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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from      to     
COMMISSION FILE NUMBER 1-9533
worldfuellogo.jpg
WORLD FUEL SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
Florida
59-2459427
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
9800 Northwest 41st Street
Miami, Florida
(Address of principal executive offices)
33178
(Zip Code)

Registrant’s telephone number, including area code: (305) 428-8000
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Common Stock, par value $0.01 per share
Name of each exchange on which registered:
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☒ Accelerated filer ☐  Non-Accelerated filer ☐ Smaller Reporting Company ☐
Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 30, 2017, the registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the market price at which the common equity was last sold was $2,586,431,684.
As of February 7, 2018, the registrant had approximately 67,644,036 shares of outstanding common stock, par value $0.01 per share.


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Documents incorporated by reference:
Part III -
Specified Portions of the Registrant’s Definitive Proxy Statement for the 2018 Annual Meeting of Shareholders.




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PART I
Item 1. Business
Overview
World Fuel Services Corporation (the “Company”) was incorporated in Florida in July 1984 and along with its consolidated subsidiaries is referred to collectively in this Annual Report on Form 10‑K (“2017 10‑K Report”) as “World Fuel,” “we,” “our” and “us.”
We are a leading global fuel services company, principally engaged in the distribution of fuel and related products and services in the aviation, marine and land transportation industries. In recent years, we have expanded our product and service offerings to include energy advisory services and supply fulfillment with respect to natural gas and power and transaction and payment management solutions to commercial and industrial customers. Our intention is to become a leading global energy management company offering a full suite of energy advisory, management and fulfillment services and technology solutions across the energy product spectrum. We also seek to become a leading transaction and payment management company, offering payment management solutions to commercial and industrial customers, principally in the aviation, land and marine transportation industries.
We have offices throughout the United States and in various foreign jurisdictions, including, but not limited to: Brazil, Costa Rica, Norway, Singapore, the United Kingdom (“U.K.”) and the United States (“U.S.”). See “Item 2 – Properties” for a list of principal offices by business segment and “Exhibit 21.1 – Subsidiaries of the Registrant” included in this 2017 10‑K Report for a list of our subsidiaries.
As of February 7, 2018, we employed more than 5,000 employees globally. Our principal executive office is located at 9800 Northwest 41st Street, Miami, Florida 33178 and our telephone number at this address is 305‑428‑8000. Our internet address is http://www.wfscorp.com and the investor relations section of our website is located at http://ir.wfscorp.com. We make available free of charge, on or through the investor relations section of our website, our Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8‑K, Proxy Statements and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) with the Securities and Exchange Commission (“SEC”) as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Also posted on our website are our Code of Conduct (“Code of Conduct”), Board of Directors’ committee charters and Corporate Governance Principles. Our internet website and information contained on our internet website are not part of this 2017 10‑K Report and are not incorporated by reference in this 2017 10‑K Report.
Segments
We operate in three reportable segments consisting of aviation, land and marine. During each of the years presented on the consolidated statements of income and comprehensive income, none of our aviation, land or marine customers accounted for more than 10% of any segment or total consolidated revenue. Financial information with respect to our business segments and the geographic areas of our business is provided below and within Note 13 to the accompanying consolidated financial statements included in this 2017 10-K Report.
Aviation Segment
We provide global aviation fuel supply and comprehensive service solutions to major commercial airlines, second and third-tier airlines, cargo carriers, regional and low-cost carriers, airports, fixed based operators, corporate fleets, fractional operators and private aircraft. Our aviation‑related service offerings include fuel management, price risk management, ground handling, 24/7 global dispatch services, and international trip planning services, including flight plans, weather reports and overflight permits. We also supply products and services to U.S. and foreign government, intergovernmental and military customers, such as the U.S. Defense Logistics Agency and the North Atlantic Treaty Organization (NATO). In addition, we offer card payment solutions and related processing services and technology.
Because fuel is a major component of an aircraft’s operating costs, our customers require cost effective and professional fuel services. We have developed an extensive network, consisting of on-airport fueling operations and third‑party suppliers and service providers that enables us to provide aviation fuel and related services throughout the world. We believe the breadth of our service offering combined with our global supplier network is a strategic differentiator that allows customers to secure fuel and high‑quality services in locations worldwide on short notice.

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We purchase our aviation fuel from suppliers worldwide, which may be delivered into our customers’ aircraft or to a designated storage facility located at one of our locations or our suppliers’ locations pursuant to arrangements with them. Inventory is purchased at airport locations or shipped via pipelines and held at multiple locations for strategic reasons. We engage in contract sales, which are sales made pursuant to fuel purchase contracts with customers who commit to purchasing fuel from us over the contract term. We also conduct spot sales, which are sales that do not involve continuing contractual obligations by our customers to purchase fuel from us. Our cost of fuel is generally tied to market‑based formulas or government-controlled prices.
Land Segment
In our land segment, we primarily offer fuel, heating oil, propane, natural gas, lubricants and related products and services to petroleum distributors operating in the land transportation market, retail petroleum operators, and industrial, commercial, residential and government customers. Our land related services include management services for the procurement of fuel and price risk management. We primarily conduct these activities throughout most of the U.S. as well as parts of the U.K. and Brazil. We also offer advisory and fulfillment solutions with respect to power, natural gas and other energy products through Kinect, our global energy management solutions business, with offices in the U.S, Australia and throughout Western Europe. In addition, we offer transaction management services, which include card payment solutions, government payment systems for global fuel procurement, merchant processing services, payment solutions for tolls across Europe, and commercial payment programs.
In connection with our fuel marketing activities, we distribute fuel under long-term contracts to branded and unbranded distributors, convenience stores and retail fuel outlets operated by third parties. We also distribute heating oil and propane to residential customers and unbranded fuel to numerous other customers, including commercial and industrial customers, such as manufacturing, mining, agriculture, construction, and oil and gas exploration companies, who buy fuel in bulk and do not generally enter into exclusive contractual relationships with us, if they enter into a contractual relationship with us at all. In certain instances, we serve as a reseller, where we purchase fuel from a supplier and contemporaneously resell it to our customers through spot and contract sales. We also maintain inventory in certain strategic locations, including pipelines. Our cost of fuel is generally tied to market‑based formulas.
Finally, we provide transportation logistics for our product deliveries, including arranging for fuel products to be delivered from storage terminals to the appropriate sites through our own fleet of trucks as well as third-party transportation providers. The fuel is generally delivered to our customers directly or to a designated tanker truck loading terminal commonly referred to as “racks,” which are owned and operated by our suppliers or other third‑parties.
Marine Segment
Through our extensive network, we market 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, U.S. and foreign governments, as well as other fuel suppliers. We provide our customers with real‑time global market intelligence and rapid access to quality, and competitively priced, marine fuel 24 hours a day, every day of the year. Our marine fuel-related services include management services for the procurement of fuel, cost control through the use of price risk management offerings, quality control, claims management, and card payment solutions and related processing services.
We serve primarily as a reseller, where we take delivery for fuel purchased from our supplier at the same place and time as the fuel is sold to our customer. We also sell fuel from our inventory, which we maintain in storage facilities that we own or lease. In certain cases, we serve as a broker and are paid a commission for negotiating the fuel purchase transaction between the supplier and the end user, as well as for expediting delivery of the fuel.  
The majority of our marine segment activity consists of spot sales. Our cost of fuel is generally tied to spot pricing, market‑based formulas, or government-controlled prices. We also contract with third parties to provide various services for our customers, including fueling of vessels in ports and at sea, and transportation and delivery of fuel and fuel-related products.

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Competitors
We operate globally across industries that are highly fragmented with numerous competitors. Our competitors range in size and complexity from large multinational corporations, principally major oil producers, which have significantly greater capital resources than us, to relatively small and specialized firms. In our fuel distribution activities, we compete with major oil producers that market fuel directly to the large commercial airlines, shipping companies and petroleum distributors operating in the land transportation market as well as fuel resellers. We compete, among other things, on the basis of service, convenience, reliability, availability of trade credit and price. We believe that our extensive market knowledge, worldwide footprint, logistics expertise and support, the use of price risk management offerings, and value-added benefits, including single-supplier convenience, fuel quality control and fuel procurement outsourcing, give us the ability to compete within those markets.
Seasonality
Our operating results are subject to seasonal variability. Our seasonality results from numerous factors, including traditionally higher demand for natural gas and home heating oil during the winter months and aviation and land fuel during the summer months, as well as other seasonal weather patterns. As such, our results of operations may fluctuate from period to period.
Regulation
Our business activities are subject to substantial regulation by federal, state and local government agencies, inside and outside of the U.S., which enforce laws and regulations governing the transportation, sale, storage and disposal of fuel and the collection, transportation, processing, storage, use and disposal of hazardous substances and wastes, including waste oil and petroleum products. For example, U.S. federal and state environmental laws applicable to us include statutes that: (i) allocate the cost of remedying contamination among specifically identified parties and prevent future contamination; (ii) impose national ambient standards and, in some cases, emission standards, for air pollutants that present a risk to public health or welfare; (iii) govern the management, treatment, storage and disposal of hazardous wastes; and (iv) regulate the discharge of pollutants into waterways. International treaties also prohibit the discharge of petroleum products at sea. The penalties for violations of environmental laws include injunctive relief, recovery of damages for injury to air, water or property, and fines for non‑compliance. See “Item 1A – Risk Factors,” and “Item 3 – Legal Proceedings.”

We may also be affected by new environmental laws and regulations that will apply to us or our customers in the future, some of which could increase the cost or reduce the demand for our products and services. For example, due to concern over the risk of climate change, a number of countries have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas (“GHG”) emissions. In the U.S., the U.S. Environmental Protection Agency has adopted rules requiring the reporting of GHG emissions by petroleum product suppliers and facilities meeting certain annual emissions thresholds and regulating emissions from major sources of GHGs under the Clean Air Act. In other countries, proposed regulations include adoption of cap and trade regimes, carbon taxes, restrictive permitting, increased efficiency standards, and incentives or mandates for renewable energy. Although the ultimate impact of these or other future measures is difficult to accurately predict, they could make our products more expensive or reduce demand for petroleum products, as well as shift demand toward relatively lower-carbon sources. This, in turn, could affect our operations, earnings and competitive position.
Forward-Looking Statements
Certain statements made in this report and the information incorporated by reference in it, or made by us in other reports, filings with the SEC, press releases, teleconferences, industry conferences or otherwise, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “project,” “could,” “would,” “will,” “will be,” “will continue,” “will likely result,” “plan,” or words or phrases of similar meaning.
Forward-looking statements are estimates and projections reflecting our best judgment and involve risks, uncertainties or other factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Our actual results may differ materially from the future results, performance or achievements expressed or implied by the forward-looking statements. These statements are based on our management’s expectations, beliefs and assumptions concerning future events affecting us, which in turn are based on currently available information.
Examples of forward-looking statements in this 2017 10-K Report include, but are not limited to, our expectations about the conditions in the aviation, land, and marine markets, the timing and impact of our cost reduction initiatives and

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restructuring activities, our expectations regarding government-related activity and the related profit contribution, our expectations about the financial and operational impact of acquisitions on our aviation and land segments, the timing and benefits of our multi-year project and upgrade of our Enterprise Resource Planning (“ERP”) platform, our expectations about oversupplied market conditions in the U.S, our ability to drive greater leverage and ratability in our land operating model, our ability to divest or exit certain businesses, our ability to improve cost competitiveness, gain structural efficiencies and rationalize our operating model, our ability to implement a single common technology platform for our land segment, as well as our business strategy, business prospects, operating results, methods of competition, the impact of the Tax Act, effectiveness of internal controls to manage risk, working capital, liquidity, capital expenditure requirements and adequacy of funding to meet such capital expenditures and working capital requirements and future acquisitions. These forward-looking statements are qualified in their entirety by cautionary statements and risk factor disclosures contained in our Securities and Exchange Commission filings. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding our ability to effectively leverage technology and operating systems and realize the anticipated benefits, our ability to successfully execute and achieve efficiencies and other benefits related to our transformation initiatives and address market conditions, our ability to effectively integrate and derive benefits from acquisitions, our ability to capitalize on new market opportunities, the demand for our products, the cost, terms and availability of fuel from suppliers, pricing levels, the timing and cost of capital expenditures, outcome of pending litigation, competitive conditions, general economic conditions and synergies relating to acquisitions, joint ventures and alliances. These assumptions could prove inaccurate. Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect.
Important factors that could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking statements include, but are not limited to:
customer and counterparty creditworthiness and our ability to collect accounts receivable and settle derivative contracts;
extended periods of low oil prices and limited market volatility;
changes in the political, economic or regulatory conditions generally and in the markets in which we operate;
our failure to effectively hedge certain financial risks and the use of derivatives;
non-performance by counterparties or customers to derivative contracts;
changes in credit terms extended to us from our suppliers;
non-performance of suppliers on their sale commitments and customers on their purchase commitments;
loss of, or reduced sales to a significant government customer;
sudden changes in the market price of fuel;
non-performance of third-party service providers;
adverse conditions in the industries in which our customers operate;
our ability to meet financial forecasts associated with our operating plan;
lower than expected valuations associated with our cash flows and revenues, which could impair our ability to realize the value of recorded intangible assets and goodwill;
the impact of cyber and other information security-related incidents;
currency exchange fluctuations;
currency and other global market impacts associated with the U.K. referendum vote to exit from the European Union;
failure of fuel and other products we sell to meet specifications;
our ability to manage growth;
our ability to effectively integrate and derive benefits from acquired businesses;
our ability to achieve the expected level of benefit from our restructuring activities and cost reduction initiatives;
our ability to successfully manage the implementation of an upgrade to our ERP platform;
our ability to effectively compete in our markets;
material disruptions in the availability or supply of fuel;
environmental and other risks associated with the storage, transportation and delivery of petroleum products;
risks associated with operating in high risk locations;
uninsured losses;

