World Fuel Services 2005 Annual Report Download - page 35

Operating Expenses. Total operating expenses for 2005 were $122.0 million, an increase of $30.1 million,
or 32.7%, as compared to 2004. The following table sets forth our expense categories (in thousands):
2004 2005 $ Change
Compensation and employee benefits ............... $58,634 $ 74,030 $15,396
Provision for bad debts ........................... 4,338 8,644 4,306
General and administrative ....................... 29,012 39,370 10,358
Total ..................................... $91,984 $122,044 $30,060
Of the total increase in operating expenses, $15.4 million was related to compensation and employee
benefits, $4.3 million to provision for bad debts and $10.4 million to general and administrative expenses. The
increase in compensation and employee benefits was primarily due to higher performance based incentive
compensation and new hires to support our global business. The increase in the provision for bad debts was due,
in part, to customers located in areas affected by Hurricane Katrina as well as a higher level of charge-offs of
accounts receivable during 2005. The increase in general and administrative expenses reflects twelve months of
expenses relating to Tramp Oil versus nine months in 2004, higher audit fees and infrastructure spending
initiatives to support our global business primarily relating to the following expenses: business travel, office rent,
employee recruitment expenses, legal fees and consulting fees.
Income from Operations. Our income from operations for 2005 was $56.6 million, an increase of $18.6
million, or 49.1%, as compared to 2004. Income from operations during these periods was attributable to the
following segments (in thousands):
2004 2005 $ Change
Marine segment ................................ $23,270 $ 35,360 $12,090
Aviation segment ............................... 29,319 40,824 11,505
52,589 76,184 23,595
Corporate overhead ............................. (14,617) (19,564) (4,947)
Total ..................................... $37,972 $ 56,620 $18,648
The marine segment earned $35.4 million in income from operations for 2005, an increase of $12.1 million,
or 52.0%, as compared to 2004. This increase resulted from approximately $26.9 million increase in gross profit,
partially offset by the $14.8 million increase in operating expenses. The marine segment incurred increases in
each of the operating expense categories of compensation and employee benefits, provision for bad debts and
general and administrative expenses. For detailed explanations of the changes in total operating expenses for
2005 as compared to 2004, see the above discussion on operating expenses.
The aviation segment income from operations was $40.8 million for 2005, an increase of $11.5 million, or
39.2%, as compared to 2004. This improvement was due to a $21.8 million increase in gross profit partially
offset by an increase in operating expenses of $10.3 million. The aviation segment incurred increases in each of
the operating expense categories of compensation and employee benefits, provision for bad debts and general and
administrative expenses. For detailed explanations of the changes in total operating expenses for 2005 as
compared to 2004, see the above discussion on operating expenses.
Corporate overhead costs not charged to the business segments totaled $19.6 million for 2005, as compared
to $14.6 million for 2004. The increase in corporate overhead costs was due to increases in compensation and
employee benefits as well as an increase in general and administrative expenses. For detailed explanations of the
changes in total operating expenses for 2005 as compared to 2004, see the above discussion on operating
expenses.
Other Expense and Income, net. During 2005, we reported $0.8 million in other expense, net, a decrease of
$1.3 million, as compared to other expense, net, of $2.1 million for 2004. This net decrease was primarily related
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