WORLD FUEL SERVICES CORP Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K) - marketscreener.com

The following discussion should be read in conjunction with the accompanyingConsolidated Financial Statements and Notes thereto appearing within Part IV.Item 15. Notes to the Consolidated Financial Statements in this 2021 10­KReport. The following discussion may contain forward-looking statements, and ouractual results may differ materially from the results suggested by theseforward-looking statements. Some factors that may cause our results to differmaterially from the results and events anticipated or implied by suchforward-looking statements are described in Item 1A - Risk Factors and underForward-Looking Statements.We have elected to omit in this 2021 10­K Report, discussion on the earliest ofthe three years covered by the Consolidated Financial Statements presented.Refer to Item 7. Management's Discussion and Analysis of Financial Condition andResults of Operations located in our Form 10-K for the fiscal year endedDecember 31, 2020 (herein incorporated by reference), filed with the SEC onMarch 1, 2021, for management's discussion of the fiscal year ended December 31,2019.Business OverviewWe are principally engaged in the distribution of fuel and related products andservices in the aviation, land and marine transportation industries. Ourintention is to become a leading global energy management company offering afull suite of energy advisory, management and fulfillment services, technologysolutions, payment management solutions, as well as sustainability products andservices across the renewable energy market. For additional discussion on ourbusinesses, climate change and the associated risks, see Part I, Item 1. -Business and Item 1A - Risk Factors within this 2021 10-K Report.

COVID-19

Throughout 2020 and 2021, the COVID-19 pandemic had a significant impact on theglobal economy as a whole, and the transportation industries in particular. Manyof our customers in these industries, especially commercial airlines,experienced a substantial decline in business activity arising from the variousmeasures enacted by governments around the world to contain the spread of thevirus. While travel and economic activity has begun to improve in certainregions, activity in many parts of the world continues to be negatively impactedby travel restrictions and lockdowns. For additional discussion on the risksrelating to the pandemic, see Item 1A. - Risk Factors within this 2021 10-KReport. 22

--------------------------------------------------------------------------------

Table of Contents

Reportable SegmentsWe operate in three reportable segments consisting of aviation, land, andmarine, where we offer fuel and related products and services to customers inthese transportation industries.

See Part I, Item 1. - Business and Note 13. Business Segments, GeographicInformation and Major Customers for additional information about our businesssegments.

Aviation SegmentOur aviation segment has benefited from growth in our fuel and related servicesofferings, as well as our improving logistics capability and the geographicexpansion of our aviation fueling operations into additional internationalairport locations. However, the global travel restrictions and sharp decrease indemand for air travel resulting from the COVID-19 pandemic significantlyimpacted the overall aviation market, and accordingly, our results of operationsthroughout 2020 and 2021. We have experienced improvements in demand and relatedvolume increases in certain regions, principally North America, and areexperiencing an accelerating recovery in Western Europe. The continued recoveryin demand will be highly contingent on the timing and extent of governmentalactions or restrictions globally in response to any increases in infection ratesand the overall recovery of the global economy and passenger travel generally.In addition, our aviation segment has historically benefited from significantsales to government customers, particularly the North Atlantic TreatyOrganization ("NATO") in Afghanistan, which accounted for a material portion ofour aviation segment's profitability in recent years. The level of troopdeployments and military-related activities can cause our government customersales to vary significantly and materially impact our operating results.Specifically, in 2020 the U.S. government and NATO began to significantly reducethe level of troops in Afghanistan and we experienced a corresponding materialdecline in demand as a result. The final withdrawal of troops in the area wascompleted during the third quarter of 2021.Land SegmentWe believe our land segment is well positioned to continue growing market share,both organically and through leveraging the capabilities of our acquisitions,serving to further enhance our commercial and industrial platforms to delivervalue-added solutions to customers across the U.S. In addition, to participatein accelerating the energy transition, we continue to focus on the expansion ofour sustainability offerings, which include consulting, renewable fuel products,and carbon management and renewable energy solutions through World Kinect, ourglobal energy management brand. Our land segment can be impacted by market andweather conditions. In periods where we experience historically extreme orunseasonable weather conditions, demand for our products may be affected. Inaddition, our land segment also similarly benefited from sales to NATO inAfghanistan in recent years, however, such activity materially declined andultimately concluded in 2021 in connection with the U.S. and NATO troopwithdrawal.In connection with our efforts to sharpen our portfolio of businesses andaccelerate growth in our core business activities, we have divested of certainbusinesses and focused on investing in businesses that we believe will driveenhanced operating efficiencies and generate long-term shareholder value. Forexample, in the third quarter of 2020, we completed the sale of MSTS and inJanuary 2022, we closed the acquisition of Flyers. We believe that the additionof Flyers' operations, which include transportation, commercial fleet fueling,lubricants distribution, and the supply of wholesale, branded and renewablefuels, will enable us to create an expanded national platform to delivervalue-added solutions to commercial and industrial customers across the UnitedStates. See Note 3. Acquisitions and Divestitures for additional information. Inaddition to our acquisition and divestiture activities, we also heightened ourfocus in 2021 on restructuring our existing land business in North America,including reorganizing and relocating certain business activities, as well asimplementing changes to the operational and management structure of the businessto allow for greater scalability and quicker integration of new businesses tocapture synergies. During the fourth quarter of 2021, we were able to completeall necessary activities and close the restructuring and expect the ultimatefinancial benefit to be realized as new businesses are acquired and integratedinto our land segment. See Note 5. Restructuring for additional information.Marine SegmentThrough much of 2019 and into early 2020, we experienced improved profitabilityin our marine segment due to higher average fuel prices, combined with ourheightened focus on cost management and the continued reshaping of our businessportfolio. In particular, the IMO 2020 regulations resulted in certain supplyimbalances and price volatility which positively impacted our operating resultsin those periods. However, beginning in the latter part of the first quarter of2020 and continuing through 2021, we experienced a material decline in volumeand related profitability primarily due to the impact of the COVID-19 pandemicon the marine transportation industry. While we 23

