# World Kinect Corp: Form 10-Q for the period ended Mar 31, 2023

- Company: [World Kinect Corp](/companies/wkc.md) (CIK 789460)
- Form: 10-Q
- Filed: 2023-04-28
- Accepted by EDGAR: Apr 28, 2023, 15:40 ET
- Period: 2023-03-31
- Accession: 0001628280-23-014148
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/789460/000162828023014148/int-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/789460/000162828023014148/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $12.48bn | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-01-01 to 2023-03-31 | $12.22bn | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-01-01 to 2023-03-31 | $262.7m | us-gaap:GrossProfit |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | $64.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $35.9m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | $4.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | $22.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | $0.36 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | $0.37 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 62,800,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | $143.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $18.8m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-01-01 to 2023-03-31 | $8.6m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2023-01-01 to 2023-03-31 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-03-31 | $216.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $4.61bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $7.49bn | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $4.15bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $5.47bn | us-gaap:Liabilities |
| Shareholders' equity | at 2023-03-31 | $2.01bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 34,342 characters.

The following discussion should be read in conjunction with our 2022 10-K Report and the unaudited Condensed Consolidated Financial Statements and related Notes in Item 1 – Financial Statements of this 10-Q Report. A reference to a "Note" herein refers to the accompanying Notes to the Condensed Consolidated Financial Statements contained in Item 1 – Financial Statements. The following discussion may contain forward-looking statements, and our actual results may differ materially from the results suggested by these forward-looking statements. Some factors that may cause our results to differ are disclosed in Item 1A – Risk Factors of our 2022 10-K Report.

### Forward-Looking Statements

This 10-Q Report and the information incorporated by reference in it, or made by us in other reports, filings with the SEC, press releases, teleconferences, industry conferences or otherwise, contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words "believe," "anticipate," "expect," "estimate," "project," "could," "would," "will," "will be," "will continue," "plan," or words or phrases of similar meaning. Specifically, this 10-Q Report includes forward-looking statements regarding (i) the conditions in the aviation, land, and marine markets and their impact on our business, (ii) growth strategies, the impact of fuel prices and our working capital, liquidity, and capital expenditure requirements, (iii) our expectations and estimates regarding tax, legal and accounting matters, including the impact on our financial statements, (iv) our expectations regarding the financial impact and other benefits of previous acquisitions, (v) estimates regarding the financial impact of our derivative contracts, and (vi) our role in the transition to lower carbon alternatives and the impact of our services on such transition. These forward-looking statements are qualified in their entirety by cautionary statements and risk factor disclosures contained in our SEC filings.

These forward-looking statements are estimates and projections reflecting our best judgment and involve risks, uncertainties or other factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Although we believe the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect. Our actual results may differ materially from the future results, performance or achievements expressed or implied by the forward-looking statements.

Important factors that could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking statements include, but are not limited to:

