Q4 2020 World Fuel Services Corp Earnings Call
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Ladies and gentlemen, thank for standing by and welcome to the World fuel services fourth quarter and full year 2020 earnings conference call.
My name is Mike and I'll be coordinating the call for 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.
And instructions on how the ask the question will be given at the beginning of the Q&A session.
If at any time during the conference you need to reach an operator, Please press star zero.
As the amount of this conference is being recorded.
I would now like to turn conference over to Mr. Glenn <unk> World The fields, Vice President Treasurer, and Investor Relations. Mr. Clovis you may begin your conference.
Thank you Mike Good evening, everyone and welcome to the World fuel services fourth quarter and full year of 2020 earnings conference call.
Then the <unk> and I'll be doing the introductions on this evening's call alongside our live slide presentation.
This call is also available via webcast to access this webcast or future webcast. Please visit the world fuel services Corporation website and click on the webcast icon.
With us on the call today are Michael <unk>, Chairman, and Chief Executive Officer, and IRA Burns Executive Vice President and Chief Financial Officer.
By now you should have all received a copy of our earnings release.
You can access the release on our website.
Before I get started I would like to review World fuel Safe Harbor statement.
Okay.
Certain statements made today, including comments about the world fuel expectations regarding future plans and performance are forward looking statements that are subject to a range of uncertainties and risks that could cause the 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 the world fuels. The most recent form 10-K, and other reports filed with Securities and Exchange Commission.
World fuel assumes no obligation to revise or publicly release the results of any of these revisions to the 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 the World fuels 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 Caspar.
This is <unk> my apologies before Mike begins we've been an operator, we've been informed that you still have music play while Glen was speaking could you. Please ensure that shut off the asap or might begin.
We wish you and one of two minutes sorry for the delay.
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Yeah, So I'd give it a couple of more minutes, our sincere apologies, we still try to work.
The work things out of the conference call company that doesn't seem to have the ability to show the Tc saw.
Sorry about that will be with you in a minute or two.
Pardon the interruption on line or any of the music on my end is anyone still hearing music.
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All of the participants of hearing it.
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Okay, we're back on the sorry for the delay.
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We had some music cabinet hopefully everybody can hear if not.
Please ask the cedar and with contact us steps of work.
Assuming good when it's here. So thank you thank you Glenn and.
And good evening, everyone. It's good to be here today as we all know it's been a year like no other.
It was a year when our company on a country in the world were challenged in ways never before experienced it was also year on which we learned a lot of that ourselves and each other about how we respond to emergencies to rapid change to having our personal and business line turned upside down.
And the health of our families and employees put at risk.
The pandemic impacted some businesses more than others we.
We support the industries that have been among the most impacted from <unk>.
World fuel it was the ultimate stress test and I could not be more pleased with and proud of the incredible job of our global team standard during this extraordinarily challenging year.
We did not miss a beat per customers or suppliers in any part of our business activity for in a part of our global operations not one we absorbed the risks performed our operations with excellence and improved our safety metrics, along the way, we maintained and enhanced our commercial operational and.
<unk> position as the counterparty of choice to the global Aviation Marine and land based industries I could not be more proud of the dedication and efforts of our team and the outcomes. They drove in this difficult risky and volatile year, we have been fired captured and a stronger for it.
G&A from all of our businesses are strong healthy and poised to respond to the resurgence of passenger travel and commercial activity in aviation Marine and land as local and global markets reopen.
The work that we've done over the years on talent leadership and culture has better positioned us to execute on delivering and scaling our existing diverse energy and last half mile logistic solutions to end users.
Aviation Marine and land businesses continued to refine and enhance their offerings and expanded global networks. We have clearly demonstrated they have clearly demonstrated the strategic value in their markets. During the most successful I'm sorry stressful time in history.
Our energy management business continued to evolve its natural gas power wind solar carbon in renewables activities and as I said last quarter of this business is breaking into strikes.
We provided robust energy management advisory services to a broad base of local and global businesses in 55 countries, we sourced renewable energy from our portfolio of the 190 renewable power plants, we concluded solar power agreements with various communities as well as agreements with utilities.
Scale solar projects for Fortune 500 companies, we manage the saw growing volumes of electricity and natural gas.