--------------------------------------------------------------------------------

Table of Contents

have experienced some improvements in demand, we expect our marine segment'soperating performance to continue to be impacted by, among other things,uncertain demand from cruise lines and other sectors of the shipping industry,as well as competitive market conditions.Consolidated Results of OperationsThe following provides a summary of our consolidated results of operations forthe periods indicated: Year Ended December 31, 2021 2020Revenue $ 31,337.0$ 20,358.3Cost of revenue 30,548.8 19,506.5Gross profit 788.2 851.8Operating expenses:Compensation and employee benefits 386.7 366.9General and administrative 247.6 311.1Asset impairments 4.7 25.6Restructuring charges 6.6 10.3Total operating expenses 645.6 714.0Income from operations 142.6 137.9Non-operating income (expenses), net:Interest expense and other financing costs, net (40.2) (44.9)Other income (expense), net (2.3) 68.8Total non-operating income (expense), net (42.5) 23.9Income (loss) before income taxes 100.0 161.7Provision for income taxes 25.8 52.1Net income (loss) including noncontrolling interest 74.2 109.6Net income (loss) attributable to noncontrolling interest 0.5 0.1Net income (loss) attributable to World Fuel 

$ 73.7$ 109.6

Basic earnings (loss) per common share 

$ 1.17$ 1.72

Diluted earnings (loss) per common share 

$ 1.16$ 1.71

Revenue. Our consolidated revenue for the year ended December 31, 2021 was $31.3billion, an increase of $11.0 billion, or 54%, compared to the year endedDecember 31, 2020, driven by increased revenue of $4.6 billion, $3.8 billion,and $2.6 billion in the aviation, land, and marine segments, respectively, asdiscussed further below.Gross profit. Our consolidated gross profit for the year ended December 31, 2021was $788.2 million, a decrease of $63.6 million, or 7%, compared to the yearended December 31, 2020, driven by decreased gross profit of $51.1 million and$46.5 million in the marine and land segments, respectively, partially offset byincreased gross profit of $34.0 million in the aviation segment, as discussedfurther below.Operating Expenses. Consolidated total operating expenses for the year endedDecember 31, 2021 were $645.6 million, a decrease of $68.3 million, or 10%,compared to the year ended December 31, 2020. The decrease in operating expenseswas driven by a reduction in the provision for credit losses due to astabilization of customer credit risk, the sale of MSTS, and the impairmentcharge recognized in 2020 as part of the global office footprint rationalization(the "2020 impairment"). These decreases were partially offset by an increase inemployee compensation and benefit costs primarily related to increased incentivecompensation to reward and retain key employees in a competitive job market.Non-Operating Income (Expenses), net. For the year ended December 31, 2021, wehad net non-operating expense of $42.5 million, compared to net non-operatingincome of $23.9 million for the year ended December 31, 2020. The decrease of$66.4 million was primarily attributable to the gain on the sale of MSTS in2020, partially offset by a decrease in foreign currency losses and an increasein interest income in 2021. 24

--------------------------------------------------------------------------------

Table of Contents

Income Taxes. For the year ended December 31, 2021, our income tax provision was$25.8 million and our effective income tax rate was 26%, as compared to anincome tax provision of $52.1 million and an effective income tax rate of 32%for the year ended December 31, 2020. The decrease of $26.2 million wasprimarily attributable to the tax on the gain on the sale of MSTS in 2020, aswell as a $3.2 million net discrete tax benefit for 2021 as compared to a$4.5 million net discrete tax expense for 2020. See Note 11. Income Taxes foradditional information.Aviation Segment Results of OperationsThe following provides a summary of the aviation segment results of operationsfor the periods indicated: Year Ended December 31, 2021 2020 ChangeRevenue $ 12,824.3$ 8,179.6$ 4,644.8Gross profit $ 386.9$ 352.9$ 34.0Operating expenses 223.5 268.4 (44.9)Income from operations $ 163.4$ 84.5$ 78.9Operational metrics:Aviation segment volumes (gallons) 5,857.5 4,694.1 1,163.3Aviation segment average price per gallon $ 

