Attached files

file filename
EX-32.1 - EX-32.1 - WORLD FUEL SERVICES CORPint-20160331ex321bea74b.htm
EX-31.2 - EX-31.2 - WORLD FUEL SERVICES CORPint-20160331ex312615452.htm
EX-31.1 - EX-31.1 - WORLD FUEL SERVICES CORPint-20160331ex311e8d831.htm

a

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

 

 

 

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

 

FOR THE QUARTERLY PERIOD ENDED MARCH  31, 2016

 

 

 

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

 

FOR THE TRANSITION PERIOD FROM                      TO                      

 

COMMISSION FILE NUMBER 1-9533

C:\Users\mvangb\Desktop\10Q\World Fuel Services Corp\04-08-2015\int_logo.gif

 

WORLD FUEL SERVICES CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

 

 

Florida

(State or other jurisdiction of

incorporation or organization)

 

59-2459427

(I.R.S. Employer

Identification No.)

 

 

 

9800 N.W. 41st Street

Miami, Florida

(Address of Principal Executive Offices)

 

33178

(Zip Code)

 

Registrant’s Telephone Number, including area code: (305) 428-8000

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes     No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes   No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  Large accelerated filer   Accelerated filer   Non-accelerated filer   Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    No

 

The registrant had a total of 70,827,000 shares of common stock, par value $0.01 per share, issued and outstanding as of April 21, 2016.

 

 

 


 

Table of Contents

 

 

 

 

 

Part I. 

Financial Information

 

 

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015

 

 

Consolidated Statements of Income and Comprehensive Income for the Three Months ended March 31, 2016 and 2015

 

 

Consolidated Statements of Shareholders’ Equity for the Three Months ended March 31, 2016 and 2015

 

 

Consolidated Statements of Cash Flows for the Three Months ended March 31, 2016 and 2015

 

 

Notes to the Consolidated Financial Statements

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29 

 

 

 

 

 

Item 4.

Controls and Procedures

29 

 

 

 

 

Part II. 

Other Information

 

 

 

 

 

 

Item 1.

Legal Proceedings

30 

 

 

 

 

 

Item 2.

Unregistered sales of Equity Securities and Use of Proceeds

30 

 

 

 

 

 

Item 6.

Exhibits

31 

 

 

 

 

Signatures 

 

32 

 

 

 

 


 

 

Part I — Financial Information

 

Item 1.Financial Statements

 

World Fuel Services Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited - In millions, except per share data)

 

 

 

 

 

 

 

 

 

 

As of

 

    

March 31,

    

December 31,

 

 

2016

 

2015

Assets:

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

689.7

 

$

582.5

Accounts receivable, net

 

 

1,673.2

 

 

1,812.6

Inventories

 

 

333.7

 

 

359.1

Prepaid expenses

 

 

46.1

 

 

57.9

Short-term derivative assets, net

 

 

128.6

 

 

227.2

Other current assets

 

 

233.7

 

 

209.8

Current assets held for sale

 

 

5.7

 

 

5.5

Total current assets

 

 

3,110.6

 

 

3,254.6

 

 

 

 

 

 

 

Property and equipment, net

 

 

229.2

 

 

225.6

Goodwill

 

 

680.6

 

 

675.8

Identifiable intangible and other non-current assets

 

 

365.8

 

 

356.9

Non-current assets held for sale

 

 

33.5

 

 

36.5

Total assets

 

$

4,419.7

 

$

4,549.4

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Short-term debt

 

$

28.8

 

$

25.5

Accounts payable

 

 

1,158.2

 

 

1,349.6

Customer deposits

 

 

94.6

 

 

118.3

Accrued expenses and other current liabilities

 

 

268.0

 

 

263.8

Current liabilities held for sale

 

 

5.5

 

 

5.6

Total current liabilities

 

 

1,555.0

 

 

1,762.8

 

 

 

 

 

 

 

Long-term debt

 

 

776.5

 

 

746.7

Non-current income tax liabilities, net

 

 

86.2

 

 

87.7

Other long-term liabilities

 

 

23.7

 

 

25.8

Non-current liabilities held for sale

 

 

5.1

 

 

5.0

Total liabilities

 

 

2,446.5

 

 

2,628.0

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

World Fuel shareholders' equity:

 

 

