2010 Annual Report W right Express is a global provider of value-based business payment processing prepaid payment solutions give customers unparalleled security and control and information management solutions. The Company’s fleet, corporate, and across a wide spectrum of business sectors with an expanding international presence. Wright Express markets its services directly to fleets and as an outsourcing partner for its strategic relationships and franchisees. The Company’s North American business portfolio includes a corporate payment solutions product, and Pacific Pride, an independent fuel distributor franchisee network. Our international operations include an office in New Zealand; various locations in Europe, where we provide payment processing and information management services for oil companies; Wright Express Australia Fuel Card, Australia’s largest multi-branded fuel card issuer with over 320,000 cards in circulation; and Wright Express Australia Prepaid, the market leading processor of prepaid cards in Australia. For more than 25 years we have built our closed loop network that includes site acceptance at more than 90 percent of the nation’s retail fuel locations and 45,000 vehicle maintenance locations. Our proprietary closed loop network gives fleets the ability to control purchases in the field, and delivers comprehensive information and analysis tools that allow fleets to effectively manage their operations and reduce operating costs. We also issue open-loop corporate payment solutions products. These product offerings provide customers with a payment processing solution for their corporate purchasing and transaction monitoring needs, which allows Wright Express to satisfy a company’s payment processing and purchasing information management needs. Wright Express stock is traded on the New York Stock Exchange under the ticker symbol “WXS.” TOTAL REVENUE ($ IN MILLIONS) TOTAL FUEL TRANSACTIONS PROCESSED ($ IN MILLIONS) MASTERCARD PURCHASES ($ IN MILLIONS) 24% increase 3.8% increase 43% increase * including Wright Express Australia Key Financial Highlights & Reconciliations ($ in thousands) Revenue GAAP net income 2008 2009 2010 $ $ 393,582 127,640 $ $ 315,203 139,659 $ $ 390,406 87,629 Reconciliation of GAAP Net Income to Adjusted Net Income GAAP net income $ 127,640 $ 139,659 $ 87,629 Gain on extinguishment of liability Non-cash, mark-to-market adjustments on derivative instruments Acquisition amortization Asset impairment charge Non-cash adjustments related to tax receivable agreement — (136,485) — (90,892) 4,854 1,538 — 43,142 5,066 814 599 17,029 11,276 — 214 Tax impact Adjusted Net Income 31,008 32,821 (8,847) $ 74,148 $ 85,616 $ 107,301 Although adjusted net income is not calculated in accordance with generally accepted accounting principles (GAAP), this measure is integral to the Company’s reporting and planning processes. The Company considers this measure integral because it eliminates the non-cash volatility associated with the derivative instruments, and excludes the amortization of purchased intangibles, the net impact of tax rate changes on the Company’s deferred tax asset and related changes in the tax-receivable agreement, non-cash asset impairment charges and the gains on the extinguishment of a portion of the tax receivable agreement. Specifically, in addition to evaluating the Company’s performance on a GAAP basis, management evaluates the Company’s performance on a basis that excludes the above items because: • Exclusion of the non-cash, mark-to-market adjustments on fuel-price related derivative instruments helps management identify and assess trends in the Company’s underlying business that might otherwise be obscured due to quarterly non-cash earnings fluctuations associated with fuel-price derivative contracts; • The non-cash, mark-to-market adjustments on derivative instruments are difficult to forecast accurately, making comparisons across historical and future quarters difficult to evaluate; and • The amortization of purchased intangibles and asset impairment have no impact on the operations of the business. For the same reasons, Wright Express believes that adjusted net income may also be useful to investors as one means of evaluating the Company’s performance. However, because adjusted net income is a non-GAAP measure, it should not be considered as a substitute for, or superior to, net income, operating income or cash flows from operating activities as determined in accordance with GAAP. In addition, adjusted net income as used by Wright Express may not be comparable to similarly titled measures employed by other companies. The tax impact of the foregoing adjustments is the difference between the Company’s GAAP tax provision and a pro forma tax provision based upon the Company’s adjusted net income before taxes. The methodology utilized for calculating the Company’s adjusted net income tax provision is the same methodology utilized in calculating the Company’s GAAP tax provision. 