World Fuel Services 2007 Annual Report Download - page 37

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64435 TX 29WORLD FUEL SERVICES
ANNUAL REPORT
26-Feb-2008 23:30 EST
CLN PSTAM
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PMT 2C
CHMFBUAC350606
9.9.26
Income from Operations. Our income from operations for 2006 was $76.6 million, an increase of $20.0
million, or 35.4%, as compared to 2005. Income from operations during these years was attributable to the
following segments (in thousands):
2006 2005 $ Change
Marine segment ................................ $ 44,225 $ 35,360 $ 8,865
Aviation segment .............................. 56,648 39,882 16,766
Land segment ................................. 1,138 942 196
102,011 76,184 25,827
Corporate overhead—unallocated ................. (25,365) (19,564) (5,801)
Total .................................... $ 76,646 $ 56,620 $20,026
Our marine segment earned $44.2 million in income from operations for 2006, an increase of $8.9 million,
or 25.1%, as compared 2005. This increase resulted from an $11.1 million higher gross profit, offset by increased
operating expenses of approximately $2.3 million. The increase in marine segment operating expenses was
attributable to increased compensation and employee benefits and general and administrative expenses, partially
offset by lower provision for bad debt.
Our aviation segment earned $56.6 million in income from operations for 2006, an increase of $16.8
million, or 42.0%, as compared to 2005. This improvement was due to a $23.2 million increase in gross profit,
offset by increased operating expenses of approximately $6.5 million. The increase in aviation segment operating
expenses was attributable to increased compensation and employee benefits and general and administrative
expenses, partially offset by lower provision for bad debt.
Our land segment earned $1.1 million in income from operations for 2006, an increase of approximately
$0.2 million, or 20.8%, as compared to 2005. This was a result of a $1.0 million increase in gross profit, offset by
increased operating expenses of $0.8 million. The increase in land segment operating expenses was attributable
to increased compensation and employee benefits and general and administrative expenses, partially offset by
lower provision for bad debt.
Our corporate overhead costs not charged to the business segments totaled $25.4 million for 2006, an
increase of $5.8 million, or 29.7% as compared to 2005. The increase in corporate overhead costs was
attributable to the $1.5 million executive severance costs and increased compensation and employee benefits, and
general and administrative expenses.
Other Income and Expense, net. In 2006, we had other income, net, of $4.8 million as compared to other
expense, net, of $0.8 million for 2005. This change of approximately $5.6 million was primarily due to a $2.8
million increase in interest income as a result of a larger average cash position and higher interest rates in 2006, a
$1.2 million decrease in interest expense and other financing costs associated with our Credit Facility due to
lower borrowings and $1.5 million income related to the settlement of retention claims against the former owners
of Tramp Oil.
Taxes. For 2006, our effective tax rate was 21.3%, for an income tax provision of $17.4 million, as
compared to an effective tax rate of 27.7% and income tax provision of $15.5 million for 2005. Included in the
calculation of the effective tax rate for 2005 was $2.8 million additional income tax provision associated with our
decision to repatriate $40.0 million in foreign earnings pursuant to the special taxing provisions contained in the
American Jobs Creation Act of 2004. This repatriation affected our effective tax rate for 2005 by approximately
5.1%. The remaining net decrease in the effective tax rate resulted primarily from profit fluctuations of our
subsidiaries in tax jurisdictions with different tax rates.
Net Income and Diluted Earnings per Share. Net income for 2006 was $63.9 million, an increase of $24.3
million, or 61.4%, as compared to 2005. Diluted earnings per share for 2006 was $2.21 per share, an increase of
$0.64 per share, or 40.8%, as compared to 2005.
29