 

 

 

 

Preferred stock, $1.00 par value; 0.1 shares authorized, none issued

 

 

 —

 

 

 —

Common stock, $0.01 par value; 100 shares authorized, 70.9 and 70.8 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively

 

 

0.7

 

 

0.7

Capital in excess of par value

 

 

438.4

 

 

435.3

Retained earnings

 

 

1,636.8

 

 

1,588.6

Accumulated other comprehensive loss

 

 

(113.9)

 

 

(113.2)

Total World Fuel shareholders' equity

 

 

1,962.0

 

 

1,911.4

Noncontrolling interest equity

 

 

11.2

 

 

10.0

Total equity

 

 

1,973.2

 

 

1,921.4

Total liabilities and equity

 

$

4,419.7

 

$

4,549.4

 

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

1


 

World Fuel Services Corporation and Subsidiaries

Consolidated Statements of Income and Comprehensive Income

(Unaudited – In millions, except per share data)

 

 

 

 

 

 

 

 

 

 

For the Three Months ended

 

 

March 31,

 

   

2016

   

2015

Revenue

 

$

5,192.6

 

$

7,340.7

Cost of revenue

 

 

4,968.8

 

 

7,125.3

Gross profit

 

 

223.8

 

 

215.4

Operating expenses:

 

 

 

 

 

 

Compensation and employee benefits

 

 

95.9

 

 

88.6

Provision for bad debt

 

 

1.5

 

 

1.3

General and administrative

 

 

63.1

 

 

54.0

 

 

 

160.5

 

 

143.9

Income from operations

 

 

63.3

 

 

71.5

Non-operating expenses, net:

 

 

 

 

 

 

Interest expense and other financing costs, net

 

 

(7.6)

 

 

(7.3)

Other income, net

 

 

1.3

 

 

0.3

 

 

 

(6.3)

 

 

(7.0)

Income before income taxes

 

 

57.1

 

 

64.5

Provision for income taxes

 

 

4.8

 

 

9.9

Net income including noncontrolling interest

 

 

52.3

 

 

54.6

Net loss attributable to noncontrolling interest

 

 

(0.1)

 

 

(1.0)

Net income attributable to World Fuel

 

$

52.4

 

$

55.6

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.75

 

$

0.79

 

 

 

 

 

 

 

Basic weighted average common shares

 

 

69.5

 

 

70.7

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

0.75

 

$

0.78

 

 

 

 

 

 

 

Diluted weighted average common shares

 

 

70.0

 

 

71.4

 

 

 

 

 

 

 

Comprehensive income:

 

 

 

 

 

 

Net income including noncontrolling interest

 

$

52.3

 

$

54.6

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

2.5

 

 

(33.8)

Derivative instruments, net of income tax benefit: 2016 - $0.2

 

 

(1.7)

 

 

 -

Other comprehensive income (loss):

 

 

0.8

 

 

(33.8)

Comprehensive income including noncontrolling interest

 

 

53.1

 

 

20.8

Comprehensive income attributable to noncontrolling interest

 

 

1.5

 

 

1.2

Comprehensive income attributable to World Fuel

 

$

51.6

 

$

19.6

 

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

2


 

World Fuel Services Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Equity  

(Unaudited - In millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

           

 

               

 

                  

 

                    

 

                          

 

                        

 

                         

 

                     

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

Other

 

World Fuel

 

Noncontrolling

 

 

 

 

 

Common Stock

 

Excess of

 

Retained

 

Comprehensive

 

Shareholders'

 

Interest

 

 

 

 

   

Shares

   

Amount

   

ParValue

   

Earnings

   

Loss

   

Equity

   

Equity

   

Total Equity

Balance as of December 31, 2015

 

70.8

 

$

0.7

 

$

435.3

 

$

1,588.6

 

$

(113.2)

 

$

1,911.4

 

$

10.0

 

$

1,921.4

Net income (loss)

 

 —

 

 

 —

 

 

 —

 

 

52.4

 

 

 —

 

 

52.4

 

 

(0.1)

 

 

52.3

Cash dividends declared

 

 —

 

 

 —

 

 

 —

 

 

(4.2)

 

 

 —

 

 

(4.2)

 

 

 —

 

 

(4.2)

Distribution of noncontrolling interest

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(0.2)

