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Edited Transcript of INT earnings conference call or presentation 25-Apr-19 9:00pm GMT

Q1 2019 World Fuel Services Corp Earnings Call

MIAMI Jul 2, 2019 (Thomson StreetEvents) -- Edited Transcript of World Fuel Services Corp earnings conference call or presentation Thursday, April 25, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Glenn Klevitz

World Fuel Services Corporation - VP & Assistant Treasurer

* Ira M. Birns

World Fuel Services Corporation - Executive VP & CFO

* Michael J. Kasbar

World Fuel Services Corporation - Chairman, CEO & President

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Conference Call Participants

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* Ariel Luis Rosa

BofA Merrill Lynch, Research Division - Associate

* Benjamin Joel Nolan

Stifel, Nicolaus & Company, Incorporated, Research Division - MD

* Kevin Wallace Sterling

Seaport Global Securities LLC, Research Division - MD & Senior Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. And welcome to the World Fuel Services 2019 First Quarter Earnings Conference Call. My name is Ash, and I will be coordinating the call this evening. (Operator Instructions) As a reminder, this conference is being recorded Thursday, April 25, 2019.

I would now like to turn the call over to Mr. Glenn Klevitz, World Fuel’s Vice President, Treasurer and Investor Relations. Mr. Klevitz, you may begin your conference.

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Glenn Klevitz, World Fuel Services Corporation - VP & Assistant Treasurer [2]

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Thank you, Ash. Good evening, everyone, and welcome to the World Fuel Services First Quarter 2019 Earnings Conference Call. I'm Glenn Klevitz, 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 this webcast or future webcasts, please visit the World Fuel Services website 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 we 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 most recent Form 10-K 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 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 will begin with several minutes of prepared remarks which will then be followed by a question-and-answer period. As with prior calls, we ask that members of the media and individual private investors on the line participate in the brief in listen-only mode.

At this time, I would like to introduce our Chairman and Chief Executive Officer, Michael Kasbar.

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Michael J. Kasbar, World Fuel Services Corporation - Chairman, CEO & President [3]

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Thank you, Glenn. Good afternoon, everyone, and thank you for joining us today. We had a solid start to the year, and I'm proud to say our team continued to make steady progress on our value creation strategy defined by our three pillars of sharpening our portfolio, driving organic growth, and exercising cost discipline.

I know you've heard me say this consistently over the last several quarters, but it is this mantra that has focused our execution, driven our results, improved the health and provided confidence in the trajectory of our business.

Through the first quarter of 2019, we continued to focus our efforts and financial capital into businesses that are predictable, sustainable, and scalable. The diversity of our business model, which we have long believed to be a strength, enabled us to offset the warm weather in the U.K. and continue our earnings momentum.

Our solid financial performance this quarter evidences that our strategy of portfolio rationalization, organic growth and cost management, is bearing fruit. Furthermore, we have built a robust pipeline of both organic and strategic opportunities that we are actively evaluating and pursuing and for which we remain well-positioned to execute on during the balance of the year.

Our aviation segment performed well, supported by supply-chain optimization efforts and a continuing expansion of our physical operations into more locations underpinned by strict adherence to our cost management discipline. Our government business also delivered strong results, leveraging our supply capabilities in strategic areas of interest and demonstrating our reliability and expertise in energy and logistics to support these complicated activities as a trusted partner.

While volume in this quarter was only marginally higher than last year, we expect organic growth to continue within our aviation services business over the balance of the year.

Our marine segment delivered positive year-over-year results and made judicious choices about our portfolio while maintaining a focus on cost-efficiency and prudent risk management. Gross profit margins remain strong in Q1 and our focus on returns on capital is designed to continue that trend.

We are leveraging the supply and logistics competencies we already have in place across all of our businesses to capture internal synergies, which will further augment our efforts to address the industry challenges inherent within the IMO 2020 low sulfur regulations.

This quarter we saw the benefits of the geographic diversity of our land business as it overcame the negative impact of a warmer-than-expected winter in the U.K. by continuing to grow our North American commercial and industrial, or C&I, fuel business and accelerating momentum of our Global Connect gas power and sustainability business.

