World Fuel Services Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

(Unaudited)

1.Acquisitions and Significant Accounting Policies

Acquisitions

2014 Acquisitions

On July 29, 2014, we completed the acquisition of all of the outstanding stock of Colt International, L.L.C. (“Colt”) a leading provider of contract fuel and international trip planning services in the general aviation marketplace. Colt is headquartered in Houston, Texas and offers services at more than 3,000 locations.

On March 7, 2014, we completed the acquisition of all of the outstanding stock of Watson Petroleum Limited (“Watson Petroleum”) a leading distributor of gasoline, diesel, heating oil, lubricants and other products and related services. Watson Petroleum is headquartered in Brinkworth, England and is one of the largest fuel distributors in the United Kingdom.

In addition to the above acquisitions, in June 2014, we completed an acquisition in our aviation segment which was not significant.

The estimated aggregate purchase price for the 2014 acquisitions was $238.5 million, and is subject to change based on the final value of the net assets acquired. The following reconciles the estimated aggregate purchase price for the 2014 acquisitions to the cash paid for the acquisitions, net of cash acquired (in thousands):



Estimated purchase price	$	238,523
Less: Cash acquired		16,167
Estimated purchase price, net of cash acquired		222,356
Less: Promissory notes issued		9,000
Less: Amounts due to sellers		789
Cash paid for acquisition of businesses	$	212,567

The estimated purchase price of the 2014 acquisitions was allocated to the assets acquired and liabilities assumed based on their estimated fair value as of the acquisition date. Since the valuations of the assets acquired and liabilities assumed in connection with the 2014 acquisitions have not been finalized, the allocation of the purchase price of these acquisitions may change. The estimated purchase price allocation for the 2014 acquisitions is as follows (in thousands):



Assets acquired:
Cash and cash equivalents	$	16,167
Accounts receivable		256,627
Inventories		14,412
Property and equipment		61,960
Identifiable intangible assets		61,031
Goodwill		126,962
Other current and long-term assets		21,275
Liabilities assumed:
Accounts payable		(247,377)
Accrued expenses and other current liabilities		(58,771)
Other long-term liabilities		(11,908)

Initial noncontrolling interest upon acquisition of joint venture		(1,855)
Estimated purchase price	$	238,523

Upon the completion of the acquisition of Watson Petroleum, we made a payment of £13.0 million ($21.7 million) to an escrow account related to an assumed obligation. As of September 30, 2014, the escrow account balance and corresponding assumed obligation of £13.0 million ($21.1 million) are included in other current assets and accrued expenses and other current liabilities, respectively, in the accompanying consolidated balance sheets.

In connection with the 2014 acquisitions, we recorded goodwill of $127.0 million of which $20.5 million is anticipated to be deductible for tax purposes. The identifiable intangible assets consisted of $51.9 million of customer relationships and $3.3 million of other identifiable intangible assets with weighted average lives of 4.2 years and 2.5 years, respectively, as well as $5.8 million of indefinite-lived trademark/trade name rights.

The following presents the unaudited pro forma results for 2014 and 2013 as if the 2014 acquisitions had been completed on January 1, 2013 (in thousands, except per share data):



	For the Three Months ended				For the Nine Months ended
	September 30,				September 30,
	2014		2013		2014		2013
	(pro forma)		(pro forma)		(pro forma)		(pro forma)

Revenue	$	11,748,457	$	11,127,729	$	34,289,238	$	33,031,887

Net income attributable to World Fuel	$	56,350	$	51,786	$	158,778	$	160,417

Earnings per common share:
Basic	$	0.80	$	0.73	$	2.24	$	2.25

Diluted	$	0.79	$	0.72	$	2.23	$	2.23

The financial position, results of operations and cash flows of the 2014 acquisitions have been included in our consolidated financial statements since their respective acquisition dates and did not have a significant impact on our results for the three and nine months ended September 30, 2014.

Significant Accounting Policies

Except as updated below, the significant accounting policies we use for quarterly financial reporting are the same as those disclosed in Note 1 of the “Notes to the Consolidated Financial Statements” included in our 2013 10‑K Report.

Goodwill

During the first nine months of 2014, we recorded goodwill of $100.4 million in our land segment and goodwill of $26.6 million in our aviation segment in connection with the 2014 acquisitions and we increased land segment goodwill by $0.4 million as a result of a reduction in identifiable intangible assets based on our ongoing fair value assessment of certain of our 2013 acquisitions. Additionally, we had goodwill decreases of $0.7 million, $0.3 million and $0.1 million as a result of foreign currency translation adjustments of our non-U.S. dollar functional currency subsidiaries in our land, marine and aviation segments, respectively.

Other Investments

As of September 30, 2014 and December 31, 2013, we had other investments, consisting primarily of equity investments, net of basis adjustments, of $106.4 million and $83.8 million, respectively, which are included within identifiable intangible and other non-current assets in the accompanying consolidated balance sheets.

Recent Accounting Pronouncements

Presentation of Financial Statements-Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. In August 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) which requires management of the Company to evaluate whether there is substantial doubt about the Company’s ability to continue as a going concern. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption permitted. We do not expect the adoption of this new guidance to have an impact on our financial statement disclosures.

Compensation-Stock Compensation. In June 2014, the FASB issued an ASU which includes guidance which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. We do not believe the adoption of this new guidance will have a significant impact on our consolidated financial statements and disclosures.

Transfers and Servicing: Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. In June 2014, the FASB issued an ASU which changes the accounting for repurchase-to-maturity transactions and repurchase financing arrangements. It also requires additional disclosures about repurchase agreements and other similar transactions. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. We do not believe the adoption of this new guidance will have a significant impact on our consolidated financial statements and disclosures.

Revenue from Contracts with Customers. In May 2014, the FASB issued an ASU which provides guidance for revenue recognition for any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. We are currently evaluating whether the adoption of this new guidance will have a significant impact on our consolidated financial statements and disclosures.

Presentation of Financial Statements and Property, Plant, and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. In April 2014, the FASB issued an ASU which changes the criteria for reporting discontinued operations while enhancing disclosures in this area. It also addresses sources of confusion and inconsistent application related to financial reporting of discontinued operations guidance. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. We do not believe the adoption of this new guidance will have a significant impact on our consolidated financial statements and disclosures.

Presentation of an Unrecognized Tax Benefit When a Net Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. In July 2013, the FASB issued an ASU on the presentation of an unrecognized tax benefit when a net operating loss carryforward exists. Under this guidance, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward. This update became effective at the beginning of our 2014 fiscal year. The adoption of this ASU did not have a significant impact on our consolidated financial statements and disclosures.

Foreign Currency Matters Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Foreign Subsidiaries. In March 2013, the FASB issued an ASU aimed at resolving the diversity in practice of accounting for the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, the amendments in this ASU resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity. This update became effective at the beginning of our 2014 fiscal year. The adoption of this ASU did not have a significant impact on our consolidated financial statements and disclosures.

Disclosure Obligations Resulting from Joint and Several Liability Arrangements. In February 2013, the FASB issued an ASU clarifying the guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this ASU is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. This update became effective at the beginning of our 2014 fiscal year. The adoption of this ASU did not have a significant impact on our consolidated financial statements and disclosures.

Reclassifications

Certain amounts in prior periods have been reclassified to conform to the current period’s presentation.