Ladies and gentlemen, thank you for standing by and welcome to the World Fuel Services 2018 First Quarter Earnings Conference Call. My name is Ash 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, Thursday, April 26, 2018. 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 begin your conference.

Thank you, Ash. Good evening everyone and welcome to the World Fuel Services first quarter 2018 earnings conference call. I am 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 this webcast or future webcasts, please visit World Fuel's Service Corporation 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 these results to materially differ from these projections can be found on 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 conference calls we ask that members of the media and individual private investors on the line participate in listen-only mode. At this time, I would like to introduce our Chairman and Chief Executive Officer, Michael Kasbar.

Thank you, Glenn and good afternoon everyone. Thanks for joining us today. Overall it was a good quarter for us. We opened the year benefiting from recent improvements in cost management, a focus on rationalizing parts of our portfolio and executing in key operational areas. Ira will take us through the financials and then I'll make some further comments and we'll save some time for Q&A. Ira?

Thank you, Mike and good evening everyone. Today we announced adjusted net income of $35 million for the first quarter, that's an increase of $400,000 when compared to the first quarter of 2017. Adjusted diluted earnings per share was $0.52 in the first quarter, that's up $0.02 from the first quarter of last year. Consolidated revenue for the first quarter was $9.2 billion, that's up 12% compared to the first quarter of 2017. This increase was principally due to a 22% year-over-year increase in oil prices, compared to the first quarter of last year offset in part by lower volume in the marine and land segments which I will discuss shortly. Our aviation segment volume was 2 billion gallons in the first quarter, up approximately a 135 million gallons or 7% year-over-year. Volume growth in our aviation segment was derived principally from our core retail operations in North America and EMEA as well as our acquired international physical fuelling operations. Volume in our marine segment for the first quarter was 5.8 million metric tons, that's down approximately 1.1 million metric tons or 16% year-over-year. The largest drivers for the volume reduction relate to our operations in the Asia Pac region and our decision to exit certain low margin or unprofitable markets which we spoke about last quarter. Our land segment volume was 1.46 billion gallons and gallon equivalents during the first quarter, set down approximately 40 million gallons with 3% compared to the first quarter of 2017. The decline in land segment volumes is principally driven by the reduction in supply and trading activities during the first quarter. And total consolidated volume in the first quarter was 4.9 billion gallons, that represents a decrease of approximately 180 million gallons or 4% year-over-year. Before I continue with our financial overview please…

Thank you, Ira. Our aviation business volume growth exemplifies the differentiated value add, we bring to the jet fuel marketplace. Our combination of third-party inventory, distribution and technology is a winning formula that we're replicating in all of our businesses. Our marine business is doing an excellent job of managing costs and repositioning the business within the supply chain. We are committed to the global marine logistic markets and are well positioned to meet the requirements of 2020 by virtue of our global sourcing and distribution capabilities including LNG. We are reallocating capital in our land business, trimming inventory levels which have produced variable results in a times lower returns and allocating more investment to an end to end zero touch distribution model where clients can order products on a smart phone. Our NCS and government business performed well and continues to demonstrate our complex physical logistics capabilities. Multiservice is increasing its operational sophistication and global reach. Despite its modest size we remain optimistic about its business pipeline and prospects to accelerate profitable growth. Our connect energy group is expanding its range of services to a broader range of small and medium-sized natural gas and powered customers which is dovetailing nicely with our existing C&I clients and aggregates demand with our larger client base to create purchasing and supply efficiencies. Today we operate a platform that creates efficiency and simplicity in global complex energy logistics and payments in 225 countries and territories. We have an increased focus on sharpening our portfolio, reallocating capital and rationalizing infrastructure costs, SG&A and operations. We are using an agile methodology to drive a leaner management system. This is driving our ability to allocate capital for better returns, methodically improve our OpEx ratio and drive growth. As a key part of this, we are aggressively leveraging cloud technologies and AI automation to drive speed to market at lower cost over the next two years. I'd now like to turn the call over to the operator to begin our Q&A.

