001.
Page 2 of 19
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WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(UNAUDITED)
ASSETS
------
<TABLE>
<CAPTION>
September 30, 2000 March 31, 2000
-------------------- ----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 19,114,000 $ 32,773,000
Accounts and notes receivable, net of allowance
for bad debts of $12,386,000 and $15,202,000
at September 30 and March 31, 2000, respectively 148,751,000 142,250,000
Inventories 6,451,000 10,418,000
Prepaid expenses and other current assets 15,614,000 9,829,000
Current net assets of discontinued operations 2,996,000 -
-------------- --------------
Total current assets 192,926,000 195,270,000
-------------- --------------
PROPERTY AND EQUIPMENT, at cost:
Leasehold and improvements 353,000 335,000
Office equipment, computer equipment and software 9,906,000 9,074,000
-------------- --------------
10,259,000 9,409,000
Less accumulated depreciation
and amortization 4,994,000 4,289,000
-------------- --------------
5,265,000 5,120,000
-------------- --------------
OTHER ASSETS:
Unamortized cost in excess of net
assets of acquired companies, net 22,616,000 23,040,000
Other 472,000 3,346,000
-------------- --------------
$ 221,279,000 $ 226,776,000
============== ==============
</TABLE>
(Continued)
Page 3 of 19
<PAGE>
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(UNAUDITED)
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
September 30, 2000 March 31, 2000
-------------------- ----------------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 1,422,000 $ 17,000
Accounts payable 83,004,000 80,404,000
Accrued expenses 26,692,000 26,316,000
Customer deposits 3,881,000 3,017,000
Accrued salaries and wages 3,227,000 3,558,000
Income taxes payable - 1,419,000
Current net liabilities of discontinued operations - 6,498,000
-------------- --------------
Total current liabilities 118,226,000 121,229,000
-------------- --------------
LONG-TERM LIABILITIES 3,516,000 5,886,000
-------------- --------------
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; 12,540,000 and
12,537,000 shares issued and outstanding at
September 30 and March 31, 2000, respectively 125,000 125,000
Capital in excess of par value 26,882,000 26,800,000
Retained earnings 87,638,000 85,256,000
Less treasury stock, at cost; 1,876,000 and
1,540,000 shares at September 30 and
March 31, 2000, respectively 15,108,000 12,520,000
-------------- --------------
99,537,000 99,661,000
-------------- --------------
$ 221,279,000 $ 226,776,000
============== ==============
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated balance sheets.
Page 4 of 19
<PAGE>
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended September 30,
--------------------------------------
2000 1999
------------------ -----------------
<S> <C> <C>
Revenue $ 752,613,000 $ 525,205,000
Cost of sales 718,893,000 493,410,000
--------------- --------------
Gross profit 33,720,000 31,795,000
--------------- --------------
Operating expenses:
Salaries and wages 12,002,000 10,497,000
Executive severance charge 3,505,000 -
Provision for bad debts 6,427,000 4,806,000
Other 9,847,000 8,009,000
--------------- --------------
31,781,000 23,312,000
--------------- --------------
Income from operations 1,939,000 8,483,000
--------------- --------------
Other income (expense), net:
Special provision for bad debts in aviation joint venture - (1,593,000)
Non-recurring credit in aviation segment 300,000 -
Non-recurring charge in marine segment - (3,092,000)
Other, net 1,059,000 (447,000)
--------------- --------------
1,359,000 (5,132,000)
--------------- --------------
Income from continuing operations before income taxes 3,298,000 3,351,000
Income tax benefit (provision) 164,000 (2,440,000)
--------------- --------------
Income from continuing operations 3,462,000 911,000
Income from discontinued operations of
oil recycling segment, net of tax - 1,089,000
--------------- --------------
Net income $ 3,462,000 $ 2,000,000
=============== ==============
Basic earnings per share:
Continuing operations $ 0.32 $ 0.08
Discontinued operations - 0.08
--------------- --------------
Net income $ 0.32 $ 0.16
================ ==============
Weighted average shares - basic 10,826,000 12,189,000
================ ==============
Diluted earnings per share:
Continuing operations $ 0.32 $ 0.08
Discontinued operations - 0.08
--------------- --------------
Net income $ 0.32 $ 0.16
=============== ==============
Weighted average shares - diluted 10,842,000 12,311,000
=============== ==============
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated financial statements.
