World Fuel Services Corporation

May 13, 2011 – 11:27 pm

World Fuel Services Corporation LogoWFS provides marine, aviation and ground transportation fuel products, and associated services to shipping companies, airlines, governments, and corporate at more than 2,500 airports and seaports across the globe. It was incorporated in July 1984, and was earlier engaged in the business of fuel recycling and reselling. The Company entered into aviation fuel services in 1986, and expanded into marine fuel services in 1995, with the acquisition of Trans?Tec group of companies.

The Company operates through 43 offices across 23 countries and employs 743 people. Beginning 1Q2006, the Company started reporting Land fuel services, previously a part of Aviation fuel services, as a separate operating segment. Currently, the Company’s reporting segments are Marine fuel services, Aviation fuel services and Land fuel services. However, prior to this change in the reporting segments, WSF’s previous two segments, Marine and Aviation (including Land fuel services) had a diversified customer base with none of the customer’s contribution exceeding 10% of the revenues.

Marine fuel services segment provides marine fuel and allied services such as fuel management, quality and cost control. It serves international shippers, including container and tanker fleets and time charter operators and vessels belonging to the US and foreign military. Under this segment, the Company operates primarily as a reseller. The Company also serves as a broker. As a reseller the Company acts as an intermediary, purchasing fuel from its suppliers and reselling it to the customers after a mark-up. The Company also provides non-collateralized credit to its customers. As a broker, WFS arranges for the contract for fuel purchase between the supplier and customer, and for the delivery of fuel. The supplier pays it a commission for this service.

Aviation fuel services segment provides aviation fuel and associated services like fuel management, management of price risk, preparation of flight plans and weather reports, ground handling, international trip planning and obtaining flight permits. The segment’s customers include different kinds of airlines such as passenger, cargo and charter airlines, corporate bodies, and governments of the US and foreign countries. WFS procure its aviation fuel from suppliers located across the globe. It either delivers fuel directly from the supplier or through the Company’s fuel inventory to its customers’ aircraft or at a selected place. Given the high proportion of debt in the capital structure of the airlines and associated financial risks, fuel suppliers do not prefer providing unsecured credit to airlines. To capitalize on this opportunity, WFS extends unsecured credit to its aviation customers and also bears the credit risk. As a result, the airline companies have to neither prepay for their fuel purchases nor provide collateral for the credit provided by fuel suppliers.

Land fuel service is the Company’s new reporting segment since 1Q2006. It serves petroleum distributors operating in the land transportation market and markets fuel with other services such as fuel procurement, price risk management and financing. The Company acts as a reseller, procuring fuel from suppliers across the US and reselling it to customers after allowing for its own margin. The sales are conducted either through contract sales (prior contract with customer to sell fixed volume of fuel at fixed price) or through rack sport sales (no customer contract). For Land fuel services as well, the Company extends unsecured credit facilities to its customers and delivers fuel directly to customers through its truck loading terminals called ‘racks’, which are owned and operated by either WSF’s suppliers or third-parties.

The Company also enters into derivative contracts to offset the risk related to the fluctuations in fuel prices. According to the Company, the counterparties in these contracts are reputed organizations and also its exposure to any single, specific counterparty is limited. It maintains minimum levels of inventory, as it arranges to provide fuel to most of its customers directly from the supplier. Inventory is hedged in order to minimize the risk of market price fluctuation. The Company uses services of subcontractors to provide services such as fueling of the shipping vessels and aircrafts and haulage, and storage of fuel and fuel products.

The Company is a Fortune 500 Company and was included in the Forbes magazine’s lists of best managed and most admired companies in America in 2005.

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