World Kinect Corp: Form 10-Q for the period ended Mar 31, 2025

The following discussion should be read in conjunction with our 2024 10-K Report and the unaudited Condensed Consolidated Financial Statements and related Notes in Item 1 – Financial Statements of this 10-Q Report. A reference to a "Note" herein refers to the accompanying Notes to the Condensed Consolidated Financial Statements contained in Item 1 – Financial Statements. 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 are disclosed in Item 1A – Risk Factors of our 2024 10-K Report.

Forward-Looking Statements

This 10-Q Report and the information incorporated by reference in it, or made by us in other reports, filings with the U.S. Securities and Exchange Commission (the "SEC"), press releases, teleconferences, industry conferences or otherwise, contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words "believe," "anticipate," "expect," "estimate," "project," "could," "would," "will," "will be," "will continue," "plan," or words or phrases of similar meaning. Specifically, this 10-Q Report includes forward-looking statements regarding (i) expectations regarding inflation and its impact on us, (ii) trade-related uncertainty, (iii) conditions in the aviation, land, and marine markets and their impact on our business, (iv) growth in our core businesses, (v) the impact of fuel prices and our working capital, liquidity, and capital expenditure requirements, (vi) our expectations and estimates regarding tax, legal and accounting matters, including the impact on our financial statements, (vii) our hedging strategy, and (viii) estimates regarding the financial impact of our derivative and other trading contracts. These forward-looking statements are qualified in their entirety by cautionary statements and risk factor disclosures contained in our SEC filings.

These forward-looking statements are estimates and projections reflecting our best judgment and involve risks, uncertainties or other factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Although we believe the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect. Our actual results may differ materially from the future results, performance or achievements expressed or implied by the forward-looking statements.

Important factors that could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking statements include, but are not limited to:

• the effects of tariffs and other trade restrictions, which can lead to continuing uncertainty and volatility in global financial and commodity markets, declining consumer confidence, lower personal and business travel and consequent demand for our fuel products;
• customer and counterparty creditworthiness and our ability to collect accounts receivable and settle derivative contracts;
• changes in the market prices of energy or commodities or extremely high or low fuel prices that continue for an extended period of time;
• adverse conditions in the industries in which our customers operate;
• our inability to effectively mitigate certain financial risks and other risks associated with derivatives and our physical fuel products;
• our ability to achieve the expected level of benefit from our restructuring activities and cost reduction initiatives;
• relationships with our employees and potential labor disputes associated with employees covered by collective bargaining agreements;
• our failure to comply with restrictions and covenants governing our outstanding indebtedness;
• the impact of cyber and other information technology or security related incidents on us, our customers or other parties;
• changes in the political, economic or regulatory environment generally and in the markets in which we operate, including as a result of the current conflicts in Eastern Europe and the Middle East and the actions of the U.S. presidential administration;
• greenhouse gas reduction programs and other environmental and climate change legislation adopted by governments around the world, including cap and trade regimes, carbon taxes, increased efficiency standards and mandates for renewable energy, each of which could increase our operating and compliance costs as well as adversely impact our sales of fuel products;
• changes in credit terms extended to us from our suppliers;
• non-performance of suppliers on their sale commitments and customers on their purchase commitments;
• non-performance of third-party service providers;
• our ability to effectively integrate and derive benefits from acquired businesses;
• our ability to meet financial forecasts associated with our operating plan;
• lower than expected cash flows and revenues, which could impair our ability to realize the value of recorded intangible assets and goodwill;
• the availability of cash and sufficient liquidity to fund our working capital and strategic investment needs;
• currency exchange fluctuations;
• inflationary pressures and their impact on our customers or the global economy, including sudden or significant increases in interest rates or a global recession;
• our ability to effectively leverage technology and operating systems and realize the anticipated benefits;
• failure to meet fuel and other product specifications agreed with our customers;
• environmental and other risks associated with the storage, transportation and delivery of petroleum products;
• reputational harm from adverse publicity arising out of spills, environmental contamination or public perception about the impacts on climate change by us or other companies in our industry;
• risks associated with operating in high-risk locations, including supply disruptions, border closures and other logistical difficulties that arise when working in these areas;
• uninsured or underinsured losses;
• seasonal variability that adversely affects our revenues and operating results, as well as the impact of natural disasters, such as earthquakes, hurricanes and wildfires;
• declines in the value and liquidity of cash equivalents and investments;
• our ability to retain and attract senior management and other key employees;
• changes in U.S. or foreign tax laws, interpretations of such laws, changes in the mix of taxable income among different tax jurisdictions, or adverse results of tax audits, assessments, or disputes;
• our failure to generate sufficient future taxable income in jurisdictions with material deferred tax assets and net operating loss carryforwards;
• changes in multilateral conventions, treaties or other arrangements between or among sovereign nations;
• our ability to comply with U.S. and international laws and regulations, including those related to anti-corruption, economic sanction programs and environmental matters;
• the outcome of litigation, regulatory investigations and other legal matters, including the associated legal and other costs; and
• other risks, including those described in Item 1A – Risk Factors in our 2024 10-K Report, together with those described from time to time in our other filings with the SEC.

