World Fuel Services 2013 Annual Report Download - page 27

(4) 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 iv) 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.
(5) In April 2009, we acquired i) all of the outstanding stock of Henty Oil Limited, Tank and Marine Engineering Limited and
Henty Shipping Services Limited (collectively, ‘‘Henty’’) and ii) 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.
(6) Included in operating expenses are total non-cash compensation costs associated with share-based payment awards of
$16.7 million for 2013, $14.1 million for 2012, $11.0 million for 2011, $10.1 million for 2010 and $6.5 million for 2009 and
intangible amortization expense of $22.4 million for 2013, $18.1 million for 2012, $25.0 million for 2011, $9.8 million for
2010 and $8.3 million for 2009.
(7) In 2013, we repurchased 926,000 shares of our common stock for an aggregate value of $35.0 million pursuant to the
Repurchase Program. In 2010, we completed a public offering of 9,200,000 shares of our common stock and received net
proceeds of $218.8 million.
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 2013 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 and related products and 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 offer transaction management services which consist of 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 products and 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, lubricants and related products and 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, lubricants and related products and
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 other products, 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.
Our revenue and cost of revenue are significantly impacted by world oil prices, as evidenced in part by our revenue and cost of revenue
fluctuations in previous fiscal years, while our gross profit is not necessarily impacted by changes in world oil prices. However,
significant movements in fuel prices during any given financial period can have a significant impact on our gross profit, either positively
or negatively depending on the direction, volatility and timing of such price movements.
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