2.08 $ 1.46$ 0.62

Revenues in our aviation segment were $12.8 billion for the year ended December31, 2021, an increase of $4.6 billion, or 57%, compared to the year endedDecember 31, 2020. The increase in revenue was driven by higher average pricesand increased volumes. Average jet fuel price per gallon sold increased by 43%in the year ended December 31, 2021 compared to the year ended December 31, 2020as a result of the rise in global oil prices. Total aviation volumes increasedby 1.2 billion, or 25%, to 5.9 billion gallons in the year ended December 31,2021 compared to the year ended December 31, 2020 as travel restrictions eased,primarily in the North American market, and demand for passenger air travelcontinued to recover.Our aviation segment gross profit for the year ended December 31, 2021 was$386.9 million, an increase of $34.0 million, or 10%, compared to the year endedDecember 31, 2020. The increase in gross profit was primarily due to therecovery in demand for passenger air travel, partially offset by a reduction inour government-related activity in Afghanistan and the sale of MSTS.Our aviation segment income from operations for the year ended December 31, 2021was $163.4 million, an increase of $78.9 million, or 93%, compared to the yearended December 31, 2020 due to a reduction in operating expenses combined withthe increase in gross profit. Operating expenses for the year ended December 31,2021 decreased $44.9 million primarily due to a $46.4 million reduction in theprovision for credit losses driven by the stabilization of customer credit riskas the global aviation industry continues to recover and the 2020 impairment,partially offset by an increase in compensation and employee benefit costs asdiscussed above.Land Segment Results of OperationsThe following provides a summary of the land segment results of operations forthe periods indicated: Year Ended December 31, 2021 2020 ChangeRevenue $ 10,426.8$ 6,663.1$ 3,763.8Gross profit 301.1 347.6 (46.5)Operating expenses 256.4 275.0 (18.6)Income from operations $ 44.6$ 72.6$ (27.9)Operational metrics:Land segment volumes (gallons) 5,254.1 5,062.8 191.3Land segment average price per gallon $ 1.98$ 1.30$ 0.68 25

--------------------------------------------------------------------------------

Table of Contents

Revenues in our land segment were $10.4 billion for the year ended December 31,2021, an increase of $3.8 billion, or 56%, compared to the year ended December31, 2020. The increase in revenue was primarily driven by a 52% increase in theaverage fuel price per gallon or gallon equivalent sold in the year endedDecember 31, 2021 compared to the year ended December 31, 2020 as a result ofthe rise in global oil prices. Total land volumes increased by 0.2 billion, or4%, to 5.3 billion gallon or gallon equivalents in the year ended December 31,2021 compared to the year ended December 31, 2020.Our land segment gross profit for the year ended December 31, 2021 was $301.1million, a decrease of $46.5 million, or 13%, compared to the year endedDecember 31, 2020. The decrease in gross profit was primarily attributable tothe sale of MSTS, the reduction in our government-related activity inAfghanistan, and a decrease in demand in the U.K., partially offset by improvedperformance in our natural gas business in North America driven by extremeweather conditions in the first quarter of 2021.Our land segment income from operations for the year ended December 31, 2021 was$44.6 million, a decrease of $27.9 million, or 38%, compared to the year endedDecember 31, 2020. In 2021, the decrease in gross profit was partially offset bythe overall reduction in operating expenses, driven by the sale of MSTS in 2020,partially offset by increased compensation and employee benefit costs andrestructuring expenses.Marine Segment Results of OperationsThe following provides a summary of the marine segment results of operations forthe periods indicated: Year Ended December 31, 2021 2020 ChangeRevenue $ 8,085.8$ 5,515.7$ 2,570.1Gross profit 100.3 151.4 (51.1)Operating expenses 79.6 92.8 (13.2)Income from operations $ 20.7$ 58.5$ (37.9)Operational metrics:Marine segment volumes (metric tons) 18.4 17.5 1.0Marine segment average price per metric ton $ 

438.31 $ 315.74$ 122.57

Revenues in our marine segment were $8.1 billion for the year ended December 31,2021, an increase of $2.6 billion, or 47%, compared to the year ended December31, 2020. The increase in revenue was primarily driven by a 39% increase in theaverage price per metric ton of bunker fuel sold as a result of the rise inglobal oil prices. Total volumes increased by 1.0 million metric tons, or 6%, to18.4 million metric tons in the year ended December 31, 2021 compared to theyear ended December 31, 2020.Our marine segment gross profit for the year ended December 31, 2021 was $100.3million, a decrease of $51.1 million, or 34%, compared to the year endedDecember 31, 2020. The decrease in gross profit was primarily attributable tohighly competitive market conditions in 2021, combined with a decline relativeto the strong results in the first half of 2020, which benefited from theimplementation of IMO 2020.Our marine segment income from operations for the year ended December 31, 2021was $20.7 million, a decrease of $37.9 million, or 65%, compared to the yearended December 31, 2020. The decrease in income from operations was primarilydue to the $51.1 million decrease in gross profit, partially offset by a $13.2million reduction in operating expenses. The decrease in operating expenses wasdriven by a lower provision for credit losses, together with the 2020 impairmentand costs associated with the restructuring program recognized in 2020,partially offset by increased compensation and employee benefit costs.Liquidity and Capital ResourcesLiquidity to fund working capital, as well as make strategic investments tofurther our growth strategy, is a significant priority for us. Our viewsconcerning liquidity are based on currently available information and ifcircumstances change significantly, whether as a result of the COVID-19 pandemicor otherwise, the future availability of trade credit or other sources offinancing may be reduced, and our liquidity would be adversely affectedaccordingly. 26