We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to publicly update any of them in light of new information, future events, or otherwise. Any public statements or disclosures by us following this 10-Q Report that modify or impact any of the forward-looking statements contained in or accompanying this 10-Q Report will be deemed to modify or supersede such forward-looking statements.

For these statements, we claim the protection of the safe harbor for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended (the "Exchange Act").

Business Overview

We are a global energy management company offering fulfillment and related services across the aviation, marine, and land-based transportation sectors. We also supply natural gas and power in the United States and Europe along with a broad suite of other sustainability-related products and services. We are principally engaged in the distribution of fuel and related products and services in the aviation, land, and marine transportation industries.

Restructuring and Exit Activities

During the fourth quarter of 2024, we decided to take actions to exit certain operations, including the rationalization of certain assets and associated personnel within our North American land business as well as the disposal of our operations in Brazil. As a result of the actions taken in 2024, during the three months ended December 31, 2024, we recognized asset impairment charges of $3.1 million, wrote off accounts receivable totaling $4.4 million, and recognized additional charges for severance and other compensation costs of $1.4 million. As part of the asset rationalization initiatives, in April 2025, we signed and closed on the sale of WFL (UK) Ltd., which represents our U.K. land fuels business, for total estimated proceeds of $42.8 million (the "Watson Fuels sale"). See Note 3. Acquisitions and Divestitures for additional information.

Aligned with these efforts, during the first quarter of 2025, we began a company-wide transformation initiative designed to further streamline our operating model and enhance organizational efficiency and effectiveness. As part of this initiative, we undertook cost management actions in response to the current and projected business needs, including the elimination of certain open positions and the closure of other roles, to better align the workforce with our current strategic priorities. As a result, we recognized restructuring charges of $15.0 million during the three months ended March 31, 2025, composed principally of severance costs that could result in approximately $30 million in annualized compensation related savings. During 2025, we will continue to assess additional areas with the intent of completing the restructuring activities during the year. See Note 14. Restructuring and Exit Activities for additional information.

Reportable Segments

We operate in three reportable segments consisting of aviation, land, and marine. For additional discussion on our reportable segments, see "Reportable Segments" under Part I, Item 1 – Business in our 2024 10-K Report. Selected financial information with respect to our business segments is provided in Note 12. 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. Since 2023, we have 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.

In connection with our efforts to sharpen our portfolio of businesses and accelerate growth in our core businesses, we completed our sale of the Avinode Group and our portfolio of aviation FBO software products (the "Avinode sale") during the second quarter of 2024. See Note 3. Acquisitions and Divestitures for additional information.

Land Segment

In our land segment we continue to focus on improving asset utilization, leveraging the capabilities of our acquisitions, and realigning our operational platform. As discussed under "Restructuring and Exit Activities" above, in 2024 we decided to take actions to exit certain operations, including the rationalization of certain assets and associated personnel within our North American land business as well as the disposal of our operations in Brazil. Additionally, on April 9, 2025, we closed the Watson Fuels sale. In 2025, we launched an initiative designed to further streamline our operating model and enhance organizational efficiency and effectiveness.

