World Kinect Corporation (WKC) Q3 2014 Earnings Report, Transcript and Summary

Ladies and gentlemen, we apologize, due to technical difficulties, there was a delay in the beginning of the call. But ladies and gentlemen, thank you for standing by, and welcome to the World Fuel Services 2014 Third Quarter Earnings Conference Call. My name is James, and I'll be coordinating the call this evening. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. Glenn Klevitz, World Fuel's Assistant Treasurer. Mr. Klevitz, you may begin your presentation.

Thank you, James. Good evening, everyone, and welcome to the World Fuel Services Third Quarter Earnings Conference Call. My name is Glenn Klevitz, World Fuel's Assistant Treasurer, and I'll be doing the introductions on this evening's call. 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 the 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 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 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 in 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 record third quarter earnings per share of $0.78 on a GAAP basis and $0.91 on a non-GAAP basis. Our business performed well, producing record quarterly results in consolidated volume, revenue, gross profit, EBITDA and net income, in addition to earnings per share. These are exciting times for our company. For our diversified downstream energy distribution, logistics and transaction services business, a multitude of opportunities exist around the globe. From the well-developed regions that we operate in today to newer geographies in emerging markets, Africa and Asia Pacific, the runway remains extremely promising, and our global teams are actively engaged locally with the support of our substantial regional headquarters in London and Singapore. Beyond our legacy line of business in core marine and aviation fuel, our suite of products and services, from crude oil to natural gas, lubricants and electricity, to charge card and payment processing services, and international trip planning to avgas, we have continued to differentiate World Fuel from any other company in the world. We are continuing to provide a comprehensive suite of solutions to a growing community of energy and logistics clients. Approximately 1 million barrels or over 1% of global liquid fuel supply passes through our company every single day. This amount of transaction flow provides us with the wealth of knowledge, which we use to make strategic decisions regarding the daily purchase and supply of fuel and energy, logistics and services, and also informs us on underwriting organic investments and acquisition opportunities. While our customers and suppliers continue to maneuver through a world of fuel price volatility, regulatory changes, political unrest and overall global economic instability, we remain a valued partner in the supply chain to our suppliers and customers as they look to leverage our knowledge and expertise in this ever-changing environment. In many markets, we are the long-term, continuous and reliable channel for logistics and industrial fuel, energy and risk management. Our mission statement to create value for our business partners in energy and transportation by delivering innovative solutions and logistics through a global team of local professionals has never been more true, and our teams have never been more engaged. We continue to make material progress on integrating recently acquired businesses onto our global technology platform, aligning our commercial teams and back-office processes to realize operational leverage. We remain focused on driving growth and results across all lines of business through both organic initiatives and strategic investments. We are pleased with the results from our aviation segment this quarter. As we mentioned on our last call, we realized the expected seasonal increase in our core marketing activities in North America, Europe and Asia. Our integration of the Colt acquisition has been progressing nicely, and we are already seeing many positive synergies within our growing business and general aviation activities. Colt is an impressive young organization, and our new standard on integration is accelerating our ability to drive growth from acquisitions. Lastly, in our government business, our complex logistics team continues to supply DLA and NATO fuel needs, and we now expect such activity to continue into 2015. In the marine segment, we performed reasonably well on a continually sluggish shipping environment. While industry fundamentals remain challenged, our team remained focused resulting in consistent financial results and solid returns. Whether it be our core expertise in marine fuels and lubricants, quality control, operational and price risk management, underwriting, upcoming low sulfur fuel regulations or LNG initiatives, our customers, suppliers and participants in the full supply chain continue to look to us for solutions and [Technical Difficulty] We remain fully committed to growing our global marine fuels, lubricants and services business. Our land segment rebounded nicely this quarter, principally driven by improvements in our core U.S. and U.K. fuel distribution businesses. Our global land team remains focused on profitable growth opportunities as well as continuing integration initiatives in an effort to streamline processes and continue to operationally scale this global business. We remain very optimistic about what lies ahead for our company, and we remain focused on continuing to execute towards our long-term vision of building a truly global downstream distribution, logistics and comprehensive service business within the multi-billion dollar energy and transportation marketplaces. We thank you, again, for your support. And now I will turn the call over to Madison Bumgarner -- I mean, Ira Birns, for a review of the financial results.

