World Fuel Services 2008 Annual Report Download - page 35

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Gross Profit. Our gross profit for 2008 was $395.4 million, an increase of $150.1 million, or 61.2%, as
compared to 2007. Our gross profit during these years was attributable to the following segments (in thousands):
2008 2007 $ Change
Marine segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $203,345 $114,505 $ 88,840
Aviation segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,834 122,797 43,037
Land segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,204 7,970 18,234
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $395,383 $245,272 $150,111
Our marine segment gross profit for 2008 was $203.3 million, an increase of $88.8 million, or 77.6%, as
compared to 2007. Contributing to the total increase in marine segment gross profit was $84.5 million in
increased gross profit per metric ton sold due to favorable market conditions, as well as a focus to increase our
return relative to invested working capital and $4.3 million due to increased sales volume.
Our aviation segment gross profit for 2008 was $165.8 million, an increase of $43.0 million, or 35.0%, as
compared to 2007. Of the increase in aviation gross profit, $48.0 million was due to higher gross profit per gallon
sold, which reflects favorable market conditions and the timing of price movements relative to our inventory
position as well as changes in business mix yielding higher margins. Partially offsetting this increase was a
decrease in aviation gross profit of $5.0 million due to net decreased sales volume primarily attributable to our
efforts to reduce low margin business and to eliminate certain high risk business and decreased gross profit
related to aviation services, partially offset by the incremental sales volume contributed by our AVCARD
acquisition.
Our land segment gross profit for 2008 was $26.2 million, an increase of $18.2 million, as compared to $8.0
million in 2007. The increase was primarily due to the inclusion of the results of the Texor business, as well as
higher gross profit per gallon from our pre-existing business.
Operating Expenses. Total operating expenses for 2008 were $241.6 million, an increase of $82.3 million,
or 51.6%, as compared to 2007. The following table sets forth our expense categories (in thousands):
2008 2007 $ Change
Compensation and employee benefits . . . . . . . . . . . . . . $140,280 $ 93,732 $46,548
Provision for bad debt . . . . . . . . . . . . . . . . . . . . . . . . . . 16,081 1,892 14,189
General and administrative . . . . . . . . . . . . . . . . . . . . . . 85,282 63,760 21,522
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $241,643 $159,384 $82,259
Of the total increase in operating expenses, approximately $46.5 million was related to compensation and
employee benefits, $14.2 million was related to the provision for bad debt and $21.5 million was related to
general and administrative expenses. The increase in compensation and employee benefits was primarily due to
higher incentive compensation, including special bonus awards to our CEO, Chief Operating Officer, CFO and
Chief Risk and Administrative Officer as a result of our strong financial performance in 2008, new hires to
support our continued growing global business, and the incremental compensation and employee benefits costs
related to the acquisitions of AVCARD and the Texor business. The increase in provision for bad debt was
primarily due to our assessment of risk related to certain of our customers due in part to higher fuel prices and the
consideration of the transportation economies of the regions in which we conduct business and its impact on our
customers, which resulted in an increase in the provision for certain accounts in 2008. The increase in general
and administrative expenses of $21.5 million, which includes the incremental general and administrative
expenses related to the acquisitions of AVCARD and the Texor business, was primarily attributable to the
following expenses: depreciation and amortization, including amortization of the intangible assets related to the
acquisitions of AVCARD and the Texor business, and depreciation from our enterprise integration project that
went live in February 2008, professional and consulting fees, office rent and telecommunication expenses.
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