 

 

(0.2)

Amortization of share-based payment awards

 

 —

 

 

 —

 

 

4.0

 

 

 —

 

 

 —

 

 

4.0

 

 

 —

 

 

4.0

Issuance of common stock related to share-based payment awards

 

0.1

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Purchases of common stock tendered by  employees to satisfy the required withholding taxes related to share-based payment awards

 

 —

 

 

 —

 

 

(0.9)

 

 

 —

 

 

 —

 

 

(0.9)

 

 

 —

 

 

(0.9)

Other comprehensive income

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(0.7)

 

 

(0.7)

 

 

1.6

 

 

0.8

Balance as of March 31, 2016

 

70.9

 

$

0.7

 

$

438.4

 

$

1,636.8

 

$

(113.9)

 

$

1,962.0

 

$

11.2

 

$

1,973.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

           

 

               

 

                  

 

 

 

                          

 

                        

 

                         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

Other

 

World Fuel

 

Noncontrolling

 

 

 

 

 

Common Stock

 

Excess of

 

Retained

 

Comprehensive

 

Shareholders'

 

Interest

 

 

 

 

   

Shares

   

Amount

   

Par Value

   

Earnings

   

Loss

   

Equity

   

Equity

   

Total Equity

Balance as of December 31, 2014

 

72.1

 

$

0.7

 

$

496.4

 

$

1,418.5

 

$

(60.2)

 

$

1,855.4

 

$

9.5

 

$

1,864.9

Net income (loss)

 

 —

 

 

 —

 

 

 —

 

 

55.6

 

 

 —

 

 

55.6

 

 

(1.0)

 

 

54.6

Cash dividends declared

 

 —

 

 

 —

 

 

 —

 

 

(4.2)

 

 

 —

 

 

(4.2)

 

 

 —

 

 

(4.2)

Amortization of share-based payment awards

 

 —

 

 

 —

 

 

3.7

 

 

 —

 

 

 —

 

 

3.7

 

 

 —

 

 

3.7

Issuance of common stock related to share-based payment awards, including income tax benefit of $0.9

 

0.1

 

 

 —

 

 

1.0

 

 

 —

 

 

 —

 

 

1.0

 

 

 —

 

 

1.0

Purchases of common stock tendered by employees to satisfy the required withholding taxes related to share-based  payment awards

 

(0.1)

 

 

 —

 

 

(4.0)

 

 

 —

 

 

 —

 

 

(4.0)

 

 

 —

 

 

(4.0)

Other comprehensive (loss) income

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(36.0)

 

 

(36.0)

 

 

2.2

 

 

(33.8)

Balance as of March 31, 2015

 

72.1

 

$

0.7

 

$

497.1

 

$

1,469.9

 

$

(96.2)

 

$

1,871.5

 

$

10.7

 

$

1,882.2

 

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

3


 

World Fuel Services Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited - In millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months ended

 

 

March 31,

 

    

2016

    

2015

Cash flows from operating activities:

 

 

 

 

 

 

Net income including noncontrolling interest

 

$

52.3

 

$

54.6

Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

18.4

 

 

13.4

Provision for bad debt

 

 

1.5

 

 

1.3

Share-based payment award compensation costs

 

 

4.1

 

 

4.2

Deferred income tax provision (benefit)

 

 

3.4

 

 

(3.7)

Extinguishment of liabilities

 

 

(1.8)

 

 

(3.7)

Foreign currency losses (gains), net

 

 

6.2

 

 

(5.2)

Other

 

 

1.4

 

 

4.1

Changes in assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts receivable, net

 

 

142.9

 

 

85.6

Inventories

 

 

26.1

 

 

13.0

Prepaid expenses

 

 

11.7

 

 

20.6

Short-term derivative assets, net

 

 

91.8

 

 

74.3

Other current assets

 

 

(11.0)

 

 

(25.5)

Cash collateral with financial counterparties

 

 

54.0

 

 

43.6

Other non-current assets

 

 

7.1

 

 

(1.4)

Accounts payable

 

 

(191.2)

 

 

(91.9)

Customer deposits

 

 

(23.6)

 

 

(33.3)

Accrued expenses and other current liabilities

 

 

(48.1)

 

 

(35.7)

Non-current income tax, net and other long-term liabilities

 

