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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED MARCH 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 (I.R.S. Employer Identification No.)
of incorporation or organization)
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
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS: ON WHICH REGISTERED:
- ------------------------ ----------------------
Common Stock, New York Stock Exchange
par value $0.01 per share Pacific Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definite proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K [ ].
The aggregate market value of the voting stock (which consists solely of
shares of common stock) held by non-affiliates of the registrant was
$162,175,000 (computed by reference to the closing sale price as of May 13,
1997).
The registrant had 8,108,768 outstanding shares of common stock, par
value $.01 per share, as of May 13, 1997.
DOCUMENTS INCORPORATED BY REFERENCE:
Part III - Definitive Proxy Statement for the 1997 Annual Meeting
of Shareholders.
TABLE OF CONTENTS
Page
ITEM 1. Business
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General 1
History 1
Description of Business 2
Aviation Fuel Services 2
Marine Fuel Services 3
Oil Recycling 4
Potential Liability and Insurance 4
Regulation 5
ITEM 2. Properties 8
------------------------------------------------------
ITEM 3. Legal Proceedings 10
------------------------------------------------------
ITEM 4. Submission of Matters to a Vote of Security Holders 10
------------------------------------------------------
ITEM 5. Market for Registrant's Common Equity and
Related Stockholder Matters 11
------------------------------------------------------
ITEM 6. Selected Financial Data 12
------------------------------------------------------
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
------------------------------------------------------
ITEM 8. Financial Statements and Supplementary Data 19
------------------------------------------------------
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
------------------------------------------------------ 19
ITEM 10. Directors and Executive Officers of the Registrant
-------------------------------------------------- 20
ITEM 11. Executive Compensation
---------------------- 20
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management
----------------------------------------------- 20
ITEM 13. Certain Relationships and Related Transactions 20
----------------------------------------------
ITEM 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
--------------------------------------------------- 21
i
PART I
ITEM 1. BUSINESS
GENERAL
World Fuel Services Corporation (the "Company") markets aviation and marine fuel
and recycles used oil. In its aviation fuel services business, the Company
extends credit and provides around-the-world single-supplier convenience,
24-hour service, and competitively-priced aviation fuel to passenger, cargo and
charter airlines. In its marine fuel services business, the Company markets
marine fuel to a broad base of international shipping companies and to the U.S.
military. Services include credit terms, 24-hour around-the-world service and
competitively priced fuel. In its oil recycling business, the Company collects
and recycles non-hazardous petroleum products and petroleum contaminated liquids
throughout the southern and mid-atlantic United States. The Company sells the
recycled oil to industrial and commercial customers.
Financial information with respect to the Company's business segments and
foreign operations is provided in Note 7 to the accompanying financial
statements.
HISTORY
The Company was incorporated in Florida in July 1984. Its executive offices are
located at 700 South Royal Poinciana Boulevard, Suite 800, Miami Springs,
Florida 33166 and its telephone number at this address is (305) 884-2001. The
Company presently conducts its aviation fuel services business through seven
subsidiaries and a joint venture, with principal offices in Florida, England,
Singapore, Mexico, Ecuador and Costa Rica. The Company conducts its marine fuel
services business through three subsidiaries with principal offices in New
Jersey, California, England, South Korea and Singapore, and its oil recycling
business is conducted through five subsidiaries with offices in Florida,
Louisiana, Maryland and Delaware. See "Item 2 - Properties" for a list of
principal offices by business and "Exhibit 21 - Subsidiaries of the Registrant".
The Company began operations in 1984 as a used oil recycler in the southeast
United States. The Company expanded this business through acquisitions, the
development of new processing technology and the establishment of new offices.
In 1986, the Company diversified its operations by entering, through an
acquisition, the aviation fuel services business. This new segment expanded
rapidly, from a business primarily concentrated in the state of Florida, to an
international sales company covering the major airports throughout the world.
This expansion resulted from acquisitions and the establishment of new offices.
In 1995, the Company further diversified its fuel services operations through
the acquisition of a group of companies which are considered leaders in the
marine fuel services business. This new segment provided the Company with
operational and supplier side synergies and entry into fast growing markets in
the Far East and Eastern Europe.
During fiscal year 1997, the Company opened its international headquarters in
San Jose, Costa Rica by establishing the wholly-owned subsidiary World Fuel
International, S.A. ("WFI"). WFI serves the Company's aviation customers in
Canada, South and Central America and the Caribbean basin.
Page 1
See "Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Note 1 to the accompanying financial statements for
additional information.
DESCRIPTION OF BUSINESS
AVIATION FUEL SERVICES
The Company markets aviation fuel to passenger, cargo and charter airlines. The
Company has developed an extensive network which enables it to fuel customers at
airports throughout the world.
In general, the aviation industry is capital intensive and highly leveraged.
Recognizing the financial risks of the airline industry, fuel suppliers
generally refrain from extending unsecured lines of credit to smaller airlines
and avoid doing business with smaller airlines directly. Consequently, most
carriers are required to post a cash collateralized letter of credit or prepay
for fuel purchases. This impacts the airlines' working capital. The Company
recognizes that the extension of credit is a risk but also a significant area of
opportunity. Accordingly, the Company extends unsecured credit to many of its
customers.
The Company purchases its aviation fuel from suppliers worldwide. The Company's
cost of fuel is generally tied to market-based formulas or is government
controlled. The Company is usually extended unsecured trade credit for its fuel
purchases. However, certain suppliers require a letter of credit. The Company
may prepay its fuel purchases to take advantage of financial discounts, or as
required to transact business in certain countries.
Outside of the United States, the Company generally does not maintain fuel
inventory and arranges to have the fuel delivered directly into the customer's
aircraft. The Company maintains fuel inventory at various airports in Ecuador
pursuant to a joint venture. In the United States, sales are made directly into
a customer's aircraft or the customer's designated storage with fuel provided by
the Company's suppliers or delivered from the Company's inventory. Inventory is
held at multiple locations in the United States for competitive reasons and
inventory levels are kept at an operating minimum. The Company has arrangements
with its suppliers and other third parties for the delivery of fuel.
The primary risk in the Company's aviation fueling business is the extension of
unsecured trade credit. The Company's success in attracting business has been
due, in large part, to its willingness to extend credit on an unsecured basis to
customers which exhibit a higher credit risk profile and would otherwise be
required to prepay or post cash collateralized letters of credit with their
suppliers of fuel. The Company's management recognizes that extending credit and
setting appropriate reserves for receivables is largely a subjective decision
based on knowledge of the customer. Active management of this risk is essential
to the Company's success. A strong capital position and liquidity provide the
financial flexibility necessary to respond to customer needs. Diversification of
risk is difficult since the Company sells primarily within the airline industry.
The Company's management meets regularly to evaluate credit exposure in the
aggregate, and by individual credit. This group is also responsible for setting
and maintaining credit standards and ensuring the overall quality of the credit
portfolio.
The level of credit granted to a customer is largely influenced by its estimated
fuel requirements for thirty to forty-five days. This period of time represents
the average business cycle of the Company's
Page 2
typical customer. The Company regularly monitors its credit portfolio by
reviewing a customer's payment patterns and estimated overall exposure,
including estimated unbilled fuel sales. During the fiscal years ended March 31,
1997, 1996 and 1995, none of the Company's aviation fuel customers accounted for
more than 10% of the Company's consolidated revenue. The Company currently
employs 60 persons in its aviation fuel services segment.
MARINE FUEL SERVICES
The Company, through its Trans-Tec subsidiaries, markets marine fuel to a broad
base of customers, including international container and tanker fleets, time
charter operators, as well as U.S. military vessels. Fueling services are
provided throughout the world.
Through strategic sales offices located in the United States, Singapore,
England, South Africa, South Korea and Costa Rica, Trans-Tec Services provides
its customers global market intelligence and rapid access to quality and
competitively priced marine fuel, 24-hours a day, every day of the year. The
cost of fuel is a major component of a vessel's operating overhead. Therefore,
the need for cost effective and professional fueling services is essential.
As an increasing number of ship owners, time charter operators, and suppliers
look to outsource their marine fuel purchasing and/or marketing needs,
Trans-Tec's value added service has become an integral part of the oil and
transportation industries' push to shed non-core functions. Suppliers use
Trans-Tec Services' global sales, marketing and financial infrastructure to sell
a spot or ratable volume of product to a diverse, international purchasing
community. End customers use Trans-Tec's real time analysis of the availability,
quality, and price of marine fuels in ports worldwide to maximize their
competitive position.
In the majority of its transactions, Trans-Tec acts as a broker and as a source
of market information for the user, negotiates the transaction by arranging the
fuel purchase contract between the supplier and end user, and expedites the
arrangements for the delivery of fuel. For this service, Trans-Tec is paid a
commission from the supplier. Trans-Tec also acts as a reseller, when it
purchases the fuel from a supplier, marks it up, and resells the fuel to a
customer at a profit. The Company holds no inventory and assumes minimal price
risk; however, in most resale transactions the Company extends unsecured trade
credit.
The Company's management meets regularly to evaluate credit exposure in the
aggregate, and by individual credit. This group is also responsible for setting
and maintaining credit standards and ensuring the overall quality of the credit
portfolio. The level of credit is largely influenced by a customer's credit
history with the Company, including claims experience and payment patterns.
During the fiscal years ended March 31, 1997, 1996 and 1995, none of the
Company's marine fuel customers accounted for more than 10% of the Company's
consolidated revenue. The Company currently employs 67 persons in its marine
fuel services segment.
Page 3
OIL RECYCLING
The Company, through its International Petroleum Corporation subsidiaries
("IPC"), collects, blends, and recycles petroleum products and petroleum
contaminated water. The Company's recycled oil products are sold primarily to
industrial and commercial customers. The Company generates revenue from the sale
of its recycled oil products and from fees paid by customers for the collection
of used oil, contaminated water and other non-hazardous liquids.
IPC collects only non-hazardous waste oil, waste water, anti-freeze and
petroleum contaminated liquids from generators such as service stations, quick
lube shops, automobile dealerships, and industrial, governmental, marine, and
utility generators. The Company uses its own fleet of trucks to collect
approximately 60 percent of its needs from generators within close proximity to
its facilities. The balance is sourced from independent collectors. Every
shipment is analyzed on-site or at the Company's laboratories to determine its
specifications and the treatment needed to convert the waste fluid into
marketable fuel products.
The Company has three recycling facilities. The facilities located in Plant
City, Florida and Wilmington, Delaware utilize a closed-loop, two stage
distillation process. The resulting recycled oil product is sold as is, or it
may be blended to customer specification. The Company's products range from
commercial diesel fuel to #6 grade residual oil. The Company's third recycling
facility, located in New Orleans, Louisiana, utilizes a batch recycling process.
The Company also has a collection and transfer facility in Baltimore, Maryland,
which has limited processing and blending capabilities.
The used oil industry is highly fragmented and consists primarily of small scale
operators that collect and resell used oil, many of which lack the necessary
facilities to adequately test and recycle the oil. However, the industry also
includes a few large-scale operators that have the facilities to collect,
re-refine, and market lubricating products.
During the fiscal years ended March 31, 1997, 1996 and 1995, none of the
Company's recycled fuel customers accounted for more than 10% of the Company's
consolidated revenue. The Company currently employs 140 persons in the oil
recycling segment.
