World Kinect Corp (WKC) 2005 Q3 法說會逐字稿

Welcome to the World Fuel third quarter and nine months 2005 financial results conference call. [OPERATOR INSTRUCTIONS] I would now like to turn the conference over to Michael Mason of Allen & Caron Investor Relations. Please go ahead sir.

Thank you. And good morning and welcome to World Fuel Services results conference call for its third quarter ended September 30 , 2005. As mentioned by the operator, I'm Michael Mason of Allen & Caron Investor Relations. Before we start this morning's call, there are a couple of items I'd like to cover. Many of you received a copy of the press release announcing the Company's results for its third quarter ended September 30, 2005. It was released Tuesday, November 15 at 6:00 am Eastern. If you did not receive a copy of the press release, it is posted in the Clients section of our Website at www.allencaron.com. Or you may call our office in New York at 212-691-8087 and we will e-mail it to you right away. It is also posted on Yahoo Finance.

This call is being broadcast live over the Internet on the Company's Website at www.wfscorp.com. A replay of the call will be available through November 23, 2005 and may be accessed from Canada and the U.S. by dialing 800-633-8284 and entering conference ID number 21269191. International callers should dial 402-977-9140. A replay of the Webcast will be available through November 23, 2005.

Additionally, I've been asked to make the following statement. With the exception of historical information, this conference call may include forward-looking statements that involve risks and uncertainties, including but not limited to; quarterly fluctuations in results, the management of growth, fluctuations in world oil prices or foreign currency. Major changes in political, economic, regulatory or environmental conditions. The loss of key customers, suppliers or key members of senior management. Uninsured losses, competition, credit risk associated with accounts and notes receivable. And other risks detailed from time to time in the Company's Securities and Exchange Commission filings. Actual results may differ materially from any forward-looking statements set forth herein.

With us this morning, is Paul Stebbins, Chairman and CEO. Paul will provide an opening statement addressing the Company progress and then the call will move into the Q&A. I would now like to turn the call over to Paul.

Good morning Paul. Good morning Michael. Thank you. Good morning and thanks for joining us. With me today are Michael Kasbar, President and Chief Operating Officer, Bob Tocci, Chief Financial Officer, and Frank Shea, Chief Risk and Administrative Officer. Today we reported earnings of - - or actually the other day, we reported earnings of $10.7 million or $0.44 per diluted share for the third quarter of fiscal 2005. This represents a 5.3 million or 97% increase in net income over the comparable quarter a year prior. Gross profit increased $16.6 million or 56% over last year, while operating income was up $9.4 million.

Our cash position at the end of the quarter was 166 million. And operating activities provided net cash of $16 million during the first nine months of 2005. We are pleased with the results, which demonstrate the continued success of our model. In the quarter, business momentum was strong in all three of our markets and the operating environment was favorable. We are very pleased with our Q3 results and remain on course for another record year.

In our marine segment, margins were healthy, driving increased profitability in all markets. And while volume was off slightly in the quarter, it increased on a year-to-date basis. Reflecting the continued success of our marketing efforts to large global fleets. Our global team has been successful in differentiating our services in the market and demand for our offering continues to grow. The overall shipping market continues to post strong results in almost every sector. And we anticipate continued health in the industry through 2006.

In our aviation segment, the results reflect continued strong performance across the spectrum. Our overall blended margin is improved as we continue to successfully diversify our customer mix and improve our supply position throughout the world. Our efforts in the future will be focused on expanding our core reselling business and aggressively growing our service offering in the corporate aircraft space. Volatility and fast changing supply markets, continue to highlight the need for our service.

Our land business continues to grow according to plan, and we expect continued steady improvement in volume and margin in this new and exciting space. We expect to break out our land business into separate reporting segments some time in 2006. One of the most exciting events for World Fuel in the third quarter, was the completion of our sale of $4.1 million shares of common stock in September. Which generated net proceeds of approximately $120 million for the Company. The offering was significantly oversubscribed and we were able to add a number of strong new shareholders. Perhaps most gratifying was the support we saw from existing shareholders. We thank you for your confidence. Also, upon the completion of our stock offering, the term of our $220 million resolving credit facility was automatically extended through December, 2010. With our strengthened capital base, we believe we will be well positioned to fund further growth organically and for acquisitions.