- customer and counterparty creditworthiness and our ability to collect accounts receivable and settle derivative contracts;
- sudden changes in the market price of fuel or extremely high or low fuel prices that continue for an extended period of time;
- adverse conditions in the industries in which our customers operate;
- our inability to effectively mitigate certain financial risks and other risks associated with derivatives and our physical fuel products;
- relationships with our employees and potential labor disputes associated with employees covered by collective bargaining agreements;
- our failure to comply with restrictions and covenants governing our senior revolving credit facility ("Credit Facility") and our senior term loan, including financial covenants;
- the impact of cyber and other information security related incidents;
- changes in the political, economic or regulatory environment generally and in the markets in which we operate, such as the current conflict in Eastern Europe;
- greenhouse gas reduction programs and other environmental and climate change legislation adopted by governments around the world, including cap and trade regimes, carbon taxes, increased efficiency standards and mandates for renewable energy, each of which could increase our operating and compliance costs as well as adversely impact our sales of fuel products;
- changes in credit terms extended to us from our suppliers;
- non-performance of suppliers on their sale commitments and customers on their purchase commitments;
- non-performance of third-party service providers;
- our ability to effectively integrate and derive benefits from acquired businesses;
- our ability to meet financial forecasts associated with our operating plan;
- lower than expected cash flows and revenues, which could impair our ability to realize the value of recorded intangible assets and goodwill;
- the availability of cash and sufficient liquidity to fund our working capital and strategic investment needs;
- currency exchange fluctuations;
- inflationary pressures and their impact on our customers or the global economy, including sudden or significant increases in interest rates or a global recession;
- our ability to effectively leverage technology and operating systems and realize the anticipated benefits;
- failure to meet fuel and other product specifications agreed with our customers;
- environmental and other risks associated with the storage, transportation and delivery of petroleum products;
- reputational harm from adverse publicity arising out of spills, environmental contamination or public perception about the impacts on climate change by us or other companies in our industry;
- risks associated with operating in high-risk locations, including supply disruptions, border closures and other logistical difficulties that arise when working in these areas;
- uninsured or underinsured losses;
- seasonal variability that adversely affects our revenues and operating results, as well as the impact of natural disasters, such as earthquakes, hurricanes and wildfires;
- declines in the value and liquidity of cash equivalents and investments;
- our ability to retain and attract senior management and other key employees;
- changes in U.S. or foreign tax laws, interpretations of such laws, changes in the mix of taxable income among different tax jurisdictions, or adverse results of tax audits, assessments, or disputes;
- our failure to generate sufficient future taxable income in jurisdictions with material deferred tax assets and net operating loss carryforwards;
- the impact of the U.K.'s exit from the European Union, known as Brexit, on our business, operations and financial condition;
- our ability to comply with U.S. and international laws and regulations, including those related to anti-corruption, economic sanction programs and environmental matters;
- the outcome of litigation and other proceedings, including the costs associated in defending any actions; and
- other risks, including those described in Item 1A – Risk Factors in our 2022 10-K Report, and those described from time to time in our other filings with the SEC.

We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to publicly update any of them in light of new information, future events, or otherwise. Any public statements or disclosures by us following this report that modify or impact any of the forward-looking statements contained in or accompanying this 10-Q Report will be deemed to modify or supersede such forward-looking statements.

For these statements, we claim the protection of the safe harbor for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended (the "Exchange Act").

### Business Overview

We are a leading global energy management company, offering a broad suite of energy advisory, management and fulfillment services, digital and other technology solutions, as well as sustainability products and services across the energy product spectrum. We are principally involved in providing energy procurement and related products and services to commercial and industrial customers in the aviation, land, and marine transportation industries. We have also expanded our product and service offerings to include energy advisory services, sustainability and renewable energy solutions, as well as supply fulfillment for natural gas and power. We are continuing to focus on advancing the energy transition to lower carbon alternatives through expanding our portfolio of energy solutions and providing customers with greater access to sustainably sourced energy as well as mechanisms to compensate for residual emissions in the near term.

### Reportable Segments

We operate in three reportable segments consisting of aviation, land, and marine. For additional discussion on our reportable segments, see "Reportable Segments" under Part I, Item 1 – Business in our 2022 10-K Report. Selected financial information with respect to our business segments is provided in Note 11. Business Segments.

#### Aviation Segment

Our aviation segment has benefited from growth in our fuel and related services offerings, as well as our enhanced logistics capabilities and the geographic expansion of our aviation fueling operations into additional international airport locations. As part of our growth strategy, we have also increased the level of inventory that we hold in order to meet the needs of our customers. While we generally enter into financial derivative contracts to mitigate price risk exposure associated with our inventory, depending on market pricing dynamics, we may experience negative impacts on our results, particularly in a market pricing environment experiencing severe backwardation, such as in the first half of 2022, where oil futures forward prices traded at significantly lower levels than the then current market price.

#### Land Segment

We believe our land segment is well-positioned to continue growing market share, both organically and through leveraging the capabilities of our acquisitions, including Flyers, which we acquired in January 2022, serving to further enhance our business to deliver value-added solutions to our land fuel customers.

