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 JUNE 30, 2004
| ¨ | 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 incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 9800 N.W. 41st Street, Suite 400 Miami, Florida |
33178 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, including area code: (305) 428-8000
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 ¨.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-12 of the Exchange Act). Yes x No ¨.
The registrant had a total of 11,345,000 shares of common stock, par value $0.01 per share, net of treasury stock, outstanding as of August 6, 2004.
| Page | ||||
| Part I. Financial Information | ||||
| Item 1. |
Financial Statements |
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| 1 | ||||
| 1 | ||||
| Condensed Consolidated Balance Sheets as of June 30, 2004 (Unaudited) and December 31, 2003 |
2 | |||
| 3 | ||||
| 4 | ||||
| Notes to the Condensed Consolidated Financial Statements (Unaudited) |
6 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 | ||
| Item 3. |
22 | |||
| Item 4. |
23 | |||
| Part II. Other Information |
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| Item 1. |
24 | |||
| Item 2. |
24 | |||
| Item 3. |
24 | |||
| Item 4. |
25 | |||
| Item 5. |
26 | |||
| Item 6. |
26 | |||
| 27 | ||||
Part I
| Item 1. | Financial Statements |
The following unaudited, condensed consolidated financial statements and notes thereto 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 June 30, 2004 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 December 31, 2003. World Fuel Services Corporation (“World Fuel”) 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.
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, cash flows 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 December 31, 2003. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.
1
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED - IN THOUSANDS, EXCEPT PER SHARE DATA)
| As of |
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| June 30, 2004 |
December 31, 2003 |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 65,328 | $ | 76,256 | ||||
| Accounts and notes receivable, net of allowance for bad debts of $11,400 and $10,538 at June 30, 2004 and December 31, 2003, respectively |
367,526 | 192,119 | ||||||
| Inventories |
38,007 | 22,940 | ||||||
| Prepaid expenses and other current assets |
27,298 | 19,706 | ||||||
| Total current assets |
498,159 | 311,021 | ||||||
| Property and equipment, net |
6,964 | 6,963 | ||||||
| Other: |
||||||||
| Goodwill, net of accumulated amortization of $3,565 at June 30, 2004 and December 31, 2003 |
43,930 | 36,860 | ||||||
| Identifiable intangible asset, net of accumulated amortization of $1,190 and $736 at June 30, 2004 and December 31, 2003, respectively |
8,210 | 1,104 | ||||||
| Other assets |
5,917 | 1,730 | ||||||
| $ | 563,180 | $ | 357,678 | |||||
| Liabilities |
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| Current liabilities: |
||||||||
| Short-term debt |
$ | 1,535 | $ | 1,600 | ||||
| Accounts payable |
283,273 | 172,885 | ||||||
| Accrued expenses |
23,481 | 9,987 | ||||||
| Other current liabilities |
28,400 | 20,290 | ||||||
| Total current liabilities |
336,689 | 204,762 | ||||||
| Long-term liabilities |
54,694 | 4,537 | ||||||
| Commitments and contingencies |
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| Stockholders’ Equity |
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| Preferred stock, $1.00 par value; 100 shares authorized, none issued |
— | — | ||||||
| Common stock, $0.01 par value; 25,000 shares authorized; 12,765 shares issued and outstanding at June 30, 2004 and December 31, 2003 |
128 | 128 | ||||||
| Capital in excess of par value |
43,434 | 34,672 | ||||||
| Retained earnings |
144,129 | 132,976 | ||||||
| Unearned deferred compensation |
(4,081 | ) | (2,788 | ) | ||||
