# WORLD KINECT CORP (WKC) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from WORLD KINECT CORP's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/789460/000162828024006634/wkc-20231231.htm
Accession: 0001628280-24-006634
Filing date: 2024-02-23
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/WKC/
All MD&A years: /company/WKC/mda/
Previous year: /company/WKC/mda/fy2022/ (FY 2022)
Next year: /company/WKC/mda/fy2024/ (FY 2024)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto appearing within Part IV. Item 15. – Notes to the Consolidated Financial Statements in this 2023 10‑K Report. The following discussion may contain forward-looking statements, and our actual results may differ materially from the results suggested by these forward-looking statements. Some factors that may cause our results to differ materially from the results and events anticipated or implied by such forward-looking statements are described in Item 1A. – Risk Factors and in Item 1. – Business under the section titled "Forward-Looking Statements."

We have elected to omit discussion on the earliest of the three years covered by the Consolidated Financial Statements presented in this 2023 10‑K Report. Refer to Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations located in our Form 10-K for the fiscal year ended December 31, 2022 (herein incorporated by reference), filed with the SEC on February 24, 2023 ("2022 10-K Report"), for management's discussion of the fiscal year ended December 31, 2021.

Business Overview

We are principally engaged in the distribution of fuel and related products and services in the aviation, land, and marine transportation industries. For additional discussion on our businesses, climate change and the associated risks, see Part I, Item 1. – Business and Item 1A. – Risk Factors within this 2023 10-K Report.

2023 Restructuring Plan

In November 2023, we approved and began implementing a restructuring plan to realign our operational focus with the purpose of simplifying our business, enabling us to focus more clearly on growing our core businesses and our new sustainability-related activities, and improving our cost structure. As part of this plan, we identified open positions that were eliminated and other positions that were closed to better align the workforce necessary to execute the revised strategy. During the year ended December 31, 2023, we recognized restructuring charges of $7.2 million, composed of severance and other compensation costs. We estimate that the plan could result in approximately $15.6 million in annualized savings related to compensation. We also decided to shift future investments away from underperforming businesses and to continue assessing our global office footprint, resulting in impairment charges of $11.2 million during the fourth quarter of 2023.

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We expect to continue assessing potential initiatives during the first quarter of 2024, which could result in additional restructuring charges, with the intent of completing the restructuring activities during the second quarter of 2024. See Note 15. Restructuring for additional information.

Reportable Segments

We operate in three reportable segments consisting of aviation, land, and marine. See Part I. Item 1. – Business and Note 14. Business Segments, Geographic Information, and Major Customers for additional information about our business segments.

Aviation Segment

Our aviation segment has benefited from growth in our fuel and related service offerings, as well as our enhanced logistics capabilities and the geographic expansion of our aviation fueling operations into additional international airport locations. During 2023, we successfully achieved higher returns in a high interest rate environment, driven in part by targeted improvements in working capital management consistent with our strategy to rationalize lower-return business activity. As part of our business strategy, we hold inventory in order to meet the needs of our customers. While we generally enter into financial derivative contracts to mitigate price risk exposure associated with our inventory, market pricing dynamics may still negatively impact our results. In the first half of 2022, oil futures forward prices traded at significantly lower levels than then-current market prices, resulting in elevated price volatility and a severely backwardated market that negatively impacted our results. The oil futures forward pricing structure has since returned closer to historical trading and volatility levels.

Land Segment

We believe our land segment is well-positioned to continue growing market share organically, in part by improving asset utilization and leveraging the capabilities of our acquisitions, including Flyers, which we acquired in January 2022, serving to further enhance our capability to deliver value-added solutions to our customers through an increasingly streamlined operational platform as discussed under "2023 Restructuring Plan" above.

Although 2023 was adversely affected by extraordinary losses associated with an erroneous bid submitted in the Finnish power market, we achieved an increase in profitability from both our natural gas business and our sustainability-related service offerings, driven in part by strong growth in our renewable energy solutions business.

We continue to focus on supporting the energy transition by expanding our sustainability offerings, including renewable fuel products, as well as carbon management and renewable energy solutions. We are continuing to invest in talent in this area, which we believe will help accelerate growth in these activities.

Marine Segment

Due to the generally spot nature of sales in our marine business, we have traditionally benefited from elevated fuel prices and volatility, supply uncertainty, and a constrained credit environment. We have spent a considerable amount of time reorganizing our business to drive internal efficiencies so that we can generate relatively moderate levels of earnings in stable markets and yet remain poised to provide additional value in volatile and credit constrained markets. In 2022, our marine segment delivered exceptional results due to the market conditions arising from the dramatic increase in global oil prices and higher interest rates, as well as the disruption of traditional supply patterns and related price volatility. The lower global oil prices and reduced market volatility experienced in 2023 have impacted our marine segment's performance as expected for the full year 2023, which results are materially lower than the exceptional returns produced in 2022.