I remain bullish about my remarks during our last call that our land segment will continue to grow at double-digit rates this year by increasing our value share with existing customers and by bringing together our capabilities in gas power and sustainability to offer a compelling and comprehensive suite of energy solutions to our C&I customers around the world.

Our MSTS Payment Solutions business continued to grow both gross profit and EBITDA at a double-digit rate. Our team continues to execute well on ongoing business activities while identifying new customers seeking cost-effective business-to-business customer acquisition and payment solutions.

I am truly pleased to see how our team has locked arms across all businesses and functions to simplify processes, improve organization alignment, and beginning to drive shared services efficiencies by employing best practices through centers of excellence.

Looking ahead, we are optimistic that our technology investments and operational streamlining will not only improve the ease with which our customers and supply partners transact with us, but would also lead to more collaboration within our team of over 5,000 talented professionals that I believe to be the most creative and innovative in the energy and logistics space with whom I am truly very fortunate to work.

So I want to say thank you to my 5,000 colleagues in 38 countries that deliver comprehensive energy solutions in over 200 countries and territories, and I want to thank our shareholders who support our vision of a global energy management, fulfillment and payments business supporting the commercial, industrial and government sectors.

I'd like to turn the call over to Ira at this moment to do a further review of our first quarter results in greater financial detail.

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Ira M. Birns, World Fuel Services Corporation - Executive VP & CFO [4]

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You're welcome, Mike, by the way, and thank you. Good evening, everyone. I'm pleased to report that we continue the positive momentum from 2018 in the first quarter by starting off the year with solid results. Before I get into the details, some of the highlights are as follows.

Adjusted EBITDA for the first quarter was $95 million. That's an increase of $14 million, or 17%, compared to last year. We have now delivered year-over-year increases in adjusted EBITDA for 8 consecutive quarters.

We again improved operating leverage, making progress toward our goal of a 250-basis-point improvement in our operating expense ratio for the full year. Adjusted earnings per share for the quarter was $0.66 including the impact of the prior period corrections which principally related to tax, referred to in our earnings release. Excluding such corrections, adjusted earnings per share was $0.50.

And lastly, our balance sheet remains strong as our net debt-to-adjusted-EBITDA ratio fell to 1.3 times.

Consolidated revenue for the first quarter was $8.7 billion, down $500 million or 6% compared to the first quarter of 2018. The year-over-year decrease in revenue is principally driven by the decline in volumes in our marine and land segments. Our aviation segment volume was 1.97 billion gallons in the first quarter, effectively flat year-over-year. For the full year we expect volume growth to be similar to the growth experienced in 2018 in the aviation segment.

Volume in our marine segment for the first quarter was 5.2 million metric tons which is down 575,000 tons compared to the first quarter of last year. The volume reduction principally related to our continued efforts to exit certain low-margin business activities in Asia. The marine team continues to focus on growth opportunities which meet our return thresholds including the identification and penetration of new markets.

Our land segment volume was 1.3 billion gallons or gallon-equivalents during the first quarter, down approximately 110 million gallons, or 8% compared to the first quarter of 2018. The year-over-year decline in land segment volume was principally related to our continuing efforts to reduce non-core, low-margin supply and trading activities in North America.

Total consolidated volume for the first quarter was 4.7 billion gallons or gallon equivalents, a decrease of approximately 260 million gallons or 5% year-over-year.

Please note that the following figures excluded the impact of pre-tax non-operational items in the first quarter, as well as non-operational items in periods previously reported as highlighted in our earnings release. These non-operational items principally represent restructuring and acquisition-related costs.

To assist all of you in reconciling results published in our earnings release, the breakdown of these non-operational items can be found on our website and on the last slide of the webcast presentation.

And now, on to gross profit. On a consolidated basis, gross profit for the first quarter was $251 million, an increase of $8 million, or 3% compared to the first quarter of 2018. Our aviation segment contributed $114 million of gross profit in the first quarter. That's up slightly compared to the first quarter of 2018.