We have also expanded our product and service offerings to include energy advisory services, sustainability solutions, as well as supply fulfillment for natural gas and power. We continue to focus on supporting the energy transition through various initiatives and expanding our sustainability offerings, including renewable fuel products, and carbon management and renewable energy solutions through World Kinect, our global energy management brand. We are continuing to invest in talent in this area, which we believe will help accelerate growth in these activities.

#### Marine Segment

Due to the generally spot nature of sales in our marine business, we have traditionally benefited from elevated fuel prices and volatility, supply uncertainty, and a constrained credit environment. Over the last several years, we have spent a considerable amount of time reorganizing our business to drive internal efficiencies so that we can generate relatively moderate levels of earnings in stable markets and yet remain poised to provide additional value in volatile and credit constrained markets. In 2022, our marine segment delivered exceptional results due to the market conditions arising from the dramatic increase in global oil prices and higher interest rates, as well as the disruption of traditional supply patterns and related price volatility. However, with lower global oil prices and reduced market volatility forecasted for 2023, we expect our marine segment's performance to be materially lower than the extraordinary results produced in 2022.

### Macroeconomic Environment

After being relatively moderate in recent years, inflation in the United States and other jurisdictions in which we do business increased significantly in late 2021 into 2022, primarily driven by supply chain disruptions, labor shortages and increased commodity prices, which generally resulted in higher costs in 2022 and the first quarter of 2023. However, to the extent that a rising cost environment impacts our results, there are typically offsetting benefits either inherent in certain parts of our business or that may result from proactive measures we take to reduce the impact of inflation on our net operating results. These benefits can include higher commodity prices that typically result in a constrained credit environment, often creating favorable market conditions that increase demand for our services, as well as our ability to renegotiate prices due to many of our sales contracts being 12 months or less in duration.

Additionally, we take measures to mitigate the impact of increases in fuel prices through comprehensive hedging programs and the use of financial derivative contracts.

For these reasons, the increased cost environment, caused in part by inflation, has not had a material impact on our historical results of operations for the periods presented in this report. However, a significant or prolonged period of high inflation, particularly when combined with rising interest rates due to actions taken by governments to attempt to control inflation, could adversely impact our results if costs, including employee compensation driven by competitive job market conditions, were to increase at a rate greater than the increase in the revenues we generate. Higher interest rates also typically increase the interest expense associated with our credit arrangements with banks and other parties that serve as important sources of liquidity for us, which can therefore negatively impact our results of operations for a particular period.

See “We extend credit to most of our customers in connection with their purchase of fuel and services from us, and our financial condition, results of operations and cash flows will be adversely affected if we are unable to collect accounts receivable,” “Changes in the market price of fuel may have a material adverse effect on our business,” “Our business depends on our ability to adequately finance our capital requirements and fund our investments, which, if not available to us, would impact our ability to conduct our operations,” "Significant inflation and higher interest rates may adversely affect our business and financial condition," and “Our derivative transactions with customers, suppliers, merchants and financial institutions expose us to price and credit risks, which could have a material adverse effect on our business” in Item 1A – Risk Factors in our 2022 10-K Report for additional discussion of these risks.

### Results of Operations

#### Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

#### Consolidated Results of Operations

The following provides a summary of our consolidated results of operations for the periods indicated (in millions, except per share amounts):

|  | For the Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Revenue | $12,481.6 | $12,382.0 |
| Cost of revenue | 12,218.9 | 12,151.1 |
| Gross profit | 262.7 | 230.9 |
| Operating expenses: |  |  |
| Compensation and employee benefits | 119.2 | 114.9 |
| General and administrative | 79.0 | 74.7 |
| Total operating expenses | 198.2 | 189.6 |
| Income (loss) from operations | 64.6 | 41.3 |
| Non-operating income (expenses), net: |  |  |
| Interest expense and other financing costs, net | (34.3) | (14.3) |
| Other income (expense), net | (3.5) | 5.7 |
| Total non-operating income (expense), net | (37.8) | (8.7) |
| Income (loss) before income taxes | 26.7 | 32.6 |
| Provision for income taxes | 4.2 | 6.4 |
| Net income (loss) including noncontrolling interest | 22.6 | 26.3 |
| Net income (loss) attributable to noncontrolling interest | (0.2) | (0.1) |
| Net income (loss) attributable to World Fuel | $22.8 | $26.3 |
| Basic earnings (loss) per common share | $0.37 | $0.42 |
| Diluted earnings (loss) per common share | $0.36 | $0.41 |