Page 5 of 19
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WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------------------
2000 1999
--------------------- ---------------------
<S> <C> <C>
Revenue $ 378,083,000 $ 299,759,000
Cost of sales 361,431,000 283,016,000
-------------- --------------
Gross profit 16,652,000 16,743,000
-------------- --------------
Operating expenses:
Salaries and wages 5,451,000 5,208,000
Executive severance charge 3,505,000 -
Provision for bad debts 5,174,000 3,249,000
Other 4,162,000 4,128,000
-------------- --------------
18,292,000 12,585,000
-------------- --------------
(Loss) income from operations (1,640,000) 4,158,000
-------------- --------------
Other income (expense), net:
Special provision for bad debts in aviation joint venture - (400,000)
Non-recurring credit in aviation segment 300,000 -
Non-recurring charge in marine segment - (3,092,000)
Other, net 317,000 (344,000)
-------------- --------------
617,000 (3,836,000)
-------------- --------------
(Loss) income from continuing operations before income taxes (1,023,000) 322,000
Income tax benefit (provision) 1,238,000 (1,218,000)
-------------- --------------
Income (loss) from continuing operations 215,000 (896,000)
Income from discontinued operations of
oil recycling segment, net of tax - 654,000
-------------- --------------
Net income (loss) $ 215,000 $ (242,000)
============== ==============
Basic earnings (loss) per share:
Continuing operations $ 0.02 $ (0.07)
Discontinued operations - 0.05
-------------- --------------
Net income (loss) $ 0.02 $ (0.02)
============== ==============
Weighted average shares - basic 10,765,000 12,190,000
============== ==============
Diluted earnings (loss) per share:
Continuing operations $ 0.02 $ (0.07)
Discontinued operations - 0.05
-------------- --------------
Net income (loss) $ 0.02 $ (0.02)
============== ==============
Weighted average shares - diluted 10,787,000 12,190,000
============== ==============
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated financial statements.
Page 6 of 19
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WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended September 30,
--------------------------------------------
2000 1999
------------------- --------------------
<S> <C> <C>
Cash flows from continuing operating activities:
Net income $ 3,462,000 $ 911,000
-------------- -------------
Adjustments to reconcile net income
to net cash used in operating activities -
Depreciation and amortization 1,139,000 1,202,000
Provision for bad debts 6,427,000 4,806,000
Non-recurring charge in marine segment - 3,092,000
Deferred income tax provision (benefit) 165,000 (286,000)
Equity in (earnings) losses of aviation joint venture, net (273,000) 1,728,000
Other non-cash operating charges 82,000 21,000
Changes in assets and liabilities, net of acquisition:
(Increase) decrease in -
Accounts and notes receivable (12,770,000) (53,583,000)
Inventories 3,967,000 (1,794,000)
Prepaid expenses and other current assets (2,985,000) (485,000)
Other assets 312,000 291,000
Increase (decrease) in -
Accounts payable and accrued expenses 2,992,000 37,487,000
Customer deposits 864,000 (1,577,000)
Accrued salaries and wages (331,000) (628,000)
Income taxes payable (1,419,000) 1,149,000
Deferred compensation (1,186,000) (455,000)
-------------- -------------
Total adjustments (3,016,000) (9,032,000)
-------------- -------------
Net cash provided by (used in)
continuing operating activities 446,000 (8,121,000)
-------------- -------------
Cash flows from investing activities:
Capital expenditures (916,000) (939,000)
Advances to aviation joint venture - (895,000)
Payment for acquisition of business, net of cash acquired - (4,183,000)
-------------- -------------
Net cash used in investing activities $ (916,000) $ (6,017,000)
-------------- -------------
</TABLE>
(Continued)
Page 7 of 19
<PAGE>
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
(Continued)
<TABLE>
<CAPTION>
Six Months Ended September 30,
-------------------------------------------
2000 1999
------------------- -------------------
<S> <C> <C>
Cash flows from financing activities:
Dividends paid on common stock $ (1,096,000) $ (1,218,000)
Purchases of treasury stock (2,588,000) -
Borrowings under revolving credit facility, net - 8,800,000
Other (11,000) (8,000)
------------------ -------------------
Net cash (used in) provided by financing activities (3,695,000) 7,574,000
