# World Kinect Corp: Form 10-Q for the period ended Jun 30, 2024

- Company: [World Kinect Corp](/companies/wkc.md) (CIK 789460)
- Form: 10-Q
- Filed: 2024-07-26
- Accepted by EDGAR: Jul 26, 2024, 11:57 ET
- Period: 2024-06-30
- Accession: 0001628280-24-033111
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/789460/000162828024033111/wkc-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/789460/000162828024033111/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $10.97bn | us-gaap:Revenues |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $21.92bn | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $10.72bn | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $21.42bn | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | $245.2m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-01-01 to 2024-06-30 | $499.3m | us-gaap:GrossProfit |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $45.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $108.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $29.2m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $60.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $9.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $13.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $108.3m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $135.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | $1.81 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | $2.25 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | $1.81 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | $2.27 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 60,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 60,300,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | $178.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $32.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2024-01-01 to 2024-06-30 | $18.5m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 6 months, 2024-01-01 to 2024-06-30 | $29.1m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-06-30 | $524.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $4.40bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $7.19bn | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $3.82bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $5.15bn | us-gaap:Liabilities |
| Shareholders' equity | at 2024-06-30 | $2.03bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 49,964 characters.

The following discussion should be read in conjunction with our 2023 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 2023 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 U.S. Securities and Exchange Commission (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) expectations regarding inflation and its impact on us, (ii) the conditions in the aviation, land, and marine markets and their impact on our business, (iii) our growth strategies, including the position of our land segment to gain market share, (iv) the impact of fuel prices and our working capital, liquidity, and capital expenditure requirements, (v) our expectations and estimates regarding tax, legal and accounting matters, including the impact on our financial statements, (vi) our hedging strategy, (vii) estimates regarding the financial impact of our derivative and other trading contracts and (viii) estimated savings arising out of various cost reduction efforts. 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;
- changes in the market prices of energy or commodities 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;
- our ability to achieve the expected level of benefit from our restructuring activities and cost reduction initiatives;
- 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 outstanding indebtedness;
- the impact of cyber and other information technology or security related incidents on us, our customers or other parties;
- changes in the political, economic or regulatory environment generally and in the markets in which we operate, including as a result of the current conflicts in Eastern Europe and the Middle East and the upcoming 2024 U.S. presidential election;
- 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;
- changes in multilateral conventions, treaties, tariffs or other arrangements between or among sovereign nations;
- 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, regulatory investigations and other legal matters, including the associated legal and other costs; and
- other risks, including those described in Item 1A – Risk Factors in our 2023 10-K Report, together with 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 global energy management company offering fulfillment and related services across the aviation, marine, and land-based transportation sectors. We also supply natural gas and power in the United States and Europe along with a growing suite of other sustainability-related products and services. We are principally engaged in the distribution of fuel and related products and services in the aviation, land, and marine transportation industries.

### 2023 Restructuring Plan

In November 2023, we approved and began implementing a restructuring plan to realign our operational focus with the purpose of simplifying our business, enabling us to focus more clearly on growing our core businesses and our new sustainability-related activities, and improving our cost structure. As part of this plan, we identified open positions that were eliminated and other positions that were closed to better align the workforce necessary to execute the revised strategy. During the year ended December 31, 2023, we recognized restructuring charges of $7.2 million, composed of severance and other compensation costs. We also decided to shift future investments away from underperforming businesses and to continue assessing our global office footprint, resulting in impairment charges of $11.2 million during the fourth quarter of 2023. During the first half of 2024, we continued to assess potential initiatives, resulting in additional severance and other compensation cost-related restructuring charges of $2.5 million. In addition, as part of the 2023 Restructuring Plan, within our marine segment we made the decision to cease operations at one of our subsidiaries in Brazil, resulting in the write-off of $3.3 million of VAT credits that are no longer recoverable. We estimate that the plan should result in approximately $21.9 million in annualized compensation-related savings. We completed the restructuring activities during the second quarter of 2024. See Note 15. Restructuring and Exit Activities for additional information.

### 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 2023 10-K Report. Selected financial information with respect to our business segments is provided in Note 13. Business Segments.

