World Kinect(WKC) - 2025 Q1 - Quarterly Report

PART I. Financial Information This section presents the unaudited financial statements, management's analysis of operations, market risk disclosures, and internal controls for the period Item 1. Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for World Kinect Corporation for the three months ended March 31, 2025, show a shift from net income to a net loss compared to the prior year, driven by decreased revenue, lower gross profit, and increased operating expenses from asset impairments and restructuring. Despite this, operating cash flows remained positive and slightly increased, while cash used in investing and financing activities decreased Consolidated Financial Highlights (Q1 2025 vs. Q1 2024): | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | Change (Millions) | Change (%) | | :-------------------------------- | :----------------- | :----------------- | :---------------- | :--------- | | Revenue | $9,452.5 | $10,951.4 | $(1,498.9) | -13.7% | | Gross Profit | $230.4 | $254.1 | $(23.7) | -9.3% | | Net Income (Loss) attributable to World Kinect | $(21.1) | $27.4 | $(48.5) | -177.0% | | Net cash provided by operating activities | $114.4 | $110.2 | $4.2 | 3.8% | - Total assets decreased to $6,589.1 million as of March 31, 2025, from $6,731.8 million at December 31, 2024[6] - Total equity decreased to $1,928.3 million as of March 31, 2025, from $1,955.9 million at December 31, 2024[6][9] Condensed Consolidated Balance Sheets The company's balance sheet as of March 31, 2025, shows a slight decrease in total assets and liabilities compared to December 31, 2024, with cash and cash equivalents increasing while accounts receivable and accounts payable decreased Condensed Consolidated Balance Sheet Highlights (Millions): | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $456.4 | $382.9 | | Accounts receivable, net | $2,245.8 | $2,432.6 | | Total current assets | $3,829.9 | $3,959.2 | | Total assets | $6,589.1 | $6,731.8 | | Accounts payable | $2,529.7 | $2,726.5 | | Total current liabilities | $3,342.3 | $3,437.8 | | Total liabilities | $4,660.9 | $4,775.8 | | Total equity | $1,928.3 | $1,955.9 | Condensed Consolidated Statements of Income and Comprehensive Income For the three months ended March 31, 2025, the company reported a net loss attributable to World Kinect of $21.1 million, a significant decline from a net income of $27.4 million in the prior-year period, primarily due to decreased revenue, lower gross profit, and increased operating expenses including asset impairments and restructuring charges Condensed Consolidated Statements of Income and Comprehensive Income (Millions, except per share data): | Metric | Q1 2025 | Q1 2024 | | :------------------------------------- | :------ | :------ | | Revenue | $9,452.5 | $10,951.4 | | Gross profit | $230.4 | $254.1 | | Total operating expenses | $237.0 | $190.8 | | Income (loss) from operations | $(6.6) | $63.3 | | Net income (loss) attributable to World Kinect | $(21.1) | $27.4 | | Basic earnings (loss) per common share | $(0.37) | $0.46 | | Diluted earnings (loss) per common share | $(0.37) | $0.45 | - Total operating expenses increased by $46.2 million, or 24%, primarily attributable to $44.5 million in asset impairment charges and $15.0 million in restructuring charges in Q1 2025[7][96] Condensed Consolidated Statements of Shareholders' Equity The company's total equity decreased from $1,955.9 million at December 31, 2024, to $1,928.3 million at March 31, 2025, primarily due to a net loss, cash dividends declared, and common stock repurchases, partially offset by other comprehensive income Changes in Shareholders' Equity (Millions): | Item | Q1 2025 Impact | | :------------------------------------- | :------------- | | Net income (loss) | $(21.1) | | Cash dividends declared | $(9.6) | | Purchases of common stock | $(10.1) | | Other comprehensive income (loss) | $10.0 | | Balance as of December 31, 2024 | $1,955.9 | | Balance as of March 31, 2025 | $1,928.3 | Condensed Consolidated Statements of Cash Flows For the three months ended March 31, 2025, net cash provided by operating activities increased slightly to $114.4 million, while net cash used in investing activities decreased to $5.8 million, and net cash used in financing activities significantly decreased to $32.4 million, leading to a net increase in cash and cash equivalents of $73.5 million Condensed Consolidated Statements of Cash Flows (Millions): | Cash Flow Activity | Q1 2025 | Q1 2024 | | :----------------------------------- | :------ | :------ | | Net cash