------------------ -------------------
Discontinued operations (9,494,000) 901,000
------------------ -------------------
Net decrease in cash and cash equivalents (13,659,000) (5,663,000)
Cash and cash equivalents, at beginning
of period 32,773,000 16,527,000
------------------ -------------------
Cash and cash equivalents, at end
of period $ 19,114,000 $ 10,864,000
================== ===================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (including $14,000 in fiscal 2000 for
discontinued operations) $ 181,000 $ 277,000
================== ===================
Income taxes (including $9,168,000 and $411,000
in fiscal 2001 and 2000, respectively, for
discontinued operations) $ 11,418,000 $ 1,970,000
================== ===================
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
Cash dividends declared, but not yet paid, totaling $538,000 and $610,000 are
included in Accrued expenses as of September 30, 2000 and 1999, respectively.
In connection with the April 1, 1999 acquisition of the Bunkerfuels group of
companies, the Company issued $4,250,000 in notes payable. In March 2000, the
Company paid $1,410,000 pursuant to the terms of the notes payable.
During the six months ended September 30, 2000, the Company reclassified
$2,500,000 of EarthCare Company common stock, received by the Company pursuant
to the sale of the oil recycling segment, from Other assets to Prepaid expenses
and other current assets.
The Company reclassified approximately $1,723,000 from Prepaid expenses and
other current assets to Other assets during the six months ended September 30,
1999.
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated financial statements.
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 polices 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, 2000.
(2) DISCONTINUED OPERATIONS
----------------------------
In January 2000, the Company's Board of Directors authorized the sale of
its 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
operating results of the discontinued operation for all periods presented.
Financial results for periods prior to the dates of discontinuance have been
restated to reflect continuing operations.
In February 2000, the Company sold all of the issued and outstanding stock
of its oil recycling subsidiaries, the International Petroleum Corporation group
("IPC"), to EarthCare Company ("EarthCare"). For the three and six months ended
September 30, 1999, the Company recognized net income from discontinued
operations of $654,000 and $1,089,000, respectively. Potential costs which
could not be reasonably estimated include expenses associated with the
indemnifications provided by the Company as part of the purchase agreement.
The Company reported current net assets of discontinued operations of
$2,996,000 as of September 30, 2000 and net current liabilities of discontinued
operations of $6,498,000 as of March 31, 2000. As of September 30, 2000, the
current net assets of discontinued operations consisted primarily of amounts due
from EarthCare. The net current liabilities of discontinued operations, as of
March 31, 2000, consisted of $9,168,000 in income taxes payable related to the
ten months of operations and the gain on sale, partially offset by $2,670,000 of
current net assets of discontinued operations. As of September 30, 2000, income
taxes related to the discontinued operations had been paid. For the three and
six months ended September 30, 1999, revenues applicable to the discontinued
operations were $6,870,000 and $12,974,000, respectively. Income from operations
of the discontinued operations were $1,060,000 and $1,775,000, respectively, for
the three and six months ended September 30, 1999.
In April 2000, the Company filed a Demand for Arbitration with the American
Arbitration Association, against EarthCare to collect approximately $3,827,000
in cash due pursuant to the Purchase Agreement. On May 23, 2000, EarthCare filed
a response to the Company's action which asserts defenses and counterclaims
against the Company as a result of alleged breaches by the Company of certain
representations under the purchase agreement. In October 2000, the Company
received notice that the arbitration hearing is set for March 2001. See Part
II, Item 1, of this Form 10-Q.
Page 9 of 19
<PAGE>
The Company anticipates substantial completion of its plan of
discontinuance by the end of fiscal 2001, and believes that the remaining net
assets will be realized.