#### Aviation Segment

Our aviation segment has benefited from growth in our fuel and related service offerings, as well as our enhanced logistics capabilities and the geographic expansion of our aviation fueling operations into additional international airport locations. Since 2023, we have successfully achieved higher returns in a high interest rate environment, driven in part by targeted improvements in working capital management consistent with our strategy to rationalize lower-return business activity. As part of our business strategy, we hold inventory 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, market pricing dynamics may still negatively impact our results.

In connection with our efforts to sharpen our portfolio of businesses and accelerate growth in our core businesses, we completed our sale of the Avinode Group and our portfolio of aviation FBO software products (the "Avinode sale") during the second quarter of 2024. See Note 3. Acquisitions and Divestitures for additional information.

#### Land Segment

We believe our land segment is well-positioned to continue growing market share organically, in part by improving asset utilization, leveraging the capabilities of our acquisitions, and realigning our operational platform as discussed under "2023 Restructuring Plan" above.

Although 2023 was adversely affected by extraordinary losses associated with an erroneous bid submitted in the Finnish power market, we achieved an increase in profitability from both our natural gas business and our sustainability-related service offerings, driven in part by strong growth in our renewable energy solutions business.

While our land segment faced several challenges during the three months ended June 30, 2024, we continue to focus on supporting the energy transition by expanding our sustainability offerings, including renewable fuel products, as well as carbon management and renewable energy solutions. 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. 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.

### Macroeconomic Environment

Inflation in the United States and other jurisdictions in which we do business increased significantly beginning in late 2021 into 2022, driven in part by supply chain disruptions, labor shortages and increased commodity prices, which generally resulted in higher costs in 2022 and 2023. Inflation, however, is decelerating and we expect will continue to do so gradually in 2024 without a major downturn in activity.

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 many of our customers in connection with their purchase of fuel and services from us, and our business, financial condition, results of operations and cash flows will be adversely affected if we are unable to collect accounts receivable," "Changes in the market prices of energy and commodities 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 2023 10-K Report for additional discussion of these risks.

### Results of Operations

#### Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

#### 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 June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Revenue | $10,965.2 | $10,980.7 |
| Cost of revenue | 10,720.0 | 10,699.0 |
| Gross profit | 245.2 | 281.7 |
| Operating expenses: |  |  |
| Compensation and employee benefits | 119.2 | 125.1 |
| General and administrative | 72.8 | 80.8 |
| Asset impairments | 2.4 | 0.3 |
| Restructuring charges | 5.6 | — |
| Total operating expenses | 200.0 | 206.2 |
| Income (loss) from operations | 45.2 | 75.5 |
| Non-operating income (expenses), net: |  |  |
| Interest expense and other financing costs, net | (27.5) | (32.5) |
| Other income (expense), net | 98.9 | (2.8) |
| Total non-operating income (expense), net | 71.4 | (35.3) |
| Income (loss) before income taxes | 116.6 | 40.3 |
| Provision for income taxes | 9.7 | 9.8 |
| Net income (loss) including noncontrolling interest | 106.9 | 30.5 |
| Net income (loss) attributable to noncontrolling interest | (1.4) | 0.5 |
| Net income (loss) attributable to World Kinect | $108.3 | $29.9 |
| Basic earnings (loss) per common share | $1.81 | $0.48 |
| Diluted earnings (loss) per common share | $1.81 | $0.48 |

*Revenue.* Our consolidated revenue for the three months ended June 30, 2024 was $11.0 billion, a decrease of $15.5 million compared to the three months ended June 30, 2023, attributable to decreased revenue of $349.8 million in our land segment, partially offset by increased revenue of $174.3 million and $160.0 million in our aviation and marine segments, respectively, as discussed further below.

*Gross Profit.* Our gross profit for the three months ended June 30, 2024 was $245.2 million, a decrease of $36.5 million, or 13%, compared to the three months ended June 30, 2023, attributable to decreased gross profit of $30.7 million, $5.3 million, and $0.5 million in our land, marine, and aviation segments, respectively, as discussed further below.