Marine Segment

Due to the generally spot nature of sales in our marine business, we have traditionally benefited from elevated fuel prices and volatility as well as a constrained credit environment. We believe that our marine business is well-positioned to generate relatively moderate levels of earnings in stable markets and provide additional value in volatile and credit constrained markets.

Macroeconomic Environment

Significant uncertainty remains regarding the extent to which recent changes in U.S. trade policy will impact international trade and demand for global transportation services. Tariffs and other trade restrictions can lead to continuing uncertainty and volatility in global financial and commodity markets, declining consumer confidence, lower personal and business travel and consequent demand for our fuel products. Additionally, in recent years, inflation in the United States and other jurisdictions in which we do business increased significantly, driven in part by supply chain disruptions, labor shortages and increased commodity prices, which generally resulted in higher costs. Inflation, however, decelerated in 2024 as supply chains stabilized.

In a rising cost environment, there may be 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.

We have begun to see impacts associated with trade-related uncertainty. A significant or prolonged period of trade uncertainty or high inflation could adversely impact our results. 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 in our 2024 10-K Report for additional discussion of these risks.

Results of Operations

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

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):

Revenue. Our consolidated revenue for the three months ended March 31, 2025 was $9.5 billion, a decrease of $1.5 billion, or 14%, compared to the three months ended March 31, 2024, attributable to decreased revenue of $551.2 million, $457.6 million, and $490.0 million in our land, marine, and aviation segments, respectively, as discussed further below.

Gross Profit. Our gross profit for the three months ended March 31, 2025 was $230.4 million, a decrease of $23.7 million, or 9%, compared to the three months ended March 31, 2024, attributable to decreased gross profit of $18.3 million and $12.7 million in our land and marine segments, respectively, partially offset by increased gross profit of $7.2 million in our aviation segment, as discussed further below.

Operating Expenses. Total operating expenses for the three months ended March 31, 2025 were $237.0 million, an increase of $46.2 million, or 24%, compared to the three months ended March 31, 2024. The increase in operating expenses was primarily attributable to asset impairment charges recognized in connection with the Watson Fuels sale, as discussed in Note 3. Acquisitions and Divestitures, and restructuring charges recognized during the first quarter of 2025, as discussed under "Restructuring and Exit Activities" above, partially offset by the Avinode sale during the second quarter of 2024 and decreased compensation costs.

Non-Operating Income (Expense), net. For the three months ended March 31, 2025, we had net non-operating expense of $21.5 million compared to net non-operating expense of $32.8 million for the three months ended March 31, 2024. The decrease in non-operating expense of $11.3 million during the three months ended March 31, 2025 was primarily attributable to a decrease in interest expense, driven by a decrease in our average interest rates and daily borrowings, and an increase in foreign currency exchange gains.

Income Taxes. For the three months ended March 31, 2025, we recognized an income tax benefit of $6.8 million, compared to income tax expense of $3.3 million for the three months ended March 31, 2024. The decrease of $10.2 million was primarily attributable to the reduction in income before income taxes as a result of asset impairments and restructuring charges as well as changes in the mix of our worldwide earnings, partially offset by a $5.6 million increase in net discrete tax expenses during the three months ended March 31, 2025 compared to three months ended March 31, 2024. See Note 11. 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):

Revenues in our aviation segment were $4.7 billion for the three months ended March 31, 2025, a decrease of $490.0 million, or 10%, compared to the three months ended March 31, 2024. The decrease in revenue was driven by lower average prices, partially offset by an increase in volume. Average jet fuel price per gallon sold decreased by 13%. Total aviation volumes increased by 27.1 million gallons, or 2%, to 1.7 billion gallons driven primarily by growth in our North America bulk fuel business.