Macroeconomic Environment

Inflation in the United States and other jurisdictions in which we do business increased significantly beginning in late 2021 into 2022, driven in part by supply chain disruptions, labor shortages and increased commodity prices, which has generally resulted in higher costs in 2022 and 2023. Inflation, however, is decelerating and we expect will continue to do so gradually in 2024 without a major downturn in activity.

However, to the extent that a rising cost environment impacts our results, there are typically offsetting benefits either inherent in certain parts of our business or that may result from proactive measures we take to reduce the impact of inflation on our net operating results. These benefits can include higher commodity prices that typically result in a constrained credit environment, often creating favorable market conditions that increase demand for our services, as well as our ability to renegotiate prices due to many of our sales contracts being 12 months or less in duration. Additionally, we take measures to mitigate the impact of increases in fuel prices through comprehensive hedging programs and the use of financial derivative contracts.

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For these reasons, the increased cost environment, caused in part by inflation, has not had a material impact on our historical results of operations for the periods presented in this report. However, a significant or prolonged period of high inflation, particularly when combined with rising interest rates due to actions taken by governments to attempt to control inflation, could adversely impact our results if costs, including employee compensation driven by competitive job market conditions, were to increase at a rate greater than the increase in the revenues we generate. Higher interest rates also typically increase the interest expense associated with our credit arrangements with banks and other parties that serve as important sources of liquidity for us, which can therefore negatively impact our results of operations for a particular period.

See "We extend credit to many of our customers in connection with their purchase of fuel and services from us, and our business, financial condition, results of operations and cash flows will be adversely affected if we are unable to collect accounts receivable," "Changes in the market prices of energy and commodities may have a material adverse effect on our business," "Our business depends on our ability to adequately finance our capital requirements and fund our investments, which, if not available to us, would impact our ability to conduct our operations," "Significant inflation and higher interest rates may adversely affect our business and financial condition," and "Our derivative transactions with customers, suppliers, merchants and financial institutions expose us to price and credit risks, which could have a material adverse effect on our business" in Item 1A. – Risk Factors within this 2023 10-K Report.

Results of Operations

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Consolidated Results of Operations

The following provides a summary of our consolidated results of operations for the periods indicated (in millions, except per share amounts):

[[GREPCENT_TABLE]]
[["","","For the Year Ended December 31,"],["","","2023","","2022"],["Revenue","","$","47,710.6","","","$","59,043.1"],["Cost of revenue","","46,652.4","","","57,954.1"],["Gross profit","","1,058.2","","","1,089.1"],["Operating expenses:"],["Compensation and employee benefits","","512.3","","","507.4"],["General and administrative","","308.0","","","308.7"],["Asset impairments","","32.8","","","0.6"],["Restructuring charges","","7.2","","","(0.8)"],["Total operating expenses","","860.2","","","815.8"],["Income (loss) from operations","","198.0","","","273.2"],["Non-operating income (expenses), net:"],["Interest expense and other financing costs, net","","(127.7)","","","(110.6)"],["Other income (expense), net","","(3.6)","","","(17.5)"],["Total non-operating income (expense), net","","(131.3)","","","(128.1)"],["Income (loss) before income taxes","","66.7","","","145.1"],["Provision for income taxes","","13.0","","","29.2"],["Net income (loss) including noncontrolling interest","","53.7","","","115.9"],["Net income (loss) attributable to noncontrolling interest","","0.8","","","1.7"],["Net income (loss) attributable to World Kinect","","$","52.9","","","$","114.1"],["Basic earnings (loss) per common share","","$","0.86","","","$","1.83"],["Diluted earnings (loss) per common share","","$","0.86","","","$","1.82"]]
[[/GREPCENT_TABLE]]

Revenue. Our consolidated revenue for the year ended December 31, 2023 was $47.7 billion, a decrease of $11.3 billion, or 19%, compared to the year ended December 31, 2022, primarily driven by lower fuel prices across all segments as well as lower volumes in our marine segment, as discussed further below.

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Gross profit. Our consolidated gross profit for the year ended December 31, 2023 was $1.1 billion, a decrease of $30.8 million, or 3%, compared to the year ended December 31, 2022, attributable to decreased gross profit of $83.4 million and $76.1 million in the marine and land segments, respectively, partially offset by increased gross profit of $128.6 million in our aviation segment, as discussed further below.