provided by operating activities | $114.4 | $110.2 | | Net cash provided by (used in) investing activities | $(5.8) | $(16.9) | | Net cash provided by (used in) financing activities | $(32.4) | $(64.3) | | Net increase (decrease) in cash and cash equivalents | $73.5 | $17.1 | | Cash and cash equivalents, end of period | $456.4 | $321.3 | - The increase in operating cash flows was principally due to increased cash provided by RPA activity and transaction tax refunds, offset by cash used in derivative activities and a decrease in net income[121] - The decrease in net cash used in investing activities was primarily driven by lower capital expenditures and cash received from the net repayment of notes receivable[122] Notes to the Condensed Consolidated Financial Statements This section provides detailed disclosures on the company's accounting policies, financial instruments, debt, equity, and segment information, highlighting recent divestitures, restructuring efforts, and ongoing legal and tax contingencies Note 1. Basis of Presentation, New Accounting Standards, and Significant Accounting Policies World Kinect Corporation is a global energy management company. The financial statements are unaudited, prepared under U.S. GAAP, and do not include all disclosures required for complete annual statements. The company is evaluating new accounting standards for income taxes (ASU 2023-09) and expense disaggregation (ASU 2024-03), which are effective in future fiscal years. No significant changes to accounting policies were reported - World Kinect Corporation is a global energy management company offering fulfillment and related services across the aviation, marine, and land-based transportation sectors, also supplying natural gas and power and sustainability-related products[11] - The company is evaluating ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures), which are effective for fiscal years beginning after December 15, 2024, and December 15, 2026, respectively[15][16] - No significant changes in the company's accounting policies from those disclosed in its 2024 10-K Report[20] Note 2. Accounts Receivable The company's net accounts receivable decreased to $2.2 billion as of March 31, 2025, from $2.4 billion at December 31, 2024. The allowance for expected credit losses increased slightly to $24.4 million. The company utilizes Receivable Purchase Agreements (RPAs) to sell qualifying accounts receivable, selling $2.8 billion in Q1 2025, down from $3.0 billion in Q1 2024 Accounts Receivable and Allowance for Credit Losses (Millions): | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Accounts receivable, net | $2,245.8 | $2,432.6 | | Allowance for expected credit losses | $24.4 | $23.7 | - 95% of accounts receivable were outstanding less than 60 days as of March 31, 2025[23] Receivable Purchase Agreements (RPAs) Activity (Millions): | Metric | Q1 2025 | Q1 2024 | | :-------------------------------- | :------ | :------ | | Aggregate face value of receivables sold | $2,800.0 | $3,000.0 | | Fees recognized | $8.1 | $10.2 | Note 3. Acquisitions and Divestitures The company completed the sale of its U.K. land fuels business (Watson Fuels) on April 9, 2025, for estimated proceeds of $42.8 million, recognizing a $44.5 million asset impairment charge in Q1 2025. This follows the May 2024 sale of the Avinode Group, which resulted in a $96.0 million pre-tax gain - Sale of WFL (UK) Ltd. (Watson Fuels disposal group) closed on April 9, 2025, for total estimated proceeds of $42.8 million, with $23.6 million collected in cash at closing[27] - An asset impairment charge of $44.5 million was recognized in Q1 2025 with respect to the Watson Fuels disposal group assets[27][49] - The sale of Avinode Group and aviation FBO software products was completed on May 1, 2024, for cash proceeds of $200.1 million, resulting in a pre-tax gain of $96.0 million[28] Note 4. Derivative Instruments World Kinect uses various derivative instruments, including fair value hedges, cash flow hedges, and non-designated derivatives, to manage exposure to commodity price, foreign currency, and interest rate risks. As of March 31, 2025, the company held gross derivative assets of $518.9 million and gross derivative liabilities of $436.1 million. Non-designated commodity contracts generated a net gain of $5.5 million in Q1 2025, a significant improvement from a $72.0 million loss in Q1 2024 - The company's risk management program includes Fair Value Hedges, Cash Flow Hedges, and Non-designated Derivatives to mitigate commodity price, foreign currency exchange rate, and interest