 

(6.7)

 

 

(7.4)

Total adjustments

 

 

86.2

 

 

52.3

Net cash provided by operating activities

 

 

138.5

 

 

106.9

Cash flows from investing activities:

 

 

 

 

 

 

Acquisition of businesses, net of cash acquired and other investments

 

 

(45.3)

 

 

(3.7)

Capital expenditures

 

 

(14.1)

 

 

(13.1)

Other investing activities, net

 

 

6.9

 

 

5.3

Net cash used in investing activities

 

 

(52.5)

 

 

(11.5)

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings of debt

 

 

689.6

 

 

1,349.1

Repayments of debt

 

 

(664.6)

 

 

(1,342.4)

Dividends paid on common stock

 

 

(4.2)

 

 

(2.6)

Federal and state tax benefits resulting from tax deductions in excess of the compensation cost recognized for share-based payment awards

 

 

 —

 

 

0.9

Purchases of common stock tendered by employees to satisfy the required withholding taxes related to share-based payment awards

 

 

(0.9)

 

 

(4.0)

Other financing activities, net

 

 

(0.2)

 

 

(3.4)

Net cash provided by (used in) financing activities

 

 

19.7

 

 

(2.4)

Effect of exchange rate changes on cash and cash equivalents

 

 

1.5

 

 

(4.3)

Net increase in cash and cash equivalents

 

 

107.2

 

 

88.7

Cash and cash equivalents, as of beginning of period

 

 

582.5

 

 

302.3

Cash and cash equivalents, as of end of period

 

$

689.7

 

$

391.0

 

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

4


 

Supplemental Schedule of Noncash Investing and Financing Activities:

 

Cash dividends declared, but not yet paid, were $4.2  million as of March 31, 2016 and March 31, 2015.

 

We had accrued capital expenditures totaling $1.3 million and $1.0 million as of March 31, 2016 and March 31, 2015, respectively, which were recorded in accounts payable.

 

In connection with our acquisitions, the following table presents the assets acquired, net of cash and liabilities assumed (in millions):

 

 

 

 

 

 

 

 

 

 

 

For the Three Months ended 

 

 

March 31, 2016

Assets acquired, net of cash

 

$

30.6

 

 

 

 

Liabilities assumed

 

$

1.0

 

 

 

In connection with 2016 acquisitions, we issued promissory notes totaling $0.5 million.

 

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

5


 

World Fuel Services Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

(Unaudited)

 

 

1.Basis of Presentation and Significant Accounting Policies

 

Basis of Presentation

 

We prepared the consolidated financial statements following the requirements of the Unites States (U.S.) Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (U.S. GAAP) can be condensed or omitted. Unless the context requires otherwise, references to “World Fuel”, “the Company”, “we”, “us”, or “our” in this Quarterly Report on Form 10-Q (“10-Q Report”)  refer to World Fuel Services Corporation and its subsidiaries.

 

Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year. In the opinion of management, all adjustments necessary for a fair presentation of the financial information, which are of a normal and recurring nature, have been made for the interim periods reported. The information included in this 10-Q Report should be read in conjunction with the consolidated financial statements and accompanying notes included in our 2015 Annual Report on Form 10-K (“2015 10-K Report”). Certain amounts in the consolidated financial statements and associated notes may not add due to rounding. All percentages have been calculated using unrounded amounts.

 

Significant Accounting Policies

 

The significant accounting policies we use for quarterly financial reporting are disclosed in Note 1 of the “Notes to the Consolidated Financial Statements” included in our 2015 10‑K Report, as updated in “Item 2.  Management’s Discussion and Analysis of Financial Condition” within this 10-Q report.

 

Goodwill

 

During the first quarter of 2016, we recorded goodwill of $2.1 million in our land segment in connection with the 2016 acquisitions, described in Note 2.  In addition, due to adjustments to provisional amounts identified during the measurement period of our 2015 acquisitions, we increased goodwill by $0.1 million, net primarily due to an increase in the land segment. Additionally, as a result of foreign currency translation adjustments of our non-U.S. dollar functional currency subsidiaries, goodwill decreased by $1.8 million in our land segment and increased by $1.0 million and $0.3 million in our aviation and marine segments, respectively.