Operating Expenses. Consolidated total operating expenses for the year ended December 31, 2023 were $860.2 million, an increase of $44.4 million, or 5%, compared to the year ended December 31, 2022. The increase in operating expenses was primarily driven by asset impairment and restructuring charges of $32.8 million and $7.2 million during the year ended December 31, 2023, as well as higher compensation costs in 2023, as discussed further below. See Note 5. Fair Value Measurements and Note 15. Restructuring for additional information about the restructuring initiatives and related impairments.

Non-Operating Income (Expenses), net. For the year ended December 31, 2023, we had net non-operating expense of $131.3 million, compared to net non-operating expense of $128.1 million for the year ended December 31, 2022. The increase of $3.2 million was primarily attributable to an increase in interest expense driven by higher interest rates, which was partially offset by the impact of losses recognized during the year ended December 31, 2022 related to contingent consideration associated with the sale of our Multiservice payment solutions businesses and a non-operating legal settlement.

Income Taxes. For the year ended December 31, 2023, we recognized income tax expense of $13.0 million, compared to income tax expense of $29.2 million in 2022. The decrease of $16.3 million was primarily attributable to significantly lower foreign earnings and total pre-tax earnings, partially offset by lower net discrete tax items. See Note 10. Income Taxes for additional information.

Aviation Segment Results of Operations

The following provides a summary of the aviation segment results of operations for the periods indicated (in millions, except price per gallon):

[[GREPCENT_TABLE]]
[["","","For the Year Ended December 31,"],["","","2023","","2022","","Change"],["Revenue","","$","23,275.1","","","$","26,799.9","","","$","(3,524.8)"],["Gross profit","","$","485.8","","","$","357.2","","","$","128.6"],["Operating expenses","","277.0","","","257.7","","","19.3"],["Income (loss) from operations","","$","208.8","","","$","99.5","","","$","109.3"],["Operational metrics:"],["Aviation segment volumes (gallons)","","7,328.0","","","7,127.6","","","200.4"],["Aviation segment average price per gallon","","$","2.97","","","$","3.61","","","$","(0.64)"]]
[[/GREPCENT_TABLE]]

Revenues in our aviation segment were $23.3 billion for the year ended December 31, 2023, a decrease of $3.5 billion, or 13%, compared to the year ended December 31, 2022. The decrease in revenue was driven by lower average prices, partially offset by increased volumes. Average jet fuel price per gallon sold decreased by $0.64, or 18%, in the year ended December 31, 2023 compared to the year ended December 31, 2022. Total aviation volumes increased by 0.2 billion, or 3%, to 7.3 billion gallons, driven largely by growth in passenger airline demand offset by the rationalization of lower-return volume.

Our aviation segment gross profit for the year ended December 31, 2023 was $485.8 million, an increase of $128.6 million, or 36%, compared to the year ended December 31, 2022. The increase in gross profit was primarily attributable to the non-recurrence in 2023 of the significant inventory losses arising from the extreme backwardation and price volatility experienced in 2022, our focus on improving returns in an elevated interest rate environment, and growth at airport operated locations during the year ended December 31, 2023.

Our aviation segment income from operations for the year ended December 31, 2023 was $208.8 million, an increase of $109.3 million, or 110%, compared to the year ended December 31, 2022. The increase in gross profit discussed above was partially offset by a $19.3 million increase in operating expenses primarily driven by higher headcount-related compensation costs and general and administrative expenses to support the increased level of operating activity, as well as asset impairment and restructuring charges recognized during the year ended December 31, 2023.

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Land Segment Results of Operations

The following provides a summary of the land segment results of operations for the periods indicated (in millions, except price per gallon):

[[GREPCENT_TABLE]]
[["","","For the Year Ended December 31,"],["","","2023","","2022","","Change"],["Revenue","","$","15,189.9","","","$","19,283.7","","","$","(4,093.8)"],["Gross profit","","399.8","","","475.9","","","(76.1)"],["Operating expenses","","359.7","","","350.3","","","9.4"],["Income from operations","","$","40.1","","","$","125.6","","","$","(85.5)"],["Operational metrics:"],["Land segment volumes (gallons) (1)","","6,237.6","","","6,166.2","","","71.4"],["Land segment average price per gallon","","$","2.44","","","$","3.13","","","$","(0.69)"]]
[[/GREPCENT_TABLE]]

(1)Includes gallons and gallon equivalents of British Thermal Units (BTU) for our natural gas sales and Kilowatt Hours (kWh) for our power business.

Revenues in our land segment were $15.2 billion for the year ended December 31, 2023, a decrease of $4.1 billion, or 21%, compared to the year ended December 31, 2022. The decrease in revenue was principally driven by lower average fuel prices, with average fuel prices decreasing by 22% in the year ended December 31, 2023 compared to 2022. In addition, total volumes increased by 0.1 billion, or 1%, to 6.2 billion gallon or gallon equivalents in the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily attributable to our natural gas businesses offset by extreme weather conditions experienced in our core fuel business in North America in early 2023.