Strength in our government-related and international fueling operations were principally offset by the effects of market-backwardation on our domestic supply activity during the first quarter. We expect similar sequential growth in aviation gross profit in the second quarter to the growth experience last year, principally-related to normal seasonality in our core resale business and international fueling operations.

The marine segment generated first quarter gross profit of $35 million, an increase of $4 million or 13% year-over-year. Our team continues to execute well, with core margins and returns remaining well above the prior year. Looking ahead to the second quarter, we expect marine gross profit to be similar to the first quarter which would again drive solid year-over-year improvement.

Our land segment delivered gross profit of $102 million in the first quarter. While land gross profit did increase sequentially, such increase was muted by yet another unseasonably warm winter in the U.K. Year-over-year gross profit was essentially flat, with the U.K. down from last year's more seasonable winter, offset by increased gross profit in our Connect Global Energy Services platform and North American commercial and industrial and retail activities.

Gross profit coming from our multi-service payments solutions business was $18.9 million, an increase of $2 million or 12% compared to the first quarter of last year, reflecting the continued strength of the multi-service business model.

Looking ahead to the second quarter, while we expect gross profit in the land segment to be flat to slightly lower sequentially, driven principally by seasonality, we expect solid year-over-year improvement driven principally by increasing profitability in our commercial and industrial and retail activities.

Operating expenses in the first quarter excluding bad debt expense and non-operational items were $176 million which is an improvement of $3 million year-over-year and an improvement of $2 million sequentially. Our total operating expense ratio as a percent of gross profit improved year-over-year to 71.1% from 74.5% in the first quarter of last year, and from 72.7% for the full year of 2018. And we remain focused on achieving our target of a 250-basis-point improvement in our operating expense ratio for the full year 2019. And, as a reminder, this target is in addition to the 425-basis-point improvement in our operating expense ratio which we achieved in 2018, a testament to the focus of our entire team globally on controlling costs better than we had done in the past.

In the second quarter, we expect operating expenses excluding bad debt and any non-operational items to be in the range of $180 million to $184 million. Adjusted EBITDA was $95 million in the first quarter, up $14 million or 17% from the first quarter of 2018. Again, this represents the 8th consecutive quarter of year-over-year improvement in EBITDA. Over this period, trailing 12-month EBITDA has increased by nearly $100 million.

Adjusted income from operations for the first quarter was $73 million, up $10 million or 17% year-over-year, and first quarter non-operating expenses, which is principally comprised of interest expense and finance charges, were $19 million, effectively flat compared to last year and I would assume interest expense to be in the same $18 million to $20 million range for the second quarter of 2019.

Our adjusted effective tax rate for the first quarter was 16.6%, including the effect of the correction related to a prior period discrete tax item. This is down from 19.3% in the first quarter of last year. Excluding the impact of the discrete item, our adjusted effective tax rate would have been 32.4%, slightly lower than the rate we guided to going into the first quarter. But for the balance of the year, we still expect our tax rate to be in a range of 32% to 36%.

Adjusted net income for the first quarter was $45 million, an increase of $9 million or 27% when compared to the first quarter of 2018, and adjusted diluted earnings per share was $0.66 for the first quarter, an increase of 27% compared to last year, again impacted by a lower-than-expected effective tax rate.

Our total accounts receivable balance was $2.7 billion at quarter end, effectively flat sequentially as well as when compared to the first quarter of 2018. We generated cash flow from operating activities of $22 million for the first quarter despite a significant increase in fuel prices from year-end to the end of the first quarter.

Despite the increase in fuel prices, we further strengthen our balance sheet, reducing our total debt balance below $700 million which is down nearly $140 million year-over-year resulting in a reduction of our ratio of net-debt-to-adjusted-EBITDA to 1.3 times, down from 2.2 times in the first quarter of last year. This improvement increases our capacity to invest in both organic and strategic investment opportunities while continuing to maintain a strong balance sheet.