Lastly, I would like to take this opportunity to discuss the reasons for the delay of our filing of quarterly results and the cancellation of our originally scheduled conference call. Two things contributed to the delay. One was hurricane Wilma. The other was the complexity of FAS 133. The timetable for the preparation and review of our financials was pushed back an entire week due to dislocations associated with hurricane Wilma. While Wilma was not as dramatic as hurricane Katrina, the localized impact of Wilma in South Florida was very serious. Our office was running on generators for several days. And our building management was enforcing a truncated schedule of building access, which made it very difficult for our team to complete their work. All of the individuals working for World Fuel were without power at home. And we had to provide emergency gasoline so that they could commute to work. Our auditors, who are based locally, were also greatly impacted by the hurricane, which resulted in delays in their review of our financials.

Lastly, the complexity of FAS 133 also contributed to the delay. As many of you know, the subject matter is complex, and additional review time was needed in order to finalize the numbers. The net result of all of this was that despite the best efforts of all parties involved, we were simply unable to complete our 10-Q filing by close of business on November, 9. Let me say that hurricane Wilma and technical accounting notwithstanding, we could not feel better about World Fuel and our current position in the market. Mike Kasbar is fond of saying that "luck is when preparation meets opportunity".

And our global team is very enthusiastic about the many opportunities we see available to us. They are prepared and highly focused on execution. The operating environment is favorable. And we continue to make investments in people, process, and systems to further our growth and enhance our value. The extraordinary market conditions seen in the aftermath of the hurricanes have settled somewhat. And we find ourselves better positioned than ever to add value to the supply and purchasing communities.

The market for expertise and supply, price, logistics, operations, transaction processing, and finance continues to expand. And our entire global team is focused on delivering that value at scale. We appreciate your continued support. And I would now like to turn it over to Bob for a detailed review of the third quarter results. Bob?

Good morning. Before we run through the financial results for the third quarter of 2005, I thought I'd take just a few minutes to talk about our basic business model. We are a marketer and reseller of aviation and marine fuel. In most instances, we simultaneously purchase, mark-up and resell to our customers. However, for competitive reasons, we hold inventories at certain locations. When we do, we hedge to eliminate market price risk. To meet customer demand, we sell on either a fixed price or a floating price basis. In certain instances, we utilize paper swaps to achieve this.

Profit on physical sales are recognized when the product is delivered. Profit from product sales and income or loss on related derivatives may or may not be recorded in the same accounting period. Effective July 1, 2005, we've implemented changes to our inventory hedging and price risk management programs to more effectively align the reporting of sales and the profit or loss on a transaction. Specifically, as it relates to our inventory derivative program, to the extent that a hedged item, inventory, and a hedged instrument are highly correlated; sales in the reporting of profit or loss on the sales from inventory are matched. To the extent that correlation is ineffective, gain or loss is recognized prior to the sale.

In the third quarter of 2005, this happened as the historical correlation between heating oil futures and jet fuel prices was disrupted by the effects of Hurricane Katrina. Market prices for jet fuel increased precipitously in the last 15 days of September whereas heating oil prices increased only slightly in the same period. This increase diluted earnings per share by $0.06 in the third quarter of 2005.

As of September 30, 2005, we also had 4.9 million in unrealized losses previously recognized in the statement of income. Primarily associated with the fixed physical purchase commitments that were entered into prior to July 1. These commitments will be fulfilled through the sale of marine fuel in the fourth quarter of 2005 and the profit or loss on those transactions realized. This should more than offset the earnings that were associated - - or accelerated into the third quarter from our inventory hedging of aviation fuel.

