World Fuel Services 2004 Annual Report Download - page 31

The future estimated amortization of our identifiable intangible assets is as follows (in thousands):
For the Year ending December 31,
2005 $ 1,448
2006 1,448
2007 1,080
2008 1,080
2009 1,080
Thereafter 1,350
$ 7,486
In accordance with SFAS No. 142, goodwill must be reviewed annually (or more frequently under certain circumstances)
for impairment. The initial step of the goodwill impairment test compares the fair value of a reporting unit with its carrying
amount, including goodwill. Based on results of these comparisons as of December 31, 2004, goodwill in each of our
reporting units is not considered impaired. Accordingly, no impairment charges were recognized.
Income Taxes
Income tax expense is provided for using the asset and liability method, under which deferred tax assets and liabilities are
determined based upon the temporary differences between the financial statement and income tax bases of assets and liabilities
using currently enacted tax rates. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available
evidence, it is more likely than not that all or a portion of the recorded deferred tax assets will not be realized in future periods.
As of December 31, 2004, we have not recorded a valuation allowance.
Results of Operations
Overview
Our profitability improved in 2004 due to increases both in metric tons of fuel sold in marine and in gallons of fuel sold in
aviation, and a decrease in the provision for bad debts. Earnings were adversely affected by decreases in both the gross profit
per metric ton sold in marine and gross profit per gallon sold in aviation, by increases in salaries and wages and in other
operating expenses, and by the effect of non-operating expenses recorded in 2004 versus non-operating income recorded in
2003.
The increase in marine business volume in 2004 was primarily due to the Tramp Oil acquisition and additional sales to
new and existing customers. The decrease in gross profit per metric ton sold in marine in 2004 reflects sustained high marine
fuel prices, competitive pressures, and the acquisition of lower margin business from Tramp Oil. The increase in sales volume
and the decrease in gross profit per gallon in the aviation business in 2004 were primarily due to growth in our fuel
management business, which is a higher credit quality, lower margin business, as well as new commercial business. The
decrease in the provision for bad debts in 2004 was primarily due to a shift of business in favor of higher credit quality, high
volume commercial business as well as the recording of bad debt expenses in 2003 relating to the write-off of receivables from
two international airlines that filed for bankruptcy. The increases in salaries and wages and other operating expenses in 2004
were due to the additional operating costs of Tramp Oil as well as higher overall operating costs associated with increased
business activities. Negative changes in non-operating items in 2004 were primarily due to the recognition of exchange losses
relating to the conversion into US dollars of foreign currencies acquired in connection with the Tramp Oil acquisition and
higher interest expense associated with borrowings under our revolving credit facility.
We may experience decreases in future sales volume and margins as a result of deterioration in the world economy, or in
the shipping or aviation industries, and continued conflicts and instability in the Middle East, Asia and Latin America, as well
as potential future terrorist activities and possible military retaliation. In addition, because fuel costs represent a significant
part of a vessel’ s and airline's operating expenses, volatile and/or high fuel prices can adversely affect our customers’
businesses, and consequently the demand for our services, and our results of operations. See “Risk Factors” in Item 1 of this
Form 10-K.
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