World Kinect Corp (WKC) 2014 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the World Fuel Services 2014 second quarter earnings conference call. My name Ashe and I will be coordinating the call this evening. During the presentation, all participants will be in a listen-only mode. After the speakers' remarks, there will be a question and answer session. Instructions on how to ask a question will be given at the beginning of the Q&A session. (Operator Instructions). As a reminder, this conference is being recorded Wednesday, July 30, 2014.

I would now like to turn the conference over to Mr. Glenn Klevitz, World Fuel's Assistant Treasurer. Mr. Klevitz, you may begin your conference.

Thank you, Ashe. Good evening, everyone, and welcome to the World Fuel Service's second quarter earnings conference call. My name is Glenn Klevitz, World Fuel's Assistant Treasurer, and I will be doing the introductions on this evening's call alongside our live slide presentation. This call is also available via webcast. To access the webcast or future webcasts, please visit our website www.wfscorp.com and click on the webcast icon. With us on the call today are Michael Kasbar, Chairman, President, and Chief Executive Officer; and Ira Birns, Executive Vice President and Chief Financial Officer.

By now you should have all received a copy of our earnings release. If not, you can access the release on our website. Before I get started, I would like to review World Fuel's Safe Harbor statement. Certain statements made today, including comments about World Fuel's expectations regarding future plans and performance are forward-looking statements that are subject to a range of uncertainties and risks that could cause World Fuel's actual results to materially differ from the forward-looking information. A description of the risk factors that could cause results to materially differ from these projections can be found in World Fuel's Form 10-K for the year ended December 31, 2013 and other reports filed with the Securities and Exchange Commission. World Fuel assumes no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. This presentation also includes non-GAAP financial measures as defined in Regulation G. A reconciliation of these non-GAAP financial measures to their most directly-comparable GAAP financial measures is included in World Fuel's press release and can be found on its website.

We will begin with several minutes of prepared remarks, which will then be followed by a question and answer period. At this time, I would like to introduce our Chairman, President, and Chief Executive Officer, Michael Kasbar.

Thank you, Glenn, and good afternoon, everyone. Today we announced second quarter earnings of $51 million or $0.72 per diluted share, excluding the impact of a one-time charge.

The diversity and resiliency of our business model once again allowed us to produce solid results. Where our land segment produced record results last quarter, making up for some of the shortfalls in our aviation segment; this quarter, our aviation segment's profitability bounced back to make up for the declines we witnessed in some of our land activities. This diversified approach allows us to weather the inevitable cycles and market dynamics we face in various business segments while continuing to focus on our long-term strategic vision of building a diversified global downstream distribution business providing fuel and energy solutions for transportation, commercial, and industrial wholesalers and end users.

As we indicated on the last quarter's call, the aviation segment realized an increase in profitability due to increased activity coming from our government business in Afghanistan. Although the level of business has been experiencing a general decline over the past few years, recent announcements regarding the continued presence of forces in the region suggest that opportunities for our company to provide mission support should continue through 2015 and beyond.

Additionally in the second quarter, our commercial aviation business observed the usual seasonal increases in results coming from our resale activities in North America, Europe, and Asia. We expect to see continued seasonal increases again in the third quarter as the summer months have historically experienced an increase in performance. We are also encouraged by expanding passenger demand and financial strength throughout the industry, which provides greater opportunities to expand customer relationships in various existing and new markets, The long-term trend for growth in passenger miles over the next 20 years is robust, further supporting our long-term positioning and investment to support this industry.

On the business aviation side, we have now completed the acquisition of Colt International. Colt, with 150 employees and 2013 revenue of approximately $400 million, is headquartered in Houston, Texas and is a leading provider of contract fuel and trip-planning services to the general and business aviation markets at more than 3,000 locations worldwide. The Colt acquisition brings a talented team of professionals and additional growth opportunities to our existing general and business aviation activities.

Our marine segment results remained flat this quarter as the overall market continues to struggle. Long-term weak market conditions in shipping has restricted material growth opportunities and we continue to focus on core reselling to our blue-ship clients as well as opportunities to develop new customer relationships, expand into new geographies, and develop new services and products to offset the impact of the prolonged market downturn.