Throughout all of our businesses, we are supporting our clients pathways to lowering their carbon footprint and meeting their growing ESG agendas, but procuring and selling carbon credits sustainable aviation fuel and renewable diesel.
As I said last quarter the reception from the market to our sustainability offerings is accelerated.
Society has passed the tipping point on climate action, and we are well positioned to serve the sustainability of needs of the market.
Last quarter, I mentioned, our government of military activity and the synergy with our commercial activities, while our core at the end of the theater business has experienced substantial declines as a result of true troop withdrawals in Afghanistan, I'm confident we'll be building out a more diverse portfolio of <unk>.
Business activities within the sector, which leverages, our commercial operational and expeditionary capabilities.
As I have said in the past our military activity and expertise has positively influenced our commercial practices and the military veterans at work shoulder to shoulder within our organization continue to help US drive operational excellence, we are grateful for their services contribution towards success and are committed to.
Hiring supporting military service members throughout our global organization.
In addition to participating in what is rapidly moving from an energy transition to an energy Revolution. We are also participating in the digital transition.
We are digitizing more transactions documents in the communications every day and moving hundreds of suppliers and customers to our a P eyes and portal solutions, all with the purpose of reducing costs lowering of ours, and our customers and suppliers carbon footprint and increasing value by improving opera.
Additional integration with the markets we served.
We are taking in our large and liquid analog transportation fuel marketplace and turning it into a digital energy ecosystem.
We're doing this with smaller teams and better performance as a function of focusing on diverse talent and thinking and a collaborative culture.
In 2020 of global team showed great strength of character tremendous resilience uncommon rent and a relentless determination and burning desire to do well I want to sincerely. Thank each and every one of you.
Now I'll turn the call over to IRA for a financial review followed by Q&A.
Thanks, Mike Good evening, ladies and gentlemen, I hope you enjoyed the Xtra music, sorry about that again book.
Before I begin my financial review I would also like to reiterate Mike's sentiments instead of a special thank you to our global team with the assets quickly two of rapidly changing environment and support of our business with tremendous synergies throughout 2020.
Last year was one the broad unforeseeable challenges to our business in the markets, we serve where.
So we couldnt be prouder of our company has accomplished in the face of such extraordinary counts while.
While uncertainty still lose the proverbial light at the end of the tunnel seems to be creeping a bit closer.
And we are very confident that our resilient business model will bounce back as the markets. We serve begins to recover.
The positive news is coming out every day regarding vaccination rates and shrinking COVID-19 activity and the progress that is being made should be very encouraging to resolve.
I'll provide additional details regarding what we advanced the strength of our company during 2020 as of.
Give a more detailed review of our fourth quarter and full year financial results.
As usual. Please note that the all of these figures exclude the impact of non operational items as highlighted in our earnings release that on.
Of the operational income and expense items for the quarter and full year principally related to the gain on the sale of our multi service business most of which was recorded in the third quarter as well as other acquisition divestiture impairment and restructuring related expenses.
To assist you in reconciling results published in our earnings release, the breakdown of the nonoperational items can be found on our website and on the last slide of today's webcast presentation.
Now, let's begin with some of the fourth quarter and full year highlights.
On solid dated volume for the fourth quarter increased three 5% sequentially to $3 5 billion gallons for the full year. Our consolidated volume was $14 4 billion gallons, that's down approximately 26% compared to 2019, mostly related to the pandemic impact on our.
It'll aviation business.
Adjusted fourth quarter net income and earnings per share of a $1 million.02 per share respectively.
And adjusted full year net income and earnings per share were $74 million per $1.15 per share respectively. Adjusted.
Adjusted EBITDA was $45 million of the fourth quarter and $261 million for the full year.
And lastly, we generated another $114 million of cash flow from operations during the fourth quarter.
The attributed to a record $604 million of cash flow from operations for the full year further strengthening our balance sheets amidst the ongoing net Evans.
<unk> consolidated revenue for the fourth quarter was $4 7 billion again negatively impacted by the continued effects of COVID-19 on our segment volumes as well as the 25% decline on average fuel prices compared to 2098 for the full year consolidated revenue was $20 4 billion.
That the decrease of $16 $5 billion of 45% when compared to 2019 with the decline driven by the same factors as the fourth quarter.