Thank you. [Operator Instructions] And our first question comes from the line of Ben Nolan with Stifel. Your line is open. Please proceed with your question.

I wanted to follow up with something Ira, that you had mentioned in the marine business that it seems like the first time in a long time there was an uptick in the crisis management, part of that aspect, and really is that -- I don't know, is that something you would think is -- you're continuing thus far in the quarter and are -- maybe more importantly, are you starting to see people think critically about how they're going to address their needs for the 2020 regulations and was there any preemptive hedging or anything like that that's beginning to happen that might actually be beneficial for your business?

I'll cover the first part of your question, and let Mike chime in on 2020 of that, so, thanks for the question. Look we're certainly happy with some of the incremental results we saw coming out of the first quarter that I described in Marine. In terms of the hedging piece of the puzzle that's a tough one, prices are up pretty meaningfully. So more people are seen to be thinking about doing some hedging and they might have thought about doing that for quite some time. The question is how sustainable is what we picked up in the first quarter, it's kind of spotty. We got a couple more transactions with the hedge component associated with them that were nice wins for us. Whether that continues or not into the second quarter or third quarter it's really tough to forecast. Thus far this quarter we are not running at the same pace, we were in -- halfway through the first quarter or [thoroughly] through the first quarter. So I purposely use the word cautiously optimistic because it seems like those opportunities that resurface the bid, how much they are going to drive incremental profitability is really a difficult one to know now.

And I will just add some further color to that. By and large the market place believes that prices are range bound despite what we are hearing in the news and hearing lot of stuff in these days, post fracking world Saudi and Russia got greater spare capacity, lot of discipline there which is incredibly surprising that. Despite some of the talk about Iran, I don't think people seem to be worried, airlines aren't hedging. So we have the capability, I think we're pretty sophisticated on that. We use that for own inventory management so we're at the ready and its part of our offering but it's not something that I think we're forecasting to be a big [deed] of mover but we're ready if and when more volatility comes in. And some folks use that to manage their exposure more conservatively than others. On the 2020 hedging, there maybe some of that that will come through as we get closer. I'm personally not aware of the people taking large approaches on that, it's been an incredible wait-and-see, certainly some people gone to the [scrubbers] and LNG but for the most part a lot of folks are thinking I think investments already, the marketplace for economic reasons are just sitting and waiting, I think we are well positioned to be able to deal with them.

Okay and then another thing that's come up was that your inventory levels are a little bit higher. I'm curious if that is a bit structural or is there something that we should agree to going forward in terms of how you guys are structuring the balance sheet and how much inventory you think, you need to have optimally and to serve your customers? Is there a change I guess in how you are thinking about the business from an inventory perspective?

Not really Ben, good question, again. In the first quarter there were two specific factors that drove most of the increase, so I would say, if I put those aside for a moment our core day to day business that involves the inventory pieces of puzzle the only that really had an impact the first quarter was price nothing really changed. As a matter of fact, in land we're down a few gallons in terms of the amount of inventory we are holding, aviation is pretty steady as was marine. But the two factors outside of that that were impacting the first quarter just said marine. So starting with marine we had actually one of the things that contributed to more profitability in the first quarter was some seasonal business right here in this neck of the woods here in Florida, you could imagine what industry that might support. And that required investment and inventory that was already dropping off from the peak of where it was during the first quarter is that kind of peak season is over. And then the other piece of the pie related to our government business in Afghanistan where we consciously worked with our principal customer there to add some levels of reserve as it mitigated against the risks of things like order closures, et cetera. We are getting compensated for that. So we invested some more -- that will be there for a while that's a short-to-medium term investment. That's not going to turn around overnight. But it seems to be very sensible move for both sides of that equitation. Everything else, again was pretty steady and we don't expect any material changes in inventory balances outside of potential price fluctuations in the next couple of quarters.

