World Fuel Services Corporation (NYSE: INT)
Third-Quarter 2020 Highlights
- Total gross profit of $214.0 million, down 30%
year-over-year
- GAAP net income of $82.0 million, or $1.29 per diluted
share
- After-tax gain on sale of Multi Service of $63.9 million, or
$1.00 per diluted share
- Adjusted net income of $20.7 million, or $0.33 per diluted
share
- Adjusted EBITDA of $64.3 million
“Modest improvements in certain areas of our global business, as
well as the continued focus on cost containment and portfolio
refinement, enabled us to profitably execute in what continues to
be a weak operating environment,” stated Michael J. Kasbar,
chairman and chief executive officer of World Fuel Services
Corporation. “We are continuing to focus on refining our portfolio,
actively seeking opportunities to invest in activities such as our
World Kinect energy management business to contribute to
accelerating the transition to a low carbon world.”
For the third quarter, our aviation segment generated gross
profit of $97.6 million, a decrease of 38% year-over-year, driven
by the decline in volume as a consequence of the depressed demand
for air travel due to the COVID-19 pandemic, together with a
reduction in our government-related activity in Afghanistan as a
result of the ongoing drawdown of troops. Our marine segment
generated gross profit of $32.0 million, a decrease of 40%
year-over-year, principally attributable to lower volume and
profitability due to a decline in demand as a consequence of the
pandemic and lower average fuel prices. Our land segment generated
gross profit of $84.3 million, a decrease of 12% year-over-year,
primarily resulting from a decline in our retail, commercial and
industrial activities in North America and a reduction in our
government-related activity in Afghanistan.
“Through continued focus on working capital management, we
generated $246 million of cash flow from operations during the
third quarter and have now generated nearly $500 million of cash
flow from operations during the first nine months of the year,”
said Ira M. Birns, executive vice president and chief financial
officer. “Combined with the proceeds received from the sale of the
Multi Service business, we significantly reduced our debt balance
during the quarter, resulting in a record level of liquidity.”
COVID-19 Update
Beginning in the first quarter of 2020, the aviation, marine and
land transportation industries, along with global economic
conditions generally, have been significantly impacted by the
coronavirus pandemic. A large number of our customers in these
industries have experienced substantial reductions in their
operations, especially commercial airlines and cruise lines, which
have been particularly impacted by ongoing travel restrictions.
Customers in our marine and land segments have also been adversely
affected by these restrictions and the reduction in operations of
various businesses in affected regions.
While the COVID-19 pandemic and associated impacts on economic
activity had a limited adverse effect on our results of operations
and financial condition in the beginning of 2020, we experienced a
sharp decline in demand and related sales during the second
quarter, as large sectors of the global economy were adversely
impacted by the crisis. While demand showed some moderate
improvement during the third quarter of 2020, our results remained
well below pre-pandemic levels. Since the level of activity in our
business and that of our customers has historically been driven by
the level of economic activity globally, we generally expect these
negative impacts to continue through the balance of the year and
into 2021 as the periodic increases in COVID-19 cases have caused
delays in the full reopening of various economies around the
world.
In addition to the actions we took during the first quarter in
light of the unprecedented effects of the COVID-19 pandemic on the
global economy, during the second and third quarters of 2020, we
continued to focus on reducing costs and restructuring our
operations to improve operating efficiencies. While the ultimate
duration and impact of the pandemic on our business and our
customers' operations remains unclear, we will continue to seek
additional opportunities to further enhance our operating
efficiencies and reduce costs throughout the current crisis and
eventual recovery.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures
(collectively, the “Non-GAAP Measures”), including adjusted net
income, adjusted diluted earnings per share, and adjusted earnings
before interest, taxes, depreciation and amortization (“EBITDA”).
The Non-GAAP Measures exclude acquisition and divestiture related
expenses, restructuring costs, impairments, gains or losses on the
extinguishment of debt and gains or losses on business dispositions
primarily because we do not believe they are reflective of our core
operating results. These changes were made to facilitate the
evaluation of our current operating performance and comparisons to
our past operating performance.
We believe that the Non-GAAP Measures, when considered in
conjunction with our financial information prepared in accordance
with GAAP, are useful to investors to further aid in evaluating the
ongoing financial performance of the Company and to provide greater
transparency as supplemental information to our GAAP results.