Our aviation segment volume was $1 1 billion gallons in the fourth quarter, Joshua the up 12% sequentially, but still well below pre COVID-19 activity levels strength in cargo operations in business aviation was offset by continued weakness in global commercial passenger aviation activity.
Fourth quarter spikes in Covid activity led to a re institution of mandated quarantines and other forms of travel restrictions for much of Europe, the Americas and even Asia. These.
Of these restrictions are expected to remain in place of the balance of the first quarter.
However, COVID-19 cases, hospitalizations and vaccination rates all seem to finally be trending of the right direction. We should begin to result in relapsed travel restrictions. This is all leading to growing optimism for a reasonable recovery in commercial aviation activity potentially beginning as early.
He has some time here in the second quarter and into the third quarter of this year.
For the full year volume of our aviation segment was $4 7 billion gallons that the $3 8 billion gallon decline or 45% compared to 2019 again for the savings obvious reasons volume of our marine segments of the fourth quarter was $4 2 million metric tons down approximately <unk> <unk>.
19% year over year, and 3% sequentially the.
Year over year declines were principally driven by weaker demand across the core resale and physical businesses.
For the full year, our Marine segment volume was $17 5 million metric tons. That's the decline of $3 4 million metric tons or 16% compared to 2019.
Our land segment volume was 1.3 billion gallons per gallon equivalents during the fourth quarter that the decrease of only 11% year over year at of natural increase of 2% sequentially generally good results considering the broader economic impacts of the pandemic on their markets. Our lab business serves we.
The experienced year over year Covid related volume declines of our retail commercial industrial of wholesale operations, which were partially offset by increases in our growing power natural gas the sustainability platform.
Our land team remains focused on expanding our C&I power of natural gas and sustainability platforms and has done a great job managing our land business through the pandemic over the course of 2020.
For the full year volume of our land segment was $5 1 billion gallons that the decline of 390 million gallons were 7% compared to 2019.
And consolidated volume for the full year was 14 4 billion gallons down of $5 1 billion gallons were 26% year over year.
Consolidated gross profit for the fourth quarter was $165 million as of 42% decrease compared to the fourth quarter of 2019 and of 23% decrease sequentially.
For the full year consolidated gross profit was $852 million down $260 million or 23% both declines driven by the impact of the pandemic on our aviation and marine results.
Our aviation segment contributed $70 million of gross profit in the fourth quarter, there on 50% year over year and 28% sequentially.
The reason for the year over year decline again is obvious but we also experienced the sequential decline due in parts of renew travel restrictions of the fourth quarter as mentioned earlier. These restrictions most significantly impacted our higher margin volumes that are serviced by our physical operating network in Europe.
So our inventory business was negatively impacted by fuel price volatility during the quarter and we also experienced the modest sequential decline in government related activity related to well publicized Afghanistan troop withdrawals mandated by the prior U S administration.
As we look ahead to the first quarter of 2021, we anticipate that aviation gross profit will remain flat sequentially driven principally by continued lockdowns in many parts of Europe and other areas of the world, which again, we expect will last through the balance of the score for.
For the full year aviation gross profit was $353 million of decline of $198 million of 36% year over year.
The Marine segment generated fourth quarter gross profit of $23 million of.
The 60% year over year decline of 29% declined sequentially the <unk>.
Covid related year over year decline in core resale activity, including the cruise sector with compounded by of comparisons to a very strong fourth quarter in 2019, which had benefited from the lead up to the January one very low sulfur.
I M O regulations.
In addition to seasonality the sequential decline related to lower margins than expected in our core resale activity and weakness in our physical business.
Impacted in part by COVID-19.
As we look ahead to the first quarter based on what we've experienced year to date, we expect marine gross profit the increase sequentially driven by a rebound in our higher margin physical business and an increase in customer derivative related activity.
For the full year, the marine segment generated $151 million of gross profit, which is there of $30 million of 17% compared to 2019.
Our land segment delivered gross profit of $72 million on the fourth quarter of 3% year over year of 11% sequentially when excluding profitability related to multi service, which was sold at the end of the third quarter.
While core domestic activity decline land experienced sequential increases in our power and gas business as well as the benefit of seasonality in the U K again, a good outcome for land considering the impacts of COVID-19 on the markets they serve.
Looking ahead to the first quarter, we expect land gross profit would be sequentially higher.