rate risks[29][30] Gross Fair Value of Derivative Instruments (Millions): | Metric | March 31, 2025 | December 31, 2024 | | :--------------------------------- | :------------- | :---------------- | | Total Gross Derivative Assets | $518.9 | $499.6 | | Total Gross Derivative Liabilities | $436.1 | $401.6 | Realized and Unrealized Gains (Losses) on Non-designated Derivatives (Millions): | Derivative Type | Q1 2025 | Q1 2024 | | :---------------------- | :------ | :------ | | Commodity contracts (net) | $5.5 | $(72.0) | | Foreign currency contracts (net) | $(5.2) | $(2.6) | Note 5. Fair Value Measurements The company measures certain assets and liabilities at fair value on a recurring basis, primarily commodity and foreign currency contracts, using Level 1 and Level 2 inputs. As of March 31, 2025, total assets at fair value were $538.7 million and total liabilities at fair value were $436.1 million. A nonrecurring asset impairment charge of $44.5 million was recognized in Q1 2025 for the Watson Fuels asset group, measured using Level 2 inputs Recurring Fair Value Measurements (March 31, 2025, Millions): | Category | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total | | :-------------------------- | :------------- | :------------- | :------------- | :---- | | Assets: Commodities contracts | $160.3 | $337.8 | $7.3 | $505.4 | | Assets: Foreign currency contracts | — | $13.5 | — | $13.5 | | Liabilities: Commodities contracts | $195.4 | $215.4 | $4.1 | $414.9 | | Liabilities: Foreign currency contracts | — | $21.2 | — | $21.2 | - A nonrecurring asset impairment charge of $44.5 million was recognized in Q1 2025 for the Watson Fuels asset group within the land segment, with its fair value determined based on estimated sale proceeds (Level 2 measurement)[49] Note 6. Supplier Financing Programs The company participates in supplier finance programs, with outstanding obligations of $129.1 million as of March 31, 2025, a decrease from $168.8 million at December 31, 2024. These obligations are included in Accounts payable Outstanding Obligations under Supplier Finance Programs (Millions): | Date | Amount | | :---------------- | :----- | | March 31, 2025 | $129.1 | | December 31, 2024 | $168.8 | Note 7. Debt, Interest Income, Expense, and Other Finance Costs Total debt slightly decreased to $879.0 million as of March 31, 2025. The company's debt primarily consists of a term loan ($449.1 million) and Convertible Senior Notes due 2028 ($341.5 million net carrying amount). Net interest expense decreased to $22.9 million in Q1 2025 from $28.9 million in Q1 2024 Outstanding Debt (Millions): | Debt Type | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Term loan | $449.1 | $455.3 | | Convertible Notes (net) | $341.5 | $340.9 | | Total debt | $879.0 | $880.8 | | Long-term debt | $792.3 | $796.8 | - The fair value of the Convertible Notes was approximately $403.3 million as of March 31, 2025[52] Interest Income, Expense, and Other Financing Costs, net (Millions): | Metric | Q1 2025 | Q1 2024 | | :------------------------------------- | :------ | :------ | | Interest income | $3.7 | $2.0 | | Interest expense and other financing costs | $(26.6) | $(30.9) | | Interest expense and other financing costs, net | $(22.9) | $(28.9) | Note 8. Commitments and Contingencies The company is involved in various legal and tax proceedings, including an investigation by the Finnish energy regulatory authority regarding an erroneous bid submission in 2023, and significant tax assessments in South Korea totaling approximately $23.3 million. While reserves for general claims are not material, an unfavorable resolution of these matters could have a material adverse effect on financial statements - An investigation by the Finnish energy regulatory authority was initiated in December 2023 regarding an erroneous bid submission in the Finnish power market, which led to $48.8 million in extraordinary losses in Q4 2023[54] - The South Korean branch of a subsidiary received tax assessments totaling approximately $23.3 million (KRW 34.3 billion) for allegedly failing to issue VAT invoices and report certain transactions during 2011-2014[56] - As of March 31, 2025, reserves for claims and other matters where losses are probable and estimable were not material[57] Note 9. Shareholders' Equity The Board declared quarterly cash dividends of $0.17 per common share for both Q1 2025 ($9.6 million) and Q1 2024 ($10.1 million). Accumulated other comprehensive income (loss) improved from $(91.0) million at January 1, 2025, to $(81.0) million at March 31, 2025, primarily due to