Our land segment gross profit for the year ended December 31, 2023 was $399.8 million, a decrease of $76.1 million, or 16%, compared to the year ended December 31, 2022. The decrease in gross profit was primarily attributable to extraordinary losses associated with an erroneous bid submitted in the Finnish power market as discussed in Note 11. Commitments and Contingencies, extreme weather conditions experienced in our core fuel business in North America in early 2023, and lower profitability from our U.K. business, which benefited from significant price volatility in the first half of 2022. These decreases were partially offset by improved performance in our sustainability-related offerings and natural gas business.

Our land segment income from operations for the year ended December 31, 2023 was $40.1 million, a decrease of $85.5 million, or 68%, compared to the year ended December 31, 2022. In addition to the decrease in gross profit discussed above, the decrease in operating income was driven by an increase in operating expenses principally related to asset impairment and restructuring charges, partially offset by lower general and administrative costs and incentive compensation.

Marine Segment Results of Operations

The following provides a summary of the marine segment results of operations for the periods indicated (in millions, except price per metric ton):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2023","","2022","","Change"],["Revenue","","$","9,245.6","","","$","12,959.6","","","$","(3,714.0)"],["Gross profit","","172.6","","","256.0","","","(83.4)"],["Operating expenses","","90.4","","","100.5","","","(10.2)"],["Income from operations","","$","82.3","","","$","155.5","","","$","(73.2)"],["Operational metrics:"],["Marine segment volumes (metric tons)","","16.8","","","19.1","","","(2.3)"],["Marine segment average price per metric ton","","$","549.64","","","$","679.17","","","$","(129.52)"]]
[[/GREPCENT_TABLE]]

Revenues in our marine segment were $9.2 billion for the year ended December 31, 2023, a decrease of $3.7 billion, or 29%, compared to the year ended December 31, 2022. The decrease in revenue was principally

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driven by a decrease of 19% in the average price per metric ton of bunker fuel sold in the year ended December 31, 2023 compared to the year ended December 31, 2022. In addition, total volumes decreased by 2.3 million metric tons, or 12%, to 16.8 million metric tons in the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to reduced demand in our resale businesses.

Our marine segment gross profit for the year ended December 31, 2023 was $172.6 million, a decrease of $83.4 million, or 33%, compared to the year ended December 31, 2022. The decrease in gross profit compared to the exceptional results during the year ended December 31, 2022 was principally driven by increased competition resulting from lower bunker fuel prices, together with softening demand driven by changes in the global macroeconomic environment.

Our marine segment income from operations for the year ended December 31, 2023 was $82.3 million, a decrease of $73.2 million, or 47%, compared to the year ended December 31, 2022, primarily due to the decrease in gross profit, partially offset by a $10.2 million decrease in operating expenses, largely driven by lower incentive compensation costs compared to 2022.

Liquidity and Capital Resources

Liquidity to fund working capital, as well as make strategic investments to further our growth strategy, is a significant priority for us. Our views concerning liquidity are based on currently available information and if circumstances change significantly, the future availability of trade credit or other sources of financing may be reduced, and our liquidity would be adversely affected accordingly.

Sources of Liquidity and Factors Impacting Our Liquidity

Our liquidity, consisting principally of cash and availability under our Credit Facility, fluctuates based on a number of factors, including the timing of receipts from our customers and payments to our suppliers, changes in fuel prices, as well as our financial performance.

We rely on credit arrangements with banks, suppliers and other parties as an important source of liquidity for capital requirements not satisfied by our operating cash flow. Future market volatility, generally, and any persistent weakness in global energy markets may adversely affect our ability to access capital and credit markets or to obtain funds at reasonable interest rates or on other advantageous terms. In addition, since our business is impacted by the availability of trade credit to fund fuel purchases, an actual or perceived decline in our liquidity or business generally could cause our suppliers to reduce our credit lines, seek credit support in the form of additional collateral or otherwise materially modify our payment terms.

During times of high fuel prices, our customers may not be able to purchase as much fuel from us because of their credit limits with us and the resulting adverse impact on their business could cause them to be unable to make payments owed to us for fuel purchased on credit. Furthermore, when fuel prices increase our working capital requirements increase and our own credit limits could prevent us from purchasing enough fuel from our suppliers to meet our customers’ demands, or we could be required to prepay for fuel purchases, any of which would adversely impact our liquidity.

Conversely, extended periods of low fuel prices, particularly when coupled with low price volatility, can also have an adverse effect on our results of operations and overall profitability. This can occur due to many factors, such as reduced demand for our price risk management products and decreased sales to our customers involved in the oil exploration sector. Low fuel prices also facilitate increased competition by reducing financial barriers to entry and enabling existing, lower-capitalized competitors to conduct more business as a result of lower working capital requirements.

