World Fuel Services 2007 Annual Report Download - page 36

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ˆ1KGX9SH6B7TB09W(Š
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64435 TX 28WORLD FUEL SERVICES
ANNUAL REPORT
26-Feb-2008 23:30 EST
CLN PSTAM
RR Donnelley ProFile SER scheg0cm 4*
PMT 2C
CHMFBUAC350606
9.9.26
Gross Profit. Our gross profit for 2006 was $214.1 million, an increase of $35.4 million, or 19.8%, as
compared to 2005. Our gross profit during these years was attributable to the following segments (in thousands):
2006 2005 $ Change
Marine segment ............................... $101,177 $ 90,049 $11,128
Aviation segment .............................. 106,867 83,619 23,248
Land segment ................................. 6,025 4,996 1,029
Total .................................... $214,069 $178,664 $35,405
Our marine segment gross profit for 2006 was $101.2 million, an increase of $11.1 million, or 12.4%, as
compared to 2005. Contributing to the total increase in marine segment gross profit was $16.0 million in
increased sales volume partially offset by $4.9 million in lower gross profit per metric ton due to changes in
market conditions.
Our aviation segment gross profit for 2006 was $106.9 million, an increase of $23.2 million, or 27.8%, as
compared to 2005. Contributing to the total increase was $22.3 million in higher gross profit per gallon sold,
which reflects changes in business mix yielding higher margins. The remaining gross profit increase of $0.9
million was due to increased sales volume.
Our land segment gross profit for 2006 was approximately $6.0 million, an increase of $1.0 million, or
20.6%, as compared to 2005. The increase in land segment gross profit resulted from $0.5 million in increased
sales volume and higher gross profit per gallon sold, respectively.
Operating Expenses. Total operating expenses for 2006 were $137.4 million, an increase of $15.4 million,
or 12.6%, as compared to 2005. The following table sets forth our expense categories (in thousands):
2006 2005 $ Change
Compensation and employee benefits .............. $ 82,987 $ 74,030 $ 8,957
Executive severance costs ....................... 1,545 — 1,545
Provision for bad debts .......................... 3,869 8,644 (4,775)
General and administrative ...................... 49,022 39,370 9,652
Total .................................... $137,423 $122,044 $15,379
Of the total increase in operating expenses, $9.0 million was related to compensation and employee benefits,
$9.7 million to general and administrative expenses and $1.5 million was due to executive severance costs related
to the departure of our former Chief Financial Officer. Partially offsetting these increases was a $4.8 million
decrease in provision for bad debt. The increase in compensation and employee benefits was primarily due to
higher performance based incentive compensation, which includes non-cash share-based payment awards, and
new hires to support our global business. The increase in general and administrative expenses was mainly due to
infrastructure spending initiatives to support our global business primarily relating to the following expenses:
professional and consulting fees, recruiting fees, systems development, travel and related expenses, depreciation
and amortization, telecommunication costs and other general administrative expenses. The decrease in the
provision for bad debt was mainly attributable to specific bad debt provisions recorded for two marine segment
customers in 2005, certain land customers located in areas affected by Hurricane Katrina in 2005 as well as the
overall improved quality of our receivables portfolio in 2006.
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