World Fuel Services 2002 Annual Report Download - page 65

6. Commitments and Contingencies
Lease Commitments
As of December 31, 2002, our future minimum lease payments under non-cancelable operating leases for rental
properties were as follows (in thousands):
For the Year Ending December 31,
2003 1
,
38
2
$
2004 1
,
318
2005 1
,
13
2
2006 981
2007 855
Thereafter 3,308
8,976$
We incurred rental expense for all properties of $1.5 million and $1.1 million for the nine months ended December 31,
2002 and 2001, respectively, $1.5 million for the year ended March 31, 2002, and $1.3 million for each of the years ended
March 31, 2001 and 2000.
In the normal course of business, we may enter into non-cancelable operating leases for office and computer equipment,
and service contracts with minimum service fee commitments for telecommunication, and computer data and document
storage. As of December 31, 2002, there were no material non-cancelable operating leases for office and computer
equipment or service contracts with minimum service fee commitments.
Surety Bonds
In the normal course of business, we are required to post bid, performance and garnishment bonds. The majority of the
surety bonds posted relate to our aviation fuel services business. As of December 31, 2002, we had $9.8 million in
outstanding bonds.
Concentration of Credit Risk
Our marine and aviation fueling businesses extend unsecured credit to most of their customers. Part of our success in
attracting business has been due, in part, to our willingness to extend credit on an unsecured basis to customers which exhibit
a high credit risk profile and would otherwise be required to prepay or post letters of credit with their suppliers of fuel and
related services. We recognize that extending credit and setting the appropriate reserves for receivables is largely a
subjective decision based on knowledge of the customer and the industry. Active management of our credit risk is essential
to our success. We do not insure our receivables. Diversification of credit risk is difficult since we sell primarily within the
marine and aviation industries. Our sales executives and their respective staff meet regularly to evaluate credit exposure, in
the aggregate and by individual credit. Credit exposure also includes the amount of estimated unbilled sales. We also have a
credit committee for each of our segments. 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. The level of
credit granted to a customer is influenced by a customer’s credit history with us, including claims experience and payment
patterns. In our marine fuel services segment, we have extended lines of credit of at least $5.0 million to ten non-
governmental customers, and two of these customers have lines of credit ranging from $9.0 to $12.0 million. In our aviation
fuel services segment, our largest credit line, extended to two non-governmental customers, is $4.0 million.
Since the sharp decline in world oil prices soon after the terrorist attacks of September 11th, world oil prices have been
very volatile. Fuel costs represent a significant part of a vessel’s and airline's operating expenses; accordingly, the volatility
in fuel prices can adversely affect our customers’ business, and consequently our credit losses.
Although most of our transactions are denominated in U.S. dollars, many of our customers are foreign and may be
required to purchase U.S. dollars to pay for our products and services. A rapid devaluation in currency affecting our
customers could have an adverse effect on our customers’ operations and their ability to convert local currency to U.S.
dollars to make the required payments to us. This will in turn result in higher credit losses for us.
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