And now for a discussion of the third quarter financial results. Revenue for the third quarter was 2.3 billion, up 738 million or 47% compared to the same quarter a year ago. Marine segment revenues grew by 289 million or 35%. And our aviation segment grew 449 million or 61%, as compared to the same quarter a year prior. An increase in the average price of fuel sold in both the marine and aviation segments contributed to the growth in revenue. In addition, aviation segment unit volume increased while marine segment volume declined. The aviation segment, which includes the land segment, sold 592 million gallons during the quarter, an increase of 37 million gallons. And is largely due to the additional sales to new and existing customers in our commercial business and growth in fuel management. For the marine segment, total business activity decreased to 5.4 million metric tons, as compared to 6.1 million metric tons during the same quarter a year ago.

Reselling constituted 65% of total marine business activity for both periods. For the first nine months of 2005, revenue was 6.2 billion, an increase of 2.3 billion or 61%, as compared to the same period a year ago. The gross profit for the quarter was 46.2 million, an increase of 16.6 million or 56% compared to the same quarter a year ago. Gross profit grew by 5.2 million or 35% in our marine segment. And 11.4 million or 77% in aviation, as compared to the same quarter last year. The increase in gross profit was due to a margin improvement in both aviation and marine, as well as increased business activity in our aviation segment. In general, margins benefited from advantageous pricing, favorable market conditions, and a change in business mix.

Also contributing to the increase in gross profit were net unrealized gains from our inventory hedging and price risk management programs. Partially offsetting was a lower level of business activity in marine. For the first nine months of 2005, our gross profit was 122.8 million, an increase of 36.1 million or 42% as compared to the same period last year. Operating expenses for the third quarter were 30.3 million, an increase of 7.2 million or 31% as compared to the same quarter a year ago. Of this increase, 3.8 million is due to higher salaries and wages. 1.9 million was due to the provision for bad debts. And the balance of 1.5 million of the increase was due to other operating expenses. The increase in salaries and wages was primarily due to higher performance based incentive compensation and new hires to support a global business.

The increase in the provision for bad debts was due in part to customers affected by Hurricane Katrina. And the increase in other operating expenses, was primarily related to infrastructure spending initiatives to support our global business activity. For the first nine months of 2005, operating expenses were 85.9 million, an increase of 22.4 million, or 35% as compared to the same period a year ago. It should be noted that the total operating expenses in 2005 include the operating expenses of Tramp Oil for nine months versus six months in 2004. Our income from operations for the third quarter was 15.9 million, an increase of 9.4 million compared to the same quarter last year. In absolute terms the aviation segment contributed 64% of the total operating income for the quarter, the balance of 36% was provided by the marine segment.

Income from operations, for our marine segment, was 7.9 million for the third quarter, an increase of 3.9 million compared to the same quarter a year ago. The aviation segment's income from operations was 13.7 million for the third quarter, an increase of 8.1 million compared to the same period last year. Included in aviation segment operating income was 2.5 million net unrealized gain. Caused by the dramatic increase in aviation fuel, market prices in the United States following Hurricane Katrina and its impact on our inventory hedging program. For the first nine months of 2005, income from operations was 36.9 million, an increase of 13.7 million or 59% as compared to the same period last year.

The Company's affective tax rate for the third quarter, was 29% versus 13% for the same quarter last year. For the first nine months of 2005, the Company's effective tax rate was 21% versus 17% for the corresponding period a year ago. The increase in the effective tax rate resulted from; the profit fluctuations of our subsidiaries and tax jurisdictions with different tax rates. A change in tax estimate related to derivatives in the relevant taxing jurisdictions. And tax return to provision adjustments for foreign income tax returns completed during the third quarter of 2005.