This will be related to the increase in activity in the U K as we expect seasonal strength of our heating oil distribution of activities, which began on the fourth quarter. The continued through the first quarter driven in part by assumed higher usage as a result of continuing pandemic related lockdowns and some additional potential upside related to the recent.
Volatility on the natural gas markets in parts of the U S.
For the full year <unk> segment contributed gross profit of $348 million after excluding the impact of the multi service the way on year over year decline was only $9 million.
We're 3%.
Core operating expenses, which exclude bad debt expense were $135 million world.
Work, which was well below the range that we provided on last quarter's call as we remain focused on managing our variable costs. During this period of continuing uncertainty.
Looking ahead to the first quarter operating expenses, excluding bad debt expense will likely be a bit higher.
In the range of $138 million to $142 million.
If we look at the full year 2020.
Core operating expenses were $613 million that standard of $152 million or 20% when compared to 2019.
By taking swift action to reduce our costs to better align with the economic realities of 2020, we were able to mitigate more than 50% of the full year decline in gross profit. This.
This is another testament of our teams focused effort the managers through the challenges of the pandemic.
Speaking of the challenges of the pandemic bad debt expense in the fourth quarter was $5 $8 million returning to a more normalized level after two quarters of COVID-19 related elevated expenses.
We continue to navigate challenging markets well our credit team continues to do a fantastic job underwriting risks with credit line remaining well below historical levels.
As we look to 2021, we expect bad debt expense to return to the levels at or below those experienced in 2018, and 2019 unless market conditions somehow deteriorate substantially from here.
Adjusted income from operations for the fourth quarter was $25 million.
Down significantly from 2019 of sequentially again.
Given the impact of the pandemic on our aviation and marine segments most specifically.
On the full year the income from operations was $176 million also down significantly principally driven by the impact of COVID-19.
Fourth quarter interest expense was $12 million, which is down 30% year over year. While total interest expense continues to benefit from lower average borrowings and significantly low interest rates interest expense increased sequentially as we ramped up our accounts receivable sales facility, which has further strengthened our liquidity pro.
While.
At the end of the fourth quarter, we again had no borrowings outstanding under our revolver and we ended the year in a net cash position.
We expect interest expense for the first quarter to be in the range of $10 million to $11 million.
Other expenses were also elevated in the fourth quarter, principally related to foreign exchange losses, driven by significant currency volatility during the quarter.
As a result of the impact of the pandemic on our operations. We were required to book of fairly Signet significant amount of valuation allowances against our deferred tax assets in various foreign jurisdictions during the fourth quarter.
This resulted in a higher effective tax rate for the fourth quarter and even the full year.
These non cash adjustments were required under tax accounting standards and preclude us from recording a tax benefit on sort of legal entity loss results, which again for the continued to be driven principally by the decrease in demand associated with travel restrictions imposed globally due to COVID-19.
The recording of these valuation allowances has no cash flow impact and our net operating loss carryforward assets remain available to offset future taxable income immediately you'll entities once they become profitable again post pandemic.
Since we may not be able to recognize any tax benefit. So we start showing profitability in these jurisdictions. Our effective income tax rate may remain higher than we would like in the short term.
If we normalize on a range for the impact of these allowances our fourth quarter effective tax rate would have been somewhere in the low thirties.
Just on what we know today, we expect our effective tax rate to be in a very similar range in 2021 unless market local market conditions changed materially.
Our total accounts receivable balance declined to about $1 2 billion at the end of the year downward of that 50% or approximately $1 $7 billion from December of 2019, driven principally once again by volume declines of lower fuel prices.
Our continued focus on carefully managing working capital resulted in fourth quarter operating cash flow of $114 million for the year, we generated more than $600 million of cash flow from operations, which has enabled us to repurchase $68 million of our shares and paid $26 million of <unk>.
<unk>, while still strengthening our balance sheet substantially again during the midst of the pandemic.
This provides us with the significant amount of available liquidity to invest in organic growth initiatives, our robust pipeline of strategic investments additional share repurchases and dividends all intended to drive greater shareholder value.
In closing as we all know 2020 was the very tough and unprecedented year not only for us as a company, but for the markets we participate in and just about everybody else.
While we cannot control on business demand recovers from COVID-19 on.
Operating remotely for almost the entire year now our global team did an exceptional job focusing and executing on what was within our control specifically managing our expenses and cash flows and credit exposure with customers and other counterparties and.