(3) STOCKHOLDERS' EQUITY
-------------------------
Common Stock Activity
---------------------
In September 2000, the Company's Board of Directors authorized a stock
repurchase program whereby the Company could repurchase up to an additional
$10,000,000 of the Company's common stock, subject to certain restrictions
pursuant to the Company's credit facility, increasing the Company's stock
repurchase programs to $26,000,000.
Warrants
--------
On July 1, 2000, the Company granted a warrant to an investment-banking
firm in connection with the engagement of such firm to provide advisory services
to the Company. The warrant entitles the holder to purchase up to 50,000 shares
of the Company's common stock at an exercise price of $9.50 per share, for a
period of three years. In accordance with Emerging Issue Task Force 96-18,
"Accounting for Equity Instruments That Are Issued through Other Than Employees
for Acquiring, or in Conjunction with Selling, Goods or Services," the Company
determined the fair value of this warrant to be approximately $60,000 based on
the Black-Scholes option-pricing model. The vesting period of the warrant is
one year.
In October 2000, the Company terminated its relationship with the
investment-banking firm. Accordingly, the Company expensed $60,000 during the
three and six months ended September 30, 2000.
(4) EMPLOYMENT AGREEMENTS
--------------------------
On July 31, 2000, the Company's Board of Directors terminated the
employment of its Chairman. Pursuant to the terms of the Chairman's employment
agreement, the Company was required to pay severance equal to three times the
executive's average salary and bonus during the five-year period preceding
termination, plus all deferred compensation. Accordingly, during the three
months ended September 30, 2000, the Company recorded an executive severance
charge of $3,505,000 and, in August 2000, paid the former Chairman $4,522,000,
including deferred compensation of $1,017,000.
Page 10 of 19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
------- -----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
During the three and six months ended September 30, 2000, world oil prices
continued to exhibit volatility and have remained high, in particular when
compared to the same periods in the prior year. The rapid and sustained increase
in fuel prices has to date, and will continue to adversely affect the Company's
customers. The Company's profitability during the first half of fiscal 2001 was
affected by a decline in overall volume, principally in the Company's aviation
segment, higher provision for bad debts, and the severance expense related to
the settlement of the employment agreement with the Company's former Chairman of
the Board. The decline in aviation volume reflects consolidation within the
aviation industry, as well as management's decision to refine its credit
practices.
The Six Months Ended September 30, 2000 Compared to the Six Months Ended
------------------------------------------------------------------------
September 30, 1999
------------------
The Company's revenue for the six months ended September 30, 2000 was
$752,613,000, an increase of $227,408,000, or 43.3%, as compared to revenue of
$525,205,000 for the corresponding period of the prior year. The revenue
increase is due to a substantial increase in world oil prices. The Company's
revenue during these periods was attributable to the following segments:
Six Months Ended September 30,
2000 1999
------------------------------------
Aviation Fueling $ 260,363,000 $ 199,889,000
Marine Fueling 492,250,000 325,316,000
--------------- ---------------
Total Revenue $ 752,613,000 $ 525,205,000
=============== ===============
The aviation fueling segment contributed $260,363,000 in revenue for the
six months ended September 30, 2000. This represented an increase in revenue of
$60,474,000, or 30.3%, as compared to the same period of the prior year. The
increase in revenue resulted from an increase in the average price per gallon
sold, partially offset by a 14.5% decrease in gallons sold. The marine
fueling segment contributed $492,250,000 in revenue for the six months ended
September 30, 2000, an increase of $166,934,000, or 51.3%, over the
corresponding period of the prior year. The increase in revenue was related to
an increase in the average price per metric ton sold, partially offset by a 4.6%
decrease in the volume of metric tons sold.