1 2010 Financial Highlights Wright Express closed out 2010 with strong momentum and an unrelenting focus on our business goals. When many companies remained hesitant in an uncertain market over the last few years, we made a conscious effort to invest in our core Fleet Payment Solutions business. Taking advantage of an improving macro-economic environment, we also invested in our Other Payment Solutions segment in order to capitalize on the potential economic recovery, and to position our business for growth. FLE ET PAYMENT SOLUTIONS In Fleet Payment Solutions, we have witnessed growing fleet fueling volume, improving same-store sales, and encouraging trends with many of our key performance metrics during the year. We saw growth return to many of the industries we serve. The value of our product and service delivery uniquely showcases our commitment to a rewarding long-term customer-centric strategy. Thanks to our continual investment in sales, marketing and customer service, we have been able to sustain our traditionally high customer satisfaction levels and keep our voluntary attrition rates low. Our investments in building the strongest front-end sales and marketing capabilities in the fleet card industry added more than 500,000 new fleet cards to our portfolio in North America in 2010. Based on a recent study, we scored higher than any other fleet card provider in terms of brand impression and long-term customer satisfaction, which we believe will translate into better organic growth performance and lower voluntary attrition. The value of our product and service delivery uniquely showcases our commitment to a rewarding long term customer-centric strategy. 2 To Our Shareholders OT HER PAYMENT SOLUTIONS While driving organic growth in the fleet business, we also have been working strategically to expand Wright Express’ footprint, while at the same time adding to the overall product and service value we provide our customers. This diversification of our business through Other Payment Solutions continues to be a key part of our long-term strategy and we have ambitious goals for this segment. To date, we have successfully executed initiatives aimed at meeting those goals and this segment continues to exceed our expectations. The Corporate Card business, currently the largest contributor to Other Payment Solutions, continues to perform extremely well, with spend volume reaching $4.4 billion in 2010, representing an increase of 43% over 2009. This growth was driven in large part by our online travel customers. In an increasingly receptive market for our single-use account product, we are experiencing traction in other verticals, including insurance and warranty markets. We expect to expand our sales force during 2011 to more aggressively capitalize on the opportunity that exists for this product set and other purchasing card solutions. 3 NEW INTERNATIONAL MARKET S Wright Express progressed on its long-term vision of providing payment processing and card issuance services internationally. In September 2010, we began processing commercial fuel card transactions for BP International in New Zealand and we expect to start processing transactions in Australia in 2011. In September we acquired Retail Decisions’ Australian fuel and prepaid card businesses, which allows us to extend our international fuel card presence in the Asia-Pacific region and creates a new avenue for growth outside of fuel cards. In-line with our strategy to expand our footprint, we acquired the Wright Express Australia fuel and prepaid card businesses in September of 2010 which advances us towards our long-term vision of providing fleet and other payment processing services internationally. Wright Express Australia’s fuel card business, which rolls into our Fleet Payment Solutions segment, is that nation’s largest multi-branded fleet card, with approximately 90% acceptance at Australian fuel retailers. Going forward, we will build on that success by further penetrating the small-business fleet market within Australia. Our Australian prepaid card business, which now falls under our Other Payment Solutions segment, is a market leader in processing prepaid cards in Australia. The prepaid 4 business provides us with a new platform for growth and opens us up to new products and new market segments. We believe the similarity of corporate cultures and focus on customer and partner relationships in the fleet and prepaid card businesses will enable us to advance our position within Australia and other Asia-Pacific markets. LOOKI NG A HEAD Looking ahead, we also are exploring a strategy focused on card program alliances or acquisitions that have the potential to further expand our international presence in 2011. We believe there is significant growth potential in the prepaid market and expanding our corporate payment solutions internationally. Near-term, We enter 2011 with a sense of confidence that is supported by an improving market environment, strategic investments that are contributing to our growth, and positive customer feedback. we continue to target internal reinvestment as one of our key priorities for capital allocation, followed by exploring alliances, mergers, or acquisitions that represent strategic opportunities to accelerate our earnings growth. 5 The strides we have made in our international strategy, combined with the positive results from our Other Payment Solutions and core fleet businesses, provide Wright Express with multiple avenues for continued advancements and add to the overall product and service value we can provide to our customers and partners. FUTU RE FOCUSED We enter 2011 with a sense of confidence that is supported by an improving market environment, strategic investments that are contributing to our growth, and positive customer feedback. As a result, we believe that we should see strong DIVERSIFYING REVENUE bEYON D N O R TH A M ER I C A N FU EL* E U N E V E R ) s n o i l l i m n i $ ( $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 07 08 09 10 » Our diversification plans include taking advantage of opportunities that exist in our current markets, products and services and expanding our international presence, all of which will help drive long-term growth. » Corporate Cards currently comprise the majority of our diversified revenues, followed by revenues from our international operations. » We anticipate our diversified businesses will continue to grow and should exceed 30% of our total revenues in 2011. *Major components of diversified revenue include Corporate Cards, International, Pacific Pride, and TelaPoint revenue. 