And while EBITDA was still significantly impacted by the pandemic. These.
These prudent actions further strengthen our balance sheet, reducing net debt by more than $578 million $575 million, leaving us in a net cash position at year end.
Looking forward many say of prices is a terrible thing to waste and we work very very hard in 2020 to ensure we did not waste. This horrible crisis I believe we will come out of this the much stronger and efficient business with our balance sheet stronger than it has been in the very long time, we are well positioned the hit the ground.
Running with the demand recovers post pandemic with significant capital available to invest a further strength in multiple areas of our business with the greatest opportunities for growth and operating leverage thank.
Thank you and please be safe I would now like to turn the call over to not much of our CEO of the Mike our operator.
For Q&A.
Thank you.
Thank you at this time of Alterra and everyone. If you want to ask a question. Please ask the number one followed by the number of for Warner telephone keypad, you'll hear us three Tom prompt the technology request.
The question is of an answer the Newark to withdraw your registration of please pass the one followed by the strength.
If you're using a speaker phone please lift your handset before entering your request.
As a reminder, we would appreciate it if the participants would limit themselves to two questions with associated follow ups, we will pause for just a moment to compile the Q&A roster.
And the first question comes from the line of Ken.
Ken <unk> from Bank of America. Please go ahead.
Hey, great.
Good afternoon, Mike IRA and Glenn Great job on amount of the gathering the balance sheet during the pandemic.
But I am looking forward with with $60 oil typically lower fuel enables strong internal cash flow and I know you've made some changes in.
What you talked about on how you manage the business and you dramatically lowered your debt, but typically on the rising fuel you moved to extend credits how should we think about cash flow going forward in this rebounding environment and in a rising fuel backdrop.
And with good question, Ken Thanks, Chip prices are a little bit higher we've been managing our balance sheet, you know really tightly or our trade cycle blow out a bit in the midst the pandemic, but it's back the more normalized single digit levels. So.
$60 or so will not make much of the dense in terms of working capital and cash flows.
The only way that it would have a more meaningful impact I think we would all be very happy as if the recovery accelerated very quickly you had a combination of higher prices.
And significantly more volume, but even so in relation to the amount of liquidity that we have available today.
The impact from the combination of those two I would still expect not to be overly material.
So while you know we made the may reduce the cash flow opportunity that we would otherwise have but not by a significant amount.
Okay. So it's not like a case, where you see of going from generating significant cash to two very thin cash because the price of crude goes up.
Look it depends on how far the price goes up and again more lora because if if prices went way up now of today's the brake pressed level of volumes the impact would be a lot lower than the who is going up with the level of volumes. We were experiencing in 2019 right. So it's really a combo of the two so.
So again if prices continued accelerating.
And the volume.
Which we begin we'd all be happy about accelerated rapidly.
That that would create a scenario where.
Cash flows, but you know maybe diminished to two of much smaller level, but you would need.
You would need that combo for that App.
Ken.
And the higher prices are not in October we negative, obviously theres cash flow impact, but yes, theres other with of dimensions to that obviously in terms of our underwriting and unit margins. So there is some salutary effects too in a higher prices as well.
So the those dimensions of artists value relative value add it up kind of market there. So.
It's the it's not really of what it concern at this stage.
The notes it highlights our cash generative bandwidth with the debt pay down.
So.
Mike Our IRA where do you see the the volumes first day, given you've been at the the three segments for a while now with with land aviation and Marine are you seeing.
IRA you mentioned a couple of I think two of the three are going to see sequential upticks.
With aviation I think of US was the aviation was flat sequentially.
But are there signs that you'd start to see at this point in the turnaround on the volume pickup that you look to first.
Seeing that and I guess that blends the kind of how you saw bad debt move back down to a normalized level, but let me start with the volume part of that question of course.
Yes.
It's anybody's guess you know listening to the major airlines the with the data at the Se.
What would the rough books.
We expect and we've seen some very modest signs of of the commercial aviation volumes.
Increasing slightly still.
Still of course nowhere near the levels, where we started.
We're assuming that there's a reasonable opportunity for that.
Net volume in aviation, which was the most significantly impacted of course of too to really accelerate.
You know more of the second half of the year again still.
Not expected to be any read on the levels of 2019.