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our ability to realize the benefit of any cost savings;
the impact of natural disasters, such as earthquakes and hurricanes;
seasonal variability that adversely affects our revenues and operating results;
our failure to comply with restrictions and covenants in our senior revolving credit facility (“Credit Facility”) and our senior term loans (“Term Loans”);
declines in the value and liquidity of cash equivalents and investments;
our ability to retain and attract senior management and other key employees;
changes in U.S. or foreign tax laws (including the Tax Act), interpretations of such laws, or changes in the mix of taxable income among different tax jurisdictions;
our failure to generate sufficient future taxable income in jurisdictions with material deferred tax assets and net operating loss carryforwards;
our ability to comply with U.S. and international laws and regulations including those related to anti-corruption, economic sanction programs and environmental matters;
increased levels of competition;
the outcome of litigation and other proceedings, including the costs associated in defending any actions;
the liquidity and solvency of banks within our Credit Facility and Term Loans;
increases in interest rates; and
other risks, including those described in “Item 1A - Risk Factors” and those described from time to time in our other filings with the SEC.
We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. The forward-looking statements in this 2017 10-K Report are based on assumptions management believes are reasonable. However, due to the uncertainties associated with forward-looking statements, you should not place undue reliance on any forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to publicly update any of them in light of new information, future events, or otherwise. Any public statements or disclosures by us following this report that modify or impact any of the forward-looking statements contained in or accompanying this 2017 10-K Report will be deemed to modify or supersede such forward-looking statements.
For these statements, we claim the protection of the safe harbor for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act.
Item 1A. Risk Factors
We extend credit to most of our customers in connection with their purchase of fuel and services from us, and our business, financial condition, results of operations and cash flows will be adversely affected if we are unable to collect accounts receivable.
Our success in attracting customers has been due, in part, to our willingness to extend credit on an unsecured basis to customers as opposed to requiring prepayment, letters of credit or other forms of credit support. Even in cases where we do obtain credit enhancements, such as guarantees, offset rights, collateral or other forms of security, such rights may not be sufficient or fully collectible depending on the circumstances of the customer at the time of default. While no single customer represents more than 10% of our total consolidated revenue, diversification of credit risk is limited to the aviation, marine and land transportation industries within which we primarily do business.
Our exposure to credit losses will depend on the financial condition of our customers and other macroeconomic factors beyond our control, such as deteriorating conditions in the world economy or in the industries we serve, changes in oil prices and political instability. While we actively manage our credit exposure and work to respond to both changes in our customers’ financial conditions or macroeconomic events, there can be no guarantee we will be able to successfully mitigate all of these risks. Substantial credit losses could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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Our business is dependent on our ability to adequately finance our capital requirements and fund our investments, which, if not available to us, would impact our ability to conduct our operations.
We rely on credit arrangements with banks, suppliers and other parties as an important source of liquidity for capital requirements not satisfied by our operating cash flow. Future market volatility, generally, and persistent weakness in global energy markets may adversely affect our ability to access capital and credit markets or to obtain funds at low interest rates or on other advantageous terms. If we are unable to obtain credit as and when we need it on commercially reasonable terms or at all, such as in the event there is a substantial tightening of the global credit markets or a substantial increase in interest rates, it could have a negative impact on our liquidity, business, financial condition, and cash flows, as well as our future development and growth. Furthermore, our business is impacted by the availability of trade credit to fund fuel purchases and an actual or perceived decline in our liquidity or operations could cause our suppliers to seek credit support in the form of additional collateral, limit the extension of trade credit, or otherwise materially modify their payment terms. Adverse changes in our payment terms from principal suppliers, including shortened payment cycles, decreased credit lines or requiring prepayment could impact our liquidity, business, results of operations and cash flows.
Finally, if we are unable to obtain debt or other forms of financing and instead raise capital through an equity issuance, existing shareholders would be diluted. Even if we are able to obtain financing, the restrictions our creditors may place on our operations or our increased interest expense and leverage could limit our ability to grow.
Sales to government customers involve unique risks that could have a material adverse effect on our business and results of operations.
In addition to normal business risks, our supply of products and services to U.S. and foreign government, intergovernmental and military customers (“government customers”) subjects us to unique risks, many of which are beyond our control. These risks include:
Dependence on government spending on defense programs, which can be negatively affected by budgetary constraints, changes in defense spending policies, government shutdowns and changes in military policies or priorities;
Contract awards that are typically made through a competitive bidding process, which can involve substantial costs and managerial time to prepare and submit bids for contracts that may not be awarded to us;
Expense and delays that may arise if our competitors protest or challenge contract awards made to us;
Contracts for indefinite delivery, such that there are no guarantees on the quantity the government will buy or when it will buy from us; and
The ability for government customers to unilaterally modify certain terms and conditions in existing contracts or terminate existing contracts for their convenience.

Furthermore, government customer contracts are subject to specific procurement regulations and a variety of other complex requirements, which affect how we transact business with our government customers and can impose additional costs on our business operations. Numerous laws and regulations affect our U.S. government contracts, including the Federal Acquisition Regulation, which governs the formation, administration and performance of government contracts, and the federal False Claims Act, which provides for substantial criminal and civil penalties and treble damages where a contractor presents a false or fraudulent claim to the U.S. government for payment. Similar laws and regulations also may apply to our contracts with foreign government and intergovernmental agency customers.
Government customers routinely audit government contractors to review contract performance, cost structure and compliance with applicable laws, regulations, and standards, as well as the adequacy of and compliance with internal control systems and policies. Any costs found to be misclassified or inaccurately allocated may not be reimbursable, and to the extent already reimbursed, may need to be refunded and could subject us to a variety of government claims. Also, any inadequacies in our systems and policies could result in payments being withheld, penalties and reduced future business. Improper or illegal activities, including those caused by our subcontractors, could subject us to civil or criminal penalties or administrative sanctions, including contract termination, fines, forfeiture of fees, suspension of payment and suspension or debarment from doing business with government agencies, any of which could materially adversely affect our reputation, business, financial condition and results of operations.

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A material portion of our profitability is derived from our government business, and the loss or material reduction in business from our government customers could have a material adverse effect on our results of operations and cash flows.
Sales to government customers, which includes sales to the U.S. Defense Logistics Agency and the North Atlantic Treaty Organization (NATO), have accounted for a material portion of our profitability in recent years, and we expect this to continue in the foreseeable future. The profitability associated with our government business can be materially impacted by supply disruptions, border closures, road blockages, hostility-related product losses, inventory shortages and other logistical difficulties that can arise when sourcing and delivering fuel in areas that are actively engaged in war or other military conflicts. Our sales to government customers may fluctuate significantly from time to time as a result of the foregoing factors, as well as the level of troop deployments and related activity in a particular region or area or the commencement, extension, renewal or completion of existing and new government contracts. Furthermore, changes in military policies or priorities, such as the decision to withdraw or reduce armed force levels in different geographies, can be sudden, subjecting us to losses or higher expenses associated with disposing of unused inventory, removal or abandonment of equipment and relocation of employees.
As a result of complex supply logistics, the indefinite nature of government contracts, and other associated risks, sales of products and services to government customers often carry higher margins than sales to our other customers. Consequently, a decrease in sales or increase in supply costs to our government customers would contribute disproportionately to a reduction in our gross margin and overall profitability and such decrease could be sudden. The loss of a key government customer or a material reduction in sales to government customers would adversely affect our business, financial condition, results of operations and cash flows.
Our derivative transactions with customers, suppliers, merchants and financial institutions expose us to price and credit risks, which could have a material adverse effect on our business.
As part of our price risk management services, we offer to customers various pricing structures for the purchase of fuel, including derivatives products designed to hedge exposure to fluctuations in fuel prices. In the ordinary course of business, we enter into fixed forward contracts with some of our counterparties under which we agree to sell or purchase certain volumes of fuel at fixed prices. In addition, we may act as a counterparty in over-the-counter swap transactions with some of our customers where the customer may be required to pay us in connection with changes in the price of fuel. Further, we may use derivatives to hedge price risks associated with our fuel inventories and purchase and sale commitments. We typically hedge our price risk in any of the foregoing types of transactions by entering into derivative instruments with large energy companies, trading houses and financial institutions.
If we have not required a customer to post collateral in connection with a fixed forward contract or swap transaction and there is an outstanding mark-to-market liability owing, we will have effectively extended unsecured credit to that customer and such amounts could be substantial. Based on the volatility of fuel prices, our counterparties may not be willing or able to fulfill their obligations to us under their fixed forward contracts or swap transactions. In such cases, we would be exposed to potential losses or costs associated with any resulting default. For example, in the event the spot market price of fuel at the time of delivery is substantially less than the fixed price of the contract with the customer, a customer could default on its purchase obligation to us and purchase the fuel at a lower “spot” market price from another supplier. Meanwhile, we may have entered into a corresponding commitment with a supplier to offer our customer specified fixed pricing or terms and would be obligated to perform our fixed price purchase obligations to such supplier. Similarly, the counterparties with whom we may hedge our price risk exposure may not be willing or able to fulfill their obligations to us under their swap transactions.
While we monitor and manage our credit exposures to our counterparties, credit defaults may still occur and the actual recovery will depend on the financial condition of that counterparty and our ability to enforce any obligation owed to us. Accordingly, if we are unable to recover such losses from a defaulting counterparty, we could sustain substantial losses that would have a material adverse effect on our business, financial condition, results of operations and cash flows.

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We are exposed to various risks in connection with our use of derivatives which could have a material adverse effect on our results of operations.
We enter into financial derivative contracts primarily to mitigate the risk of market price fluctuations in fuel products, to offer our customers fuel pricing alternatives to meet their needs, to manage price exposures associated with our inventories, and to mitigate the risk of fluctuations in foreign currency exchange rates. However, our efforts to hedge our exposure to fuel price and exchange rate fluctuations may be ineffective in certain instances. For example, we hedge jet fuel prices with derivatives tied to other petroleum products that have historically been correlated to aviation jet fuel (e.g. heating oil in the United States or gasoil in Europe or Asia). If the price of aviation jet fuel at a specific location experiences a divergence to historical correlations, our attempts to mitigate price risk associated with our aviation business may not be effective. Moreover, there may be times where the change in the price of jet fuel at a specific location is disrupted (e.g. hurricanes) and is not correlated to the underlying hedges when compared to historical prices.
We also enter into proprietary derivative transactions, which are not intended to hedge our own risk but rather make a profit by capitalizing on arbitrage opportunities associated with basis, time, quality or geographic spreads related to fuel products we sell. Proprietary derivative transactions, by their nature, expose us to changes in commodity prices in relation to the proprietary positions taken. Although we have established limits on such exposure, any adverse changes could result in losses which can be further exacerbated by volatility in the financial and other markets. In addition, our employees failing to comply with our policies and procedures with respect to hedging or proprietary trading, such as engaging in unauthorized trading activity, failing to hedge a specific price risk or failing to comply with our internal limits on exposure, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Finally, many of our derivative transactions are not designated as hedges for accounting purposes, and we therefore may recognize changes in the fair market value of these derivatives as a component of revenue or cost of revenue (based on the underlying transaction type) in our consolidated statements of income and comprehensive income. Since the fair market value of these derivatives is marked to market at the end of each quarter, changes in the value of our derivative instruments as a result of gains or losses may cause our earnings to fluctuate from period to period.
If we fail to comply with laws or other government regulations applicable to our operations, we could suffer penalties or costs that could have a material adverse effect on our business.
We are required to comply with extensive and complex laws and other regulations in the countries in which we operate at the international, federal, state/provincial and local government levels relating to, among other things:
the transportation, handling and delivery of fuel and fuel products;
the operation of fuel storage, blending and distribution facilities;
workplace safety;
fuel spillage or seepage;
environmental protection, carbon emissions and hazardous waste disposal;
consumer protection;
data privacy and protection;
commodities trading, brokerage, derivatives and advisory services;
credit and payment card processing and payment services;
government contracting and procurement;
antitrust and competition;
anti-money laundering, financial services, and funds transmission; and
regulatory reporting and licensing.

Due to the complex and technical nature of these laws and regulations, inadvertent violations may occur. If we fail to comply with these laws or regulations for any reason, we would be required to correct or implement measures to prevent a recurrence of any violations, which could increase our operating costs. If more serious violations were to occur, we could be subject to substantial fines or penalties or to civil or criminal liability. Any substantial fines and costs incurred as a result of a violation of such regulations could have a material adverse effect on our business and results of operations.


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Our failure to comply with U.S. or foreign tax laws or a government challenging our tax position 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 (“VAT”), energy, environmental and other taxes. From time to time, we may also benefit from special tax concessions in certain jurisdictions. For example, we have operated under a special income tax concession in Singapore since 2008 which is conditional upon our meeting certain employment and investment thresholds which, if not met in accordance with our agreement, may eliminate the benefit beginning with the first year in which the conditions are not satisfied. The income tax concession reduces the income tax rate on qualified sales and derivative gains and losses. The impact of this income tax concession decreased (increased) foreign income taxes by $1.3 million, $2.7 million and $(7.7) million for 2017, 2016 and 2015, respectively. The impact of the income tax concession on a diluted earnings per common share basis was $0.02 for 2017, $0.04 for 2016 and $(0.11) for 2015. 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. Our tax expense includes estimates of additional tax that may be incurred for tax exposures and reflects various estimates and assumptions, including assessments of future earnings that could affect the valuation of our net deferred tax assets. Our operating results could be adversely affected by changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in our overall profitability, changes in tax legislation, the results of audits and examinations of previously filed tax returns and continuing assessments of our income tax exposures.
From time to time, we are under review by the Internal Revenue Service (“IRS”) and various other domestic and foreign tax authorities with regards to income tax and indirect tax matters and are involved in various challenges and litigation in a number of countries, including, in particular, the U.S., Brazil, Denmark and South Korea, where the amounts under controversy may be material. We are in the process of challenging a number of these tax assessments in several administrative and legal proceedings, which are at various stages of appeal. In addition, in some jurisdictions these challenges require the posting of collateral or payment of the contested amount which may affect our flexibility in operating our business or our liquidity. If these challenges are ultimately determined adversely to us, these proceedings may have a material adverse effect on our business, results of operations, financial condition or prospects. Furthermore, any failure to comply with applicable laws and regulations or appropriately resolve these challenges could subject us to administrative, civil, and criminal remedies, including fines, penalties, disgorgement, injunctions and damage to our reputation. See notes 9 and 11 of the accompanying consolidated financial statements for additional details regarding certain tax matters.
Finally, we earn a material 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 us. Further, recent developments, including investigations by the European Commission on illegal state aid, the project by the Organisation for Economic Co-operation and Development (“OECD”) on Base Erosion and Profit Shifting (“BEPS”) and other initiatives, could adversely affect our worldwide effective tax rate. With the finalization of specific actions contained within the OECD’s BEPS study, many OECD countries have acknowledged their intent to implement the actions and update their local tax laws. The extent (if any) to which countries in which we operate adopt and implement these actions could have a material adverse impact on our effective tax rate, income tax expense, financial condition, and results of operations and cash flows.
Recent U.S. tax legislation, as well as future substantial changes that may be made by the Trump Administration to regulatory, fiscal and trade policies, may materially adversely affect our financial condition, results of operations and cash flows.
On December 22, 2017, the U.S. President signed into law tax legislation known as the Tax Cuts and Jobs Act (the “Tax Act”). This legislation significantly changes the U.S. Internal Revenue Code, including taxation of U.S. corporations, by, among other things, limiting interest deductions, reducing the U.S. corporate income tax rate, altering the expensing of capital expenditures, adopting elements of a territorial tax system, taxing global intangible low-taxed income (“GILTI”), assessing a repatriation tax or “toll-charge” on undistributed earnings and profits of U.S.-owned foreign corporations, and introducing certain base erosion and anti-abuse minimum tax provisions. The legislation is unclear in certain respects and will require interpretations and implementing regulations by the IRS, as well as state tax authorities, and the legislation could be subject to potential amendments and technical corrections, any of which could increase certain adverse impacts of the legislation.

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Because of the complexity of the GILTI tax rules effective in 2018, we continue to evaluate this provision of the Tax Act and the application of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 740, Income Taxes (“ASC Topic 740”). Under accounting principles generally accepted in the United States of America (“U.S. GAAP”), we are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. GILTI inclusions as a current period expense when incurred (the “period cost method”) or (2) factoring such amounts into our measurement of our deferred taxes (the “deferred method”). Our selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing our global income and our global structure to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and the impacts thereof. We are currently analyzing this provision and have not made any adjustment related to potential GILTI tax in our financial statements and have not made a policy decision regarding whether to record deferred tax on GILTI since a reasonable amount cannot be determined.
The changes included in the Tax Act are broad and complex. The final transition impacts of the Tax Act may differ from our estimates, possibly materially, due to, among other items, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to current year earnings and tax estimates. In accordance with Staff Accounting Bulletin No. 118 regarding application of ASC Topic 740, we anticipate that we will finalize our provisional estimates and determine the impact of any potential deferred tax related to GILTI during the measurement period and reflect any necessary adjustments in the subsequent periods. Any material revisions in our computations could adversely affect our results of operations.
In addition, there may be other material adverse effects resulting from the legislation that we have not yet identified. If we are unable to successfully take actions to manage the adverse impacts of the new tax legislation, or if additional interpretations, regulations, amendments or technical corrections exacerbate the adverse impacts of the legislation, the legislation could have a material adverse effect on our financial condition, results of operations and cash flows.
Our physical operations have inherent risks that could negatively impact our business, financial condition and results of operations.
We provide various products and services to customers, including but not limited to into-plane fueling at airports, fueling of vessels in port and at sea, on the ground fueling of customer storage tanks and vehicles, and transportation, delivery and storage of fuel and fuel products. Operating fuel storage and distribution terminals and transporting fuel products involve inherent risks, such as:
fires, collisions and other catastrophic disasters;
traffic accidents, injuries and loss of life;
spills, discharges, contaminations and other releases;
severe damage to and destruction of property and equipment; and
loss of product and business interruption.