Our land segment results this quarter were hindered by certain market dynamics as well as seasonality in some of our businesses. We experienced margin pressures in our Brazilian operations and returned to a more ratable level of activity in our U.S. energy natural gas business, which benefitted significantly from unseasonably cold weather in the first quarter. Great opportunities remain in our land segment as we focus efforts on driving organic growth and pursuing additional strategic growth opportunities.

Our company continues to grow and we remain committed to our long-term plan. With annual revenue of over $40 billion and a dedicated team of over 3,500 employees worldwide, our company is more focused than ever on providing premium value-added services to our customers and suppliers while delivering meaningful returns to our shareholders. We thank you again for your support and, now, I will turn the call over to Ira Birns for a financial review of our results.

Thank you, Mike, and good evening, everybody. Before I comment on our results, I would like to note that our second quarter land and consolidated results include a full quarter of operating results for Watson Petroleum, compared to less than one month in the first quarter, as the Watson acquisition closed in early March of this year.

Consolidated revenue for the second quarter was $11.3 billion, up 8% sequentially and year over year. Approximately 55% of the year-over-year increase was related to increases in volume and the remainder was a result of higher average fuel prices.

Our aviation segment generated revenues of $4.4 billion, an increase of 4% sequentially and 18% year over year. Approximately 85% of the year-over-year increase was a result of increased volume and the remainder was a result of higher average fuel prices.

Our marine revenues were $3.5 billion, up 2% sequentially, but down 11% year over year. The entire year-over-year decrease was related to a decrease in volume offset partially by an increase in fuel prices.

And, finally, the land segment generated revenues of $3.4 billion, up 20% sequentially and 22% year over year. The year-over-year increase was principally related to volume from acquired businesses.

Our aviation segment sold 1.4 billion gallons of fuel during the second quarter, an increase of 75 million gallons or 6% sequentially and approximately 200 million gallons or 17% year over year. Volume in our marine segment for the second quarter was 6.1 million metric tons, up 1% sequentially, but down approximately 1.3 million metric tons or 17% year over year.

Our land segment volume in the second quarter was 1.06 billion gallons, up 100 million gallons or 10% sequentially and approximately 150 million gallons or 17% from the second quarter of 2013. Our land segment has now achieved an annual run rate of over 4 billion gallons for the first time; a true testament to the hard work and dedication of our entire global land team.

Consolidated gross profit for the second quarter was $192 million, an increase of $3 million or 2% both sequentially and year over year. Our aviation segment contributed $82 million of gross profit in the second quarter, an increase of $13 million or 19% sequentially and $6 million or 8% compared to the second quarter of last year.

As projected on last quarter's call, we experienced the rebound in our government business, which was one of the principal drivers behind this quarter's sequential increase in gross profit. As Mike mentioned earlier, although the storyline of the troop withdrawal in Afghanistan remains, there is now a bit more clarity on the level of troop activity that will remain beyond 2014. Therefore, despite the general decline in activity over the past several quarters, a trend that will likely continue through the end of the year, opportunities in the region should remain in 2015 and beyond.

In our core commercial business, all regions delivered strong results, especially Europe and Asia, demonstrating our continued success at further penetrating key markets around the world. Our global self-supply model's jet fuel inventory position was approximately 130 million gallons or $365 million at the end of the second quarter, up from approximately 110 million gallons or $319 million at the end of the first quarter. Inventory-related results were negatively impacted by a few million dollars in the second quarter related to both basis spreads and inventory average costing.

The marine segment generated gross profit of $49 million, an increase of $1 million or 2% sequentially, but a decrease of $3 million or 7% year over year. While we continue to witness soft market conditions in the marine segment, our global team remains actively engaged in pursuing opportunities to drive medium- to long-term growth including geographic expansion, the development of new customers, and the expansion of existing relationships, all without sacrificing any of our risk management principles, which has resulted in less than $3 million of bad debt expense in marine throughout the last 2 1/2 year slump in the shipping markets.

Our land segment delivered gross profit of $61 million in the second quarter. That's down $10 million or 15% sequentially, but an increase of $1 million or 1% year over year. The decline in gross profit was principally attributable to continuing competitive margin pressure in our crude oil business, weakness in our Brazil operations impacted in part by the distraction of the World Cup, as well as a return to a more ratable level of profitability in our U.S. Energy natural gas business, which materially benefitted from the polar vortex in the first quarter.

