World Kinect Corp (WKC) 2015 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the World Fuel Services 2015 third-quarter earnings conference call. My name is Kelmer, 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.

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

Thank you, Kelmer. Good evening, everyone, and welcome to the World Fuel Services third-quarter earnings conference call. I'm Glenn Klevitz, World Fuel's Assistant Treasurer, and I'll be doing the introductions on this evening's call, alongside our live slide presentation.

This call is also available via webcast. To access this 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 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 the results to materially differ from these projections can be found in World Fuel's Form 10-K for the year ended December 31, 2014, and other reports filed with the Securities and Exchange Commission. World Fuel assumes no obligation to revise our publicly release the results of any revisions to these forward-looking statements in light of new information or future events.

This presentation also includes certain 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'll 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 and Chief Executive Officer, Michael Kasbar.

Thank you, Glenn, and good afternoon, everyone. Thank you for taking the time to join us today.

In the third quarter, we delivered results consistent with expectations we provided on our last call. As forecasted, we experienced a seasonally strong quarter in our aviation segment, a pickup in our marine segment due to the return of some volatility, and a solid quarter from our land segment where opportunities for growth remain strong.

In aviation, the team did an outstanding job selling a record 1.7 billion gallons of fuel across both our commercial and general aviation businesses. In commercial aviation, we experienced the expected seasonal increase in passenger volume, related to summer travel in North America, Europe, and Asia.

We continue to leverage our self-supply model to support the needs of our customers, while delivering an extensive array of value-added services. Our business and general aviation teams produced a solid result across our bulk, contract fuel, Fleet Card, software and payment-processing services.

Our government business in Afghanistan continues to contribute to aviation results, and we continue to pursue additional global opportunities involving advanced logistics for military and commercial clients.

Finally, positive results from another successful tender season has positioned the core commercial business for a strong finish to the year and continued momentum into 2016.

In the marine segment, volume again increased to a record quarterly level of 8.6 million metric tons, and we continue to believe that our market-share gains will serve us well, and certainly when conditions in the market improve.

With an annual run rate of more than 34 million metric tons, we continue to maintain the largest independent market share in the industry. As we mentioned on last quarter's call, an uptick in volatility during the beginning of the third quarter contributed to gains in our derivative sales business.

Activity in our core resale, offshore, and lubricants businesses remained flat (technical difficulty) during the quarter, against the backdrop of a market that remained soft.

Longstanding relationships with our valued suppliers and customers, as well as our attention to fuel quality, [surety] of supply, price risk management, value-added services, and perhaps most importantly, the strength of our balance sheet, continues to differentiate World Fuel in the marketplace.

Although the outlook for the overall marine industry calls for little to no improvement, we remain focused on profitably growing our marine business by providing comprehensive and superior solutions to our partners.

Our land segment produced a solid result, selling a record of more than 1.2 billion gallons of fuel during the third quarter. In North America, our dealer, wholesale, and C&I businesses all performed well; and our US energy business continues to grow, while delivering value-added advisory services to a growing number of diverse customers looking for natural gas and power solutions.

As I have mentioned in the past, we are taking our US energy management business and expanding their platform globally, both organically and through similar-sized acquisitions and strategic tuck-ins.

Multiservice has delivered reasonable year-over-year growth and continues to grow its payment and transaction processing pipeline, as we leverage our technology platform and expand our service offering to new and existing customers and markets.

The Watson results were in line with our expectations during the seasonally weak summer months in the United Kingdom, and the team is geared up for the stronger winter season.

Lastly, on September 1, we closed the acquisition of Pester Marketing, based in Denver, Colorado, a regional diverse (technical difficulty) fuel and lubricants marketer with a total volume of more than 100 million gallons. This transaction immediately expands our dealer and transportation footprint and adds a strong C&I customer base, with meaningful regional bulk and lubricant sales.

We also acquired (technical difficulty) interest in aviation fuel operations at four airports in Sweden and Denmark from BP at the end of the quarter, further enhancing our global aviation network.

