World Fuel Services 2012 Annual Report Download - page 41

(3) In 2010, we acquired i) certain assets of Lakeside Oil Company, Inc., including the assets comprising
its wholesale motor fuel distribution business (the ‘‘Lakeside business’’) on July 1st, ii) all of the
outstanding stock of Western Petroleum Company (‘‘Western’’) on October 1st, iii) all of the
outstanding stock of The Hiller Group Incorporated, Air Petro Corp. and all of the outstanding
membership interests of HG Equipment, LLC and AHT Services, LLC (collectively, ‘‘Hiller’’) on
December 31st and completed two additional acquisitions which were not material individually or in
the aggregate. The financial position and results of operations of these acquisitions have been
included in our consolidated financial statements since their respective acquisition dates.
(4) In April 2009, we acquired all of the outstanding stock of Henty Oil Limited, Tank and Marine
Engineering Limited and Henty Shipping Services Limited (collectively, ‘‘Henty’’) and certain assets
of TGS Petroleum, Inc., including the assets comprising its wholesale motor fuel distribution
business (the ‘‘TGS business’’). The financial position and results of operations of these acquisitions
have been included in our consolidated financial statements since April 1, 2009.
(5) In June 2008, we acquired certain assets of Texor Petroleum Company, Inc. The financial position
and results of operations of this acquisition have been included in our consolidated financial
statements since June 1, 2008.
(6) Included in operating expenses are total non-cash compensation costs associated with share-based
payment awards of $14.1 million for 2012, $11.0 million for 2011, $10.1 million for 2010, $6.5 million
for 2009 and $14.7 million for 2008 (including special bonus awards of $4.5 million, which were
settled in our common stock in 2009) and intangible amortization expense of $18.1 million for 2012,
$25.0 million for 2011, $9.8 million for 2010, $8.3 million for 2009 and $5.6 million for 2008.
Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with ‘‘Item 6 – Selected Financial Data,’’ and with
the accompanying consolidated financial statements and related notes thereto appearing elsewhere in
this 2012 10-K Report. The following discussion may contain forward-looking statements, and our actual
results may differ significantly from the results suggested by these forward-looking statements. Some
factors that may cause our results to differ materially from the results and events anticipated or implied
by such forward-looking statements are described in ‘‘Item 1A – Risk Factors.’’
Overview
We are a leading global fuel logistics company, principally engaged in the marketing, sale and distribution
of aviation, marine, and land fuel products and related services on a worldwide basis. We compete by
providing our customers with value-added benefits, including single-supplier convenience, competitive
pricing, the availability of trade credit, price risk management, logistical support, fuel quality control and
fuel procurement outsourcing. We have three reportable operating business segments: aviation, marine,
and land. We primarily contract with third parties for the delivery and storage of fuel products, however,
in some cases we own storage and transportation assets for strategic purposes. Additionally, we have
expanded our service offering within the transportation industry, including card payment solutions and
merchant processing services to customers in the aviation, marine and land transportation industries. In
our aviation segment, we offer fuel and related services to major commercial airlines, second and
third-tier airlines, cargo carriers, regional and low cost carriers, airports, fixed based operators, corporate
fleets, fractional operators, private aircraft, military fleets and to the U.S. and foreign governments. In our
marine segment, we offer fuel and related services to a broad base of marine customers, including
international container and tanker fleets, commercial cruise lines, yachts and time-charter operators, as
well as to the U.S. and foreign governments. In our land segment, we offer fuel and related services to
petroleum distributors operating in the land transportation market, retail petroleum operators, and
industrial, commercial and government customers and we engage in crude oil marketing activities.
In our aviation and land segments, we primarily purchase and resell fuel, and we do not act as brokers.
Profit from our aviation and land segments is primarily determined by the volume and the gross profit
achieved on fuel resales and a percentage of card payment and processing revenue. In our marine
segment, we primarily purchase and resell fuel and also act as brokers for others. Profit from our marine
segment is determined primarily by the volume and gross profit achieved on fuel resales and by the
volume and commission rate of the brokering business. Our profitability in our segments also depends
on our operating expenses, which may be significantly affected to the extent that we are required to
provide for potential bad debt.
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