 

 

Adoption of New Accounting Standards

 

The following accounting standards updates were recently adopted by the Company:

 

Business Combinations: Simplifying the Accounting for Measurement – Period Adjustments.  In September 2015, the Financial Accounting Standards Board (‘FASB”) issued an Accounting Standards Update (“ASU”), to simplify the accounting for adjustments made to provisional amounts recognized in a business combination; the amendments eliminate the requirement to retrospectively account for those adjustments.  The ASU requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. It also requires the acquirer to record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.  This update became effective at the beginning of our 2016 fiscal year. The adoption of this ASU did not have a significant impact on our consolidated financial statements and disclosures. 

  

Interest—Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs. In April 2015, the FASB issued an ASU which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. This update became effective at the beginning of our 2016 fiscal year.  The adoption of this ASU did not have a significant impact on our consolidated financial statements and disclosures.

 

6


 

Consolidation: Amendments to the Consolidation Analysis.  In February 2015, the FASB issued an ASU which is intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures. This update became effective at the beginning of our 2016 fiscal year.  The adoption of this ASU did not have a significant impact on our consolidated financial statements and disclosures.

 

Income Statement-Extraordinary and Unusual Items: Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. In January 2015, the FASB issued an ASU which eliminates the concept of extraordinary items. This update became effective at the beginning of our 2016 fiscal year.  The adoption of this ASU did not have a significant impact on our consolidated financial statements and disclosures.

 

Derivatives and Hedging: Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. In November 2014, the FASB issued an ASU which clarifies how current generally accepted accounting principles in the United States should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share.  This update became effective at the beginning of our 2016 fiscal year.  The adoption of this ASU did not have a significant impact on our consolidated financial statements and disclosures.

 

Compensation - Stock Compensation. Accounting for Share-Based Payments when the Terms of an Award Provide that a Performance Target could be Achieved after the Requisite Service Period. In June 2014, the FASB issued an ASU which includes guidance that requires a performance target that affects vesting and that could be achieved after the requisite service period to be treated as a performance condition. This update became effective at the beginning of our 2016 fiscal year. The adoption of this ASU did not have a significant impact on our consolidated financial statements and disclosures.

 

 

2.Acquisitions, Assets and Liabilities Held for Sale

 

2016 Acquisitions

 

In the first quarter of 2016, we completed three acquisitions in our land segment which were not significant individually or in the aggregate. The financial position, results of operations and cash flows of the 2016 acquisitions have been included in our consolidated financial statements, since their respective acquisition dates, and did not have a significant impact on our revenue and net income for the three months ended March 31, 2016.

 

In the first quarter of 2016, we agreed to acquire from certain ExxonMobil affiliates their aviation fueling operations at 83 airports in Canada, the United Kingdom, Germany, Italy, France, Australia and New Zealand.  The transaction is subject to customary regulatory consents and closing conditions, including securing third party consents and therefore there can be no assurance that we will be successful in closing the acquisition.

 

Assets and Liabilities Held for Sale

 

In connection with the acquisition of all of the outstanding stock of Pester Marketing Company (“Pester”) on September 1, 2015, we committed to a plan to sell certain assets and liabilities of Pester’s fuel retail business. As all of the criteria for classification as held for sale were met, those assets and liabilities of the business were presented separately as held for sale in our consolidated balance sheets as of March 31, 2016.  Current assets held for sale of the disposal group, which includes inventories and other current assets, were $5.7 million. The non-current assets held for sale, which include property and equipment, goodwill and identifiable intangible assets, were $33.5 million. Current liabilities held for sale, which includes accounts payable and accrued expenses and other current liabilities, were $5.5 million.  Non-current liabilities held for sale, comprised of deferred tax liabilities, were $5.1 million. These net assets have been reported as part of our land segment.

 

3.Derivatives  

 

We enter into financial derivative contracts in order to mitigate the risk of market price fluctuations in aviation, marine and land fuel, to offer our customers fuel pricing alternatives to meet their needs and to mitigate the risk of fluctuations in foreign currency exchange rates.  We also enter into proprietary derivative transactions, primarily intended to capitalize on arbitrage opportunities in basis or time spreads related to fuel products we sell.  We have applied the normal purchase and normal sales exception (“NPNS”), as provided by accounting guidance for derivative instruments and hedging activities, to certain of our physical forward sales and purchase contracts.  While these contracts are considered derivative instruments under the guidance for derivative instruments and hedging

7


 

activities, they are not recorded at fair value, but rather are recorded in our consolidated financial statements when physical settlement of the contracts occurs.  If it is determined that a transaction designated as NPNS no longer meets the scope of the exception, the fair value of the related contract is recorded as an asset or liability on the consolidated balance sheets and the difference between the fair value and the contract amount is immediately recognized through earnings.