Thanks, Mike, and congratulations to the San Francisco Giants. Before I review our third quarter financial performance, I will ask you to please note that when I compare sequential results versus the second quarter of 2014, second quarter results will exclude the onetime charge related to the executive nonrenewal expense of $4.8 million, which is $3 million after-tax or $0.04 per diluted share. Consolidated revenue for the third quarter was $11.7 billion, up 3% sequentially and 12% year-over-year. The year-over-year increase was related to increases in volume across all 3 of our segments, offset by a decrease in average fuel prices. Our aviation segment generated revenue of $4.7 billion, that's an increase of 5% sequentially and 12% year-over-year. The year-over-year increase was a result of increased volume, also offset by lower average fuel prices. Our marine segment revenue was $3.7 billion, up 6% sequentially and 4% year-over-year. Approximately 85% of the year-over-year increase was related to increased volume and the remainder was related to the increase in fuel prices in marine. And finally, the land segment generated revenue of $3.3 billion, down 2% sequentially but up 21% year-over-year. The year-over-year increase was principally related to volume from acquired businesses. Our aviation segment sold a record 1.5 billion gallons of fuel during the third quarter, an increase of 110 million gallons or 8% sequentially and 210 million gallons or 16% year-over-year. Our aviation segment has now reached an annual run rate of 6 billion gallons. The vast majority of growth in our aviation segment's volume has come from our core commercial reselling business, contributing to a 22% compound annual growth rate in volume over the past 5 years. Volume in our marine segment for the third quarter was 6.5 million metric tons, up 400,000 metric tons or 7% sequentially, and 220,000 metric tons or 4% year-over-year, representing the first sequential increase in marine segment volume since the second quarter of 2013. Our land segment volume in the third quarter was a record 1.1 billion gallons, up 40 million gallons or 4% sequentially and 220 million gallons or 24% from the third quarter of 2013. Consolidated gross profit for the third quarter was also a record of $215 million, an increase of $23 million or 12% sequentially and $28 million or 15% compared to the third quarter of last year. All 3 of our business segments realized increases in sequential and year-over-year gross profit this quarter, contributing to our record results. In the aviation segment, aviation contributed a record $96 million of gross profit in the third quarter, that's an increase of $14 million or 18% sequentially and $6 million or 7% compared to the third quarter of last year. As forecasted on last quarter's call, we experienced a seasonal increase in our core reselling businesses in North America, Europe and Asia. Our general aviation business also posted solid results this quarter, aided by strong contract fuel activity in both our existing business as well as Colt, which we acquired on July 30. Our self-supply model's jet fuel inventory position was approximately 154 million gallons or $417 million at the end of the third quarter, up from 131 million gallons or $365 million at the end of the second quarter. Inventory increased to support the volume growth we experienced during the third quarter. And inventory-related results were positively impacted by a few million dollars in the third quarter related to inventory average costing. The marine segment generated gross profit of $49 million, which is an increase of $600,000 or 1% sequentially and $9 million or 23% year-over-year. While the marine market remains sluggish, our team continues to deliver consistent results and solid returns, while focusing on opportunities to expand relationships with customers, suppliers and the overall industry. Our land segment delivered gross profit of $69 million in the third quarter, that's an increase of $8 million or 13% sequentially and $13 million or 22% year-over-year. The increase in gross profit this quarter was attributable to increased profitability in our fuel distribution businesses in both the United States and United Kingdom as well as the modest improvement in our Brazilian operations. Fuel-related gross profit in our land segment this quarter represented approximately $57 million of the overall $69 million gross profit reported. Operating expenses in the third quarter, excluding our provision for bad debt, and approximately $600,000 of onetime charges related to recent acquisitions, were $139 million, that's up $14 million or 10% sequentially and $18 million or 16% year-over-year. The sequential increase in operating expenses this quarter, principally related to the record gross profit achieved during the quarter, impacted compensation accruals as well as 2 months of the recently acquired Colt business, which was not included in our results last quarter. As we look forward to the fourth quarter, I would assume overall core operating expenses will be between $140 million and $144 million. This estimate includes a full