Any of the foregoing could result in distribution difficulties and disruptions, environmental pollution, government-imposed fines or clean-up obligations, personal injury or wrongful death claims, and other damage to our properties and the properties of others. Although we generally maintain liability insurance for these types of events, such insurance may be insufficient to cover certain losses which may be in excess of coverage limits or outside the scope of the coverage. If we are held liable for any damages, and the liability is not adequately covered by insurance, our financial position and results of operations will be adversely affected.
In addition, some of our employees are represented by labor unions under collective bargaining agreements, including certain of our truck drivers that transport and deliver fuel and fuel-related products. Employees who are not currently represented by labor unions may seek union representation in the future, and any renegotiation of current collective bargaining agreements may result in terms that are less favorable to us. Although we believe that our relations with our employees are good, if our unionized workers were to engage in a strike, work stoppage or other slowdown in the future, we could experience a significant disruption of our operations, which could interfere with our ability to transport and deliver products on a timely basis and could have other negative effects, such as decreased productivity and increased labor costs. A significant labor dispute with our own union employees, or by the union employees of third parties who provide services for our business, could have a material adverse effect on our results of operations and cash flows.

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Our operations are subject to environmental risks and extensive laws and regulations pertaining to environmental protection, health, safety and security that can result in material costs and liabilities.
Our business is subject to numerous federal, state, local and foreign environmental laws and regulations, including those relating to fuel storage and distribution, terminals, underground storage tanks, the release or discharge of regulated materials into the air, water and soil, the generation, storage, handling, use, transportation and disposal of hazardous materials, the exposure of persons to regulated materials, and the health and safety of our employees. A violation of, liability under, or noncompliance with these laws and regulations, or any future environmental law or regulation, could result in significant liability, including administrative, civil or criminal penalties, remediation costs for natural resource damages as well as third-party damages. Furthermore, some environmental laws impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. In our marine segment we utilize fuel delivery barges and store refined products adjacent to water, thereby potentially subjecting us to strict, joint, and potentially unlimited liability for removal costs and other consequences of an oil spill where the spill is into navigable waters, along shorelines or in the exclusive economic zone of the United States. Any of these occurrences, and any resulting negative media coverage, could have a material adverse effect on our stock price and on our business, financial condition, results of operations and cash flows.
Further, increasingly stringent U.S. federal and foreign environmental regulations have resulted and will likely continue to increase our overall cost of business. For example, compliance with existing and future laws regulating the delivery of fuel by barge, truck, vessel, pipeline or railcar; that regulate fuel storage terminals or underground storage tanks that we own, lease or operate; or that regulate the quality of product under our control may require significant capital expenditures and increased operating and maintenance costs, particularly as we acquire businesses with more physical assets. In addition, mandatory fuel standards have been adopted in many jurisdictions, such as amendments to the International Convention for the Prevention of Pollution from Ships, or MARPOL, which established a phased reduction of the sulfur content in fuel oil and allows for stricter sulfur limits in designated emission control areas, will be effective in January 2020. Further changes in laws and regulations applicable to international and national maritime trade are expected over the coming years. These and future changes to applicable standards or other more stringent requirements in the industries we serve could reduce our ability to procure product, require us to incur additional handling costs and/or require the expenditure of capital. To the extent these expenditures, as with all costs, are not ultimately reflected in the prices of our products, our business and result of operations would be adversely affected.

Due to our international operations, we are subject to U.S. and international laws, including U.S. economic sanctions, the Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery laws, which can impose substantial compliance costs and subject us to civil or criminal penalties for non-compliance.
Doing business on a global basis requires us to comply with the laws and regulations in jurisdictions worldwide that can impose substantial compliance costs and subject us to civil or criminal penalties for non-compliance. In particular, our global operations are subject to anti-corruption laws, such as the FCPA, anti-money laundering laws, international trade controls, and antitrust and competition laws. The FCPA prohibits us from providing anything of value to foreign officials for the purposes of improperly influencing official decisions or improperly obtaining or retaining business. Where applicable, the U.K. Bribery Act prohibits bribery both in the U.K. and internationally, including bribery across both public and private sectors. As part of our business, we regularly deal with state-owned enterprises, the employees of which may be considered foreign officials for purposes of the FCPA, the U.K. Bribery Act, and other applicable anti-bribery laws. In addition, some of the international jurisdictions in which we operate lack a developed legal system and have higher than normal levels of corruption. Our activities in these countries may increase the risk of improper payment demands made to, or offers made by, one of our employees or other parties acting on our behalf, and the rejection of demands to make such improper payments may also negatively impact our activities in those countries.

Furthermore, international trade controls, including economic sanctions such as those administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), export controls and anti-boycott regulations are complex, restrict our business dealings with certain countries and individuals, and are constantly changing. Additional restrictions may be enacted, amended, enforced or interpreted in a manner that materially impacts our operations. From time to time, certain of our subsidiaries have limited business dealings in countries subject to comprehensive OFAC administered sanctions. These business dealings currently represent an immaterial amount of our consolidated revenue and income and are undertaken pursuant to general and/or specific licenses issued by OFAC or as otherwise permitted by applicable sanctions regulations. As a result of the above activities, we are exposed to a heightened risk of violating trade control regulations.
We have established policies and procedures designed to assist with our compliance with these laws and regulations, but such policies and procedures may not always prevent us from violations. Violations of these laws are punishable

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by fines and expose us and/or employees to criminal sanctions and civil suits and subject us to other adverse consequences including the denial of export privileges, injunctions, asset seizures, debarment from government contracts, revocations or restrictions of licenses. In addition, non-compliance with laws could adversely affect, among other things, our reputation, business, financial condition, results of operations and cash flows. Violations of law could also cause an event of default under our Credit Facility, which if not waived, could result in the acceleration of any outstanding indebtedness, could trigger cross defaults under other agreements to which we are a party (such as certain derivative contracts), and would impair our ability to obtain working capital advances and letters of credit. Such events could adversely affect our business, financial condition, results of operations and cash flows.
Third parties who fail to provide products or services to us or our customers as agreed could harm our business.
We purchase fuel and other products from suppliers and resell to customers. If the fuel and other products we sell fail to meet the specifications we have agreed to with customers, we could incur material liabilities if such products cause physical damage to a vessel or aircraft or result in other losses such that a customer initiates a claim or a lawsuit for which we settle or results in a decision against us. In addition, our relationship with our customers could be adversely affected and adverse publicity about any allegations of contaminated products may negatively affect us, regardless of whether the allegations are true. Although in most cases our agreements with suppliers provide that we have recourse against our suppliers for products that fail to meet contractual specifications, if the terms of such agreements are not adequate to protect our interests, we may not be able to enforce such recourse. In the event we are able to pursue it, such recourse cannot be assured and may be costly to enforce. For example, several of our supply agreements are with foreign entities, including foreign governments, and are governed by the laws of foreign jurisdictions. If a supplier breaches such agreement, then we may incur the additional costs of determining our rights and obligations under the agreement, under applicable foreign laws, and enforcing an agreement in a foreign jurisdiction. Any material liability in excess of any applicable insurance coverage could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We also use third parties to provide various services to our customers, including into plane fueling at airports, fueling of vessels in port and at sea and delivering land-based fuel. The failure of these third parties to perform these services in accordance with contractual terms for any reason, such as their inability to supply specified fuel or an interruption of their business because of weather, environmental or labor difficulties or political unrest, could affect our relationships with our customers and subject us to claims and other liabilities that could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Information technology (IT) failures and data security breaches, including as a result of cybersecurity attacks, could negatively impact our results of operations and financial condition, subject us to increased operating costs, and expose us to litigation.
We rely heavily on our computer systems, information technology and network infrastructure across our operations, particularly as we seek to grow our technology offerings, digitize our business and drive internal efficiencies. Despite our implementation of security and back-up measures, our technology systems are vulnerable to damage, disability or failures due to physical theft, fire, power loss, telecommunications failure, operational error, or other catastrophic events. Our technology systems are also subject to cybersecurity attacks including malware, other malicious software, phishing email attacks, attempts to gain unauthorized access to our data, the unauthorized release, corruption or loss of our data, loss or damage to our data delivery systems, and other electronic security breaches. Due to the large number of transactions that run through our systems each day, significant system down-time or slow-down could have a material impact on our ability to conduct business, process and record transactions, as well as make operational and financial decisions. In addition, as we continue to grow the volume of transactions in our businesses, our existing IT systems infrastructure, applications and related functionality may be unable to effectively support a larger scale operation, which can cause the information being processed to be unreliable and impact our decision-making or damage our reputation with customers. We have also been increasing our use of cloud-based technology and computing platforms operated by third parties. If our use of these cloud services is disrupted either due to system failures, denial of service or other cyberattacks and computer viruses, or if the infrastructure which allows us to connect to the third party systems is interrupted, it could adversely impact our operations and our business.
In addition to our own vulnerabilities, our reliance on email transmissions over public networks to process certain transactions exposes us to risks associated with the failure of our customers, business partners and other third parties to use appropriate controls to protect sensitive information, as well as to risks of on-line fraud and email scams. Furthermore, despite our efforts to ensure the integrity of our systems and prevent future cybersecurity attacks, it is possible that our business, financial and other systems could be compromised, especially because such attacks can originate from a wide variety of sources including persons involved in organized crime or associated with external

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service providers. Those parties may also attempt to fraudulently induce employees, customers or other users of our systems to disclose sensitive information in order to gain access to our data or use electronic means to induce us to enter into fraudulent transactions. Past and future occurrences of such attacks could damage our reputation and our ability to conduct our business, impact our credit and risk exposure decisions, cause us to lose customers or revenues, subject us to litigation and require us to incur substantial expenses to address and remediate or otherwise resolve these issues, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We currently maintain insurance to protect against cybersecurity risks and incidents. However, insurance coverage may not be available in the future on commercially reasonable terms or at commercially reasonable rates. In addition, insurance coverage may be insufficient or may not cover certain of these cybersecurity risks and, even if available, the insurance proceeds received for any loss or damage may be insufficient to cover our losses or liabilities without materially adversely affecting our business, financial condition and results of operations.
The personal information that we collect may be vulnerable to breach, theft, loss or misuse that could increase operational costs, result in regulatory penalties and adversely affect our results of operation and financial condition.
In connection with various businesses we operate, such as our transaction management and payment processing businesses, we have access to sensitive, confidential or personal data or information from our employees, customers (both corporate and individual consumers), suppliers and other third parties, some of which may be subject to privacy and security laws, regulations and customer imposed controls. In the ordinary course of business, we collect, process, transmit and retain sensitive information regarding these parties. Despite our efforts to protect this information, our facilities and systems and those of our third party service providers may be vulnerable to security breaches, theft, misplaced or lost data and programming and human errors that could potentially lead to such information being compromised.

Failure to adequately protect this information could lead to substantial fines, penalties, third party liability, remediation costs, potential cancellation of existing contracts and inability to compete for future business. Due to legislative and regulatory rules, we may be required to notify the owners of such information of any data breaches, which could harm our business relationships, reputation and financial results, as well as subject us to litigation or actions by regulatory authorities. Furthermore, there has been heightened legislative and regulatory focus on data security in the U.S. and abroad (particularly in the European Union through the General Data Protection Regulation that will go into effect in May 2018). Substantial changes in applicable regulations may require us to make costly changes to our systems. Although we have taken steps to address these concerns by implementing network security and internal control measures, these steps may not prevent a data security breach and any data security breach may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Implementation of our growth strategy may place a strain on our management, operational and financial resources, as well as our information systems.
A key element of our business strategy has been the growth of our business through acquisitions and strategic investments. However, this growth strategy may place a strain on our management, operational and financial resources, as well as our information systems and expose us to additional business and operating risks and uncertainties, including:
our ability to effectively and efficiently integrate the operations, financial reporting, and personnel of acquired businesses and manage acquired businesses or strategic investments, while maintaining uniform standards and controls;
the diversion of management’s time and attention from other business concerns, the potentially negative impact of changes in management on existing business relationships and other disruptions of our business;
the risks associated with entering into businesses or markets in which we may have no or limited direct prior experience;
the potential loss of key employees, customers or suppliers of the acquired businesses;
a decrease in our liquidity resulting from a material portion of our available cash or borrowing capacity being used to fund acquisitions and a corresponding increase in our interest expense or financial leverage if we incur additional debt to fund acquisitions;
the ability to integrate the IT systems and technology of acquired businesses into our existing infrastructure and manage those systems and technologies that cannot be effectively integrated;
the requirement to write down acquired assets in the event the acquired business or strategic investment is worth less than we paid for or invested in it;
capital expenditure requirements exceeding our estimates;

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the assumption of material liabilities, exposure to litigation, regulatory noncompliance or unknown liabilities associated with the acquired businesses, and no or limited indemnities from sellers or ongoing indemnity obligations to purchasers; and
the need to implement internal controls, procedures and policies appropriate for a public company at companies that prior to the acquisition lacked such controls, procedures and policies.

These risks may result in an adverse effect on our results of operations or financial condition or result in costs that outweigh the financial benefit of such opportunities. Furthermore these acquisitions or strategic investments may result in us incurring substantial additional indebtedness and other expenses or consummating potentially dilutive issuances of equity securities to fund the required capital investment. This could adversely affect the market price of our common stock, inhibit our ability to pay dividends or otherwise restrict our operations.
We may not be able to fully recognize the anticipated benefits of our acquisitions and other strategic investments.
As part of our growth strategy, we have been pursuing acquisition opportunities complementary to our business portfolio. From time to time, we may also enter into strategic investments such as joint venture arrangements or equity investments intended to complement or expand a portion of our business. Our ability to successfully implement our growth strategy depends on our ability to find attractive acquisition candidates or strategic investments and consummate such transactions on economically acceptable terms. Before making acquisitions or other strategic investments, we conduct due diligence that we deem reasonable and appropriate based on the facts and circumstances applicable to each investment. We rely, among other things, on our due diligence, representations and warranties of the sellers, financial statements and records of target businesses to establish the anticipated revenues and expenses and whether the acquisitions or strategic investments will meet our internal guidelines for current and future potential returns. Our due diligence investigation and other information we rely on with respect to any opportunity may not reveal or highlight all relevant risks and issues that may be necessary or helpful in evaluating such opportunity. Consequently, these transactions could result in (i) an adverse impact on our overall profitability if the acquisitions or strategic investments do not achieve the projected financial results, (ii) unanticipated costs that may impact our results of operations, and (iii) increased demands on our cash resources that may, among other things, impact our ability to explore other opportunities. If our acquisitions or strategic investments do not achieve the financial results anticipated, it could adversely affect our revenues and results of operations.

