Ladies and gentlemen, thank you for standing by and welcome to the World Fuel Services’ 2017 Fourth Quarter and Full-year Earnings Conference Call. My name is Jen, 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 Mr. Glenn Klevitz, World Fuel's Vice President, Assistant Treasurer and Investor Relations. Mr. Klevitz, you may now begin your conference.

Thank you, Jen. Good evening everyone and welcome to the World Fuel Services fourth quarter and full-year 2017 earnings conference call. I’m Glenn Klevitz, World Fuel's Assistant Treasurer and I will be doing the introductions on this evening's call, alongside our live slide presentation. This call is also available via webcast. To access the webcast or future webcast, 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 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 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. And at this time, I would like to introduce our Chairman and Chief Executive Officer, Michael Kasbar.

Thank you, Glenn and good afternoon everyone. We closed out the year with a lot of changes and events behind us in a clear focus for the future. I will comment more on that after Ira goes through our financial review of results, which includes of course the impact of Tax Reform and other items. Ira.

Thanks Mike and good evening everyone. Today we announced adjusted net income of $17 million in the fourth quarter, that’s an increase of $2.7 million when compared to the fourth quarter of 2016 and for the full-year, adjusted net income was $127 million a decrease of $20 million compared to 2016. Adjusted diluted earnings per share was $0.25 in the fourth quarter, up from $0.21 in the fourth quarter of last year and full-year adjusted diluted earnings per share was $1.86 this year compared to $2.11 in 2016. For the past several years, we have provided two or often three income in EPS measures GAAP, adjusted GAAP which simply adds back non-recurring charges and non-GAAP which additionally add back intangible amortization and stock based compensation. We have received feedback from investors that this as being cumbersome and confusing. So effective this quarter, we have simplified such reporting. We are now only reporting GAAP and adjusted GAAP. Intangible amortization and stock based compensation information will always be available on our public filings for those who find such information useful for modeling purposes. At the same time, we will now regularly report adjusted EBITDA which we find to be a very meaningful measure of our operating results and growth, as well as a common valuation metric. For this reason, we are more closely focused on this metric and looking to drive significant year-over-year improvements. Now on to the detailed review of the financial statements. Consolidated revenue for the fourth quarter was $8.9 billion, up 14% compared to the fourth quarter of 2016. The increase was principally due to the significant increase in oil prices compared to the fourth quarter of 2016. For the full-year, revenue was $33.7 billion an increase of $6.7 billion or 25% compared to 2016. Our aviation segment volume…

Thank you, Ira. If we look back at the origins of our business, our roots when creating value as a reseller in fragmented markets through price location credit and information arbitrage. It seemed like one big endless summer where we were looking for the next big waves of value to the marketplace at the time and of course, gross profit. Cost really wasn't a critical part of the equation within that simple business model. Today, almost everything has changed in energy finance, information and technology. Now we have shale oil and shale gas, we have rode that constrain crude oil a while it lasted in North Dakota, but that came crashing down. We have low costs of money, low price, ample supply of almost everything in a highly transparent and consolidating marketplace. Our value proposition is now increasingly as a specialized distribution and service network, providing comprehensive and easily accessible solutions. Low cost and scalability are key as it is the right mix of activities to serve a more demanding customer in competitive marketplace. As such, the three pillars around which everything we do revolves are one, a continuous cost management culture; two, a discipline sharpening of the portfolio; and three, driving aggressive organic growth complemented with selective acquisitions. Of course, an intense focus on the market, talent and culture is foundational for any successful organization. Our approach to cost management is comprised of utilizing a digital and agile business team methodology to leapfrog manual processes and accelerate the integration of people and approved processes and problem solving. The nature of work is changing and so are we. We have started to restructure parts of our business utilizing this approach. Telemetry, telematics, logistics optimization, increased spans and reduced layers, co-location, shared service centers, empowered end-to-end agile teams, consolidated procurement, elimination…

Thank you. [Operator Instructions]. And our first question comes from the line as Ken Hoexter from Merrill Lynch. Please go ahead.

Hey, good afternoon. Michael and Ira and Glenn. Looks like, I guess you have made about a 17 or up to 20 acquisitions over the past decade. Today we are hearing a lot about I guess cost cuts, trimming charges. Is there still more integration that you need to occur here? Maybe you can take a step back. Michael, you sounded like you want to take a step back and talk about kind of what you started as, are there are too many disparate businesses here or do you still feel like you head in the right direction with these acquisitions, now that you are stepping back with the cost cutting program?