POTENTIAL LIABILITY AND INSURANCE
The Company, through the use of subcontractors and its own operations,
transports, stores or processes flammable aviation, marine and residual fuel
subjecting it to possible claims by employees, customers, regulators and others
who may be injured. In addition, the Company may be held liable for the clean-up
costs of spills or releases of materials from its facilities or vehicles, or for
damages to natural resources arising out of such events. The Company follows
what it believes to be prudent procedures to protect its employees and customers
and to prevent spills or releases of these materials. The Company's domestic and
international fueling activities also subject it to the risks of significant
potential liability under federal and state statutes, common law and contractual
indemnification agreements. The Company has general and automobile liability
insurance coverage, including the statutory Motor Carrier Act/MCS 90 endorsement
for sudden and accidental pollution.
In the aviation and marine fuel segments, the Company utilizes subcontractors
which provide various services to customers, including intoplane fueling at
airports, fueling of vessels in port and at sea, and
Page 4
transportation and storage of fuel and fuel products. Although the Company
generally requires its subcontractors to carry liability insurance, not all
subcontractors carry adequate insurance. The Company's liability insurance
policy does not cover the acts or omissions of its subcontractors. If the
Company is held responsible for any liability caused by its subcontractors, and
such liability is not adequately covered by the subcontractor's insurance and is
of sufficient magnitude, the Company's financial position and results of
operations will be adversely affected.
The Company has exited several environmental businesses which handled hazardous
waste. This waste was transported to various disposal facilities and/or treated
by the Company. The Company may be held liable as a potentially responsible
party for the clean-up of such disposal facilities in certain cases pursuant to
current federal and state laws and regulations.
The Company continuously reviews the adequacy of its insurance coverage.
However, the Company lacks coverage for various risks. A claim arising out of
the Company's activities, if successful and of sufficient magnitude, will have a
material adverse effect on the Company's financial position and results of
operations.
REGULATION
The Company's operations are subject to substantial regulation by federal, state
and local government agencies, including, but not limited to, regulations which
restrict the transportation, storage and disposal of hazardous waste and the
collection, transportation, processing, storage, use and disposal of waste oil.
The principal U.S. federal statutes affecting the business of the Company and
the markets it serves are as follows:
THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980
("SUPERFUND" OR "CERCLA") establishes a program for federally directed response
or remedial actions with respect to the uncontrolled discharge of hazardous
substances, pollutants or contaminants, including waste oil, into the
environment. The law authorizes the federal government either to seek a binding
order directing responsible parties to undertake such actions or authorizes the
federal government to undertake such actions and then to seek compensation for
the cost of clean-up and other damages from potentially responsible parties.
Congress established a federally-managed trust fund, commonly known as the
Superfund, to fund response and remedial actions undertaken by the federal
government. The trust fund is used to fund federally conducted actions when no
financially able or willing responsible party has been found.
THE SUPERFUND AMENDMENTS AND RE-AUTHORIZATION ACT OF 1986 ("SARA") adopted more
detailed and stringent standards for remedial action at Superfund sites, and
clarified provisions requiring damage assessments to determine the extent and
monetary value of injury to natural resources. SARA also provides a separate
funding mechanism for the clean-up of underground storage tanks.
THE RESOURCE CONSERVATION AND RECOVERY ACT OF 1976 ("RCRA") established a
comprehensive regulatory framework for the management of hazardous waste at
active facilities, complementing the Superfund program which addresses inactive
and abandoned waste sites. RCRA sets up a "cradle-to-grave" system for the
management of hazardous waste, imposing upon all parties who generate,
Page 5
transport, treat, store or dispose of waste, above certain minimum quantities,
requirements for performance, testing and record keeping. RCRA also requires new
and existing facilities to obtain permits for construction, operation and
closure and requires 30 years of post-closure care and monitoring. RCRA was
amended in 1984 to increase the scope of RCRA regulation of small quantity waste
generators and waste oil handlers and recyclers; require corrective action at
hazardous waste facilities (including remediation at certain previously closed
solid waste management units); phase in restrictions on land disposal of
hazardous waste; and require the identification and regulation of underground
storage tanks containing petroleum and certain chemicals.
On November 29, 1985, the Environmental Protection Agency ("EPA") issued final
regulations under RCRA which restrict the burning of waste oil. These
regulations prohibit burning waste oil in non-industrial boilers unless the oil
meets certain standards for levels of lead, arsenic, chromium, chlorine,
cadmium, and flashpoint. The regulations do not restrict the burning of waste
oil in industrial boilers and furnaces. These regulations have not had a
significant impact on the Company's business because the Company does not
presently sell burner fuel to non-industrial burners. Industrial burners of
recycled oil, however, must comply with certain notification and administrative
procedures.
THE CLEAN AIR ACT OF 1970, as amended in 1977, was the first major federal
legislation enacted after NEPA became law. The Act authorized the EPA to
establish National Ambient Air Quality Standards for certain pollutants, which
are to be achieved by the individual states through State Implementation Plans
("SIPs"). SIPs typically attempt to meet ambient standards by regulating the
quantity and quality of emissions from specific industrial sources. For toxic
emissions, the Act authorizes the EPA to regulate emissions from industrial
facilities directly. The EPA also directly establishes emissions limits for new
sources of pollution, and is responsible for ensuring compliance with air
quality standards. The Clean Air Act Amendments of 1990 place the primary
responsibility for the prevention and control of air pollution upon state and
local governments. The 1990 amendments require regulated emission sources to
obtain operating permits, which could impose emission limitations, standards,
and compliance schedules.
THE CLEAN WATER ACT OF 1972, as amended in 1987, establishes water pollutant
discharge standards applicable to many basic types of manufacturing plants and
imposes standards on municipal sewage treatment plants. The Act requires states
to set water quality standards for significant bodies of water within their
boundaries and to ensure attainment and/or maintenance of those standards. Most
industrial and government facilities must apply for and obtain discharge
permits, monitor pollutant discharges, and under certain conditions reduce
certain discharges.
Page 6
THE SAFE DRINKING WATER ACT, as amended in 1986, regulates public water supplies
by requiring the EPA to establish primary drinking water standards. These
standards are likely to be further expanded under the EPA's evolving groundwater
protection strategy which is intended to set levels of protection or clean-up of
the nation's groundwater resources. These groundwater quality requirements will
then be applied to RCRA facilities and CERCLA sites, and remedial action will be
required for releases of contaminants into groundwater.
THE INTERNATIONAL CONVENTION FOR THE PREVENTION OF POLLUTION FROM SHIPS
("MARPOL") places strict limitations on the discharge of oil at sea and in port
and requires ships to transfer oily waste to certified reception facilities. The
U.S. Coast Guard has issued regulations effective March 10, 1986 which implement
the requirements of MARPOL. Under these regulations, each terminal and port of
the United States that services oceangoing tankers or cargo ships over 400 gross
tons must be capable of receiving an average amount of oily waste based on the
type and number of ships it serves. The reception facilities may be fixed or
mobile, and may include tank trucks and tank barges.
THE NATIONAL POLLUTANT DISCHARGE ELIMINATION SYSTEM ("NPDES"), a program
promulgated under the Clean Water Act, permits states to issue permits for the
discharge of pollutants into the waters of the United States in lieu of federal
EPA regulation. State programs must be consistent with minimum federal
requirements, although they may be more stringent. NPDES permits are required
for, among other things, certain industrial discharges of storm water.
THE OIL POLLUTION ACT OF 1990 imposes liability for oil discharges, or threats
of discharge, into the navigable waters of the United States on the owner or
operator of the responsible vessel or facility. Oil is defined to include oil
refuse and oil mixed with wastes other than dredged spoil, but does not include
oil designated as a hazardous substance under CERCLA. The Act requires the
responsible party to pay all removal costs, including the costs to prevent,
minimize or mitigate oil pollution in any case in which there is a substantial
threat or an actual discharge of oil. In addition, the responsible party may be
held liable for damages for injury to natural resources, loss of use of natural
resources and loss of revenues from the use of such resources.
STATE AND LOCAL GOVERNMENT REGULATIONS. Many states have been authorized by the
EPA to enforce regulations promulgated under RCRA and other federal programs. In
addition, there are numerous state and local authorities that regulate the
environment, some of which impose stricter environmental standards than federal
laws and regulations. Some states, including Florida, have enacted legislation
which generally provides for registration, recordkeeping, permitting,
inspection, and reporting requirements for transporters, collectors and
recyclers of hazardous waste and waste oil. The penalties for violations of
state law include injunctive relief, recovery of damages for injury to air,
water or property and fines for non-compliance. In addition, some local
governments have established local pollution control programs, which include
environmental permitting, monitoring and surveillance, data collection and local
environmental studies.
Page 7
EXCISE TAX ON DIESEL, AVIATION AND MARINE FUEL. The Company's aviation and
marine fueling operations are affected by various federal and state taxes
imposed on the purchase and sale of aviation and marine fuel products in the
United States. Federal law imposes a manufacturer's excise tax on sales of
aviation and marine fuel. Sales to aircraft and vessels engaged in foreign trade
are exempt from this tax. These exemptions may be realized either through
tax-free or tax-reduced sales, if the seller qualifies as a producer under
applicable regulations, or, if the seller does not so qualify, through a
tax-paid sale followed by a refund to the exempt user. Several states, where the
Company sells aviation and marine fuel, impose excise and sales taxes on fuel
sales; certain sales of the Company qualify for full or partial exemptions from
these state taxes.
ITEM 2. PROPERTIES
The following pages set forth by segment and subsidiary the principal properties
owned or leased by the Company as of May 9, 1997. The Company considers its
properties and facilities to be suitable and adequate for its present needs.
The Company generally enters into installment notes to finance the replacement,
upgrade or expansion of its vehicles and equipment. For additional information
with respect to obligations under the Company's installment notes, see Note 2 to
the financial statements appearing elsewhere in this report.
Page 8
WORLD FUEL SERVICES CORPORATION and SUBSIDIARIES
PROPERTIES
OWNER/LESSEE and LOCATION PRINCIPAL USE OWNED or LEASED
- ------------------------- ------------- ---------------
CORPORATE
World Fuel Services Corporation Executive offices Leased to June 1998
700 S. Royal Poinciana Blvd.,
Suite 800
Miami Springs, FL 33166
AVIATION FUELING
World Fuel Services of FL Administrative, operations Leased to June 1998
700 S. Royal Poinciana Blvd., and sales offices
Suite 800
Miami Springs, FL 33166
World Fuel Services, Inc.
700 S. Royal Poinciana Blvd., Administrative, operations Leased to June 1998
Suite 800 and sales offices
Miami Springs, FL 33166
2707 N. Loop West, Administrative, operations Leased month-to-month
Suite 150 and sales offices
Houston, Texas 77008
4995 East Anderson Avenue Administrative, operations Leased month-to-month
Fresno, CA 93727 and sales offices
World Fuel International S.A. Administrative, operations Leased to May 1998
Oficentro Ejecutivo La Sabana Sur and sales offices
Edificio #5, Primer Piso
San Jose, Costa Rica
World Fuel Services LTD. Administrative, operations Leased month-to-month
London Gatwick Hilton and sales offices
Suite 1211, Gatwick Airport
West Sussex, RH6 0LL
United Kingdom
World Fuel Services (Singapore) Administrative, operations Leased to June 2000
PTE., LTD and sales offices
101 Thomson Road #09-03A,
United Square
Singapore 307591
PetroServicios de Mexico S.A. de C.V. Administrative, operations Leased to March 1999
Av. Fuerza Aerea Mexicana No. 465 and sales offices
Colonia Federal
15700 Mexico, D.F.
MARINE FUELING
Trans-Tec Services (Signapore) Administrative, operations Leased to June 2000
PTE., LTD. and sales offices
101 Thomson Road #09-03A,
United Square
Singapore 307591
Trans-Tec Services (UK) LTD.