Furthermore, Watson did not contribute to profitability in the second quarter, principally due to unseasonably warm weather in the UK during the quarter. As I have indicated in the past, Watson should generally contribute more to profitability during the colder winter months, principally in the fourth and first quarters. Also, fuel-related gross profit in our land segment represented approximately $49.5 million of the $61 million of total segment gross profit this quarter.

Operating expenses in the second quarter, excluding our provision for bad debt and the $4.8 million one-time charge related to the non-renewal of Paul Stebbins' employment contract, were $126 million, up $3 million or 3% sequentially and $9 million or 7% year over year, principally related to expenses from acquired businesses. I would assume overall core operating expenses of approximately $130 million to $135 million in the third quarter. This estimate includes two months of operating expenses related to the Colt acquisition as well as approximately $1 million of one-time expenses related to the transaction.

In addition to the overview that Mike just gave on the Colt business, I would like to reiterate the financial guidance regarding the acquisition, which we closed earlier this week. The Colt transaction is expected to be $0.08 to $0.11 accretive to earnings on a non-GAAP basis in the first 12 months. Our team is extremely excited about the opportunities that this acquisition brings and we welcome the entire Colt team to World Fuel.

Our total accounts receivable balance was $2.9 billion at the end of the second quarter, up 5% from the first quarter, related primarily to the increase in volume and fuel prices across all three of our business segments. Our bad debt expense in the second quarter was $1.2 million, which was flat from the first quarter. Our overall bad debt reserve remains at approximately 1% of total accounts receivable, which we continue to believe to be adequate.

Consolidated income from operations for the second quarter was $60 million, down $4 million or 7% from the first quarter and $9 million or 13% year over year. Excluding the one-time charge that I mentioned earlier, consolidated operating income for the second quarter was $65 million, effectively flat sequentially, but still down $4 million or 6% year over year.

For the quarter, income from operations in our aviation segment was $37 million, up $7 million sequentially and $3 million compared to the second quarter of 2013. The principal drivers of the increase in operating income in the aviation segment were related to the increase in government activity as well as the seasonal increases that we saw across our core commercial reselling businesses. Our marine segment's income from operations was $21 million for the second quarter, flat sequentially and down $3 million compared to the results posted during the second quarter of last year. And finally, our land segment had income from operations of $14 million, a decrease of $12 million sequentially and $7 million year over year, related to the gross profit variances that I referenced earlier.

Consolidated EBITDA for the second quarter was $82 million, adjusted for the one-time charge that I had mentioned several times, an increase of $4 million or 5% both sequentially and year over year. Non-operating expenses, which include interest expense, equity earnings, and foreign exchange gains and losses, were $3.2 million in the second quarter, up $700,000 compared to the first quarter, but down $1.6 million compared to second quarter of last year. I would assume overall non-operating expenses to be approximately $3 million to $4 million in the third quarter.

Our effective tax rate for the second quarter was 18.1%, down from 18.3% last quarter and flat to the second quarter of last year. We estimate that our effective tax rate for the full year of 2014 will be between 17% and 21%.

Excluding the one-time charge, net income for the second quarter was $51.2 million, an increase of $0.5 million or 1% sequentially and flat year over year. Non-GAAP net income, which excludes intangible amortization, stock-based compensation, and the one-time charge this quarter, was $57.9 million in second quarter, a decrease of $1 million or 1% sequentially, but an increase of $400,000 or 1% year over year. Excluding the charge, diluted earnings per share for the second quarter was $0.72, an increase of 1% sequentially and year over year. Non-GAAP diluted earnings per share was $0.81 in the second quarter, a decrease of 2% sequentially, but an increase of 1% year over year.

We generated $10 million of cash flow from operations in the second quarter, increasing year-to-date cash flow from ops to $102 million compared to $152 million in the first half of last year. We have now generated positive cash flow from operations in each of the past eight quarters, totaling approximately $570 million. Our consistent cash flow performance has enabled us to continue to fund both organic and strategic investments while still maintaining a strong and liquid balance sheet.

Net debt was just under $300 million at $297 million in the second quarter, an increase of $15 million sequentially. Despite acquisitions and other investments of nearly $250 million over the past 18 months, our ratio of net debt to EBITDA remains below 1, again highlighting the strength of our balance sheet.

In closing, despite challenging market conditions in certain segments of our business, our overall portfolio of businesses delivered another strong quarter. We continue to work toward integrating new businesses and making strategic investments, like the Watson and Colt acquisitions, to support the long-term growth of the business. And our balance sheet remains strong, providing liquidity to pursue what remains a very robust pipeline of opportunities.