quarter of operating expenses related to Colt, as well as approximately another $1 million of onetime expenses related to the Colt acquisition. Our total accounts receivable balance was $2.8 billion at the end of the third quarter, that's down 3% from the second quarter and relates primarily to the decreases in fuel prices during the quarter, which was offset by higher volume in all 3 segments. Our bad debt expense in the third quarter was $1.2 million, which is flat with the second quarter, but down from $1.9 million in the third quarter of last year. Our overall bad debt reserve remains at approximately 1% of total accounts receivable, which we believe and continue to believe to be adequate. Consolidated income from operations for the third quarter was $74 million. Excluding onetime expenses related to the Colt acquisition, consolidated income from operations was $75 million, up $10 million or 15% from the second quarter, and up $11 million or 15% year-over-year. For the quarter, income from operations in our aviation segment was $47 million, up $10 million or 27% sequentially and up $6 million or 15% compared to the third quarter of 2013. Our marine segment's income from operation was $21 million for the third quarter, that's flat sequentially, but up $4 million or 23% compared to the results posted for the third quarter of 2013. And finally, our land segment had income from operations of $19 million, that's an increase of $5 million or 33% sequentially and $4 million or 27% year-over-year. Consolidated EBITDA for the third quarter was a record $93 million. That's an $11 million or 13% sequential increase, and it's up $18 million or 24% year-over-year. Nonoperating expenses, which include interest expense, equity earnings, and foreign exchange gains and losses were $6.2 million for the third quarter, up $3 million compared to the second quarter and up $500,000 compared to the third quarter of last year. The increase in nonoperating expenses in this quarter is principally related to higher interest expense related to increased average borrowings during the quarter and higher average borrowing rates during the quarter. For modeling purposes, I would assume overall nonoperating expenses to be in the range of $4.5 million to $6.5 million in the fourth quarter. Our effective tax rate this quarter was 19.8%, up from 19.5% last quarter and 14% in the third quarter of last year. We estimate that our effective tax rate for the fourth quarter should be between 17% and 21%. Net income for the third quarter was $56 million, an increase of $4 million or 9% sequentially, and $4 million or 8% year-over-year. Non-GAAP net income, which again excludes intangible amortization, stock-based compensation and certain onetime expenses related to recent acquisitions, was $65 million in the third quarter, that's an increase of $7 million or 12%, both sequentially and year-over-year. Diluted earnings per share for the third quarter were $0.78, that's an increase of 8% sequentially and year-over-year. And non-GAAP diluted earnings per share, which we continue to believe to be the best measurement of our results, were $0.91 in the third quarter, that was an increase of 12%, both sequentially and year-over-year. We generated $27 million of cash flow from operations in the third quarter, increasing year-to-date cash flow from operations to $129 million. We have now generated cash flow from operations in each of the past 9 quarters totaling nearly $600 million. We repurchased an additional $10 million of our common stock in the open market this quarter, increasing total repurchases to $45 million since the third quarter of 2013. As I have previously mentioned, the principal objective of our share repurchase program is to offset the dilutive impact of employee stock awards. Net debt was $379 million in the third quarter, that's an increase of $82 million sequentially, principally related to the funding of the Colt acquisition in late July. Our net trade cycle was down slightly at 8 days, and our return on invested capital increased to 10.7%, the highest return that we have achieved since 2013, which is 35% above our cost of capital. We continue to focus on accretive growth opportunities that will generate returns well in excess of our cost of capital in order to drive long-term shareholder value. So in closing, we delivered record results this quarter, highlighted by a 15% year-over-year increase in gross profit, a 24% year-over-year increase in EBITDA and a 12% year-over-year increase in non-GAAP earnings per share. We generated cash flow from operations for the ninth consecutive quarter and increased our overall returns. Despite continued headwinds in certain geographies and lines of business, our team remains focused on driving profitable growth across all of our fuel and related service activities, and our results this quarter reflect the fruits of such efforts. And finally, the strength of our balance sheet provides us with the capital strength to continue investing in growth opportunities across the business. I would now like to turn the call over to the operator to begin our Q&A session. Thank you.