Listen, I think that, I don't, I don't really have any regrets. All the businesses we bought were good businesses with good people. I think if I had to turn the clock back I do a couple of different things, because I think we were taking intelligent diversification steps. I think I would have dropped some people and done a little bit different. So I think, we are a lot smarter now in terms of how to acquire, how to integrate cultures, brands, technology. We sort of let the folks alone the what the technology alone and, now we have got I think a much stronger view on how to move a lot more quickly. Technology is the name of the game and within our U.S. land platform, we have got disparate number of systems. We are moving them to the cloud which will accelerate our ability to deal with that. Jeff Smith obviously is going to be instrumental in doing that. And with Kinect to a massive amount of data. I mean Kinect alone had 30 terabytes themselves, so incredibly data intensive business. So, the technology side of it is crucial, I mean we seek for the end of the game with growing businesses, but it's a big, big part of it and we are not really where we needs to go. So that's something that we have to move very quickly on. Mike Crosby on the line side and his team, I think are doing an excellent job in the U.S. we are optimistic and bullish in terms of our ability to bring that together and brand that properly. So, I feel good about what we are doing, cost is a whole different ballgame today, it's not an event, it's something that is continuous. So, we are serious about it, we have an outside view, we have outside people helping us and teaching us some new tricks. So it's important, it’s very difficult and when you look at Marine aviation, obviously marine has its own issues, but we are working through them. If you look at aviation, they have got a platform we spent a lot of times years ago and created an end-to-end solution. So we have got the people, the process and the technology and that is what allows them to scale. We don't exactly have that in land. Land is a conglomeration of a number of different businesses and systems and technologies and we are bringing those together and as that comes together and it is coming together, we are going to see a better result, a more predictable results, recurring revenue. We went through, debt commodity cycle, we started out exploiting the inefficiencies in the marketplace. That was our first cycle, we rode the commodity side, Q4 of 2014, Q1 of 2015, it came crashing down. We should have pivoted faster, but okay, it is what it is and now we are smarter and it heads down to basically go after that.

Let me just follow-up. Ira, you talked about biding back for NCS. Maybe you can talk a little bit more about that, I mean obviously I presume you view it as still profitable, but why chase that business at that lower margins, does that highlight how competitive the market has become or I guess as Michael keeps talking about on technology that others can provide this kind of service and should we expect continual degradation of margins going forward on new business given that contract renewal?

So, listen, we have been in the government business and government contracting business since the late 80s and it's really helped our Company tremendously. I have compared it to Formula One racing for passenger cars where you really have to deal with the contracting and logistics. It's serious requirements and it's really helped our Company, in these commercial activities. So that's a two year contract and we will have obviously the uncertainties of what the volume may be, but that is a contract, so that that margin shouldn't change. But, we will continue to develop our capability, we already are expanding that in different geographies, taking it where ever different governments have an interest in our contracting and logistics capabilities. So that margin is locked in for at least two years within the possibility of extensions.

And additional opportunities that you mentioned as well.

Yes, that's right and we are in sort of the pole position for when there are other requirements that come up in that area or other areas. So as Ira commented in the script, we have got an excellent relationship with them and we have got a fantastic reputation for performance. So it's important part of our area of our business and we leverage that within our commercial area. I think I mentioned with the Exxon Mobile acquisition we would use the physical logistics competencies of our military personnel to handle those into planes deliveries in those seven countries around the world. We set up a center of excellence on logistics and that worked out for us extremely well.

Just a quick one. Ira, did you say that the hedges now are back in proper format as far as going from backwardation or is that continuing into the 2018?

That backwardated curve smoothed out, I would say by the middle of January it was back to way more normal levels. It was really, one of the most severely backwardated markets that we have seen in many, many years in the fourth quarter, but thus far where we sit today it's been very calm and the issues I described do not seem to be repeating themselves during this quarter.

Great, I'll stop there and turn over. Thanks for the time guys.

Thanks Ken.

Thanks.

And our next question comes from the line of Kevin Sterling with Seaport Global Security. Please go ahead sir.

Thank you, good afternoon, Mike, Ira and Glen, how are you guys doing?

Welcome back,

Welcome back Kevin.

Yes, thank you, it’s good to be back, nice to talk to you all again. So the marine volumes we saw in Q4 of 2017. Should we expect something similar in the first quarter of 2018 or do you have more markets to exit?

I don't know if we have more of the markets to exist. We are being mindful of returns. So there has been some changes that is not a surprise to folks that have been following the marine business. So, we are looking as I said to model or physical business. I think, aviation asset right in terms of the third-party, the inventory, the distribution, the technology side of it. So it's certainly not in a robust place, if we can't get the returns then we are going to be focused on that financial discipline. We certainly want to support our client and, we are still committed to the space. So I don't think we see aggressive growth in volume. So I would say it's more likely to be flat.

Okay. Thanks Mike. That helps. And as you have exited those marine markets. Are you deploying those resources elsewhere?

In some cases, yes. In some cases we are just reducing cost.