*Operating Expenses.* Total operating expenses for the three months ended June 30, 2024 were $200.0 million, a decrease of $6.1 million compared to the three months ended June 30, 2023. The decrease in operating expenses was primarily driven by lower general and administrative expenses and lower compensation costs associated with the Avinode sale during the second quarter of 2024, as discussed in Note 3. Acquisitions and Divestitures. In addition, general and administrative expenses were lower across the three segments for the three months ended June 30, 2024 due to our continued focus on driving operating efficiencies, incentive compensation costs decreased compared to the prior year principally in our land segment, and credit losses in our aviation segment decreased compared to the prior year. These decreases were partially offset by $5.6 million of restructuring and exit activity charges recognized during the three months ended June 30, 2024 as discussed under "2023 Restructuring Plan" above as well as a $2.1 million increase in asset impairment charges compared to the prior year.

*Non-Operating Income (Expense), net.* For the three months ended June 30, 2024, we had net non-operating income of $71.4 million compared to net non-operating expense of $35.3 million for the three months ended June 30, 2023. The increase in non-operating income of $106.7 million during the three months ended June 30, 2024 was primarily attributable to the $96.0 million gain recognized on the Avinode sale, a decrease in interest expense of $5.7 million driven by a decrease in our average interest rates and daily borrowings, and lower foreign currency losses.

*Income Taxes.* For the three months ended June 30, 2024, we recognized an income tax expense of $9.7 million, compared to income tax expense of $9.8 million for the three months ended June 30, 2023. The decrease of $0.1 million was primarily attributable to lower pre-tax book income, excluding the gain recognized on the Avinode sale, and changes in the mix of our worldwide earnings, partially offset by higher net discrete tax expense, including an additional $9.1 million related to the Avinode sale. See Note 12. 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 June 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Revenue | $5,368.7 | $5,194.4 | $174.3 |
| Gross profit | $127.7 | $128.2 | $(0.5) |
| Operating expenses | 59.7 | 70.1 | (10.4) |
| Income (loss) from operations | $68.0 | $58.1 | $9.9 |
| Operational metrics: |  |  |  |
| Aviation segment volumes (gallons) | 1,825.0 | 1,846.6 | (21.6) |
| Aviation segment average price per gallon | $2.74 | $2.61 | $0.13 |

Revenues in our aviation segment were $5.4 billion for the three months ended June 30, 2024, an increase of $174.3 million, or 3%, compared to the three months ended June 30, 2023. The increase in revenue was driven by higher average prices, partially offset by a decrease in volume compared to the three months ended June 30, 2023. Average jet fuel price per gallon sold increased by 5% in the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Total aviation volumes decreased by 21.6 million gallons, or 1%, to 1.8 billion gallons driven primarily by a reduction in lower margin bulk fuel, partially offset by an increase in commercial passenger activity.

Aviation segment gross profit for the three months ended June 30, 2024 was $127.7 million, a decrease of $0.5 million compared to the three months ended June 30, 2023. The decrease in gross profit during the three months ended June 30, 2024 as compared to the prior year was primarily attributable to the Avinode sale during the second quarter of 2024, largely offset by our continued focus to improve returns, stronger performance in our inventory businesses, and growth at operated airport locations.

Income from operations in our aviation segment for the three months ended June 30, 2024 was $68.0 million, an increase of $9.9 million, or 17%, compared to the three months ended June 30, 2023, driven by decreased operating expenses, partially offset by the decrease in gross profit discussed above. The decrease in operating expenses was primarily attributable to lower general and administrative expenses and lower compensation costs associated with the Avinode sale, as well as a decrease in our provision for credit losses driven by the recovery of a receivable previously written off as uncollectible.

### 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 June 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Revenue | $3,292.4 | $3,642.3 | $(349.8) |
| Gross profit | $80.8 | $111.5 | $(30.7) |
| Operating expenses | 85.0 | 86.9 | (1.8) |
| Income (loss) from operations | $(4.2) | $24.6 | $(28.9) |
| Operational metrics: |  |  |  |
| Land segment volumes (gallons) (1) | 1,449.2 | 1,507.6 | (58.3) |
| Land segment average price per gallon | $2.27 | $2.42 | $(0.14) |

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

Revenues in our land segment were $3.3 billion for the three months ended June 30, 2024, a decrease of $349.8 million, or 10%, compared to the three months ended June 30, 2023. The decrease in revenue was driven by lower average fuel prices and a decrease in volume. Average fuel prices decreased by 6% in the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Total volumes decreased by 58.3 million, or 4%, to 1.4 billion gallons or gallon equivalents in the three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily attributable to our liquid fuel business in North America.

