World Fuel Services 2004 Annual Report Download - page 59

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Cash Flow Hedges
As of December 31, 2004, our cash flow hedges consisted of fixed price sales commitments (an “All-in-One” hedged) and
fixed price swaps. The fixed price sales commitments are used to fix the prices of future fuel sales, while the fixed price swap
agreements are used to fix the prices of anticipated future fuel purchases. Accordingly, changes in fair value of these
derivatives fully offset in OCI and are recorded in prepaid expenses and other current assets and related accrued expenses and
other current liabilities.
Fair Value Derivatives
As of December 31, 2004, our fair value derivatives consisted of positions in futures that are used to offset against
changes in the fair value of our inventory. Changes in the fair value of the derivative are recorded in revenue and prepaid
expenses and other current assets.
Non-designated Derivatives
As of December 31, 2004, our non-designated derivatives consisted of swap contracts with our customers and swap and
collar contracts with counterparties. As part of our price risk management services, we offer swap contracts to our customers
to fix their fuel prices and simultaneously we enter into a swap contract with a counterparty with substantially the same terms
and conditions, and for this, we earn a fee. We recognize the fee revenue when both of the swap contracts are settled.
Because these contracts are back-to-back transactions, changes in the fair value of these derivatives have no impact on
earnings and are recorded in prepaid expenses and other current assets and related accrued expenses and other current
liabilities.
As of December 31, 2004 we had the following commodity related derivative instruments outstanding with average
underlying prices that represent hedged prices of commodities at various market locations:
Notional Amount
Average Fair Value
Settlement Derivative Marine Aviation Underlying Asset
Period Instrument Hedge Strategy (metric tons) (gallons) Prices (Liability)
(In thousands)
2005 Swap Cash flow 75,000 157.13$ 755$
Sales commitments Cash flow 75,000 170.19 (755)
Sales commitments Cash flow 114,840 161.91 1,341
Swap Cash flow 114,840 162.49 (1,341)
Swap Non-designated 70,040 165.98 1,245
Swap Non-designated 70,040 168.16 (1,245)
Swap Non-designated 151,824 182.35 2,738
Swap Non-designated 151,824 181.07 (2,738)
Swap Non-designated 37,186,210 141.99 625
Swap Non-designated 37,186,210 142.88 (625)
Swap Non-designated 36,114,000 140.39 2,810
Swap Non-designated 36,114,000 138.76 (2,810)
Futures Fair value 4,662,000 125.26 125
Futures Fair value 210,000 123.06 (3)
2006 Swap Non-designated 7,200 152.40 80
Swap Non-designated 7,200 152.70 (80)
Swap Non-designated 24,000 159.00 468
Swap Non-designated 24,000 158.00 (468)
2007 Swap Non-designated 2,500 147.32 40
Swap Non-designated 2,500 147.75 (40)
122$
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