Non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, financial information
prepared in accordance with GAAP. In addition, our presentation of
the Non-GAAP Measures may not be comparable to the presentation of
such metrics by other companies. Non-GAAP diluted earnings per
common share is computed by dividing non-GAAP net income
attributable to World Fuel Services and available to common
shareholders by the sum of the weighted average number of shares of
common stock, stock units, restricted stock entitled to dividends
not subject to forfeiture and vested restricted stock units
outstanding during the period and the number of additional shares
of common stock that would have been outstanding if our outstanding
potentially dilutive securities had been issued. Investors are
encouraged to review the reconciliation of these Non-GAAP Measures
to their most directly comparable GAAP financial measures in this
press release and on our website.
Information Relating to Forward-Looking
Statements
This release includes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including statements regarding our beliefs and expectations with
respect to our focus on refining our portfolio and the
opportunities to invest in activities such as our World Kinect
energy management business, our expectations regarding our ability
to contribute to the transition to a low carbon world, as well as
our expectations about our liquidity and the impact of the
coronavirus pandemic on us. These forward-looking statements are
qualified in their entirety by cautionary statements and risk
factor disclosures contained in the Company’s Securities and
Exchange Commission (“SEC”) filings, including the Company’s most
recent Annual Report on Form 10-K filed with the SEC. Actual
results may differ materially from any forward-looking statements
due to risks and uncertainties, including, but not limited to: our
ability to effectively manage the effects of the COVID-19 pandemic,
the extent of the impact of the pandemic on ours and our customers'
sales, profitability, operations and supply chains due to the
duration, severity and scope of travel restrictions, customer and
counterparty creditworthiness and our ability to collect accounts
receivable and settle derivative contracts, particularly for those
customers most significantly impacted by the pandemic, sudden
changes in the market price of fuel or extremely high or low fuel
prices that continue for an extended period of time, the loss of,
or reduced sales to a significant government customer, such as the
North Atlantic Treaty Organization as a result of the ongoing troop
withdrawal in Afghanistan, the availability of cash and sufficient
liquidity to fund our working capital and strategic investment
needs, particularly in light of the impact of the pandemic on the
financial markets, adverse conditions in the markets or industries
in which we or our customers and suppliers operate such as the
current global economic environment as a result of the coronavirus
pandemic, our failure to comply with restrictions and covenants in
our senior revolving credit facility and our senior term loans,
including our financial covenants, our ability to effectively
utilize the proceeds from the sale of the Multi Service business
and derive the expected benefits, our ability to manage the changes
in supply and other market dynamics in the regions where we
operate, our ability to successfully execute and achieve
efficiencies, our ability to achieve the expected level of benefit
from any restructuring activities and cost reduction initiatives,
our ability to successfully implement our growth strategy and
integrate acquired businesses and recognize the anticipated
benefits, our ability to capitalize on new market opportunities,
risks related to the complexity of U.S. Tax Cuts and Jobs Act and
any subsequently issued regulations and our ability to accurately
predict the impact on our effective tax rate and future earnings,
our ability to effectively leverage technology and operating
systems and realize the anticipated benefits, unanticipated tax
liabilities or adverse results of tax audits, assessments, or
disputes, potential liabilities and the extent of any insurance
coverage, the outcome of pending litigation and other proceedings,
the impact of quarterly fluctuations in results, particularly as a
result of seasonality, supply disruptions, border closures and
other logistical difficulties that can arise when sourcing and
delivering fuel in areas that are actively engaged in war or other
military conflicts, our failure to effectively hedge certain
financial risks associated with the use of derivatives, uninsured
losses, the impact of climate change and natural disasters, adverse
results in legal disputes, and other risks detailed from time to
time in our SEC filings. In addition, other current or potential
risks and uncertainties related to the coronavirus pandemic
include, but are not limited to: disruptions resulting from office
and facility closures, reductions in operating hours, and changes
in operating procedures, including additional cleaning and
disinfecting procedures, possible infections or quarantining of our
employees which could impact our ability to service our customers
or operate our business, notices from customers, suppliers and
other third parties asserting force majeure or other bases for
their non-performance, losses on hedging transactions with
customers arising from the decline in fuel prices and their
inability to benefit from the reduced cost of fuel due to
substantial reductions in their operations, heightened risk of
cybersecurity issues as digital technologies may become more
vulnerable and experience a higher rate of cyber-attacks in a
remote connectivity environment, reduction of our global workforce
to adjust to market conditions, including increased costs
associated with severance payments, retention issues, and an
inability to hire employees when market conditions improve, the
impact of asset impairments, including any impairment of the
carrying value of our goodwill in our aviation and land segments,
as well as other accounting charges if expected future demand for
our products and services materially decreases, a structural shift
in the global economy and its demand for fuel and related products
and services as a result of changes in the way people work, travel
and interact, or in connection with a global recession. New risks
emerge from time to time and it is not possible for management to
predict all such risk factors or to assess the impact of such risks
on our business. Accordingly, we undertake no obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, changes in expectations, future
events, or otherwise, except as required by law.