Despite a major collapse in fuel prices, a material drop in demand for risk-management products due to a lack of clear market direction, and continued sluggish global economic activity, our diversified business model produced a solid result this quarter.

No one is immune to large swings in commodity prices. We selectively enter the supply chain to create value for a significant retail demand, and at times we get buffeted by the risks we are managing for our suppliers and customers.

However, the fact that our core business model is focused on supplying end-user demand across many market sectors gives us a level of relative stability and a powerful platform for optimization of the critical aspects of energy and logistics and related services that truly keep the wheels of global commerce turning.

Our more than 4,000 professionals create energy-management solutions for transportation, commercial, industrial, and governmental segments that drove each of our business segments to post record volumes. We are clearly winning in the market. Our transparency, solid balance sheet, and breadth of our product and service offerings makes us the counterparty of choice for our customers and suppliers across our global footprint.

We remain focused on risk management and leveraging our operational disciplines as we execute on our growth strategies. We know that we have our work cut out for us to balance our short-term results with the investments required to build out our longer-term strategic platform.

As always, we appreciate the continued support from our shareholders, customers, and suppliers, and remain very excited about the abundance of opportunities for future growth.

Now I'll turn the call over to Ira for a financial review of our results.

Thank you, Mike, and good afternoon, everybody. Before I begin the formal financial third-quarter review, I would like to point out a few changes to the way we will be presenting financial information each quarter going forward.

Rather than discussing both sequential and year-over-year comparisons, we will now generally only review year-over-year information, which we believe is most relevant and consistent with market practice. We have also now added segment volume information to our earnings release, which I now makes many of you very happy.

Consolidated revenue for the third quarter was $7.8 billion, down 33% compared to the third quarter of 2014. This decline was due to lower oil prices, offset in part by increased volumes across all three of our business segments.

As reflected in our earnings release, our aviation-segment volume was a record 1.7 billion gallons in the third quarter, up 165 million gallons, or 11% year over year. Volume in our marine segment for the third quarter was a record 8.6 million metric tons, up approximately 2.1 million metric tons, or 33% year over year.

Brokered business activity for the quarter was approximately 12% of total marine volume, as compared to 8% in the third quarter of last year. Our land segment sold a record volume of 1.3 billion gallons during the third quarter, up 160 million gallons, or 14% from the third quarter of last year.

Total consolidated volume was a record 5.2 billion gallons, up 20% year over year. Consolidated gross profit for the third quarter was $227 million. That's an increase of $12 million, or 6%, compared to the third quarter of 2014.

Our aviation segment contributed a record $170 million of gross profit in the third quarter, an increase of $11 million, or 11% compared to the third quarter of 2014.

While the aviation segment benefitted from traditional summer seasonality, we also took advantage of market volatility and related dislocations between certain markets, driven in part by unplanned refinery disruptions during the third quarter.

Year-over-year growth was driven by a 10% increase in volume and a larger contribution from our government-related business in Afghanistan. As we enter into the fourth quarter, we do expect a seasonal decline. However, it is unlikely that such decline will be as pronounced as it was in the fourth quarter of 2014.

The marine segment generated gross profit of $49 million, down slightly year over year. While margins declined due to lower market prices and a reduction in offshore activity, this was offset by a 33% year-over-year increase in volume.

Volatility clearly increased a bit in the third quarter, especially in the early part of the quarter, which helped to stabilize margins and improve the profit contribution for price risk management products after the lull we experienced in the second quarter. Based upon activity and volatility levels quarter to date, we expect our marine business to deliver a similar result in the fourth quarter.

Our land segment delivered gross profit of $71 million in the third quarter. That's an increase of $2 million, or 3% year over year. The gross-profit increase is principally related to increases in our core fuels activity, which is comprised of our dealer, wholesale, commercial-industrial businesses, compared to the year-ago period.