positive foreign currency translation adjustments Cash Dividends Declared (Millions): | Period | Per Common Share | Total | | :-------------------------- | :--------------- | :---- | | Q1 2025 | $0.17 | $9.6 | | Q1 2024 | $0.17 | $10.1 | Accumulated Other Comprehensive Income (Loss) (Millions): | Metric | January 1, 2025 | March 31, 2025 | | :------------------------------------- | :-------------- | :------------- | | Balance | $(91.0) | $(81.0) | | Other comprehensive income (loss) before reclassifications | — | $11.7 | | Foreign currency translation adjustments | — | $12.6 | Note 10. Revenue from Contracts with Customers Total revenue for Q1 2025 was $9,452.5 million, a decrease from $10,951.4 million in Q1 2024. This decline was observed across all major geographic areas (Asia Pacific, EMEA, LATAM, North America) and segments (Aviation, Land, Marine) Revenue from Contracts with Customers (Millions): | Geographic Area | Q1 2025 | Q1 2024 | | :---------------- | :------ | :------ | | Asia Pacific | $1,149.6 | $1,445.1 | | EMEA | $1,999.0 | $2,358.5 | | LATAM | $1,287.2 | $1,604.2 | | North America | $4,992.3 | $5,620.2 | | Total revenue | $9,452.5 | $10,951.4 | Revenue by Segment (Millions): | Segment | Q1 2025 | Q1 2024 | | :-------- | :------ | :------ | | Aviation | $4,654.2 | $5,144.2 | | Land | $2,865.4 | $3,416.6 | | Marine | $1,932.9 | $2,390.5 | Note 11. Income Taxes For Q1 2025, the company recognized an income tax benefit of $6.8 million, a significant change from an income tax expense of $3.3 million in Q1 2024. The effective income tax rate for Q1 2025 was 24.3%, up from 11.0% in Q1 2024, influenced by a reduction in income before taxes and changes in the mix of worldwide earnings, partially offset by increased net discrete tax expenses. The company is also facing a material tax audit in Denmark with proposed assessments of approximately $138.0 million Income Tax Provision and Effective Rate (Millions, except rates): | Metric | Q1 2025 | Q1 2024 | | :-------------------------- | :------ | :------ | | Provision for income taxes | $(6.8) | $3.3 | | Effective income tax rate | 24.3% | 11.0% | - The Q1 2025 provision includes a net discrete income tax expense of $0.5 million, primarily a $2.6 million valuation allowance against deferred tax assets of a foreign subsidiary[64] - A tax audit in Denmark has proposed tax assessments for 2015-2021 of approximately $138.0 million (DKK 951.5 million), excluding interest, which could be material[67] Note 12. Business Segments The company operates in three segments: aviation, land, and marine. For Q1 2025, the aviation segment reported an operating income of $56.2 million, while the land segment incurred an operating loss of $45.3 million, and the marine segment reported an operating income of $14.8 million. Overall, consolidated income from operations was $25.7 million before unallocated corporate expenses Segment Operating Income (Loss) (Millions): | Segment | Q1 2025 | Q1 2024 | | :-------- | :------ | :------ | | Aviation | $56.2 | $44.0 | | Land | $(45.3) | $18.5 | | Marine | $14.8 | $26.8 | | Total Operating Income - segment profit (loss) | $25.7 | $89.2 | Segment Revenue (Millions): | Segment | Q1 2025 | Q1 2024 | | :-------- | :------ | :------ | | Aviation | $4,654.2 | $5,144.2 | | Land | $2,865.4 | $3,416.6 | | Marine | $1,932.9 | $2,390.5 | Total Assets by Reportable Segment (Millions): | Segment | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Aviation segment | $2,466.6 | $2,548.2 | | Land segment | $2,989.1 | $2,970.6 | | Marine segment | $833.5 | $929.6 | | Total reportable segment assets | $6,289.2 | $6,448.5 | Note 13. Earnings Per Common Share For Q1 2025, the company reported a basic and diluted loss per common share of $(0.37), a significant decrease from basic EPS of $0.46 and diluted EPS of $0.45 in Q1 2024, primarily due to the net loss attributable to World Kinect Earnings Per Common Share (per share amounts): | Metric | Q1 2025 | Q1 2024 | | :------------------------------------- | :------ | :------ | | Basic earnings (loss) per common share | $(0.37) | $0.46 | | Diluted earnings (loss) per common share | $(0.37) | $0.45 | - The net loss attributable to World Kinect was $(21.1) million in Q1 2025, compared to net income of $27.4 million in Q1 2024[72] Note 14. Restructuring and Exit Activities In Q1 2025, the company initiated a company-wide transformation, recognizing $15.0 million in restructuring charges, primarily severance costs, with an expectation of approximately $30 million in annualized compensation-related savings. This follows 2024 actions