[Operator Instructions] And our first question is from the line of Jon Chappell from Evercore.

Mike, I wanted to start off on the dominant conversation of the last month or so, which is the oil price volatility mostly down. And just if you can give a refresher with all the different businesses that you're involved in, whether it's the crude by rail domestically in the land, bunker prices have fallen pretty significantly, globally. What's your exposure to the oil price across the different businesses and how does the downward pressure on the commodity either help or hurt you in the last month or so?

So, thanks, Jon. Appreciate that. It's been an interesting stretch of time. Surprisingly, over the last few years, we've had significant political unrest as we know. But pricing really has been quite stable, and that is mostly because of shale oil. Your disruptions in Libya and the Middle East really have had very little impact because they've been absorbed by the increase in production from the United States, which has created an incredibly stable market for quite some time, which is certainly good for planning purposes. From what we do, which is provide solutions, if everyone knows what something costs and where it is, well, okay, maybe you don't need a solutions provider as much as you do in more volatile environment. So we now have got a change in that dynamic. The shale oil is just extraordinary. You created some disruptions in terms of the flow of oil. West African product is now going to the Far East, and you've got a lot of very strange things in terms of dislocation of product. You've got coal that's going to Europe. Any number of different things. And certainly that change is what we thrive on. Most recently now, we've seen the Saudi is looking to flex. You've got a number of different things going on with Middle East politics. It's not working as well as it used to. They're looking to assert themselves. I think you commented on in one of your recent publications, in terms of not having a salutary effect on the tanker market. So for us, the movement is fundamentally a good thing. We understand it. As it relates to our own orientation to price risk, our derivatives activity in terms of being able to market price risk management products, we're pretty sophisticated in that. We've been doing that since the late '80s, so we understand that quite well. Backwardated market, contango market, all of those markets in terms of having different profiles allows us to embed those instruments and market it to our clientele to provide them with solutions on price risk management. As it relates to our own inventory, which I think is a little bit of where you're getting to, within our Marine business, we only have about 5% of our activity is represented by inventory. It's only -- it's primarily 2 locations in the U.K. Our aviation activity is predominantly in the U.S. We've been dealing with our inventory business in the U.S. for about 14 years. Those are pretty much movements from the U.S. Gulf to the East Coast, mostly New York and the Midwest, it's 2 pipelines. So we understand it extremely well. We basically take a very traditional, nonspeculative approach to hedging. So we don't have any residual risk step we look to exploit in terms of profitability. So we're kind of boy scouts. We work within the market. We're creating liquidity between buyers and sellers in terms of managing that supply function, and it's what we've been doing for a long time. So I don't know if that answers your question, but I'm happy to talk about if further.

I think it's a long way of saying that it helps you in a lot of different ways without giving you much commodity price risk, which may be a misperception in the market. I will leave it at that. So just for my follow-up, the volumes in the Marine business were, I think the strongest in 6 quarters, surprisingly strong. Markets are getting a little bit better, but certainly not back to the heyday of 7, 8 years ago. Have you kind of ratcheted up the risk profile that you're willing to take as far as credit risks are concerned that have enabled you to grow the volumes there?

No. I mean, this is sort of a consistent question. People seem to think that the only way that you can grow the business is by taking more risk. Our risk orientation really hasn't changed. I don't think it's ever going to change to the extent that we could securitize our way in different ways. I mean, we certainly understand Admiralty law and we're pretty careful. I mean, I don't want to say that we're boy scouts, that's probably going to sound old, but that's not really the way we believe we should grow our business. We're very long-term oriented. So the simple answer is no. We haven't really changed our risk profile, and we never will.

Our next question is from the line of Jack Atkins from Stephens.

Just wanted to ask, I guess, one high-level question first. In that, we've seen, I guess, over the course of the last couple of quarters, but that's been especially apparent in the last few months, a contraction in the Brent and WTI spread. But I know you have a small joint venture where that is impacted, but I guess, more generally speaking, when I think about both suppliers of the product to the market and the speculators of the people who are consuming that fuel, do you think that the changes that we've seen in the Brent-WTI spread is going to have any impact, especially if you see it stay down here in the $3, $4, $5 range for a sustained period of time? Any impact on fuel or crude oil logistics, the way we've seen it sort of grow and manifest itself across the country in the last couple of years?