Based on the information currently available, we believe that our cash and cash equivalents as of December 31, 2023 and available funds from our Credit Facility, as described below, together with cash flows generated by operations, are sufficient to fund our working capital and capital expenditure requirements for at least the next twelve months.

Convertible Notes. On June 26, 2023, we issued $350.0 million aggregate principal amount of 3.250% Convertible Senior Notes due 2028 (the "Convertible Notes"), which reflects the exercise in full of an option to purchase up to an additional $50.0 million in principal amount of the Convertible Notes. The Convertible Notes mature on July 1, 2028, unless earlier converted, redeemed or repurchased. The Convertible Notes are senior, unsecured obligations that bear interest at a rate of 3.250% per year, payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2024. The initial conversion rate was 35.1710 shares of common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $28.43 per share. The conversion rate will be subject to adjustment upon the occurrence of certain events but will not be adjusted for

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accrued and unpaid interest. Upon conversion, the Convertible Notes will be settled in cash up to the aggregate principal amount of the Convertible Notes to be converted, and in cash, shares of common stock or any combination thereof, at our option, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount.

In connection with the pricing of the Convertible Notes, we entered into convertible note hedge transactions and warrant transactions. The cost of the convertible note hedge transactions was approximately $70.5 million. The convertible note hedge transactions cover, subject to customary anti-dilution adjustments, the number of shares of common stock that initially underlie the Convertible Notes, and have an initial strike price equal to the initial conversion price of the Convertible Notes. Separately, we received $40.0 million of proceeds from the sale of warrants to acquire, subject to anti-dilution adjustments, the same amount of shares at an initial strike price of $40.14 per share. As a result, dilution upon conversion of the Convertible Notes will be mitigated as the bond hedge and warrant transactions increase the effective conversion price of the Convertible Notes to $40.14 per share.

The net proceeds from the sale of the Convertible Notes was approximately $337.5 million after deducting the initial purchasers’ discounts and estimated offering expenses payable by us. We used the net proceeds from the sale of the Convertible Notes (i) to pay the cost of the convertible note hedge transactions net of the proceeds from the sale of the warrants), (ii) to repurchase approximately 2.24 million shares of common stock from purchasers of the Convertible Notes for an aggregate purchase price of approximately $50.0 million and (iii) to repay the amounts outstanding under our revolving credit facility.

See Note 7. Debt, Interest Income, Expense, and Other Finance Costs for additional information.

Credit Agreement. The Fourth Amended and Restated Credit Agreement (as amended, the "Credit Agreement"), matures in April 2027 and provides for a term loan as well as a revolving credit facility of $1.5 billion (the "Credit Facility"). Our availability under the Credit Facility is limited by, among other things, our consolidated total leverage ratio, which is defined in the Credit Agreement and is based, in part, on our consolidated earnings before interest, taxes, depreciation and amortization, and share-based compensation, with such adjustments as specified therein, for the four immediately preceding fiscal quarters. The Credit Agreement generally limits the total amount of indebtedness we may incur to a consolidated total leverage ratio of not more than 4.75 to 1.

As a result of the foregoing, as well as other covenants and restrictions contained in our Credit Agreement, our availability under the Credit Facility may fluctuate from period to period. In addition, our failure to comply with the covenants contained in our Credit Agreement could result in an event of default. An event of default, if not cured or waived, would permit acceleration of any outstanding indebtedness under the Credit Facility and our term loan, trigger cross-defaults under certain other agreements to which we are a party, and impair our ability to obtain working capital advances and issue letters of credit, which would have a material adverse effect on our business, financial condition, results of operations and cash flows. See Note 7. Debt, Interest Income, Expense, and Other Finance Costs for additional information.

Other Credit Lines. Additionally, we have other uncommitted credit lines primarily for the issuance of letters of credit, bank guarantees and bankers’ acceptances. These credit lines are renewable on an annual basis and are subject to fees at market rates. As of December 31, 2023 and 2022, our outstanding letters of credit and bank guarantees under these credit lines totaled $437.1 million and $523.1 million, respectively.

Receivables Purchase Agreements. We also have accounts receivable programs under RPAs that allow us to sell a specified amount of qualifying accounts receivable and receive cash consideration equal to the total balance, less an associated fee, which varies based on the outstanding accounts receivable at any given time. The RPAs provide the constituent banks with the ability to add or remove customers from these programs in their discretion based on, among other things, the level of risk exposure the bank is willing to accept with respect to any particular customer. The fees the banks charge us to purchase the receivables from these customers can also be impacted for these reasons. During 2023, we amended one of our RPAs to, among other things, reduce the overall fee structure. See Note 2. Accounts Receivable for additional information.