 

The following describes our derivative classifications:

 

Cash Flow Hedges.  Includes certain commodity contracts we enter into to mitigate the risk of price volatility in forecasted purchases and sales.

 

Fair Value Hedges.  Includes derivatives we enter into in order to hedge price risk associated with our inventory and certain firm commitments relating to fixed price purchase and sale contracts.

 

Non-designated Derivatives.  Includes derivatives we primarily enter into in order to mitigate the risk of market price fluctuations in aviation, marine and land fuel in the form of swaps or futures as well as certain fixed price purchase and sale contracts and proprietary trading. In addition, non-designated derivatives are entered into to hedge the risk of currency rate fluctuations.

 

8


 

As of March 31, 2016, our derivative instruments, at their respective fair value positions were as follows (in millions, except weighted average fixed price and weighted average mark-to-market amount):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

Mark-to-

 

 

 

 

 

Settlement

 

 

 

 

 

 

 

Average

 

Market

 

Fair Value

Derivative Classification

   

Period

   

Derivative Instrument

   

Notional

    

Unit

   

Fixed Price

    

Amount

    

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Hedge

 

2016

 

Commodity contracts for inventory hedging

 

2.5

 

BBL

 

$

49.507

 

$

(0.135)

 

$

(0.3)

 

 

2017

 

Commodity contracts for inventory hedging

 

0.1

 

BBL

 

 

51.789

 

 

4.716

 

 

0.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flow Hedge

 

2016

 

Commodity contracts for inventory hedging

 

24.0

 

BBL

 

$

47.404

 

$

0.241

 

$

5.8

 

 

2017

 

Commodity contracts for inventory hedging

 

1.5

 

BBL

 

 

58.575

 

 

2.274

 

 

3.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

9.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Designated

 

2016

 

Commodity contracts (long)

 

56.0

 

BBL

 

$

36.915

 

$

(9.793)

 

$

(548.5)

 

 

2016

 

Commodity contracts (short)

 

53.3

 

BBL

 

 

38.926

 

 

10.374

 

 

552.5

 

 

2017

 

Commodity contracts (long)

 

8.6

 

BBL

 

 

22.835

 

 

(0.239)

 

 

(2.1)

 

 

2017

 

Commodity contracts (short)

 

5.9

 

BBL

 

 

29.761

 

 

0.870

 

 

5.2

 

 

2018

 

Commodity contracts (long)

 

2.2

 

BBL

 

 

12.593

 

 

2.186

 

 

4.8

 

 

2018

 

Commodity contracts (short)

 

1.5

 

BBL

 

 

12.253

 

 

(1.647)

 

 

(2.5)

 

 

2019

 

Commodity contracts (long)

 

0.1

 

BBL

 

 

20.912

 

 

0.210

 

 

 —

 

 

2019

 

Commodity contracts (short)

 

0.1

 

BBL

 

 

49.907

 

 

10.084

 

 

0.1

 

 

2020

 

Commodity contracts (long)

 

0.1

 

BBL

 

 

21.620

 

 

(1.970)

 

 

(0.1)

 

 

2020

 

Commodity contracts (short)

 

0.1

 

BBL

 

 

37.674

 

 

7.626

 

 

0.8

 

 

2021

 

Commodity contracts (long)

 

 —

 

BBL

 

 

20.792

 

 

0.136

 

 

 —

 

 

2016

 

Foreign currency contracts

 

10.7

 

AUD

 

 

0.714

 

 

(0.044)

 

 

(0.5)

 

 

2016

 

Foreign currency contracts

 

65.5

 

CAD

 

 

1.372

 

 

(0.046)

 

 

(3.0)

 

 

2016

 

Foreign currency contracts

 

0.3

 

CHF

 

 

1.005

 

 

(0.046)

 

 

 —

 

 

2016

 