It's pretty fascinating in terms of just how things have changed the impact event on natural gas. So the movements around the marketplace are definitely a whole lot different. I think a big part of the equation is going to be very much looking at how the Saudis play their hand in terms of what's going to happen to the overall complex. For us, it really is not a big driver in terms of what impacts us with the exception of all of the musical chairs on the flows of oil. Relative to our crude oil marketing side, it will definitely impact that to us on that spread. We certainly go up and down depending on what that spread is coming out of North Dakota, and you see that reducing price in terms of absolute price as opposed to the spread starting to get some discussions about levels of production, at what point are they going to start shutting in, which is some part of what we think the Saudis are sort of up to, but there's obviously lots of thoughts and theories about that. But it really doesn't have that much of an impact on us. The fact that there is change, whether it's regulatory on low sulfur with the Marine business or whether it's the constant dynamics of Brent, WTI, Saudi, you name it, all of that is fundamentally advantageous to us because it gives us an opportunity to do what's in our wheelhouse, which is provide solutions on sourcing as well as quality in any number of different issues. So that may not be exactly the specific answer you're looking for, but that's really orientation, it's -- I don't want to say it's irrelevant, but it's not directly impacting us.

Okay, okay. That definitely makes sense. And then just to kind of follow up on Jon's question about volatility. Historically, I think of volatility being good for your business and you've referenced the reasons why we haven't seen a lot of volatility, Mike, over the last couple of years. But I guess, just to ask you directly, are you seeing increased volatility in the prices for some of these refined products that you sell? And then do you think that's driving increased demand for some of the more value-added services that you provide during those types of volatile times?

Without question. And we're about to enter a period with the new low sulfur regulations where everybody is going to respond a little bit differently. You're going to see some refiners are -- can't wait to market their higher-margin specialty blends. You've got a number of different companies that are looking at different ways of dealing with the new regulations. So all of those changes are fundamentally positive for us. It's in our wheelhouse. It allows us to educate our clients and to provide new distribution vehicles for those suppliers.

Okay. Okay. And then last question for me. Mike, in your prepared comments, you referenced a new standard of integration for acquisitions, which is helping to drive additional cross-selling opportunities so far with the recent Colt acquisition. Could you maybe expand on that a little bit? What do you mean by new standard and sort of what is that helping to drive you guys in terms of seeing progress after you close the deal?

So, whatever -- I guess you live a long life and we've been doing this now for a long time. And I've been doing this for, now 37 years. And once upon a time, I thought that, "Wow, we are really good at integration." And more recently, I said, "You know what? I don't think we're that good at it." And as we look to acquire companies that are in adjacencies, that aren't exactly our core competency, but are extensions, we recognize with Watson in that being our largest acquisition to date, that we really needed to do something different. So Ira and I chatted about it, and we took one of our top folks out of their existing business and created a separate integration function and team. We actually bought some software. We brought in some outside folks to give us a new external metric, and that now has become our standard. And it's 90 days prior -- 90 days after grabbing synergies and really connecting all of our functions, so that we're doing this a lot more scientifically. So it's still -- it's the same old world fuel in terms of a great place for people to put their typically privately held companies and have their long-term folks have a great home. But now we have a significantly enhanced integration standard. Our technology integration, which is always difficult, particularly when you're going into a new business, is significantly enhanced, and we just get better and better out of it. These could be rather stressful, not only for us, but certainly for the acquired company. And to the extent that you've got very specific communication, very specific onboarding, very specific sorting out of the people, it certainly improves results. So I feel pretty good about it. It's just another part of the ongoing, maturing of our global organization. So it's important. I thought it was worth commenting. We're going to continue to grow through acquisitions. So this was an important developmental area for the company.

Our next question is from the line of Gregory Lewis from Crédit Suisse. Gregory Lewis - Crédit Suisse AG, Research Division: Michael, I have to ask this question, following those remarks. And I mean, as we -- as I look at the balance sheet, I mean, clearly, you have a ton of cash on the balance sheet. Given what's happened in the oil markets over the last couple of months, has there been -- have you noticed a pickup in willing [ph] the sellers or sort of the M&A market sort of the same as it was 3, 6 months ago? Or is it -- has it improved? Has it gotten worse? If you could just sort of talk a little bit about that being as clearly you guys are now -- it sounds like you're gearing up to really be able to bolt-on a lot more companies.