Integration difficulties, or any other factors that make operating the acquired businesses more challenging following the completion of the acquisitions, may also prevent us from realizing the benefits from the recent acquisitions or any future acquisitions to the extent, or in the time frame, anticipated by us. We have incurred, and expect to continue incurring, expenses related to the integration of acquisitions. These transaction and integration expenses could, particularly in the near term, exceed the savings and synergies that we expect to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the integration of the acquired businesses following the completion of the recent acquisitions. Any of these factors could have an adverse effect on our business, financial condition, results of operations and cash flows.
As a result of our acquisition activity, our goodwill and intangible assets have increased substantially in recent years and we have incurred, and may continue to incur, impairments to goodwill or intangible assets.
When we acquire a business, a substantial portion of the purchase price of the acquisition is allocated to goodwill and other identifiable intangible assets. In accordance with applicable acquisition accounting rules, we are required to record as goodwill on our consolidated balance sheet the amount by which the purchase price exceeds the net fair value of the tangible and intangible assets and liabilities acquired as of the acquisition date. As of December 31, 2017, we had goodwill of $845.5 million and net intangible assets of $279.7 million. We review our indefinite-lived intangible assets, including goodwill, for impairment annually in the fourth fiscal quarter or whenever events or changes in circumstances indicate that a potential impairment exists. Factors that may be considered in assessing whether goodwill or intangible assets may be impaired include a decline in our stock price or market capitalization, reduced estimates of future cash flows in our annual operating plan and slower growth rates in our industry.

Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on a number of factors including industry experience, internal benchmarks, and the economic environment. We also rely heavily on projections of future operating performance, however, if our annual operating plan is not achieved or if there are other variations to our estimates and assumptions, particularly in the expected growth rates and profitability embedded in our cash flow projections or the discount rate used, there is the potential for a partial or total impairment of the carrying amount of goodwill within one or more of our reporting units.


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During the fourth quarter of 2017, we recorded an impairment charge of $91.9 million, of which $72.3 million was attributable to the write-off of goodwill in our marine segment, and $7.9 million associated with intangible assets, primarily customer relationships. The impairment within our marine segment was driven principally by growing competitive pressures in maritime markets, including the decline of maritime shipping volumes along with lower demand for price risk management products and our ultimate decision in the fourth quarter to exit our marine business in certain international markets. See Note 7 in the accompanying Notes to Consolidated Financial Statements for more information. Due to continual changes in market and general business conditions, we cannot predict whether, and to what extent, our goodwill and long-lived intangible assets may be impaired in future periods. Any resulting impairment loss would have a negative effect on our results of operations.
Adverse conditions or events affecting the aviation, marine and land transportation industries may have a material adverse effect on our business.
Our business is focused on the marketing of fuel and other related products and services primarily to the aviation, marine and land transportation industries, which are generally affected by economic cycles. Therefore, weak economic conditions can have a negative impact on the business of our customers which may, in turn, have an adverse effect on our business. For example, our marine segment has been significantly impacted by the economic conditions adversely affecting the maritime industry. In addition, any political instability, terrorist activity, military action that disrupts shipping, flight operations or land transportation or natural disasters and other weather-related events, will adversely affect our customers and may reduce the demand for our products and services. For example, during 2017, an earthquake in Mexico and Hurricanes Irma and Harvey resulted in business interruptions and supply disruptions which negatively impacted our results of operations. Our business could also be adversely affected by increased merger activity in the aviation, marine or land transportation industries, which may reduce the number of customers that purchase our products and services, as well as the prices we are able to charge for such products and services. For example, the shipping industry has gone through a period of significant consolidation in recent years, which has created a concentration of volume among a smaller number of shipping companies. Larger shipping companies often have greater leverage, are more sophisticated purchasers of fuel and have greater ability to buy directly from major oil companies, which can negatively impact our value proposition to these types of customers.
In addition, the aviation, marine and land transportation industries are subject to continuing changes in laws and regulations, including environmental regulations mandating or incentivizing alternative energy sources or attempting to control or limit emissions and pollution. Complying with these and other laws and regulations may require capital expenditures by our customers or otherwise increase our customers’ operating costs, which could in turn, reduce the demand for our products and services or impact the pricing or availability of the products we sell. Although the ultimate impact of any regulations is difficult to predict accurately, they could have a material adverse effect on our business or on the businesses of our customers.
Our business is subject to seasonal variability, which can cause our revenues and operating results to fluctuate and adversely affect the market price of our shares.
Our operating results are subject to seasonal variability. Seasonality results from numerous factors, including traditionally higher demand for natural gas and home heating oil during the winter months and for aviation and land fuel during the summer months, as well as other seasonal weather patterns. As such, our results for the second and third quarters of the year in our aviation segment tend to be the strongest and our results for the fourth and first quarters of the year in our land segment tend to be the strongest. However, extreme or unseasonable weather conditions can substantially reduce demand for our products and services which can, in turn, adversely impact our results of operations. There can be no assurance that seasonal variability factors will continue in future periods. Accordingly, results for any one quarter may not necessarily be indicative of the results that may be achieved for any other quarter or for the full fiscal year. These seasonal fluctuations in our quarterly operating results may adversely affect the market price of our shares.
We may be unable to realize the level of benefit that we expect from our restructuring activities and cost reduction initiatives which may hurt our profitability and our business otherwise might be adversely affected.
We continually assess the strategic fit of our existing businesses and seek the most cost effective means and efficient structure to serve our customers and suppliers and respond to changes in the markets in which we operate. In line with this commitment, we have in the past and are likely to, in the future, divest of certain non-core assets, exit lines of businesses that are not achieving the desired return on investment, or otherwise restructure certain of our operations in an effort to improve cost competitiveness and profitability. For example, we exited our rail business in the fourth quarter of 2017. We also engaged in cost reduction initiatives, principally in our marine segment in 2016 and throughout our organization in 2017, and restructuring activities during the fourth quarter of 2017. We continue to evaluate additional restructuring activities, cost reduction opportunities and potential divestitures.

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We may not be able to achieve the level of benefit that we expect to realize from our past or future restructuring activities or divestitures. We may also materially alter various aspects of our business, or our business model, and there can be no assurance that any such changes will be successful or that they will not ultimately have a negative effect on our business and results of operations. Finally, restructuring activities and divestitures may result in restructuring charges and material write-offs, including those related to goodwill and other intangible assets, any of which could have a material adverse effect on our results of operations and financial condition.
Changes in the market price of fuel may have a material adverse effect on our business.
Fuel prices are impacted by many factors beyond our control, including:
global economic conditions;
changes in global crude oil and natural gas prices;
expected and actual supply and demand for fuel;
the ability or willingness of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels for oil;
oil and gas production levels by non-OPEC countries;
geopolitical conditions;
laws and regulations related to environmental matters, including those mandating or incentivizing alternative energy sources or otherwise addressing global climate change;
changes in pricing or production controls by various organizations and oil producing countries;
technological advances affecting energy consumption or supply;
energy conservation efforts;
price and availability of alternative fuels and energy sources; and
weather.

If fuel prices increase, our customers may not be able to purchase as much fuel from us because of their credit limits with us and the resulting adverse impact on their business could cause them to be unable to make payments owed to us for fuel purchased on credit. They may also choose to reduce the amount of fuel they consume in their operations to reduce costs or comply with new environmental regulations to obtain associated incentives. For example, in the shipping industry a number of container ships sail at reduced speeds, known as “slow steaming,” to conserve fuel and reduce carbon emissions. In any such event, the volume of orders from our customers may thereafter decrease and we may not be able to replace lost volumes with new or existing customers. In addition, if fuel prices increase, our own credit limits could prevent us from purchasing enough fuel from our suppliers to meet our customers’ demands or could require us to prepay for fuel purchases which would impair our liquidity.
Conversely, extended periods of low fuel prices, particularly when coupled with low price volatility, such as we experienced during 2016 and 2017, can also have an adverse effect on our results of operations and overall profitability. This outcome can be due to a number of factors, including reduced demand from our customers involved in the oil exploration sector and for our price risk management products. Low fuel prices also facilitate increased competition by reducing financial barriers to entry and enabling existing, lower-capitalized competitors to conduct more business as a result of lower working capital requirements.
Finally, we maintain fuel inventories for competitive or logistical reasons. Because fuel is a commodity, we have no control over the changing market value of our inventory although we may manage or hedge this price exposure with derivatives. Our inventory is valued using the weighted average cost methodology and is stated at the lower of average cost or market. A rapid decline in fuel prices could cause our inventory value to be higher than market, resulting in our inventory being marked down to market or the inventory itself sold at lower prices. While we attempt to mitigate these fluctuations through hedging, such hedges may not be fully effective. Accordingly, if the market value of our inventory is less than our average cost and to the extent our hedges are not effective at mitigating fluctuations in prices, we could record a write down of inventory on hand and incur a non-cash charge or suffer losses as fuel is sold, which could adversely impact our earnings.
Economic, political and other risks associated with international sales and operations could adversely affect our business and future operating results.
Because we offer fuel products and services on a worldwide basis, our business is subject to risks associated with doing business internationally. Our business and future operating results could be harmed by a variety of factors, including, but not limited to:

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trade protection measures and import, export and other licensing requirements, which could increase our costs or prevent us from doing certain business internationally;
the costs of hiring and retaining senior management for overseas operations;
difficulty in staffing and managing widespread operations, which could reduce our productivity;
changes in regulatory requirements, which may be costly and require significant time to implement;
laws restricting us from repatriating profits earned from our activities within foreign countries, including making distributions;
governmental actions that may result in the deprivation of our contractual rights or the inability to obtain or retain authorizations required to conduct our business;
political risks, including changes in governments; and
terrorism, war, civil unrest and natural disasters and other weather-related events.

In particular, we operate in certain international markets which have been plagued by corruption and have uncertain regulatory environments, either of which could have a negative impact on our operations there. Furthermore, many countries in which we operate have historically been, and may continue to be, susceptible to recessions or currency devaluation.
We also operate in certain high-risk locations that have been experiencing military action, terrorist activity or continued unrest which could disrupt the supply of fuel or otherwise disrupt our operations in those areas. An act of terror could result in disruptions of fuel supply and oil markets, and our facilities could be direct or indirect targets. Terrorist activity may also hinder our ability to transport fuel if our means of transportation become damaged as a result of an attack. In these high-risk locations, we may also incur substantial operating costs, including maintaining the safety of our personnel. Furthermore, we cannot guarantee the safety of our personnel in these locations and there is a risk of serious injury or loss of life of employees or subcontractors.
Finally, the U.S. may potentially withdraw from or renegotiate various trade agreements and take other actions that would change current trade policies of the U.S. We cannot predict the impact, if any, of these or other proposed changes to our business. However, it is possible that these proposed changes could adversely affect our business, financial condition and results of operations. It is likely that some policies adopted by the new administration will benefit us and others will negatively affect us. Until we know what changes are enacted, we will not know whether in total we benefit from, or are negatively affected by such changes.
Material disruptions in the availability or supply of fuel would adversely affect our business.
The success of our business depends on our ability to purchase, sell and coordinate delivery of fuel and related services to our customers. Political instability, natural disasters and other weather-related events, transportation, terminal or pipeline capacity constraints, terrorist activity, piracy, military action or other similar conditions or events may disrupt the availability or supply of fuel. Decreased availability or supply of fuel or other petroleum products may have a negative impact on our sales and margins and adversely affect our operating results. In addition, we rely on a single or limited number of suppliers for the provision of fuel and related products and services in certain markets. These parties may have significant negotiating leverage over us, and if they are unable or unwilling to supply us on commercially reasonable terms, our business would be adversely affected.
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 we do, to relatively small and specialized firms. Industry developments, such as fuel price transparency, procurement technology tools and increasing customer sophistication may, over time, reduce demand for our services and thereby exacerbate the competition. In addition to competing with resellers, we also compete with the major oil producers that market fuel and other energy products directly to the large commercial airlines, shipping companies and commercial and industrial users. 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.

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If we are unable to retain our senior management and key employees, our business and results of operations could be harmed.
Our ability to maintain our competitive position is largely dependent on the services of our senior management and key personnel. Although we have employment or severance agreements with certain of our key employees, these agreements do not prevent those individuals from ceasing their employment with us at any time. If we are unable to retain existing senior management and key personnel, or to attract other qualified senior management and key personnel on terms satisfactory to us, our business could be adversely affected. While we maintain key man life insurance with respect to certain members of senior management, our coverage levels may not be sufficient to offset any losses we may incur and there is no assurance that we will continue to maintain key man life insurance in the future.
Our failure to comply with the requirements of our Credit Facility and Term Loans could adversely affect our operating flexibility.
We have the ability to borrow money pursuant to a Credit Facility and Term Loans that impose certain operating and financial covenants on us, which, among other things, restrict our ability to (i) pay dividends or make certain other restricted payments, (ii) incur additional debt, (iii) create liens, (iv) sell assets, and (v) engage in mergers or acquisitions. Our failure or inability to comply with the requirements of these facilities, including meeting certain financial ratios or other covenants, could limit the availability under our Credit Facility or result in an event of default. An event of default, if not cured or waived, would permit acceleration of any outstanding indebtedness under these facilities, could trigger cross defaults under other agreements to which we are a party (such as certain derivative contracts), and would impair our ability to obtain working capital advances and letters of credit, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our operations may be adversely affected by legislation and competition from other energy sources and new or advanced technology.
Fuel competes with other sources of energy, some of which are less costly on an equivalent energy basis. There have been significant governmental incentives and consumer pressures to increase the use of alternative fuels in the United States and abroad. A number of automotive, industrial and power generation manufacturers are developing more fuel efficient engines, hybrid engines and alternative clean power systems. The more successful these alternatives become as a result of governmental incentives or regulations, technological advances, consumer demand, improved pricing or otherwise, the greater the potential negative impact on pricing and demand for our products and services and accordingly, our profitability.
On March 28, 2017, the U.S. President signed an executive order directing the Environmental Protection Agency (“EPA”) and other executive agencies to review their existing regulations, orders, guidance documents and policies that potentially burden the development of energy resources. It remains unclear how and to what extent these executive actions will impact the regulation of GHG emissions at the federal level. Even if federal efforts in this area are slow, state, local and/or foreign governments may enact legislation or regulations that attempt to control or limit GHGs such as carbon dioxide. Such laws or regulations could impose costs tied to carbon emissions, operational requirements or restrictions, or additional charges to fund energy efficiency activities. They could also provide a cost advantage to alternative energy sources, result in other costs or requirements, such as costs associated with the adoption of new infrastructure and technology to respond to new mandates, or impose costs or restrictions on end users of fuel. For example, some of our customers in the transportation industry may be required to purchase allowances or offsets or incur other costs to comply with existing or future requirements relating to GHG. Finally, the focus on climate change could also negatively impact the reputation of our fuel products or services. The occurrence of any of the foregoing events could put upward pressure on the cost of fuel relative to other energy sources, increase our costs and the prices we charge our customers, reduce the demand for our products, and therefore adversely affect our business, financial condition, results of operations and cash flows.
Insurance coverage for some of our operations may be insufficient to cover losses, which may have a material adverse effect on our financial condition and results of operations.
We maintain insurance to cover various risks associated with the operation of our business. Certain risks, however, such as environmental risks, are not fully insurable and our insurance coverage does not cover all potential losses, costs, or liabilities. Accordingly, our insurance policies may not adequately cover or may have exclusions of coverage for certain losses. Therefore, our insurance coverage may not be available or, if available, may not be adequate to cover claims that may arise.
Furthermore, our ability to obtain and maintain adequate insurance and the cost of such insurance may be affected by significant claims and conditions in the insurance market over which we have no control. If the cost of insurance