See Item 1A. – Risk Factors in Part 1 within this 2023 10-K Report for additional information.

Future Uses of Liquidity

Cash is primarily used to fund working capital to support our operations as well as for strategic acquisitions and investments, such as the acquisition of Flyers discussed below.

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As of December 31, 2023, our contractual obligations were as follows (in millions):

[[GREPCENT_TABLE]]
[["","Current","","Long-Term","","Total"],["Debt and interest obligations (1)","$","114.9","","","$","893.3","","","$","1,008.2"],["Operating lease obligations (2)","39.4","","","188.8","","","228.2"],["Finance lease obligations (2)","3.7","","","13.1","","","16.8"],["Derivatives obligations (3)","128.2","","","51.5","","","179.7"],["Purchase commitment obligations (4)","363.8","","","184.9","","","548.7"],["Other obligations","1.5","","","6.9","","","8.4"],["Total","$","651.5","","","$","1,338.5","","","$","1,990.0"]]
[[/GREPCENT_TABLE]]

(1)Debt and interest obligations include principal and interest payments on fixed-rate and variable-rate, fixed-term debt based on their maturity dates, and includes $53.6 million of secured borrowings related to the transfer of tax receivables. See Note 7. Debt, Interest Income, Expense, and Other Finance Costs for additional information.

(2)We enter into lease arrangements for the use of offices, operational facilities, vehicles, vessels, storage tanks and other assets for our operations around the world. See Note 13. Leases for additional information.

(3)As part of our risk management program, we enter into derivative instruments intended to mitigate risks associated with changes in commodity prices, foreign currency exchange rates, and interest rates. Our obligations associated with these derivative instruments fluctuate based on changes in the fair value of the derivatives. See Note 4. Derivative Instruments and Note 5. Fair Value Measurements for additional information.

(4)We have fixed purchase commitments associated with our risk management program, as well as a purchase contract, that runs through 2026, under which we agreed to purchase annually between 1.9 million barrels and 2.0 million barrels of aviation fuel at future market prices. See Note 11. Commitments and Contingencies for additional information.

Future material cash requirements and off-balance sheet arrangements, in addition to the contractual obligations in the table above, include the following:

Acquisition of Flyers. During the year ended December 31, 2022, we completed the acquisition of Flyers as discussed in Note 3. Acquisitions. In January 2024, $49.8 million of the $50.0 million that remained due as of December 31, 2023 was paid to the seller.

Capital Expenditures. During the year ended December 31, 2023, we incurred capital expenditures in the ordinary course of business of approximately $87.6 million. In 2024, we expect our capital expenditures to be generally consistent with the year ended December 31, 2023.

Unrecognized Income Tax Liabilities. As of December 31, 2023, we have recorded gross liabilities for unrecognized income tax benefits ("Unrecognized Tax Liabilities"), including penalties and interest, of $106.4 million. The timing of any settlement of our Unrecognized Tax Liabilities with the respective taxing authority cannot be reasonably estimated.

Letters of Credit and Bank Guarantees. In the normal course of business, we are required to provide letters of credit to certain suppliers. A majority of these letters of credit expire within one year from their issuance and expired letters of credit are renewed as needed. As of December 31, 2023, we had issued letters of credit and bank guarantees totaling $575.2 million under our Credit Facility and other uncommitted credit lines.

Surety Bonds. In the normal course of business, we are required to post bid, performance and other surety-related bonds. The majority of the surety bonds posted relate to our aviation and land segments. We had outstanding bonds that were executed in order to satisfy various security requirements of $71.9 million as of December 31, 2023.

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Cash Flows

The following table reflects the major categories of cash flows (in millions). For additional details, please see the Consolidated Statements of Cash Flows.

[[GREPCENT_TABLE]]
[["","For the Years Ended December 31,"],["","2023","","2022","","2021"],["Net cash provided by (used in) operating activities","$","271.3","","","$","138.5","","","$","173.2"],["Net cash provided by (used in) investing activities","(101.1)","","","(724.9)","","","(58.3)"],["Net cash provided by (used in) financing activities","(152.4)","","","237.3","","","(113.6)"]]
[[/GREPCENT_TABLE]]

Operating Activities. For the year ended December, 31 2023, net cash provided by operating activities was $271.3 million, compared to $138.5 million net cash provided during the year ended December 31, 2022. The $132.9 million increase in operating cash flows was principally due to lower average fuel prices compared to the prior year, which reduced our cost of inventory; the decrease of our accounts receivable and accounts payable largely driven by the rationalization of lower-return business within our aviation segment and the reduction of average fuel prices; and cash provided by our derivative activities. These increases were offset by a decrease in our net income (see "Results of Operations" for further details of the drivers impacting our net income) adjusted for noncash items, lower utilization of our RPA programs, as discussed under "Sources of Liquidity and Factors Impacting Our Liquidity" above, as well as a decrease in customer prepayments.

