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 JUNE 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM___________TO__________
COMMISSION FILE NUMBER 1-9533
WORLD FUEL SERVICES CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-2459427
------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 SOUTH ROYAL POINCIANA BLVD., SUITE 800
MIAMI SPRINGS, FLORIDA 33166
------------------------------------------ ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code: (305) 884-2001
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of June 30, 1997, the registrant had a total of 8,108,768 shares of
common stock, par value $0.01 per share, issued and outstanding.
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 three months ended June 30, 1997, will not be necessarily
indicative of the results for the entire fiscal year ending March 31, 1998.
Page 2 of 12
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
JUNE 30, 1997 MARCH 31, 1997
------------- --------------
CURRENT ASSETS:
Cash and cash equivalents $ 18,296,000 $ 11,035,000
Accounts receivable, net of allowance
for bad debts of $4,410,000 and $4,360,000
at June 30 and March 31, 1997, respectively 69,272,000 70,819,000
Inventories 5,327,000 6,449,000
Prepaid expenses and other current assets 4,135,000 5,133,000
------------ ------------
Total current assets 97,030,000 93,436,000
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 601,000 601,000
Buildings and improvements 3,006,000 2,998,000
Office equipment and furniture 3,906,000 3,331,000
Plant, machinery and equipment 17,185,000 16,310,000
Construction in progress 36,000 135,000
------------ ------------
24,734,000 23,375,000
Less accumulated depreciation
and amortization 7,547,000 7,094,000
------------ ------------
17,187,000 16,281,000
------------ ------------
OTHER ASSETS:
Unamortized cost in excess of net
assets of acquired companies, net of
accumulated amortization 11,695,000 11,785,000
Other 1,627,000 1,637,000
------------ ------------
$127,539,000 $123,139,000
============ ============
(Continued)
Page 3 of 12
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Continued)
LIABILITIES AND STOCKHOLDERS'EQUITY
JUNE 30, 1997 MARCH 31, 1997
------------- --------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,187,000 $ 2,191,000
Accounts payable and accrued expenses 39,786,000 37,950,000
Customer deposits 1,913,000 2,241,000
Accrued salaries and wages 865,000 2,187,000
Income taxes payable 1,680,000 282,000
------------ ------------
Total current liabilities 46,431,000 44,851,000
------------ ------------
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities 366,000 396,000
Deferred compensation 2,009,000 2,166,000
Deferred income taxes 279,000 468,000
------------ ------------
2,654,000 3,030,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value;
100,000 shares authorized, none issued -- --
Common stock, $0.01 par value;
10,000,000 shares authorized, 8,109,000
shares issued and outstanding at June 30
and March 31, 1997 81,000 81,000
Capital in excess of par value 23,275,000 23,275,000
Retained earnings 55,155,000 51,959,000
Less treasury stock, at cost 57,000 57,000
------------ ------------
78,454,000 75,258,000
------------ ------------
$127,539,000 $123,139,000
============ ============
Page 4 of 12
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED JUNE 30,
-----------------------------
1997 1996
------------- -------------
Revenue $ 186,307,000 $ 170,694,000
Cost of sales 175,233,000 159,062,000
------------- -------------
Gross profit 11,074,000 11,632,000
------------- -------------
Operating expenses:
Salaries and wages 3,697,000 3,206,000
Provision for bad debts 42,000 1,318,000
Other 2,941,000 2,771,000
------------- -------------
6,680,000 7,295,000
------------- -------------
Income from operations 4,394,000 4,337,000
------------- -------------
Other income, net:
Equity in earnings of
aviation joint venture 453,000 409,000
Other, net 266,000 (13,000)
------------- -------------
719,000 396,000
------------- -------------
Income before income taxes 5,113,000 4,733,000
Provision for income taxes 1,310,000 1,629,000
------------- -------------
Net income $ 3,803,000 $ 3,104,000
============= =============
Net income per share $ 0.46 $ 0.38
============= =============
Weighted average shares outstanding 8,249,000 8,184,000
============= =============
Page 5 of 12
