World Fuel Services 2005 Annual Report Download - page 57

WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business, Recent Acquisitions and Significant Accounting Policies
Nature of Business
World Fuel Services Corporation (the “Company”) was incorporated in Florida in July 1984 and along with
its consolidated subsidiaries is referred to collectively as “World Fuel,” “we,” “our” and “us.” We commenced
business as a recycler and reseller of used fuel and related products. In 1986, we diversified our operations by
entering the aviation segment. In 1995, we entered the marine segment, by acquiring the Trans-Tec group of
companies.
We are engaged in the marketing and sale of marine and aviation fuel products and related services on a
worldwide basis. In our marine segment, we offer marine fuel and related services to a broad base of maritime
customers, including international container and tanker fleets and time-charter operators, as well as to the United
States and foreign governments. In our aviation segment, we offer aviation fuel and related services to major
commercial airlines, second and third-tier airlines, cargo carriers, regional and low cost carriers, corporate fleets,
fractional operators, private aircraft, military fleets and to the United States and foreign governments. We
compete by providing our customers value-added benefits including single-supplier convenience, competitive
pricing, the availability of trade credit, price risk management, logistical support, fuel quality control and fuel
procurement outsourcing.
Recent Acquisitions
In April 2004, we acquired all of the outstanding shares (the “THL Shares”) of Tramp Holdings Limited
(“THL”) and the shares of Tramp Group Limited, a subsidiary of THL, which were not otherwise held by THL
(the “TGL Shares”), to expand our marine segment. The aggregate purchase price for the THL Shares and the
TGL Shares was approximately $86.1 million, including acquisition costs of approximately $1.2 million. The
aggregate purchase price consisted of $85.4 million in cash and $0.8 million in the form of restricted common
stock, representing approximately 38 thousand shares and valued using the market value of our common stock on
the acquisition date. The acquisition of Tramp Oil, which primarily offers fuel and fuel services, was accounted
for under the purchase method. Accordingly, the operations of Tramp Oil have been included in our operating
results since April 2004. At acquisition date, we identified an intangible asset relating to customer relations of
$7.6 million, which is being amortized over seven years using the straight-line method. In April 2005, we
finalized the purchase price allocation with a reduction in the fair value of the acquired net assets and a related
increase in goodwill of $0.3 million. Goodwill, representing the cost in excess of the fair value of assets acquired
and liabilities assumed for this acquisition, amounted to $5.8 million. Included in the fair value of assets acquired
was approximately $90.0 million in cash, accordingly, the acquisition of Tramp Oil resulted in a net cash inflow
of approximately $3.6 million.
The following presents the unaudited pro forma results of 2004 as if the Tramp Oil acquisition had been
completed as of January 1, 2004 (in thousands, except per share data):
2004
(Pro Forma)
Revenue ................................................ $5,912,875
Net income ............................................. $ 27,822
Basic earnings per share ................................... $ 1.26
Diluted earnings per share .................................. $ 1.19
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