World Fuel Services 2004 Annual Report Download - page 32

Year ended December 31, 2004 compared to Year ended December 31, 2003
Revenue. Our revenue for the year ended December 31, 2004 was $5.65 billion, an increase of $2.98 billion, as compared
to revenue of $2.67 billion for the year ended December 31, 2003. Our revenue increase was primarily due to increases in
business volume in marine and aviation. Our revenue during these periods was attributable to the following segments (in
thousands):
For the Year ended December 31,
2004 2003
Restated
Marine fuel services 3,031,474$ 1,644,598$
Aviation fuel services 2,622,899 1,026,959
Total 5,654,373$ 2,671,557$
Our marine fuel services segment contributed $3.03 billion in revenue for the year ended December 31, 2004, an increase
of $1.39 billion, or 84.3%, over the prior year. Of the total increase in marine revenue, $1.25 billion pertained to increased
business volume, primarily due to the acquisition of Tramp Oil, as well as additional sales to new and existing customers. The
remaining revenue increase of $134.4 million was due to a 6.8% increase in the average price per metric ton sold. Our
aviation fuel services segment contributed $2.62 billion in revenue for the year ended December 31, 2004, an increase of $1.59
billion over the prior year. Increased volume in aviation contributed $970.0 million of the total increase in aviation revenue,
with the remaining revenue increase of $626.0 million pertaining to a 30.4% increase in the average price per gallon sold. The
increase in aviation sales volume was largely due to the growth in our fuel management business, new commercial business,
and the consolidation of PAFCO, our aviation joint venture with Signature. See Note 7 to the accompanying consolidated
financial statements included in this Form 10-K for additional information.
Gross Profit. Our gross profit of $130.0 million for the year ended December 31, 2004 increased $28.8 million, or 28.5%,
as compared to the prior year. Our gross margin decreased from 3.8% for the year ended December 31, 2003, to 2.3% for the
year ended December 31, 2004. Our marine fuel services gross margin of 2.1% decreased from 3.0% in the prior year.
However, our gross profit in the marine fuel services segment increased $14.4 million, or 29.5%, due to increased business
volume, partially offset by a lower gross profit per metric ton sold. Our marine segment gross profit was also reduced due to a
write-down in the fourth quarter of 2004 of fuel inventory associated with our exit from the Panamanian market, a market area
we acquired as part of the Tramp Oil transaction. The decrease in gross profit per metric ton sold in marine reflects
competitive pressures. Our gross profit in the aviation fuel services business increased $14.4 million, or 27.6%, while our
aviation fuel services gross margin decreased to 2.5% for the year ended December 31, 2004, as compared to 5.1% for the
prior year. The increase in our gross profit in the aviation fuel services segment was primarily due to increased business
volume. The decrease in aviation gross margin reflects the business volume growth in our lower margin fuel management
business.
Operating Expenses. Total operating expenses for the year ended December 31, 2004 were $93.0 million, as compared to
$73.8 million for the year ended December 31, 2003. The increase in operating expenses of $19.2 million, or 26.0%, was due
to increases in salaries and wages of $13.0 million and in other operating expenses of $8.1 million, partially offset by a
decrease in provision for bad debts of $1.9 million. The overall increase in operating expenses for 2004 reflects the additional
operating expenses of Tramp Oil and the overall higher operating costs associated with increased business activities. The
increase in salaries and wages was primarily due to new hires, the additional employees from Tramp Oil, and higher
performance based incentive compensation. The increase in other operating expenses was primarily the result of the additional
other operating expenses of Tramp Oil, higher business travel, in part due to the acquisition and integration of Tramp Oil, and
higher professional fees, insurance, payroll taxes and credit facility loan and letters of credit fees. The decrease in the
provision for bad debts for 2004 was primarily due to a shift of business in favor of higher credit quality, high volume
commercial business, and market condition improvement of our marine customers 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.
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