The Company's gross profit of $33,720,000 for the six months ended
September 30, 2000 increased $1,925,000, or 6.1%, as compared to the same period
of the prior year. The Company's gross margin decreased from 6.1% for the six
months ended September 30, 1999, to 4.5% for the six months ended September 30,
2000. The Company's aviation fueling business achieved a 6.2% gross margin for
the six months ended September 30, 2000, as compared to 9.8% achieved for the
same period during the prior year. This decrease resulted from an increase in
the average price of fuel sold, and a lower gross profit per gallon sold. The
Company's marine fueling segment achieved a 3.6% gross margin for the six months
ended September 30, 2000, as compared to a 3.7% gross margin for the same period
of the prior year. The
Page 11 of 19
<PAGE>
marine segment maintained its gross margin despite higher fuel prices, due to an
increase in the average gross profit per metric ton sold and brokered.
Total operating expenses for the six months ended September 30, 2000 were
$31,781,000, an increase of $8,469,000, or 36.3%, as compared to the same period
of the prior year. The increase resulted from higher compensation, professional
fees, and provision for bad debts, and an executive severance charge in
settlement of the employment agreement with the Company's former Chairman of the
Board. Partially offsetting was the reduction of previously provisioned phase-
out costs related to the Company's exit of its offshore marine transportation
business.
The Company's income from operations for the six months ended September 30,
2000 was $1,939,000, a decrease of $6,544,000, or 77.1%, as compared to the same
period of the prior year. Income from operations during these periods was
attributable to the following segments:
Six Months Ended September 30,
2000 1999
------------------------------------
Aviation Fueling $ 4,911,000 $ 7,754,000
Marine Fueling 3,705,000 3,208,000
Corporate Overhead (6,677,000) (2,479,000)
------------ -----------
Total Income from Operations $ 1,939,000 $ 8,483,000
============ ===========
The aviation fueling segment's income from operations was $4,911,000 for
the six months ended September 30, 2000, a decrease of $2,843,000, or 36.7%, as
compared to the six months ended September 30, 1999. This resulted from a
decrease in volume and in the average gross profit per gallon sold, partially
offset by a lower provision for bad debts. The marine fueling segment earned
$3,705,000 in income from operations for the six months ended September 30,
2000, an increase of $497,000, or 15.5%, over the corresponding period of the
prior year. This increase resulted from an improved gross profit per metric ton
on trade and brokered transactions. Partially offsetting were a volume decrease
in overall metric tons sold and increases in compensation and provision for bad
debts.
During the six months ended September 30, 2000, the Company reported
$1,359,000 in other income, net, compared to other expense, net, of $5,132,000,
for the same period a year ago. For the six months ended September 30, 1999, the
Company recorded a non-recurring charge in the marine segment due to the theft
of product in Nigeria and a special charge to the provision for bad debts in the
aviation joint venture in Ecuador related to certain customers based in Ecuador.
Also contributing to the variance in other income and expense, net, were
increases in net interest income, foreign exchange gains, and a reduction to the
previously provisioned write-down in the Company's aviation joint venture.
Income taxes for the six months ended September 30, 2000, reflect the
impact of the executive severance and the provision for bad debts, for which the
Company received an income tax benefit. Income taxes for the six months ended
September 30, 1999, reflect the impact of the provision for bad debts and the
non-recurring loss in marine, for which the Company did not receive an income
tax benefit.
Page 12 of 19
<PAGE>
Net income from continuing operations for the six months ended September
30, 2000 was $3,462,000, an increase of $2,551,000 from the same period of the
prior year. Diluted earnings per share on income from continuing operations was
$0.32, an increase of $0.24 from the same period of the prior year.
Net income for the six months ended September 30, 2000 was $3,462,000, an
increase of $1,462,000, or 73.1%, as compared to net income of $2,000,000 for
the six months ended September 30, 1999. Diluted earnings per share of $0.32 for
the six months ended September 30, 2000 exhibited a $0.16, or 100.0% increase
over the $0.16 achieved during the same period of the prior year. The results
for the first six months of fiscal 2000 included $1,089,000, or $0.08 per
diluted share, in income from discontinued operations.