| Treasury stock, at cost; 1,403 shares and 1,973 shares at June 30, 2004 and December 31, 2003, respectively |
(11,813 | ) | (16,609 | ) | ||||
| 171,797 | 148,379 | |||||||
| $ | 563,180 | $ | 357,678 | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED - IN THOUSANDS, EXCEPT PER SHARE DATA)
| For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
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| 2004 |
2003 |
2004 |
2003 |
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| Revenue |
$ | 1,377,378 | $ | 645,918 | $ | 2,289,175 | $ | 1,303,918 | ||||||||
| Cost of revenue |
(1,345,924 | ) | (620,436 | ) | (2,230,790 | ) | (1,251,125 | ) | ||||||||
| Gross profit |
31,454 | 25,482 | 58,385 | 52,793 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Salaries and wages |
(11,518 | ) | (10,647 | ) | (21,766 | ) | (20,745 | ) | ||||||||
| Provision for bad debts |
(1,354 | ) | (1,237 | ) | (2,239 | ) | (3,938 | ) | ||||||||
| Other |
(8,782 | ) | (7,817 | ) | (16,870 | ) | (15,411 | ) | ||||||||
| (21,654 | ) | (19,701 | ) | (40,875 | ) | (40,094 | ) | |||||||||
| Income from operations |
9,800 | 5,781 | 17,510 | 12,699 | ||||||||||||
| Other (expense) income, net: |
||||||||||||||||
| Interest (expense) income, net |
(283 | ) | 112 | (199 | ) | 254 | ||||||||||
| Other, net |
(1,170 | ) | 370 | (1,188 | ) | (25 | ) | |||||||||
| (1,453 | ) | 482 | (1,387 | ) | 229 | |||||||||||
| Income before income taxes |
8,347 | 6,263 | 16,123 | 12,928 | ||||||||||||
| Provision for income taxes |
(1,481 | ) | (820 | ) | (3,303 | ) | (2,217 | ) | ||||||||
| Net income |
$ | 6,866 | $ | 5,443 | $ | 12,820 | $ | 10,711 | ||||||||
| Basic earnings per share |
$ | 0.62 | $ | 0.51 | $ | 1.17 | $ | 1.01 | ||||||||
| Basic weighted average shares |
11,056 | 10,600 | 10,919 | 10,592 | ||||||||||||
| Diluted earnings per share |
$ | 0.58 | $ | 0.49 | $ | 1.10 | $ | 0.97 | ||||||||
| Diluted weighted average shares |
11,751 | 11,118 | 11,628 | 11,071 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - IN THOUSANDS)
| For the Six Months Ended June 30, |
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| 2004 |
2003 |
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| Cash flows from operating activities: |
||||||||
| Net income |
$ | 12,820 | $ | 10,711 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities - net of effects from business acquired |
||||||||
| Provision for bad debts |
2,238 | 3,938 | ||||||
| Depreciation and amortization |
1,842 | 2,239 | ||||||
| Deferred income tax benefits |
(2,392 | ) | (1,865 | ) | ||||
| Unearned deferred compensation amortization |
679 | 358 | ||||||
| Other non-cash operating charges |
330 | 204 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts and notes receivable |
(97,361 | ) | 27,521 | |||||
| Inventories |
(4,894 | ) | (8,120 | ) | ||||
| Prepaid expenses and other current assets |
(8,501 | ) | 685 | |||||
| Other assets |
(153 | ) | 276 | |||||
| Accounts payable and accrued expenses |
52,696 | (31,090 | ) | |||||
| Other current liabilities |
1,076 | 5,715 | ||||||
| Deferred compensation and other non-current liabilities |
1,646 | 243 | ||||||
| Total adjustments |
(52,794 | ) | 104 | |||||
| Net cash (used in) provided by operating activities |
(39,974 | ) | 10,815 | |||||
| Cash flows from investing activities: |
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| Capital expenditures |
(1,244 | ) | (2,355 | ) | ||||
| Acquisition of business, net |
12,077 | — | ||||||
| Net cash provided by (used in) investing activities |
10,833 | (2,355 | ) | |||||
| Cash flows from financing activities: |
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| Dividends paid on common stock |
(1,652 | ) | (1,600 | ) | ||||
| Proceeds from exercise of stock options |
6,325 | 467 | ||||||
| Repayment of long term debt |
(1,600 | ) | (2,527 | ) | ||||
| Repayment of assumed bank loans and bank overdrafts |
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