World Fuel Services 2002 Annual Report Download - page 28

our January 2002 acquisition of the Oil Shipping group of companies. Our aviation fuel services segment contributed $520.7
million in revenue for the nine months ended December 31, 2002, an increase of $234.0 million, or 81.6%, over the corresponding
period of the prior year. The increase in revenue was due to a 97.7% increase in the volume of gallons sold, which more than
offset an 8.1% decrease in the average price per gallon sold. The increase in aviation sales volume was due to new commercial
and government business, increases in wholesale and fuel management business, and a recovery from the general slowdown
in aviation activity during the prior year.
Our gross profit of $62.9 million for the nine months ended December 31, 2002 increased $7.9 million, or 14.3%, as
compared to the corresponding period of the prior year. Our gross margin decreased from 5.4% for the nine months ended
December 31, 2001, to 4.1% for the nine months ended December 31, 2002. Our marine fuel services segment achieved a
2.7% gross margin for the nine months ended December 31, 2002, as compared to a 3.9% gross margin for the same period
of the prior year. This decrease resulted primarily from a lower average gross profit per metric ton sold as well as an
increase in the average sales price per metric ton sold. The decrease in the gross profit per metric ton sold was primarily
related to increased competitive pressures. Our aviation fuel services business achieved a 6.7% gross margin for the nine
months ended December 31, 2002, as compared to 9.4% for the same period during the prior year. The decrease in gross
margin reflects increases in our wholesale and fuel management businesses, which are higher quality, lower margin
businesses.
Total operating expenses for the nine months ended December 31, 2002 were $49.1 million, as compared to $40.1 million for
the nine months ended December 31, 2001. Included in operating expenses for the nine months ended December 31, 2002 were
operating expenses of our January 2002 marine acquisition and executive severance charges of $4.5 million, of which $3.7 million
related to our former Chairman and Chief Executive Officer and the remaining amounts were for our former Chief Financial
Officer, Chief Information Officer, and two other executives. The remaining increase in operating expenses were primarily
increases in salaries and other operating expenses, partially offset by a lower provision for bad debts for aviation and a
reimbursement of legal fees associated with prior years’ insurance claims in the marine segment. The increase in other operating
expenses was due, in part, to overall higher insurance costs resulting from the terrorist attacks of September 11th, and increases in
travel, audit fees, telecommunication, worldwide office rent and depreciation expense. In general, increases to operating expenses
relate to business growth and expansion.
Our income from operations for the nine months ended December 31, 2002 was $13.8 million, as compared to $14.9 million
for the nine months ended December 31, 2001. Income from operations during these periods was attributable to the following
segments (in thousands):
For the Nine Months Ended December 31,
2002 2001
(unaudited)
Marine fuel services 9,932$ 11,288$
Aviation fuel services 14,103 8,950
Corporate overhead (10,249) (5,332)
Total 13,786$ 14,906$
The marine fuel services segment earned $9.9 million in income from operations for the nine months ended December 31,
2002, as compared to $11.3 million for the corresponding period of the prior year. This decrease resulted primarily from lower
gross profit due to increased competitive pressures, higher operating expenses related to the marine acquisition in January 2002,
and an executive severance charge, partially offset by lower salaries and a reimbursement of legal fees associated with prior years’
insurance claims. The aviation fuel services segment’s income from operations was $14.1 million for the nine months ended
December 31, 2002, an increase of $5.2 million, or 57.6%, as compared to the same period of the prior year. This improvement
was due to a higher gross profit related to increases in sales volume and lower provision for bad debts, partially offset by increased
salaries and other operating expenses related to business growth and expansion, and an executive severance charge. Corporate
overhead costs not charged to the business segments totaled $10.2 million for the nine months ended December 31, 2002, as
compared to $5.3 million during the same period of the prior year. The increase in corporate overhead costs was primarily due to
executive severance charges of $4.3 million and increased other operating expenses, partially offset by lower salaries.
During the nine months ended December 31, 2002, we reported $2.0 million in other expense, net, as compared to other
income, net, of $1.8 million for the same period of the prior year. Included in other expense, net, for the nine months ended
December 31, 2002, was a $1.6 million non-recurring charge in connection with the settlement of the remaining balance due on
the Moorehead judgment. Included in other income, net, for the nine months ended December 31, 2001, were a gain on the sale
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