The Three Months Ended September 30, 2000 Compared to the Three Months Ended
----------------------------------------------------------------------------
September 30, 1999
------------------
The Company's revenue for the three months ended September 30, 2000 was
$378,083,000, an increase of $78,324,000, or 26.1%, as compared to revenue of
$299,759,000 for the corresponding period of the prior year. The revenue
increase is due to a substantial increase in world oil prices. The Company's
revenue during these periods was attributable to the following segments:
Three Months Ended September 30,
2000 1999
----------------------------------
Aviation Fueling $ 127,562,000 $ 107,673,000
Marine Fueling 250,521,000 192,086,000
-------------- --------------
Total Revenue $ 378,083,000 $ 299,759,000
============== ==============
The aviation fueling segment contributed $127,562,000 in revenue for the
three months ended September 30, 2000. This represented an increase in revenue
of $19,889,000, or 18.5%, as compared to the same period of the prior year. The
increase in revenue resulted from an increase in the average price per gallon
sold, partially offset by a 20.7% decrease in gallons sold. The marine fueling
segment contributed $250,521,000 in revenue for the three months ended September
30, 2000, an increase of $58,435,000, or 30.4%, over the corresponding period of
the prior year. The increase in revenue was related to an increase in the
average price per metric ton sold, partially offset by a 8.9% decrease in the
volume of metric tons sold and brokered.
The Company's gross profit of $16,652,000 for the three months ended
September 30, 2000 decreased $91,000, or 0.5%, as compared to the same period of
the prior year. The Company's gross margin decreased from 5.6% for the three
months ended September 30, 1999, to 4.4% for the three months ended September
30, 2000. The Company's aviation fueling business achieved a 6.2% gross margin
for the three months ended September 30, 2000, as compared to 9.3% achieved for
the same period during the prior year. This decrease resulted from an increase
in the average price of fuel sold and a lower gross profit per gallon sold. The
Company's marine fueling segment achieved a 3.5% gross margin for the three
months ended September 30, 2000, consistent with the same period of the prior
year. The marine segment maintained its gross margin despite higher fuel prices,
due to an increase in the average gross profit per metric ton sold and brokered.
Page 13 of 19
<PAGE>
Total operating expenses for the three months ended September 30, 2000 were
$18,292,000, an increase of $5,707,000, or 45.3%, as compared to the same period
of the prior year. The increase resulted from higher compensation, professional
fees, and provision for bad debts, and an executive severance charge in
settlement of the employment agreement with the Company's former Chairman of the
Board. Partially offsetting was the reduction of previously provisioned phase-
out costs related to the Company's exit of its offshore marine transportation
business.
The Company's loss from operations for the three months ended September 30,
2000 was $1,640,000, as compared to income from operations of $4,158,000 for the
same period of the prior year. Income from operations during these periods was
attributable to the following segments:
Three Months Ended September 30,
2000 1999
--------------------------------
Aviation Fueling $ 1,705,000 $ 3,415,000
Marine Fueling 1,258,000 2,084,000
Corporate Overhead (4,603,000) (1,341,000)
------------ ------------
Total (Loss) Income from Operations $ (1,640,000) $ 4,158,000
============ ============
The aviation fueling segment's income from operations was $1,705,000 for
the three months ended September 30, 2000, a decrease of $1,710,000, or 50.1%,
as compared to the three months ended September 30, 1999. This resulted from a
decrease in volume and in the average gross profit per gallon sold. Partially
offsetting was a decrease in the provision for bad debts. The marine fueling
segment earned $1,258,000 in income from operations for the three months ended
September 30, 2000, a decrease of $826,000, or 39.6%, over the corresponding
period of the prior year. This decrease resulted from a volume decline in
overall metric tons sold and brokered and higher provision for bad debts.
Partially offsetting was an improved gross profit per metric ton on trade and
brokered transactions.
During the quarter ended September 30, 2000, the Company reported $617,000
in other income, net, compared to other expense, net, of $3,836,000, for the
same quarter a year ago. For the three months ended September 30, 1999, the
Company recorded a non-recurring charge in the marine segment due to the theft
of product in Nigeria and a special charge to the provision for bad debts in the
aviation joint venture in Ecuador related to certain customers based in Ecuador.
Also contributing to the variance in other income and expense, net, were
increases in net interest income, foreign exchange gains and a reduction to the
previously provisioned write-down in the Company's aviation joint venture.