Land segment gross profit for the three months ended June 30, 2024 was $80.8 million, a decrease of $30.7 million, or 28%, compared to the three months ended June 30, 2023. The decrease in gross profit was primarily driven by highly unfavorable market conditions in North America and Brazil, as well as lower profit contribution from our natural gas business as a result of oversupplied market conditions and lower market volatility.

Income (loss) from operations in our land segment for the three months ended June 30, 2024 was a loss of $4.2 million, a decrease of $28.9 million, or 117%, compared to the three months ended June 30, 2023. The decrease in gross profit discussed above was partially offset by a decrease in operating expenses principally related to lower incentive compensation costs as well as lower general and administrative expenses due to our focus on driving operating efficiencies, partially offset by an increase in asset impairment charges compared to the prior year, and $0.9 million of restructuring charges recognized during the three months ended June 30, 2024.

### 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 June 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Revenue | $2,304.1 | $2,144.0 | $160.0 |
| Gross profit | $36.7 | $42.0 | $(5.3) |
| Operating expenses | 26.3 | 22.2 | 4.1 |
| Income (loss) from operations | $10.4 | $19.8 | $(9.4) |
| Operational metrics: |  |  |  |
| Marine segment volumes (metric tons) | 4.2 | 4.2 | — |
| Marine segment average price per metric ton | $553.80 | $509.37 | $44.43 |

Revenues in our marine segment were $2.3 billion for the three months ended June 30, 2024, an increase of $160.0 million, or 7%, compared to the three months ended June 30, 2023. The increase in revenue was driven by a 9% increase in the average price per metric ton of bunker fuel sold. Total volumes were flat compared to the three months ended June 30, 2023.

Marine segment gross profit for the three months ended June 30, 2024 was $36.7 million, a decrease of $5.3 million, or 13%, principally due to reduced market volatility when compared with the three months ended June 30, 2023.

Income from operations in our marine segment for the three months ended June 30, 2024 was $10.4 million, a decrease of $9.4 million, or 48%, compared to the three months ended June 30, 2023, primarily due to the decrease in gross profit discussed above, as well as restructuring and exit activity charges recognized during the three months ended June 30, 2024 as discussed in Note 15. Restructuring and Exit Activities.

#### Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

#### 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 Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Revenue | $21,916.6 | $23,462.3 |
| Cost of revenue | 21,417.2 | 22,917.9 |
| Gross profit | 499.3 | 544.4 |
| Operating expenses: |  |  |
| Compensation and employee benefits | 234.7 | 244.2 |
| General and administrative | 147.9 | 159.8 |
| Asset impairments | 2.4 | 0.3 |
| Restructuring charges | 5.8 | — |
| Total operating expenses | 390.9 | 404.3 |
| Income (loss) from operations | 108.5 | 140.1 |
| Non-operating income (expenses), net: |  |  |
| Interest expense and other financing costs, net | (56.4) | (66.8) |
| Other income (expense), net | 95.0 | (6.3) |
| Total non-operating income (expense), net | 38.6 | (73.1) |
| Income (loss) before income taxes | 147.1 | 67.0 |
| Provision for income taxes | 13.0 | 14.0 |
| Net income (loss) including noncontrolling interest | 134.1 | 53.0 |
| Net income (loss) attributable to noncontrolling interest | (1.6) | 0.3 |
| Net income (loss) attributable to World Kinect | $135.7 | $52.7 |
| Basic earnings (loss) per common share | $2.27 | $0.85 |
| Diluted earnings (loss) per common share | $2.25 | $0.84 |

*Revenue.* Our consolidated revenue for the six months ended June 30, 2024 was $21.9 billion, a decrease of $1.5 billion, or 7%, compared to the six months ended June 30, 2023, attributable to decreased revenue of $904.3 million and $824.5 million in our aviation and land segments, respectively, partially offset by increased revenue of $183.0 million in our marine segment, as discussed further below.