Yes. Listen, just generally, in terms of our pipeline of opportunities, as we -- and this is perhaps true of every growing company. As we continue to evolve into a truly global organization, and I mentioned specifically our regional headquarters in Singapore and London, the amount of deal flow and the amount of deals that we review has expanded significantly. So the environment today, I'm not sure has changed dramatically. Our orientation towards acquisition, I think, with the comment on our integration standard and our capability and our global technology platform, our ability to handle multiple acquisitions is significantly enhanced. So I think we all feel pretty good about that. Having a technology platform to deal with acquisitions and integration allows us to pursue these more aggressively than we have in the past. Typically, this is something that required the intense engagement of a select number of senior people. This now has brought into the notion where this is becoming a distributed function, and we're seeing now regional folks driving acquisitions and integration. So it's just a fantastic part of us becoming an intelligently decentralized company that has global standards that we comply with. So not exactly a commentary on the global nature of the environment, but I think you're going to continue to see us grow through acquisition. Gregory Lewis - Crédit Suisse AG, Research Division: Okay. And then, just one quick follow-up on the Marine business. As we think about the business and clearly that market is just kind of trying to get its feet under itself. As we look at the marine margins, I guess, what I would say is Q3 was, I guess, in line with the sort of the 3.5-year trailing average. Is that the type of gross profit margins we should think about being in marine? Or is there anything that World Fuel is looking at, where potentially you get those margins higher? Or is it just more sitting back, managing through and waiting for demand to get to a point where maybe we could see some margin uplift?

Yes. Listen, I think you're looking at pretty competitive market. We all know what the marine industry has been through over a period of time. So we don't really expect anything to change dramatically. I mean, we're pretty pleased with what we've been able to produce, and we think that our team has done a pretty darn good job. I think as you look at the marine space, it's not an insignificant space. And the thing that is really interesting, fascinating and certainly keeps me going in this company is the interrelation between all of our business segments and units. So we get a reasonable amount of collaboration here between our marine and aviation and land business, and fuel is getting from one place to the next, on cargos, going on the water. So I think, you've got some adjacencies. You've got some extensions. We've got a fantastic technical group within our Marine business. Our lubricants activity continues to expand. It's a natural thing. We're sitting between the same oil industry and the same consuming industry. So that's part of our distribution. There's a technical aspect to it. So I think it's going to be more of the same. Obviously, we'd like to drive a little bit of volume, but we're not going to get crazy in terms of increasing our risk profile. So it's a little bit of steady as she goes, and we've always taken the long-term view. So I think you're going to see some different things within the marine space, but I don't think it's going to be dramatically different in terms of the margin profile.

Our next question is from the line of Kevin Sterling from BB&T Capital Markets. Kevin W. Sterling - BB&T Capital Markets, Research Division: Let's talk a little bit about land. It looks like you guys saw a very nice recovery there. Is this more related to working through some of the seasonal issues you saw during Q2, namely the potential lingering seasonality from Watson in the U.K.? And what about your transloading and marketing JV?

Okay. So with Watson, that is really pretty cool. We're really happy with that. We've got a very significant logistics in distribution position within the U.K., a significant amount of diesel, gasoline, heating oil. We've got a significant position on marine fuel. We've got a significant position in jet. We're the exclusive supplier at the Northolt Airport with a 5-year contract. Our Lubricants business is growing. That's a lot of land lubricants distribution. We've got a total Fluid Management business that's emerging, which is very service oriented. We're going to be adding risk management to national accounts within Watson. They didn't have that. So we bring our derivatives marketing there, our fuel card, our natural gas coming from U.S. Energy. So our ability to be able to provide an investment platform to go after some larger targets and frankly, make some quicker decisions. I mean, we're still highly entrepreneurial. And even for smaller companies, I think they're impressed with the speed of our decision-making. So within Watson, we haven't really seen that kick-in yet because it's highly seasonal. We managed to get a little bit of a nice pickup in our crude oil business in the quarter. So that, I think, is something that there's a little bit of a benefit here and there. We've got a lot of moving pieces, and that's the beauty of our business model. We've got a lot of cylinders, and we're not having to depend on any single one area, any single geography. So we don't have to take any undue risks, so that diversification is working well for us. And at the end of the day, when you wipe away the labels on the different segments and the different products, it's a lot of the same thing. We're looking at a volatile commodity that is managed through a certain amount of logistics with a certain amount of underwriting. We're sitting between these energy markets and transportation markets and managing a variety of different risks. And it's a pretty similar platform, and it's huge. So that's really the strategy is to go after that globally and to provide similar solutions. Our U.S. Energy business has given us a whole new class of customer in terms of food companies, power generation, you name it. And those are companies that we can now provide derivative solutions, lubricants, diesel, gasoline. So it just continues to be a broadening marketplace for us. Kevin W. Sterling - BB&T Capital Markets, Research Division: Great. And then in aviation, you talked about some of that strength coming from Colt and obviously some was typical seasonal pickup. Is there any way to kind of -- maybe percentage-wise, what was -- what came from Colt? And maybe more importantly, should we expect that similar trend that we saw from the Colt growth this quarter continue next quarter?

