World Fuel Services 2012 Annual Report Download - page 32

consist of the purchase of overflight permits and the provision of flight support and fuel services
pursuant to licenses issued by OFAC or as otherwise permitted by U.S. sanctions regulations. As a result
of the above activities, we are exposed to a heightened risk of violating anti-corruption laws and OFAC
regulations. Violations of these regulations are punishable by civil penalties, including fines, denial of
export privileges, injunctions, asset seizures, debarment from government contracts and revocations or
restrictions of licenses, as well as criminal fines and imprisonment.
We have established policies and procedures designed to assist with our compliance with applicable
U.S. and international laws and regulations. However, there can be no assurance that our policies and
procedures will effectively prevent us from violating these regulations in every transaction in which we
may engage, and such a violation could adversely affect our reputation, business, financial condition,
results of operations and cash flows. In addition, various state and municipal governments, universities
and other investors maintain prohibitions or restrictions on investments in companies that do business
with sanctioned countries, which could adversely affect the market for our securities.
On April 19, 2009, we received an administrative subpoena from OFAC requesting information regarding
transactions that we have conducted involving Cuba since April 1, 2004. Upon receipt of this subpoena,
we initiated an internal review to identify transactions involving Cuba, and we voluntarily expanded the
scope of this review to include transactions involving Iran and Sudan. On December 8, 2009, we
received a separate administrative subpoena from OFAC requesting information regarding our
transactions involving Sudanese overflight payments since June 30, 2008. We responded to both
subpoenas and identified certain transactions that may have resulted in violations of U.S. sanctions
regulations or our OFAC-issued licenses, including the failure to make certain periodic reports as
required by our OFAC-issued licenses and a small number of sanctioned country-related transactions
which took place after one of our licenses had expired. In our responses to OFAC, we noted that the
transactions we identified as potential violations resulted in very small amounts of revenue to us, and
that we intend to take certain remedial actions to further strengthen our compliance related policies and
procedures. Nevertheless, should OFAC determine that these activities constituted violations of U.S.
sanctions regulations, civil penalties, including fines, could be assessed against the Company.
Additionally, in the course of its ongoing review, OFAC could request additional information from us, in
the form of additional subpoenas or otherwise, and we intend to fully cooperate with any such additional
subpoenas or requests. We cannot predict the ultimate outcome of the OFAC review, the total costs to
be incurred in response to this review, the potential impact on our personnel, the effect of implementing
any further measures that may be necessary to ensure full compliance with U.S. sanctions regulations or
to what extent, if at all, we could be subject to fines, sanctions or other penalties.
We face intense competition and, if we are not able to effectively compete in our markets,
our revenues and profits may decrease.
Competitive pressures in our markets could adversely affect our competitive position, leading to a
possible loss of market share or a decrease in prices, either of which could result in decreased revenues
and profits. Our competitors are numerous, ranging from large multinational corporations, which have
significantly greater capital resources than us, to relatively small and specialized firms. In addition to
competing with fuel resellers, we also compete with the major oil producers that market fuel directly to
the large commercial airlines, shipping companies and petroleum distributors operating in the land
transportation market. Although many major oil companies have been divesting their downstream
assets, some continue to compete with us in certain markets while others may decide to reenter the
market in the future. Our business could be adversely affected because of increased competition from
these oil companies, who may choose to increase their direct marketing in order to compete with us or
provide less advantageous price and credit terms to us than to our fuel reseller competitors.
Reduced sales to our government customers could adversely affect our profitability.
We have a large and varied customer base. During 2012, no individual customer accounted for revenue
totaling more than 10% of our consolidated revenue. Future U.S. government budget conditions and the
scheduled withdrawal of armed forces from Afghanistan could result in a decrease in defense spending,
which in turn could cause a reduction in sales in our government services business. Since such sales
carry higher margins than certain of our other products and services, such a decrease could contribute
disproportionately to a reduction in our gross margin and profitability. Therefore, the loss of a significant
government customer or a material reduction in sales to a significant government customer could
adversely affect our business, financial condition, results of operations and cash flows.
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