*Revenue.* Our consolidated revenue for the three months ended March 31, 2023 was $12.5 billion, an increase of $99.6 million, or 1%, compared to the three months ended March 31, 2022, due to higher prices and volumes in the aviation segment offset by decreased revenues in the marine and land segments, as discussed further below.

*Gross Profit.* Our gross profit for the three months ended March 31, 2023 was $262.7 million, an increase of $31.8 million, or 14%, compared to the three months ended March 31, 2022, attributable to increased gross profit of $36.4 million and $5.1 million in the aviation and marine segments, respectively, partially offset by a decrease of $9.6 million in the land segment, as discussed further below.

*Operating Expenses.* Total operating expenses for the three months ended March 31, 2023 were $198.2 million, an increase of $8.5 million, or 4%, compared to the three months ended March 31, 2022. The increase in operating expenses was primarily driven by an increase in general and administrative expenses and higher compensation costs as business activities continued to normalize.

*Non-Operating Income (Expense), net.* For the three months ended March 31, 2023, we had net non-operating expense of $37.8 million compared to net non-operating expense of $8.7 million for the three months ended March 31, 2022. The increase of $29.2 million during the three months ended March 31, 2023 was primarily attributable to an increase in interest expense as well as foreign currency losses. The increase in interest expense was primarily driven by higher interest rates and an increase in fees associated with sales of accounts receivable under our Receivables Purchase Agreements ("RPAs").

*Income Taxes*. For the three months ended March 31, 2023, we recognized an income tax expense of $4.2 million, compared to income tax expense of $6.4 million for the three months ended March 31, 2022. The decrease of $2.2 million was primarily attributable to differences in discrete tax items. See Note 8. Income Taxes for additional information.

### Aviation Segment Results of Operations

The following provides a summary of the aviation segment results of operations for the periods indicated (in millions, except price per gallon):

|  | For the Three Months Ended March 31, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Revenue | $6,222.8 | $5,010.5 | $1,212.3 |
| Gross profit | $100.6 | $64.2 | $36.4 |
| Operating expenses | 66.6 | 56.7 | 9.9 |
| Income (loss) from operations | $34.0 | $7.5 | $26.5 |
| Operational metrics: |  |  |  |
| Aviation segment volumes (gallons) | 1,777.1 | 1,655.4 | 121.7 |
| Aviation segment average price per gallon | $3.30 | $2.91 | $0.38 |

Revenues in our aviation segment were $6.2 billion for the three months ended March 31, 2023, an increase of $1.2 billion, or 24%, compared to the three months ended March 31, 2022. The increase in revenue was driven by higher average prices and increased volumes. Average jet fuel price per gallon sold increased by 13% in the three months ended March 31, 2023 compared to the three months ended March 31, 2022. Total aviation volumes increased by 121.7 million gallons, or 7%, to 1.8 billion gallons, driven largely by growth in international passenger airline demand.

Aviation segment gross profit for the three months ended March 31, 2023 was $100.6 million, an increase of $36.4 million, or 57%, compared to the three months ended March 31, 2022. The increase was attributable to higher contribution from growth in volume and related service offerings during the quarter, as well as the impact of inventory losses driven by significant price volatility and backwardation that occurred during the quarter ended March 31, 2022.