I would now like to turn the call over to our operator, Ashe, to open the Q&A session.

Thank you. (Operator Instructions). Jon Chappell, Evercore.

Thanks. Mike, I wanted to ask about the land business first. So, obviously there's some seasonality involved here. You talked about the impact of winter in the first quarter, that helped, and then obviously there's a sequential impact there. But, is there any way to kind of quantify what you would consider one-time or seasonal impacts on the land business? Because, if you just look sequentially, it was down pretty meaningfully from the first quarter and even the fourth quarter. And then, if you compare it to the second quarter of last year, it was flat, but you've also made some acquisitions in the meantime. So, I'm just trying to figure out a better kind of normalized run rate to use for that land business going forward.

Yes. We've got a lot of moving pieces in that, Jonathan, and I sort of apologize for that, as we kind of work our way through all of the different pieces of our growing land empire, if you will. As we started this journey back in 2008 in earnest with the gasoline business, it was a nice business. It's nice and ratable. Not so easy to grow it organically. So, we put a few other pieces into it; our crude oil activity, the natural gas which we brought out about a year ago from U.S. Energy. It was a significant impact last quarter with the TransCanada pipeline blowing up and that was an opportunity not likely to be repeated.

The thing with all of our businesses is that you are going to have these disruptions and certainly you look at our government business activity you're seeing activity coming there. In terms getting this predictable ratability to it, we're not quite there. So, I don't know if you want to add sort of some more color to that.

Yes, just one thing, Jon. In terms of your question about one-time, I'd say it was about a $10 million drop-off in GP sequentially. You could probably attribute half of that to what was of the kind of one-time variety in the first quarter, which was the nat gas related pickup because of the historic winter that we had here in the States. The rest of it relates to what I described earlier in terms of margin pressures in both Brazil and the crude marketing business.

Okay, that's helpful. For my follow-up, I wanted to push a little bit more on the government piece. It's obviously been this kind of sword that's been hanging over you for a while. You knew it was going to kind of bleed away at some point and it's still kind of happening. But, it sounds like there's potential for, I don't know if recovery is the right word, but a little bit of a snap-back maybe in 2015 as you look at opportunities out there. Is there any way to kind of put some quantitative thoughts around when it bottoms out, but then what the opportunity for a snap-back could be, maybe, in 2015?

Yes. It's certainly we'll -- well, I take back the word certainly. But, based on what we're seeing today, the expectation is that, in the second half of this year, the level of activity will most likely decline, although you never know. And, in 2015, if there are some opportunities, it's impossible to quantify what they may be. I think the point we were trying to raise, I believe the assumption for many were that after we got through the rest of this year we were probably down at zero. And I think the point that we're trying make is that's not necessarily the case, but we don't have any concrete evidence to support a number at this point. But there are greater opportunities than we would have assumed there were going back a quarter or two.

Right. Okay, understood. Thanks, guys.

Thanks, Jon.

Gregory Lewis, Credit Suisse.

Yes, thank you and good afternoon, guys.

Hey, Greg.

Hi, Greg.

Hi. Could you talk a little bit more about the Colt acquisition? And clearly this is sort of the evolution of World Fuel developing. I guess, any sense on what the potential is for margins from Colt would be pretty helpful.

Well, without giving you an exact number, our general aviation business generally operates, as you could imagine or as we've discussed in the past, at a higher margin than our overall aviation business, which mixes in everything from government business in Afghanistan to large commercial airlines here in the U.S. So, while it would benefit margins a bit, it is a relatively small piece compared to the overall aviation business. So, it's not going to move the needle materially, but it's certainly a positive as opposed to a negative, if you want to look at it that way.

Okay, great. And then just shifting gears over to the opportunities in natural gas. Michael, as you think about the landscape over the next two years in land, I mean clearly there's been a lot of conversations about World Fuel; you guys finding opportunities in the land side of the business. I guess when it comes to natural gas, is this something really where it's going to have to be organically built or are there actually opportunities for you to go out and find acquisitions in sort of the nat gas space?