And I'll take the opportunity to just add a little bit more color to that because as we look at inventory as we've gone through the sort of three cycles of evolution within oil fuel. We started out as a asset light underwriter creating value for others in the marketplace and then went into an inventory base commodity market maker with crude oil and [well] and you've heard me talk about it before. And now we're in our current evolution as a distribution and service network coming up with more ratable returns. So there is four methods of the sale, and we have our third party, which is where we came from. We have our physical which breaks down into inventory as well as distribution assets. And then we have virtual what I call 3PV and those were the four ways that we basically satisfied customers' demand. So on the aviation side we have inventory because its strategic to have -- if we didn't put inventory in some locations there would be no supply. There were many manufacturers, jet fuel had no interest in supplying it into wings. So it's a bit of a peculiarity if you will of that particular business model, and we got in tough markets there. Today we have inventory in 35 countries. In our Marine business we started to penetrate the chain in niche markets. And that's worked out pretty well for us developing some capability there. And then in our land business again it's for the same reason and its strategic and evaluating. The choice is there in terms of third-party [rack] supply inventory. But now we have distribution assets in 16 countries and 11 states. And then in terms of fuel cards and our ability to drive e-commerce courtesy of multiservice and app card we continue to expand that. We are making investments and putting more dollars into those types of investments to create internal efficiencies for us as zero touch end to end eliminating some of the internal manual processes, using robotics but then also creating convenience for our customers to basically procure fuel and to integrate more completely with our operation. So long way away from inventory but I thought that was an opportunity just to lay out a little bit of the current business model and how we are looking at the allocation and the returns and optimizing that. So going with standardized accounting systems and looking at consolidating those areas, some of cloud-based that Jeff Smith and his team are driving is I think going to create additional opportunities for us to derive better service at lower cost. So, anyway. Sorry to -- inventory but I thought it was worth to share that.

I think honestly that was -- certainly what I was driving at there as kind of how inventory relates to the strategy where the company is on a holistic level, so it was very helpful. I appreciate it. Thanks guys.

Our next question comes from the line of Ken Hoexter with Merrill Lynch. Your line is open. Please proceed with your question.

Michael, Ira and Glenn maybe I don't know if it's I guess it's Michael if you want to talk about the land business you were just talking a bit, you kind of hit on a lot of things, zero touch, off the web, you can order off the web, robotics, maybe just you also threw at the beginning rationalizing some of the stuff you're working on. Maybe walk me through what's going on? I mean land volumes came down, Ira you mentioned that through your presentation but is it now different than just distributing fuel to gas stations selling in a wholesale model, owning some of those assets? Maybe talk to me about what you're doing because you just, Michael you threw out a lot of different things that seemed very different than from what I understood, the land business to be, and I want to understand the rationalization part since volumes were down year-on-year?

So, we are predominantly in the U.S., the UK and Brazil. Although our intention is to go global because it is a global business and we've got the ability to do that in the aforementioned methods of fulfillment. So we grew up internationally. Many of us started by doing business globally, so we have a global orientation in our company, ships and planes go over the world, and if you're going to play that game, then you start out with the global orientation. So there's absolutely no reason why our land business should be global, so just want to start out with that. So, we entered that space in 2004 de novo, that was an interesting experience. We went to the retail business in 2008 and aggregated a good amount of that in the Midwest, so that was supplying fuel by full truckloads to gas stations under multiyear contracts. We still have that, it's a good business. We like it. So that's a chunky piece of our business in the U.S. We recently in 2016 we diversified into C&I, let me sort of backtrack a little bit. We started out in 2004 wholesale against the rack to distributors that were looking for credit and some pricing and some derivatives and we had expertise in all of that. That was interesting, 2018 wasn't such a great strategy, and we decided to move into the retail business, which we built up a certain amount of concentration in the Midwest. 2016 we went into the C&I business and we've got Western rather -- sorry, 2010 was Western -- the reason we acquired Western was because we were consolidating the three business aviation branded and unbranded distribution businesses to FBO. So today we distribute to about 1,400 FBOs under contract and they also had…

I think you have covered all of it.

I don't know Ken if…

So just to wrap it up, I mean that was [indiscernible].