As we look to the fourth quarter, we should see a benefit from seasonality in our Watson business in the UK, as well as our natural gas business in the United States.

Nonfuel-related gross profit associated with our multiservice business was $12.6 million in the third quarter. That's an increase of approximately 7% year over year. We have continued to build out our team in multiservice, which has a growing suite of opportunities that should drive further growth in this part of our business as we enter 2016.

Operating expenses in the third quarter, excluding our provision for bad debt and approximately $3 million of one-time acquisition-related costs, were $156 million. That's up $17 million, or 12% year over year. Excluding the impact of acquired businesses, operating expenses increased $10 million, or 7% year over year. And our bad-debt provision for the third quarter was $1.6 million, up approximately $400,000 year over year.

The year-over-year increase in core operating expenses, principally related to expenses of acquired businesses, integration costs, and (technical difficulty) related to strategic hires in several areas of our overall business. As we look towards 2016, we remain focused on improving operating efficiencies, as well as driving greater operating leverage from acquisitions going forward.

The $3 million of acquisition-related costs is related to two acquisitions which we completed during the quarter, as well as opportunities which we are actively pursuing.

As Mike mentioned earlier, we acquired Pester Marketing, which is a leading distributor of motor fuels and lubricants, also an operator of convenience stores, and a leading supplier to industrial and commercial customers, headquartered in Denver, Colorado. We also acquired certain interests in aviation-fuel operations in airport locations in Sweden and Denmark from BP.

The combined purchase price for the two investments was approximately $78 million. As part of the Pester acquisition, we acquired certain assets and [liabilities] with a net book value of approximately $35 million, which we expect to sell within the next six months.

We expect these investments to be accretive to earnings between $0.07 and $0.09 per diluted share during the first 12 months, excluding the impact of related up-front integration costs.

Total operating expenses, excluding bad-debt expense, should be in the range of approximately $157 million to $161 million in the fourth quarter, including a full quarter of expenses associated with the two acquisitions I just referenced.

Consolidated income from operations in the third quarter, excluding one-time items, was $69 million, down $5 million, or 7%, year over year. And EBITDA for the third quarter, again excluding one-time items, was $89 million, also down $5 million, or 5%, compared to 2014.

Non-operating expenses, which principally consists of interest expense, in the third quarter was $6 million. That's effectively flat compared to the third quarter of last year, and I would assume such non-operating expenses will be approximately $6 million to $7 million in the fourth quarter.

Our tax rate in the third quarter was 19.5%, compared to 19.8% in the third quarter of last year. And we estimate that our effective tax rate in the fourth quarter should be between 17% and 19%.

Adjusted net income, which excludes approximately $3 million of one-time acquisition-related expenses, was $51.7 million this quarter, down $4 million, or 8%, year over year.

Non-GAAP net income, which also excludes intangible amortizations, stock-based comps, in addition to acquisition-related expenses, was $60 million in the third quarter, a decrease of $5 million, or 7%, year over year.

And adjusted diluted earnings per share was $0.74 in the third quarter. That's a decrease of 6% year over year. Non-GAAP diluted earnings per share was $0.86 in the third quarter, a decrease of 5% from last year.

Our total accounts-receivable balance was $2 billion at the end of the third quarter, down approximately $300 million year to date, principally related to the decline in average fuel prices, offset by increased volume across all of our business segments.

Net working capital was $824 million, down approximately $70 million year to date; and return on working capital was 32% in the third quarter, up from 28% in the third quarter of last year.

We generated $147 million of operating cash flow in the third quarter, marking the 13th consecutive quarter of positive operating cash flow and totaling nearly $950 million over this period. CapEx was $15 million this quarter, down from $17 million in the third quarter of last year.

During the third quarter, we also returned $40 million to our shareholders by repurchasing 1 million shares of our common stock in the open market, taking our repurchases year to date to approximately 1.6 million shares and leaving approximately $60 million available under our current authorization.