In closing, we delivered strong results in the first quarter while further improving our balance sheet and liquidity profile. We remain focused on sharpening our portfolio of business activities by divesting of additional non-core businesses and reinvesting related proceeds in core activities which should drive additional profitable growth.

Our continued focus on cost control resulted in a significant year-over-year improvement in our operating expense ratio in the first quarter, and we remain focused on delivering a 250-basis-point reduction in the ratio for the full year. These opportunities remain bound tightly together in support of our principal goals of increasing returns on capital and increasing shareholder value.

I will now turn the call back over to our operator, Ash, to begin the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Ben Nolan with Stifel.

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Benjamin Joel Nolan, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [2]

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I guess for my first question, you mentioned as it relates to the aviation business that you've done pretty well on the government contracting side. I know that's always been kind of an ambiguous number or somewhat of an uncertain outlook, and that it's hard to pin down. But how are you feeling about the continuation of that government business going forward? And you know, both for the rest of the year and maybe out into the future as well?

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Ira M. Birns, World Fuel Services Corporation - Executive VP & CFO [3]

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That's always very, very difficult to predict long-term based upon a lot of the factors that we're all equally exposed to day-to-day in terms of what's going on in that part of the world. We've been pleased that our relationship remains strong, and activity remains strong. As a matter of fact, our first quarter is one of the strongest we've had in a very long time in that regard, and it's -- while we have contracts that doesn't guarantee us any particular level of volume on any given day. But in saying that, at the same time those volumes have continued but it's impossible to project when they may change materially in one direction or the other. For now, we're still relatively confident that we'll deliver similar results to what we did in 2018 in that area. But the caveat to that is, that could always change on a dime if something develops in terms of troop withdrawals, or border closures, or anything that would have an impact on that business. But at the moment our team's done a phenomenal job and the business continues to be generally robust.

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Michael J. Kasbar, World Fuel Services Corporation - Chairman, CEO & President [4]

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I think I'll just add to that in terms of, what we've -- and I've said this in the past but I'll repeat it, it's worth repeating -- is the capability that we've developed there was instrumental in terms of our global petroleum logistics. And you know, the company has really transformed from an asset-light company to a fairly sophisticated logistics company and we benefited from our military logistics personnel. So that's been tremendously helpful, and the objective -- and we've made progress on diversifying, you know, that military activity to a number of different locations and we are making progress there. So those are two dimensions that I think are noteworthy in terms of just that military activity.

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Benjamin Joel Nolan, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [5]

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Okay. It would theoretically make it a little stickier and also more diverse, I guess is kind of the idea, right?

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Michael J. Kasbar, World Fuel Services Corporation - Chairman, CEO & President [6]

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Exactly. Exactly. And you know, the reputation obviously -- it's serving a very demanding client. So having that reputation and being able to handle that, again, I've said it in the past, make it analogous to Formula I racing to a passenger car, new companies. So that capability to be able to deal with that has really strengthened the logistics capability throughout the entire company, and I made reference to our -- in our shared service and center of excellence, and our global physical operations capabilities driven by military personnel. And that has been a tremendous asset for us.

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Benjamin Joel Nolan, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [7]

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And then my second question relates to sort of capital allocation. I know that in the last call you talked about the idea that maybe you're sniffing around perhaps a little bit more at some M&A opportunities. I'm curious if you have color there, but also I noticed that the inventory levels were rising, and as you're sort of becoming more of a logistics company and less of an asset-light, sort of a broker effectively, how do you have to weigh in the need to support and build a balance sheet as a function of capital allocation in addition to M&A opportunities or debt repayment, what have you?

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Michael J. Kasbar, World Fuel Services Corporation - Chairman, CEO & President [8]

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Listen, it's step-by-step, you know. Obviously the returns are what keep you in the right place, so you need to manage that carefully. If you get the returns then you're going to be able to grow your balance sheet. So blending that within a combination of asset-light inventory, lots of services, or we like the services side so growing that services and those services have grown within the aviation side. So it really is getting the balance right, and the notion of value share where we are becoming a strategic partner for our clients and also a strategic partner for our suppliers and refiners in terms of the offtake and bringing that demand to them. So certainly, the balance sheet has implications there and it's making sure that you're getting the returns and growing more your earnings so that you can continue to flex your balance sheet.