Net income for the third quarter was 10.7 million, an increase of 5.3 million or 97% compared to the corresponding quarter last year. Diluted earnings per share was $0.44 per share, an increase of $0.21 per share as compared to the same quarter a year ago. For the first nine months of 2005, net income was 27.6 million up 10.3 million or 59% over the same period last year. Diluted earnings per share was $1.15 per share, an increase of $0.40 or 54% as compared to the corresponding period a year ago. Our return on equity was 16% for the third quarter, as compared to 13% for the same quarter last year. Our return on assets for the third quarter was 4.3% versus 3.5% for the corresponding period last year.

At quarter end, our cash position was 166 million, an increase of 102 million as compared to 64 million at December 31, 2004. This increasing cash was primarily due to 120 million in net proceeds from the public offering of 4.1 billion shares of common stock. 15.6 million of net cash provided by operating activities. Partially offset was 30 million net retained under our revolving credit facility. Our gross receivables increased 502 million at December 31, 2004 to 296 million at quarter end. Our allowance for doubtful accounts increased by 1.3 million to 12.6 million. During the first nine months of 2005, we provisioned 6.6 million and wrote off receivables totaling 5.3 million.

At September 30, 2005, our consolidated DSO was 31 days versus 32 days DSO at December 31, 2004. At quarter end, working capital totaled 298 million, an increase of 116 million, and total assets were 1.1 billion, an increase of 410 million from December 31, 2004. Our total liabilities of 756 million at the quarter end, represented an increase of 284 million from December 31, 2004. Also at quarter end, our consolidated stockholders equity amounted to 342 million, an increase of 154 million from December 31. Thank you for staying with me during this detailed overview of our third quarter results. I'd like now to turn over the call back over to Paul Stebbins.

Operator, we'd like to open up for questions, please.

[OPERATOR INSTRUCTIONS] Our first question comes from the line of Joe Chumbler from Stephens, Inc. Please proceed.

Great quarter, guys.

Good morning, Joe.

I was wondering if you would give a little more color on the derivative contracts? I guess typically who are the counterparties involved and how do you manage the counterparty risk?

They're major underwriters like [Jay Aaron]. And as it relates to counterparty risk from the derivative standpoint, we're dealing with world class names in this area. And there is no disproportionate percentage of our overall business activity with any one counterparty.

Okay. And then on the land-based opportunity, have you got an annualized run rate in terms of gallons as of the third quarter?

Yes. It's looking around the 200 million gallon mark, and we see indications that that's growing. Certainly it's up significantly from where we were a year ago, and we're pretty pleased with the trending. As we stated in the script, we'll be looking to break some of that out in more detail in 2006. But it's premature at this point. But I would say we've had a variety of meetings with the entire team, and we feel pretty good about where it's going.

And is it contributing gross profit in the aviation segment right now?

Yes.

Yes, it is.

Can you quantify it?

No. Not till we break it out, Joe.

Bob, can you just repeat what we should expect in the fourth quarter from the derivative hedges you mentioned?

Yes. I mean, what we said was this. In reality, we're hedging our inventories on an effective basis. All right? Broadly and generally. It was an unusual period where the correlations between the home heating oil and the jet fuel was temporarily in operation. So, what happened was we effectively accelerated $0.06 of earnings into the third quarter from the fourth quarter. But we also have the purchase commitments that are unwinding in 2005 which, on a pre-tax basis, have already been realized into our P&L. And that was 4.9 million which on an after-tax basis would effectively offset that $0.06, more than offset the $0.06.

In the fourth quarter.

So, if I'm understanding this, in the fourth quarter, we should see 4.9 and 2.5 million in losses come out of the gross profit line?

No. They're going in different directions.

They're going in different directions. They're offsetting. The $0.06 that we recorded in Q3 is offset negatively in Q4. However, as the unrealized losses and gains unravel in Q4, that is a gain and more than offsets the $0.06 negative.

Okay. Now, the tax rate, should that return to about a 20% average tax rate?

Yes. For the most part, yes.

Thanks.

Thank you. Our next question comes from the line of John Chapell from J.P. Morgan.