About World Fuel Services
Corporation
Headquartered in Miami, Florida, World Fuel Services is a global
energy management company involved in providing energy procurement
advisory services, supply fulfillment and transaction and payment
management solutions to commercial and industrial customers,
principally in the aviation, marine and land transportation
industries. World Fuel Services sells fuel and delivers services to
its clients at more than 8,000 locations in more than 200 countries
and territories worldwide.
For more information, call 305-428-8000 or visit www.wfscorp.com.
-- Some amounts in this press release may not
add due to rounding. All percentages have been calculated using
unrounded amounts --
WORLD FUEL SERVICES
CORPORATION
CONSOLIDATED BALANCE
SHEETS
(Unaudited - In millions, except
per share data)
As of
September 30,
December 31,
2020
2019
Assets:
Current assets:
Cash and cash equivalents
$
572.7
$
186.1
Accounts receivable, net
1,244.1
2,891.9
Inventories
291.0
593.3
Prepaid expenses
56.3
80.6
Short-term derivative assets, net
101.4
59.5
Other current assets
269.2
358.8
Total current assets
2,534.8
4,170.1
Property and equipment, net
347.8
360.9
Goodwill
848.2
843.7
Identifiable intangible and other
non-current assets
661.5
617.7
Total assets
$
4,392.3
$
5,992.4
Liabilities:
Current liabilities:
Current maturities of long-term debt
$
19.6
$
54.1
Accounts payable
1,085.8
2,602.7
Customer deposits
118.5
126.7
Accrued expenses and other current
liabilities
333.0
378.9
Total current liabilities
1,557.0
3,162.4
Long-term debt
506.9
574.7
Non-current income tax liabilities,
net
215.6
210.1
Other long-term liabilities
193.0
151.3
Total liabilities
2,472.5
4,098.5
Commitments and contingencies
Equity:
World Fuel shareholders' equity:
Preferred stock, $1.00 par value; 0.1
shares authorized, none issued
—
—
Common stock, $0.01 par value; 100.0
shares authorized, 63.3 and 65.2 issued and outstanding as of
September 30, 2020 and December 31, 2019, respectively
0.6
0.7
Capital in excess of par value
221.1
274.7
Retained earnings
1,846.6
1,761.3
Accumulated other comprehensive loss
(152.3)
(146.3)
Total World Fuel shareholders' equity
1,916.0
1,890.4
Noncontrolling interest
3.8
3.5
Total equity
1,919.8
1,893.9
Total liabilities and equity
$
4,392.3
$
5,992.4
WORLD FUEL SERVICES
CORPORATION
CONSOLIDATED STATEMENTS OF
INCOME AND COMPREHENSIVE INCOME
(Unaudited – In millions, except
per share data)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
September 30,
2020
2019
2020
2019
Revenue
$
4,482.7
$
9,322.7
$
15,656.2
$
27,460.9
Cost of revenue
4,268.7
9,017.0
14,969.6
26,635.6
Gross profit
214.0
305.7
686.6
825.3
Operating expenses:
Compensation and employee benefits
91.4
126.7
289.8
347.0
General and administrative
80.9
82.8
249.1
232.9
Asset impairments
—
—
18.6
—
Restructuring charges
2.9
2.6
7.7
6.3
175.2
212.0
565.1
586.2
Income from operations
38.8
93.6
121.5
239.2
Non-operating income (expenses), net:
Interest expense and other financing
costs, net
(8.7)
(19.5)
(34.1)
(59.1)
Other income (expense), net
77.7
(3.3)
75.0
(0.3)
69.0
(22.8)
41.0
(59.4)
Income (loss) before income taxes
107.8
70.9
162.4
179.8
Provision for income taxes
25.4
21.5
49.0
55.5
Net income (loss) including noncontrolling
interest
82.4
49.4
113.4
124.3
Net income (loss) attributable to
noncontrolling interest
0.5
1.2
0.2
1.9
Net income (loss) attributable to World
Fuel
$
82.0
$
48.2
$
113.1
$
122.4
Basic earnings per common share
$
1.29
$
0.74
$
1.77
$
1.84
Basic weighted average common shares
63.4
65.3
63.9
66.4