As stated in the past, the principal objective of our share-repurchase program is to offset the dilutive impact of employee stock awards, although as evidenced by our actions this past quarter, we may also repurchase shares when we feel such shares are significantly undervalued.

Our net debt was $274 million, down more than $100 million year to date, which provides us with significant capacity to fund organic growth and future strategic investment opportunities, while continuing to maintain a strong and unleveraged balance sheet.

So in closing, we bounced back from an unusually weak second quarter. All our businesses grew volumes and delivered improved results. We completed two acquisitions, repurchased 1 million shares of our stock, and still reduced our net debt position, driven by our 13th consecutive quarter of operating cash flow.

As we look towards the fourth quarter and 2016, with the investments we have made to strengthen and expand our leadership team during 2015, we believe our team is stronger than ever and well prepared to pursue the multitude of growth opportunities that remain ahead.

I would now like to turn the call back over to Kelmer, our operator, to begin the Q&A session.

(operator instructions) Jon Chappell, Evercore ISI.

Good evening, guys. I know you're never out of the acquisition market, but it seems like you're back to a certain extent with what you did in the third quarter. And then, Ira, in your comments you also mentioned some of the costs associated with acquisitions in the third were for some other things beyond the two that you actually closed. Generally speaking, what's the M&A landscape like right now? Were there certain segments where more opportunities exist? And really what's your financial wherewithal or appetite to maybe ratchet up the M&A a little bit?

Okay, Jon, I would say -- again, we closed two deals during the quarter, which is more than we've done in a while, so that's a good start. I would say the landscape is pretty solid. There are a lot of opportunities out there. They don't all make complete sense, and some of them seem to make sense early on; and then as we get into diligence, they make less and less sense, and some make more and more.

So they're really all over the lot. Valuations are all over the place. In some segments, valuations have gotten to levels that really don't fit well with our appetite for returns, for example.

But in a nutshell, there are a lot of opportunities that still fit within what I would describe as the sweet spot for us, and they really cross all three segments.

Clearly, there are a lot of opportunities in land, being the largest market that we serve worldwide. We've been expanding our global energy business. Mike may talk a little bit about that a little later, which is still small, but there are lots of small- to medium-sized opportunities there. And even in aviation-marine, although you may not think so, there remain plenty of opportunities for us to sink our teeth into.

So lots to look at in terms of our capacity. As I mentioned in my prepared remarks, our balance sheet is still very strong. We've got a lot of cash on hand. Granted, a lot of that is offshore, which increases our appetite to do some acquisitions over in other parts of the world. But even domestically, we have liquidity to make a pretty serious dent in the M&A space while maintaining a solid balance-sheet profile, which is something we're always very focused on.

So I think there'll be more news to come. It's tough to tell when certain deals come to fruition. Some happen very quickly. Some take a very long time. But the good news is there are lots of opportunities for us to continue to pursue.

All right. And I'll ask my followup for this one before I ask a different second question. I think the last time you guys gave any broad numbers around market share might have been your analyst day five years ago. Mike mentioned in his prepared comments that [your largest] independent market share in the marine business. We get this question all the time. Is there any way to give a range of percentages of what the market share is in the three main businesses right now?

It's pretty small in our land business because it's such a large business. In aviation, it's mid-single-digit, I would say. And then in marine it's probably low-double-digit.

Okay, that helps. And then my second question -- and I don't want to bring up the recent past, but I'm only bringing it up because this seems to be more of a normalized quarter -- with hindsight now of three months or six months, or whatever you want to say, the second quarter sticks out as a super anomaly, relative to the results over the last five years, or so. Have you learned anything else about what may have resulted in such a wide swing in results in Q2 and your ability to bounce back to what I would consider as a normalized range of results soon thereafter?

It's sort of interesting. We've chatted about that, and I guess this is -- it's sort of good news, bad news. We feel really good about our Company. I think we've gotten an extraordinarily good Company, with a great business model and just a fantastic senior team.

