WORLD FUEL SERVICES CORP - 10-Q Quarterly Report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

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

(State or other jurisdiction of

incorporation or organization)

59-2459427

(I.R.S. Employer

Identification No.)

700 South Royal Poinciana Blvd., Suite 800

Miami Springs, Florida

(Address of Principal Executive Offices)

33166

(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:

The registrant had a total of 10.7 million shares of common stock, par value $0.01 per share, net of treasury stock, outstanding as of November 4, 2002.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

	General	1

	Forward-Looking Statements	1

	Condensed Consolidated Balance Sheets as of September 30, 2002 (Unaudited) and March 31, 2002	2

	Condensed Consolidated Statements of Income (Unaudited) for the three and six months ended September 30, 2002 and 2001	3

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended September 30, 2002 and 2001	4

	Notes to the Condensed Consolidated Financial Statements (Unaudited)	6

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	Reportable Segments	12

	Critical Accounting Policies and Estimates	12

	Results of Operations	14

	Liquidity and Capital Resources	19

	Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements	20

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	21

ITEM 4.	CONTROLS AND PROCEDURES	22

PART II. OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	23

ITEM 2.	CHANGES IN SECURITIES AND USE OF PROCEEDS	23

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	23

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	24

ITEM 5.	OTHER INFORMATION	24

ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	24

SIGNATURES		25

CERTIFICATIONS		26

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

General

The following unaudited, condensed consolidated financial statements of World Fuel Services Corporation and Subsidiaries 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 accounting principles generally accepted in the United States. 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 and six months ended September 30, 2002, will not be necessarily indicative of the results for the entire fiscal year. The condensed consolidated financial statements and notes thereto included in this Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K (“10-K Report”) for the year ended March 31, 2002. World Fuel Services Corporation and Subsidiaries are collectively referred to in this Form 10-Q as “we,” “our” and “us.” Certain amounts in prior periods have been reclassified to conform to the current period presentation.

Forward-Looking Statements

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and forecasted demographic and economic trends relating to our industry are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as “may,” “will,” “anticipate,” “estimate,” “expect,” or “intend” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Factors that impact such forward looking statements include, but are not limited to, quarterly fluctuations in results; the management of growth; fluctuations in world oil prices or foreign currency; 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 our other Securities and Exchange Commission filings. A more detailed description of the principal risks in our business is set forth in “Risk Factors” in our 10-K Report for the year ended March 31, 2002. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	September 30, 2002			March 31, 2002
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	55,333		$	58,172
Accounts and notes receivable, net of allowance for bad debts of $11,155 and $11,012 at September 30 and March 31, 2002, respectively		168,905			132,586
Inventories		6,843			2,219
Prepaid expenses and other current assets		22,310			20,162

Total current assets		253,391			213,139
Property and equipment, net		5,351			5,618
Other assets:
Goodwill, net		34,003			34,003
Identifiable intangible asset, net		1,564			1,748
Other		4,489			3,415

	$	298,798		$	257,923

LIABILITIES
Current liabilities:
Current maturities of long-term debt	$	2,453		$	5,710
Accounts payable		110,562			82,904
Accrued expenses		43,786			30,806
Other current liabilities		11,135			14,431

Total current liabilities		167,936			133,851

Long-term liabilities		8,685			7,633


Commitments and contingencies

STOCKHOLDERS’ EQUITY
Preferred stock, $1.00 par value; shares of 100 authorized, none issued		—			—
Common stock, $0.01 par value; shares of 25,000 authorized;shares of 12,765 issued and outstanding		128			128
Capital in excess of par value		31,641			29,691
Retained earnings		110,420			106,841
Unearned deferred compensation		(1,961	)		(116	)
Treasury stock, at cost; shares of 2,144 and 2,388 at September 30 and March 31, 2002, respectively		(18,051	)		(20,105	)

		122,177			116,439

	$	298,798		$	257,923

The accompanying notes are an integral part of these condensed consolidated financial statements.

WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited—In thousands, except per share data)

	Three Months Ended September 30,						Six Months Ended September 30,
	2002			2001			2002			2001
Revenue	$	510,601		$	349,710		$	969,510		$	687,817
Cost of revenue		490,467			331,828			929,270			651,638

Gross profit		20,134			17,882			40,240			36,179

Operating expenses:
Salaries and wages		7,501			7,366			15,145			14,990
Executive severence charges		4,492			—			4,492			—
Provision for bad debts		805			1,326			1,446			2,172
Other		6,231			4,479			12,183			9,672

		19,029			13,171			33,266			26,834

Income from operations		1,105			4,711			6,974			9,345

Other (expense) income, net:
Interest income, net		280			393			665			802
Non-recurring (charge) credit		(1,577	)		—			(1,577	)		1,000
Other, net		(240	)		(375	)		(936	)		(548	)

(Loss) income before income taxes		(432	)		4,729			5,126			10,599
Income tax benefit (provision)		1,179			(1,127	)		27			(2,310	)

Net income	$	747		$	3,602		$	5,153		$	8,289

Basic earnings per share	$	0.07		$	0.35		$	0.49		$	0.80

Basic weighted average shares		10,468			10,391			10,420			10,397

Diluted earnings per share	$	0.07		$	0.34		$	0.48		$	0.78

Diluted weighted average shares		10,876			10,618			10,840			10,584

The accompanying notes are an integral part of these condensed consolidated financial statements

WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited—In thousands)

	Six Months Ended September 30,
	2002		2001
Cash flows from continuing operating activities:
Net income	$	5,153	$	8,289

Adjustments to reconcile net income to net cash (used in) provided by continuing operating activities—
Depreciation and amortization		1,416		865
Provision for bad debts		1,446

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