--------------------------------------------------------------------------------

Table of Contents

Sources of Liquidity and Factors Impacting Our LiquidityOur liquidity, consisting principally of cash and availability under our CreditFacility, fluctuates based on a number of factors, including the timing ofreceipts from our customers and payments to our suppliers, changes in fuelprices, as well as our financial performance.

We rely on credit arrangements with banks, suppliers and other parties as animportant source of liquidity for capital requirements not satisfied by ouroperating cash flow. Future market volatility, generally, and any persistentweakness in global energy markets may adversely affect our ability to accesscapital and credit markets or to obtain funds at reasonable interest rates or onother advantageous terms. In addition, since our business is impacted by theavailability of trade credit to fund fuel purchases, an actual or perceiveddecline in our liquidity or business generally could cause our suppliers toreduce our credit lines, seek credit support in the form of additionalcollateral or otherwise materially modify our payment terms.During times of high fuel prices, our customers may not be able to purchase asmuch fuel from us because of their credit limits with us and the resultingadverse impact on their business could cause them to be unable to make paymentsowed to us for fuel purchased on credit. Furthermore, when fuel prices increaseour working capital requirements increase and our own credit limits couldprevent us from purchasing enough fuel from our suppliers to meet our customers'demands, or we could be required to prepay for fuel purchases, any of whichwould adversely impact our liquidity.Conversely, extended periods of low fuel prices, particularly when coupled withlow price volatility, can also have an adverse effect on our results ofoperations and overall profitability. This can occur due to many factors, suchas reduced demand for our price risk management products and decreased sales toour customers involved in the oil exploration sector. Low fuel prices alsofacilitate increased competition by reducing financial barriers to entry andenabling existing, lower-capitalized competitors to conduct more business as aresult of lower working capital requirements.Based on the information currently available, we believe that our cash and cashequivalents as of December 31, 2021 and available funds from our CreditFacility, together with cash flows generated by operations, are sufficient tofund our working capital and capital expenditure requirements for at least thenext twelve months.Credit Facility and Term Loans. Our availability under our Credit Facility islimited by, among other things, our consolidated total leverage ratio, which isdefined in the Credit Agreement and is based, in part, on our adjustedconsolidated earnings before interest, taxes, depreciation and amortization("Adjusted EBITDA") for the four immediately preceding fiscal quarters. TheCredit Agreement generally limits the total amount of indebtedness we may incurto not more than 3.75 to 1. In connection with the acquisition of Flyers inJanuary 2022, the applicable leverage ratio is 4.5 to 1 until the end of 2022pursuant to the terms of the Credit Facility.As a result of the foregoing, as well as other covenants and restrictionscontained in our Credit Facility, our availability under the Credit Facility mayfluctuate from period to period. In addition, our failure to comply with thecovenants contained in our Credit Facility and our Term Loans could result in anevent of default. An event of default, if not cured or waived, would permitacceleration of any outstanding indebtedness under the Credit Facility and ourTerm Loans, trigger cross-defaults under certain other agreements to which weare a party and impair our ability to obtain working capital advances and issueletters of credit, which would have a material adverse effect on our business,financial condition, results of operations and cash flows. See Note 8. Debt,Interest Income, Expense and Other Finance Costs for additional information.Other Credit Lines. Additionally, we have other uncommitted credit linesprimarily for the issuance of letters of credit, bank guarantees and bankers'acceptances. These credit lines are renewable on an annual basis and are subjectto fees at market rates. As of December 31, 2021 and 2020, our outstandingletters of credit and bank guarantees under these credit lines totaled $404.0million and $328.4 million, respectively.Receivables Purchase Agreements. We also have accounts receivable programs underreceivables purchase agreements ("RPAs") that allow us to sell a specifiedamount of qualifying accounts receivable and receive cash consideration equal tothe total balance, less a discount margin, which varies based on the outstandingaccounts receivable at any given time. The RPA agreements provide theconstituent banks with the ability to add or remove customers from theseprograms in their discretion based on, among other things, the level of riskexposure the bank is willing to accept with respect to any particular customer.The fees the banks charge us to purchase the receivables from these customerscan also be impacted for these reasons. See Note 2. Accounts Receivable foradditional information.

See Item 1A. - Risk Factors in Part 1 within this 2021 10-K Report foradditional information.

 27

--------------------------------------------------------------------------------

Table of Contents

Future Uses of LiquidityCash is primarily used to fund working capital to support our operations as wellas for strategic acquisitions and investments, such as the acquisition of Flyersdiscussed below.