It's sort of interesting, when that price dropped, I think in the World Fuel of however many years ago, we would have got ourselves in a room and would have been in that room every single day. And I think it's a reflection of the level of sophistication that we have in our Company that we feel -- and it's true -- that we've got significant capability.

We've got a fantastic balance sheet. We've got very smart people. But the impact of that -- you know, it was kind of pervasive, and probably we could have done some different things. I mean, there are certain secular dimensions that really are bigger than us in terms of just the macro markets and all of that.

But certainly we commented about the different market segments that were tremendously impacted. And you look at the offshore side of the equation and the fact that the market dropped. Everyone thought it was the bottom, and then it dropped again, with no clear view of which direction the market was going in. And people just simply stopped hedging, so that was a part of it.

But I think it was really -- you know, as big as you get, you really need to be looking at these things very closely every single day, and we do. But that was a fairly, fairly sizable move. And as I mentioned in my opening comments, we do absorb those risks for our customers and our suppliers.

But the basic business model is in satisfying end demand, end-user demand, so we've got a very basic driver, and the fact that we're monetizing some of this in the commodity side does hit from time to time. But really as I commented last quarter, we've got a pretty diverse model, and a bunch of those items hit at the same time.

So I think we're back on track, and the main thing that I think we're focused on is really driving operating leverage. We are in pursuit of a global energy-management services company, and it's pretty exciting. And we're making it happen. So we don't have to go deep into taking risk in any particular area because we have such a diverse model.

The thing, of course, is to make sure we're managing all of those pieces at the same time. And I think we're well on our way -- and you see the things that we're doing. So it's sort of business as usual.

Got it. I appreciate it that (inaudible).

Gregory Lewis, Credit Suisse.

Thank you, and good afternoon. Hi, Ira. Hi, Mike. You kind of touched on it. Clearly, it was a great quarter for volumes pretty much across the board. Is that -- I guess mine is like a bigger-picture question. One is, is that just the oil fuel markets expanding, or do you think you guys are doing a real good job of taking market share away from other players?

We're taking market share. I don't think -- you're certainly not seeing the growth in the market over that period of time, that's for sure. I mean, you will see some growth in demand over the long term, but we've clearly taken market share.

Okay. And then just -- we've seen in the last couple days -- and you mentioned the natural gas business that you're running and growing. In the last week, we're seeing a huge step down in natural gas prices. As we look ahead to the fourth quarter, where it seems like the US is swimming in natural gas, should we be -- what type of impact -- will that have any impact on that segment of the business as we look ahead to the fourth quarter, just --?

Everyone has a different view of things, so -- with those movements with things that come down -- clearly you have a little bit of a different scenario, where it's a very sloppy market. But all of our consumers are short, and certainly an opportunity for them to lock in low numbers. And we work with them on creating those strategies.

So the absolute price, itself, isn't going to impact us very much. So it's really, again, building volume, which is really what our whole game plan is, is to provide those combined solutions. With our US energy management business, it's procurement, it's sustainability, it's utilization optimization, it's carbon services. I mean, it's any number of those different activities that every commercial and industrial user needs to have (technical difficulty) package it in a very convenient solution for them.

So it's not just the commodity, and it's not just the price. And that's really, I think, an important thing that everyone should understand, is a big part of our value prop is the services. It's the intellectual capital, and it's the software. It's the technology. It's the management capability that we're partnering with our clients. And we're also a distribution platform for the organized oil community and energy community.

So it's beyond fuel. It's now energy. And it's all of that packaged together. So certainly we do have some exposure to moving prices, and we absorb those risks. And I think we do an exceedingly good job of that. But the price, itself, is only part of the equation.

Okay. But I mean -- just following up on that, Mike, real quick -- I know it's been more recent, last week or two that this has really happened -- has there been an increase in traffic, do we think, or is it -- and the phone started ringing more following this move, or is it sort of something that you're slowly building out over time and that's not the way to think about it?

Are you referring to natural gas?

Yes.