Foreign currency contracts

 

3,869.5

 

CLP

 

 

699.730

 

 

(0.000)

 

 

(0.1)

 

 

2016

 

Foreign currency contracts

 

71,005.7

 

COP

 

 

3,293.082

 

 

(0.000)

 

 

 —

 

 

2016

 

Foreign currency contracts

 

44.2

 

DKK

 

 

6.804

 

 

(0.002)

 

 

(0.1)

 

 

2016

 

Foreign currency contracts

 

42.4

 

EUR

 

 

1.097

 

 

(0.039)

 

 

(1.7)

 

 

2016

 

Foreign currency contracts

 

102.1

 

GBP

 

 

1.464

 

 

0.033

 

 

3.3

 

 

2016

 

Foreign currency contracts

 

94.7

 

INR

 

 

68.082

 

 

(0.000)

 

 

 —

 

 

2016

 

Foreign currency contracts

 

870.1

 

JPY

 

 

115.852

 

 

(0.000)

 

 

(0.1)

 

 

2016

 

Foreign currency contracts

 

1,785.8

 

MXN

 

 

18.104

 

 

0.000

 

 

0.3

 

 

2016

 

Foreign currency contracts

 

72.6

 

NOK

 

 

8.712

 

 

(0.005)

 

 

(0.4)

 

 

2016

 

Foreign currency contracts

 

6.7

 

PLN

 

 

4.002

 

 

(0.005)

 

 

 —

 

 

2016

 

Foreign currency contracts

 

81.3

 

RON

 

 

4.128

 

 

(0.005)

 

 

(0.4)

 

 

2016

 

Foreign currency contracts

 

35.5

 

SEK

 

 

8.569

 

 

0.007

 

 

0.2

 

 

2016

 

Foreign currency contracts

 

28.3

 

SGD

 

 

1.407

 

 

(0.014)

 

 

(0.4)

 

 

2016

 

Foreign currency contracts

 

26.6

 

ZAR

 

 

16.080

 

 

(0.004)

 

 

(0.1)

 

 

2017

 

Foreign currency contracts

 

1.8

 

EUR

 

 

1.083

 

 

(0.070)

 

 

(0.1)

 

 

2017

 

Foreign currency contracts

 

9.3

 

GBP

 

 

1.527

 

 

0.088

 

 

0.8

 

 

2018

 

Foreign currency contracts

 

1.7

 

EUR

 

 

1.105

 

 

(0.057)

 

 

(0.1)

 

 

2018

 

Foreign currency contracts

 

0.2

 

GBP

 

 

1.403

 

 

(0.034)

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

7.8

 

9


 

The following table presents information about our derivative instruments measured at fair value and their locations on the consolidated balance sheets (in millions):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

Balance Sheet Location

 

March 31, 2016

 

December 31, 2015

Derivative assets:

 

 

 

 

 

 

 

 

Derivatives designated as hedging instruments

 

 

 

 

 

 

Commodity contracts

 

Short-term derivative assets, net

 

$

84.2

 

$

114.0

Commodity contracts

 

Identifiable intangible and other non-current assets

 

 

 —

 

 

7.4

Commodity contracts

 

Accrued expenses and other current liabilities

 

 

0.9

 

 

6.3

 

 

 

 

 

85.2

 

 

127.7

Derivatives not designated as hedging instruments

 

 

 

 

 

 

Commodity contracts

 

Short-term derivative assets, net

 

 

167.6

 

 

241.4

Commodity contracts

 

Identifiable intangible and other non-current assets

 

 

16.8

 

 

17.0

Commodity contracts

 

Accrued expenses and other current liabilities

 

 

136.2

 

 

120.4

Commodity contracts

 

Other long-term liabilities

 

 

12.0

 

 

4.0

Foreign currency contracts

 

Short-term derivative assets, net

 

 

4.5

 

 

10.9

Foreign currency contracts

 

Identifiable intangible and other non-current assets

 

 

0.4

 

 

0.7

Foreign currency contracts

 

Accrued expenses and other current liabilities

 

 

4.9

 

 

0.8

Foreign currency contracts

 

Other long-term liabilities

 

 

0.2

 

 

 —

 

 

 

 

 

342.7

 

 

395.2

 

 

 

 

$

427.8

 

$

522.9