As of December 31, 2021, our contractual obligations were as follows (inmillions):

 Year 1 Years 2-3 Years 4-5 > 5 Years Total

Debt and interest obligations (1) $ 40.4$ 486.2 $

 7.1 $ 3.0$ 536.6Operating lease obligations (2) 38.0 59.7 40.9 59.2 197.9Finance lease obligations (2) 5.3 7.9 6.6 3.6 23.5Derivatives obligations (3) 168.4 66.6 - - 235.0Purchase commitment obligations (4) 52.0 17.5 15.4 8.1 93.0Other obligations 1.7 2.6 2.6 1.2 8.1Total $ 305.8$ 640.6$ 72.6$ 75.1$ 1,094.0(1)Debt and interest obligations include principal and interest payments onfixed-rate and variable-rate, fixed-term debt based on their maturity dates. SeeNote 8. Debt, Interest Income, Expense and Other Finance Costs for additionalinformation.

(2)We enter into lease arrangements for the use of offices, operationalfacilities, vehicles, vessels, storage tanks and other assets for our operationsaround the world. See Note 15. Leases for additional information.

(3)As part of our risk management program, we enter into derivative instrumentsintended to mitigate risks associated with changes in commodity prices, foreigncurrency exchange rate, and interest rates. Our obligations associated withthese derivative instruments fluctuate based on changes in the fair value of thederivatives. See Note 4. Derivative Instruments and Note 12. Fair ValueMeasurements for additional information.(4)We have fixed purchase commitments associated with our risk managementprogram, as well as a purchase contract, that runs through 2026, under which weagreed to purchase annually between 1.9 million barrels and 2.0 million barrelsof aviation fuel at future market prices. See Note 9. Commitments andContingencies for additional information.

Future material cash requirements and off-balance sheet arrangements, inaddition to the contractual obligations in the table above, include thefollowing:

Acquisition of Flyers. On January 3, 2022, we closed the acquisition of Flyersfor total consideration of $792.7 million, subject to customary adjustmentsrelating to net working capital, indebtedness and transaction expenses. Atclosing, $642.7 million was paid in cash, $50.0 million was satisfied throughthe delivery of the Company's common stock, and the remaining $100.0 millionremains payable to the seller, with one-half to be released on each of the firstand second anniversary of the closing of the acquisition. The consideration atclosing was funded through approximately $326 million of cash on hand andincremental borrowings under our Credit Facility subsequent to December 31,2021. See Note 3. Acquisitions and Divestitures for additional information.

Capital Expenditures. During the year ended December 31, 2021, we incurredcapital expenditures in the ordinary course of business of approximately$39.2 million. In 2022, we expect our capital expenditures to continue toincrease to levels more reflective of those experienced prior to the pandemic.

Unrecognized Income Tax Liabilities. As of December 31, 2021, we have recordedgross liabilities for unrecognized income tax benefits ("Unrecognized TaxLiabilities"), including penalties and interest, of $98.2 million. The timing ofany settlement of our Unrecognized Tax Liabilities with the respective taxingauthority cannot be reasonably estimated.Letters of Credit and Bank Guarantees. In the normal course of business, we arerequired to provide letters of credit to certain suppliers. A majority of theseletters of credit expire within one year from their issuance and expired lettersof credit are renewed as needed. As of December 31, 2021, we had issued lettersof credit and bank guarantees totaling $450.7 million under our Credit Facilityand other uncommitted credit lines.Surety Bonds. In the normal course of business, we are required to post bid,performance and other surety-related bonds. The majority of the surety bondsposted relate to our aviation and land segments. We had outstanding bonds thatwere executed in order to satisfy various security requirements of $54.9 millionas of December 31, 2021. 28

--------------------------------------------------------------------------------

Table of Contents

Cash FlowsThe following table reflects the major categories of cash flows for the yearsended December 31, 2021, 2020 and 2019 (in millions). For additional details,please see the Consolidated Statements of Cash Flows. 2021 2020 

2019

Net cash provided by (used in) operating activities $ 173.2$ 604.1

$ 228.8Net cash provided by (used in) investing activities (58.3) 72.8 

(50.5)

Net cash provided by (used in) financing activities (113.6) (213.0)

(204.9)