I mean, 'tis the season. Everyone is basically again geared up for up the season. So it's Q4, and it's Q1, so we've been gearing up for that, and everyone is starting to basically set their game plans, and so discussions -- absolutely, and this is where you really start to load up.

Okay, got it. Thank you very much for the time.

Ken Hoexter, Merrill Lynch.

Good afternoon, Mike, Iran, and Glenn. Congrats on simplifying the presentation, focusing year to year and providing the volume data, real helpful.

Mike or Ira, maybe your thoughts on the deteriorating environment that we're seeing on a macro basis. Obviously, you're seeing it with where WTI is, as low as it is, and what Greg was just talking on nat gas. But thoughts about the customer side of this. In 2008, you moved to reduce your exposure to the market, reducing day sales outstanding and the like. Are you seeing any of that in this kind of market yet? I know, Ira, you pointed out the bad-debt expense, just wondering if that's anything you're worried about or concerned at this point in the game, or is it still just purely benefit from the lower prices?

If you're talking about credit risk, Ken, is that --?

Yes.

(multiple speakers) yes. So I think our credit function -- we talked about this over a period of time -- I don't see that as being something that is a huge change. Our risk profile, I think, is pretty constant.

We've managed to navigate through the markets pretty well. And again, people have asked this question from time to time, have we changed our risk profile. I don't think we ever will. If anything, we're probably a tad on the conservative side.

And again, we're not looking to make money by taking credit risk. I think we understand what we're doing, and it's really driving market share and growth by value creation.

So certainly, there's a casualty here or there in the marketplace. There always will be. But I don't think there's anything we're seeing that is undue, or certainly nothing within our portfolio.

Then talking about that settling in, is (inaudible) is that all settled in now? Is the share all distributed, or is there still opportunity to go and win additional market -- you were talking about market share before, is that still something that's [floating] out there, or has that all found a new home and that's not still available on market?

Well, listen, you certainly had a company out there that was extremely aggressive. And there's obviously another side to that story. Those folks have found new homes, for the most part. Some of them moved around. There's a little bit of musical chairs, there.

But I think the only significant remaining issue there is the lack of that entire group and their aggressive determination to grab volume in the way that they grab volume.

So we're continuing to do what we do. Nothing's really changed. Our strategy and our direction and our long-term strategic roadmap really hasn't changed. The market's changed in a number of different ways, and certainly you've got some of the regulatory environment, which is interesting and is sort of hanging over everyone's head for 2020.

But that's pretty much over. It's kind of -- to some extent, it's old news. It's not old news for the folks who have got those legal issues. They're starting to wind down to some extent, but that's pretty much in the past. It's pretty much over.

I don't know if it's the more significant issue, but in equally -- an equal driver of that is really price and the impact on the marine industry that lower prices has had. So that's made it easier for a number of folks to participate and compete in the marketplace.

But I think that the bigger story is the continuing drag on the global shipping market, obviously China. You do have a lot of supply in the marketplace. The overall dynamics of the market are terrible. So I think the fact that we're still doing reasonably well is just testimony to the value of our business model and the professionals that we have in our Company.

It's not a simple business, not easy business. There's a lot of moving parts, and it is live action, full-time. It's a spot market, and we handle about 45,000 deliveries every year, and every single one of them needs to be handled by a series of professionals. So it's a very active business. It's not a simple business. I think our team does a pretty good job. I don't know if that gives you the color you need.

No, that's great. If I can ask my second question on a different subject, but the same issue that you just talked about, in terms of the complexity. Ira mentioned Watson and Carter in a couple of different places. Let me just ask a fundamental question. As you make these acquisitions, do you blend them all in? Are they still considered separate entities? Do they get the same operating software? I want to understand the level of integration you get on the businesses.

And I guess the reason I'm asking is, there's still extreme seasonality in the Watson business. Does that blend over time and we start to see that smooth out? Is that just a factor of what that business is, that you just get such winter seasonality in the fourth and first quarter? I just want to understand that concept, if that smooths out over time, or if they really do stay separate.