Income from operations in our aviation segment for the three months ended March 31, 2023 was $34.0 million, an increase of $26.5 million, or 352%, compared to the three months ended March 31, 2022. The higher gross profit discussed above was partially offset by a $9.9 million increase in operating expenses arising from higher compensation costs and an increase in marketing and travel-related expenses to support the growth in business activity and improved financial performance.

### Land Segment Results of Operations

The following provides a summary of the land segment results of operations for the periods indicated (in millions, except price per gallon):

|  | For the Three Months Ended March 31, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Revenue | $3,891.3 | $4,380.8 | $(489.6) |
| Gross profit | $110.1 | $119.8 | $(9.6) |
| Operating expenses | 83.9 | 86.4 | (2.4) |
| Income (loss) from operations | $26.2 | $33.4 | $(7.2) |
| Operational metrics: |  |  |  |
| Land segment volumes (gallons) (1) | 1,564.7 | 1,582.6 | (17.9) |
| Land segment average price per gallon | $2.49 | $2.77 | $(0.28) |

(1) Includes gallons and gallon equivalents of British Thermal Units (BTU) for our natural gas sales and Kilowatt Hours (kWh) for our World Kinect power business.

Revenues in our land segment were $3.9 billion for the three months ended March 31, 2023, a decrease of $489.6 million, or 11%, compared to the three months ended March 31, 2022. The decrease in revenue was principally driven by an 10% decrease in prices for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. Total volumes decreased by 17.9 million, or 1%, to 1.6 billion gallons or gallon equivalents in the three months ended March 31, 2023 compared to the three months ended March 31, 2022 driven by extreme weather conditions experienced in our liquid fuel business in North America, partially offset by increased activity in our natural gas business.

Our land segment gross profit for the three months ended March 31, 2023 was $110.1 million, a decrease of $9.6 million, or 8%, compared to the three months ended March 31, 2022. The decrease in gross profit was primarily attributable to extreme weather conditions experienced in our liquid fuel business in North America and lower contributions from our U.K. business, which benefited from significant price volatility in the first quarter of 2022, partially offset by improved performance in our natural gas, power and sustainability-related offerings.

In our land segment, income from operations for the three months ended March 31, 2023 was $26.2 million, a decrease of $7.2 million, or 22%, compared to the three months ended March 31, 2022. The decrease in gross profit discussed above was partially offset by a decrease in operating expenses principally related to lower general and administrative costs.

### Marine Segment Results of Operations

The following provides a summary of the marine segment results of operations for the periods indicated (in millions, except price per metric ton):

|  | For the Three Months Ended March 31, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Revenue | $2,367.5 | $2,990.6 | $(623.1) |
| Gross profit | $52.0 | $47.0 | $5.1 |
| Operating expenses | 21.2 | 23.8 | (2.6) |
| Income (loss) from operations | $30.8 | $23.1 | $7.6 |
| Operational metrics: |  |  |  |
| Marine segment volumes (metric tons) | 4.3 | 4.7 | (0.4) |
| Marine segment average price per metric ton | $553.16 | $637.61 | $(84.45) |

Revenues in our marine segment were $2.4 billion for the three months ended March 31, 2023, a decrease of $623.1 million, or 21%, compared to the three months ended March 31, 2022. The decrease in revenue was principally driven by a 13% decrease in the average price per metric ton of bunker fuel sold in the three months ended March 31, 2023 compared to the three months ended March 31, 2022. Total volumes decreased by 0.4 million metric tons, or 9%, from 4.3 million metric tons for the three months ended March 31, 2023 compared to 4.7 million metric tons for three months ended March 31, 2022 primarily due to reduced demand in our core resale businesses.

Marine segment gross profit for the three months ended March 31, 2023 was $52.0 million, an increase of $5.1 million, or 11%, compared to the three months ended March 31, 2022 principally as a result of a higher interest rate and credit-constrained environment.

Our marine segment income from operations for the three months ended March 31, 2023 was $30.8 million, an increase of $7.6 million, or 33%, compared to the three months ended March 31, 2022, primarily due to the increase in gross profit as well as a $2.6 million decrease in operating expenses, largely driven by lower compensation costs.

