World Fuel Services 2002 Annual Report Download - page 50

three years through January 2005 with approximately $73 thousand paid in July 2002 and $1.1 million paid in January 2003,
which represented the remaining first installment balance. Both of these acquisitions were accounted for as purchases and
the operations of these acquisitions have been included in our operating results since their respective dates of acquisition.
Goodwill, representing the cost in excess of net assets acquired, for these acquisitions totaled $9.4 million. At the date of our
January 2002 acquisition, we identified an intangible asset of approximately $1.8 million, relating to customer relations.
This intangible asset is being amortized over five years using the straight-line method.
The BVI company sells and markets marine fuel services through Marine Energy Arabia Co, LLC, a United Arab
Emirates (“Dubai”) corporation. The BVI company owns 49% of the Dubai company. In accordance with local laws, the
Dubai entity is 51% owned by a Dubai citizen, referred to as a Sponsor. The Dubai company, pursuant to a management
contract, is required to pay for the staff and administrative support provided by the BVI entity. The BVI entity has entered
into various agreements with the Dubai Sponsor to prevent an unauthorized ownership transfer and to effectively grant
majority control of the Dubai entity to BVI. Accordingly, the financial position and operations of the Dubai entity have been
included in our consolidated financial statements.
Basis of Consolidation
The accompanying consolidated financial statements and related notes to the consolidated financial statements include
our accounts and those of our majority owned or controlled subsidiaries, after elimination of all significant intercompany
accounts, transactions, and profits. Investments in non-majority controlled subsidiaries representing ownership of at least
20%, but less than or equal to 50%, are accounted for under the equity method. Accordingly, we use the equity method of
accounting to record our share of the earnings and losses of our aviation joint ventures.
Cash and Cash Equivalents
Cash and cash equivalents are stated at cost, which approximates fair value. Cash equivalents consist of highly liquid
investments with maturities of three months or less from the date of purchase. Our cash equivalents consist principally of
bank repurchase agreements collateralized by the United States Government, bank money market accounts, and commercial
paper rated A1P1.
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
receivable are reduced by an allowance for amounts that may become uncollectible in the future. Such allowances can be
either specific to a particular customer or general to all customers in each of our two business segments. We had accounts
and notes receivable of $177.4 million, net of allowance for bad debts of $11.1 million, as of December 31, 2002. At March
31, 2002 and 2001, we had accounts and notes receivable of $132.6 million and $125.9 million, net of allowance for bad
debts of $11.0 million and $11.2 million, respectively. The allowance for bad debts at December 31, 2002, March 31, 2002
and 2001 included a specific allowance of $3.0 million for one aviation customer representing the entire accounts receivable
balance for that customer. Also, as of March 31, 2001, we established additional specific allowances for two other
customers. Our general allowances for all other customers amounted to $8.1 million at December 31, 2002 and March 31,
2001, and $8.0 million at March 31, 2002.
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