to exit certain operations, including the sale of the U.K. land fuels business - Restructuring charges of $15.0 million were recognized during Q1 2025, composed principally of severance costs, with an expectation of approximately $30 million in annualized compensation-related savings[73][84] Accrued Restructuring and Exit Activity Charges (Millions): | Segment | Accrued charges as of Dec 31, 2024 | Restructuring and exit activity charges (Q1 2025) | Paid during the period (Q1 2025) | Accrued charges as of Mar 31, 2025 | | :---------- | :--------------------------------- | :------------------------------------------ | :------------------------------- | :--------------------------------- | | Aviation | — | $2.2 | $(0.5) | $1.6 | | Land | $1.7 | $7.3 | $(3.3) | $5.7 | | Marine | — | $0.4 | $(0.2) | $0.3 | | Corporate | $0.3 | $5.2 | $(1.0) | $4.5 | | Consolidated | $2.0 | $15.0 | $(4.9) | $12.1 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights World Kinect's global energy management business, ongoing restructuring and divestiture efforts (including the Watson Fuels sale), and segment-specific performance. The company experienced a consolidated revenue decline and operating loss in Q1 2025, attributed to lower fuel prices, reduced demand, and significant asset impairment and restructuring charges. Liquidity remains sufficient, supported by cash, credit facilities, and operating cash flows - World Kinect Corporation is a global energy management company primarily engaged in the distribution of fuel and related products and services in the aviation, land, and marine transportation industries[82] - The company initiated a company-wide transformation in Q1 2025, resulting in $15.0 million in restructuring charges and expected annualized compensation-related savings of approximately $30 million[84] - Consolidated revenue for Q1 2025 decreased by 14% to $9.5 billion, and gross profit decreased by 9% to $230.4 million, leading to an operating loss of $6.6 million[94][95] - The company believes its cash and cash equivalents, available funds from its Credit Facility, and cash flows from operations are sufficient to fund working capital and capital expenditure requirements for at least the next twelve months[112] Business Overview World Kinect Corporation is a global energy management company focused on fuel distribution and related services across aviation, land, and marine transportation, also supplying natural gas and power and sustainability-related products - The company is a global energy management company offering fulfillment and related services across the aviation, marine, and land-based transportation sectors, and supplies natural gas and power in the United States and Europe[82] Restructuring and Exit Activities The company is undergoing a company-wide transformation, initiating cost management actions in Q1 2025, resulting in $15.0 million in restructuring charges and expected annualized compensation savings of approximately $30 million. This follows 2024 actions to exit certain operations, including the sale of the U.K. land fuels business (Watson Fuels) for $42.8 million - In Q1 2025, the company began a company-wide transformation initiative, recognizing $15.0 million in restructuring charges, primarily severance costs, with an expectation of approximately $30 million in annualized compensation-related savings[84] - In 2024, the company took actions to exit certain operations, including rationalization of assets in its North American land business and disposal of operations in Brazil[83] - The sale of WFL (UK) Ltd. (U.K. land fuels business) closed in April 2025 for total estimated proceeds of $42.8 million[83] Reportable Segments The company operates in aviation, land, and marine segments. The aviation segment has seen growth and higher returns, benefiting from working capital management and divesting Avinode Group. The land segment is focused on improving asset utilization and realigning operations, including recent divestitures. The marine segment is positioned for moderate earnings in stable markets and additional value in volatile conditions - Aviation segment has benefited from growth in fuel and related service offerings, enhanced logistics, and geographic expansion, achieving higher returns since 2023 through working capital management[86] - The land segment focuses on improving asset utilization and realigning its operational platform, including exiting certain operations in North America and Brazil in 2024, and the Watson Fuels sale in April 2025[88] - The marine business traditionally benefits from elevated