Well, there's absolutely acquisitions. We certainly have a lot on the table and we've kind of moved into a lot of houses at the same time, if you will. If you look at some of the last acquisitions that we've made, between Multi Service on the technology side, Watson on the logistics and distribution, and then U.S. Energy on natural gas, we've got a lot going on at the same time. And we're doing, I think, a significantly better job of integrating those companies into the Company, having the center provide better services.

So, we feel really good about the U.S. Energy business. Natural gas is a very happening source of energy, certainly in this country. And we're seeing it, for a variety of reasons, not only economic but also environmental, is becoming a fuel of choice and an energy source of choice. So, we'll definitely grow that organically. We know how to do that. But there are opportunities to expand that through acquisitions.

So, as we get that humming along, we'll definitely go after that. We've already started to expand it organically into new geographies because it is a global business. So, the beauty of all the things we're doing is they're all global. So, once we get those mousetraps working properly our global platform becomes a great way to expand it.

Alright, perfect, guys. Thank you very much.

Thanks, Greg.

Jack Atkins, Stephens.

Good evening, guys. Thanks for the time.

Hey, Jack.

So, I guess just to kind of go back to the Colt acquisition for a moment, if I'm understanding the business correctly, there's a component of that that's tied to, I guess, aviation payment cards and I think it complements your existing aviation payment processing business. Could you maybe comment on is that a significant portion of Colt's business? And then I'm just sort of curious overall, within your aviation gross profit line, how much of your aviation gross profit is ties to that high-margin fee-based business? Because I think that's something that I think investors would give you a bigger multiple for if they kind of knew how much that was.

So, the Colt addition to our group, their focus is on fuel and ITPS, international trip planning services. And a big chunk of that business activity is going on that fuel card. We haven't broken that out from, essentially, Multi Service that essentially hosts that activity for us and we've consolidated that into the overall segments that it represents. But, Colt is a significant player within the business aviation space. It's going to be pretty additive to that aviation payment side.

But, as I mentioned earlier, we've moved into a lot of houses at the same time and we haven't seen the growth that we're looking for within those technology offerings. We won a significant contract with the U.S. military. We have our AVCARD business that we picked up in 2007. We picked up a handful of merchant software businesses in the business aviation space. All of that, we put under Multi Service's roof. So, they've taken that. That was the logical way to consolidate that. I think we're still looking for the type of growth that we're going to see out of that. So, thanks, Jack, for calling that out, but we're not exactly there in terms of seeing the type of traction. But, it certainly is our intention and that, I think, is something that you'll see over the next 12 months.

Okay. Okay, that's helpful. You know, Mike, just given all of the geopolitical instability that's sort of popped up here over the last several months, whether it's in Eastern Europe or the issues in the Middle East; are you seeing more volatility out there in the fuel markets? Because I know, generally speaking, volatility helps drive better profitability for your business. Granted, these are very challenging times geopolitically, but are you seeing anything to make you think that volatility is maybe creeping back into the fuel markets to some degree?

Thanks for asking the question, Jack, because I'm not sure that -- if you look at the environment that we operate in, you've got oversupply, overcapacity of almost everything in the marketplace today, whether it's refining, whether it's shipping. Okay, the U.S. airlines have done a pretty good job in terms of working their capacity. Some of the foreign carriers, I think, are losing a little bit track of that. You look at low interest rates. Some part of what we're doing is financing.

And then you look at the disruptions in the marketplace. All of those disruptions would have caused significant volatility and some amount of turmoil, which we sort of thrive on. We obviously smooth out that for the marketplace. But the U.S. market, shale oil, all of that has really been subdued. So the market is remarkably stable. You look at Libya and some of the other things that are going on in the marketplace, whether it's Russia, Ukraine, so it's just remarkably stable, which is certainly good for those folks who are trying to plan their businesses against the price of energy, but it doesn't show some of our best capabilities is managing volatility. So, considering all of the markets and the environment, I think we're not doing bad. We certainly are looking for significantly better results than what we have on the table.

And we're continuing to invest in our platform. I think we've got a fantastic group of people and a fantastic business where -- we handle about a million barrels a day of liquid energy so we are a significant participant in global energy markets. I don't know how many companies can talk about that and dealing with end users.

So, volatility has not been there despite everything that's going on and that's because the market is oversupplied and you don't have a lot of demand. And the new sources of supply have offset the disruptions that, in another market environment, you would have seen prices going haywire. So, anyway, kind of a long-winded answer, but there you have it.