65 Petty France Administrative, operations Leased to December 1997
London SW1H 9EU and sales offices
Gammelbyved 2 Administrative, operations Leased month-to-month
Karise, Denmark 4653 and sales offices
(Continued)
Page 9
WORLD FUEL SERVICES CORPORATION and SUBSIDIARIES
PROPERTIES
(Continued)
OWNER/LESSEE and LOCATION PRINCIPAL USE OWNED or LEASED
- ------------------------- ------------- ---------------
MARINE FUELING (continued)
Trans-Tec Services, Inc.
Glenpointe Center West Administrative, operations Leased to May 2002
500 Frank W. Burr Blvd. and sales offices
Teaneck, NJ 07666
60 East Sir Francis Drake, No.301 Administrative, operations Leased to December 1999
Larksur, CA 94939 and sales offices
2nd Floor Kipun Building Administrative, operations Leased to December 1997
200 Naeja-Dong and sales offices
Chongru-Ku
Seoul, Korea
Oficentro Ejecutivo La Sabana Sur Administrative, operations Leased to May 1998
Edificio #5, Primer Piso and sales offices
San Jose, Costa Rica
Seagram House, 2nd Floor Administrative, operations Leased to September 1998
71 Dock Road, Waterfront and sales offices
Capetown, South Africa 8001
OIL RECYCLING
International Petroleum Corporation Storage tanks, recycling Leased to August 2001
105 South Alexander Street plant, laboratory and
Plant City, FL 33566 administrative offices
International Petroleum Corp. of Storage tanks, recycling Owned
Delaware plant, laboratory and
505 South Market Street administrative offices
Wilmington, DE 19801
International Petroleum Corp. of LA Storage tanks, recycling Leased to August 2001
14890 Intracostal Drive plant, laboratory and
New Orleans, LA 70129 administrative offices
International Petroleum Corp. of Storage tanks, recycling Owned
Maryland plant, laboratory and
6305 East Lombard Street administrative offices
Baltimore, MD 21224
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings to which the Company or any of its
subsidiaries is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of stockholders, through the solicitation of
proxies or otherwise, during the fourth quarter of fiscal year 1997.
Page 10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the New York Stock Exchange and the
Pacific Stock Exchange under the symbol INT. The following table sets forth, for
each quarter within the fiscal years ended March 31, 1997 and 1996, the sale
prices of the Company's common stock as reported by the New York Stock Exchange
and the quarterly cash dividends per share of common stock declared during the
periods indicated. The amounts shown have been restated to reflect a 3-for-2
stock split of the Company's common stock which was effective June 19, 1995. See
Note 4 to the financial statements included as part of this report.
PRICE CASH
--------------- DIVIDENDS
HIGH LOW PER SHARE
------- ------- ---------
Year ended March 31, 1997
First quarter $19 5/8 $16 5/8 $.075
Second quarter 18 5/8 15 5/8 .075
Third quarter 22 1/2 16 .075
Fourth quarter 22 5/8 17 5/8 .075
Year ended March 31, 1996 $15 3/4 $11 1/8 $.050
First quarter 16 12 7/8 .050
Second quarter 15 7/8 13 1/4 .050
Third quarter 18 3/8 15 1/8 .050
Fourth quarter
As of May 13, 1997, there were 321 shareholders of record of the Company's
common stock. On May 13, 1997 the Company's Board of Directors approved the
following cash dividend schedule for the 1998 fiscal year:
DECLARATION DATE PER SHARE RECORD DATE PAYMENT DATE
- ---------------- --------- ----------- ------------
June 4, 1997 $ 0.075 June 19, 1997 July 2, 1997
September 4, 1997 $ 0.075 September 19, 1997 October 2, 1997
December 4, 1997 $ 0.075 December 19, 1997 January 2, 1998
March 4, 1998 $ 0.075 March 19, 1998 April 2, 1998
The Company's loan agreement with NationsBank restricts the payment of cash
dividends to a maximum of 25% of net income for the preceding four quarters. The
Company's payment of the above dividends is in compliance with the NationsBank
loan agreement.
Page 11
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data has been summarized from the Company's
consolidated financial statements set forth in Item 8 of this report. The
selected financial data should be read in conjunction with the notes set forth
at the end of these tables, the consolidated financial statements and the
related notes thereto, and "Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations."
SELECTED FINANCIAL DATA
Fiscal Year Ended March 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
----- ------- ------- ------- -------
(In thousands, except earnings per share data)
CONSOLIDATED INCOME STATEMENT DATA
Revenue $ 772,618 $ 642,299 $ 361,891 $ 250,527 $ 254,767
Cost of Sales 725,991 601,930 334,134 223,576 230,847
-------- -------- ------- ------- -------
Gross profit 46,627 40,369 27,757 26,951 23,920
Operating Expenses 31,001 25,423 16,508 17,181 15,854
-------- -------- ------- ------- -------
Income from operations 15,626 14,946 11,249 9,770 8,066
Other income (expense), net 2,243 1,875 1,774 (1,333) 180
-------- -------- ------- ------- -------
Income from continuing operations
before income taxes 17,869 16,821 13,023 8,437 8,246
Provision for income taxes 4,604 5,876 4,935 3,242 2,984
-------- -------- ------- ------- -------
Net income from continuing operations 13,265 10,945 8,088 5,195 5,262
Loss from operations and disposal of discontinued
operations (net of applicable income taxes) - - - - (3,715)
------- -------- ------- ------- -------
Net income $ 13,265 $ 10,945 $ 8,088 $ 5,195 $ 1,547
======= ======== ======= ======= =======
Earnings (losses) per common and
common equivalent share:
Income from continuing operations $ 1.62 $ 1.35 $ 1.10 $ 0.73 $ 0.74
Loss from discontinued operations - - - - (0.52)
------- ------- ------- ------- -------
Net income $ 1.62 $ 1.35 $ 1.10 $ 0.73 $ 0.22
======== ======= ======= ======= =======
Weighted average shares outstanding 8,197 8,100 7,359 7,101 7,124
======== ======= ======= ======= =======
(Continued)
Page 12
SELECTED FINANCIAL DATA
(Continued)
AS OF MARCH 31,
---------------------------------------------------
1997 1996 1995 1994 1993
------- -------- -------- -------- --------
(In thousands)
CONSOLIDATED BALANCE SHEET DATA
Current assets $ 93,436 $ 83,252 $ 58,006 $ 33,682 $ 39,263
Total assets 123,139 111,974 89,536 53,687 54,717
Current liabilities 44,851 43,706 30,486 13,141 15,587
Long-term liabilities 3,030 4,518 6,984 575 4,760
Stockholders' equity 75,258 63,750 52,066 39,971 34,370
- ------------------------
Notes to Selected Financial Data:
During the first quarter of fiscal year 1996, the Company issued 117,825
shares of the Company's common stock in payment of its portion of the class
action settlement made in February 1994. Accordingly, the Company
reclassified $1,300,000 from current liabilities to accrued litigation
settlement expense, a long-term liability, as of March 31, 1995.
No cash dividends were declared or paid prior to fiscal year 1995. See Item
5 - Market for Registrant's Common Equity and Related Stockholder Matters.
Effective January 1, 1995, the Company acquired the Trans-Tec group of
companies. The acquisition was accounted for under the purchase method.
Accordingly, the selected financial information for the year ended March
31, 1995, includes the results of the Trans-Tec group since January 1,
1995.
In June 1995, the Board of Directors approved a 3-for-2-stock split for all
shares of common stock outstanding as of June 19, 1995. The shares were
distributed on June 27, 1995. Accordingly, all share and per share data, as
appropriate, have been retroactively adjusted to reflect the effects of
this split.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Item 6 - Selected
Financial Data," and with the consolidated financial statements and related
notes thereto appearing elsewhere in this report.
RESULTS OF OPERATIONS
In January 1995, the Company entered the marine fuel business through the
acquisition of the Trans-Tec group of companies. The acquisition of the
Trans-Tec group of companies has been accounted for under the purchase method.
Accordingly, the consolidated statement of income for the fiscal year ended
March 31, 1995, includes the results of operations of the Trans-Tec group of
companies from the acquisition date.
Profit from the Company's aviation fuel business is directly related to the
volume and the margins achieved on sales, as well as the extent to which the
Company is required to provision for potential bad debts. Profit from the
Company's marine fuel business is determined primarily by the volume of
brokering business generated and by the volume and margins achieved on marine
fuel sales, as well as the extent to which the Company is required to provision
for potential bad debts. The Company's profit
Page 13
from oil recycling is principally determined by the volume and margins of
recycled oil sales and used oil collection revenue.
FISCAL YEAR ENDED MARCH 31, 1997 COMPARED TO THE FISCAL YEAR ENDED
MARCH 31, 1996
The Company's revenue for the fiscal year ended March 31, 1997 was $772,618,000,
an increase of $130,319,000, or 20.3%, as compared to revenue of $642,299,000
for the prior fiscal year. The Company's revenue during these periods was
attributable to the following segments:
FISCAL YEAR ENDED MARCH 31,
1997 1996
------------- ------------
Aviation Fueling $ 381,236,000 $ 302,101,000
Marine Fueling 368,470,000 321,216,000
Oil Recycling 22,912,000 18,993,000
Intersegment Eliminations -- (11,000)
------------- -------------
Total Revenue $ 772,618,000 $ 642,299,000
============= =============
The aviation fueling segment contributed $381,236,000 in revenue for the fiscal
year ended March 31, 1997. This represented an increase in revenue of
$79,135,000, or 26.2%, as compared to the prior fiscal year. The increase in
revenue was due to an increase in volume and the average price per gallon sold.
The marine fueling segment contributed $368,470,000 in revenue for the fiscal
year ended March 31, 1997, an increase of $47,254,000, or 14.7%, over the prior
fiscal year. The increase in revenue was related to an increase in the average
price per metric ton sold and brokered, partially offset by a decrease in the
volume of metric tons brokered. The oil recycling segment contributed
$22,912,000 in revenue for the fiscal year ended March 31, 1997, an increase of
$3,919,000, or 20.6%, as compared to the prior fiscal year. The increase in
revenue was due to an increase in volume and the average sales price per gallon
of recycled oil sold, and higher used oil and waste water collection revenue.
The Company's gross profit for the fiscal year ended March 31, 1997, was
$46,627,000, an increase of $6,258,000, or 15.5%, as compared to the prior
fiscal year. The Company's gross margin decreased from 6.3% for the fiscal year
ended March 31, 1996 to 6.0% for the fiscal year ended March 31, 1997. The
decrease resulted primarily from an overall increase in the average sales price
per gallon sold in the Company's aviation segment, despite an increase in the
average gross profit per gallon sold.
The Company's aviation fueling business achieved a 6.0% gross margin for the
fiscal year ended March 31, 1997, as compared to 6.7% achieved for the prior
fiscal year. The Company's marine fueling segment achieved a 4.4% gross margin
for the fiscal year ended March 31, 1997, as compared to a 4.3% gross margin for
the prior fiscal year. The gross margin in the Company's oil recycling segment
remained relatively constant at 33.4% for the fiscal year ended March 31, 1997,
as compared to 33.5% for the prior fiscal year.