Aviation segment gross profit for the three months ended March 31, 2025 was $115.7 million, an increase of $7.2 million, or 7%, compared to the three months ended March 31, 2024. The increase in gross profit was primarily attributable to higher profit contribution from our operated airport locations in Europe, our physical inventory business, and our business and general aviation activities, partially offset by a decrease in gross profit attributable to the Avinode sale, which closed during the second quarter of 2024.

Income from operations in our aviation segment for the three months ended March 31, 2025 was $56.2 million, an increase of $12.2 million, or 28%, compared to the three months ended March 31, 2024, driven by the increase in gross profit discussed above and a decrease in operating expenses. The decrease in operating expenses was primarily attributable to lower compensation and general and administrative expenses associated with the Avinode sale, partially offset by an increase in restructuring charges during the first quarter of 2025, as discussed under "Restructuring and Exit Activities" above, and an increase in general and administrative costs.

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):

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(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 $2.9 billion for the three months ended March 31, 2025, a decrease of $551.2 million, or 16%, compared to the three months ended March 31, 2024. The decrease in revenue was driven by lower average fuel prices and a decrease in volume. Average fuel prices decreased by 10%. Total volumes decreased by 103.8 million, or 6%, to 1.5 billion gallons or gallon equivalents, primarily attributable to the sale of our fuel business in Brazil as well as the rationalization of certain assets within our North American land business during the fourth quarter of 2024.

Land segment gross profit for the three months ended March 31, 2025 was $79.0 million, a decrease of $18.3 million, or 19%, compared to the three months ended March 31, 2024. The decrease in gross profit was primarily attributable to lower profit contribution from our liquid fuel business in North America, as a result of industry trends and reduced demand driven by economic uncertainty.

Loss from operations in our land segment for the three months ended March 31, 2025 was $45.3 million, a decrease of $63.7 million, or 345%, compared to the three months ended March 31, 2024. In addition to the decrease in gross profit discussed above, operating expenses increased due to asset impairment charges recognized in connection with the Watson Fuels sale and restructuring charges during the first quarter of 2025, as discussed under "Restructuring and Exit Activities" above, partially offset by lower compensation and general and administrative costs principally as a result of the savings already achieved a part of our exit and restructuring activities.

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):

Revenues in our marine segment were $1.9 billion for the three months ended March 31, 2025, a decrease of $457.6 million, or 19%, compared to the three months ended March 31, 2024. The decrease in revenue was driven by lower average fuel prices and a decrease in volume. The average price per metric ton of bunker fuel sold decreased by 6%. Total volumes decreased by 0.6 million metric tons, or 14%, to 3.7 million primarily due to lower demand in our resale businesses driven in part by increasing market uncertainty with respect to international trade.

Marine segment gross profit for the three months ended March 31, 2025 was $35.7 million, a decrease of $12.7 million, or 26%, principally due to to lower bunker fuel prices and further reduced volatility that had benefited prior year results, as well as reduced demand and lower margins in our resale and physical businesses as a result of increasing market uncertainty.

Income from operations in our marine segment for the three months ended March 31, 2025 was $14.8 million, a decrease of $12.0 million, or 45%, compared to the three months ended March 31, 2024. The decrease in gross profit discussed above was partially offset by a decrease in operating expenses principally related to lower incentive compensation costs, partially offset by an increase in general and administrative costs and restructuring charges during the first quarter of 2025, as discussed under "Restructuring and Exit Activities" above.

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, as described below, 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.

Based on the information currently available, we believe that our cash and cash equivalents as of March 31, 2025 and available funds from our Credit Facility, 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 after the financial statements are issued.

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 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 is subject to adjustment upon the occurrence of certain events, but will not be adjusted for 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. 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 up to $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.

Receivables Purchase Agreements. We also have accounts receivable programs under receivables purchase agreements ("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.

See Note 2. Accounts Receivable 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. There were no material changes in our expected future uses of liquidity from December 31, 2024 to March 31, 2025. For a discussion of these matters, refer to "Liquidity and Capital Resources" under Part II, Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2024 10-K Report.

Cash Flows

The following table reflects the major categories of cash flows for the three months ended March 31, 2025 and 2024 (in millions). For additional details, please see the unaudited Condensed Consolidated Statements of Cash Flows in this Quarterly Report on Form 10-Q.