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increases, we may decide to discontinue certain insurance coverage, reduce our level of coverage or increase our deductibles/retentions in order to offset the cost increase. In addition, our existing types and levels of insurance coverage could become difficult or impossible to obtain in the future. The occurrence of an event that is not fully covered by insurance, the loss of insurance coverage or a material increase in the cost of insurance could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Current and future litigation could have a material adverse effect on our business and results of operations.
We are currently, and may in the future be, involved in legal proceedings that arise in the ordinary course of our business. Lawsuits and other administrative or legal proceedings as well as any governmental investigations 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 exposures, costs associated with lawsuits or other legal proceedings may exceed the limits of insurance policies, which could adversely impact our results of operations. Furthermore, 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 financial condition and results of operations.
The majority of our business transactions are denominated in U.S. dollars. In particular markets, however, payments to certain of our fuel suppliers and from certain of our customers are denominated in local currency. We also have certain liabilities, primarily for local operations, including income and transactional taxes, which are denominated in foreign currencies. This subjects us to foreign currency exchange risk. For example, the strengthening of the U.S. dollar relative to the British pound and other currencies may harm our results of operations as the local currency results of our U.K. operations may translate into fewer U.S. dollars. Currency fluctuations could also impact our customers based outside of the U.S., who may closely monitor their costs and reduce their spending budgets on our products and services, which in turn, may adversely affect our business, results of operations and financial condition.
Although we generally use hedging strategies to manage and minimize the impact of foreign currency exchange risk when available, these hedges may be costly and at any given time, only a portion of this risk may be hedged. Accordingly, our exposure to this risk may be substantial and fluctuations in foreign exchange rates could adversely affect our profitability.
The U.K.’s proposed withdrawal from the European Union (E.U.”) could harm our business and financial results.
On June 23, 2016, the U.K. held a referendum in which British voters approved an exit from the E.U., commonly referred to as “Brexit”. On March 29, 2017, the U.K. government initiated the exit process under Article 50 of the Treaty of the European Union, commencing a period of up to two years for the U.K. and the other E.U. member states to negotiate the terms of the withdrawal. Uncertainty over the terms of the U.K’s departure from the E.U. could cause political and economic uncertainty in the U.K. and the rest of Europe, which could harm our business and financial results. A withdrawal could, among other outcomes, disrupt the free movement of goods, services and people between the U.K. and the E.U., undermine bilateral cooperation in key geographic areas and significantly disrupt trade between the U.K. and the E.U. or other nations as the U.K. pursues independent trade relations. These factors pose a risk to the overall U.K. economy and as a result, our operations in the U.K., particularly in our land segment, as well as our global operations, could be adversely impacted.
Finally, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace or replicate. We may incur additional costs and expenses as we adapt to such potentially divergent regulatory frameworks. The effects of Brexit will depend on any agreements the U.K. makes to retain access to E.U. or other markets either during a transitional period or more permanently. Given the lack of comparable precedent, it is unclear what financial, trade and legal implications the withdrawal of the U.K. from the E.U. would have and how such withdrawal would affect us. In addition, Brexit may lead other E.U. member countries to consider referendums regarding their E.U. membership. Adverse consequences concerning Brexit or the E.U. could include deterioration in global economic conditions, instability in global financial markets, political uncertainty, continued volatility in currency exchange rates, or adverse changes in the cross-border agreements currently in place, any of which could have an adverse impact on our financial results in the future.

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Current and proposed derivatives legislation and rulemaking could have a material adverse effect on our business.
The Dodd Frank Wall Street Transparency and Accountability Act of 2010 (the “Dodd-Frank Act”) provides for federal regulation of the over the counter derivative markets both for commodities and securities, and gives the U.S. Commodity Futures Trading Commission (“CFTC”) and the SEC broad authority to regulate such markets and their participants. This includes, among others, derivative transactions linked to crude oil, refined products and natural gas prices. The Dodd-Frank Act and the rules being promulgated thereunder subject certain swap participants to capital and margin requirements and business conduct standards. If we or our derivatives counterparties are subject to additional requirements imposed as a result of the Dodd-Frank Act, this may increase our transaction costs or make it more difficult for us to enter into hedging transactions on favorable terms. Our inability to enter into hedging transactions on favorable terms, or at all, could increase our operating expenses and put us at increased exposure to risks of adverse changes in energy commodities prices. Further, on December 30, 2016, the CFTC re-proposed new position limits rules for public comment, which would limit trading in options, futures, and swaps contracts related to certain agricultural, metal, and energy commodities, including energy commodities in which we currently engage in derivative transactions, and solicited public comment. These rules have not been finalized, and we cannot currently predict whether or when the re-proposed rules will be adopted, in what form the rules will be adopted, or the effect of the final rules, if any, on our businesses. Any such regulations could also subject our derivatives counterparties to limits on commodity positions and thereby have an adverse effect on our ability to hedge risks associated with our business or on the cost of our hedging activity.
In addition, other legislation regulating the use of derivatives that certain foreign jurisdictions have adopted or are in the process of adopting, could have a material adverse effect on our business. One of the most significant pieces of E.U. financial services legislation in recent years, the Markets in Financial Instruments Directive II (“MiFID II”) and the Markets in Financial Instruments Regulation (“MiFIR”), went into effect on January 3, 2018. As a result of the available exemptions from MiFID II licensing, we have experienced minimal disruption in our ability to continue to conduct our business since these regulations took effect in the E.U., although we will continue to evaluate the availability of these exemptions as our business grows or changes in the future. In addition, new rules have been enacted on “position limits,” which places a limit on the number of commodity derivative contracts we can hold at one time that are traded on a “E.U. trading venue,” which includes E.U. Regulated Markets/Exchanges. Although we do not believe these limits pose an immediate threat on our ability to hedge risk or carry out our existing business activities, we will continue to evaluate whether these limits may have any adverse business impact in the future.
Any new (or newly implemented) regulations and international legislation could:
materially increase the cost of our derivative contracts (including through requirements to post collateral, which could adversely affect our cash flows and liquidity, or require us to obtain licenses and subject us directly or indirectly to additional reporting and other requirements);
materially alter the terms of our derivative contracts;
reduce our ability to offer derivative and other price management products to our customers;
require that we limit our derivatives activities to avoid being subject to burdensome requirements and regulations;
reduce the demand for our price risk management services;
reduce the availability of derivatives to protect against risks we encounter;
increase price volatility in the commodities we buy and sell (and derivatives related to those commodities);
affect cash flow and liquidity due to margin calls;
reduce our ability to monetize or restructure our existing commodity price contracts; and
increase our exposure to less creditworthy counterparties.

If the increased cost of derivative contracts is substantial or we reduce or limit our derivatives activities as a result of any such legislation or rules, our profitability and results of operations could be adversely affected. Any of these consequences could have a material adverse effect on us, our financial condition, and our results of operations and cash flows.

Item 1B. Unresolved Staff Comments
None.

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Item 2. Properties
The following table sets forth our principal properties, the majority of which are leased, as of February 7, 2018. We consider all of our properties and facilities to be suitable and adequate for our present needs and do not anticipate that we will experience difficulty in renewing or replacing those leases that expire in 2018 in any material respect.
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
PROPERTIES 
Location
 
Principal Use
 
Lease Expiration
 
 
 
 
 
9800 Northwest 41st Street
Miami, FL 33178, USA
 
Executive, administrative, operations and sales office for corporate, aviation, land and marine segments
 
August 2031
 
 
 
 
 
62 Buckingham Gate
London, United Kingdom SW1E 6AJ
 
Administrative, operations and sales office for aviation, land and marine segments
 
June 2028
 
 
 
 
 
238A Thompson Road #08‑01/10
Novena Square Tower A
Singapore 307684
 
Administrative, operations and sales office for aviation and marine segments
 
March 2020
 
 
 
 
 
Office No. 2003, Swiss Tower
Plot No. Y3, Jumeirah Lakes Towers
Dubai, United Arab Emirates
 
Sales and marketing office for aviation and marine segments
 
March 2022
 
 
 
 
 
Praia do Flamengo, 200, 22nd floor
Rio de Janeiro, Brazil 22210 030
 
Administrative, operations and sales office for aviation, land and marine segments
 
November 2021
 
 
 
 
 
Forum 2, Building N, Level 4, Radial
Santa Ana Belén (Lindoral), Pozos,
Santa Ana San José, Costa Rica
 
Administrative, operations and sales office for aviation and marine segments
 
December 2019
 
 
 
 
 
605 North Highway 169, Suites 1100 & 1200
Plymouth, MN 55441, USA
 
Administrative, operations and sales office for land segment
 
June 2018
 
 
 
 
 
25 Mill Street
Parish, NY 13131, USA
 
Administrative, operations and sales office for aviation segment
 
March 2020
 
 
 
 
 
Strommen 6
9400 Norresundby, Denmark
 
Administrative, operations and sales office for aviation and land segments
 
Month-to-month
 
 
 
 
 
6000 Metcalf Avenue
Overland Park, KS 66202, USA
 
Administrative, operations and sales office for land segment
 
August 2024
 
 
 
 
 
8650 College Boulevard
Overland Park, KS 66210, USA
 
Administrative, operations and sales office for aviation, land and marine segments
 
August 2024
 
 
 
 
 
Causeway End, Brinkworth,
Chippenham SN15 5DN, United Kingdom
 
Administrative, operations and sales office for land segment
 
Owned
 
 
 
 
 
300 Flint Ridge Road
Webster, Texas 77598, USA
 
Administrative, operations and sales office for aviation segment
 
Owned
 
 
 
 
 
Fantoftvegen 38, 5072
Bergen, Norway
 
Administrative, operations and sales office for land segment
 
November 2023
 
 
 
 
 
2320 Milwaukee Way,
Tacoma, Washington 98421, USA
 
Administrative, operations and sales office for land segment
 
June 2026
 
 
 
 
 
4920 Southern Boulevard
Virginia Beach, VA 23462, USA
 
Administrative, operations and sales office for land segment
 
Owned
 
 
 
 
 
1B North Mole Road (C.P. No. 1360)
Gibraltar
 
Administrative, operations and sales office for marine segment
 
May 2021
 
 
 
 
 
The Docks, Falmouth, Cornwall,
TR11 4NR, United Kingdom
 
Administrative, operations and sales office for marine segment
 
February 2037
 
 
 
 
 

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Location
 
Principal Use
 
Lease Expiration
Huskisson Dock No.1
Regent Road
Liverpool, United Kingdom
 
Administrative, operations and sales office for marine segment
 
February 2029
 
 
 
 
 
Lange Kleiweg 28, 8th Floor
Rijswijk, Netherlands 2228
 
Administrative, operations and sales office for aviation, land and marine segments
 
September 2022
 
 
 
 
 

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Item 3. Legal Proceedings 
On July 20, 2016, we were informed that the U.S. Department of Justice (the “DOJ”) is conducting an investigation into the aviation fuel supply industry, including certain activities by us and other industry participants at an airport in Central America. In connection therewith, we were served with formal requests by the DOJ about its activities at that airport and its aviation fuel supply business more broadly. We are cooperating with the investigation.
From time to time, we are under review by the IRS and various other domestic and foreign tax authorities with regards to income tax and indirect tax matters and are involved in various challenges and litigation in a number of countries, including, in particular, U.S., Brazil, Denmark and South Korea, where the amounts under controversy may be material. See Notes 9 and 11 of the accompanying consolidated financial statements for additional details regarding certain tax matters.
We are a party to various claims, complaints and proceedings arising in the ordinary course of our business including, but not limited to, environmental claims, commercial and governmental contract claims, such as property damage, demurrage, personal injury, billing and fuel quality claims, as well as bankruptcy preference claims and administrative claims. We are not currently a party to any such claim, complaint or proceeding that we expect to have a material adverse effect on our business or financial condition. However, any adverse resolution of one or more such claims, complaints or proceedings during a particular reporting period could have a material adverse effect on our consolidated financial statements or disclosures for that period.
Item 4. Mine Safety Disclosures
Not applicable.

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PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol INT. As of December 29, 2017, the closing price of our stock on the NYSE was $28.14. The following table sets forth, for each quarter in 2017 and 2016, the high and low sales prices of our common stock as reported by the NYSE.
 
Price
 
High
 
Low
2017
 
 
 
First quarter
$
47.49

 
$
34.79

Second quarter
38.67

 
34.64

Third quarter
40.16

 
32.28

Fourth quarter
36.64

 
25.80

 
 
 
 
2016
 
 
 
First quarter
$
49.50

 
$
35.13

Second quarter
51.01

 
42.95

Third quarter
49.38

 
44.14

Fourth quarter
47.30

 
38.79

As of February 7, 2018, there were 370 shareholders of record of our common stock.
Cash Dividends
The following table sets forth the amount, the declaration date, record date and payment date for each quarterly cash dividend declared in 2017 and 2016.
 
Per Share Amount
 
Declaration Date
 
Record Date
 
Payment Date
2017
 
 
 
 
 
 
 
First quarter
$
0.0600

 
March 3, 2017
 
March 17, 2017
 
April 7, 2017
Second quarter
0.0600

 
May 25, 2017
 
June 9, 2017
 
July 7, 2017
Third quarter
0.0600

 
October 4, 2017
 
October 16, 2017
 
November 6, 2017
Fourth quarter
0.0600

 
December 1, 2017
 
December 15, 2017
 
January 5, 2018
 
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
 
First quarter
$
0.0600

 
March 3, 2016
 
March 18, 2016
 
April 8, 2016
Second quarter
0.0600

 
May 26, 2016
 
June 10, 2016
 
July 1, 2016
Third quarter
0.0600

 
September 12, 2016
 
September 23, 2016
 
October 12, 2016
Fourth quarter
0.0600

 
November 30, 2016
 
December 16, 2016
 
January 6, 2017
Our Credit Facility and Term Loans restrict the payment of cash dividends to a maximum of the sum of (i) $100.0 million plus (ii) 50% of the cumulative consolidated net income for each fiscal quarter beginning with the fiscal quarter ended March 31, 2016, plus (iii) 100% of the net proceeds of all equity issuances made after October 2013. For additional information regarding our Credit Facility and Term Loans, see Note 8 to the accompanying consolidated financial statements, included herein, and “Liquidity and Capital Resources” in “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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Stock Performance
This graph compares the total shareholder return on our common stock with the total return on the Russell 2000 Index and the S&P Energy Index for the five‑year period from December 31, 2012 through December 31, 2017. The cumulative return includes reinvestment of dividends.

cumtotreturn.jpg

Equity Compensation Plans

The following table summarizes securities authorized for issuance related to outstanding restricted stock units (“RSUs”) and stock‑settled stock appreciation rights (“SSAR Awards”) under our 2016 omnibus plan (the “2016 Plan”) and available for future issuance under our 2016 Plan as of December 31, 2017 (in millions, except weighted average price data), as well as the 2006 omnibus plan, as amended and restated (the “2006 Plan”):

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Plan name or description
(a) Maximum number of securities to be issued upon exercise of outstanding RSUs and SSAR Awards
 
(b) Weighted average exercise price of outstanding RSUs and SSAR Awards(1)
 
(c) Number of securities remaining available for future issuance under equity compensation plan (excluding securities reflected in column (a))
2016 Plan
1.0

 
$
14.68

 
3.4

2006 Plan
1.2

 
$
9.71

 

(1)
Calculated without taking into account shares of common stock subject to the RSUs reported in column (a) and that will become issuable following vesting of such RSUs without any cash consideration or other payment required.
Issuer Purchases of Equity Securities
The following table presents information with respect to repurchases of common stock made by us during the quarterly period ended December 31, 2017 (in thousands, except average price per share):
Period
Total Number of Shares Purchased (1)
 
Average Price Paid Per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
10/1/2017 - 10/31/2017

 
$

 

 
$
100,000

11/1/2017 - 11/30/2017

 

 

 
100,000

12/1/2017 - 12/31/2017

 

 

 
100,000

Total

 
$

 

 
$
100,000

(1)
These amounts include shares purchased as part of our publicly announced programs and shares owned and tendered by employees to satisfy the required withholding taxes related to share-based payment awards, which are not deducted from shares available to be purchased under publicly announced programs.
(2)
In October 2017, our Board of Directors approved a new common stock repurchase program which replaced the remainder of the existing program and authorized the purchase of up to $100.0 million in common stock (the “Repurchase Program”). The Repurchase Program does not require a minimum number of shares of common stock to be purchased, has no expiration date and may be suspended or discontinued at any time. As of December 31, 2017, $100.0 million remains available for purchase under the Repurchase Program. The timing and amount of shares of common stock to be repurchased under the Repurchase Program will depend on market conditions, share price, securities law and other legal requirements and factors.
For information on repurchases of common stock for the first three quarters of 2017, see the corresponding Quarterly Report on Form 10-Q.

