Economic and Market Conditions - Significant inflation in the U.S. increased notably from late 2021 into 2022, driven by supply chain disruptions and higher commodity prices, which may adversely affect business results if costs rise faster than revenues [93]. - The company faces intense competition from both large multinational corporations and smaller specialized firms, which could lead to a loss of market share or reduced prices, negatively impacting revenues and profits [94]. - Increasing governmental incentives and consumer pressures to adopt alternative fuels may negatively impact pricing and demand for petroleum-based products, affecting profitability [100]. Legal and Regulatory Risks - Legal and regulatory risks related to climate change and GHG emissions could significantly impact business operations and financial results, with various proposals being adopted globally to limit emissions [97]. - The Inflation Reduction Act of 2022 imposes a fee on GHG emissions from certain facilities in the oil and natural gas sector, which could accelerate the transition away from fossil fuels and adversely affect business operations [99]. - The company is subject to extensive laws and regulations, including environmental protection and health and safety, which can result in significant costs and liabilities [112]. - Compliance with existing and future environmental laws may require substantial capital expenditures and increase operating costs, potentially reducing demand for products and services [113]. - The company is subject to various data privacy laws, including the California Consumer Privacy Act, which may lead to significant compliance costs and potential financial penalties for noncompliance [116]. - International operations expose the company to anti-corruption laws and trade control regulations, increasing the risk of substantial fines and penalties [118]. - The company has established policies to comply with laws and regulations, but violations could result in severe penalties, including asset seizures and loss of government contracts [122]. Operational Impact and Risks - The COVID-19 pandemic has impacted operations, but business activities have normalized to near pre-pandemic levels, with ongoing monitoring for future disruptions [124]. - The handling of sensitive data may be vulnerable to breaches, and changes in data privacy laws could increase operational costs or result in regulatory penalties [114]. - The evolving nature of privacy laws, such as the EU's General Data Protection Regulation, may require costly changes to IT systems to ensure compliance [115]. Financial Instruments and Derivative Transactions - The company engages in derivative transactions to manage price risks associated with energy products, exposing it to potential losses if counterparties default [126]. - As of December 31, 2022, the total notional value of commodity derivative contracts was 19.6 million [218]. - The company uses forward and swap contracts to hedge foreign currency exchange risks, with no material impact expected from a hypothetical 10% change in exchange rates [219]. - The company’s derivative transactions are not always designated as hedges for accounting purposes, leading to fluctuations in earnings based on market value changes [133]. - As of December 31, 2022, the total fair value of foreign currency exchange derivative contracts was a net liability of 0.4 million in 2021 [221]. Debt and Interest Rate Management - The company had 488.4 million Term Loan as of December 31, 2022 [222]. - The interest rate swap agreement locks in a floating interest rate at 0.535% for a notional value of 24.7 million as of December 31, 2022 [223]. - A fluctuation of 100 basis points in the interest rate would result in a 15.4 million, with interest rates ranging from 1.0% to 5.9% [222]. Currency Positions - The company had a net long position in DKK of 410.3 million with a fair value amount of 0.2 million [221]. - The weighted average contract price for AUD was 0.653, with a net short position of 17.9 million and a fair value amount of (9.3) million as of December 31, 2022 [221].
World Kinect(WKC) - 2022 Q4 - Annual Report