Operating Activities. For the three months ended March 31, 2025, net cash provided by operating activities was $114.4 million, compared to $110.2 million net cash provided during the three months ended March 31, 2024. The $4.1 million increase in operating cash flows was principally due to increased cash provided by our RPA activity, as well as cash provided by the collection of transaction tax refunds during the three months ended March 31, 2025. These increases were offset by cash used in our derivative activities driven by increased collateral requirements as well a decrease in our net income adjusted for noncash items (see "Results of Operations" for further details of the drivers impacting our net income).

Investing Activities. For the three months ended March 31, 2025, net cash used in investing activities was $5.8 million, compared to net cash used of $16.9 million during the three months ended March 31, 2024. The net cash used in investing activities for the three months ended March 31, 2025 was primarily driven by capital expenditures of $15.2 million, partially offset by $9.3 million of cash received from the net repayment of notes receivable. Net cash used in investing activities for the three months ended March 31, 2024 was primarily driven by capital expenditures of $17.5 million.

Financing Activities. For the three months ended March 31, 2025, net cash used in financing activities was $32.4 million compared to net cash used of $64.3 million for the three months ended March 31, 2024. The net cash used in financing activities for the three months ended March 31, 2025 was principally attributable to repurchases of common stock of $10.0 million, dividend payments of $9.7 million, and net repayments under our Credit Facility of $6.3 million. Net cash used in financing activities for the three months ended March 31, 2024 was primarily attributable to payments of deferred consideration related to prior acquisitions of $50.7 million, dividend payments of $8.4 million, and net repayments under our Credit Facility of $3.1 million.

Critical Accounting Estimates

The unaudited Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America. The significant accounting policies used are disclosed in Item 15 – Financial Statement Schedules, Note 1. Basis of Presentation, New Accounting Standards, and Significant Accounting Policies to the Consolidated Financial Statements in our 2024 10-K Report.

We make estimates and assumptions that affect the reported amounts on our unaudited Condensed Consolidated Financial Statements and accompanying Notes as of the date of the unaudited Condensed Consolidated Financial Statements. There have been no material changes to the Critical Accounting Estimates disclosed in our 2024 10-K Report.

Impairment Assessments of Goodwill, Long-Lived Assets, and Equity Investments

We assess accounting estimates that require consideration of forecasted financial information. Significant judgment is involved in performing these estimates. A reporting unit is considered at risk when its fair value does not exceed its carrying amount by more than 10%. While our aviation reporting unit is not currently considered at risk, our land reporting unit is considered to be at risk as of March 31, 2025.

The assumptions used in these assessments, particularly the expected growth rates, the profitability embedded in the projected cash flows provided by our legacy and newly acquired businesses, the discount rate and the market-based multiples, are defined based on available information as of the testing date considering current market volatility and geopolitical risks. When testing goodwill at our reporting units, we also consider the volatility in the Company's market capitalization and evaluate the potential impact that this volatility may have on the estimated fair value of our reporting units. As of March 31, 2025, the goodwill balances in our land and aviation reporting units were $831.9 million and $354.5 million, respectively.

When our results or the results of our equity investments differ significantly from projections and the expectation is that future results would also be impacted, the carrying value of our goodwill, long-lived assets and equity investments could be at risk or could result in an impairment.

There have been no material changes to our exposures to commodity price, interest rate, or foreign currency risk since December 31, 2024. Please refer to Part II, Item 7A - Quantitative and Qualitative Disclosures About Market Risk of our 2024 10-K Report for a complete discussion of our exposure to these risks.

For information about our derivative instruments at their respective fair value positions as of March 31, 2025, see Note 4. Derivative Instruments.

Management's Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer ("CEO") and our Chief Financial Officer ("CFO"), as appropriate, to allow timely decisions regarding required financial disclosure.

As of the end of the period covered by this 10-Q Report, we evaluated, under the supervision and with the participation of our CEO and CFO, the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e). Based upon this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the three months ended March 31, 2025.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only the reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.