World Fuel Services 2008 Annual Report Download - page 30

(3) We acquired Tramp Oil in April 2004. The financial position and results of operations of this acquisition
have been included in our consolidated financial statements since April 1, 2004.
(4) Included in operating expenses are total compensation costs associated with share-based payment awards of
$14.7 million (including special bonus awards of approximately $4.5 million which will be settled in our
common stock in March 2009), $7.2 million, $7.0 million, $4.0 million and $1.7 million for 2008, 2007,
2006, 2005 and 2004, respectively.
(5) In September 2005, we completed a public offering of 4,112,000 shares of our common stock at a price of
$31.00 per share. We received net proceeds of $120.3 million from the offering, after deducting $6.4 million
in commissions paid to the underwriters and $0.8 million in other expenses incurred in connection with the
offering, which was recorded as an increase to shareholders’ equity.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with “Item 6—Selected Financial Data,” and with
the accompanying consolidated financial statements and related notes thereto appearing elsewhere in this Form
10-K. The following discussion may contain forward-looking statements, and our actual results may differ
significantly from the results suggested by these forward-looking statements. Some factors that may cause our
results to differ materially from the results and events anticipated or implied by such forward-looking statements
are described in “Item 1A—Risk Factors.”
Overview
We are engaged in the marketing and sale of marine, aviation and land fuel products and related services on
a worldwide basis. We compete by providing our customers value-added benefits, including single-supplier
convenience, competitive pricing, the availability of trade credit, price risk management, logistical support, fuel
quality control and fuel procurement outsourcing. We have three reportable operating business segments: marine,
aviation and land. In our marine segment, we offer fuel and related services to a broad base of maritime
customers, including international container and tanker fleets, commercial cruise lines and time-charter
operators, as well as to the United States and foreign governments. In our aviation segment, we offer 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, as well as a private label charge card used to purchase aviation fuel and related services to
customers in the general aviation industry. In our land segment, we offer fuel and related services to petroleum
distributors operating in the land transportation market and retail petroleum operators and other end users.
Through our acquisition of the Texor business in June 2008, we also offer branded and unbranded gasoline and
diesel fuel to retail petroleum operators and industrial, commercial and government customers and operate a
small number of retail gasoline stations.
Our revenue and cost of revenue are significantly impacted by world oil prices, as evidenced in part by our
revenue and cost of revenue increases year over year, while our gross profit is not necessarily impacted by the
change in world oil prices. However, our gross profit can be impacted by significant movements in fuel prices
during any given financial period due to our inventory average costing methodology. Changes in fuel prices can
positively or negatively impact gross profit during any given financial period depending on the direction,
volatility and timing of such price movements.
In our marine segment, we primarily purchase and resell fuel, and act as brokers for others. Profit from our
marine segment is determined primarily by the volume and gross profit achieved on fuel resales and by the
volume and commission rate of the brokering business. In our aviation and land segments, we primarily purchase
and resell fuel, and we do not act as brokers. Profit from our aviation and land segments is primarily determined
by the volume and the gross profit achieved on fuel resales, and in the case of the aviation segment, a percentage
of processed credit card charges related to our AVCARD business. Our profitability in our segments also
depends on our operating expenses, which may be significantly affected to the extent that we are required to
provide for potential bad debt.
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