World Fuel Services 2013 Annual Report Download - page 19

Current and future litigation could have an adverse effect on us.
We are currently involved in legal proceedings that have arisen in the ordinary course of our business. Lawsuits and other
administrative or legal proceedings can involve substantial costs, including the costs associated with investigation, litigation and
possible settlement, judgment, penalty or fine. Although we generally maintain insurance to mitigate certain costs, there can be no
assurance that costs associated with lawsuits or other legal proceedings will not exceed the limits of insurance policies. Our business,
financial condition, results of operations and cash flows could be adversely affected if a judgment, penalty or fine is not fully covered by
insurance.
Fluctuations in foreign exchange rates could materially affect our reported results.
The majority of our business transactions are denominated in U.S. dollars. In certain markets, however, payments to some of our fuel
suppliers and from some of our customers are denominated in local currency. We also have certain liabilities, primarily for local
operations, including income and transactional taxes, that are denominated in foreign currencies. This subjects us to foreign currency
exchange risk. Although we use hedging strategies to manage and minimize the impact of foreign currency exchange risk, at any given
time, only a portion of this risk may be hedged, and our exposure to this risk may be substantial. As a result, fluctuations in foreign
exchange rates could adversely affect our profitability.
In addition, many of our customers are based outside of the U.S. and may be required to purchase U.S. dollars to pay for our products
and services. A rapid depreciation or devaluation in currency that affects our customers could have an adverse effect on their
operations and their ability to convert local currency to U.S. dollars in order to make required payments to us. This could, in turn,
increase our credit losses and adversely affect our business, financial condition, results of operations and cash flows.
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 re-enter 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.
Changes in U.S. or foreign tax laws could adversely affect our business and future operating results.
We are affected by various U.S. and foreign taxes, including income taxes and taxes imposed on the purchase and sale of aviation,
marine and land fuel products, such as sales, excise, value added tax, energy, environmental and other taxes. From time to time, we
may also benefit from special tax concessions in certain jurisdictions. Changes in U.S. and foreign tax laws, our failure to comply with
such laws or the loss of tax concessions could adversely affect our business, financial condition, results of operations and cash flows.
Furthermore, significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our
business, there are many transactions and calculations where the ultimate tax determination is uncertain. We are regularly under audit
by tax authorities and, although we believe our tax estimates are reasonable, the final determination of tax audits and any related
litigation could be materially different from our historical income tax provisions and accruals. The results of an audit or litigation could
have a material effect on our financial statements in the period or periods for which that determination is made.
Finally, we earn a significant amount of our operating income from outside the U.S., and any repatriation of funds currently held in
foreign jurisdictions to the U.S. may result in higher effective income tax rates for the Company. In addition, there have been proposals
to change U.S. income tax laws that would significantly impact how U.S. multinational corporations are taxed on foreign earnings.
Although we cannot predict whether or in what form any proposed legislation may pass, if enacted it could have a material adverse
impact on our income tax expense, financial condition, results of operations and cash flows.
Item 1B. Unresolved Staff Comments
None.
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