Operating Activities. For the year ended December 31, 2021, net cash provided byoperating activities was $173.2 million compared to net cash provided of $604.1million for the year ended December 31, 2020. The $430.9 million decrease inoperating cash flows was principally due to an increase in net working capitalof $451.3 million due to a recovery in activity as compared to thepandemic-related impacts in 2020, as well as higher average fuel prices in 2021,partially offset by increased operating results of $19.5 million.Investing Activities. For the year ended December 31, 2021, net cash used ininvesting activities was $58.3 million, compared to net cash provided of $72.8million for the year ended December 31, 2020. The net cash used in investingactivities for the year ended December 31, 2021 was primarily driven by$39.2 million in capital expenditures and $37.1 million for the acquisition of abusiness in the land segment in the fourth quarter of 2021, partially offset bynet cash proceeds of $25.0 million from the collection of a note receivablerelated to the sale of MSTS. Net cash provided by investing activities for theyear ended December 31, 2020 was primarily driven by net cash proceeds of $259.6million received from the sale of MSTS, partially offset by cash paid for theacquisition of the UVair fuel business of $128.6 million, as discussed in Note3. Acquisitions and Divestitures, and capital expenditures of $51.3 million.Financing Activities. For the year ended December 31, 2021, net cash used infinancing activities was $113.6 million, compared to net cash used of $213.0million for the year ended December 31, 2020. Net cash used in financingactivities for the year ended December 31, 2021 was primarily driven byrepurchases of our common stock in the aggregate amount of $50.5 million,dividend payments on our common stock of $28.7 million, and net repayments ofdebt under our Credit Facility of $23.9 million. Net cash used in financingactivities of $213.0 million for the year ended December 31, 2020 was primarilydriven by net repayments of debt under our Credit Facility of $112.0 million,repurchases of our common stock in the aggregate amount of $68.3 million, anddividend payments on our common stock of $25.6 million.Critical Accounting EstimatesManagement's discussion and analysis of our financial condition and results ofoperations are based upon our Consolidated Financial Statements includedelsewhere in this 2021 10­K Report, which has been prepared in accordance withU.S. GAAP. The preparation of these financial statements requires management tomake estimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses and related disclosure of contingent assetsand liabilities. On an ongoing basis, we evaluate our estimates, including thoserelated to unbilled revenue and associated costs of sales, allowance for creditlosses, goodwill and identifiable intangible assets, certain accruedliabilities, and income taxes. We base our estimates on historical experienceand on other assumptions that are believed to be reasonable under thecircumstances, the results of which form the basis for making judgments aboutthe carrying values of assets and liabilities that are not readily apparent fromother sources. Actual results may differ from these estimates under differentassumptions or conditions.We have identified the areas described below as critical to our businessoperations and the understanding of our results of operations given theuncertainties associated with the assumptions underlying each estimate. For adetailed discussion on the application of these and other significant accountingpolicies, see Note 1. Basis of Presentation, New Accounting Standards andSignificant Accounting Policies. 29

--------------------------------------------------------------------------------

 Table of Contents Effect if Actual Results Differ Description Judgments and Uncertainties from Assumptions

Impairment Assessments of Goodwill, Long-Lived Assets, and Equity InvestmentsWe evaluate goodwill for

 These assessments require us to make Based on the assessmentsimpairment at least annually, and accounting estimates that require performed, and supported by thewhenever events or changes in consideration of forecasted available information as ofcircumstances indicate it is more financial information. Significant December 31, 2021, we concludedlikely than not that the fair judgment is involved in performing that the carrying value of ourvalue of a reporting unit is less these estimates as they are long-lived assets and equitythan its carrying amount. We developed based on forecasted investments were recoverable andperiodically evaluate whether the assumptions. As of December 31, that the fair value of our landcarrying value of long-lived 2021, the assumptions used, and aviation reporting units wereassets (property and equipment, particularly the expected growth not less than their respectiveidentifiable intangible assets, rates, the profitability embedded in carrying values. However, at thisand leases) and equity investments our projected cash flow, the time, we are unable to predicthave been impaired when discount rate and the market-based with specificity the ultimatecircumstances indicate the multiples, were defined in the impact of the pandemic, as itcarrying value of those assets may context of current and future will depend on the magnitude,not be recoverable. potential impacts of COVID-19 on 

our severity and duration, as well as

 business and other business 

factors. how quickly, and to what extent,

 Management also considered the normal economic and operating volatility in the company's market conditions resume on a capitalization since the beginning sustainable basis globally. of the pandemic and evaluated the Accordingly, if the impact of the potential impact that this pandemic, and its associated volatility may have had on the reduction in business are more estimated fair value of our severe or longer in duration than reporting units. we have assumed, such impact could potentially result in impairments.

Accounts Receivable and Allowance for Credit LossesWe maintain a provision for

 We consider historical payment As a result of the challengesestimated credit losses based upon trends of our customers together inherent in estimating whichour historical experience with our with internal and external customers are less likely tocustomers, any specific customer information about the economic remit amounts owed to us, ourcollection issues that we have outlook, geopolitical risks and provision for estimated creditidentified from current financial macroeconomic events, which may not losses may not always beinformation and business fully capture the current or future sufficient. Any write-off ofprospects, as well as creditworthiness of our customers, accounts receivable in excess offorward-looking information from particularly in difficult economic our provision for credit lossesmarket sources. periods. could adversely affect our results of operations and cash flow.Business CombinationsA business combination occurs when Significant judgment is involved in If estimates or assumptions usedan entity obtains control of a the determination of fair values in to estimate fair values are"business." To conclude if the the context of acquisitions as fair materially incorrect, futuredefinition of a business is met, values are generally developed based earnings through depreciation andwe need to conclude whether on forecasted assumptions. Other amortization expense could besubstantially all of the fair factors affecting the concluded fair impacted. In addition, ifvalue of the gross assets acquired value are assumptions and estimates forecasts supporting theis concentrated in a single regarding the industry and economic valuation of the long-livedidentifiable asset or a group of factors as well as expected growth, assets, intangibles, or goodwillsimilar identifiable assets which profitability and risks embedded in are not achieved, impairmentsrequires significant judgment to the new acquired activities. could arise.determine the fair value. Thedetermination of whether theacquired activities and assetsconstitute a business is criticalbecause the accounting for abusiness combination differssignificantly from that of anasset acquisition. Businesscombinations are accounted forusing a fair value model. Incontrast, asset acquisitions areaccounted for using a costaccumulation and allocation model. 30