Total operating expenses for the fiscal year ended March 31, 1997 were
$31,001,000, an increase of $5,578,000, or 21.9%, as compared to the prior
fiscal year. Operating expenses increased partly as a
Page 14
result of the Company's international expansion. During this period, the Company
devoted substantial resources to the expansion of its international
infrastructure, adding professional staff, implementing telecommunications,
sales, operational and accounting systems, and establishing an international
headquarters office in Costa Rica. The increase in operating expenses also
resulted from an increase of $2,398,000 in the provision for bad debts in the
aviation fueling segment.
The Company's income from operations for the fiscal year ended March 31, 1997
was $15,626,000, an increase of $680,000, or 4.5%, as compared to the prior
fiscal year. Income from operations during these periods was attributable to the
following segments:
FISCAL YEAR ENDED MARCH 31,
1997 1996
------------- ------------
Aviation Fueling $ 10,620,000 $ 12,858,000
Marine Fueling 5,013,000 3,425,000
Oil Recycling 5,020,000 3,976,000
Corporate Overhead (5,027,000) (5,313,000)
------------- -------------
Total Income from Operations $ 15,626,000 $ 14,946,000
============= =============
The aviation fueling segment's income from operations was $10,620,000 for the
fiscal year ended March 31, 1997, a decrease of $2,238,000, or 17.4%, as
compared to the prior fiscal year. This resulted from an increase in operating
expenses, due to expenses incurred in the Company's international expansion and
a higher provision for bad debts. The increase in operating expenses was
partially offset by an increase in the volume and gross profit of product sold.
The Company's aviation fueling segment also earned $1,773,000 from its Ecuador
joint venture during the fiscal year ended March 31, 1997, as compared to
$1,748,000 during the prior fiscal year. The results of the joint venture are
shown in Other income, net. The marine fueling segment earned $5,013,000 in
income from operations for the fiscal year ended March 31, 1997, an increase of
$1,588,000, or 46.4%, as compared to the prior fiscal year. The increase was
related primarily to an increase in the average gross profit per metric ton
sold, partially offset by a decrease in the volume of metric tons brokered and
higher operating expenses. Income from operations of the oil recycling segment
increased by $1,044,000, or 26.3%, for the fiscal year ended March 31, 1997, as
compared to the prior fiscal year. This improvement resulted from an increase in
the volume and average gross profit per gallon of recycled oil sold. Corporate
overhead costs not charged to the business segments totaled $5,027,000 for the
fiscal year ended March 31, 1997, a decrease of $286,000, or 5.4%, as compared
to the prior fiscal year.
The Company's effective income tax rate for the fiscal year ended March 31, 1997
was 25.8%, as compared to 34.9% for the prior fiscal year. The decrease resulted
largely from an overall decline in foreign income taxes.
Net income for the fiscal year ended March 31, 1997 was $13,265,000, an increase
of $2,320,000, or 21.2%, as compared to net income of $10,945,000 for the fiscal
year ended March 31, 1996. Earnings per share of $1.62 for the fiscal year ended
March 31, 1997 exhibited a $0.27, or 20.0%, increase over the $1.35 achieved
during the prior fiscal year.
Page 15
FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO THE FISCAL YEAR ENDED
MARCH 31, 1995
The Company's revenue for the fiscal year ended March 31, 1996 was $642,299,000,
an increase of $280,408,000, or 77.5%, as compared to revenue of $361,891,000
for the prior fiscal year. The Company's revenue during these periods was
attributable to the following segments:
FISCAL YEAR ENDED MARCH 31,
1996 1995
------------- ------------
Aviation Fueling $ 302,101,000 $ 288,728,000
Marine Fueling 321,216,000 54,578,000
Oil Recycling 18,993,000 18,591,000
Intersegment Eliminations (11,000) (6,000)
------------- -------------
Total Revenue $ 642,299,000 $ 361,891,000
============= =============
The aviation fueling segment contributed $302,101,000 of revenue for the fiscal
year ended March 31, 1996, an increase of $13,373,000, or 4.6%, as compared to
the prior year. This increase was due to an increase in the average price per
gallon sold, partially offset by an overall volume decrease and the termination
of the fuel terminaling operations conducted at Miami International Airport,
which contract was not renewed effective June 30, 1994. The marine fueling
segment contributed $321,216,000 of revenue for the fiscal year ended March 31,
1996. The 1996 fiscal year included a full year of operations for the marine
fuel segment, compared to only three months in the 1995 fiscal year. The oil
recycling segment contributed $18,993,000 of revenue for the fiscal year ended
March 31, 1996, an increase of $402,000, or 2.2%, as compared to the prior year.
The revenue increase was due to higher used oil and waste water collection
revenue. Partially offsetting was an overall volume decrease.
The Company's gross profit of $40,369,000 increased by $12,612,000, or 45.4%, as
compared to the prior year. The Company's gross margin decreased from 7.7% for
the fiscal year ended March 31, 1995, to 6.3% for the fiscal year ended March
31, 1996. The decrease resulted principally from the effect of the narrower
margin marine fuel services segment.
The Company's aviation fueling business achieved a 6.7% gross margin for the
fiscal year ended March 31, 1996, as compared to 6.9% achieved for the same
period during the prior fiscal year. The Company's marine fueling segment
achieved a 4.3% gross margin for the fiscal year ended March 31, 1996. The gross
margin in the Company's oil recycling segment increased from 30.9% for the
fiscal year ended March 31, 1995, to 33.5% for the fiscal year ended March 31,
1996.
Total operating expenses for the fiscal year ended March 31, 1996 were
$25,423,000, an increase of $8,915,000, or 54.0%, as compared to the prior
fiscal year. This increase resulted primarily from the full year impact of
operating expenses of the marine fueling segment.
Page 16
The Company's income from operations for the fiscal year ended March 31, 1996
was $14,946,000, an increase of $3,697,000, or 32.9%, as compared to the prior
fiscal year. Income from operations during these periods was attributable to the
following segments:
FISCAL YEAR ENDED MARCH 31,
1996 1995
------------- ------------
Aviation Fueling $ 12,858,000 $ 12,304,000
Marine Fueling 3,425,000 220,000
Oil Recycling 3,976,000 2,973,000
Corporate Overhead (5,313,000) (4,248,000)
------------- -------------
Total Income from Operations $ 14,946,000 $ 11,249,000
============= =============
Income from operations of the aviation fueling segment increased $554,000, or
4.5%, for the fiscal year ended March 31, 1996, as compared to the fiscal year
ended March 31, 1995. This improvement resulted from an increase in the average
gross profit per gallon sold and a decrease in operating expenses due to a lower
provision for bad debts. Partially offsetting were an overall volume decrease
and the termination of the Company's fuel terminaling activities. The marine
fueling segment earned $3,425,000 in income from operations for the fiscal year
ended March 31, 1996. The gross profit of this segment was $13,766,000, reduced
by $10,341,000 in operating expenses. Income from operations of the oil
recycling segment increased by $1,003,000, or 33.7%, for the fiscal year ended
March 31, 1996, as compared to the prior fiscal year. This improvement resulted
from lower operating expenses and higher used oil and waste water collection
revenue. Partially offsetting was a volume decrease. Corporate overhead costs
not charged to the business segments totaled $5,313,000 for the fiscal year
ended March 31, 1996, an increase of $1,065,000, or 25.1%, as compared to the
prior fiscal year. This increase was due largely to higher salaries and payroll
related costs.
For the fiscal year ended March 31, 1996, the Company had other income, net, of
$1,875,000, an increase of $101,000 over the prior fiscal year. This increase
was due to a $1,204,000 increase in equity earnings of the Company's aviation
fueling joint venture in Ecuador. Partially offsetting was a $737,000 decline in
foreign currency exchange gains realized in fiscal 1995 and $119,000 in foreign
currency exchange losses during fiscal 1996.
Net income for the fiscal year ended March 31, 1996 was $10,945,000, an increase
of $2,857,000, as compared to net income for the fiscal year ended March 31,
1995. Earnings per share of $1.35 for the fiscal year ended March 31, 1996
exhibited a $0.25, or 22.7% increase over the $1.10 achieved during the prior
fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
In the Company's aviation and marine fuel businesses, the primary use of capital
is to finance accounts receivable. The Company maintains aviation fuel
inventories at certain locations in the United States for competitive reasons,
but inventory levels are kept at an operating minimum. The Company's
Page 17
aviation and marine fuel businesses historically have not required significant
capital investment in fixed assets as the Company subcontracts fueling services
and maintains inventory at third party storage facilities.
In contrast to the Company's aviation and marine fueling segments, the oil
recycling segment capital requirements are for the financing of property, plant
and equipment, and accounts receivable. The Company normally utilizes internally
generated cash to fund capital expenditures, and secondarily the Company will
utilize its available line of credit or enter into leasing or installment note
arrangements to match-fund the useful life of certain long-term assets with the
related debt. The Company's oil recycling operations also require working
capital to purchase and carry an inventory of used oil, as well as the costs of
operating the plant until the proceeds from the re-refined oil sales are
received.
Cash and cash equivalents amounted to $11,035,000 at March 31, 1997, as compared
to $12,856,000 at March 31, 1996. The principal uses of cash during the fiscal
year ended March 31, 1997 were $1,872,000 of repayments on notes payable,
$2,212,000 in dividends paid on common stock and $3,199,000 used for the
purchase and construction of plant, equipment and other capital expenditures.
Partially offsetting these cash uses were $3,678,000 in net cash provided by
operating activities, $774,000 from collections on notes receivable and $661,000
from the issuance of common stock in connection with the exercise of options.
Working capital as of March 31, 1997 was $48,585,000, exhibiting a $9,039,000
increase from working capital as of March 31, 1996. As of March 31, 1997, the
Company's accounts receivable, excluding the allowance for bad debts, amounted
to $75,179,000, an increase of $8,071,000 as compared to the March 31, 1996
balance. In the aggregate, accounts payable, accrued expenses and customer
deposits increased $916,000. The net increase in trade credit of $7,155,000 was
attributed to the marine and aviation segments. The allowance for doubtful
accounts as of March 31, 1997 amounted to $4,360,000, relatively unchanged when
compared to the balance at March 31, 1996. During the fiscal years ended March
31, 1997 and 1996, the Company charged $5,107,000 and $2,291,000, respectively,
to the provision for bad debts and had charge-offs in excess of recoveries of
$5,110,000 and $2,494,000, respectively.
Inventories at March 31, 1997 were $1,857,000 higher as compared to March 31,
1996. This consisted of increases in the aviation fuel services and oil
recycling segments. Prepaid and other current assets as of March 31, 1997 were
$5,133,000, exhibiting an increase of $2,074,000 over the March 31, 1996
balance. This is partially related to an increase in prepaid fuel and the
Company's reclassification related to its aviation joint venture investment,
which had previously been classified as non-current, to other current assets.
Capital expenditures, which amounted to $3,199,000 for the fiscal year ended
March 31, 1997, consisted primarily of $763,000 in computer and office equipment
and $2,166,000 in plant, machinery and equipment related primarily to the
Company's oil recycling operations. During fiscal year 1998, the Company
anticipates spending approximately $2,000,000 for the upgrade of plant,
machinery and equipment. The Company also anticipates spending an additional
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 cost will be capitalized as part of the cost of the site, up to the
fair market value of the site.
Page 18
Long-term liabilities as of March 31, 1997 were $3,030,000, exhibiting a
$1,488,000 decrease as compared to March 31, 1996. This decrease was primarily
the result of the second installment payment of $1,888,000 on the promissory
notes payable related to the acquisition of the Trans-Tec group of companies,
which was partially off-set by a $594,000 increase in deferred compensation.