Good morning. We've heard a lot from our shipping companies on rising bunker prices and the impact that's having on their cost side of their equation. When you look at your marine segment had the volumes come down, how much of that do you think was your own focus on trying to clean up the customer base and focus on higher margin business? And how much of that was some, whether it be temporary or more secular, demand destruction as bunker prices continue to rise?

No. It's the prior. It's our own rationalization of our portfolio and a drive to higher ground.

You haven't seen any slowing in demand despite bunker prices?

Not as of yet. The bunker price itself, it's not like what we've seen in aviation where you saw some very much publicized instances where, let's say, American Airlines just decided to cancel some flights, supposedly because of high fuel prices. The shipping guys, we have not seen that. People are not cancelling charters or cancelling container route traffic. And they're not cancelling the shipment of oil because of the bunker price. We have not seen that happen.

Rates are still very high in marine.

Rates are still high. And although there's talk about rates perhaps sometime in '06 dropping a little bit, no matter what they are, they're still high relative to a couple years ago. And I would say we still see some pretty good sustaining of that activity in the current term. And bunker price is not the reason anybody's dropping volume. It has to do with our own rationalization of the portfolio.

How long do you see that rationalization of the portfolio continuing? Are you pretty happy with the customer base now? Or do you think there's a little bit further to go?

Yes. I think we feel pretty good about where we are. You're always looking at it. As you know, the marine business is more of a spot business. And the way that the aviation is, where you've got some of the more ratable contract stuff. So, there is a little bit more variability quarter to quarter just as the portfolio shifts around and as trade changes. And from time to time we're consolidating volumes of a certain number of lifts in one period, as opposed to having them be spread out incrementally through a period. So there's a little bit of back and forth.

But I would say, generally speaking, if you look at the trend throughout the year-to-date, we do see increases over last year. We feel very good about that. We had a recent conference in London where we brought in all the heads of the European groups. We've got a very robust marketing effort going on. We see a lot of very positive reception to our product differentiation. We see a lot of focus on deeper penetration in these large global fleets and a true respect for the value that we're offering. So, we feel pretty excited about not only the quality of our offering but the ability to continue to more deeply penetrate these large global fleets.

Okay. And you mentioned in the answer to the first question about the aviation side, the higher profile names there like American. Can you talk a little bit about the diversification of your customer base? We got a lot of questions when Northwest and Delta made their announcement.

Sure. Well, it actually turned out that as we finally sorted all of that, we ended up being in the black on both those guys. We hadn't lost money, it turned out, on those guys. We thought we lost a couple hundred thousand between them. But it just turns out that when you looked at the prepays and the reconciling, we were ahead of the game in both.

But as you know, historically our focus has not been on those large legacy carriers, so that hasn't been an area of exposure. If you look at the portfolio, you've got 1,800 customers in the aviation segment. About 650 of those are corporate customers, John. And those tend to be, just by their very nature, a far more blue chip. It's Motorola and Citicorp and Franklin Templeton and Bill Gates flying around in 757's. So, it's a much more quality base.

But if you look at that core, for the 1,200 commercial customers, it's highly diversified. It's broad in scope. It's all over the world. It's in charter, it's in cargo, it's in passenger, it's in scheduled, it's in nonscheduled, it's in military. It covers a broad cross-section. But we don't have concentrations in these legacy carriers. And to the extent that we do have business with some of them, it's often on a prepaid basis.

And then finally, you spoke a little bit about the provision for bad debts increasing because of some of the customers in the Hurricane impacted region. What's the carry forward you're looking at that going forward as well? A lot of customers that you think were impacted there, did you write off those accounts already or is there a lot – (multiple speakers)?

No. We don't think it's a broad cross-section of customers that are impacted by that. It was very, very specific and it has already been dealt with. So again, we take a very aggressive approach on this, John. It's basically - - there's no hangover now. It's done.

Great.

The fact of the matter is, related to the hurricane, there was just a handful of customers that were impacted by this. But from quarter to quarter, we review the provision, and the allowance and the receivables. Really the receivables, are marked to a net realizable basis based on the best information available to us at the time. So, what the future holds will constantly be reevaluated.