Income taxes for the three months ended September 30, 2000, reflect the
impact of the executive severance and provision for bad debts, for which the
Company received an income tax benefit. Income taxes for the three months ended
September 30, 1999, reflect the impact of the provision for bad debts and the
non-recurring loss in marine, for which the Company did not receive an income
tax benefit.
Net income from continuing operations for the three months ended September
30, 2000 was $215,000, as compared to a net loss from continuing operations of
$896,000 for the same period of the prior year. Diluted earnings per share on
income from continuing operations was $0.02 as compared to a loss per share from
continuing operations of $0.07 for the same period of the prior year.
Page 14 of 19
<PAGE>
Net income for the three months ended September 30, 2000 was $215,000, as
compared to a net loss of $242,000 for the three months ended September 30,
1999. Diluted earnings per share was $0.02 for the three months ended September
30, 2000, as compared to a loss per share of $0.02 achieved during the same
period of the prior year. The results for the second quarter of fiscal 2000
included $654,000, or $0.05 per diluted share, in income from discontinued
operations.
Liquidity and Capital Resources
-------------------------------
Cash and cash equivalents amounted to $19,114,000 at September 30, 2000, as
compared to $32,773,000 at March 31, 2000. The principal uses of cash and cash
equivalents during the first six months of fiscal 2001 were $9,168,000 for the
payment of income taxes related to the discontinued operations, $2,588,000 for
the purchase of treasury stock, $916,000 for capital expenditures and $1,096,000
in dividends paid on common stock. Partially offsetting these uses of cash and
cash equivalents was $446,000 in net cash provided by continuing operating
activities, net of $4,522,000 for the payment of severance and deferred
compensation to the Company's former Chairman of the Board. Other components of
changes in cash and cash equivalents are detailed in the Consolidated Statements
of Cash Flows.
Working capital as of September 30, 2000 was $74,700,000, representing a
$659,000 increase from working capital as of March 31, 2000. As of September 30,
2000, the Company's accounts and notes receivable, excluding the allowance for
bad debts, amounted to $161,501,000, an increase of $3,527,000, as compared to
the balance at March 31, 2000. In the aggregate, accounts payable, accrued
expenses and customer deposits increased $3,840,000. The allowance for bad
debts, as of September 30, 2000, amounted to $12,386,000, a decrease of
$2,816,000 as compared to the balance at March 31, 2000. During the first six
months of fiscal 2001, the Company charged $6,427,000 to the provision for bad
debts and had charge-offs in excess of recoveries of $9,243,000.
Capital expenditures for the six months ended September 30, 2000 consisted
primarily of $692,000 for the purchase of computer equipment and $201,000 in
computer software development costs.
Stockholders' equity amounted to $99,537,000, or $9.33 per share at
September 30, 2000, compared to $99,661,000, or $9.06 per share at March 31,
2000. This decrease of $124,000 was primarily due to the declaration of
dividends of $1,079,000 and purchases of treasury stock of $2,588,000, partially
offset by $3,462,000 in earnings for the six months ended September 30, 2000.
The Company expects to meet its working capital requirements and capital
expenditures for fiscal 2001 from existing cash, operations and borrowings, as
necessary, under its existing line of credit.
The Company's business has been, and will continue to be affected by the
rapid, and sustained increase in fuel prices.
Forward-looking Statements
--------------------------
This document includes forward-looking statements. The words believes,
intends, expects, anticipates, projects, estimates, predicts, and similar
expressions are intended to identify forward-looking statements. Such
statements, estimates, and projections reflect various assumptions by the
Company's management concerning anticipated results, and are subject to
significant business,
Page 15 of 19
<PAGE>
economic and competitive risks and contingencies, many of which are beyond
management's control. Factors that could cause results to differ include, but
are 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 report and in the Company's other Securities and
Exchange Commission filings. Actual results may differ materially from any
forward-looking statements set forth herein.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
------- ----------------------------------------------------------
The Company has no material changes to the disclosure made on this matter
in the Company's annual report on Form 10-K for the year ended March 31, 2000.
