World Fuel Services 2014 Annual Report Download - page 7

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We purchase our aviation fuel from suppliers worldwide, which is then typically delivered into our customers’ aircraft or
designated storage directly from our suppliers pursuant to arrangements with them or from our fuel inventory pursuant to
contracts with various third parties. Inventory is purchased at airport locations or shipped via pipelines and held at multiple
locations for strategic reasons. We typically hedge inventory in an effort to protect us against price risk. We also engage in
both contract sales, which are sales made pursuant to fuel purchase contracts with customers who commit to purchasing
fuel from us over the contract term, and spot sales, which are sales that do not involve continuing contractual obligations
by our customers to purchase fuel from us. Our cost of fuel is generally tied to market-based formulas or is government
controlled and our suppliers typically extend unsecured trade credit to us. We may prepay our fuel purchases when limited
by the amount of credit extended to us by suppliers or as required to transact business in certain countries. We also enter
into derivative contracts in order to mitigate the risk of market price fluctuations of certain of our transactions and to offer
our customers fuel pricing alternatives to meet their needs.
During each of the years presented in the accompanying consolidated statements of income and comprehensive income,
none of our aviation customers accounted for more than 10% of total consolidated revenue.
Marine Segment
We market fuel, lubricants and related products and services to a broad base of marine customers, including international
container and tanker fleets, commercial cruise lines, yachts and time-charter operators, the U.S. and foreign governments,
as well as other fuel suppliers. Through our extensive network of offices, we provide our customers with real-time global
market intelligence and rapid access to quality and competitively priced marine fuel 24 hours a day, every day of the year.
In addition, we offer card payment solutions and related processing services. Our marine fuel related services include
management services for the procurement of fuel, cost control through the use of price hedging instruments, quality control
and claims management.
We primarily act as a reseller as we generally take delivery for fuel purchased from our supplier at the same place and time
as the fuel is sold to our customer. We also sell fuel from our inventory, which we maintain in certain locations for strategic
reasons in storage facilities that we own or lease and generally hedge in an effort to protect us against price risk. We also
act as a broker and are paid a commission for negotiating the transaction by arranging the fuel purchase contract between
the supplier and the end user and expediting the arrangements for the delivery of fuel. In addition, we enter into derivative
contracts in order to mitigate the risk of market price fluctuations on certain of our transactions and to offer our customers
fuel pricing alternatives to meet their needs.
The majority of our marine segment activity consists of spot sales. Our cost of fuel is generally tied to spot pricing or
market-based formulas or is government controlled, and our suppliers typically extend unsecured trade credit to us. We
also contract with third parties to provide various services for our customers, including fueling of vessels in port and at sea,
and transportation and delivery of fuel and fuel products.
During each of the years presented in the accompanying consolidated statements of income and comprehensive income,
none of our marine customers accounted for more than 10% of total consolidated revenue.
Land Segment
In our land segment, we offer fuel, heating oil, lubricants and related products and services to petroleum distributors
operating in the land transportation market, retail petroleum operators, and industrial, commercial, residential and
government customers. Our land-related services include management services for the procurement of fuel and price risk
management. Additionally, we engage in crude oil marketing activities. We primarily conduct these activities throughout
most of the United States as well as parts of the United Kingdom and Brazil.
In addition, we offer transaction management services, which include card payment solutions, merchant processing
services, payment solutions for tolls across Europe, government payment systems for global fuel procurement and
commercial payment programs in the land transportation industry.
In connection with our fuel marketing activities, we act as a reseller as we purchase fuel from a supplier and
contemporaneously resell it to our customers through spot sales and contract sales. In general, fuel is delivered to our
customers directly or at designated tanker truck loading terminals commonly referred to as “racks,” which are owned and
operated by our suppliers or other third-parties, or directly to customer locations through third party carriers. We also
maintain inventory in certain locations including pipelines and ship inventory via railcar. Inventory held in storage or being
shipped is typically hedged in an effort to protect us against price risk. Our cost of fuel is generally tied to market-based
formulas and our suppliers typically extend unsecured trade credit to us. We also enter into derivative contracts in order to
mitigate the risk of market price fluctuations for certain of our transactions and to offer our customers fuel pricing alternatives
to meet their needs.