fuel prices and volatility, and a constrained credit environment, positioned to generate moderate earnings in stable markets and additional value in volatile markets[89] Macroeconomic Environment The company faces ongoing uncertainty from U.S. trade policy, which can lead to volatility in global markets and impact demand. While inflation decelerated in 2024, a significant or prolonged period of trade uncertainty or high inflation, along with higher interest rates, could adversely affect results by increasing costs and interest expense - Significant uncertainty remains regarding the impact of U.S. trade policy on international trade and demand for global transportation services, potentially leading to volatility in financial and commodity markets[90] - Inflation decelerated in 2024, but a prolonged period of trade uncertainty or high inflation, along with higher interest rates, could adversely impact the company's results of operations[90][92] - The company mitigates the impact of increases in fuel prices through comprehensive hedging programs and financial derivative contracts[91] Results of Operations Consolidated revenue for Q1 2025 decreased by 14% to $9.5 billion, leading to a 9% decrease in gross profit to $230.4 million and a shift from operating income to an operating loss of $6.6 million. This was primarily driven by lower average fuel prices and volumes across all segments, coupled with increased operating expenses from asset impairments and restructuring charges Consolidated Results of Operations Consolidated revenue for Q1 2025 decreased by 14% to $9.5 billion, and gross profit decreased by 9% to $230.4 million. The company reported an operating loss of $6.6 million, a significant decline from an operating income of $63.3 million in Q1 2024, primarily due to increased operating expenses from asset impairments and restructuring charges. Net non-operating expense decreased by $11.3 million due to lower interest expense and higher foreign currency exchange gains Consolidated Results of Operations (Millions, except per share amounts): | Metric | Q1 2025 | Q1 2024 | | :-------------------------------- | :------ | :------ | | Revenue | $9,452.5 | $10,951.4 | | Gross profit | $230.4 | $254.1 | | Total operating expenses | $237.0 | $190.8 | | Income (loss) from operations | $(6.6) | $63.3 | | Net income (loss) attributable to World Kinect | $(21.1) | $27.4 | | Basic earnings (loss) per common share | $(0.37) | $0.46 | - The $1.5 billion decrease in revenue was attributable to decreases in the land ($551.2 million), marine ($457.6 million), and aviation ($490.0 million) segments[94] - Operating expenses increased by $46.2 million, or 24%, primarily due to $44.5 million in asset impairment charges and $15.0 million in restructuring charges[96] Aviation Segment Results of Operations Aviation segment revenue decreased by 10% to $4.7 billion in Q1 2025, primarily due to lower average jet fuel prices, despite a 2% increase in volumes. Gross profit increased by 7% to $115.7 million, and income from operations rose by 28% to $56.2 million, benefiting from higher profit contribution from European airport locations and physical inventory business, and lower operating expenses post-Avinode sale Aviation Segment Results of Operations (Millions, except price per gallon): | Metric | Q1 2025 | Q1 2024 | | :-------------------------- | :------ | :------ | | Revenue | $4,654.2 | $5,144.2 | | Gross profit | $115.7 | $108.4 | | Income (loss) from operations | $56.2 | $44.0 | | Aviation segment volumes (gallons) | 1,700.2 | 1,673.1 | | Aviation segment average price per gallon | $2.50 | $2.86 | - The increase in gross profit was primarily attributable to higher profit contribution from operated airport locations in Europe, physical inventory business, and business and general aviation activities[100] - Operating expenses decreased primarily due to lower compensation and general and administrative expenses associated with the Avinode sale[101] Land Segment Results of Operations Land segment revenue decreased by 16% to $2.9 billion in Q1 2025, driven by lower average fuel prices and a 6% decrease in volumes due to the sale of the Brazil fuel business and asset rationalization. Gross profit declined by 19% to $79.0 million, and the segment reported an operating loss of $45.3 million, a significant drop from a $18.5 million income in Q1 2024, primarily due to lower profit contribution and increased operating expenses from asset impairments and restructuring Land Segment Results of Operations (Millions, except price per gallon): | Metric | Q1 2025 | Q1 