Okay. Thanks a lot, guys.

Thanks, John.

Thank you. [OPERATOR INSTRUCTIONS] Our next question comes from the line of Jim Larkins from Wasatch Advisors.

Good morning. I wondered if I could get some comments from Mike Kasbar on just where you are with systems? It seems like you've invested a lot in people this past year. I wonder if you could give us what the importance [Inaudible] this coming year?

I'm sorry. You cut out at the end part of that Jim.

I just wanted to know what the important systems initiatives were this year? It seems like you've maybe focused on people a lot this past year. And I've kind of heard that this year is much more of a systems year. I wondered if you could just put some color on that?

We've been historically very shy on the technology side. We completely missed the dot.com. We didn't dive into it, couldn't quite get it. So, we never really spent very much money on that at all. And we haven't really spent very much money on technology over the years. And we've decided we've got a solid management team and we've been gearing up for an ERP implementation with Oracle. That's scheduled to come into play January of '07. So we've been spending a bit of money this year. It's not a huge spend that we have. We've got a significant budget. A lot of it will become capitalized, so the bottom-line impact will not be too violent. In terms of other expenditure, we've purchased and will be implementing within days some tracking software for our derivatives activity. But in terms of any other information on it, we feel pretty good about our ability to implement our programs. We've got solid consultants in place.

Are there any key functionality that you're going to get out of that that will help volume for example, on the land business? Or is it really just a refining of existing processes that you want to get more automation to those processes? Can you give some color?

It's going to be a solid foundation. ERP systems have come a long, long way. If you can wait to implement technology, generally that's a good idea, and we have. So, some of the new products that are out today are significantly improved over the last few years. And we'll be putting in some point solutions, as I just mentioned, on the derivative side. On the land side, we're in the process of reviewing some of these straightforward systems that are used by the industry. We don't look at technology as a massive differentiator. But really just a tool to help our efficiency and process and bring our global team together. And basically just get some of the basic utilization. A big part of our secret sauce is the culture, the people that we've got in the Company, and really what our business methodology is.

Great. Switching gears a little bit, on the marine business, you talked about rationalizing your customer base a little bit. Can you just give more color on that? Is that going away from credit risk? Is it because you limited credit on certain customers? I'd just like to understand a little bit better what you did there.

Sure. Over the last year, when we bought Tramp, it brought a new portfolio of (ph) business into the Company. And what we've been looking, as you know; you've heard us talk about our value proposition and our business model. Which is a deep tangilent (ph) model with large global fleets trying to add value in the logistics, the pricing. The market visibility using domain expertise to help them get a visibility on markets that moving all the time. And just getting more deeply involved in their technical operations, in their quality control, in their management of the forward curve in terms of price risk management. So, all of these are sort of high yield relationships. And we find that that is the differentiation that we've been able to achieve in the market.

So, as we look at the portfolio, we look at the optimization of that model and matching it to the best customer base. So, we're constantly culling and re-evaluating that. And there are certain, what we used to call in the business as broker/traders, it's kind of transactional basis. It's stuff that you're doing a lot of work for but it doesn't give you particularly good returns. They don't necessarily value what you're doing for them. So, you're looking to cull out some of that volume and move to higher. ground. So that you get a much higher hit rate, a much higher incident of return with that customer. And it's all about no longer having to resell yourself to that customer. You've delivered the value. And now it's about opening up new areas where you can more deeply penetrate and work more closely with that customer.

So, as you think about the 100 sales guys around the world and what are they spending their time on? We've got a very deep dive look at an operational review that allows us to look at all these portfolios on a person by person basis throughout the world. And as you dissect those portfolios and you look at the return for number of worksheets, how much time is being spent on that account, what the return is on that account is that volume expensive volume to maintain or is it cheap volume to maintain? You have to do a pretty detailed review. So, as we look at all that, it's a constantly moving target just depending on what's going on in the space in any one given quarter.