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Operator [9]

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Our next question comes from the line of Kevin Sterling with Seaport Global Securities.

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Kevin Wallace Sterling, Seaport Global Securities LLC, Research Division - MD & Senior Analyst [10]

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You guys mentioned, I think, for Q2 we should expect organic growth in aviation. How should we think about growth in marine and land? I know Ira, I believe you said gross profit improvement year-over-year in marine. I assume that's mainly coming from price, not necessarily volume. But how should we think about marine and land organic growth, if you will?

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Michael J. Kasbar, World Fuel Services Corporation - Chairman, CEO & President [11]

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So within marine, that -- you know, we've got 2020. There has been a lot of wait-and-see on that. The forward curve isn't really showing very much, but there have been a couple of select deals. But if you look at, and I've said this before, aviation being a manifestation for the entire company in terms of a combination of asset-light, select physical inventory distribution and technology, and that applies to both marine and land. So we'll have a selective approach to organic growth. We've got tremendous capabilities. We are leveraging more of the capabilities within the company that cut across all of the, “segments”. So we'll continue to grow organically. We'll penetrate markets selectively both on the asset-light side which we've done at marine and aviation, but selectively enter the physical side of the equation, try to add more services where we can, utilizing technology. Within land, as I've mentioned I think last quarter, we are going to use the global platform that we have within marine and land -- marine and aviation -- to selectively grow our land business. So certainly, the U.S. is an area of interest where we've got a foothold within Europe. So there's acquisitions within the land space we have very small market share. So that's a fairly rich place for us to continue to grow our C&I business. Within Connect, we believe that we've got good growth within our gas and power and sustainability business. Blending those together on a go-to-market within our commercial and industrial users makes a lot of sense. I made reference to that last quarter. So it's a combination of leveraging the corporation's innate capabilities and applying that across the entire business, using our global platform to logically extend into those different activities and then selectively looking at acquisitions. So marine, we feel good about in terms of getting some growth there. Certainly with 2020 we are well prepared to support our loyal clients. And then land has been a rough road, but we feel like we are getting a solid team together and while technology is slow to come, we are focused very much on the customer experience and being able to sort of overcome some of the challenges in terms of putting together complex systems. So we feel like we've got a much better growth curve and momentum, and the land engine is starting to come together. It's palpable in terms of a hell of a lot more engagement within the team, both on diesel, gas and power and sustainability. So that feels good. We're feeling very positive about that. And the marine team, as well, is extremely engaged. So it feels like all of the businesses are coming together and the balance sheet looks good. So we're ready to roll. I mean, it's never simple, but we feel like we're in better condition now than ever before.

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Kevin Wallace Sterling, Seaport Global Securities LLC, Research Division - MD & Senior Analyst [12]

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And I guess I'll dig in a little bit deeper into marine, if you don't mind, and you guys have done a good job exiting some of the low-margin business there, getting out of some of the Asian ports. How much more do you have left to exit? Is it possible to quantify it or ballpark it? We could see another quarter or two where you continue to exit this business, or how should we think about exiting? How much more do you have left to exit in your marine business?

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Ira M. Birns, World Fuel Services Corporation - Executive VP & CFO [13]

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I would say we've been through -- if you put it in innings, in baseball vernacular, we're probably in the eighth inning or so. So if you look at it from a volume perspective, I would hope with no guarantees that we kind of bottomed out in the first quarter. I don't expect that volume number to grow materially in the second quarter. Mike talked about the opportunities that may come to test in terms of 2020. But we're always, I would say we're permanently more seriously looking at pieces of business that maybe we should have never been doing in the first place. Obviously the low-hanging fruit has been pulled. There are always going to be opportunities to identify more of that, but you know, hopefully replacing that going forward more than on a one-to-one basis. So we think we're going to start seeing some uplift in volume over the course of the year. Not material uplift, but I also -- it's pretty safe to say we don't expect the number to decline from the first quarter over the next three quarters. So it's activity that had low returns. We're also looking at, that market is still kind of fragile, right. So we're looking at various relationships and some of them continue to make sense. Some of them may not from a credit perspective. And so we're looking at it from a whole bunch of angles and focusing on driving the parts of the business that make the most sense to us. Our guys have done a great job in doing that, and improving overall margins and returns. And that quest will continue over the balance of this year. So we expect a pretty good result out of marine this year because of all those efforts, despite likely limited volume growth.

