World Fuel Services 2002 Annual Report Download - page 25

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
consolidated financial statements and related notes thereto appearing elsewhere in this Form 10-K.
Reportable Segments
We have two reportable operating businesses: marine and aviation fuel services. In our marine fuel services business,
we market marine fuel and related management services to a broad base of international shipping companies and to the
United States and foreign militaries. Services include credit terms, 24-hour around-the-world service, fuel management
services, and competitively priced fuel. In our aviation fuel services business, we extend credit and provide around-the-
world single-supplier convenience, 24-hour service, fuel management services, and competitively priced aviation fuel and
other aviation related services to passenger, cargo and charter airlines, as well as to United States and foreign militaries. We
also offer flight plans and weather reports to our corporate customers.
Our marine fuel business accounted for approximately 66% of our total revenue for the nine months ended December
31, 2002, while our aviation fuel business accounted for the remaining 34%. For the nine months ended December 31, 2001,
and the years ended March 31, 2002, 2001, and 2000, our marine fuel services business accounted for approximately 72%,
72%, 66%, and 62%, respectively, of our total revenue. For the nine months ended December 31, 2002, excluding corporate
overhead, our aviation fuel services and our marine fuel services contributed 59% and 41%, respectively, of operating
income. For the nine months ended December 31, 2001, and the years ended March 31, 2002, 2001, and 2000, excluding
corporate overhead, our marine fuel services contributed 56%, 52%, 53% and 63%, respectively, of operating income.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon the consolidated financial
statements included elsewhere in this Form 10-K, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, deferred tax
assets and liabilities, goodwill and identifiable intangible asset, and certain accrued liabilities. We base our estimates on
historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We have identified the policies below as critical to our business operations and the understanding of our results of
operations. For a detailed discussion on the application of these and other accounting policies, see Note 1 to the
accompanying consolidated financial statements included in this Form 10-K.
Revenue Recognition
Revenue is generally recorded in the period when the sale is made or as the services are performed. We contract with
unrelated third parties to provide the fuel and/or deliver most services. This causes delays in receiving the necessary
information for invoicing to our customers. Accordingly, revenue may be recognized in a period subsequent to when the
actual delivery of fuel or service was performed. This policy does not result in reported results that are materially different
than if the revenue were recognized in the period of actual delivery or performance.
Accounts Receivable and Allowance for Bad Debts
Credit extension, monitoring and collection are performed by each of our business segments. Each segment has a credit
committee. The credit committees are responsible for approving credit limits above certain amounts, setting and maintaining
credit standards, and managing the overall quality of the credit portfolio. We perform ongoing credit evaluations of our
customers and adjust credit limits based upon payment history and the customer’s current credit worthiness, as determined by
our review of our customer’s credit information. We extend credit on an unsecured basis to many of our customers.
We continuously monitor collections and payments from our customers and maintain a provision for estimated credit
losses based upon our historical experience and any specific customer collection issues that we have identified. Accounts
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