*Gross Profit.* Our gross profit for the six months ended June 30, 2024 was $499.3 million, a decrease of $45.1 million, or 8%, compared to the six months ended June 30, 2023, attributable to decreased gross profit of $43.5 million and $9.0 million in our land and marine segments, respectively, partially offset by increased gross profit of $7.4 million in our aviation segment, as discussed further below.

*Operating Expenses.* Total operating expenses for the six months ended June 30, 2024 were $390.9 million, a decrease of $13.5 million compared to the six months ended June 30, 2023. The decrease in operating expenses was primarily driven by lower general and administrative expenses due to our continued focus on driving operating efficiencies and lower incentive compensation costs principally in our land segment. In addition, operating expenses decreased as a result of the Avinode sale during the second quarter of 2024, as discussed in Note 3. Acquisitions and Divestitures. These decreases were partially offset by $5.8 million of restructuring and exit activity charges recognized during the six months ended June 30, 2024 as discussed under "2023 Restructuring Plan" above as well as a $2.1 million increase in asset impairment charges compared to the prior year.

*Non-Operating Income (Expense), net.* For the six months ended June 30, 2024, we had net non-operating income of $38.6 million compared to net non-operating expense of $73.1 million the six months ended June 30, 2023. The increase in non-operating income of $111.7 million during the six months ended June 30, 2024 was primarily attributable to the $96.0 million gain recognized on the Avinode sale, as discussed in Note 3. Acquisitions and Divestitures. In addition, interest expense decreased by $10.7 million, driven by a decrease in our average interest rates and daily borrowings, as well as fees associated with sales of accounts receivable under our RPAs.

*Income Taxes.* For the six months ended June 30, 2024, we recognized income tax expense of $13.0 million, compared to $14.0 million for the six months ended June 30, 2023. The decrease of $0.9 million was primarily attributable to lower pre-tax book income, excluding the gain recognized on the Avinode sale, and changes in the mix of our worldwide earnings, partially offset by higher net discrete tax expense, including an additional $9.1 million related to the Avinode sale. See Note 12. 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 Six Months Ended June 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Revenue | $10,512.9 | $11,417.2 | $(904.3) |
| Gross profit | $236.2 | $228.8 | $7.4 |
| Operating expenses | 124.2 | 136.7 | (12.5) |
| Income (loss) from operations | $112.0 | $92.1 | $19.9 |
| Operational metrics: |  |  |  |
| Aviation segment volumes (gallons) | 3,498.1 | 3,623.7 | (125.6) |
| Aviation segment average price per gallon | $2.80 | $2.95 | $(0.15) |

Revenues in our aviation segment were $10.5 billion for the six months ended June 30, 2024, a decrease of $904.3 million, or 8%, compared to the six months ended June 30, 2023. The decrease in revenue was driven by lower average prices and a decrease in volume compared to the six months ended June 30, 2023. Average jet fuel price per gallon sold decreased by 5% in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. Total aviation volumes decreased by 125.6 million gallons, or 3%, to 3.5 billion gallons, driven primarily by a reduction in lower margin bulk fuel.

Our aviation segment gross profit for the six months ended June 30, 2024 was $236.2 million, an increase of $7.4 million, or 3%, compared to the six months ended June 30, 2023. The increase in gross profit during the six months ended June 30, 2024 as compared to the prior year was primarily attributable to our continued focus to improve returns, stronger performance in our inventory businesses, and growth at operated airport locations during the six months ended June 30, 2024. The overall increase in gross profit was partially offset by a reduction in gross profit attributable to the Avinode sale, which closed during the second quarter of 2024 as discussed in Note 3. Acquisitions and Divestitures.

Income from operations in our aviation segment for the six months ended June 30, 2024 was $112.0 million, an increase of $19.9 million compared to the six months ended June 30, 2023. In addition to the increase in gross profit discussed above, operating expenses decreased by $12.5 million primarily attributable to lower general and administrative expenses resulting from our focus on driving operating efficiencies, and lower general and administrative expenses and compensation costs associated with the Avinode sale, in addition to a decrease in our provision for credit losses.