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Item 6. Selected Financial Data
The following selected consolidated financial data should be read in conjunction with the consolidated financial statements and related notes thereto and Part II, Item 7 of this report appearing under the caption, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial data and “Risk Factors” included elsewhere in this 2017 10‑K Report. The historical results are not necessarily indicative of the operating results to be expected in the future. All financial information presented has been prepared in U.S. dollars and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(In millions, except earnings and dividends per share data)
 
For the Year ended December 31,
 
2017
(1)(2) 
2016
(3)(4) 
2015
(4)(5) 
2014
(4)(6) 
2013
(4)(7) 
Revenue
$
33,695.5

 
$
27,015.8

 
$
30,381.4

 
$
43,391.8

 
$
41,559.9

 
Cost of revenue
32,763.3

 
26,116.8

 
29,520.4

 
42,572.7

 
40,807.8

 
Gross profit
932.2

 
899.0

 
861.0

 
819.1

 
752.2

 
Operating expenses (8)
886.6

 
710.1

 
615.3

 
542.4

 
488.5

 
Income from operations
45.6

 
188.9

 
245.7

 
276.7

 
263.7

 
Non-operating expenses, net (9)
(66.7
)
 
(46.7
)
 
(27.9
)
 
(1.9
)
 
(15.4
)
 
Income (loss) before income taxes
(21.1
)
 
142.1

 
217.7

 
274.8

 
248.3

 
Provision for income taxes
149.2

 
15.7

 
47.2

 
53.6

 
46.0

 
Net income (loss) including noncontrolling interest
(170.3
)
 
126.4

 
170.5

 
221.1

 
202.3

 
Net income (loss) attributable to noncontrolling interest
(0.1
)
 

 
(3.9
)
 
(3.3
)
 
4.4

 
Net income (loss) attributable to World Fuel (10)
$
(170.2
)
 
$
126.5

 
$
174.5

 
$
224.5

 
$
198.0

 
Basic earnings (loss) per common share (10)
$
(2.50
)
 
$
1.82

 
$
2.49

 
$
3.17

 
$
2.78

 
Basic weighted average common shares
68.1

 
69.3

 
70.2

 
70.8

 
71.2

 
Diluted earnings (loss) per common share (10)
$
(2.50
)
 
$
1.81

 
$
2.47

 
$
3.15

 
$
2.76

 
Diluted weighted average common shares
68.1

 
69.8

 
70.7

 
71.3

 
71.8

 
Cash dividends declared per common share
$
0.24

 
$
0.24

 
$
0.24

 
$
0.15

 
$
0.15

 
 
As of December 31,
 
2017
(1)(2) 
2016
(3)(4) 
2015
(4)(5) 
2014
(4)(6) 
2013
(4)(7) 
Cash and cash equivalents
$
372.3

 
$
698.6

 
$
582.5

 
$
302.3

 
$
292.1

 
Accounts receivable, net
2,705.6

 
2,344.0

 
1,812.6

 
2,308.2

 
2,538.6

 
Total current assets
3,940.4

 
3,836.6

 
3,246.0

 
3,675.2

 
3,815.5

 
Total assets
5,587.8

 
5,412.6

 
4,525.3

 
4,878.1

 
4,735.2

 
Total current liabilities
2,718.6

 
2,182.7

 
1,754.2

 
2,241.9

 
2,518.9

 
Total long-term liabilities
1,131.3

 
1,290.1

 
865.3

 
776.8

 
545.9

 
Total equity (10)
1,738.0

 
1,940.0

 
1,905.9

 
1,859.4

 
1,670.5

 

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(1)
In 2017, we acquired the assets of certain ExxonMobil affiliates in Italy, Germany, Australia and New Zealand and completed five 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.
(2)
Operating expenses for 2017 includes goodwill and other impairments of $91.9 million and restructuring related charges of $59.6 million. Provision for income taxes for 2017 includes a $143.7 million expense related to the one-time transition tax on accumulated foreign earnings recorded as a result of the Tax Act.
(3)
In 2016, we acquired the assets of certain ExxonMobil affiliates in Canada and two airports in France on November 1st, and the U.K. and one airport in France on December 1st, as well as all of the outstanding stock of PAPCO, Inc. (“PAPCO”) and Associated Petroleum Products, Inc. (“APP”) on July 1st. We also completed six 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)
Certain prior period amounts have been revised to reflect the impact of adjustments made to our provision for income taxes.
(5)
In 2015, we acquired all the outstanding stock of Pester Marketing Company (“Pester”) on September 1st and completed four 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.
(6)
In 2014, we acquired i) all of the outstanding stock of Watson Petroleum Limited (now known as WFL (UK) Limited) (“Watson Petroleum”) on March 7th, ii) all of the outstanding stock of Colt International, L.L.C. (“Colt”) on July 29th, and iii) completed three 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.
(7)
In 2013, we completed three 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.
(8)
Included in operating expenses are total non‑cash compensation costs associated with share‑based payment awards of $21.2 million for 2017, $19.3 million for 2016, $17.0 million for 2015, $15.8 million for 2014, and $16.7 million for 2013 and intangible amortization expense of $41.9 million for 2017, $39.7 million for 2016, $30.4 million for 2015, $27.0 million for 2014, and $22.6 million for 2013.
(9)
Included in non-operating income (expenses), net for 2014 is a gain of $18.1 million related to the sale of our crude oil joint venture interests. The after-tax gain, net of certain related operating expenses was $9.9 million, or $0.14 per basic and diluted share.
(10)
In 2017, we repurchased 1.7 million shares of common stock for an aggregate value of $61.9 million. In 2016, we repurchased 1.0 million shares of common stock for an aggregate value of $41.2 million. In 2015, we repurchased 1.6 million shares of our common stock for an aggregate value of $70.5 million. In 2014, we repurchased 0.2 million shares of our common stock for an aggregate value of $10.0 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 2017 10‑K Report. The following discussion may contain forward‑looking statements, and our actual results may differ materially 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” and under “Forward-Looking Statements.”

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Business Overview

We are a leading global fuel services company, principally engaged in the distribution of fuel and related products and services in the aviation, marine and land transportation industries. In recent years, we have expanded our product and service offerings to include energy advisory services and supply fulfillment with respect to natural gas and power and transaction and payment management solutions to commercial and industrial customers. Our intention is to become a leading global energy management company offering a full suite of energy advisory, management and fulfillment services and technology solutions across the energy product spectrum. We also seek to become a leading transaction and payment management company, offering payment management solutions to commercial and industrial customers, principally in the aviation, land and marine transportation industries.
The overall aviation market remains strong, reflecting healthy airline financial performance and strong overall demand. Our aviation segment has benefited from our increased logistics capability and expanded footprint from the acquisition of international aviation fueling operations from various ExxonMobil affiliates, which has facilitated our expansion into additional airport locations. The aviation segment has also benefited from increased sales to government customers, which include the U.S. Defense Logistics Agency, the North Atlantic Treaty Organization (NATO) and other government and military customers. Sales to government customers account for a material portion of our aviation segment's profitability. We expect our government-related activity to remain strong, although we believe the related profit contribution will decrease in 2018 as a result of compressed margins associated with contract renewals. Sales to government customers are driven by global events and military-related activities and can therefore significantly change from period to period and materially impact our results of operations.

Our land segment has grown primarily through acquisitions as we seek to build out our land fuel distribution capabilities, primarily in the U.S. and U.K. Recently, our land segment has been negatively impacted by lower profitability from our supply and trading activities as a result of market conditions, specifically within the U.S., which we do not expect will improve in the near future. In addition, our operating results in the U.S. and U.K. in recent years have been adversely impacted by unseasonably warm winter weather conditions. In contrast, our land segment has benefited from sales to government customers and we expect such activity to remain strong in the near term. We are focused on realizing the synergies associated with our acquisitions, implementing a single common technology platform and driving greater leverage and ratability in our operating model.

Over the course of 2017, our marine segment was adversely impacted by the weak conditions within the global shipping and offshore oil exploration markets and as a result, our marine segment experienced lower overall volumes in our core resale business as compared to historical levels. We also experienced lower demand for our price risk management products as a result of low fuel prices and limited market volatility. Due to growing competitive pressures in maritime markets, including the prolonged decline of maritime shipping volumes along with lower demand for price risk management products and our decision to exit our marine business in certain international markets, we expect lower than previously anticipated sales and operating margins.

We continue to rationalize our operating model to gain efficiencies through various initiatives that are ongoing throughout the company, including moving to cloud-based solutions. Furthermore, during the fourth quarter, we began an enterprise-wide restructuring plan that is designed to streamline the organization, and reallocate resources to better align our organizational structure and costs with our strategy, ultimately to improve operating efficiencies. The restructuring program involves reviewing non-core businesses and investments, our organizational structure, and expected commercial opportunities in the markets we serve. We will also consider our existing technology platforms in connection with our ongoing enterprise resource planning platform upgrade, specifically with an aim to more fully integrate recent acquisitions and increase associated profit contribution. While these activities are ongoing, we expect the majority of these activities to be completed over the course of 2018.


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Reportable Segments

We operate in three reportable segments consisting of aviation, land and marine. 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 the U.S. and foreign governments as well as intergovernmental organizations. In our land segment, we offer fuel, lubricants, power and natural gas solutions through Kinect, our global energy management services platform, and related products and services to customers including petroleum distributors operating in the land transportation market, retail petroleum operators, and industrial, commercial, residential and government customers. Our marine segment product and service offerings include fuel, lubricants and related products and services to a broad base of customers, including international container and tanker fleets, commercial cruise lines, yachts and time charter operators, offshore rig owners and operators, the U.S. and foreign governments as well as other fuel suppliers. Within each of our segments we may enter into derivative contracts to mitigate the risk of market price fluctuations and also to offer our customers fuel pricing alternatives to meet their needs.
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 sales 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. Profitability in our segments also depends on our operating expenses, which may be materially affected to the extent that we are required to provide for potential bad debt.
Corporate expenses are allocated to each segment based on usage, where possible, or on other factors according to the nature of the activity. We evaluate and manage our business segments using the performance measurement of income from operations.
The results of operations include the results of the fueling operations acquired from certain ExxonMobil affiliates in during 2017.
Selected financial information with respect to our business segments is provided in Note 13 to the accompanying consolidated financial statements included in this 2017 10‑K Report.
Results of Operations

2017 compared to 2016
Revenue. Our revenue for 2017 was $33.7 billion, an increase of $6.7 billion, or 24.7%, as compared to 2016. Our revenue during these periods was attributable to the following segments (in millions):
 
2017
 
2016
 
$ Change
Aviation segment
$
14,538.2

 
$
10,914.4

 
$
3,623.9

Land segment
10,958.0

 
8,918.8

 
2,039.1

Marine segment
8,199.3

 
7,182.5

 
1,016.7

Total
$
33,695.5

 
$
27,015.8

 
$
6,679.7

Revenues in our aviation segment were $14.5 billion for the year ended 2017, an increase of $3.6 billion, or 33.2% as compared to 2016. The increase in aviation revenues was driven by higher average jet fuel prices per gallon sold during the year ended 2017, where the average price per gallon sold was $1.83, as compared to $1.53 in 2016. The overall increase in revenue was also driven by higher volumes from foreign military-related activity and our international fueling operations, where total volumes for the year ended 2017 were 7.9 billion gallons, an increase of 11.4%, as compared to 2016.
Revenues in our land segment were $11.0 billion for the year ended 2017, an increase of $2.0 billion, or 22.9%, as compared to 2016. The increase in land revenues primarily resulted from a higher average fuel price per gallon sold during the year ended 2017, where the average price per gallon sold was $1.84, as compared to $1.66 in 2016. The increase was also due to an increase in volumes from acquired businesses, where volumes for the year ended 2017 were 5.9 billion gallons, an increase of 10.7%, as compared to 2016.

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Revenues in our marine segment were $8.2 billion for the year ended 2017, an increase of $1.0 billion, or 14.2%, as compared to 2016. The increase was driven primarily by a 34.8% increase in the average price per metric ton sold, to $308.88 for the year ended 2017, as compared to $229.2 in 2016. Volumes in our marine segment for the year ended 2017 were 26.5 million metric tons, a decrease of 4.8 million metric tons or 15.3%, as compared to 2016, driven principally by lower volumes in Asia.
Gross Profit. Our gross profit for 2017 was $932.2 million, an increase of $33.3 million, or 3.7%, as compared to 2016. Our gross profit was attributable to the following segments (in millions):
 
2017
 
2016
 
$ Change
Aviation segment
$
440.5

 
$
401.0

 
$
39.5

Land segment
365.8

 
348.5

 
17.3

Marine segment
126.0

 
149.5

 
(23.5
)
Total
$
932.2

 
$
899.0

 
$
33.3

Our aviation segment gross profit for the year ended 2017 was $440.5 million, an increase of $39.5 million, or 9.9%, as compared to 2016. The increase in aviation gross profit was due to increased activity from our government-related business, including certain spot government supply opportunities and increased volumes and profitability from our international fueling operations. These increases were partially offset by lower gross profit per gallon sold in our physical inventory business, as a result of unfavorable jet fuel price movements.
Our land segment gross profit for the year ended 2017 was $365.8 million, an increase of $17.3 million, or 5.0%, as compared to 2016. The increase in land segment gross profit was primarily driven by the benefit derived from recently acquired businesses, and were partially offset by continued lower profits from our supply and trading activities in North America.
Our marine segment gross profit for the year ended 2017 was $126.0 million, a decrease of $23.5 million, or 15.7%, as compared to 2016. Over the course of 2017, the marine segment continued to be adversely impacted by the prolonged weakness in the overall maritime industry, lower overall volumes and profitability in our core resale business, primarily in the Asia Pacific region, and our decision to exit certain markets, combined with further declines in profits from the sale of price risk management products globally.
Operating Expenses. Total operating expenses for 2017 were $886.6 million, an increase of $176.5 million, or 24.9%, as compared to 2016. The following table sets forth our expense categories (in millions):
 
2017
 
2016
 
$ Change
Compensation and employee benefits
$
428.2

 
$
413.3

 
$
14.9

General and administrative
306.9

 
296.8

 
10.1

Goodwill and other impairments
91.9

 

 
91.9

Restructuring charges
59.6

 

 
59.6

Total
$
886.6

 
$
710.1

 
$
176.5

The $14.9 million increase in compensation and employee benefits and the $10.1 million increase in general and administrative expenses was principally due to the inclusion of expenses of acquired businesses.
Goodwill and other impairments of $91.9 million were primarily attributable to the $72.3 million impairment of goodwill in our marine segment, $7.9 million associated with intangible assets, primarily customer relationships in both the marine and land segments, and certain impairments of property and equipment within our marine segment. The restructuring charges of $59.6 million were comprised primarily of costs associated with exiting two business activities, our railcar business and an underperforming capital-intensive distributor program.

