World Fuel Services 2002 Annual Report Download - page 27

which may be significantly affected to the extent that we are required to provision for potential bad debts. Profit from our
aviation fuel services business is directly related to the volume and the gross profit achieved on sales, as well as the overall
level of operating expenses, which may be significantly affected to the extent that we are required to provision for potential
bad debts.
In April 1999, February 2001, April 2001, and January 2002, we acquired the operations of the Bunkerfuels group of
companies, Norse Bunker A.S., the Marine Energy group of companies, and the Oil Shipping group of companies,
respectively. These acquisitions form part of our worldwide marine fuel marketing segment and were accounted for as
purchases. Accordingly, the results of operations of these acquisitions were included with our results since their respective
dates of acquisition. In December 2000, we entered into a joint venture agreement with Signature Flight Support
Corporation through the acquisition of a 50% equity interest in PAFCO. Under the equity method of accounting, we have
recorded our share of the results of PAFCO since January 1, 2001. In February 2000, we sold our oil-recycling segment to
EarthCare Company and we reported this segment as a discontinued operation as of December 31, 1999. In October 2000,
our aviation joint venture in Ecuador ceased operations.
During the comparable nine-month periods ending December 31, 2002 and 2001, our profitability was favorably
impacted in 2002 by increases in metric tons sold in marine and sales volume in aviation, and a lower provision for bad debts
in aviation. Earnings were adversely affected by the executive severance charges, a non-recurring charge in connection with
the settlement of the remaining balance due on the Moorehead judgment, decreases in gross profit per metric ton sold in
marine and gross profit per gallon sold in aviation, operating expenses of our January 2002 marine acquisition, and increases in
salaries and other operating expenses. Also, the results for the nine months ended December 31, 2001 included an insurance
settlement recovery of $1.0 million related to a product theft off the coast of Nigeria in 1999 and a gain on the sale of a
leasehold property.
The increase in metric tons sold in marine for the nine months ended December 31, 2002 was due, in part, to our January
2002 acquisition of the Oil Shipping group of companies. The increase in aviation sales volume during the nine months
ended December 31, 2002 was due to new commercial and government businesses, increases in wholesale and fuel
management businesses, and a recovery from the general slowdown in aviation activity during the prior year. The increases
in both the wholesale and fuel management businesses contributed to the decrease in gross profit per gallon sold. In marine,
the decrease in the gross profit per metric ton sold was primarily related to increased competitive pressures.
We may experience decreases in future sales volume and margins as a result of deterioration in the world economy, or in
the shipping or aviation industries, the continued conflicts and instability in the Middle East, Asia and Latin America, and
military actions in response to terrorist attacks of September 11th, as well as possible future terrorist activity and military
conflicts. In addition, since the sharp decline in world oil prices soon after September 11th, world oil prices have been very
volatile. We expect continued volatility in world oil prices as a result of the instability in the Middle East. The volatility in
world oil prices can adversely affect our customers’ business, and consequently our results of operations. See “Risk Factors”
in Item 1 of this Form 10-K.
Nine months ended December 31, 2002 compared to Nine months ended December 31, 2001 (unaudited)
Our revenue for the nine months ended December 31, 2002 was $1.55 billion, an increase of $533.1 million, or 52.6%,
as compared to revenue of $1.01 billion for the nine months ended December 31, 2001. Our revenue increase was primarily
due to an increase in sales volume for marine and aviation, as well as an increase in marine fuel prices, partially offset by a
decrease in aviation fuel prices. Our revenue during these periods was attributable to the following segments (in thousands):
For the Nine Months Ended December 31,
2002 2001
(unaudited)
Marine fuel services 1,026,162$ 727,035$
Aviation fuel services 520,735 286,746
Total 1,546,897$ 1,013,781$
Our marine fuel services segment contributed $1.03 billion in revenue for the nine months ended December 31, 2002, an
increase of $299.1 million, or 41.1%, over the same period of the prior year. The increase in revenue was primarily due to a 13.1%
increase in the average price per metric ton sold and a 25.2% increase in the volume of metric tons sold, which was due, in part, to
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