WORLD FUEL SERVICES CORPORATIQN AND SUBSIDLAMES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30,
---------------------------
1997 1996
----------- -----------
Cash flows from operating activities:
Net income $ 3,803,000 $ 3,104,000
----------- -----------
Adjustments to reconcile net income
to net cash provided by operating activities -
Depreciation and amortization 596,000 443,000
Provision for bad debts 42,000 1,318,000
Deferred income tax (benefit) provision (189,000) 328,000
Equity in earnings of aviation joint venture, net (67,000) (325,000)
Other non-cash operating charges (credits) 6,000 (4,000)
Changes in assets and liabilities:
(Increase) decrease in -
Accounts receivable 1,505,000 2,085,000
Inventories 1,122,000 925,000
Prepaid expenses and other current assets 607,000 (984,000)
Other assets (41,000) (157,000)
Increase (decrease) in -
Accounts payable and accrued expenses 1,836,000 (5,609,000)
Customer deposits (328,000) 151,000
Accrued salaries and wages (1,322,000) (1,326,000)
Income taxes payable 1,398,000 989,000
Deferred compensation (157,000) (203,000)
----------- -----------
Total adjustments 5,008,000 (2,369,000)
----------- -----------
Net cash provided by operating activities 8,811,000 735,000
----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment (1,366,000) (1,056,000)
Proceeds from notes receivable 352,000 107,000
Repayments of advances to aviation joint venture 106,000 --
----------- -----------
Net cash used in investing activities $ (908,000) $ (949,000)
----------- -----------
(Continued)
Page 6 of 12
WORID FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Continued)
THREE MONTHS ENDED JUNE 30,
----------------------------
1997 1996
------------ ------------
Cash flows from financing activities:
Dividends paid on common stock $ (608,000) $ (402,000)
Repayment of long-term debt (34,000) (11,000)
Proceeds from issuance of common stock -- 38,000
------------ ------------
Net cash used in financing activities (642,000) (375,000)
------------ ------------
Net increase (decrease) in cash
and cash equivalents 7,261,000 (589,000)
Cash and cash equivalents, at beginning
of period 11,035,000 12,856,000
------------ ------------
Cash and cash equivalents, at end
of period $ 18,296,000 $ 12,267,000
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 16,000 $ 44,000
============ ============
Income taxes $ 193,000 $ 326,000
============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Cash dividends declared, but not yet paid, totaling $607,000 and
$603,000 are included in accounts payable and accrued expenses as of June 30,
1997 and 1996, respectively.
Page 7 of 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1996
The Company's revenue for the three months ended June 30, 1997 was
$186,307,000, an increase of $15,613,000, or 9.1%, as compared to revenue of
$170,694,000 for the corresponding period for the prior year. The Company's
revenue during these periods was attributable to the following segments:
THREE MONTHS ENDED JUNE 30,
---------------------------
1997 1996
------------ ------------
Aviation Fueling $ 96,117,000 $ 87,984,000
Marine Fueling 84,282,000 77,132,000
Oil Recycling 5,908,000 5,578,000
------------ ------------
Total Revenue $186,307,000 $170,694,000
============ ============
The aviation fueling segment contributed $96,117,000 in revenue for the
three months ended June 30, 1997. This represented an increase in revenue of
$8,133,000, or 9.2%, as compared to the same period of the prior year. The
increase in revenue was due to increases in volume and the average price per
gallon sold. The marine fueling segment contributed $84,282,000 in revenue for
the three months ended June 30, 1997, an increase of $7,150,000, or 9.3%, over
the corresponding period of the prior year. The increase in revenue was related
primarily to an increase in the volume of metric tons traded, partially offset
by decreases in the volume of metric tons brokered and the average sales price
per metric ton. The oil recycling segment contributed $5,908,000 in revenue for
the three months ended June 30, 1997, an increase of $330,000, or 5.9%, as
compared to the same period of the prior year. The increase in revenue was due
to an increase in volume of recycled oil sold and higher used oil and waste
water collection revenue, partially offset by a decrease in the average sales
price per gallon of recycled oil sold.