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Kevin Wallace Sterling, Seaport Global Securities LLC, Research Division - MD & Senior Analyst [14]

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And last question here, and Mike, you briefly touched on this. I'm going to ask it, if you don't mind. You talked about M&A opportunities. Obviously you mentioned the balance sheet leverage, it's low. My gosh, it's probably one of the lowest levels I've seen in quite some time. So how does the M&A pipeline look, and if that doesn't come to fruition how can we think about maybe stock buyback or dividend increases as well?

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Ira M. Birns, World Fuel Services Corporation - Executive VP & CFO [15]

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I'll start on that, and Mike, I think we get that question on every call so we should probably record our answer. Look, great point from the standpoint that we've done a good job with the balance sheet. Maybe a little more conservative in trying to clean up that balance sheet over the course of the last 12 months, and put it to a much better position going forward. We didn't do any M&A in 2018 purposely, but our balance sheet is in good shape. We've spent a lot of time focusing on costs. We've gotten that in much better shape. So we're in a much better position in our minds now to go out and look at opportunities. The pipeline is extensive. There are a lot of opportunities in our core businesses that are out there. We're scrutinizing many of them and we're hopeful that a couple will come to fruition some time in the near future. But there's a lot of heavy lifting to occur before that happens. So I believe we could do that and find some opportunities without really changing the beauty of the current balance sheet, so to speak. We'll always look at buybacks and dividends. We'll always evaluate the level of our dividend. We review that with our board on a regular basis. And buybacks as you know, I don't think we're ever going to be a large buyback type of company. We try to do that opportunistically. We try to buy back enough shares every year to cover the diluted impact of stock awards. We're probably never going to do a whole lot more than that unless we were really generating tremendous amounts of cash and didn't feel we had any better use for it. So investing in our business, in our core, organic business today is number one. Investing in strategic opportunity, I'd say, would be number two. And then finding ways to return additional value to shareholders with I would say limited buybacks and dividends would be tied for third.

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Kevin Wallace Sterling, Seaport Global Securities LLC, Research Division - MD & Senior Analyst [16]

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Okay. Ira, would you say most of your M&A opportunities are in land, or is it spread across the board?

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Michael J. Kasbar, World Fuel Services Corporation - Chairman, CEO & President [17]

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Land.

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Ira M. Birns, World Fuel Services Corporation - Executive VP & CFO [18]

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Yeah. If you look at it mathematically, it's land. Obviously we have the lowest market share in the largest business by far in terms of the overall markets worldwide, so that there are clearly more opportunities in land than anywhere else. But you know, we're not only looking at opportunities in land. There are always opportunities to look at in the other businesses as well.

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Operator [19]

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Our next question comes from the line of Ari Rosa with Bank of America.

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Ariel Luis Rosa, BofA Merrill Lynch, Research Division - Associate [20]

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Congrats on what looks like a pretty solid quarter here. I'm curious if -- maybe if you could just discuss a little bit, some of these improvements that you've made.

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Michael J. Kasbar, World Fuel Services Corporation - Chairman, CEO & President [21]

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Ari, sorry, we can't -- we can't quite hear you. (technical difficulty)

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Ariel Luis Rosa, BofA Merrill Lynch, Research Division - Associate [22]

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Just asking, to what extent do you think that some of the improvements you've made put you in a position where you're less sensitive to swings in the environment or the macro economy?

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Michael J. Kasbar, World Fuel Services Corporation - Chairman, CEO & President [23]

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Swings in the macro economy?