Stockholders' equity amounted to $75,258,000, or $9.28 per share, at March 31,
1997, compared to $63,750,000, or $7.93 per share, at March 31, 1996. This
increase of $11,508,000 was due to $13,265,000 in earnings for the period and
$661,000 due to the issuance of common stock pursuant to the exercise of stock
options. Partially offsetting was $2,418,000 in cash dividends declared.
The Company expects to meet its capital investment and working capital
requirements for fiscal year 1998 from existing cash, operations and additional
borrowings, as necessary, under its existing line of credit. The Company's
business has not been significantly affected by inflation during the periods
discussed in this report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attached hereto and filed as a part of this Form 10-K are the financial
statements required by Regulation S-X and the supplementary data required by
Regulation S-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
No disagreements with accountants on any matter of accounting principles or
practices or financial statement disclosure have been reported on a Form 8-K
within the twenty-four months prior to the date of the most recent financial
statement.
Page 19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the directors and executive officers of the Company
set forth under the captions "Election of Directors" and "Information Concerning
Executive Officers", respectively, appearing in the definitive Proxy Statement
of the Company for its 1997 Annual Meeting of Shareholders (the "1997 Proxy
Statement"), is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth in the 1997 Proxy Statement under the caption
"Compensation of Officers" and "Board of Directors - Compensation of Directors"
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information set forth under the caption "Principal Stockholders and Security
Ownership of Management" in the 1997 Proxy Statement is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Transactions with Management and
Others" in the 1997 Proxy Statement is incorporated herein by reference.
Page 20
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The following consolidated financial statements are filed as a part of
this report:
(i) Report of Independent Certified Public Accountants. 24
(ii) Consolidated Balance Sheets as of March 31, 1997 and 1996. 25
(iii) Consolidated Statements of Income for the Years Ended
March 31, 1997, 1996 and 1995. 27
(iv) Consolidated Statements of Stockholders' Equity for the Years
Ended March 31, 1997, 1996 and 1995. 28
(v) Consolidated Statements of Cash Flows for the Years Ended
March 31, 1997, 1996 and 1995. 29
(vi) Notes to Consolidated Financial Statements. 31
(a)(2) The following consolidated financial statement schedule is filed as a
part of this report:
(I) Schedule II - Valuation and Qualifying Accounts. 45
Schedules not set forth herein have been omitted either because
the required information is set forth in the Consolidated
Financial Statements or Notes thereto, or the information called
for is not required.
(a)(3) The exhibits set forth in the following index of exhibits are filed as a
part of this report:
EXHIBIT NO. DESCRIPTION
(3) Articles of Incorporation and By-laws:
(a) Articles of Incorporation are incorporated by reference to
the Company's Registration Statement on Form S-18 filed
February 3, 1986.
(b) By-laws are incorporated by reference to the Company's
Registration Statement on Form S-18 filed February 3,
1986.
(4) Instruments defining rights of security holders:
(a) Employee Stock Option Plan is incorporated by reference to
the Company's Registration Statement on Form S-18 filed
February 3, 1986.
Page 21
(b) 1993 Non-Employee Directors Stock Option Plan is
incorporated by reference to the Company's Schedule 14A
filed June 28, 1994.
(10) Material Contracts:
(a) Material contracts incorporated by reference to the
Company's Report on Form 10-K filed May 28, 1996:
(i) Amendment to Employment Agreement with Jerrold Blair,
dated March 31, 1996.
(ii) Amendment to Employment Agreement with Ralph Weiser,
dated March 31, 1996.
(b) Material contracts filed with this Form 10-K:
(i) Amended and Restated Credit Agreement, dated February
21, 1997, by and among World Fuel Services
Corporation and NationsBank, N.A. (South).
(ii) Promissory note, dated February 21, 1997, executed by
World Fuel Services Corporation and its subsidiaries
in favor of NationsBank, N.A. (South).
(21) Subsidiaries of the Registrant
(23) Consent of Independent Certified Public Accountants
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the fourth quarter of the Company's
fiscal year ended March 31, 1997.
Page 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
WORLD FUEL SERVICES CORPORATION
Dated: May 13, 1997 By: /s/ JERROLD BLAIR
-----------------
Jerrold Blair, President
Dated: May 13, 1997 By: /s/ CARLOS A. ABAUNZA
---------------------
Carlos A. Abaunza, Chief Financial
Officer
Pursuant to the requirements of the Security Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Dated: May 13, 1997 By: /s/ RALPH R. WEISER
--------------------
Ralph R. Weiser, Director
Dated: May 13, 1997 By: /s/ JERROLD BLAIR
------------------
Jerrold Blair, Director
Dated: May 13, 1997 By: /s/ PHILLIP S. BRADLEY
----------------------
Phillip S. Bradley, Director
Dated: May 13, 1997 By: /s/ RALPH FEUERRING
-------------------
Ralph Feuerring, Director
Dated: May 13, 1997 By: /s/ JOHN R. BENBOW
------------------
John R. Benbow, Director
Dated: May 13, 1997 By: /s/ CELESTIN DURAND III
-----------------------
Celestin Durand III, Director
Dated: May 13, 1997 By: /s/ MYLES KLEIN
---------------
Myles Klein, Director
Dated: May 13, 1997 By: /s/ MICHAEL J. KASBAR
---------------------
Michael J. Kasbar, Director
Dated: May 13, 1997 By: /s/ PAUL H. STEBBINS
--------------------
Paul H. Stebbins, Director
Page 23
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of World Fuel Services Corporation:
We have audited the accompanying consolidated balance sheets of World Fuel
Services Corporation (a Florida corporation) and subsidiaries as of March 31,
1997 and 1996, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended March 31,
1997. These consolidated financial statements and the schedule referred to below
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and the schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of World Fuel Services Corporation
and subsidiaries as of March 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1997 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. Schedule II is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ Arthur Andersen LLP
- -----------------------
ARTHUR ANDERSEN LLP
Miami, Florida,
May 9, 1997.
Page 24
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31,
---------------------------
1997 1996
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 11,035,000 $ 12,856,000
Accounts receivable, net of allowance
for bad debts of $4,360,000 and $4,363,000
at March 31, 1997 and 1996, respectively 70,819,000 62,745,000
Inventories 6,449,000 4,592,000
Prepaid expenses and other current assets 5,133,000 3,059,000
------------ ------------
Total current assets 93,436,000 83,252,000
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 601,000 601,000
Buildings and improvements 2,998,000 2,890,000
Office equipment and furniture 3,331,000 2,645,000
Plant, machinery and equipment 16,310,000 14,171,000
Construction in progress 135,000 67,000
------------ ------------
23,375,000 20,374,000
Less accumulated depreciation
and amortization 7,094,000 5,856,000
------------ ------------
16,281,000 14,518,000
------------ ------------
OTHER ASSETS:
Unamortized cost in excess of net
assets of acquired companies, net of
accumulated amortization 11,785,000 12,123,000
Other 1,637,000 2,081,000
------------ ------------
$123,139,000 $111,974,000
============ ============
(Continued)
Page 25
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31,
---------------------------
1997 1996
------------ ------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,191,000 $ 1,944,000
Accounts payable and accrued expenses 37,950,000 37,808,000
Customer deposits 2,241,000 1,467,000
Accrued salaries and wages 2,187,000 2,055,000
Income taxes payable 282,000 432,000
------------ ------------
Total current liabilities 44,851,000 43,706,000
------------ ------------
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities 396,000 2,103,000
Deferred compensation 2,166,000 1,572,000
Deferred income taxes 468,000 843,000
------------ ------------
3,030,000 4,518,000
------------ ------------
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 and
8,039,000 shares issued and outstanding
at March 31, 1997 and 1996, respectively 81,000 80,000
Capital in excess of par value 23,275,000 22,615,000
Retained earnings 51,959,000 41,112,000
Less treasury stock, at cost 57,000 57,000
------------ ------------
75,258,000 63,750,000
------------ ------------
$123,139,000 $111,974,000
============ ============
The accompanying notes to the consolidated financial statements
are an integral part of these consolidated balance sheets.
Page 26
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED MARCH 31,
------------------------------------------
1997 1996 1995
------------ ------------ ------------
Revenue $772,618,000 $642,299,000 $361,891,000
Cost of sales 725,991,000 601,930,000 334,134,000
------------ ------------ ------------
Gross profit 46,627,000 40,369,000 27,757,000
------------ ------------ ------------
Operating expenses:
Salaries and wages 14,795,000 13,266,000 8,117,000
Provision for bad debts 5,107,000 2,291,000 2,062,000
Other 11,099,000 9,866,000 6,329,000
------------ ------------ ------------
31,001,000 25,423,000 16,508,000
------------ ------------ ------------
Income from operations 15,626,000 14,946,000 11,249,000
------------ ------------ ------------
Other income, net:
Equity in earnings of
aviation joint venture 1,773,000 1,748,000 544,000
Other, net 470,000 127,000 1,230,000
------------ ------------ ------------
2,243,000 1,875,000 1,774,000
------------ ------------ ------------
Income before income taxes 17,869,000 16,821,000 13,023,000
Provision for income taxes 4,604,000 5,876,000 4,935,000
------------ ------------ ------------
Net income $ 13,265,000 $ 10,945,000 $ 8,088,000
============ ============ ============
Net income per share $ 1.62 $ 1.35 $ 1.10
============ ============ ============
Weighted average shares outstanding 8,197,000 8,100,000 7,359,000
============ ============ ============
The accompanying notes to the consolidated financial statements
are an integral part of these consolidated financial statements.
Page 27
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON STOCK CAPITAL IN
------------------------------ EXCESS OF RETAINED TREASURY
SHARES AMOUNT PAR VALUE EARNINGS STOCK
---------- ------------ ------------- ------------- ------------
Balance at March 31, 1994 7,107,000 $ 71,000 $ 14,905,000 $ 25,052,000 $ (57,000)
Exercise of warrants 57,000 - 463,000 - -
Exercise of options 60,000 - 455,000 - -
Issuance of shares
for acquisition 581,000 7,000 4,577,000 - -
Cash dividends declared - - - (1,509,000) -
Net Income - - - 8,088,000 -
Other - - 14,000 - -
---------- ------------ ------------- ------------- ------------
Balance at March 31, 1995 7,805,000 78,000 20,414,000 31,631,000 (57,000)
Exercise of options 116,000 1,000 862,000 - -
Issuance of shares for
litigation settlement 118,000 1,000 1,299,000 - -
Cash dividends declared - - - (1,464,000) -
Net Income - - - 10,945,000 -
Other - - 40,000 - -
---------- ------------ ------------- ------------- ------------
Balance at March 31, 1996 8,039,000 80,000 22,615,000 41,112,000 (57,000)
Exercise of options 70,000 1,000 660,000 - -
Cash dividends declared - - - (2,418,000) -
Net Income - - - 13,265,000 -
---------- ------------ ------------- ------------- ------------
Balance at March 31, 1997 8,109,000 $ 81,000 $ 23,275,000 $ 51,959,000 $ (57,000)
========== ============ ============= ============= ============
The accompanying notes to the consolidated financial statements are an
integral part of these consolidated financial statements.