### Liquidity and Capital Resources

Liquidity to fund working capital, as well as make strategic investments to further our growth strategy, is a significant priority for us. Our views concerning liquidity are based on currently available information and if circumstances change significantly, the future availability of trade credit or other sources of financing may be reduced, and our liquidity would be adversely affected accordingly.

#### Sources of Liquidity and Factors Impacting Our Liquidity

Our liquidity, consisting principally of cash and availability under our Credit Facility, fluctuates based on a number of factors, including the timing of receipts from our customers and payments to our suppliers, changes in fuel prices, as well as our financial performance.

Based on the information currently available, we believe that our cash and cash equivalents as of March 31, 2023 and available funds from our Credit Facility, as described below, together with cash flows generated by operations, are sufficient to fund our working capital and capital expenditure requirements for at least the next twelve months.

*Credit Agreement.* The Fourth Amended and Restated Credit Agreement (as amended, the "Credit Agreement"), matures in April 2027 and provides for a term loan as well as a revolving credit facility of $1.5 billion (the "Credit Facility"). Our availability under the Credit Facility is limited by, among other things, our consolidated total leverage ratio, which is defined in the Credit Agreement and is based, in part, on our consolidated earnings before interest, taxes, depreciation and amortization, and share-based compensation, with such adjustments as specified therein, for the four immediately preceding fiscal quarters. The Credit Agreement generally limits the total amount of indebtedness we may incur to a consolidated total leverage ratio of not more than 4.75 to 1.

As a result of the foregoing, as well as other covenants and restrictions contained in our Credit Agreement, our availability under the Credit Facility may fluctuate from period to period. In addition, our failure to comply with the covenants contained in our Credit Agreement could result in an event of default. An event of default, if not cured or waived, would permit acceleration of any outstanding indebtedness under the Credit Facility and our term loan, trigger cross-defaults under certain other agreements to which we are a party, and impair our ability to obtain working capital advances and issue letters of credit, which would have a material adverse effect on our business, financial condition, results of operations and cash flows. See Note 6. Debt, Interest Income, Expense, and Other Finance Costs for additional information.

*Receivables Purchase Agreements.* We also have accounts receivable programs under RPAs that allow us to sell a specified amount of qualifying accounts receivable and receive cash consideration equal to the total balance, less an associated fee, which varies based on the outstanding accounts receivable at any given time. The RPAs provide the constituent banks with the ability to add or remove customers from these programs in their discretion based on, among other things, the level of risk exposure the bank is willing to accept with respect to any particular customer. The fees the banks charge us to purchase the receivables from these customers can also be impacted for these reasons. See Note 2. Accounts Receivable for additional information.

#### Cash Flows

The following table reflects the major categories of cash flows for the three months ended March 31, 2023 and 2022 (in millions). For additional details, please see the unaudited Condensed Consolidated Statements of Cash Flows in this Quarterly Report on Form 10-Q.

|  | For the Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash provided by (used in) operating activities | $143.0 | $(72.0) |
| Net cash provided by (used in) investing activities | (23.5) | (657.3) |
| Net cash provided by (used in) financing activities | (192.8) | 343.7 |

*Operating Activities.* For the three months ended March 31, 2023, net cash provided by operating activities was $143.0 million, compared to $72.0 million net cash used during the three months ended March 31, 2022. The $215.0 million increase in operating cash flows was principally due lower average fuel prices compared to the prior year, which reduced our cost of inventory and decreased both our accounts receivable and accounts payable (net of activity under our RPA programs, as discussed under "Sources of Liquidity and Factors Impacting Our Liquidity" above) offset by increased interest payments driven by higher interest rates. These operating cash inflows were partially offset by a decrease in net income (see "Results of Operations" for further details of the drivers impacting our net income) adjusted for noncash items (primarily related to unrealized derivative activity and foreign exchange losses) of $95.6 million.