### 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 Six Months Ended June 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Revenue | $6,709.0 | $7,533.5 | $(824.5) |
| Gross profit | $178.1 | $221.6 | $(43.5) |
| Operating expenses | 163.9 | 170.8 | (6.9) |
| Income (loss) from operations | $14.2 | $50.8 | $(36.6) |
| Operational metrics: |  |  |  |
| Land segment volumes (gallons) (1) | 3,047.4 | 3,072.3 | (24.9) |
| Land segment average price per gallon | $2.20 | $2.45 | $(0.25) |

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

Revenues in our land segment were $6.7 billion for the six months ended June 30, 2024, a decrease of $824.5 million, or 11%, compared to the six months ended June 30, 2023. The decrease in revenue was driven by lower average fuel prices and a decrease in volumes. Average fuel prices decreased by 10% in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. Total volumes decreased by 24.9 million, or 1%, to 3.0 billion gallons or gallon equivalents in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily attributable to our liquid fuel business in North America.

Our land segment gross profit for the six months ended June 30, 2024 was $178.1 million, a decrease of $43.5 million, or 20%, compared to the six months ended June 30, 2023. The decrease in gross profit was primarily driven by highly unfavorable market conditions in North America and Brazil, lower profit contribution from our natural gas business as a result of lower market volatility as well as our U.K. businesses, which were impacted by unfavorable weather conditions.

Income from operations in our land segment for the six months ended June 30, 2024 was $14.2 million, a decrease of $36.6 million, or 72%, compared to the six months ended June 30, 2023. The decrease in gross profit discussed above was partially offset by a decrease in operating expenses principally related to lower incentive compensation costs and a reduction in general and administrative expenses attributable to our continued focus on driving operating efficiencies, partially offset by an increase in our provision for credit losses and asset impairment charges compared to the prior year, as well as $1.2 million of restructuring charges recognized during the six months ended June 30, 2024.

### 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 Six Months Ended June 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Revenue | $4,694.6 | $4,511.6 | $183.0 |
| Gross profit | $85.0 | $94.0 | $(9.0) |
| Operating expenses | 47.9 | 43.4 | 4.5 |
| Income (loss) from operations | $37.2 | $50.6 | $(13.4) |
| Operational metrics: |  |  |  |
| Marine segment volumes (metric tons) | 8.5 | 8.5 | — |
| Marine segment average price per metric ton | $552.90 | $531.45 | $21.46 |

Revenues in our marine segment were $4.7 billion for the six months ended June 30, 2024, an increase of $183.0 million, or 4%, compared to the six months ended June 30, 2023. The increase in revenue was driven by a 4% increase in the average price per metric ton of bunker fuel sold. Total volumes were flat compared to the prior year.

Our marine segment gross profit for the six months ended June 30, 2024 was $85.0 million, a decrease of $9.0 million, or 10%, principally due reduced market volatility when compared with the six months ended June 30, 2023.

Income from operations in our marine segment for the six months ended June 30, 2024 was $37.2 million, a decrease of $13.4 million, or 27%, compared to the six months ended June 30, 2023, primarily due to the decrease in gross profit discussed above, as well as restructuring and exit activity charges recognized during the six months ended June 30, 2024.

### 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 June 30, 2024 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.

*Convertible Notes.* On June 26, 2023, we issued $350.0 million aggregate principal amount of 3.250% Convertible Senior Notes due 2028 (the "Convertible Notes") which mature on July 1, 2028, unless earlier converted, redeemed or repurchased. The Convertible Notes are senior, unsecured obligations that bear interest at a rate of 3.250% per year, payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2024. The initial conversion rate was 35.1710 shares of common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $28.43 per share. The conversion rate is subject to adjustment upon the occurrence of certain events but will not be adjusted for accrued and unpaid interest. Upon conversion, the Convertible Notes will be settled in cash up to the aggregate principal amount of the Convertible Notes to be converted, and in cash, shares of common stock or any combination thereof, at our option, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount.

*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 7. 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.

#### 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, 2023 to June 30, 2024. 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 2023 10-K Report.