Okay. Ira, it looks like you guys paid down a good chunk of debt in the quarter. Do you expect to continue to delever in 2018, is that the plan?

assuming that we have already got pretty much paid down all the debt we could with the cash that became available to us, because of the Tax Reform. We have had a pretty good track record or an excellent record of consistently generating operative and free cash flow year-in and year-out. An you may note that interestingly enough we generated the exact same amount of operating cash flow in 2017 as we did in 2016 by coincidence. So to the extent we continue to do that we can now more likely use that cash to delever further, assuming prices stay in the same ballpark and of course if prices move up that may require some more capital or if we decide to go after some of the strategic opportunities that are in the pipeline that remains very robust for us. Obviously we would use some cash there too. So it depends on a few factors, but the cool thing now Kevin is that we could have generated a lot of cash in a given quarter, but historically, if it was all generated overseas, we couldn't use any of that cash to delever. So while Tax Reform is quite likely hurting us on a tax rate side, it's giving us a lot more flexibility to move capital around where we need it and keep debt at below lowest levels possible. So we have always had a growth stuff balance sheet, if you will, with hundreds of millions of cash and then a larger sum of debt. Those days are unfortunately over, we will still hold on with some cash on our balance sheet to cover our day-to-day business, but we don't need to cover, to carry any one than that anymore. So, as I said in my script, that we are making investments, Tax Reform and the lower corporate tax rate makes U.S. investments a lot more attractive. So, anyway, I hope that answered your question.

Yes, it does. Thanks. And so speaking of like those investments and stuff and you guys have taken a little bit of a hiatus from M&A, how does your pipeline look right now? And, as you kind of, I guess reinvent yourselves if you will, can we see it back on the M&A train as you take advantage of your lower debt levels and the tax rate?

Yes. People tell me that they prefer short answers. So the answer to your question is Yes.

I know that maybe much shorter than that Mike. But the pipeline is pretty robust.

Yes, certainly the land, as I said before, it's a very sizable market. Our intention obviously is to build density, particularly when you are in a distribution business that's critically important. We have, perhaps a unique feature that we have the global network. There are too many folks in the world that have our spread of geography where we truly understand the markets and certainly the distilled of markets by virtue of our jet fuel, in some of the different countries. So we are still bullish on going global, our Kinect business is truly a global business and marine and aviation, multi-service is active in more and more countries, their clients look to take them in more countries. So at any case, land certainly sizable, I would love to acquire within the FinTech space with multi-service, if I had to turn the clock back, we would have bought, three, four, five companies within that and bulk that business up. Kinect we feel very bullish about in that area, marine so interesting, we feel like we could look at that in many number of different ways and aviation still has a good amount of runway in it, we are happy with all of the acquisitions we have done there. And I think if you want to look at going back to Ken's question, having a platform makes all the difference and so, we are getting a lot more serious about our land platform, it’s very high on our list of priorities but kind of tough to really get the value out of businesses if you can't do the plug and play. But now you have made me give you a long answer Kevin, but in any case, there is no shortage in organic growth opportunities that are intelligent. When you look at our business, we have a fairly broad chassis, we have got a broad geographies, so our opportunity for growth and profitable growth is good, but we have to do a couple of things before we could do that the right way, we are building it step-by-step.

Got you, thank you, Mike, I like your long answers, its good detail for me. So thank you. Another point, and if I’m remembering correctly, a few years ago, you guys had a similar issue, you had in aviation this quarter where I think at the end of the quarter, fuel spiked and you kind of got caught on the wrong side and your head just didn't work. Am I thinking about that right, I think it's happened to you before. And then point number two, do you still - is it black oil futures you sell, as your hedge against jet fuel inventory.

No its a heating oil. So historically heating oil and jet fuel are very tightly correlated and heating oil is the liquid market to hedge, because there is no real liquid market to hedge, jet fuel directly. What you are referring to Kevin, is true. It's actually happened several times in 10, 11 years that I have been here and it's not that the hedges didn't work, at least that the $7 million item that I referred to, it’s simply because of the inventory methodology we utilize, we wind up with hedges that are intended to cover our risk being on the wrong side, because in this example prices spike. The assumption is that you are covering your risk from prices going down and your inventory being valued too high when you are trying to sell it off to customers. This is the opposite side, so the assumption is that you have got some extra profit on your inventory. So you have got a liability on the hedge side, right. The problem is the liability of the hedge side happens at the end of the year when, mark your hedges to market and the pickup, because all this happened at the very end of the year. You don’t see that until you start selling that inventory a few weeks later, which has a lower cost basis, so make the profit back because prices are higher. Right. So that's something that we are still exploring, there are potential opportunities to change the inventory of methodology that we utilize today, which could reduce that risk going forward. There is some technological requirements to do that and we may actually get there in 2018 and more news to follow there. So we always have run the risk of that happening historically. The good news is those aren't the last dollars, right. The dollars tend to come right back when the inventory is sold, which is exactly what happened in this case.

Got you. Okay. That makes sense. Thank you, Ira and Mike. Good to talk to you again and thanks for your time. I appreciate it. Thanks again.

Thanks Kevin. Really good conference.

Thanks Kevin. Good luck.

Alright, thanks.

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

Well, thanks for joining us and look forward to talking to you next quarter. Take care.