World Fuel Services 2002 Annual Report Download - page 56

2. Discontinued Operations
In January 2000, our Board of Directors authorized the sale of our oil-recycling segment. Accordingly, as of December
1999, we reported our oil-recycling segment as a discontinued operation. Financial results for periods prior to the dates of
discontinuance have been reclassified to reflect continuing operations.
In February 2000, we sold the stock of our oil-recycling subsidiaries, the International Petroleum Corporation group
("IPC"), to EarthCare Company. Pursuant to the stock purchase agreement between the parties, we received $28.0 million in
cash and $5.0 million in EarthCare common stock, subject to lock-up and price protection agreements. In addition to the
$33.0 million purchase price, after the sale, EarthCare was to pay us the value of certain assets employed in the oil-recycling
business through the collection of our accounts receivable by EarthCare and the sale of inventory, prepaid expenses and
other assets to EarthCare. EarthCare failed to pay us the amounts due after closing of the sale, and we commenced legal
proceedings to collect these amounts.
In March 2001, we entered into a settlement agreement with EarthCare (the “Settlement Agreement”) which dismissed
the pending proceedings. Pursuant to this settlement, in April 2001, we received $1.75 million from EarthCare in settlement
of amounts due to us. The Settlement Agreement also released us from all indemnifications previously provided to
EarthCare, including environmental indemnifications, as stated in the original purchase agreement for the IPC companies.
The settlement resulted in a reduction in the amount of assets we ultimately realized in connection with the discontinuance of
our used oil-recycling business. Accordingly, this was reflected as a non-recurring after-tax charge of $656 thousand to our
discontinued operations for the year ended March 31, 2001. We also recorded additional income taxes of $496 thousand
associated with the discontinued operations based on the actual income tax returns filed for the year ended March 31, 2000.
As of March 31, 2001, the $1.75 million settlement was included in Prepaid expenses and other current assets.
As part of the Settlement Agreement, Donald F. Moorehead, Jr., Chairman of EarthCare, agreed to purchase the
EarthCare stock owned by us for approximately $5.0 million. In May 2001, Mr. Moorehead defaulted on his agreement to
purchase those shares. We commenced legal proceedings against Mr. Moorehead to enforce his contract to purchase the
EarthCare stock owned by us.
In July 2001, we received a Summary Judgment from the United States District Court for the Southern District of
Florida which ordered Mr. Moorehead to pay us compensatory damages of approximately $5.0 million, plus interest from
May 1, 2001. From August 2001 to October 2001, we received principal and interest payments totaling $700 thousand from
Mr. Moorehead. As of March 31, 2002 and 2001, a receivable from Mr. Moorehead of approximately $4.3 million and $5.0
million, respectively, was included in Prepaid expenses and other current assets in the accompanying Consolidated Balance
Sheets. We had been pursuing collection of this judgment and, in May 2002, the court appointed a receiver to take
possession and control of all nonexempt assets and property interests of Mr. Moorehead. As a result of the receiver’s
activities, we received several offers from Mr. Moorehead to settle the outstanding balance on our judgment and received
$350 thousand of principal and interest payments from Mr. Moorehead from May 2002 to August 2002, resulting in a total
principal and interest collection of approximately $1.1 million. Finally, in October 2002, we received $3.0 million as a final
payment to settle the remaining balance due on our judgment. Accordingly, in connection with the settlement, during the
nine months ended December 31, 2002, we recorded a non-recurring charge of approximately $1.6 million, which includes
$346 thousand of legal and receiver fees. See Note 6, Commitments and Contingencies – Legal matters, for additional
information.
During the year ended March 31, 2000, we recognized net income of $9.8 million on the disposal of our oil-recycling
segment. Net income from discontinued operations included $1.6 million, net of $980 thousand in taxes, for the oil-
recycling segment operating income for the ten months ended January 31, 2000, the measurement date, and $8.2 million, net
of $5.2 million in taxes and $92 thousand in provision for certain costs during the phase-out period, for the gain on sale of
the segment. Revenue applicable to the discontinued operations was $22.5 million for the year ended March 31, 2000.
Income from operations of the discontinued operations for the year ended March 31, 2000 was $2.5 million.
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