Diluted earnings per common share
$
1.29
$
0.73
$
1.76
$
1.84
Diluted weighted average common shares
63.6
65.7
64.1
66.7
Comprehensive income:
Net income (loss) including noncontrolling
interest
$
82.4
$
49.4
$
113.4
$
124.3
Other comprehensive income (loss):
Foreign currency translation
adjustments
15.1
(11.5)
(12.9)
(17.4)
Cash flow hedges, net of income tax
expense of $2.1 and expense of $2.8 for the three months ended
September 30, 2020 and 2019, respectively, and net of income tax
expense of $2.3 and benefit of $2.4 for the nine months ended
September 30, 2020 and 2019, respectively
6.1
7.9
6.8
(6.8)
Other comprehensive income (loss)
21.2
(3.6)
(6.0)
(24.2)
Comprehensive income (loss) including
noncontrolling interest
103.6
45.8
107.3
100.1
Comprehensive income (loss) attributable
to noncontrolling interest
—
(0.8)
—
(1.5)
Comprehensive income (loss) attributable
to World Fuel
$
103.6
$
46.6
$
107.3
$
101.6
WORLD FUEL SERVICES
CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited - In millions)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
September 30,
2020
2019
2020
2019
Cash flows from operating activities:
Net income including noncontrolling
interest
$
82.4
$
49.4
$
113.4
$
124.3
Adjustments to reconcile net income
including noncontrolling interest to net cash provided by operating
activities:
Depreciation and amortization
22.1
21.1
66.3
64.2
Provision for bad debt
23.3
13.8
57.9
19.6
Share-based payment award compensation
costs
1.9
4.6
2.5
12.4
Deferred income tax expense (benefit)
(2.6)
(3.3)
(7.9)
1.4
Foreign currency (gains) losses, net
(2.9)
(2.6)
0.2
(0.5)
Gain on sale of business
(80.0)
—
(80.0)
—
Other
12.2
0.6
12.4
0.3
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable, net
(179.0)
33.6
1,283.6
21.1
Inventories
16.6
(13.0)
299.4
(53.4)
Prepaid expenses
16.1
—
22.5
(7.2)
Short-term derivative assets, net
42.1
(40.4)
(68.3)
127.2
Other current assets
55.2
(67.3)
72.3
(58.4)
Cash collateral with counterparties
28.3
34.8
45.8
(3.1)
Other non-current assets
10.9
(5.8)
(7.6)
28.1
Accounts payable
205.5
(33.4)
(1,321.6)
36.6
Customer deposits
(8.2)
(23.3)
(10.6)
(3.8)
Accrued expenses and other current
liabilities
(6.3)
84.1
(31.5)
(59.7)
Non-current income tax, net and other
long-term liabilities
8.0
(19.8)
41.8
(80.2)
Total adjustments
163.1
(16.4)
377.2
44.4
Net cash provided by (used in)
operating activities
245.5
33.0
490.6
168.7
Cash flows from investing activities:
Acquisition of business, net of cash
acquired
2.0
—
(128.6)
—
Proceeds from sale of business, net of
divested cash
268.4
—
268.4
—
Capital expenditures
(12.6)
(22.2)
(45.5)
(59.5)
Other investing activities, net
(2.2)
0.7
(7.5)
4.5
Net cash provided by (used in)
investing activities
255.6
(21.5)
86.9
(55.1)
Cash flows from financing activities:
Borrowings of debt
15.0
1,254.8
2,095.0
4,452.4
Repayments of debt
(589.1)
(1,249.8)
(2,202.8)
(4,468.4)
Dividends paid on common stock
(6.3)
(6.6)
(19.3)
(14.6)
Repurchases of common stock
—
—
(55.6)
(65.4)
Other financing activities, net
(3.3)
(4.5)
(6.0)
(7.1)
Net cash provided by (used in)
financing activities
(583.7)
(6.0)
(188.8)
(103.1)
Effect of exchange rate changes on cash
and cash equivalents
9.7
(5.0)
(2.0)
(3.7)
Net increase (decrease) in cash and
cash equivalents
(72.9)
0.4
386.7
6.7
Cash and cash equivalents, as of the
beginning of the period
645.7
218.1
186.1
211.7
Cash and cash equivalents, as of the
end of the period
$
572.7
$
218.5
$
572.7
$
218.5
WORLD FUEL SERVICES
CORPORATION
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(Unaudited - In millions, except