Well, we don't typically break out business aviation from commercial aviation. The Colt team is just a fantastic team. We're really excited about having them in the fold. So I don't think that we see a huge amount of seasonality there. So that should be fairly consistent in terms of that contribution. Kevin W. Sterling - BB&T Capital Markets, Research Division: Okay, good. And Mike, last question here. And I think Jon touched on with his first question, talked about the volatile fuel prices. And it sounds like it doesn't have much impact because you guys do have sophisticated hedging in place to hedge your jet fuel. But I remember a couple of years ago, it worked against you. I think -- I guess oil prices were rising at that time. Maybe could you share with us some lessons learned from that experience a few years ago and kind of where you are today, maybe that you're better protected with your hedges?

Well, Kevin, the company continues to learn by doing. So we made the appropriate changes to make sure that none of our inventory, none of the market got away from us. So we have significant control infrastructure, significant middle office, significant investment in systems. And I think as I said previously, we take a traditional nonspeculative approach to hedging. So I think it would take quite a while to get into the details of how we manage that so that the market doesn't get away from us. I think, suffice it to say, that we're on top of that and we don't make money by speculating, we make money by providing a value add to our clientele and creating liquidity between buyers and sellers. So I don't know if that's a sufficient answer, or I don't want to add anymore color to that.

That's good. What's the other follow-up, Kevin? Kevin W. Sterling - BB&T Capital Markets, Research Division: No, that's good. I appreciate that. I do have one final question. Are the Heat going to make the playoffs this year?

Yes. You see, I got to answer one question today.

Our next question is from the line of Jack Atkins from Stephens.

Just a couple of quick housekeeping items. I guess, on the marine side, you guys talked about the volume increase, both sequentially and year-over-year. Could you maybe give us a little bit more color on what was behind that? And do you feel like that now -- now we're starting to see a period of maybe modest recovery, but recovery in the marine fuels market?

Yes, Jack, listen, I think that every market is not likely to stay down forever. This market has been in the doldrums from -- for a long time. So it's I think to be expected that you're going to see every market sort itself out over a period of time. So I think a combination of some of the market weeding out some of the weaker players. Some of the things that we've been doing in terms of creating more effectiveness in the marketplace is having an impact. The increases are not revolutionary. So it's pretty much one step at a time. So I'd like to think that we're going to continue to grow our market share. We talked about in the past with fuel economy, right now, demand is not great. You still have slow steaming that takes an enormous amount of demand out of the marketplace. So you're dealing with an environment which is pretty challenging. Nevertheless, we think we've got a fantastic mousetrap, and it wouldn't be too bold to say that we're going to continue to look to grow market share and grow volume, but we don't -- we're not forecasting anything revolutionary.

Okay. Okay. That makes sense, Mike. And then, last question is on the aviation side. Fantastic net operating margins this quarter, I think 49%. Is that the right way to think about that margin profile of that segment going forward, plus or minus a couple of percent given the Colt acquisition? Or was there maybe something positively impacting it this quarter that may not repeat going forward?

There's definitely seasonality in that number as both Mike and I alluded to on the call. If you look at -- if you look back at last year, our GP per gallon, as an example, was up about 10% sequentially from Q2 to Q3, and the same thing happened this year. It tends to trip back a little bit in the fourth quarter, which is one of the weaker quarters of the year. So I would say this quarter's result is probably a bit better than when you expect the average result to be for the year. And certainly Colt is contributing to that positively, but Colt is still a relatively small piece of the pie when you compare it to the overall activity in aviation.

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

Thank you, everyone. We really appreciate the support. We feel like we're in a good place and look forward to talking to you next quarter. Thanks very much.