World Fuel Services 2007 Annual Report Download - page 10

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ANNUAL REPORT
26-Feb-2008 22:13 EST
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Marine Segment
We market fuel and related services to a broad base of customers, including international container and
tanker fleets, and time-charter operators, as well as to the United States and foreign governments. We provide
marine fuel and related services throughout most of the world under the following trade names: World Fuel,
Trans-Tec, Bunkerfuels, Oil Shipping, Marine Energy, Norse Bunker, Casa Petro and Tramp Oil.
Through our extensive network of offices, we provide our customers global market intelligence and rapid
access to quality and competitively priced marine fuel, 24 hours a day, every day of the year. Our marine fuel
related services include management services for the procurement of fuel, cost control through the use of price
hedging instruments, quality control and claims management. Our customers need cost effective and professional
fuel services, since the cost of fuel is a major component of a vessel’s operating overhead.
As ship owners, time charter operators and suppliers continue to outsource their marine fuel purchasing and/
or marketing needs, our value added services have become an integral part of the oil and transportation
industries’ push to shed non-core functions and reduce costs. Suppliers use our global sales, marketing and
financial infrastructure to sell a spot or ratable volume of product to a diverse, international purchasing
community. End customers use our real time analysis of the availability, quality, and price of marine fuels in
ports worldwide to maximize their competitive position.
In our marine segment, we primarily act as a reseller. When acting as a reseller, we contemporaneously
purchase fuel from a supplier, mark it up, and resell the fuel to a customer, normally taking delivery for
purchased fuel at the same place and time as we make delivery for fuel sold. We extend unsecured credit to most
of our customers. We also act as a broker. When acting as a broker, we negotiate the transaction by arranging the
fuel purchase contract between the supplier and the end user, and expedite the arrangements for the delivery of
fuel. When acting as a broker, we are paid a commission by the supplier.
We purchase our marine fuel from suppliers worldwide. We enter into derivative contracts in order to
mitigate the risk of market price fluctuations, and to offer our customers fuel pricing alternatives to meet their
needs. Our cost of fuel is generally tied to spot pricing, market-based formulas or is government controlled. We
are usually extended unsecured trade credit from our suppliers for our fuel purchases. However, certain suppliers
require us to provide a letter of credit. We may prepay our fuel purchases to take advantage of financial discounts
when limited by the amount of credit extended to us by suppliers, or as required to transact business in certain
countries.
Because we typically arrange to have fuel delivered by our suppliers directly to our customers, inventory is
maintained only for competitive reasons and at minimum operating levels. Inventory is primarily maintained at
two locations and is hedged in an effort to protect us against price risk. We have arrangements with our suppliers
and other third parties for the storage and delivery of fuel.
We utilize subcontractors to provide various services to customers, including fueling of vessels in port and
at sea, and transportation of fuel and fuel products.
During each of the years presented in the accompanying consolidated statements of income, none of our
marine customers accounted for more than 10% of total consolidated revenue.
Aviation Segment
We market 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. Our aviation related services include fuel management, price risk
management, arranging ground handling and arranging and providing international trip planning, including
flights plans, weather reports and overflight permits. With the acquisition of AVCARD in December 2007, we
also offer a private label charge card to customers in the general aviation industry. We have developed an
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