World Fuel Services 2002 Annual Report Download - page 66

We may also incur credit losses due to other causes, including deteriorating conditions in the world economy, or in the
shipping or aviation industries, continued conflicts and instability in the Middle East, Asia and Latin America, and military
actions in response to the terrorist attacks of September 11th, as well as possible future terrorist activity and military
conflicts. Any credit losses, if significant, will have a material adverse effect on our financial position and results of
operations.
Environmental and Other Liabilities; Uninsured Risks
In the marine and aviation fuel segments, we utilize subcontractors to provide various services to customers, including
into-plane fueling at airports, fueling of vessels in-port and at-sea, and transportation and storage of fuel and fuel products.
We are subject to possible claims by customers, regulators and others who may be injured by a fuel spill or other accident.
In addition, we may be held liable for damages to the environment arising out of such events. Although we generally require
our subcontractors to carry liability insurance, not all subcontractors carry adequate insurance. Our marine business does not
have liability insurance to cover the acts or omissions of our subcontractors. None of our liability insurance covers acts of
war and terrorism. If we are held responsible for any acts of war or terrorism, accident or other event, and the liability is not
adequately covered by insurance and is of sufficient magnitude, our financial position and results of operations will be
adversely affected.
We have exited several businesses which handled hazardous and non-hazardous waste. We treated and/or transported
this waste to various disposal facilities. We may be held liable as a potentially responsible party for the clean-up of such
disposal facilities, or required to clean up facilities previously operated by us, pursuant to current U.S. federal and state laws
and regulations.
We continuously review the adequacy of our insurance coverage. However, we lack coverage for various risks,
including environmental claims. An uninsured claim arising out of our activities, if successful and of sufficient magnitude,
will have a material adverse effect on our financial position and results of operations.
Legal Matters
In July 2001, we settled litigation filed in February 2000 relating to a product theft off the coast of Nigeria. The
settlement resulted in a recovery of $1.0 million. In the accompanying Consolidated Statements of Income, the product theft
was included as a non-recurring charge in Other income (expense), net during the year ended March 31, 2000 and the
recovery was included as a non-recurring credit in Other income (expense), net for the year ended March 31, 2002.
In July 2001, we received a Summary Judgment from the United States District Court for the Southern District of
Florida which ordered Donald F. Moorehead, Jr., Chairman of EarthCare Company (“EarthCare”) to pay us compensatory
damages of approximately $5.0 million, plus interest from May 1, 2001. This judgment relates to Mr. Moorehead’s default
on his agreement to purchase all of the EarthCare stock owned by us for approximately $5.0 million. We received the
EarthCare stock as part payment for the sale of our oil-recycling operations in February 2000. From August 2001 to October
2001, we received principal and interest payments totaling $700 thousand from Mr. Moorehead. We had been pursuing
collection of this judgment and, in May 2002, the court appointed a receiver to take possession and control of all nonexempt
assets and property interests of Mr. Moorehead. As a result of the receiver’s activities, we received several offers from Mr.
Moorehead to settle the outstanding balance on our judgment and received $350 thousand of principal and interest payments
from Mr. Moorehead from May 2002 to August 2002, resulting in a total principal and interest collection of approximately
$1.1 million. Lastly, in October 2002, we received $3.0 million as a final payment to settle the remaining balance due on our
judgment. Accordingly, in connection with the settlement, during the nine months ended December 31, 2002, we recorded a
non-recurring charge of $1.6 million, which includes $346 thousand for legal and receiver fees.
In April 2001, Miami-Dade County, Florida (the “County”) filed suit (the “County Suit”) against 17 defendants to seek
reimbursement for the cost of remediating environmental contamination at Miami International Airport (the “Airport”). Page
Avjet Fuel Corporation, now known as PAFCO L.L.C. (“PAFCO”), is a defendant. We acquired a 50% interest in PAFCO
from Signature Flight Support Corporation (“Signature”) in December 2000. Pursuant to the PAFCO acquisition agreement,
Signature agreed to indemnify us for all PAFCO liabilities arising prior to the closing date (“Closing”). Because the Airport
contamination occurred prior to Closing, we believe that the County Suit is covered by Signature’s indemnification
obligation. We have notified Signature of the County Suit, as stipulated in the acquisition agreement. We expect Signature
to defend this claim on behalf of PAFCO and at Signature’s expense.
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