Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. WORLD FUEL SERVICES CORP (789460) 10-Q published on Apr 28, 2017 at 2:22 pm
Reporting Period: Mar 30, 2017
Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. In February 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-05. The amendments in the update clarify a financial asset is within the scope of this guidance if it meets the definition of an in substance nonfinancial asset; this may include nonfinancial assets transferred within a legal entity to a counterparty. This standard is effective at the beginning of our 2018 fiscal year. We are currently evaluating whether the adoption of this new guidance will have a significant impact on our consolidated financial statements and related disclosures.
Our provision for income taxes for each of the three-month periods ended March 31, 2017 and 2016 was calculated based on the estimated annual effective income tax rate for the full 2017 and 2016 fiscal years. Our provision for income taxes for the three months ended March 31, 2017 was adjusted for an income tax expense of $1.2 million, net, for discrete items related to changes in estimates in uncertain tax positions and an adjustment for stock based compensation in accordance with ASU 2016-09. Without the $1.2 million expense, the three month period ended March 31, 2017 effective income tax rate would have been 10.6%. Our provision for income taxes for the three months ended March 31, 2016 was adjusted for an income tax benefit of $4.0 million, net, for discrete items related to changes in estimates in uncertain tax positions. Without the $4.0 million adjustment, the three month period ended March 31, 2016 effective income tax rate would have been 15.4%. The actual effective income tax rate for the full 2017 fiscal year may be materially different as a result of differences between estimated versus actual results and the geographic tax jurisdictions in which the results are earned.
We 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 deliver value-added solutions to customers across the U.S. However, our land segment can be impacted by market and weather conditions, such as the warmer weather conditions experienced in the U.K. during the first quarter of 2017. In periods where we experience historically extreme or unseasonable weather conditions, demand for our products may be affected. The continuation of unusual weather conditions in the future could adversely impact our results of operations. Furthermore, adverse market conditions could impact our supply and trading activities and related results of operations and profitability.
Our marine segment gross profit for the first quarter of 2017 was $33.6 million, a decrease of $5.5 million, or 14.2%, as compared to the first quarter of 2016. The gross profit decline was principally driven by reduced volume and margins in our core business, impacted, in large part, by lower profits from the sale of price risk management products to our marine customers, which has been adversely impacted by the limited price volatility. Our marine segment continued to be adversely impacted by the prolonged weakness in the overall maritime industry during the first quarter of 2017, however, the cost reduction activities we executed contributed to the improved operating efficiency of the marine business.
Operating Activities. For the three months ended March 31, 2017, net cash provided by operating activities was $137.0 million as compared to $138.6 million for the first three months of 2016. The $1.6 million decrease in operating cash flows was primarily due to year-over-year changes in net accounts receivables and accounts payables. Cash flows from net accounts receivable and accounts payable balances increased $133.2 million as a result of timing of payments to suppliers and fuel price changes. These increases were partially offset by declines in short-term derivative assets, net and the associated cash collateral we are required to post with our financial counterparties, as a result of limited price volatility resulting in reduced hedging activities.