per share data)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
September 30,
Non-GAAP financial measures and
reconciliation:
2020
2019
2020
2019
Net income attributable to World Fuel
$
82.0
$
48.2
$
113.1
$
122.4
Loss on extinguishment of debt
—
0.5
—
0.5
Acquisition and divestiture related
expenses
0.5
0.3
2.7
1.1
Gain on sale of business
(80.0)
—
(80.0)
—
Asset impairments
—
—
18.6
—
Restructuring charges
2.9
2.6
7.7
6.3
Income tax impacts
15.4
(0.8)
10.3
(1.8)
Adjusted net income attributable to World
Fuel
$
20.7
$
50.7
$
72.4
$
128.4
Diluted earnings per common share
$
1.29
$
0.73
$
1.76
$
1.84
Loss on extinguishment of debt
—
0.01
—
0.01
Acquisition and divestiture related
expenses
0.01
—
0.04
0.02
Gain on sale of business
(1.26)
—
(1.25)
—
Asset impairments
—
—
0.29
—
Restructuring charges
0.05
0.04
0.12
0.09
Income tax impacts
0.24
(0.01)
0.16
(0.03)
Adjusted diluted earnings per common
share
$
0.33
$
0.77
$
1.13
$
1.92
For the Three Months
Ended
For the Nine Months
Ended
September 30,
September 30,
Non-GAAP financial measures and
reconciliation:
2020
2019
2020
2019
Income from operations
$
38.8
$
93.6
$
121.5
$
239.2
Depreciation and amortization
22.1
21.1
66.3
64.2
Acquisition and divestiture related
expenses
0.5
0.3
2.7
1.1
Asset impairments
—
—
18.6
—
Restructuring charges
2.9
2.6
7.7
6.3
Adjusted EBITDA (1)
$
64.3
$
117.6
$
216.8
$
310.7
(1)
The Company defines adjusted EBITDA as
income from operations, excluding the impact of depreciation and
amortization, and items that are considered to be non-operational
and not representative of our core business, including those
associated with acquisition and divestiture related expenses, asset
impairments, and restructuring charges.
WORLD FUEL SERVICES
CORPORATION
BUSINESS SEGMENTS
INFORMATION
(Unaudited - In millions)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
September 30,
Revenue:
2020
2019
2020
2019
Aviation segment
$
1,596.2
$
4,743.0
$
6,381.0
$
13,780.8
Land segment
1,645.2
2,555.8
4,948.8
7,712.4
Marine segment
1,241.2
2,023.9
4,326.4
5,967.7
$
4,482.7
$
9,322.7
$
15,656.2
$
27,460.9
Gross profit:
Aviation segment
$
97.6
$
156.9
$
282.6
$
411.7
Land segment
84.3
95.4
275.4
288.6
Marine segment
32.0
53.4
128.6
125.0
$
214.0
$
305.7
$
686.6
$
825.3
Income from operations:
Aviation segment
$
29.2
$
86.3
$
67.3
$
215.4
Land segment
18.8
13.4
54.1
46.2
Marine segment
8.2
20.6
55.4
44.2
56.2
120.3
176.8
305.9
Corporate overhead - unallocated
(17.4)
(26.7)
(55.3)
(66.7)
$
38.8
$
93.6
$
121.5
$
239.2
SALES VOLUME SUPPLEMENTAL
INFORMATION
(Unaudited - In millions)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
September 30,
Volume (Gallons):
2020
2019
2020
2019
Aviation Segment
1,017.4
2,174.6
3,550.2
6,289.1
Land Segment (1)
1,241.6
1,350.7
3,790.8
4,025.9
Marine Segment (2)
1,151.2
1,457.2
3,499.1
4,178.8
Consolidated Total
3,410.1
4,982.5
10,840.1
14,493.9
(1)
Includes gallons and gallon equivalents of
British Thermal Units (BTU) for our natural gas sales and Kilowatt
Hours (kWh) for our Kinect power business.
(2)
Converted from metric tons to gallons at a
rate of 264 gallons per metric ton. Marine segment metric tons were
4.4 and 13.3 for the three and nine months ended September 30,
2020.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201029006259/en/
World Fuel Services Corporation Ira M Birns, 305-428-8000
Executive Vice President & Chief Financial Officer
Glenn Klevitz, 305-428-8000 Vice President, Treasurer &
Investor Relations
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