*Investing Activities.* For the three months ended March 31, 2023, net cash used in investing activities was $23.5 million, compared to net cash used of $657.3 million during the three months ended March 31, 2022. The net cash used in investing activities for the three months ended March 31, 2023 was primarily driven by capital expenditures of $18.8 million. Net cash used in investing activities for the three months ended March 31, 2022 was principally driven by $639.4 million net cash paid for the acquisition of Flyers, as discussed in Note 3. Acquisitions, and $16.7 million for capital expenditures.

*Financing Activities.* For the three months ended March 31, 2023, net cash used in financing activities was $192.8 million compared to net cash provided of $343.7 million for the three months ended March 31, 2022. The net cash used in financing activities for the three months ended March 31, 2023 was primarily attributable to net repayments under our Credit Facility of $123.1 million, payments of deferred consideration related to prior acquisitions of $60.8 million, and dividend payments of $8.6 million. Net cash provided by financing activities for the three months ended March 31, 2022 of $343.7 million was primarily driven by net borrowings of debt under our Credit Facility of $376.0 million, primarily driven by incremental borrowings related to the acquisition of Flyers, partially offset by common stock repurchases of $13.7 million, payments for deferred consideration related to prior acquisitions of $10.0 million, and dividend payments on our common stock of $7.4 million.

#### Future Uses of Liquidity

Cash is primarily used to fund working capital to support our operations as well as for strategic acquisitions and investments. There were no material changes in our expected future uses of liquidity from December 31, 2022 to March 31, 2023. For a discussion of these matters, refer to "Liquidity and Capital Resources" under Part II, Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2022 10-K Report.

### Critical Accounting Estimates

The unaudited Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America. The significant accounting policies used are disclosed in Item 15 – Financial Statement Schedules, Note 1. Basis of Presentation, New Accounting Standards and Significant Accounting Policies to the Consolidated Financial Statements in our 2022 10-K report.

We make estimates and assumptions that affect the reported amounts on our unaudited Condensed Consolidated Financial Statements and accompanying Notes as of the date of the unaudited Condensed Consolidated Financial Statements. There have been no material changes to the Critical Accounting Estimates disclosed in our 2022 10-K report.

#### Impairment Assessments of Goodwill, Long-Lived Assets, and Equity Investments

We assess accounting estimates that require consideration of forecasted financial information. Significant judgment is involved in performing these estimates as they are developed based on forecasted assumptions. As of March 31, 2023, the assumptions used in these assessments, particularly the expected growth rates, the profitability embedded in the projected cash flows provided by our legacy and newly acquired businesses, the discount rate and the market-based multiples, were defined based on available information considering current market volatility and geopolitical risks. Management also considered the volatility in the Company's market capitalization and evaluated the potential impact that this volatility may have on the estimated fair value of our reporting units.

Based on the assessments performed, and supported by the available information as of March 31, 2023, we concluded that the carrying value of our long-lived assets and equity investments were recoverable and that the fair value of our land and aviation reporting units were not less than their respective carrying values. If our results differ significantly from our assumptions, such impact could potentially result in impairments.

## Market risk

As filed, 381 characters.

There have been no material changes to our exposures to commodity price, interest rate, or foreign currency risk since December 31, 2022. Please refer to our 2022 10-K Report for a complete discussion of our exposure to these risks.

For information about our derivative instruments at their respective fair value positions as of March 31, 2023, see Note 4. Derivative Instruments.

## Controls and procedures

As filed, 1,849 characters.

### Management's Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer ("CEO") and our Chief Financial Officer ("CFO"), as appropriate, to allow timely decisions regarding required financial disclosure.

As of the end of the period covered by this 10-Q Report, we evaluated, under the supervision and with the participation of our CEO and CFO, the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e). Based upon this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2023.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the three months ended March 31, 2023.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only the reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

Filed Apr 28, 2023.
Source: SEC EDGAR, the filing index for accession 0001628280-23-014148. Last ingested by Listed: Nov 2, 2026, 17:58 ET. No prices; not investment advice.