Sure. If you use Watson as an example, Ken, Watson has that seasonality in their business, and it relates to certain parts of what they do.

There's certainly a concerted effort to try to drive more a more ratable business that comes through each quarter of the year. That's a lot of heavy lifting to get there, obviously, because the profitability in Q4 and Q1 historically has been so much greater because of the concentration of winter weather-related fuels that they sell.

We have integrated Watson with our other UK land platforms. It's in various stages of technology-related integration. But from a business standpoint, that business has been fully integrated with businesses that are more ratable over the course of the year. But there's still a pretty big gap there in that specific example.

As we continue to grow our business in the UK, that's one of the things that we look at. We've got a few folks that we've brought into that business that have a lot of experience with the land-fuels operations in the UK. And we'll be looking to tap into that in 2016 and beyond to try to find more opportunities that can squelch some of that seasonality.

But for now, it's not going to change in the short term. And it's the same for other parts of our business, where we see seasonality in aviation in the summer. We've got things like deicing in the winter months. That's not a gigantic piece of the pie, but it's something that contributes to aviation in a different way during the seasonally weaker winter period.

So we look to integrate pretty much everything we acquire within a relatively short period of time. Different businesses have different technical requirements, and some happen sooner than later, but that's certainly a standing principle that we have.

I think we could do a better job of getting more integration-type synergies in the future than we have historically. I alluded to that in my prepared remarks, as a way to drive more operating efficiencies in our cost structure. But certainly on a historical basis, we've tried to integrate all the businesses we've acquired as quickly as possible.

I'm just going to add a little bit of color to that, Ken.

There's a good amount of convergence within our land business. So our dealer business, our C&I, which is delivering to end users of national accounts, lubricants, our wholesale business at the rack, and then natural gas and power and risk management and derivatives. So there's a lot of similarities across all of our businesses, actually.

But we're coming together now with a very powerful global platform, which is pretty exciting, where we now can approach clients and give them a much more comprehensive service. And all of these businesses are collaborating with each other. So that's pretty exciting, and that's really what we're going after.

And then I want to just turn back to one thing that I forgot to mention, which is maybe the most important thing, relevant to [O.W.], and that is counterparty risk.

I think this is an increasingly important issue with O.W. (technical difficulty) there was a lot of double jeopardy. And within the marine business, it's pretty fragmented. The barrier to entry is quite low, and it's still amazing to me that our esteemed clients and the industry does not really look so much at counterparty risk.

But I think this is becoming a much bigger issue. Supply chain certification, who you're doing business with -- it's just, I think, a fact of modern life, where people want to know who's on the other side of a transaction. And I think that that trend and that transparency that is being driven by the marketplace is right in our wheelhouse.

We've always operated that way, and it's cost us a lot of money. It's pretty expensive to do things the right way. It's pretty expensive to do things in a comprehensive way. So we have always tried to fill the vacuum, and I think we have, in terms of quality control, HSSE compliance, code of conduct, you name it.

So all of that costs a lot of money, but there's a value to it. And in any case, I think it's the thing that should stick out from O.W. And so -- anyway, some of the other value props that are easier, in terms of credit lines -- as the price has gone, that's been less of an obvious value.

I know when I got involved in the business, a long time ago, we had a French cable address. There were telex machines. And your stock in trade was price discovery. It's no longer price discovery. It's really significantly more sophisticated parts of the business. In any case, I think that's a big part of the O.W. story is counterparty risk.

I appreciate the time and all the answers. Just one quick clarification from Ira, if I may. I caught the accretion. I missed what you said with the integration costs. You said the $0.79 accretion. What was the integration cost?

Well, all I quoted was $3 million of total integration cost. The (multiple speakers) contribute to that, but some of that $3 million relates to other transactions that are still a work in progress.

Great. I just missed the number. I appreciate that. Thanks for the time, guys. I appreciate the insights.