--------------------------------------------------------------------------------

 Table of Contents Effect if Actual Results Differ Description Judgments and Uncertainties from AssumptionsRevenue RecognitionThe majority of our consolidated In drawing this conclusion, we 

Our determination of whether torevenues are generated through the consider various factors, including recognize revenue on a gross or netsale of fuel and fuel-related

 inventory risk management, latitude basis can materially impact theproducts. We generally recognize in establishing the sales price, amount of revenue we report.fuel sales on a gross basis as we discretion in the supplier selectionhave control of the products and that we are normally the 

primary

before they are delivered to our obligor in our sales arrangements.customers.Income TaxesWe estimate total income tax Changes in tax laws and rates, such Due to the complexity of some ofexpense based on statutory tax as The Tax Cuts and Jobs Act (the these uncertainties, the ultimaterates and tax planning "Tax Act") enacted on December 22, resolution of our tax relatedopportunities available to us in 2017, could affect recorded deferred balances or valuation allowancesvarious jurisdictions in which we tax assets and liabilities in the may result in a payment that isoperate. Deferred income taxes are future. Changes in projected future materially different from therecognized for the future tax earnings could affect the recorded current estimate of the taxeffects of temporary differences valuation allowances in the future. liabilities. To the extent webetween financial and income tax Our calculations related to income prevail in matters for whichreporting using tax rates in taxes contain uncertainties due to unrecognized tax benefiteffect for the years in which the judgment used to calculate tax liabilities have been established,differences are expected to liabilities in the application of or are required to pay amounts inreverse. Valuation allowances are complex tax regulations across the excess of our recorded unrecognizedrecorded when it is likely a tax tax jurisdictions where we operate. tax benefit liabilities, ourbenefit will not be realized for a Our analysis of unrecognized tax effective tax rate in a givendeferred tax asset. We record benefits contains uncertainties financial statement period could beunrecognized tax benefit based on judgment used to apply the materially affected.liabilities for known or more likely than not recognition 

and

anticipated tax issues based on measurement thresholds.our analysis of whether, and theextent to which, additional taxeswill be due.

Derivatives

We enter into financial derivative When available, quoted market prices While we currently believe that ourcontracts to mitigate our risk of or prices obtained through external derivative contracts will befuel market price fluctuations in sources are used to determine a effective in mitigating theaviation, land and marine fuel as contract's fair value. For contracts associated price risks, it iswell as changes in interest and for which quoted market prices are possible that our derivativeforeign currency exchange rates not available, fair value is instruments will be ineffective atand also to offer our customers determined based on pricing models 

mitigating material changes infuel pricing alternatives to meet developed primarily from historical prices, which could have an adversetheir needs. These instruments may information and the expected

 impact on our financial positionbe designated as cash flow or fair relationship with quoted market and results of operations. If ourvalue hedges, or accounted for as prices. Measurement of the fair estimates of fair value arenon-designated derivatives. All value of our derivatives also inaccurate, we may be exposed toderivative instruments are requires the assessment of certain losses or gains that could bemeasured and recorded at fair risks related to non-performance, material. See Item 7A. -value. which requires a significant amount Quantitative and Qualitative of judgment. Disclosures About Market Risks for additional information.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Derivative and Financial Instruments Market RiskWe use commodity-based derivative contracts and financial instruments, when wedeem it appropriate, to manage the risks associated with changes in the pricesof fuel and fuel-related products, fluctuations in foreign currency exchangerates and interest rates, or to capture market opportunities. We utilize hedgeaccounting and formally designate certain of our derivative instruments aseither cash flow or fair value hedges. Derivative instruments that are notdesignated are considered non-designated hedges and are designed to achieve aneconomic offset of the underlying price risk exposure. Financial instruments andpositions affecting our financial statements are described below and are heldprimarily for hedging purposes. As a result, any changes in income associatedwith our derivatives contracts are substantially offset by corresponding changesin the value of the underlying risk being mitigated. 31