#### Cash Flows

The following table reflects the major categories of cash flows for the six months ended June 30, 2024 and 2023 (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 Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash provided by (used in) operating activities | $178.1 | $186.5 |
| Net cash provided by (used in) investing activities | 163.8 | (56.1) |
| Net cash provided by (used in) financing activities | (114.7) | (129.3) |

*Operating Activities.* For the six months ended June 30, 2024, net cash provided by operating activities was $178.1 million, compared to $186.5 million net cash provided during the six months ended June 30, 2023. The $8.3 million decrease in operating cash flows was principally due to relatively stable average fuel prices during the six months ended June 30, 2024 compared to the lower fuel prices experienced during the six months ended June 30, 2023, which reduced our cost of inventory and decreased our accounts payable and accounts receivable, as well as a decrease in cash provided by our derivative activities. These decreases were offset by an increase in our net income (see "Results of Operations" for further details of the drivers impacting our net income) adjusted for noncash items and cash flows associated with income taxes and deferred revenue.

*Investing Activities.* For the six months ended June 30, 2024, net cash provided by investing activities was $163.8 million, compared to net cash used of $56.1 million during the six months ended June 30, 2023. The net cash provided by investing activities for the six months ended June 30, 2024 was primarily driven by net proceeds of $200.4 million from the Avinode sale, as discussed in Note 3. Acquisitions and Divestitures, partially offset by capital expenditures of $32.1 million. Net cash used in investing activities for the six months ended June 30, 2023 was principally driven by capital expenditures of $46.5 million.

*Financing Activities.* For the six months ended June 30, 2024, net cash used in financing activities was $114.7 million compared to net cash used of $129.3 million for the six months ended June 30, 2023. The net cash used in financing activities for the six months ended June 30, 2024 was primarily attributable to payments of deferred consideration related to prior acquisitions of $50.9 million, repurchases of common stock of $29.1 million, dividend payments of $18.5 million, and net repayments under our Credit Facility of $9.4 million. Net cash used in financing activities for the six months ended June 30, 2023 was primarily attributable to net borrowings of $39.9 million, driven by proceeds of $350.0 million from the issuance of the Convertible Notes and proceeds of $40.3 million from secured borrowings associated with the transfer of transaction taxes, as discussed in Note 7. Debt, Interest Income, Expense, and Other Finance Costs, partially offset by $348.4 million of net repayments under our Credit Facility. In connection with the issuance of the Convertible Notes, we paid $70.5 million for the purchase of the convertible note hedges and $10.5 million for debt issuance costs, and received $40.0 million from the sale of warrants. In addition, net cash used in financing activities includes payments of deferred consideration related to prior acquisitions of $62.8 million, repurchases of common stock of $50.0 million, and dividend payments of $17.3 million.

### 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 2023 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 2023 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 of June 30, 2024, we have no reporting units considered at risk and the carrying value of our long-lived assets and equity investments were recoverable. A reporting unit is considered at risk when its fair value does not exceed its carrying amount by more than 10%. While our land reporting unit is not currently considered at risk, as a result of the performance during the second quarter combined with updated projections, we noted that the excess of the fair value over the carrying amount has decreased during three months ended June 30, 2024.

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, are defined based on available information as of the testing date considering current market volatility and geopolitical risks. When testing goodwill at our reporting units, we also consider the volatility in the Company's market capitalization and evaluate the potential impact that this volatility may have on the estimated fair value of our reporting units. As of June 30, 2024 the goodwill balances in our land and aviation reporting units were $838.0 million and $336.9 million, respectively.

When our results or the results of our equity investments, differ significantly from projections and the expectation is that future results would also be impacted, the carrying value of our goodwill, long-lived assets and equity investments could be at risk or could result in an impairment.

## Market risk

As filed, 380 characters.

There have been no material changes to our exposures to commodity price, interest rate, or foreign currency risk since December 31, 2023. Please refer to our 2023 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 June 30, 2024, see Note 5. Derivative Instruments.

## Controls and procedures

As filed, 1,847 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 June 30, 2024.

### 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 June 30, 2024.

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 Jul 26, 2024.
Source: SEC EDGAR, the filing index for accession 0001628280-24-033111. Last ingested by Listed: Oct 30, 2026, 16:26 ET. No prices; not investment advice.