2024 | | :-------------------------- | :------ | :------ | | Revenue | $2,865.4 | $3,416.6 | | Gross profit | $79.0 | $97.3 | | Income (loss) from operations | $(45.3) | $18.5 | | Land segment volumes (gallons) | 1,494.3 | 1,598.1 | | Land segment average price per gallon | $1.92 | $2.14 | - The decrease in revenue was driven by lower average fuel prices (10% decrease) and a decrease in total volumes (6% decrease), primarily attributable to the sale of the Brazil fuel business and asset rationalization in North America[103] - Operating expenses increased due to asset impairment charges recognized in connection with the Watson Fuels sale and restructuring charges during Q1 2025[105] Marine Segment Results of Operations Marine segment revenue decreased by 19% to $1.9 billion in Q1 2025, driven by lower average fuel prices and a 14% decrease in volumes due to reduced demand and market uncertainty. Gross profit declined by 26% to $35.7 million, and income from operations decreased by 45% to $14.8 million, primarily due to lower bunker fuel prices, reduced volatility, and lower margins in resale and physical businesses Marine Segment Results of Operations (Millions, except price per metric ton): | Metric | Q1 2025 | Q1 2024 | | :-------------------------- | :------ | :------ | | Revenue | $1,932.9 | $2,390.5 | | Gross profit | $35.7 | $48.4 | | Income (loss) from operations | $14.8 | $26.8 | | Marine segment volumes (metric tons) | 3.7 | 4.3 | | Marine segment average price per metric ton | $519.49 | $552.04 | - The decrease in gross profit was principally due to lower bunker fuel prices, reduced volatility, and lower margins in resale and physical businesses as a result of increasing market uncertainty[107] Liquidity and Capital Resources The company believes its cash, Credit Facility, and operating cash flows are sufficient to fund working capital and capital expenditures for the next twelve months. Liquidity is influenced by customer receipts, supplier payments, and fuel prices. Key liquidity sources include $350.0 million Convertible Notes due 2028 and a $1.5 billion revolving Credit Facility, which has covenants that can impact availability - The company believes its cash and cash equivalents as of March 31, 2025, and available funds from its Credit Facility, together with cash flows generated by operations, are sufficient to fund working capital and capital expenditure requirements for at least the next twelve months[112] - Key liquidity sources include $350.0 million aggregate principal amount of 3.250% Convertible Senior Notes due 2028 and a revolving credit facility of up to $1.5 billion under the Fourth Amended and Restated Credit Agreement[113][114] - Availability under the Credit Facility is limited by covenants, including a consolidated total leverage ratio of not more than 4.75 to 1[114][115] Cash Flows For Q1 2025, net cash provided by operating activities increased slightly to $114.4 million, driven by RPA activity and tax refunds, offset by derivative activities. Net cash used in investing activities decreased to $5.8 million due to lower capital expenditures and notes receivable repayments. Net cash used in financing activities significantly decreased to $32.4 million, primarily due to lower deferred acquisition payments and net debt repayments, despite common stock repurchases Major Categories of Cash Flows (Millions): | Cash Flow Activity | Q1 2025 | Q1 2024 | | :----------------------------------- | :------ | :------ | | Net cash provided by operating activities | $114.4 | $110.2 | | Net cash provided by (used in) investing activities | $(5.8) | $(16.9) | | Net cash provided by (used in) financing activities | $(32.4) | $(64.3) | - The $4.1 million increase in operating cash flows was principally due to increased cash provided by RPA activity and the collection of transaction tax refunds[121] - Net cash used in financing activities decreased primarily due to lower payments of deferred consideration for acquisitions ($0.4 million in Q1 2025 vs. $50.7 million in Q1 2024) and net repayments under the Credit Facility[123] Critical Accounting Estimates The company's critical accounting estimates, including impairment assessments of goodwill, long-lived assets, and equity investments, remain unchanged from the 2024 10-K Report. The land reporting unit is considered at risk as of March 31, 2025, due to its fair value not exceeding its carrying amount by more than 10% - There have been no material changes to the Critical Accounting Estimates disclosed in the 2024 10-K Report[125] - The land reporting unit is considered at