Again, the marine is more of a spot business. It isn't contracted in the way that aviation is. So, there's a little bit of variability that comes quarter to quarter just because of the nature of the spot business. And some of it is our deliberate intent to just get our team to work smarter, not harder. And that represents sometimes changes in volume. But I would say overall, the trend is up but it's a better quality, overall.

And then did you break out the segments by gross profit? I don't know if I missed that earlier.

Yes, we did. Gross profits.

Let's just go through it.

Just for the three months.

Sure. For the third quarter, the gross profit from marine was 20.1 million and the gross profit from aviation was 26.2 million.

26.2?

26.2.

Okay. I think that's it. Thanks, guys.

[OPERATOR INSTRUCTIONS] We do have a follow-up question from the line of Jim Larkins from Wasatch Advisors. Please proceed.

I just wanted to jump back in and ask about America West and U.S. Air, if you have any color on that relationship?

Sure. I would say that it's a wait and see mode. Right now, between America West and U.S. Air, they've got a lot of stuff going on in that relationship in terms of leases and rationalization of schedules and what aircraft they're going to deploy. There's lots of other things going on besides the fuel thing. Right now what they've done in an effort just to sort of keep it calm; is we're still doing our thing and the U.S. Air guy is sort of doing his thing. And it's - - we've been indicated that by sort of mid next year they're going to have some sort of disposition on what they want to do. So we're just waiting.

If they decide to have us do it, we'll do it. If they decide not to have us do it, that's okay, too. But at the end of the day, it's really their decision. And obviously, there are human beings involved. There's a lot that goes into these integrations. And our relationship is with the America West side and we're just waiting for their lead. Certainly they've been forthcoming. We know that they're very happy with the offering we provide. And we'll just wait and see. They've got lots on their plate and we're certainly not bothering them. They know where we are. And when they finally get around to really sorting it out, we'll be happy to do whatever they think is best.

Okay. Very good. Thank you.

Thank you. Our next question comes from the line of Ben Segal from Winchester Capital.

Hi, guys. You guys did a quarter job this past quarter. And you've done a great job in the past five years. And I just want to commend you on that. You've done everything that you've always set out to do. Going forward, since your volumes are going to pick up dramatically and it seems like you are at the tipping point. At what point could we expect some - - a little bit of a margin improvement now that your scale is so large, which on the incremental margin improvement would translate to huge bottom line gains?

Thanks, Ben. We've already seen some margin improvement, which I think reflects our position in the market, both in marine and aviation. So, I think that - - I can't - - I don't know that I could characterize it the way that you phrased it. That we don't think about it that way. I would say, that there - - if you look at the trending on margin over the last two or three years in the marine space, you saw a steady increase that I think reflects the success and validation of our business model. If you look at the aviation space, as we've talked about before, you saw over the last three years a deterioration in absolute margins because it reflected the integration of the fuel management volume into the overall blended rate. And I would say that that was tracking somewhere around $0.03.

We now see that moving back up slightly. And I think that reflects the fact that again, it was success and validation of our business model, which was to use aggregated demand to buy more effectively in the market. Generate more economies of scale on supply. And drive better yield on our overall underlying reselling volume, which is the core of our business. So, we're very happy about the current status of that trend. We certainly believe it's validation of the model. It's what we hoped would happen and we had reason to believe it would. So, I would say right now we're pleased. We're not looking for some radical transformation in margin. That's not the way the model works. But I would say the successes, we're very happy with where we are right now.

Thank you very much.

Thank you. [OPERATOR INSTRUCTIONS] Mr. Stebbins, I'm showing no further questions at this time. I will now turn the call back to you.

Thank you. We appreciate all of you joining us. Again, we regret that there was a delay but we got it out, and we're pleased with the quarter. And as we said before, we think it's going to be another record year. And we appreciate all your time and patience. Thanks for participating. Bye-bye.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. This concludes the conference call.