On a whole lot better than where we were at the bottom in 2020.
So again that depends on.
What will transpire over the next couple of months with in terms of the co.
Covid rates vaccination rates.
And the impact on on travel restrictions you know, there's a lot of <unk>.
On the test up demand for travel I personally haven't been on the commercial aircraft in the year, probably for decades right and so there are a lot of people that once they are comfortable that it's safe to be out there that are looking.
Looking at the start book and a bunch of flights and net net.
That Ty could start turning very quickly I don't think we're there yet but when that type of start turning.
The issue volumes of the off periods, the web two accelerated pretty meaningfully again.
Not necessarily bring us back to where we started a portion of the overnight but.
He is closer to where we work on <unk>.
19 land volume didn't get impacted as much.
In marine volume sitting get impacted as much of the the real the real punch line of volume is is aviation.
And we're hoping again to see that number of start moving north.
Second quarter of the third quarter and then.
Through the end through the end of the year.
Great I appreciate the tablet.
You'll see one.
Obviously, the the cruise market.
It's factored into aviation somewhat related but different.
And the.
On the container tanker to dry bulk is going to be more broader economy based.
So as you see that start to pick up you'll see some.
You're not knockouts.
They're on.
The land part in terms of our diesel activity.
Retail gasoline that.
Of that business is moving progressively and taking market share. So we feel good about that.
Then the natural gas and power business is growing.
The more natural gas and power of but you'll see it start to do a bit more activity on the parasites as well.
Heating oil obviously within the U K.
Somewhat contained market but.
So some of it is it on the broader based market and the economy coming back yet.
I think you're seeing that the Atlanta is the start to kick in at some of the energy management business of all of that small will be looking to grow that business.
Yes.
Great appreciate the time of thought you guys.
Have a good afternoon. Thanks Keith.
Yeah.
The next question comes from line of Ben Nolan from Stifel. Please go ahead.
Thanks.
Yeah, I wanted to dig in on a little bit on a couple of things add the the first is on <unk>.
The aviation business, just kind of looking at it the.
The the volumes were pretty similar but the the gross profit was off some and I know you'd mentioned Afghanistan.
Yeah.
But majestic and keeping with sort of a flat volumes, what what was really the main or or or the pressure point on on on your margins in the year any aviation business or was it all afghanis have guessed that stuff.
The structure.
Good question, and obviously that number was off clearly on on a sequential basis.
So three three issues that I tried to hit on in my prepared remarks that I'll elaborate on the government piece was actually the smallest piece of the three.
That was only off a little bit of its.
We're talking about that for a moment since you brought up.
Joseph Resiliency every time, you think it is going away.
It doesn't at all of it.
With the change of administration now you don't have the same.
At the same level of excitement about trying to bring all of the troops on net that seems to have waned.
And of the troops. The remaining May you may remain of definitely we don't know so that was actually a pretty small piece of the five of book, we'll see we'll see that decline a bit more of the first quarter, but not materially.
The bigger pieces were the lockdown the staff.
Were reinstituted in Europe.
Adjusted.
Many of almost all of our physical locations each of the locations that we picked up in the exon of acquisitions, you've never you know several years ago, we operated.
Over 100 locations of today, most of which are of Europe on many of the words were basically shut down.
With like next to nothing going on and those are higher margin.
Pieces of our business right because there because of the.
The physical nature, plus the back to back sales were actually on the ground.
We're providing the services in the fuel.
So that that was you know of.
Profit 40 40, 50%.
Of the decline sequentially and then there was a significant amount of inventory volatility most specifically in November.
And.
We had we had a much future result on the inventory side of our business are sequentially. We will begin a little bit of net back some of that was timing, we get a little bit back of the first quarter, but but not a whole lot.
And that was beyond the second biggest piece of it again government was was the third piece.
As we look to the first quarter first quarter and the reason I guided a flattish is because we only had a partial quarter of shutdowns.
In.
In the fourth quarter, respecting and as European countries, where it's probably going to be just about the full quarter.
But offsetting that we don't anticipate the inventory piece of the puzzle.
We're seeing a little bit of growth in other markets cargo was actually really strong business aviation is coming back. So we believe that'll offset on an incremental negative impacts of <unk> in the European physical network.
Of the locations so the operating on airport.