risk as of March 31, 2025, as its fair value does not exceed its carrying amount by more than 10%[126] Goodwill Balances by Reporting Unit (March 31, 2025, Millions): | Reporting Unit | Goodwill Balance | | :------------- | :--------------- | | Land | $831.9 | | Aviation | $354.5 | Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the company's exposures to commodity price, interest rate, or foreign currency risk since December 31, 2024 - No material changes to the company's exposures to commodity price, interest rate, or foreign currency risk since December 31, 2024[129] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025. There were no material changes in internal control over financial reporting during the three months ended March 31, 2025 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025[132] - There were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the three months ended March 31, 2025[133] PART II. Other Information This section details legal proceedings, equity security sales, director trading plans, and required exhibits Item 1. Legal Proceedings The company is involved in various legal and tax proceedings, including ongoing tax audits in the U.S. and foreign jurisdictions (e.g., Denmark, South Korea) and claims arising in the ordinary course of business. While no current proceedings are expected to have a material adverse effect, an unfavorable resolution of any matter could be material to a specific reporting period - The company is under review by the IRS and various other domestic and foreign tax authorities regarding income tax and indirect tax matters[136] - The company is a party to various claims, complaints, and proceedings arising in the ordinary course of business, including environmental, commercial, governmental contract, and personal injury claims[137] - No current claim, complaint, or proceeding is expected to have a material adverse effect on the company's business or financial condition, but an adverse resolution could be material for a particular reporting period[139] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2025, the company repurchased 351 thousand shares of common stock at an average price of $28.38 per share, totaling approximately $10.0 million. As of March 31, 2025, approximately $227.0 million remained available under the existing stock repurchase authorizations Issuer Purchases of Equity Securities (Q1 2025): | Metric | Value | | :-------------------------------- | :---- | | Total Number of Shares Purchased | 351 thousand | | Average Price Paid Per Share | $28.38 | | Approximate Dollar Value of Shares Purchased | $10.0 million | | Approximate Dollar Value of Shares that May Yet Be Purchased | $227.0 million | - The company has two stock repurchase programs, approved in March 2020 and September 2024, authorizing a total of $400.0 million in common stock repurchases, with no expiration date[140] Item 5. Other Information A director, Jorge Benitez, adopted a Rule 10b5-1 trading plan on March 6, 2025, for the sale of up to 13,000 shares of common stock, expiring by March 6, 2026. No other officers or directors adopted or terminated such plans in Q1 2025 - On March 6, 2025, director Jorge Benitez adopted a Rule 10b5-1 trading plan for the sale of up to 13,000 shares of common stock, expiring by March 6, 2026[141] - No other officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended March 31, 2025[142] Item 6. Exhibits This section lists the exhibits filed as part of the 10-Q Report, including certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32.1) and XBRL formatted financial statements (Exhibits 101, 104) - Exhibits include certifications from the Chief Executive Officer (31.1) and Chief Financial Officer (31.2) pursuant to Rule 13a-14(a) or Rule 15d-14(a), and under Section 906 of the Sarbanes-Oxley Act of 2002 (32.1)[143] - XBRL formatted financial statements (Condensed Consolidated Balance Sheets, Income, Equity, Cash Flows, and Notes) are filed as Exhibit 101, with the cover page interactive file as Exhibit 104[143] SIGNATURES This section provides the official signatures of the company's executive officers for the quarterly report Signatures The Quarterly Report on Form 10-Q was signed on behalf of World Kinect Corporation by Michael J. Kasbar, Chairman and Chief Executive Officer, and Ira M. Birns, President and Chief Financial Officer, on April 25, 2025 - The report was signed by Michael J. Kasbar, Chairman and Chief Executive Officer, and Ira M. Birns, President and Chief Financial Officer[146] - The signing date for the report was April 25, 2025[146]