No, that's very, very helpful, Mike. Thank you for that insight. And then one last one follow-up, if I might. Ira, looking at the operating expenses, ex bad debt expense and the executive charge, they were a good bit lower in the second quarter than I think you told us to sort of think about on the last conference call. I think you were saying like $130 million to $134 million.

I guess, is that a reflection flexibility in your cost structure and you guys are sort of managing that with the issues in the land segment? Or was there something else there that maybe took costs lower than what you were expecting? And then if you could help us sort of bridge the sequential increase in those core operating expenses, I think that would be helpful. Just what portion of that is tied to acquisition? What portion of that is just general inflation within the business?

Sure. I'll try my best at both, Jack. On the first part, I would say the principal driver of why the number was lower than what I projected on last quarter's call is that our forecast for overall compensation, principally incentive comp which is the variable, was higher than where it actually came out in the quarter. So, we kind of overestimated that one. It's a very complex set of calculations to get us there and that number tends to move around a bit quarter over quarter. It's moved around more, from a favorable standpoint, in Q2.

If you take the $126 million, which excludes the one-time charge, and you want to bridge the gap to the forecast for next quarter, and let's say the midpoint in the forecast is $132.5 million so that's a $6.5 million increase, I would say about two-thirds of that relate to the Colt acquisition, including their core operating expenses plus amount $1 million of one-time expenses related to the deal that we will book in third quarter. And the rest of that is kind of, as you described it, inflationary numbers in terms of forecasting not being an exact science. So there's a couple million dollars of that in there in addition to Colt.

Okay, great. Thanks again for the time, guys.

Thanks, Jack.

Kevin Sterling, BB&T Capital Markets.

Thanks. Good evening, gentlemen.

Hey, Kevin.

Hi, Kev.

You guys have talked for a while about the acquisition pipeline being full and I'm not asking as to specific market segments you're finding more attractive, but maybe rather the size of acquisitions you're targeting. If I'm not mistaken, Watson was your largest to date, roughly $190 million. Colt was sizeable, over $63 million. Are you finding more opportunities in companies with existing scale and size? Or are you seeing just as much opportunities with companies such as U.S. Energy where you can pick up a smaller company and kind of grow that business organically?

It's pretty much all over the board, Kevin. There are plenty of tuck-ins, bolt-ons. We've been looking historically at these companies that have been the size that you've seen. Looking at larger companies, something that we review from time to time. So, it's pretty much all over the board. But, there's certainly plenty of these smaller companies that fit within all of the areas that we're active in and fit with the vision of that downstream side, the supply and trading side, the technology and software, and the marketing and underwriting side.

So, it's continuing to look at the geographic expansion. Certainly, Asia is an area that we'd like to focus on, as well, with the growth and the long-term growth prospects there. We're looking at that more closely today than we have in the past. We've got a fantastic organization all throughout Asia.

So, it's really all over. And Watson was a good size. Multi Service was a good size. So you're starting to see the size of these acquisitions pick up, but there's a lot out there. As you'd imagine, with a company of our size and global footprint, the opportunity set we have is significant and we're continuing to evolve and define more clear runways in technology and software, in marketing and underwriting, logistics and distribution, supply and trading. So, all of those are candidates for us. So, it's pretty endless, to be honest with you.

Right. Okay, thanks. Some good color. Some of the smaller acquisitions, you look at the tuck-ins and I'm not necessarily sure Colt fits that mold, but some of these smaller guys. Is it still kind of the same story we've heard a couple years; they just don't have the working capital or the balance sheet to grow. They don't have the scale. And that's why they're a good fit with you guys because you do have that ability to grow.

Yes. I mean it depends what business they are in. On the natural gas side, there's interesting opportunities there on the infrastructure side. There's not a surplus of people that understand the technology to be able to put together all of the pieces to get LNG for marine or LNG, micro-LNG, within various different markets. You've got a tremendous amount of natural gas in this country. It's inexpensive. It's economic. But, that requires a certain amount of technical skill and it requires an infrastructure build out. So those opportunities are interesting for us. We like that. It's happening. So, it's across the board. You've got generational issues, as you'd imagine. So, it really just depends. On the technology side, that has other attributes to it as well. So, typically there's some missing components and we provide, I think, a great place for selling owners and shareholders to put their companies in a good place and for some of those individuals to be able to express themselves in ways that they couldn't working for their own businesses.