Page 28
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31,
-------------------------------------------
1997 1996 1995
------------ ------------ -----------
Cash flows from operating activities:
Net income $ 13,265,000 $ 10,945,000 $ 8,088,000
------------ ------------ -----------
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 1,938,000 1,656,000 1,373,000
Provision for bad debts 5,107,000 2,291,000 2,062,000
Deferred income tax (benefit) provision (369,000) 1,108,000 181,000
Equity in earnings of aviation joint venture, net (675,000) (354,000) (544,000)
Other non-cash operating charges (credits) (19,000) (123,000) 35,000
Changes in assets and liabilities, net of acquisitions
and dispositions:
(Increase) decrease in -
Accounts receivable (13,181,000) (26,286,000) 1,959,000
Inventories (1,857,000) (953,000) (933,000)
Prepaid expenses and other current assets (2,067,000) 1,371,000 (72,000)
Other assets 250,000 11,000 (15,000)
Increase (decrease) in -
Accounts payable and accrued expenses (64,000) 13,731,000 (4,290,000)
Customer deposits 774,000 (92,000) 166,000
Accrued salaries and wages 132,000 1,308,000 461,000
Income taxes payable (150,000) (1,286,000) 852,000
Deferred compensation 594,000 335,000 (24,000)
------------ ------------ -----------
Total adjustments (9,587,000) (7,283,000) 1,211,000
Net cash provided by operating activities 3,678,000 3,662,000 9,299,000
------------ ------------ -----------
Cash flows from investing activities:
Additions to property, plant and equipment (3,199,000) (1,407,000) (2,194,000)
Advances to aviation joint venture (588,000) -- (338,000)
Repayments from aviation joint venture 482,000 338,000 --
Proceeds from disposition of assets 43,000 381,000 585,000
Proceeds from notes receivable 774,000 2,046,000 768,000
Payment for acquisition of business, net of cash acquired -- -- (3,184,000)
------------ ------------ -----------
Net cash (used in) provided by investing activities (2,488,000) 1,358,000 (4,363,000)
------------ ------------ -----------
(Continued)
Page 29
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
FOR THE YEAR ENDED MARCH 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
Cash flows from financing activities:
Dividends paid on common stock (2,212,000) (1,854,000) (717,000)
Repayment of notes payable (1,872,000) (1,817,000) (1,643,000)
Repayment of long-term debt (74,000) (263,000) (286,000)
Proceeds from issuance of long-term debt 486,000 -- --
Proceeds from issuance of common stock 661,000 863,000 918,000
----------- ----------- -----------
Net cash used in financing activities (3,011,000) (3,071,000) (1,728,000)
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (1,821,000) 1,949,000 3,208,000
Cash and cash equivalents, at beginning of period 12,856,000 10,907,000 7,699,000
----------- ----------- -----------
Cash and cash equivalents, at end of period $11,035,000 $12,856,000 $10,907,000
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 423,000 $ 613,000 $ 129,000
=========== =========== ===========
Income taxes $ 5,182,000 $ 6,368,000 $ 3,714,000
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
In connection with the January 1995 acquisition of the Trans-Tec group of
companies, the Company issued 581,000 shares of its common stock valued at
$4,584,000 and $6,000,000 in notes payable.
In April 1995, the Company paid $1,300,000, representing its share of a
litigation settlement, by issuing 117,825 shares of the Company's common
stock at an agreed upon price of $11.03 per share (restated to reflect the
3-for-2 stock split).
As partial consideration for the sale of certain assets on June 1, 1995, the
Company received a $979,000 note receivable, with an original maturity date
of July 1, 2007. In October 1995, the entire outstanding principal balance
was collected in cash, net of a $98,000 pre-payment discount.
Cash dividends declared, but not yet paid, totaling $608,000, $402,000 and
$792,000 are included in accounts payable and accrued expenses as of March
31, 1997, 1996 and 1995, respectively.
The accompanying notes to the consolidated financial statements are an
integral part of these consolidated financial statements.
Page 30
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF ACQUISITIONS AND DIVESTITURES
World Fuel Services Corporation (the "Company") began operations in 1984 as a
used oil recycler in the southeast United States. The Company expanded this
business through acquisitions, the development of new processing technology and
the establishment of new offices. In 1986, the Company diversified its
operations by entering, through an acquisition, the aviation fuel services
business. This new segment expanded rapidly, from a business primarily
concentrated in the state of Florida, to an international sales company covering
the major airports throughout the world. This expansion resulted from
acquisitions and the establishment of new offices.
In 1995, the Company further diversified its fuel services operations through
the acquisition of a group of companies which are considered leaders in the
marine fuel services business. This new segment provided the Company with
operational and supplier side synergies and entry into fast growing markets in
the Far East and Eastern Europe.
During fiscal year 1997, the Company opened its international headquarters in
San Jose, Costa Rica by establishing the wholly-owned subsidiary, World Fuel
International, S.A. ("WFI"). WFI serves the Company's aviation customers in
Canada, South and Central America and the Caribbean basin.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. The Company uses the equity
method of accounting to record its proportionate share of the earnings of its
aviation joint venture.
CASH AND CASH EQUIVALENTS
The Company classifies as cash equivalents all highly liquid investments with a
maturity of three months or less from the date of purchase. The Company's
investments at March 31, 1997 and 1996 amounted to $8,461,000 and $11,395,000
respectively, consisting principally of bank repurchase agreements
collateralized by United States Government Securities. Interest income, which is
included in other, net in the accompanying statements of income, totaled
$862,000, $1,029,000 and $765,000 for the years ended March 31, 1997, 1996 and
1995, respectively.
INVENTORIES
Inventories are stated at the lower of cost (principally, first-in, first-out)
or market. Components of inventory cost include oil and fuel purchase costs,
direct materials, direct and indirect labor and factory overhead.
Page 31
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost less accumulated depreciation
and amortization. Depreciation and amortization are calculated on a
straight-line basis over the estimated lives of the assets as follows:
YEARS
---------------
Buildings and improvements 10 - 40
Office equipment and furniture 3 - 8
Plant, machinery and equipment 3 - 40
Costs of major additions and improvements are capitalized and expenditures for
maintenance and repairs which do not extend the lives of the assets are
expensed. Upon sale or disposition of property, plant and equipment, the cost
and related accumulated depreciation and amortization are eliminated from the
accounts and any resultant gain or loss is credited or charged to income.
LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121").
SFAS 121 establishes accounting standards for recognizing the impairment of
long-lived assets, certain identifiable intangibles and goodwill. The Company
adopted the provisions of SFAS 121 for the year ended March 31, 1997, as
required. The implementation did not have an impact on the Company's financial
position or results of operations.
UNAMORTIZED COST IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES
Unamortized cost in excess of net assets of acquired companies is being
amortized over 35-40 years using the straight-line method. Accumulated
amortization amounted to $1,138,000 and $775,000, as of March 31, 1997 and 1996,
respectively. Subsequent to an acquisition, the Company continually evaluates
whether events and circumstances have occurred that indicate the remaining
useful life of this asset may warrant revision or that the remaining balance of
this asset may not be recoverable.
The Company's policy, in accordance with SFAS 121, is to assess any impairment
in value by making a comparison of the current and projected undiscounted cash
flows, associated with the acquired companies, to the carrying amount of the
unamortized costs in excess of the net assets of the acquired companies. Such
carrying amount would be adjusted, if necessary, to reflect any impairment in
the value of the asset.
REVENUE RECOGNITION
Revenue is generally recorded in the period when the sale is made or as the
services are performed. In the Company's aviation and marine fueling segments,
the Company contracts third parties to provide the fuel and/or delivery
services. This may cause delays in receiving the necessary information for
invoicing. Accordingly, revenue may be recognized in a period subsequent to when
the delivery of fuel took place. Costs not yet billed are classified as current
assets and are included under Inventories. The
Page 32
Company's revenue recognition policy with respect to the aviation and marine
fueling segment does not result in amounts that are materially different than
accounting under generally accepted accounting principles.
INCOME TAXES
The Company and its United States subsidiaries file consolidated income tax
returns. In addition, the Company's foreign subsidiaries file income tax returns
in their respective countries of incorporation.
FOREIGN CURRENCY TRANSLATION
The Company's primary functional currency is the U.S. Dollar which also serves
as its reporting currency. Most foreign entities translate monetary assets and
liabilities at fiscal year-end exchange rates while non-monetary assets and
liabilities are translated at historical rates. Income and expense accounts are
translated at the average rates in effect during the year, except for
depreciation which is translated at historical rates. The Company's Ecuador
joint venture uses the Company's reporting currency as the functional currency
(as it operates in a highly inflationary economy) and translates net assets at
fiscal year-end rates while income and expense accounts are translated at
average exchange rates. Gains or losses from changes in exchange rates are
recognized in consolidated income in the year of occurrence and are included in
Other, net.
The Company's purchases from certain aviation fuel suppliers are denominated in
local currency. Foreign currency exchange gains and losses are included in
Other, net, in the period incurred, and amounted to a net loss of $119,000 and a
net gain of $737,000 for the fiscal years ended March 31, 1996 and 1995,
respectively. There were no significant foreign currency gains or losses in
fiscal year 1997.
EARNINGS PER SHARE
Earnings per common and common equivalent share have been computed by dividing
net income by the weighted average number of shares of common stock and common
stock equivalents outstanding. Common stock equivalents include all potentially
dilutive outstanding stock options and warrants applying the treasury stock
method. Primary and fully diluted earnings per share are not materially
different.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). The
earnings per share computation under SFAS 128 differs from primary and fully
diluted earnings per share computed under APB Opinion No. 15, primarily in the
manner in which potential common stock is treated. SFAS 128 will apply to the
Company for the fiscal year ending March 31, 1998, including interim periods;
earlier application is not permitted. The implementation of SFAS 128 will not
have a material effect on earnings per share.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
Page 33
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments which are presented herein
have been determined by the Company's management using available market
information and appropriate valuation methodologies. However, considerable
judgment is required in interpreting market data to develop estimates of fair
value. Accordingly, the estimates presented herein are not necessarily
indicative of amounts the Company could realize in a current market exchange.
Cash and cash equivalents, accounts receivable and accounts payable and accrued
expenses are reflected in the accompanying balance sheets at amounts considered
by management to reasonably approximate fair value due to their short-term
nature.
The Company estimates the fair value of its long-term debt generally using
discounted cash flow analysis based on the Company's current borrowing rates for
similar types of debt. At March 31, 1997, the carrying value of the long-term
debt and the fair value of such instruments was not considered to be
significantly different.
(2) LONG-TERM DEBT
Long-term debt consisted of the following at March 31:
1997 1996
---- ----
Promissory notes issued in connection
with the acquisition of the Trans-Tec
group of companies, payable annually
through January 1998, bearing interest
at 9.0%, unsecured $ 2,058,000 $ 3,928,000
Equipment notes, payable monthly through
January 2002, interest rates ranging
from 6.76% to 8.52%, secured by equipment 529,000 101,000
Other -- 18,000
----------- ------------
2,587,000 4,047,000
Less current maturities 2,191,000 1,944,000
----------- ------------
$ 396,000 $ 2,103,000
============= =============
The Company has an unsecured credit facility providing a $25,000,000 revolving
line of credit with sublimits of $10,000,000 for standby letters of credit and
documentary letters of credit. Approximately $6,558,000 in standby letters of
credit were outstanding as of March 31, 1997 under the credit facility. The
Company also has $100,000 outstanding in standby letters of credit from other
financing institutions and has pledged $100,000 of cash as collateral on these
letters of credit.