PART II. OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
------ -----------------
In April 2000, the Company filed arbitration proceedings against EarthCare
to collect approximately $3,827,000 due to the Company pursuant to the stock
purchase agreement between EarthCare and the Company relating to the sale of the
Company's oil recycling segment. In May 2000, EarthCare filed a response to the
Company's action which asserts defenses and counterclaims against the Company as
a result of alleged breaches by the Company of certain representations under the
stock purchase agreement. The Company believes that EarthCare's allegations are
without merit and is vigorously prosecuting its action against EarthCare. In
October 2000, the Company received notice that the arbitration hearing is set
for March 2001. There can be no assurance that the Company will prevail in this
arbitration and management cannot estimate the exposure or recovery to the
Company if it does not prevail.
The Company is also involved in litigation and administrative proceedings
primarily arising in the normal course of its business. In the opinion of
management, except as set forth above and in the Company's annual report on Form
10-K for the year ended March 31, 2000 and quarterly report on Form 10-Q for the
quarterly period ended June 30, 2000, the Company's liability, if any, under any
pending litigation or administrative proceedings will not materially affect its
financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
------ -----------------------------------------
On September 12, 2000, the Company issued 500 shares of its common stock
and options to purchase 2,500 shares of its common stock to each of the five
non-employee directors of the Company, pursuant to plans previously adopted by
the Board of Directors. The options have an exercise price of $8.875 per share.
On July 1, 2000, the Company granted a warrant to an investment-banking firm in
connection with the engagement of such firm to provide advisory services to the
Company. The warrant entitles the holder to purchase up to 50,000 shares of the
Company's common stock at an exercise price of $9.50 per share, for a period of
three years. The vesting period of the warrant is one year.
Page 16 of 19
<PAGE>
The securities described above were issued in reliance upon section 4(2) of
the Securities Act of 1933. The holders represented to the Company their
intention to hold and acquire the securities for investment purposes only and
not with a view to sell the securities in connection with any distribution
thereof. The holders had adequate access to information about the Company. The
Company believes that the holders are accredited investors as defined in Rule
501 promulgated under the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
------ -------------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------ ---------------------------------------------------
The Company's annual meeting of stockholders was held on September 12,
2000.
The matters voted on at the annual meeting were to elect the directors of
the Company and to increase the number of shares of common stock reserved under
the 1993 Non-Employee Directors Stock Option Plan. All of the Company's director
nominees were elected and the proposal was approved.
The following tables set forth the voting on the matters submitted to a
vote at the annual meeting:
Election of Directors
---------------------
Name of Director Votes For Votes Against
------------------ --------------- --------------
1. Jerrold Blair 8,759,126 601,762
2. Ralph R. Feuerring 9,130,185 230,703
3. John R. Benbow 9,131,890 228,998
4. Phillip S. Bradley 9,117,306 243,582
5. Myles Klein 9,170,510 190,378
6. Michael J. Kasbar 9,180,292 180,596
7. Paul H. Stebbins 9,181,492 179,396
8. Luis R. Tinoco 9,097,263 263,625
9. Jerome Sidel 9,167,946 192,942
Increase the number of shares of common stock reserved under the 1993 Non-
--------------------------------------------------------------------------
Employee Directors Stock Option Plan
------------------------------------
Votes For Votes Against Votes Abstained
--------- ------------- ---------------
8,519,043 795,662 46,183
ITEM 5. OTHER INFORMATION
------ -----------------
None
Page 17 of 19
<PAGE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------
(a) Exhibits.
27.1 Financial data schedule for the six months ended September
30, 2000.
(b) Reports on Form 8-K.
During the quarter ended September 30, 2000, the Company did not file
any reports on Form 8-K.
Page 18 of 19
<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: October 25, 2000 WORLD FUEL SERVICES CORPORATION
---------------------- -------------------------------
/S/ Paul Stebbins
----------------------------------
PAUL STEBBINS
PRESIDENT and CHIEF OPERATING OFFICER
/S/ Carlos A. Abaunza
---------------------------
CARLOS A. ABAUNZA
CHIEF FINANCIAL OFFICER and TREASURER
(Principal Financial and Accounting Officer)
Page 19 of 19