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Ira M. Birns, World Fuel Services Corporation - Executive VP & CFO [24]

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Ari, if we got the question right, I'm going to repeat it because we couldn't hear you, whether that means everyone else can hear you either. I think what you asked was, how do we -- do we feel that we positioned ourselves better to insulate us from the macro economy, is that correct?

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Ariel Luis Rosa, BofA Merrill Lynch, Research Division - Associate [25]

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Yes. Exactly. Correct.

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Michael J. Kasbar, World Fuel Services Corporation - Chairman, CEO & President [26]

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Listen, I'll take a crack at that. One of the beauties of our business model is we're still primarily an asset-light business. So -- and we're diverse, right. We're doing business in lots of different geographies and we're doing business in lots of different end markets. We don't have concentration in different business segments. So that gives us a certain amount of insulation in terms of macroeconomic moves. So that was by design, as opposed to having a monoculture, so to speak, something hits and it has catastrophic impact. So from that perspective, if you're looking at interest rates, if you're looking at the price of oil, certainly the volatility that could impact, we generally benefit from because we've got the ability to pivot. If we're looking at economic downturns, sometimes the risk goes up. I've commented in the past that with 2020, one of the things that not a lot of people are thinking about is credit risk because undoubtedly the price is going to go up. Some ship owners are going to be able to pass on the cost. Some maybe not so much. So there potentially is going to be some risk, there's going to be some, I think, quality risk and performance risk there. So by and large we are one big risk management company so to the extent that you've got global downturns, we've got the ability to dial back better than most companies. And the improvements that we've made, I think, certainly from a balance sheet perspective, certainly from a cost perspective, we are a stronger company. We're a more resilient company. We've got a fairly diverse portfolio as I've mentioned, both geographic and end market, from an end market perspective. And going through the rather unpleasant transformation that we have to go through, and it's the first time we've really had to do that, we've got a little bit of experience in terms of how to basically scale back. So I'd say that we've got a more durable and a more resilient business model today, balance sheet, financial perspective, and frankly, organization. So that comes with time and I think that we're in better shape than some companies. And when we look at our physical logistics capability, we've got the ability to have pre-emptive exits in terms of exiting. We don't really have very many long-term commitments. So we don't have heavy duty fixed assets with long-term commitments. So I think that we're better-positioned than most companies and for all of the previous reasons. So I hope that gives you enough color to answer the question.

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Ariel Luis Rosa, BofA Merrill Lynch, Research Division - Associate [27]

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Yes, that's a terrific level of detail and hopefully you can hear me a little bit better. I'll just ask one more. Hopefully the line (inaudible). But you know, as you talk about acquisitions, maybe you could talk about what you've learned from some of the past acquisitions that you've done where maybe there have been a couple of hiccups, and how that's influenced your thinking as you begin to evaluate acquisitions now going forward?

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Michael J. Kasbar, World Fuel Services Corporation - Chairman, CEO & President [28]

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Oh, yes. We've learned, yes. We went to the best school going. So anyway, no, listen. We're in a far better position now as we look at sharpening our portfolio, and looking at the organization. At the end of the day it's very much about the people, it's very much about the process and the platform. So having a more streamlined organization, having a clearer idea of what we're interested in, allows us to really focus on the both selection for acquisition, the valuation, and importantly, the integration. You know, the realization of synergies both on cost as well on growth. So I think that those are areas that we've got a far greater focus. We've talked about ratability, scalability, sustainability. So I think that the entire organization is much more keyed into those areas. We've got a level of maturity. I think the organization is looking very good right now from that perspective. So there's always room for improvement, but we've come a long way. So the -- you know, we're feeling a lot more in the zone relative to making those selections and being able to execute on that. So there's a higher level of organizational confidence and engagement.

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Operator [29]

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

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Michael J. Kasbar, World Fuel Services Corporation - Chairman, CEO & President [30]

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Well, thanks very much for joining us. Thanks for the support and thanks for all the team members that may be listening for all of the engagement and the burning desire to succeed. It really is a pleasure working with all of you, so thanks everybody, and we'll talk to you next quarter.

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Operator [31]

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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.