And then as you look beyond the first quarter, we're hoping just to start seeing some improvement.
Little by Little Q2, Q3 Corp.
Okay, Matt I appreciate the granularity there are of that is helpful.
I want to shift a little bit too.
Capital allocation of acreage together.
We are on track to be at $700 million of cash pretty quickly here.
The debt is not really falling I assume you're sort of with the revolver fully paid here sort of against some of some limits of there.
You did a little bit.
At $12 million to $13 million of share repurchases in the quarter, but.
Yeah I asked.
As we share to go for and maybe the Ken's point earlier, if oil prices are going higher and especially of volumes increase and theres going to be need for some of that for working capital but.
Yeah.
Is there.
Is there any thinking about maybe really ramping up the buyback program or or.
Is it going to are you hanging a little bit more of just sort of a.
Gradual in nature.
She probably has can answer that question.
Good good good question.
We always look at all the pieces.
The mission of my prepared remarks.
We have organic growth initiatives, especially as parts of the market come back to.
The case question earlier, you, we always want to have liquidity available for working capital again in the event that if you take a look at accounts receivable there.
We're down from $3 billion of 1 billion two of obviously accounts payable are way down as well.
But eventually we will be investing something in working capital. So that's always critical.
And then there's M&A right. There is a lot of a lot of opportunities.
On may be better after the circumstance of 2020 than maybe before.
Most specifically in in our land business, either the commercial industrial side of the business, where our team continues to do a good job of identifying opportunities or the connect side of our business, which is one.
That I believe has maybe the greatest growth potential of any of our businesses with lots of opportunities out there on the power of gas and sustainability.
Out of the stats.
So the I would say those come first but.
But depending upon the level of activity of the amount of capital we need to working capital as always the dividend, obviously and we always seem to find.
A certain amount of dollars to.
Repurchase shares whether that will become a materially greater number.
Probably argue unlikely, but you never know it really depends on our overall liquidity or cash flows.
While we may have on the table in terms of opportunities to invest so.
We always try to do as much as we can within reason.
We're never going to be the company that goes overboard from a share.
Share repurchase perspectives.
Yeah.
Alright.
Okay now that's helpful and then lastly from me.
IRA I think you'd mentioned and <unk> <unk>. When you were talking about the marine business that in the first quarter, you had seen an uptick and hedging activity for your customer and so that's the first time I've heard about that in the number of quarters any color on sort of what's happening there or is it just sort of <unk>.
Opportunistic or visit feel like Theres some.
Sustainability to that perhaps.
I don't know that sustainability of the Odyssey price. It has moved pretty significantly in a very short period of time to a level, we haven't seen in a while so that it doesn't take a lot for that to kind of trigger some sell in of marine procurement person spring to say on they want to lock in may of <unk>.
On the market.
Price right.
So we're seeing a little bit more of that day that accelerate further really depends on People's view on pricing going forward is to continue to increase is that going to level off of drop but youre right. You haven't heard that from all time, because it's kind of been somewhat dormant.
So there is some signs of life there they're small.
And really.
Any further growth in that regard of which depending on what.
What may happen from a pricing perspective or pricing expectations, which are equally as important.
Really what's driving the people like that going on or.
That's been it's been sluggish market, there's plenty of suppliers.
The demand is off.
So.
That will perhaps see some some some changes there of you if you really reduces the volatility in pricing of about that relates to the SEC.
Right.
Net.
Non <unk> net man the upsell.
Out of these drops management risk management.
We trend during the downturn.
And in terms of looking at.
Other activities.
We're evaluating get out of other participation models within that space.
Pat.
Lot of it is really going to be the key.
Core activity of some of our physical locations.
Bruce coming back in some of the of the market's coming back and just.
The broad based economic activity.
Uh-huh.
Okay, Yeah that makes sense all right I appreciate guys. Thanks.
Thanks.
Okay.
Okay.
Okay, well I guess I guess said that said so listen thanks, once again to our global fleet, especially end.
All of the families. It's Dan.
Quite a year of sale.
And of course of shareholders and we.
We look forward to actually see you soon so hopefully that will occur.
Stay well stay safe take care and the App will certainly talk to you next quarter Bye bye for now.
Okay.
Yes.
Ladies and gentlemen that does conclude the conference call for today, where you think of you for your participation and ask you to please disconnect your lines.
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