Right. Okay, thank you. And last question here. You guys talked about strength in aviation and you talked about strong passenger demand you're seeing. As we go forward in aviation the next couple years, when you look at the Boeing and the Airbus order book and how massive they are and these large planes coming online, but they also are more fuel-efficient. Does that possibly damper your potential growth in aviation? Or is it something we just kind of track, monitoring passenger activity? How should we kind of think looking forward at aviation with the strength we saw this quarter possibly continuing?

Yes. Boeing just released their market forecast. I forget what they call it. But --

20-year forecast.

That's right. So, they show over the next 20 years practically a doubling of passenger, mostly passenger, aircraft. Freighters increase too, but, it's largely passenger-aircraft-related. Today, new aircraft are about 20% more fuel-efficient. How much more fuel-efficient they're going to be 20 years from now, who knows.

I think it's safe to say that you're going to have increased consumption. That's a fair position to take. You're going to have alternative fuels. We're very much all over alternative fuels. We've made some investments into the best ventures along those lines. We've also diversified into services; technology. Airlines typically are focused on running their airline, servicing their passengers. So, procuring energies and dealing with energy and fuel and dealing with logistics on ground handling is another part of our business and it's a growing part of our business. And we're doing that not, only on business aircraft but also on commercial aircraft, whether it's ferrying flights or providing pilots, any number of different levels of service. So, it's really about doing the surround sound to our clients, providing for them what we can provide more efficiently at scale than they can provide individually. So, it's beyond fuel.

Right, okay. Thanks so much for your time and sorry about the loss of LeBron James.

It's alright, Kevin. We'll get you back for that one.

Sean Collins, Bank of America.

Great, thank you. Hi, Michael. Hi, Ira. How are you?

Hi, Sean.

Hi, Sean.

Just on the marine segment, you reference a shipping industry slump. Are you seeing any signs of a turnaround there or any change in the end market? And, if not, what type of conditions are you seeing there?

It's really not a great market. I mean, you do have some pockets, some specialty businesses, perhaps chemical, offshore. But, the bulk of the marketplace, the bulk market, the container, the tanker, the vast majority of ocean transportation is not doing well. So, we try to and we have successfully gone into different specialty markets that require specialty services and that's been a good thing for us. It's good to be challenged with a market because you've got to come up with some innovation and creativity and our team has done an excellent job of that.

But, overall, the market is very sluggish. A lot of people have been forecasting that we've seen the last of it, but I think we're in it for a little while longer. It's all really a function; supply demand, global economic growth. The shipping industry is able to push out a ship a whole lot quicker today than it used to so it's really probably not unlike the aviation industry where you're coming up with discipline with capacity. But, I don't know if we're ever really going to see that. You've got private equity that's come into the mix as values of assets are extremely low. So, tough place to do business, that's for sure. So, we understand it. We've got a tremendous risk management team. And it's really continuing to diversify our position within that shipping space and also, from a corporate perspective, diversify our participation in just transportation logistics and energy.

Okay, great. I appreciate those thoughts. Just a real quick follow-up. I know we're getting late here. But on the Colt acquisition, the international trip planning services segment, I suspect that has a different business profile than the rest of your businesses. And can you just talk about how it fits in with your other business and kind of how you thought about it? (inaudible) that segment.

So, we've been in the trip planning space since 1998 when we acquired Baseops. And what that is, is as it relates to business aviation; they need a flight plan. They need weather routing. They need overflight permits. They need ground handling. So, that's what our trip planning services does for those corporate aircraft or general aviation and we provide that around the world. We also do that for commercial aircraft.

So we've been doing that for a long, long time and Colt has excellence in that space and we've got some tremendous synergies between what Colt does, what World Fuel does, through our Spire brand, and Baseops does. So, we're no stranger to it. We've been in it for a while. We've got specialized software for it and experts around the world that provide those logistical support services and flight services to both commercial and private aircraft.

Okay, that's great. Thank you for that color. That's all from me. Thank you for the time and insight.

Okay.

Thanks, Sean.

Mr. Kasbar, there are no further questions at this time. I will now turn the call back to you for closing remarks.

Well, I just want to thank everyone for the support, especially our shareholders and our fantastic employees. It's tough global economic conditions. Everybody knows that. And I feel like our company is performing well. We look forward to talking to you next quarter with continuing reports on our results and activities.

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