I'm sorry, let me just tell you about the inventory side within land. We are looking at that where that was fairly robust, and the Arabs have changed and the market is just not as -- it's just not giving you as much as it used to. So we will continue to maintain expertise and inventory in derivatives and distribution because that's what the market needs. So it's really setting up whatever operation is required. Obviously we get better return when you got less amount of working capital deployed but the market to market and we basically approach it with whatever needs to be done. Sorry to interrupt, can I have another question.

I guess, I was just trying to simplify at the end there. So it sounded like to rationalize some parts of that. Does that mean going back down to just simply doing the retail type of operation that while you are distributing the fuel to gas stations in a branded or is it staying as broad with the so many different things going on and I don't know even through like some app based ordering in there in your overview? I just want to -- I'm trying to simplify kind of what the story is for land and then again come back to why it was down?

No, no, no, it was a great question. So we have got retail we have C&I. If you look at this there is a lot of commonality in our businesses. So if you look at now our retail businesses we are ranging for full truckloads to go from a rack from terminal to a gas station. We have our FBO business which is not a lot different. We are ranging a full truck of jet fuel to go from a rack or internal refinery to an FBO. So there is lot of commonality. As we are looking at our C&I business there is a lot of commonality there between serving that customer the liquid fuel as well as their gas and power. So there is a commonality in these businesses all across them where its logistics its procuring fuel and delivering it. With the C&I that could be a laundromat, could be aggregate company, any commercial and industrial user of diesel or gasoline is our customer. And when I talked about that app its people ordering fuel. They want a truck of fuel. So now in the on demand economy and society that we have you have got to provide convenience for them to basically manage their energy and their operations. So that's where the world is going and we are now deploying technology in our operations that are connecting our complete internal systems with our customers' requirements. So that they are able to buy their fuel when they want it, where they want it, how they want it. So that's the name of the game and we are integrating all of that within our business. I hope that's clear.

Let me just ask one question from last quarter. You had mentioned earlier or maybe it's for Ira different things on hedging gains or anything rolling over into the quarter. Is there anything that I think you would recognize something this quarter. Is there something that is still left over in that in the quarterly results that does not go forward for the rest of '18?

I think what you are referring Ken, yes, thanks for the question, is the $7 million or so that we talked about in the fourth quarter where we took a hedge on the hedge side of the equation and then had a gain on the physical inventory we sold it in the first quarter. So that $7 million all came back during January but that's generally behind us now.

Our next question comes from the line of Kevin Sterling with Seaport Global Securities. Your line is open. Please proceed with your question.

Michael as we think about the rest of the year because we have had a lot of -- we had some moving parts this quarter, you guys had nice rebound from Q4. Can you give us any color how you're thinking about volume growth in your three segments for the rest of the year just to kind of help us there as we have got some new moving parts?

Well the thing that we've been spending a lot more time on is looking at all of these metrics. Obviously, as you put all the cost structure together, there is a lot of moving parts. So our model obviously is comprised of volume and margin OpEx. So we've been thinking a lot about that lately, as we look at all of the -- this is a lot of where we have been focused on. So this year, I think we've got some work to do, but I think over the next three to five years we feel like we have got a shot if our plans come to fruition in terms of restructuring some of our systems or our portfolio, being able to get a lot more of our financial resources and our people focused on fewer things. That we've got the ability to drive the CAGR over three to five years of about 10% both organic and inorganic. So that -- I don't know if that sounds like to everybody but that's certainly now [lay] up but we think that we have got the ability to do that that as we build our global machine and platform, we should as a system that should be able to aggressively hunt for business. I have mentioned in the past that we are deploying some technology in terms of sales and cross sales. We have got a fairly incredible role with that. I mean if you look at our customer base and customer list it's extraordinary and as we both acquire companies and as we create more connectivity within the organization and we look at the products and services that we have. We feel that we have got something that is differentiated. We have got a strong right to win. We know that within our existing customers if you cross reference our customers demand with our products and services, that there is a lot of white space, so I feel good about it. It's an exciting part of it, I think we're all looking forward to getting back to that place where we've got a lot of capability to execute in the marketplace and getting this global mousetrap that we're building, working a whole lot better. So it's been a transition but we think that that's reasonable to look at a 10% CAGR over the next three to five years both organic and inorganic.