Kevin Sterling, BB&T Capital Markets.

Good evening, guys. It's actually William Horner on for Kevin.

Hey, William.

Hi, Ira and Mike. Going back to the marine question, and asking it a little different way. Mike, you provided a lot of great detail. If we could boil it down a little bit -- was the improvement this quarter more from the levers you were able to pull internally, or do you think it was more from a macro perspective with customers looking to you for some of the value propositions and transactional sophistications that you've touched on?

It was a little bit of both. I don't have the precise cuts on it, but it was a mix of both. I can't give you anything more precise than that. I probably could, but I don't know if I want to.

(multiple speakers) -- go ahead.

Clearly, there are some internal levers, but as we've said a couple of times, and as we indicated on the call last quarter, we did get a [blip], and that produced the response. So we were able to monetize that.

That's fair, and I understand you can't give much more detail, just trying to get a sense of how much maybe the competitive dynamics are rationalizing out there (inaudible) more color in that arena, as well.

So maybe switching gears to aviation for a second. Obviously, it's been in the news a lot recently with the Obama administration, the decision to extend the troop presence in Afghanistan. So looking at your opportunities in that region, would you expect that your activity level would remain consistent with where it's been, or do you think that there may be some incremental opportunities with that decision?

I think, William, clearly as we've been talking about this specific issue for a couple years now, the contribution from that particular activity in Afghanistan has been on the decline.

If I think if you asked the question a year ago, we would have told you that the number might be zero today in terms of contribution, but it's clearly hung in there for reasons related to your question, in terms of more troops sticking around way longer than anyone had anticipated.

So it's really tough. There's no crystal ball, in terms of the correlation between troop decision and the level of activity that we see. But clearly those types of decisions don't hurt and provide us with a greater opportunity than we had before those decisions were made. But it's also clear that it's very difficult to predict the requirements going forward.

We had a much better year to date this year than we expected in terms of that level of contribution. But again, we don't have a crystal ball in terms of what that may be for 2016 or 2017. But we continue to look for similar opportunities. They may not be of the size and scale of an Afghanistan, with what we've learned from the skills we've built in servicing those complex needs in a region like that. And we'll -- identifying opportunities like that takes some time, and hopefully as that starts lull, we'll find something to fill that void.

That's fair, Ira. I appreciate the color. I'll leave it there, and congrats on a nice quarter, and I'll also second the thanks for providing the volumes in the press release now, very helpful.

You're welcome.

(operator instructions) Andrew Hall, Stephens Inc.

Hey, guys, thanks for the time. Most of mine have been asked and answered. You guys have talked on past calls, and somewhat on this call, about customers being somewhat reluctant to utilize your hedging programs. Just looking out the end of this year into 2016, do you expect that activity to pick up as your marine and aviation customers try to lock in these low rates?

Well, as I mentioned, it's really a function of what people believe is the future direction of the market. You've got -- with Iran as a backdrop, with a lot of supply and not a lot of demand, and the thing that really put people on the sidelines was the secondary drop. So it really just depends on [sentiment]. If most of the market believes that, okay, we've hit the bottom, then you're going to see some folks rush to try to cover.

But we haven't seen that just yet, and you're seeing a number of different folks talk about how it could go forward. So what that is getting people to do is absolutely nothing, or very little. So until that changes, I don't think you're going to see a robust environment.

All right, makes sense. Just a couple housekeeping items. I might have missed this earlier, Ira, but did you give what the impact of your aviation self-supply was in the quarter?

No, I didn't give it. We had a benefit this quarter, but it wasn't overly substantial.

Okay. And then what was the annual volume you gave associated with your Pester acquisition?

The Pester acquisition is about, a little over 100 million gallons.

Okay, perfect. That's all guys. Thanks a lot, and congrats on a good quarter.

Thanks.

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

Well, thanks, everyone. We appreciate the support, and we look forward to talking to you next quarter.

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.