--------------------------------------------------------------------------------

Table of Contents

Commodity Price RiskOur commercial business segments use derivative instruments, primarily futures,forward, swap, and options contracts, in various markets to manage price riskinherent in the purchase and sale of fuel. Certain of these derivativeinstruments are utilized to mitigate the risk of price volatility in forecastedtransactions in a cash flow hedge relationship and to mitigate the risk ofchanges in the price of our inventory in a fair value hedge relationship. Inaddition, we use derivatives as economic hedges or to optimize the value of ourfuel inventory to capitalize on anticipated market opportunities.The notional and fair market values of our commodity-based derivative instrumentpositions were as follows (in millions, except weighted average contract price): As of December 31, Commodity Contracts (In millions of BBL) 2021 2020 Notional Weighted Notional Weighted Net Average Fair Net Average Fair Settlement Long/ Contract Value Long/ Contract Value Hedge Strategy Derivative Instrument Period (Short) Price Amount (Short) Price Amount Commodity contractsDesignated hedge hedging inventory 2021 - $ - $ - (3.3) $ 53.291$ 2.9 2022 (2.8) 92.257 (8.2) (0.1) 54.256 (0.4) (8.2) 2.5Non-designated hedge Commodity contracts 2021 - - - 13.9 1.052 24.3 2022 4.6 4.633 10.1 1.0 1.067 7.8 2023 0.1 14.199 7.8 - 9.333 4.3 2024 0.1 12.274 6.5 0.1 10.118 4.4 2025 - 12.354 2.0 - - - Thereafter (0.2) 12.497 1.4 - 10.745 1.7 27.8 42.5Total commodity derivative contracts $ 19.6$ 45.0Foreign Currency Exchange RiskWe hedge our exposure to currency exchange rate changes, such asforeign-currency-denominated trade receivables, payables, or local currency taxpayments. The foreign currency exchange rate risk results primarily from ourinternational operations and is economically hedged using forward and swapcontracts. The changes in the fair value of these foreign currency exchangederivatives are recorded in earnings. Since the gains or losses on the forwardand swap contracts are substantially offset by the gains or losses fromremeasuring the hedged foreign-currency-denominated exposure, we do not believethat a hypothetical 10% change in exchange rates at December 31, 2021 would havea material impact on our income from operations. 32

--------------------------------------------------------------------------------

Table of Contents

As of December 31, 2021, the foreign currency denominated notional amounts andfair value in U.S. dollars of our exposures from our foreign currency exchangederivatives, were primarily related to the following (in millions, exceptweighted average contract price): Notional Weighted AverageSettlement Period Unit Net Long/(Short) Contract Price Fair Value Amount2022 CAD (22.3) 1.257 $ (0.1)2022 CLP 15,459.0 838.368 0.12022 COP (37,217.2) 3,828.634 0.42022 DKK 266.6 6.152 (0.8)2022 EUR (37.6) 1.154 0.52022 GBP 4.8 1.358 (0.1)2022 KRW (10,769.6) 1,196.713 (0.1)2022 MXN (1,107.2) 21.151 (0.7)2022 NOK (773.1) 8.481 1.72022 SEK 138.1 8.201 (0.3)2022 ZAR 158.0 15.705 (0.2)Total foreign currency exchange derivative contracts $ 0.4The total fair value our foreign currency exchange derivative contracts was anasset of $0.4 million and a liability of $12.3 million as of December 31, 2021and 2020, respectively. The majority of foreign currency exchange derivativesare settled within one year. See Note 4. Derivative Instruments for additionalinformation.Interest Rate RiskBorrowings under our Credit Facility and Term Loans related to base rate loansor Eurodollar rate loans bear floating interest rates plus applicable margins.As of December 31, 2021, the applicable margins for base rate loans andEurodollar rate loans were 0.75% and 1.75%, respectively. As of December 31,2021, we had no outstanding borrowings under our Credit Facility and $484.1million in Term Loans. As of December 31, 2021, the aggregate outstandingbalance of our finance lease obligations was $21.2 million, which bear interestat annual rates ranging from 1.0% to 5.9%. Our other remaining outstanding debtof $3.3 million, as of December 31, 2021, primarily relates to loans payable invarying amounts which bear interest at annual rates ranging from zero to 3.5%.The weighted average interest rate on our short-term debt was 2.0% as ofDecember 31, 2021. A 1% fluctuation in the interest rate on our outstanding debtwould result in a $4.8 million change in interest expense during the next twelvemonths.In March 2020, we entered into a $300 million, one-month LIBOR,floating-for-fixed interest rate non-amortizing swap with a maturity date inMarch 2025 (the "Swap"). The Swap agreement effectively locks in the variableinterest cash flows we will pay for a portion of our Eurodollar rate loans at0.55%. The fair value of the interest rate swap contract was an asset of$5.1 million and a liability of $3.7 million as of December 31, 2021 and 2020,respectively.The following table presents the contractual weighted average interest rates andexpected cash flows by maturity dates (in millions, except weighted averageinterest rates): Expected Maturities as of December 31, 2021Interest Rate Swap 2022 2023 2024 2025 Fair ValueNotional Value: $300$ 5.1Variable to Fixed(1) $ (0.3)$ 2.0$ 2.7$ 0.7Average pay rate 0.55 % 0.55 % 0.55 % 0.55 %Average receive rate 0.45 % 1.21 % 1.46 % 1.52 %

(1)Represents discounted net cash flow receipts or (payments).

© Edgar Online, source Glimpses