Just to add to that briefly to the first part of your question Kevin that Mike made part of this, for this year I think one of the principal reasons why we expect volume not to grow is part of the -- to the uncovering of lots and looking through the entire business for where we've got lower margin business, and businesses aren't performing well, where we're looking actually --[checks now] we've been doing that on purpose. As you could see from this quarter we had year-over-year volume declines but our profitability was stronger, so we're -- that's a lot of the story of 2018, I think once we get through '18, it's a nice point, we believe with maybe with a little bit of M&A we should be able to grow 10% a year in volume without much of a problem.

No okay gotcha. You mentioned M&A how does the pipeline work, is there any like maybe new verticals you're looking at or maybe kind of update us on the pipeline, since you did mention M&A if you don't mind?

There is a lot of opportunity out there, we're certainly not sure of opportunities in the pipeline. Its identifying which opportunities make sense, which valuations make sense, how we could plug and play into our current business as might as we continue to shop in our portfolio, refine it a bit. So take a lot of -- we're looking at the short term is more in line with our core activities in businesses like land as an example. So there is really almost too much out there, to digest sometimes but we are kind of through very carefully as you can all tell, we haven't been overly acquisitive in the past year, two years. But I think the opportunity for us to jump back into the game is getting a bit stronger but we use the cautious word again. Right, we're not going to make an acquisition for sake of making an acquisition but rather doing deals that we think is really going to add some value and provide synergies and help drive one of our existing core lines of business to new levels of growth.

And one last follow-up here if you don't mind. With the rise in -- kind of the steady rise we have seen in oil prices are you seeing the behavior or your customer buying patterns change, kind of with this rise in oil prices? And maybe along those lines are some of your Marine customers, are they feeling a little bit more optimistic about the environment, to that the environment is improving on the Marine side compared to a few years ago. I'm just curious what you are seeing terms of like buying patterns of your customers with this rise in oil prices that is now your Marine customers are feeling a little bit better by the current environment that they operate in?

Kevin I don't think there is a lot to celebrate within the market. I think, this is still a bit of a slog. You have got some of the trade activity but I think [drive] both is from modern expectations but product tanker side maybe has got a bit obviously, what the supply include, what the supply scenario is in terms of production, it's hard to tell. But certainly, I don't think there's anything to celebrate for. Container has sorted themselves out a little bit. But I think its steady as she goes. I am not -- I don't think there is anything that is particularly noticeable or that has changed in the recent period.

On the buying side just to answer your question there. There is some moderate activity as you have seen in our results. That remains to be seen. I still believe that the markets are more or less range down second change. We certainly are at the ready to handle that but we're not forecasting that. So -- and we're not forecasting that in how we're structuring our costs. So I think probably the more important thing that folks may want to hear is that in the past, I made these comments, it was really about looking at the next opportunity to make a significant amount of profit in high margin areas. And we're structuring the company, such that we're dealing within our recurring revenue and flow business and should those opportunities present themselves to us they are [worthy]. So I think maybe that's the more important comment there but we are committed to the Marine industry. We think it makes sense. We think we've got a good synergy between our land business and our Marine business, our natural gas business in terms of provisioning LNG. We think we have got a very good mousetrap within Marine, we have got a great organization. But we are not forecasting any robust increase and it's just continuing to provide a superior service for our clientele and also penetrating a supply chain and select those, as we have done with aviation and using technology which we have.

Mr. Kasbar at this time, I would like to turn the call back over to you for closing remarks.

Okay, well thanks everybody. Appreciate you taking the time to listen to this quarter's results. Thanks for your support and we look forward to talking to you again next quarter. And take care, have a good evening.

Ladies and gentlemen that does conclude the conference call for today.