Page 34
The revolving line of credit bears interest, at the Company's option, at the
NationsBank Prime rate, or LIBOR, as defined under the credit facility. Interest
is payable quarterly in arrears. The credit facility, in addition to other
restrictions, requires the maintenance of certain financial ratios. As of March
31, 1997 and 1996, there were no amounts outstanding under the revolving line of
credit. Any outstanding principal and interest will mature on March 1, 2001. As
of March 31, 1997, the Company was in compliance with the requirements under the
credit facility.
Aggregate annual maturities of long-term debt as of March 31, 1997, are as
follows:
1998 $ 2,191,000
1999 90,000
2000 97,000
2001 105,000
2002 104,000
----------
$ 2,587,000
===========
Interest expense, which is included in Other, net, in the accompanying
consolidated statements of income, is as follows for the years ended March 31:
1997 1996 1995
---------- --------- ---------
Interest expense $ 395,000 $ 565,000 $ 263,000
========== ========= =========
(3) INCOME TAXES
The provision for income taxes consists of the following components for the
years ended March 31:
1997 1996 1995
---------- ---------- ----------
Current:
Federal $3,061,000 $3,568,000 $3,540,000
State 417,000 567,000 614,000
Foreign 1,495,000 633,000 600,000
---------- ---------- ----------
4,973,000 4,768,000 4,754,000
---------- ---------- ----------
Deferred:
Federal (157,000) 998,000 217,000
State (22,000) 138,000 39,000
Foreign (190,000) (28,000) (75,000)
---------- ---------- ----------
(369,000) 1,108,000 181,000
---------- ---------- ----------
Total $4,604,000 $5,876,000 $4,935,000
========== ========== ==========
Page 35
The difference between the reported tax provision and the provision computed by
applying the statutory U.S. federal income tax rate currently in effect to
income before income taxes for each of the three years ended March 31, 1997, is
primarily due to state income taxes and the effect of foreign income tax rates.
The Company's share of undistributed earnings of foreign subsidiaries not
included in its consolidated U.S. federal income tax return that could be
subject to additional U.S. federal income taxes if remitted, was approximately
$13,065,000 and $6,007,000 at March 31, 1997 and 1996, respectively. The
distribution of these earnings would result in additional U.S. federal income
taxes to the extent they are not offset by foreign tax credits. No provision has
been recorded for the U.S. taxes that could result from the remittance of such
earnings since the Company intends to reinvest these earnings outside the U.S.
indefinitely and it is not practicable to estimate the amount of such taxes.
The temporary differences which comprise the Company's net deferred tax
liability are as follows:
MARCH 31,
1997 1996
---------- -----------
Excess of provision for bad debts over
charge-offs $ 1,522,000 $ 1,537,000
Excess of tax over financial reporting (2,006,000) (1,989,000)
depreciation and amortization
Accrued expenses recognized for financial 290,000 161,000
reporting purposes, not currently tax
deductible
Excess of tax over financial reporting (428,000) (365,000)
amortization of identifiable intangibles
Other, net 154,000 (187,000)
----------- -----------
$ (468,000) $ (843,000)
=========== ===========
(4) STOCKHOLDERS' EQUITY
COMMON STOCK ACTIVITY
On June 5, 1995, the Board of Directors approved a 3-for-2 stock split for all
shares of common stock outstanding as of June 19, 1995. The shares were
distributed on June 27, 1995. Accordingly, all share and per share data, as
appropriate, have been retroactively adjusted to reflect the effects of this
split.
In April 1995, the Company paid $1,300,000, representing its share of the
stockholders class action settlement, by issuing 117,825 shares of the Company's
common stock at an agreed upon price of $11.03 per share (restated to reflect
the 3-for-2 stock split).
Page 36
DIVIDENDS
The Company declared and paid cash dividends of $0.30 and $0.20 per share of
common stock for fiscal years 1997 and 1996, respectively.
EMPLOYEE STOCK OPTION ACTIVITY
The Company has adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), which was effective for
the Company's 1997 fiscal year, in accounting for stock-based transactions with
non-employees. The Company has evaluated the proforma effects of SFAS 123 and
determined the effects of SFAS 123 are not material to the Company's
consolidated financial position or results of operations. Accordingly, the
disclosure provisions of SFAS 123 have been omitted. The Company accounts for
its stock-based transaction with employees under the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), as permitted by SFAS 123.
The Company's 1986 employee stock option plan expired in January 1996. Options
granted, but not yet exercised, survive the 1986 employee stock option plan
until the options expire. The following summarizes the status of the 1986
employee stock option plan at, and for the year ended, March 31:
1997 1996 1995
-------------- -------------- ---------------
Granted None 98,091 46,206
Per Share $10.33 - $12.58 $14.88 - $15.50
Adjustment for 3:2 stock
split
None 86,464 None
Expired 5,250 None 20,000
Exercised 54,375 69,375 None
Per Share $9.08 - $9.33 $2.00 - $9.33 None
Proceeds received by
the Company $499,000 $531,000 None
Outstanding 228,482 288,107 172,927
Per Share $9.33 - $12.58 $9.08 - $12.58 $3.00 - $15.50
Available for future grant None 153,489 37,294
Exercisable 189,642 120,707 125,221
Per Share $9.33 - $10.33 $9.33 - $9.83 $3.00 - $14.75
During fiscal year 1997, non-qualified options to purchase 3,750 and 5,614 of
the Company's common stock were exercised and expired, respectively. The
proceeds received by the Company from the exercise of these options totaled
$35,000. As of March 31, 1997, non-qualified options to purchase a total of
30,600 shares of the Company's common stock at an exercise price ranging from
$10.33 to $12.58 per share were outstanding and exercisable.
Page 37
In August 1996, the Company's Board of Directors authorized the establishment of
the 1996 Employee Stock Option Plan (the "1996 Plan"), subject to stockholder
approval at the Company's 1997 annual shareholders' meeting. Under the
provisions of the 1996 Plan, the Company's Board of Directors is authorized to
grant Incentive Stock Options ("ISO") to employees of the Company and its
subsidiaries and non-qualified options to employees, independent contractors and
agents. The plan permits the issuance of options to purchase up to an aggregate
of 500,000 shares of the Company's common stock. The minimum price at which any
option may be exercised will be the fair market value of the stock on the date
of grant; provided, however, that with respect to ISOs granted to an individual
owning more than 10% of the Company's outstanding common stock, the minimum
exercise price will be 110% of the fair market value of the common stock on the
date of grant. All options granted pursuant to the 1996 Plan must be exercised
within ten years after the date of grant, except that ISOs granted to
individuals owning more than 10% of the Company's outstanding common stock must
be exercised within five years after the date of grant.
Pursuant to the 1996 Plan, the Company's Board of Directors, on August 28, 1996,
granted the Chairman and President of the Company each a qualified and
non-qualified option to purchase 17,517 shares and 63,483 shares, respectively,
of the Company's common stock at an exercise price of $17.13 per share. These
options were granted subject to stockholder approval of the 1996 Plan.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
In August, 1994, at the annual meeting of the stockholders of the Company, the
1993 Non-Employee Directors Stock Option Plan ("1993 Directors Plan") was
adopted. An aggregate of 50,000 shares of the Company's common stock has been
reserved for issuance under the 1993 Directors Plan.
Under the 1993 Directors Plan, members of the Board of Directors who are not
employees of the Company or any of its subsidiaries or affiliates will receive
annual stock options to purchase common stock in the Company pursuant to the
following formula. Each non-employee director will receive a non-qualified
option to purchase 2,500 shares when such person is first elected to the Board
of Directors and will receive a non-qualified option to purchase 2,500 shares
each year, starting in August 1995, that the individual is re-elected. As of
March 31, 1997, options to purchase 21,250 shares of the Company's common stock
remain outstanding under the 1993 Directors Plan and 15,000 shares are available
for future grant.
The exercise price for options granted under the Plan may not be less than the
fair market value of the common stock, which is defined as the closing bid
quotation for the common stock at the end of the day preceding the grant.
Options granted under the Plan become fully exercisable one year after the date
of grant. All options expire five years after the date of grant. The exercise
price must be paid in cash or in common stock, subject to certain restrictions.
Page 38
(5) COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases premises in New Orleans, Louisiana and Plant City, Florida
from trusts co-managed by the President of the Company under two operating
leases with rent aggregating $96,000 per year. The leases expire in August 2001.
The Company has an option to purchase the properties at current market value at
any time during the lease term. The Company intends to exercise the purchase
options on both leases. The Company also leases office space and railroad tank
cars from unrelated third parties.
At March 31, 1997, the future minimum lease payments under operating leases with
an initial non-cancellable term in excess of one year were as follows:
OPERATING
LEASES
----------
1998 $ 834,000
1999 467,000
2000 357,000
2001 345,000
2002 288,000
----------
Total minimum lease payments $2,291,000
==========
Rental expense under operating leases with an initial non-cancellable term in
excess of one year was $843,000, $722,000, and $535,000 for the years ended
March 31, 1997, 1996 and 1995, respectively.
CAPITAL EXPENDITURES
During fiscal year 1998, the Company anticipates spending approximately
$2,000,000 for the upgrade of plant, machinery and equipment. The Company
intends to spend 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.
SURETY BONDS
In the normal course of business, the Company is required to post bid,
performance and garnishment bonds. The majority of the bonds issued relate to
the Company's aviation fueling business. As of March 31, 1997, the Company had
$3,774,000 in outstanding bonds.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to credit risk
consist primarily of trade accounts receivable. The Company extends credit on an
unsecured basis to many of its aviation and
Page 39
marine customers, some of which have a line of credit in excess of $2,000,000.
The Company's management recognizes that extending credit and setting
appropriate reserves for accounts receivable is largely a subjective decision
based on knowledge of the customer. Active management of this risk is essential
to the Company's success. A strong capital position and liquidity provide the
financial flexibility necessary to respond to customer needs. The Company's
management meets regularly to evaluate credit exposure in the aggregate, and by
individual credit. This group is also responsible for setting and maintaining
credit standards and ensuring the overall quality of the credit portfolio.
POTENTIAL LIABILITY AND INSURANCE
The Company, through the use of subcontractors and its own operations,
transports, stores or processes flammable aviation, marine and residual fuel
subjecting it to possible claims by employees, customers, regulators and others
who may be injured. In addition, the Company may be held liable for the clean-up
costs of spills or releases of materials from its facilities or vehicles, or for
damages to natural resources arising out of such events. The Company follows
what it believes to be prudent procedures to protect its employees and customers
and to prevent spills or releases of these materials. The Company's domestic and
international fueling activities also subject it to the risks of significant
potential liability under federal and state statutes, common law and contractual
indemnification agreements. The Company has general and automobile liability
insurance coverage, including the statutory Motor Carrier Act/MCS 90 endorsement
for sudden and accidental pollution.
In the aviation and marine fuel segments, the Company utilizes subcontractors
which provide various services to customers, including intoplane fueling at
airports, fueling of vessels in port and at sea, and transportation and storage
of fuel and fuel products. Although the Company generally requires its
subcontractors to carry liability insurance, not all subcontractors carry
adequate insurance. The Company's liability insurance policy does not cover the
acts or omissions of its subcontractors. If the Company is held responsible for
any liability caused by its subcontractors, and such liability is not adequately
covered by the subcontractor's insurance and is of sufficient magnitude, the
Company's financial position and results of operations will be adversely
affected.
The Company has exited several environmental businesses which handled hazardous
waste. This waste was transported to various disposal facilities and/or treated
by the Company. The Company may be held liable as a potentially responsible
party for the clean-up of such disposal facilities in certain cases pursuant to
current federal and state laws and regulations.
The Company continuously reviews the adequacy of its insurance coverage.
