World Fuel Services 2005 Annual Report Download - page 76

WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Lease Commitments
As of December 31, 2005, our future minimum lease payments under non-cancelable operating leases were
as follows (in thousands):
Year Ended December 31,
2006 ............................................................. $ 3,126
2007 ............................................................. 2,304
2008 ............................................................. 1,864
2009 ............................................................. 1,695
2010 ............................................................. 1,461
Thereafter ......................................................... 2,140
$12,590
We incurred rental expense for all properties and equipment of $2.4 million, $2.8 million and $4.1 million
for 2003, 2004 and 2005, respectively.
In the normal course of business, we may enter into service contracts with minimum service fee
commitments for telecommunication, and computer data and document storage. As of December 31, 2005, we
had no material service contracts with minimum service fee commitments.
Concentration of Credit Risk
Our marine and aviation segments extend unsecured credit to most of their customers. Part of our success in
attracting business has been due, in part, to our willingness to extend credit on an unsecured basis to customers
which exhibit a high credit risk profile and would otherwise be required to prepay or post letters of credit with
their suppliers of fuel and related services. We recognize that extending credit and setting the appropriate
reserves for receivables is largely a subjective decision based on knowledge of the customer and the industry.
Active management of our credit risk is essential to our success. Diversification of credit risk is difficult since we
sell primarily within the marine and aviation industries. Our sales executives and their respective staff meet
regularly to evaluate credit exposure, in the aggregate and by individual credit. Credit exposure also includes the
amount of estimated unbilled sales. We also have a credit committee for each of our segments. The credit
committees are responsible for approving credit limits above certain amounts, setting and maintaining credit
standards, and managing the overall quality of the credit portfolio. The level of credit granted to a customer is
influenced by a customer’s credit history with us, including claims experience and payment patterns.
World oil prices have been very volatile over the last several years, and since fuel costs represent a
significant part of a vessel’s and airline’s operating expenses, the volatility in fuel prices can adversely affect our
customers’ business, and consequently our credit losses.
Although most of our transactions are denominated in U.S. dollars, many of our customers are foreign
customers and may be required to purchase U.S. dollars to pay for our products and services. A rapid devaluation
in currency affecting our customers could have an adverse effect on our customers’ operations and their ability to
convert local currency to U.S. dollars to make the required payments to us. This would in turn result in higher
credit losses for us.
We may also incur credit losses due to other causes, including deteriorating conditions in the world
economy, or in the shipping or aviation industries, and continued conflicts and instability in the Middle East,
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