World Fuel Services 2007 Annual Report Download - page 34

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64435 TX 26WORLD FUEL SERVICES
ANNUAL REPORT
26-Feb-2008 23:30 EST
CLN PSTAM
RR Donnelley ProFile SER scheg0cm 4*
PMT 2C
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9.9.26
Operating Expenses. Total operating expenses for 2007 were $159.4 million, an increase of $22.0 million,
or 16.0%, as compared to 2006. The following table sets forth our expense categories (in thousands):
2007 2006 $ Change
Compensation and employee benefits .............. $ 94,809 $ 82,987 $11,822
Executive severance costs ....................... — 1,545 (1,545)
Provision for bad debts .......................... 1,892 3,869 (1,977)
General and administrative ...................... 62,683 49,022 13,661
Total .................................... $159,384 $137,423 $21,961
Of the total increase in operating expenses, $11.8 million was related to compensation and employee
benefits and $13.7 million was related to general and administrative expenses. Partially offsetting these increases
was a reduction of $2.0 million in provision for bad debt and the $1.5 million in executive severance costs
incurred during 2006. The increase in compensation and employee benefits was primarily due to 2007 new hires
to support our continued growing global business and the full year effect on compensation and employee benefits
relating to 2006 new hires, partially offset by a decrease in incentive compensation. Included in general and
administrative expenses for 2007 was an impairment charge of $2.4 million during the fourth of 2007 for
internally developed computer software costs related to an aviation project. The remaining increase in general
and administrative expenses of $11.3 million was primarily attributable to the following expenses: systems
development, which included costs related to our enterprise integration project, professional and consulting fees,
business travel, depreciation and amortization, office rent and telecommunication. The decrease in provision for
bad debt was primarily due to an overall improved quality of our receivable portfolio during 2007 as compared to
2006, primarily in the aviation and land segment.
Income from Operations. Our income from operations for 2007 was $85.9 million, an increase of $9.2
million, or 12.1%, as compared to 2006. Income from operations during these years was attributable to the
following segments (in thousands):
2007 2006 $ Change
Marine segment ............................... $ 50,844 $ 44,225 $ 6,619
Aviation segment .............................. 60,796 56,648 4,148
Land segment ................................. 1,237 1,138 99
112,877 102,011 10,866
Corporate overhead—unallocated ................. (26,989) (25,365) (1,624)
Total .................................... $ 85,888 $ 76,646 $ 9,242
The marine segment earned $50.8 million in income from operations for 2007, an increase of $6.6 million,
or 15.0%, as compared to 2006. This increase resulted from $13.3 million in higher gross profit, offset by
increased operating expenses of $6.7 million. The increase in marine segment operating expenses, which includes
an increase in allocated corporate expenses, was attributable to increases in compensation and employee benefits,
provision for bad debt and general and administrative expenses.
The aviation segment income from operations was $60.8 million for 2007, an increase of $4.1 million, or
7.3%, as compared to 2006. This increase resulted from $15.9 million in higher gross profit, offset by increased
operating expenses of $11.8 million. The increase in aviation segment operating expenses, which includes an
increase in allocated corporate expenses, was attributable to increases in compensation and employee benefits
and general and administrative expenses, partially offset by a decrease in provision for bad debt.
The land segment income from operations was $1.2 million for 2007, an increase of $0.1 million, or 8.7%,
as compared to 2006. This increase resulted from $1.9 million in higher gross profit, offset by increased
operating expenses of $1.8 million. The increase in land segment operating expenses, which includes an increase
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