However, the Company lacks coverage for various risks. A claim arising out of
the Company's activities, if successful and of sufficient magnitude, will have a
material adverse effect on the Company's financial position and results of
operations.
LEGAL MATTERS
The Company is involved in litigation and administrative proceedings primarily
arising in the normal course of its business. In the opinion of management, the
Company's liability, if any, under any pending litigation or administrative
proceedings, will not materially affect its financial condition or operations.
Page 40
EMPLOYMENT AGREEMENTS
The Company's amended and restated employment agreements with its Chairman of
the Board and President expire on March 31, 2001. Each agreement provides for a
fixed salary and an annual bonus equal to 5% of the Company's income before
income taxes in excess of $2,000,000. In addition, the payment of any portion of
the bonus causing the executive's compensation to exceed $1,000,000 during any
fiscal year will be deferred and accrue interest at the Prime rate, until a
fiscal year during the employment term in which the executive earns less than
$1,000,000; provided, however, that in the event of the executive's death, the
termination of the executive for any reason, or the expiration of the employment
agreement, any excess amount, including any interest earned thereon, shall be
paid to the executive within ten (10) days of such death, termination or
expiration. As of March 31, 1997 and 1996, $473,000 and $171,000, respectively,
including accrued interest, was deferred under the agreements. The agreements
also provide that, if the Company terminates the employment of the executive for
reasons other than death, disability, or cause, or, if the executive terminates
employment with the Company for good reason, including under certain
circumstances, a change in control of the Company, the Company will pay the
executive compensation of up to three times his average salary and bonus during
the five year period preceding his termination.
The Company and its subsidiaries have also entered into employment, consulting
and non-competition agreements with certain of their executive officers, and
previous and current employees. The agreements provide for minimum salary
levels, as well as bonuses which are payable if specified management goals are
attained. During the years ended March 31, 1997, 1996 and 1995, approximately
$9,136,000, $7,632,000 and $3,963,000, respectively, was expensed under the
terms of the above described agreements.
The future minimum commitments under employment agreements, excluding bonuses,
as of March 31, 1997 are as follows:
1998 $ 5,085,000
1999 2,312,000
2000 1,208,000
2001 734,000
2002 107,000
Thereafter 561,000
-----------
$10,007,000
============
DEFERRED COMPENSATION PLANS
The Company has an incentive compensation plan which provides incentive
compensation to certain key personnel whose performance contributes to the
profitability and growth of the existing Trans-Tec group of companies. The plan
is unfunded and is not a qualified plan under the Internal Revenue Code. Under
the plan, participants are awarded units equal to 20% of the Trans-Tec group's
annual net income, excluding the incentive compensation expense, and earn
interest on their deferred amounts. The plan allows for distributions of vested
amounts over a five year period, subject to certain requirements, during and
after employment with the Company. Participants become fully vested over
Page 41
a five year period. Fully vested participants must wait two years from the year
of contribution to be eligible for the distribution of deferred account
balances.
The plan is administered by a plan committee appointed by the Board of Directors
of Trans-Tec Services, Inc. The plan committee has the authority to suspend or
terminate the plan, as well as the responsibility to allocate the amount of
incentive compensation among participants, during each plan year. The plan's
fiscal year corresponds to the Company's fiscal year.
The Company maintains a 401(k) defined contribution plan which covers all
employees who meet minimum requirements and elect to participate. Participants
may contribute up to 15% of their compensation, subject to certain limitations.
The Company makes matching contributions of 25% of the participants'
contributions up to 4% of the participant's compensation contributed. The
Company may make annual additional contributions at its sole discretion. During
the fiscal years ended March 31, 1997, 1996 and 1995, approximately $82,000,
$52,000 and $11,000, respectively, was expensed as Company contributions.
(6) AVIATION JOINT VENTURE
In August 1994, the Company began operation of a joint venture with Petrosur, an
Ecuador corporation. The joint venture was organized to distribute jet fuel in
Ecuador pursuant to a contract with the nationally owned oil company and the
airport authority. The contract with the government entities may be terminated
at any time. The joint venture arrangement has a term of five years and will
automatically renew for a similar term unless one of the partners objects at
least ninety days prior to the end of the term.
The Company's current ownership interest in the joint venture is 50%.
Accordingly, the Company uses the equity method of accounting to record its
proportionate share of joint venture earnings. The Company's proportionate share
of the net earnings of the joint venture amounted to $1,773,000, $1,748,000 and
$544,000 for the fiscal years ended March 31, 1997, 1996 and 1995, respectively,
and is included as part of Other income, net in the accompanying consolidated
statements of income. The amount of the investment in and advances to the joint
venture totaled $1,681,000 and $882,000 at March 31, 1997 and 1996,
respectively, and is included in prepaid expenses and other current assets in
the accompanying consolidated balance sheets. A summary of selected financial
information for the aviation joint venture is as follows:
AS OF MARCH 31,
1997 1996
----------- -----------
BALANCE SHEET DATA:
Current assets $ 6,680,000 $ 5,531,000
=========== ===========
Non-current assets $ 33,000 $ 47,000
=========== ===========
Current liabilities $ 3,889,000 $ 3,778,000
=========== ===========
FOR THE YEAR ENDED MARCH 31,
1997 1996
----------- -----------
INCOME STATEMENT DATA:
Revenue $44,512,000 $39,406,000
=========== ===========
Gross profit $ 3,969,000 $ 3,844,000
=========== ===========
Income from operations $ 3,222,000 $ 3,565,000
=========== ===========
Net income $ 3,546,000 $ 3,966,000
=========== ===========
Page 42
(7) BUSINESS SEGMENTS, FOREIGN OPERATIONS AND MAJOR CUSTOMERS
BUSINESS SEGMENTS
THE COMPANY OPERATES IN THREE BUSINESS SEGMENTS: AVIATION FUELING, MARINE
FUELING AND OIL RECYCLING. INFORMATION CONCERNING THE COMPANY'S OPERATIONS BY
BUSINESS SEGMENT IS AS FOLLOWS:
FOR THE FISCAL YEAR ENDED MARCH 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
REVENUE
Aviation fueling $381,236,000 $302,101,000 $288,728,000
Marine fueling 368,470,000 321,216,000 54,578,0000
Oil recycling 22,912,000 18,993,000 18,591,0000
Intersegment eliminations -- (11,000) (6,000)
------------ ------------ ------------
Consolidated revenue $772,618,000 $642,299,000 $361,891,000
============ ============ ============
INCOME FROM OPERATIONS
Aviation fueling $ 10,620,000 $ 12,858,000 $ 12,304,000
Marine fueling 5,013,000 3,425,000 220,000
Oil recycling 5,020,000 3,976,000 2,973,000
Corporate (5,027,000) (5,313,000) (4,248,000)
------------ ------------ ------------
Consolidated income from operations $ 15,626,000 $ 14,946,000 $ 11,249,000
============ ============ ============
IDENTIFIABLE ASSETS
Aviation fueling $ 54,129,000 $ 42,345,000 27,920,000
Marine fueling 43,013,000 39,948,000 34,313,000
Oil recycling 17,574,000 15,567,000 17,557,000
Corporate 8,423,000 14,114,000 9,746,000
------------ ------------ ------------
Consolidated identifiable assets $123,139,000 $111,974,000 $ 89,536,000
============ ============ ============
CAPITAL EXPENDITURES
Aviation fueling $ 369,000 $ 66,000 $ 27,000
Marine fueling 208,000 424,000 104,000
Oil recycling 2,426,000 623,000 1,901,000
Corporate 196,0000 294,000 162,000
------------ ------------ ------------
Consolidated capital expenditures $ 3,199,000 $ 1,407,000 $ 2,194,000
============ ============ ============
DEPRECIATION AND AMORTIZATION
Aviation fueling $189,000 $ 116,000 $ 236,000
Marine fueling 599,000 535,000 140,000
Oil recycling 916,000 819,000 824,000
Corporate 234,000 186,000 173,000
------------ ------------ ------------
Consolidated depreciation and
amortization $ 1,938,000 $ 1,656,000 $ 1,373,000
============ ============ ============
For the year ended March 31, 1995, the marine fueling segment reflects activity
from January 1, 1995 to March 31, 1995.
Page 43
FOREIGN OPERATIONS
A summary of financial data for foreign operations is shown below as of, and for
the fiscal years ended, March 31, 1997, 1996 and 1995. Non-U.S. operations of
the Company and its subsidiaries are conducted primarily from offices in the
United Kingdom, Singapore, Mexico, South Africa, South Korea and Costa Rica.
Income from operations is before the allocation of corporate general and
administrative expenses and income taxes.
1997 1996 1995
------------- ------------- ------------
Revenue $ 287,589,000 $ 184,768,000 $ 47,045,000
============= ============= ============
Income from operations $ 7,753,000 $ 2,555,000 $ 1,572,000
============= ============= ============
Identifiable assets $ 37,313,000 $ 13,506,000 $ 11,770,000
============= ============= ============
MAJOR CUSTOMERS
No customer accounted for more than 10% of total consolidated revenue for the
years ended March 31, 1997, 1996 and 1995.
(8) QUARTERLY INFORMATION (UNAUDITED)
FOR THE THREE MONTHS ENDED
--------------------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1996 1996 1996 1997
------------ ------------- ------------ ------------
Revenue $170,694,000 $180,349,000 $207,665,000 $213,910,000
============ ============ ============ ============
Gross Profit $ 11,632,000 $ 11,626,000 $ 11,716,000 $ 11,653,000
============ ============ ============ ============
Net Income $ 3,104,000 $ 3,253,000 $ 3,395,000 $ 3,513,000
============ ============ ============ ============
Earnings per
share $ 0.38 $ 0.40 $ 0.41 $ 0.43
============ ============ ============ ============
FOR THE THREE MONTHS ENDED
--------------------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1995 1995 1995 1996
------------ ------------- ------------ ------------
Revenue $138,960,000 $145,658,000 $166,671,000 $191,010,000
============ ============ ============ ============
Gross Profit $ 9,174,000 $ 9,911,000 $ 10,328,000 $ 10,956,000
============ ============ ============ ============
Net Income $ 2,545,000 $ 2,655,000 $ 2,861,000 $ 2,884,000
============ ============ ============ ============
Earnings per
share $ 0.32 $ 0.33 $ 0.35 $ 0.35
============ ============ ============ ============
Page 44
SCHEDULE II
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS
-------------------------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING ACQUISITION COSTS AND OTHER END
OF PERIOD OF BUSINESS EXPENSES ACCOUNTS(1) DEDUCTIONS(2) OF PERIOD
============ =========== =========== =========== ============= ===========
Year Ended March 31, 1997
- ---------------------------
Allowance for bad debts $4,363,000 $ - $5,107,000 $ 415,000 $5,525,000 $4,360,000
=========== ========= =========== =========== =========== ===========
Year Ended March 31, 1996
- ---------------------------
Allowance for bad debts $4,566,000 $ - $2,291,000 $ 785,000 $3,279,000 $4,363,000
=========== ========= =========== =========== =========== ===========
Year Ended March 31, 1995
- ---------------------------
Allowance for bad debts $2,464,000 $ 250,000 $2,062,000 $2,408,000 $2,618,000 $4,566,000
=========== ========= =========== =========== =========== ===========
Notes:
(1) Recoveries of bad debts and reclassifications. In fiscal year 1995,
allowance for bad debts totaling $130,000 was transferred from the Company's
discontinued operations to continued operations.
(2) Accounts determined to be uncollectible.
Page 45