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Income (loss) from Operations. Our income from operations for 2017 was $45.6 million, a decrease of $143.3 million, or 75.9%, as compared to 2016. Income from operations during these periods was attributable to the following segments (in millions):
 
2017
 
2016
 
$ Change
Aviation segment
$
192.9

 
$
160.5

 
$
32.4

Land segment
(7.9
)
 
70.8

 
(78.8
)
Marine segment
(57.8
)
 
30.2

 
(88.1
)
 
127.2

 
261.5

 
(134.4
)
Corporate overhead - unallocated
81.6

 
72.7

 
8.9

Total
$
45.6

 
$
188.9

 
$
(143.3
)
Our income from operations, including unallocated corporate overhead, for the year ended 2017 was $45.6 million, a decrease of $143.3 million as compared to 2016. The decline was primarily attributable to our marine and land segments, specifically as a result of the impairment of goodwill, intangible assets and the restructuring charges recorded in 2017. In our marine segment, loss from operations for the year ended 2017 was $57.8 million, a decrease of $88.1 million as compared to 2016. Our marine segment continued to be adversely impacted by the prolonged weakness in the overall maritime industry. Limited fuel price volatility continued to result in decreased demand for our price risk management offerings. The lower fuel price environment resulted in lower overall unit margins in 2017 as compared to 2016. In our land segment, loss from operations for the year ended 2017 was $7.9 million, a decrease of $78.8 million as compared to 2016. Our land segment continued to be adversely impacted by lower profits from our supply and trading activities in North America, as well as increased acquisition-related costs that were directly attributable to our acquired businesses. The declines in our income from operations in our marine and land segments were partially offset by an increase in our aviation segment of $32.4 million, or 20.2%, where our aviation segment benefited from increased profitability from our government-related business, and increased volumes and profitability from our international fueling operations.
Non-Operating Expenses, net. We had non-operating expenses, net of $66.7 million and $46.7 million, for the year ended 2017 and 2016, respectively, driven principally by higher average borrowings, fees associated with our receivable purchase program and interest rates.
Income Taxes. For the year ended 2017, our effective income tax rate was (707.1)% and our income tax provision was $149.2 million, as compared to an effective income tax rate of 11.0% and an income tax provision of $15.7 million in 2016. The higher effective income tax rate for 2017, as compared to 2016, resulted principally from the effects of the Tax Act's $143.7 million one-time transition tax on historical accumulated foreign earnings. Without the one-time tax charge, the effective tax rate for 2017 would have been (25.9)%.
As a result of the Tax Act, we recorded an income tax charge of $157.4 million, payable over eight years, which includes the $143.7 million one-time transition tax. As we intend to use our U.S. net operating losses, we expect to only pay approximately $100.0 million over the eight-year period.

Net Loss and Diluted Earnings per Common Share. Our net loss for the year ended 2017 was $170.2 million as compared to net income of $126.5 million in 2016. Diluted loss per common share for the year ended 2017 was $2.50 per common share as compared to diluted earnings per common share of $1.81 in 2016.
2016 compared to 2015
Revenue. Our revenue for 2016 was $27.0 billion, a decrease of $3.4 billion, or 11.1%, as compared to 2015. Our revenue during these periods was attributable to the following segments (in millions):
 
2016
 
2015
 
$ Change
Aviation segment
$
10,914.4

 
$
11,739.8

 
$
(825.4
)
Land segment
8,918.8

 
9,274.3

 
(355.5
)
Marine segment
7,182.5

 
9,367.2

 
(2,184.7
)
Total
$
27,015.8

 
$
30,381.4

 
$
(3,365.6
)

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Revenues in our aviation segment were $10.9 billion for the year ended 2016, a decrease of $0.8 billion, or 7.0% as compared to 2015. The decline in aviation revenues was driven by lower average jet fuel prices per gallon sold during the year ended 2016, where the average price per gallon sold was $1.53, as compared to $1.85 in 2015. The overall decline attributable to jet fuel prices was partially offset by increased volume, where volumes for the year ended 2016 were 7.1 billion gallons, an increase of 12.4%, as compared to 2015.
Revenues in our land segment were $8.9 billion for the year ended 2016, a decrease of $0.4 billion, or 3.8%, as compared to 2015. The decline in land revenues primarily resulted from a lower average fuel price per gallon sold during the year ended 2016, where the average price per gallon sold was $1.66, as compared to $1.88 in 2015.  The overall decline was partially offset by an increase in volumes from new customers and acquired businesses, where volumes for the year ended 2016 were 5.4 billion gallons, an increase of $433.2 million, or 8.8%, as compared to 2015.
Revenues in our marine segment were $7.2 billion for the year ended 2016, a decrease of $2.2 billion, or 23.3%, as compared to 2015. The decrease was driven primarily by a 20.1% decline in the average price per metric ton sold, to $229.17 for the year ended 2016, as compared to $286.9 in 2015. Volumes in our marine segment for the year ended 2016 were 31.4 million metric tons, a decrease of 1.3 million metric tons or 4.0%, as compared to 2015.
Gross Profit. Our gross profit for 2016 was $899.0 million, an increase of $38.0 million, or 4.4%, as compared to 2015. Our gross profit during these periods was attributable to the following segments (in millions):
 
2016
 
2015
 
$ Change
Aviation segment
$
401.0

 
$
361.9

 
$
39.1

Land segment
348.5

 
309.5

 
39.0

Marine segment
149.5

 
189.6

 
(40.1
)
Total
$
899.0

 
$
861.0

 
$
38.0

Our aviation segment gross profit for the year ended 2016 was $401.0 million, an increase of $39.1 million, or 10.8%, as compared to 2015. The increase in aviation gross profit was due to increased volume attributable to the core resale business in North America and Europe, as well as increased activity in our U.S. and foreign military-related businesses.
Our land segment gross profit for the year ended 2016 was $348.5 million, an increase of $39.0 million, or 12.6%, as compared to 2015. The increase in land segment gross profit was primarily driven by recently acquired businesses, including PAPCO, APP and acquisitions in Kinect, our global energy management services business. Increases in our land segment were partially offset by lower demand in the U.K. due to unseasonably warm weather conditions.
Our marine segment gross profit for the year ended 2016 was $149.5 million, a decrease of $40.1 million, or 21.1%, as compared to 2015. The marine segment continued to be adversely impacted by the prolonged weakness in the overall maritime industry. The lower fuel price environment combined with lower price volatility, led to decreased demand for our price risk management offerings, which contributed to lower overall unit margins.
Operating Expenses. Total operating expenses for 2016 were $710.1 million, an increase of $94.8 million, or 15.4%, as compared to 2015. The following table sets forth our expense categories (in millions):
 
2016
 
2015
 
$ Change
Compensation and employee benefits
$
413.3

 
$
365.8

 
$
47.5

Provision for bad debt
15.4

 
7.5

 
8.0

General and administrative
281.4

 
242.1

 
39.3

Total
$
710.1

 
$
615.3

 
$
94.8

Of the $47.5 million increase in compensation and employee benefits, $29.4 million was due to expenses related to acquired businesses and $18.1 million was due to compensation for new hires to support our growing global business. The $39.3 million increase in general and administrative expenses was principally due to expenses related to acquired businesses.

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Income from Operations. Our income from operations for 2016 was $188.9 million, a decrease of $56.8 million, or 23.1%, as compared to 2015. Income from operations during these periods was attributable to the following segments (in millions):
 
2016
 
2015
 
$ Change
Aviation segment
$
160.5

 
$
132.2

 
$
28.3

Land segment
70.8

 
101.4

 
(30.6
)
Marine segment
30.2

 
73.0

 
(42.7
)
 
261.5

 
306.5

 
(45.0
)
Corporate overhead - unallocated
72.7

 
60.9

 
11.8

Total
$
188.9

 
$
245.7

 
$
(56.8
)
Our income from operations, including unallocated corporate overhead, for the year ended 2016 was $188.9 million, a decrease of $56.8 million, or 23.1%, as compared to 2015.  The decline was attributable to our marine segment and our land segment. In our marine segment, income from operations for the year ended 2016 was $30.2 million, a decrease of $42.7 million, or 58.6%, as compared to 2015. Our marine segment continued to be adversely impacted by the prolonged weakness in the overall maritime industry. The lower fuel price environment, combined with lower price volatility and to a lesser extent, increased competition, led to decreased demand for our price risk management offerings and lower overall unit margins in 2016 as compared to 2015. In addition, certain large marine customers experienced financial challenges, which created disruption and resulted in lower sales to such customers. In our land segment, income from operations for the year ended 2016 was $70.8 million, a decrease of $30.6 million, or 30.1% as compared to 2015 due to the higher compensation expenses and increased amortization expenses related to acquired businesses. The declines in our income from operations in our marine and land segments were partially offset by increases in our aviation segment of $28.3 million, or 21.4%, where our aviation segment benefited from increased volume attributable to our core resale business in North America and Europe, and increased activity in our U.S. and foreign military-related businesses.
Non-Operating Expenses, net. We had non-operating expenses, net of $46.7 million and $27.9 million, for the year ended 2016 and 2015, respectively. Increased debt costs of $8.8 million resulted from higher average borrowings in 2016 as compared to 2015. Also, in connection with the December 2016 bankruptcy filing of our former joint venture partner, we wrote off approximately $7.5 million of outstanding amounts owed to us, during the three months ended December 31, 2016. These expenses were offset by a $4.4 million positive change related to foreign currency exchange during 2016 as compared to 2015.
Income Taxes. For the year ended 2016, our effective income tax rate was 11.0% and our income tax provision was $15.7 million, as compared to an effective income tax rate of 21.7% and an income tax provision of $47.2 million in 2015. The lower effective income tax rate for 2016, as compared to 2015, resulted principally from differences in the results of our subsidiaries in tax jurisdictions with different income tax rates.
Net Income and Diluted Earnings per Common Share. Our net income for the year ended 2016 was $126.5 million, a decrease of $48.0 million, or 27.5%, as compared to 2015. Diluted earnings per common share for the year ended 2016 was $1.81 per common share, a decrease of $0.66 per common share, or 26.7%, as compared to 2015.
Liquidity and Capital Resources
Cash Flows
The following table reflects the major categories of cash flows for 2017, 2016 and 2015. For additional details, please see the consolidated statements of cash flows in the consolidated financial statements.
 
2017
 
2016
 
2015
Net cash provided by operating activities
$
205.2

 
$
205.2

 
$
447.5

Net cash used in investing activities
(180.1
)
 
(428.5
)
 
(144.8
)
Net cash provided by financing activities
(361.6
)
 
340.9

 
(17.0
)

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2017 compared to 2016
Operating Activities. Net cash provided by operating activities was $205.2 million in each 2016 and 2017. Cash flows related to cash collateral with financial counterparties decreased $175.9 million as a result of reduced hedging activity. This change was offset by increased cash flows from net accounts receivable and accounts payable balances, which were $168.0 million higher primarily as a result of higher fuel prices during 2017, as compared to 2016. Operating cash flow impact of the year over year net income decrease of $296.7 million was primarily offset by increased income taxes payable and deferred income tax liabilities as a result of the Tax Act, including the one-time transition tax on accumulated foreign earnings recorded in 2017 and the non-cash operating expenses related to the goodwill and other impairment charges recorded in 2017.
Investing Activities. For 2017, net cash used in investing activities was $180.1 million as compared to $428.5 million for 2016. The $248.4 million decrease in cash used in investing activities was principally due to a decrease in the cash used for the acquisition of businesses in 2017 as compared to 2016.
Financing Activities. For 2017, net cash used in financing activities was $361.6 million as compared to $340.9 million net cash provided by financing activities for 2016. The $702.5 million change was principally due to a $684.7 million decrease in net borrowing under our credit facility in 2017 as compared to 2016. This reduction in borrowing was facilitated by the ability to use foreign cash without incurring additional U.S. tax costs as a result of the recently enacted Tax Act. Additionally, cash used for common stock repurchases increased $20.8 million in 2017 as compared to 2016.
2016 compared to 2015
Operating Activities. For 2016, net cash provided by operating activities was $205.2 million as compared to $447.5 million for 2015. The $242.2 million decrease in operating cash flows was primarily due to year-over-year changes in assets and liabilities, net of acquisitions. Cash flows from changes in inventory resulted in a cash use of $130.9 million in 2016 as compared to 2015, primarily as a result of additional inventory in support of overall volume increases, specifically in our aviation and land segments. Additionally, cash flows from net accounts receivable and accounts payable balances, decreased $86.9 million primarily to fund the working capital needs of the aviation fueling business acquired. In 2016, changes in short-term derivative assets provided cash of 163.7 million as compared to $81.5 million in 2015. This $82.3 million positive cash flow change was offset by a $43.3 million negative cash flow change in short-term derivative liabilities, reported within accrued expenses and other current liabilities, both of which primarily related to a decline in fuel prices.
Investing Activities. For 2016, net cash used in investing activities was $428.5 million as compared to $144.8 million for 2015. The $283.7 million increase in cash used in investing activities was principally due to a increase in the cash used for the acquisition of businesses in 2016 as compared to 2015.
Financing Activities. For 2016, net cash provided by financing activities was $340.9 million as compared to net cash used in financing activities of $17.0 million for 2015. The $357.9 million change was principally due to a $328.4 million increase in net borrowing under our credit facility in 2016 as compared to 2015.
Other Liquidity Measures
Cash and Cash Equivalents. As of December 31, 2017 and 2016, we had cash and cash equivalents of $372.3 million and $698.6 million, respectively. Our primary uses of cash and cash equivalents are to make strategic investments, primarily acquisitions, and to purchase inventory. We are provided unsecured trade credit by nearly all of our suppliers for our fuel purchases; however, a small number of suppliers require us to either prepay or provide a letter of credit. Increases in oil prices can negatively affect liquidity by increasing the amount of cash needed to fund fuel purchases as well as reducing the amount of fuel which we can purchase on an unsecured basis from our suppliers.
Credit Facility and Term Loans. As of December 31, 2017, our Credit Facility permitted us to borrow up to $1.26 billion, with a sublimit of $400.0 million for the issuance of letters of credit and bankers' acceptances. We had outstanding borrowings under our Credit Facility totaling $60.0 million as of December 31, 2017 compared to $325.2 million as of December 31, 2016. Our issued letters of credit under the Credit Facility totaled $8.6 million as of December 31, 2017 compared to $8.3 million as of December 31, 2016. We also had $835.8 million in Term Loans outstanding as of December 31, 2017 compared to $840.0 million as of December 31, 2016. As of December 31, 2017, the unused portion of our Credit Facility was $1,191.4 million compared to $926.5 million, as of December 31, 2016. Borrowings under our Credit Facility and Term Loans related to base rate loans or Eurodollar rate loans bear floating interest rates plus applicable margins. As of December 31, 2017, the applicable margins for base rate loans and Eurodollar rate loans were 1.50% and 2.50%, respectively. Letters of credit issued under our Credit Facility are subject to letter of