The Company's gross profit of $11,074,000 for the three months ended
June 30, 1997, decreased $558,000, or 4.8%, as compared to the same period of
the prior year. The Company's gross margin decreased from 6.8% for the three
months ended June 30, 1996, to 5.9% for the three months ended June 30, 1997.
The Company's aviation fueling business achieved a 5.4% gross margin for the
three months ended June 30, 1997, as compared to 6.9% achieved for the same
period during the prior year. This resulted from a decrease in the average gross
profit per gallon sold. The Company's marine fueling segment achieved a 4.5%
gross margin for the three months ended June 30, 1997, as compared to a 4.7%
gross margin for the same period of the prior year. This resulted from a lower
average gross profit in brokering activities, despite an improvement in the
average gross profit related to trading activities. The gross margin in the
Company's oil recycling segment increased from 34.7% for the three months ended
June 30, 1996, to 35.4%, for the three months ended June 30, 1997. This increase
resulted from higher used oil and waste water collection revenue.
Page 8 of 12
Total operating expenses for the three months ended June 30, 1997 were
$6,680,000, a decrease of $615,000, or 8.4%, as compared to the same period of
the prior year. The decrease resulted primarily from a $1,276,000 lower
provision for bad debts over the corresponding period during the prior year. In
relation to revenue, total operating expenses decreased from 4.3% to 3.6%.
The Company's income from operations for the three months ended June
30, 1997 was $4,394,000, an increase of $57,000, or 1.3%, 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 JUNE 30,
---------------------------
1997 1996
----------- -----------
Aviation Fueling $ 3,174,000 $ 3,093,000
Marine Fueling 1,023,000 1,018,000
Oil Recycling 1,367,000 1,348,000
Corporate Overhead (1,170,000) (1,122,000)
----------- -----------
Total Income from
Operations $ 4,394,000 $ 4,337,000
=========== ===========
The aviation fueling segment's income from operations was $3,174,000
for the three months ended June 30, 1997, an increase of $81,000, or 2.6%, as
compared to the three months ended June 30, 1996. This resulted from a decrease
in operating expenses, principally in the provision for bad debts, largely
offset by a decrease in gross profit which resulted from a lower average gross
profit per gallon sold. The Company's aviation fueling segment also earned
$453,000 from its aviation joint venture during the three months ended June 30,
1997, as compared to $409,000 during the same period of the prior year. The
results of the aviation joint venture are shown in Other income, net. The marine
fueling segment earned $1,023,000 in income from operations for the three months
ended June 30, 1997, relatively unchanged over the corresponding period of the
prior year. The increased gross profit was largely offset by higher operating
expenses. Income from operations of the oil recycling segment increased by
$19,000, or 1.4%, for the three months ended June 30, 1997, as compared to the
same period of the prior year. This improvement resulted from an increase in
gross profit, partially offset by higher operating expenses. Corporate overhead
costs not charged to the business segments totaled $1,170,000 for the three
months ended June 30, 1997, an increase of $48,000, or 4.3%, as compared to the
same period of the prior year.
Other income increased $323,000 over the quarter a year ago, as a
result of higher interest income from improved liquidity and interest earned on
receivables. The Company's effective income tax rate for the three months ended
June 30, 1997 was 25.6%, as compared to 34.4% for the same period of the prior
year. The decrease is the result of an overall decline in foreign taxes.
Net income for the three months ended June 30, 1997 was $3,803,000, an
increase of $699,000, or 22.5%, as compared to net income of $3,104,000 for the
three months ended June 30, 1996. Earnings per share of $0.46 for the three
months ended June 30, 1997 exhibited a $0.08, or 21.1% increase over the $0.38
achieved during the same period of the prior year.
Page 9 of 12
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents amounted to $18,296,000 at June 30, 1997, as
compared to $11,035,000 at March 31, 1997. The principal sources of cash and
cash equivalents during the first three months of fiscal year 1998 were
$8,811,000 provided by operating activities, partially offset by $1,366,000 for
capital expenditures and $608,000 in dividends paid on common stock. Other
components of changes in cash and cash equivalents are detailed in the
Consolidated Statements of Cash Flows.