Investing Activities. For the year ended December 31, 2023, net cash used in investing activities was $101.1 million, compared to net cash used of $724.9 million during the year ended December 31, 2022. The net cash used in investing activities in 2023 was primarily driven by capital expenditures of $87.6 million and cash paid for the acquisition of a business of $13.7 million, which was partially offset by proceeds received from the sale of a business of $9.3 million. Net cash used in investing activities in 2022 was principally driven by $643.9 million net cash paid for the acquisition of businesses, principally Flyers, as discussed in Note 3. Acquisitions, and $78.6 million for capital expenditures.

Financing Activities. For the year ended December 31, 2023, net cash used in financing activities was $152.4 million compared to net cash provided of $237.3 million for the year ended December 31, 2022. The net cash used in financing activities in 2023 was primarily attributable to payments of deferred consideration related to prior acquisitions of $62.9 million and repurchases of common stock of $60.1 million and dividend payments of $34.0 million, partially offset by net borrowings of $47.4 million The net borrowings of $47.4 million were primarily driven by $350.0 million proceeds from the issuance of the Convertible Notes and $53.3 million proceeds from secured borrowings associated with the transfer of transaction taxes, as discussed in Note 7. Debt, Interest Income, Expense, and Other Finance Costs, partially offset by $348.4 million of net repayments under our Credit Facility. In connection with the issuance of the Convertible Notes, we paid $70.5 million for the purchase of the convertible note hedges and $12.6 million for debt issuance costs, and received $40.0 million from the sale of warrants. Net cash provided by financing activities in 2022 was primarily attributable to net borrowings of $333.6 million, primarily driven by incremental borrowings under our Credit Facility related to the acquisition of Flyers and increased working capital requirements, partially offset by $48.7 million in purchases of our common stock, dividend payments of $31.0 million, and payments for deferred consideration related to prior acquisitions of $12.0 million.

Critical Accounting Estimates

Management's discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements included in this 2023 10‑K Report, which has been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to unbilled revenue and associated costs of sales, allowance for credit losses, goodwill and long-lived assets, certain accrued liabilities, and income taxes. We base our estimates on historical experience and on other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We have identified the areas described below as critical to our business operations and the understanding of our results of operations given the uncertainties associated with the assumptions underlying each estimate. For a detailed discussion on the application of these and other significant accounting policies, see Note 1. Basis of Presentation, New Accounting Standards, and Significant Accounting Policies.