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credit fees of 0.25% as of December 31, 2017, and the unused portion of our Credit Facility is subject to commitment fees of 0.35% as of December 31, 2017.
On January 30, 2018, we amended our Credit Facility and elected to prepay $300.0 million of our outstanding Term Loans and decrease the borrowing capacity of our Credit Facility to approximately $1.16 billion. The Credit Facility continues to have a sublimit of $400.0 million for the issuance of letters of credit and bankers' acceptances and we have the right to request increases in available borrowings up to an additional $200.0 million, subject to the satisfaction of certain conditions. The Credit Facility matures in October 2021.
Our liquidity, consisting of cash and cash equivalents and availability under the Credit Facility, fluctuates based on a number of factors, including the timing of receipts from our customers and payments to our suppliers as well as commodity prices. Availability under our Credit Facility is principally limited by the ratio of adjusted total debt to adjusted EBITDA, as defined in the agreement, which limits the total amount of indebtedness we may incur to not more than 3.5 to 1. Accordingly, our availability under the Credit Facility may fluctuate from period to period.
Our Credit Facility and our Term Loans contain certain financial and other covenants with which we are required to comply. Our failure to comply with the covenants contained in our Credit Facility and our Term Loans could result in an event of default. An event of default, if not cured or waived, would permit acceleration of any outstanding indebtedness under the Credit Facility and our Term Loans, trigger cross‑defaults under certain other agreements to which we are a party and impair our ability to obtain working capital advances and issue letters of credit, which would have a material adverse effect on our business, financial condition, results of operations and cash flows. As of December 31, 2017, we were in compliance with all financial and other covenants contained in our Credit Facility and our Term Loans.
Other Credit Lines and Receivables Purchase Agreements. Additionally, we have other uncommitted credit lines primarily for the issuance of letters of credit, bank guarantees and bankers’ acceptances. These credit lines are renewable on an annual basis and are subject to fees at market rates. As of December 31, 2017 and December 31, 2016, our outstanding letters of credit and bank guarantees under these credit lines totaled $272.0 million and $176.5 million, respectively. We also have Receivables Purchase Agreements (“RPAs”) that allow for the sale of our accounts receivable. We had sold accounts receivable of $377.3 million and $235.5 million under the RPAs, as of December 31, 2017 and 2016, respectively.
Short-Term Debt. As of December 31, 2017, our short-term debt of $25.6 million primarily represents the current maturities (within the next twelve months) of Term Loan borrowings, certain promissory notes related to acquisitions and capital lease obligations.
ERP. We previously committed to undertake a multi-year project designed to drive greater improvement in operating efficiencies and optimize scalability, particularly when integrating future acquisitions. We planned to accomplish this in part by a global design and deployment of an upgrade to our existing ERP platform. We made certain provider determinations and completed design phases of the upgrade, and the overall costs incurred to date have not been material. Our digital transformation is predicated on bringing agility to business teams and driving improved operational performance through technology solutions. In connection with our recently announced restructuring plan, the organizational structure will be assessed and the ultimate solutions deployed by us will be geared towards facilitating an optimized and collaborative workforce, coupled with an exceptional experience to our customers and suppliers. These restructuring activities may have a material impact on our timing and overall expected cost of the project. If we fail to successfully implement the upgrade to our existing ERP platform, or other technology platforms we decide upon, or should we experience material delays, or fail to properly manage the project, our ability to grow our business could be adversely affected. Estimating the expected expenditures related to these activities is highly complex and is subject to variables that can materially change our costs. Should the actual costs exceed our estimates, our liquidity and results of operations could be adversely affected.

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Table of Contents

We believe that our cash and cash equivalents as of December 31, 2017 and available funds from our Credit Facility, together with cash flows generated by operations, remain sufficient to fund our working capital and capital expenditure requirements for at least the next twelve months. In addition, to further enhance our liquidity profile, we may choose to raise additional funds which may or may not be needed for additional working capital, capital expenditures or other strategic investments. Our opinions concerning liquidity are based on currently available information. To the extent this information proves to be inaccurate, or if circumstances change, future availability of trade credit or other sources of financing may be reduced and our liquidity would be adversely affected. Factors that may affect the availability of trade credit or other forms of financing include our financial performance (as measured by various factors, including cash provided by operating activities), the state of worldwide credit markets, and our levels of outstanding debt. Depending on the severity and direct impact of these factors on us, financing may be limited or unavailable on terms favorable to us.
Contractual Obligations and Off‑Balance Sheet Arrangements
Our contractual obligations and off‑balance sheet arrangements are set forth below. For additional information on any of the following and other contractual obligations and off‑balance sheet arrangements, see Notes 8 and 9 in the notes to the consolidated financial statements in Item 15 of this 2017 10‑K Report.
Contractual Obligations
Debt and Interest Obligations. These obligations include principal and interest payments on fixed‑rate and variable‑rate, fixed‑term debt based on the expected payment dates.
Other Obligations. These obligations primarily consist of deferred compensation arrangements.
Unrecognized Income Tax Liabilities. As of December 31, 2017, our gross liabilities for unrecognized income tax benefits (“Unrecognized Tax Liabilities”), including penalties and interest, were $72.6 million. The timing of any settlement of our Unrecognized Tax Liabilities with the respective taxing authority cannot be reasonably estimated.
As of December 31, 2017, our contractual obligations were as follows (in millions):
 
Total
 
< 1 year
 
1-3 years
 
3-5 years
 
> 5 years
Debt and interest obligations
$
1,011.0

 
$
51.8

 
$
147.2

 
$
809.9

 
$
2.0

Operating lease obligations
165.2

 
39.7

 
56.7

 
36.4

 
32.4

Employment agreement obligations
0.9

 
0.9

 

 

 

Derivatives obligations
64.2

 
57.6

 
6.7

 

 

Purchase commitment obligations
516.4

 
502.2

 
14.2

 

 

Other obligations
20.9

 
10.2

 
9.0

 
1.3

 
0.5

Total
$
1,842.8

 
$
719.9

 
$
240.4

 
$
847.6

 
$
34.9

Additionally, we have certain purchase contracts, that run through 2026, under which we agreed to purchase annually between 1.72 million barrels and 2.00 million barrels of aviation fuel at future market prices.
Off-Balance Sheet Arrangements
Letters of Credit and Bank Guarantees. In the normal course of business, we are required to provide letters of credit to certain suppliers. A majority of these letters of credit expire within one year from their issuance, and expired letters of credit are renewed as needed.
As of December 31, 2017, we had issued letters of credit and bank guarantees totaling $280.6 million under our Credit Facility and other uncommitted credit lines. For additional information on our Credit Facility and other credit lines, see the discussion in “Liquidity and Capital Resources” above.
Surety Bonds. In the normal course of business, we are required to post bid, performance and other surety-related bonds. The majority of the surety bonds posted relate to our aviation and land segments. We had outstanding bonds that were executed in order to satisfy various security requirements of $44.6 million as of December 31, 2017.

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Table of Contents

Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements included elsewhere in this 2017 10‑K Report, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to unbilled revenue and related costs of sales, bad debt, goodwill and identifiable intangible assets, certain accrued liabilities, and income taxes. We base our estimates on historical experience and on other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We have identified the policies below as critical to our business operations and the understanding of our results of operations. For a detailed discussion on the application of these and other significant accounting policies, see Note 1 to the accompanying consolidated financial statements included in this 2017 10-K Report.
Accounts Receivable and Allowance for Bad Debt
Our accounts receivables credit terms are generally 30-60 days. Accounts receivable balances that are not paid within the terms of the sales agreement are generally subject to finance fees, based on the outstanding balance. Credit extension, monitoring and collection are performed for each of our business segments. Each business segment has a credit function that is responsible for establishing credit limits and approving limits above previously approved amounts, and managing the overall quality of the credit portfolio. We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer’s current creditworthiness, as determined by our review of our customer’s credit information. We extend credit on an unsecured basis to most of our customers. Accounts receivable are deemed past due based on contractual terms agreed to with our customers. Although we analyze customers’ payment history and creditworthiness, we cannot predict with certainty that the customers to whom we extend credit will be able to remit payments on a timely basis, or at all. Because we extend credit on an unsecured basis to most of our customers, there is a possibility that any accounts receivable not collected will ultimately need to be written off. Write-offs for the year ended December 31, 2017 did not have a material impact on our consolidated statement of operations.

We continuously monitor the composition of accounts receivable, collections and payments from our customers and maintain a provision for estimated credit losses based upon our historical experience with our customers, current market and industry conditions affecting our customers and any specific customer collection issues that we have identified. Principally based on these factors, an internally derived risk-based reserve is established on a quarterly basis. In addition to a risk-based reserve, a specific reserve is established for certain customers, based on customer receivable balances, overall exposure, payment history, current and expected market conditions, business developments, and other factors that influence the likelihood of collectability.
Historical payment trends may not be an accurate indicator of current or future credit worthiness of our customers, particularly in difficult economic and financial markets. As a result of the limited predictability inherent in estimating which customers are less likely or unlikely to remit amounts owed to us, our provision for estimated credit losses may not be sufficient. Any write-off of accounts receivable in excess of our provision for estimated credit losses would have an adverse effect on our results of operations. If credit losses exceed established allowances, our business, financial condition, results of operations and cash flows may be adversely affected. For additional information on the credit risks inherent in our business, see “Item 1A – Risk Factors” in this 2017 10‑K Report.
Inventories
Inventories are valued primarily using weighted average cost, and first-in first-out in certain limited locations, and are stated at the lower of average cost and net realizable value. We utilize a variety of fuel indices and other indicators of market value. Sharp negative changes in these indices can result in reduction of our inventory valuation, which could have an adverse impact on our results of operations in the period in which we take the adjustment. Historically, these adjustments have not had a material impact on our consolidated statements of operations. Components of inventory include fuel purchase costs, the related transportation costs and changes in the estimated fair market values for inventories included in a fair value hedge relationship.

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Business Combinations
We account for business combinations using the acquisition method of accounting, under which the purchase price of the acquisition is allocated to the assets acquired and liabilities assumed using the fair values determined by management as of the acquisition date. We calculate the fair value based on the present value of estimated future cash flows. The estimated future cash flows are based on the best information available to us at the time, acquisition-related costs incurred in connection with a business combination are expensed as incurred.

Goodwill and Identifiable Intangible Assets
Goodwill arises because the purchase price paid reflects numerous factors, including the strategic fit and expected synergies these acquisitions bring to our existing operations. Goodwill is recorded at fair value and is reviewed at least annually at year-end (or more frequently under certain circumstances) for impairment.
Goodwill is evaluated for impairment at the reporting unit level and is initially based on an assessment of qualitative factors to determine whether it is more likely than not that the fair value of any individual reporting unit is less than its carrying amount. Such events or circumstances could include a material adverse change in the markets where we operate, similar to the current conditions within the shipping and offshore markets, limited market volatility, which adversely impact our supply and trading activities, among others.
To determine whether goodwill is impaired, we would compare the fair value of the reporting units to which goodwill was assigned to their respective carrying values to measure the amount of goodwill impairment, if any. In calculating fair value, we use a combination of both an income and market approach as our primary indicator of fair value. Under the market approach we use a selection of global companies that correspond to each reporting unit to derive a market-based multiple. Under the income approach, we calculate the fair value of a reporting unit based on the present value of estimated future cash flows. The estimated future cash flows are based on the best information available to us at the time, including our annual operating plan, which is completed annually during the fourth quarter and is approved by our Board of Directors. Our estimates are considered supportable assumptions that we believe are reasonable based on information available to us at that time, and are based on a number of factors including industry experience, internal benchmarks and the economic environment. Our cash flow estimates are discounted using rates that correspond to a weighted-average cost of capital consistent with those used internally for investment decisions.
If our annual operating plan is not achieved or if there are other variations to our estimates and assumptions, particularly in the expected growth rates and profitability embedded in our cash flow projections or the discount rate used, there is the potential for a partial or total impairment of the carrying amount of goodwill within one or more of our reporting units. If we are required to impair all or a substantial amount of the goodwill attributable to one or more of our reporting units, our financial results of operations and financial condition could be adversely affected.
In connection with our acquisitions, we record identifiable intangible assets at fair value. The determination of the fair values of our identifiable intangible assets involves a significant amount of forecasting and other assumptions associated with recently acquired businesses for which we may not have as much historical information or trend data as we would for our existing businesses. Identifiable intangible assets subject to amortization are amortized over their estimated useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We assess identifiable intangible assets not subject to amortization during the fourth quarter of each year for potential impairment. Our impairment analysis of our intangible assets not subject to amortization (primarily trademarks and/or trade names) generally involves the use of qualitative and quantitative analyses to estimate whether the estimated future cash flows generated as a result of these assets will be greater than or equal to the carrying value assigned to such assets.
Revenue Recognition
We execute contracts with customers through a variety of methods including by executing a master supply or blanket sales agreement combined with a purchase order or delivery ticket, stand-alone contracts, or through spot transactions where fuel is delivered for immediate settlement. Our contracts primarily require us to deliver fuel and fuel-related products, while other arrangements require us to complete agreed-upon services. Our contracts may contain fixed or variable pricing or some combination of those.
The majority of our consolidated revenues are generated through the sale of fuel and fuel-related products. Revenue from the sale of fuel is recognized when delivery is made to our customers and title has passed, the sales price is determinable and collectability is reasonably assured.

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Our fuel sales are generated as a fuel reseller as well as from inventory supply. When acting as a fuel reseller, we generally purchase fuel from the supplier, and contemporaneously resell the fuel to the customer, normally taking delivery for purchased fuel at the same place and time as the delivery is made to the customer.
Revenue from services, including energy procurement advisory services and international trip planning support, and transaction and payment management processing, are recognized over the contract period when services have been performed and we have the right to invoice for those services.
We record fuel sales and services on a gross basis as we generally take inventory risk, have latitude in establishing the sales price, have discretion in the supplier selection, maintain credit risk and are the primary obligor in the sales arrangement.
Whether the services have been performed and when title and risk of loss passes to the customer are the factors we take into consideration in deciding when to recognize revenue. These factors are readily determinable and consistently applied throughout our business. Therefore, we generally have not needed to make material estimates or assumptions with respect to revenue recognition.

Income Taxes
On December 22, 2017, the U.S. President signed into law the Tax Act. This legislation will significantly change the U.S. Internal Revenue Code, including taxation of U.S. corporations, by, among other things, limiting interest deductions, reducing the U.S. corporate income tax rate, altering the expensing of capital expenditures, adopting elements of a territorial tax system, GILTI, assessing a repatriation tax or “toll-charge” on undistributed earnings and profits of U.S.-owned foreign corporations, and introducing certain base erosion and anti-abuse minimum tax provisions. The legislation is unclear in certain respects and will require interpretations and implementing regulations by the IRS, as well as state tax authorities, and the legislation could be subject to potential amendments and technical corrections, any of which could increase certain adverse impacts of the legislation.
Because of the complexity of the GILTI tax rules effective in 2018, we continue to evaluate this provision of the Tax Act and the application of ASC 740, Income Taxes. Under US GAAP, we are allowed to make an accounting policy choice of either (1) treating taxes due on future US GILTI inclusions as a current period expense when incurred (the "period cost method") or (2) factoring such amounts into our measurement of our deferred taxes (the "deferred method"). Our selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing our global income and our global structure to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and the impacts thereof. We are currently analyzing this provision and have not made any adjustment related to potential GILTI tax in our financial statements and have not made a policy decision regarding whether to record deferred tax on GILTI since a reasonable amount cannot be determined.
The changes included in the Tax Act are broad and complex. The final transition impacts of the Tax Act may differ from those recorded as of December 31, 2017, possibly materially, due in part to changes in interpretations of the Tax Act, any legislative action to address questions that arise as a result of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any other updates to current tax estimates that may be required. In accordance with Staff Accounting Bulletin No. 118 regarding the application of ASC Topic 740, Income Taxes, we anticipate that we will finalize our provisional estimates and determine the impact of any potential deferred tax related to GILTI during the measurement period and will reflect any necessary changes to those estimates in subsequent periods. Any material revisions in our computations could adversely affect our financial condition, results of operations and cash flows.
Recent Accounting Pronouncements
Information regarding accounting standards adopted during 2017 is included in Note 1 to the accompanying consolidated financial statements included in this 2017 10‑K Report.
Recently Issued Accounting Standards
Revenue Recognition (Topic 606): Revenue from Contracts with Customers. In May 2014, ASU 2014-09 was issued. Under this ASU and subsequently issued amendments, an entity is required to recognize the amount of revenue it expects to be entitled to for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP. This ASU provides alternative methods of transition, a full retrospective and a modified retrospective approach. The modified retrospective approach would result in recognition of the cumulative impact of a retrospective application as of the beginning of the period of initial application, which in our case is the period beginning January 1, 2018.

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