Working capital as of June 30, 1997 was $50,599,000, exhibiting a
$2,014,000 increase from working capital as of March 31, 1997. As of June 30,
1997, the Company's accounts receivable, excluding the allowance for bad debts,
amounted to $73,682,000, a decrease of $1,497,000, as compared to the March 31,
1997 balance. In the aggregate, accounts payable, accrued expenses and customer
deposits increased $1,508,000. The net decrease in trade credit of $3,005,000,
was primarily attributable to the marine segment. The allowance for bad debts as
of June 30, 1997 amounted to $4,410,000, an increase of $50,000 compared to the
March 31, 1997 balance. During the first three months of fiscal year 1998, the
Company charged $42,000 to the provision for bad debts and had recoveries in
excess of charge-offs of $8,000.
Inventories at June 30, 1997 were $1,122,000 lower when compared to
March 31, 1997, related primarily to the aviation segment. Prepaid and other
current assets as of June 30, 1997, were $4,135,000, exhibiting a decrease of
$998,000 from the March 31, 1997 balance. The decrease was partially related to
decreases in prepaid fuel and collections of notes receivable.
Accrued salaries and wages decreased $ 1,322,000 during the first
quarter of the 1998 fiscal year, resulting from the payment of sales and
management performance bonuses accrued for the 1997 fiscal year. Income taxes
payable at June 30, 1997 increased $1,398,000, when compared to March 31, 1997.
This resulted from the accrual of the consolidated income tax provision for the
first quarter of the 1998 fiscal year which is not currently payable, in
accordance with U.S. and foreign tax laws.
Capital expenditures for the first three months of fiscal year 1998,
consisted primarily of $575,000 in office and computer equipment and $752,000 in
plant, machinery and equipment related to the recycled oil segment. During the
balance of fiscal year 1998, the Company anticipates spending approximately
$1,500,000 to upgrade plant, machinery and equipment. The Company also
anticipates spending an estimated $1,000,000 over the next several years to
clean up contamination which was present at one of the Company's sites when it
was acquired by the Company. The clean up costs will be capitalized as part of
the cost of the site, up to the fair market value of the site.
Stockholders' equity amounted to $78,454,000, or $9.68 per share at
June 30, 1997, compared to $75,258,000, or $9.28 per share at March 31, 1997.
This increase of $3,196,000 was due to $3,803,000 in first quarter earnings,
partially offset by the declaration of first quarter cash dividends of $607,000.
The Company's working capital requirements are not expected to vary
substantially for the balance of fiscal year 1998. The Company expects to meet
its cash requirements for the balance of fiscal year 1998 from existing cash,
operations and additional borrowings, as necessary, under its existing credit
facility. The Company's business has not been significantly affected by
inflation during the periods discussed in this report.
Page 10 of 12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
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
27 Financial Data Schedule (for SEC use only).
(a) During the three months ended June 30, 1997, the Company did not
file any reports on Form 8-K.
Page 11 of 12
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: JULY 31, 1997 WORLD FUEL SERVICES CORPORATION
/s/ JERROLD BLAIR
-------------------------
JERROLD BLAIR
PRESIDENT
/s/ CARLOS A. ABAUNZA
-------------------------
CARLOS A. ABAUNZA
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
Page 12 of 12
EXHIBIT INDEX
EXHIBIT PAGE
- ------- ----
27 Financial Data Schedule
5
3-MOS
MAR-31-1998
APR-01-1997
JUN-30-1997
18,296,000
0
73,682,000
4,410,000
5,327,000
97,030,000
24,734,000
7,547,000
127,539,000
46,431,000
0
0
0
81,000
78,373,000
127,539,000
186,307,000
186,307,000
175,233,000
175,233,000
0
42,000
72,000
5,113,000
1,310,000
3,803,000
0
0
0
3,803,000
0.46
0.46