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[["Description","","Judgments and Uncertainties","","Effect if Actual Results Differ from Assumptions"],["Impairment Assessments of Goodwill, Long-Lived Assets, and Equity Investments"],["We evaluate goodwill for impairment at least annually, and whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. We periodically evaluate whether the carrying value of long-lived assets (property and equipment, identifiable intangible assets, and leases), cost method investments, and equity method investments have been impaired when circumstances indicate the carrying value of those assets may not be recoverable.","","These assessments require us to make accounting estimates that require consideration of forecasted financial information. Significant judgment is involved in performing these estimates as they are developed based on forecasted assumptions. As of December 31, 2023, the assumptions used, particularly the expected growth rates, the profitability embedded in the projected cash flow provided by our legacy and newly acquired businesses, the discount rate and the market-based multiples, were defined on available information considering current market volatility and geopolitical risks. Specifically for goodwill, management also considered the volatility in the company's market capitalization and evaluated the potential impact that this volatility may have had on the estimated fair value of our reporting units. For our cost and equity method investments, the profitability embedded in the projected cash flows provided by our investees are a critical estimate.","","Based on the assessments performed, and supported by the available information as of December 31, 2023, we concluded that the fair value of our land and aviation reporting units were not less than their respective carrying values, however we concluded that the carrying value of certain of our long-lived assets and equity investments were not recoverable. See Note 5. Fair Value Measurements and Note 15. Restructuring for additional information regarding impairment charges recognized during the year ended December 31, 2023. If our results differ significantly from our assumptions, such impact could potentially result in additional impairments."],["Accounts Receivable and Allowance for Credit Losses"],["We maintain a provision for estimated credit losses based upon our historical experience with our customers, any specific customer collection issues that we have identified from current financial information and business prospects, as well as forward-looking information from market sources.","","We consider historical payment trends of our customers together with internal and external information about the economic outlook, geopolitical risks and macroeconomic events, which may not fully capture the current or future creditworthiness of our customers, particularly in difficult economic periods.","","As a result of the challenges inherent in estimating which customers are less likely to remit amounts owed to us, our provision for estimated credit losses may not always be sufficient. Any write-off of accounts receivable in excess of our provision for credit losses could adversely affect our results of operations and cash flow."]]
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[["Description","","Judgments and Uncertainties","","Effect if Actual Results Differ from Assumptions"],["Business Combinations"],["A business combination occurs when an entity obtains control of a \"business.\" To conclude if the definition of a business is met, we assess whether or not substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, which requires the use of significant judgment to determine the fair value. The determination of whether the acquired activities and assets constitute a business is critical because the accounting for a business combination differs significantly from that of an asset acquisition. Business combinations are accounted for using a fair value model. In contrast, asset acquisitions are accounted for using a cost accumulation and allocation model.","","Significant judgment is involved in the determination of fair values in the context of acquisitions, such as the acquisition of Flyers during the year ended December 31, 2022, as fair values are generally developed based on forecasted assumptions. The assumptions and inputs incorporated within the fair value estimates are subject to considerable management judgement and are based on industry, market, and economic conditions prevalent at the time of the acquisition. Significant inputs incorporated in the determination of fair values, including customer relationships valued using an income approach, include the discount rate determined using a market-based weighted average cost of capital, expected growth rates, and profitability and risks embedded in the newly acquired activities, including customer attrition rates.","","If assumptions used to estimate fair values are materially different, future earnings through depreciation and amortization expense could be impacted. In addition, if forecasts supporting the valuation of the long-lived assets, including intangibles, or goodwill are not achieved, impairments could arise."],["Revenue Recognition"],["The majority of our consolidated revenues are generated through the sale of fuel and fuel-related products. We generally recognize fuel sales on a gross basis as we have control of the products before they are delivered to our customers.","","In drawing this conclusion, we consider various factors, including inventory risk management, latitude in establishing the sales price, discretion in the supplier selection and that we are normally the primary obligor in our sales arrangements.","","Our determination of whether to recognize revenue on a gross or net basis can materially impact the amount of revenue we report."],["Income Taxes"],["We estimate total income tax expense based on statutory tax rates and tax planning opportunities available to us in various jurisdictions in which we operate. Deferred income taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting using tax rates in effect for the years in which the differences are expected to reverse. Valuation allowances are recorded when it is likely a tax benefit will not be realized for a deferred tax asset. We record unrecognized tax benefit liabilities for known or anticipated tax issues based on our analysis of whether, and the extent to which, additional taxes will be due.","","Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future. Changes in projected future earnings could affect the recorded valuation allowances in the future. Our calculations related to income taxes contain uncertainties due to judgment used to calculate tax liabilities in the application of complex tax regulations across the tax jurisdictions where we operate. Our analysis of unrecognized tax benefits contains uncertainties based on judgment used to apply the more likely than not recognition and measurement thresholds.","","Due to the complexity of some of these uncertainties, the ultimate resolution of our tax related balances or valuation allowances may result in a payment that is materially different from the current estimate of the tax liabilities. To the extent we prevail in matters for which unrecognized tax benefit liabilities have been established, or are required to pay amounts in excess of our recorded unrecognized tax benefit liabilities, our effective tax rate in a given financial statement period could be materially affected."]]
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[["Description","","Judgments and Uncertainties","","Effect if Actual Results Differ from Assumptions"],["Derivatives"],["We enter into financial derivative contracts to mitigate our risk of fuel market price fluctuations in aviation, land, and marine as well as changes in interest and foreign currency exchange rates and also to offer our customers fuel pricing alternatives to meet their needs. These instruments may be designated as cash flow or fair value hedges, or accounted for as non-designated derivatives. All derivative instruments are measured and recorded at fair value. We also assess convertible notes and other related contracts to determine if those contracts or embedded components of those contracts meet the definition of a derivative that require separate accounting.","","When available, quoted market prices or prices obtained through external sources are used to determine a contract's fair value. For contracts for which quoted market prices are not available, fair value is determined based on pricing models developed primarily from historical information and the expected relationship with quoted market prices. Measurement of the fair value of our derivatives also requires the assessment of certain risks related to non-performance, which requires a significant amount of judgment. Significant judgment is involved in assessing if the contracts are indexed to our own stock and if the contracts shall be classified as equity or liabilities in our statement of financial position.","","While we currently believe that our derivative contracts will be effective in mitigating the associated price risks, it is possible that our derivative instruments will be ineffective at mitigating material changes in prices, which could have an adverse impact on our financial position and results of operations. If our estimates of fair value are inaccurate, we may be exposed to losses or gains that could be material. If contracts indexed to our own stock are derivatives or contain embedded derivatives, they would be classified as a liability and remeasured to fair value through net income impacting future earnings. See Item 7A. \u2013 Quantitative and Qualitative Disclosures About Market Risks for additional information."]]
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