World Fuel Services 2005 Annual Report Download - page 67

WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
enactment date or the first tax year that begins during the one-year period beginning on the enactment date. FSP
No. 109-2 provides entities additional time to assess the effect of repatriating foreign earnings under the Act for
purposes of applying SFAS No. 109, “Accounting for Income Taxes,” which typically requires the effect of a
new tax law to be recorded in the period of enactment. In the fourth quarter of 2005, we decided to repatriate
$40.0 million in foreign earnings pursuant to the special taxing provisions contained in the Act. For 2005, we
recorded additional tax expense of approximately $2.8 million, or $0.12 per basic share and $0.11 per diluted
share, related to this decision to repatriate foreign earnings.
Inventory Costs. In November 2004, the FASB issued SFAS No. 151, “Inventory Costs—an amendment of
Accounting Research Bulletins No. 43, Chapter 4.” This statement clarifies the requirement that abnormal
inventory-related costs be recognized as current-period charges. The provisions of this statement are to be
applied prospectively to inventory costs incurred during fiscal years beginning after June 15, 2005. We do not
expect the effects of adoption of SFAS No. 151 will have a material impact on our results of operations or
financial position.
2. Debt
In August 2005, our $150 million revolving credit facility was amended to, among other things: 1) increase
available borrowings under the credit facility to $200.0 million, 2) provide us with the right to request increases
in available borrowings up to an additional $50.0 million, subject to the approval of the administrative agent,
3) increase the sublimit for the issuance of letters of credit to $100.0 million, and 4) modify certain financial
covenants. Immediately following the entering into of the amendment of the revolving credit facility, the
administrative agent approved a request by us to increase available borrowings under the credit facility by an
additional $20.0 million to $220.0 million. With the completion of the September 2005 equity offering (see Note
4), certain fees and borrowing costs under the credit facility were reduced and the expiration date of the
revolving credit facility was extended to December 19, 2010 from December 19, 2006, as provided for in the
amendment described above.
Available borrowings under our revolving credit facility are reduced by the amount of outstanding letters of
credit. Outstanding borrowings under our revolving credit facility totaled $50.0 million and $20.0 million at
December 31, 2004 and 2005, respectively. Our issued letters of credit, as of December 31, 2004 and 2005,
totaled $28.4 million and $34.4 million, respectively. Our average daily outstanding borrowings were $26.7
million and $36.9 million during 2004 and 2005 and the maximum borrowings were $75.0 million and $90.0
million during 2004 and 2005, respectively. As defined in the credit facility, borrowings under our revolving
credit facility bear interest at market rates plus applicable margins ranging from zero percent to 0.75% for U.S.
Prime Rate loans and 1.00% to 1.75% for LIBOR Rate loans. The unused portion of our revolving credit facility
are subject to fees (“Non-Use Fees”) ranging from 0.25% to 0.375%. Letters of credit issued under our revolving
credit facility are subject to fees (“L/C Fees”) ranging from 1.00% to 1.75%. Interest, Non-Use Fees and L/C
Fees are payable quarterly and at maturity in arrears. As of December 31, 2004, our weighted average interest
rate on borrowings under the revolving credit facility was 4.3% per annum. In March 2005, we entered into two
interest rate protection arrangements, for $20.0 million of borrowings under our revolving credit facility, which
represents our entire borrowings at December 31, 2005. The interest rate protection arrangements expire equally
in March and April 2008. As of December 31, 2005, our weighted average interest rate on borrowing under the
revolving credit facility adjusting for the interest rate protection arrangements was 5.2% per annum.
Our revolving credit facility contains certain operating and financial covenants with which we are required
to comply. Our failure to comply with the operating and financial covenants contained in our revolving credit
facility could result in an event of default. An event of default, if not cured or waived, would permit acceleration
of any outstanding indebtedness under the revolving credit facility, trigger cross-defaults under other agreements
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