6 top and bottom-line growth as we execute our strategy in the coming year. Thanks to the strength and resilience of our business model, we have the financial strength, flexibility and cash flow necessary to support our organic growth and diversification initiatives, while maintaining a solid balance sheet position. We are committed to leveraging our competitive advantages, capitalizing on our market opportunities, and continuing to deliver consistent results in the years ahead to drive long-term shareholder value. On behalf of the management team and Board of Directors, we thank you for your continued interest and support in Wright Express. Sincerely, Michael E. Dubyak Chairman, President and Chief Executive Officer April 1, 2011 7 Standing, left to right: Hilary A. Rapkin, Senior Vice President, General Counsel and Corporate Secretary; Robert C. Cornett , Senior Vice President, Human Resources; Richard K. Stecklair, Senior Vice President, Corporate Payment Solutions; Gregory S. Strzegowski, Senior Vice President, Corporate Development; Jamie Morin, Senior Vice President, Client Service Operations; George Hogan , Senior Vice President and Chief Information Officer; Kenneth W. Janosick, Senior Vice President, Small b usiness Solutions Seated, left to right: Melissa D. Smith, Chief Financial Officer and Executive Vice President, Finance and Operations; Michael E. Dubyak , Chairman, President and Chief Executive Officer; David D. Maxsimic , Executive Vice President, Sales and Marketing; Gareth Gumbley , Executive Vice President, Wright Express International Cautionary Note Regarding Forward-Looking Statements Except for the historical information, statements contained in this annual report may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Achieving the results described involves a number of risks, uncertainties, and other factors that could cause actual results to differ materially from our forward-looking statements, as discussed in the attached Form 10-K. Any statements that are not statements of historical facts may be deemed to be forward-looking statements. When used in this annual report, the words “may,” “will,” “could,” “anticipate,” “plan,” “continue,” “project,” “intend,” “estimate,” “believe,” “expect” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. Forward-looking statements relate to our future plans, objectives, expectations and intentions and are not historical facts and accordingly involve known and unknown risks and uncertainties and other factors that may cause the actual results or performance to be materially different from future results or performance expressed or implied by these forward-looking statements. The following factors, among others, could cause results to differ from those contained in forward-looking statements made in this Annual Report: fuel price volatility; the company’s failure to maintain or renew key agreements; failure to expand the company’s technological capabilities and service offerings as rapidly as the company’s competitors; the actions of regulatory bodies, including bank regulators, or possible changes in banking regulations impacting the company’s industrial loan bank and the company as the corporate parent; the uncertainties of litigation; the impact of foreign currency exchange rates on the company’s operations; the effects of general economic conditions on fueling patterns and the commercial activity of fleets; the effects of the company’s international business expansion efforts; the impact and range of credit losses; the amount of interest rates; financial loss if the company determines it necessary to unwind its derivative instrument position prior to the expiration of the contract; the failure to successfully expand business internationally; the failure to successfully integrate the businesses the company has acquired; as well as other risks and uncertainties identified in item 1A of the attached Form 10-K. We disclaim any obligation to update any forward-looking statements as a result of new information, future events or otherwise. 8 PERFORMANCE GRAPH The following graph assumes $100 invested on December 31, 2005 and compares (a) the percentage change in the Company’s cumulative total stockholder return on the common stock (as measured by dividing (i) the sum of (A) the cumulative amount of dividends, assuming dividend reinvestment, during the period commencing December 31, 2005, and ending on December 31, 2010, and (B) the difference between the Company’s share price at the end and the beginning of the periods presented by (ii) the share price at the beginning of the periods presented) with (b) (i) the Russell 2000 Index and (ii) the S&P 500® Data Processing & Outsourced Services. Total Return Performance l e u a V x e d n I 250 200 150 100 50 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 Wright Express Corporation S&P Data Processing and Outsourced Services Russell 2000 Period Ending Index 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 Wright Express Corporation Russell 2000 100.00 141.68 161.32 57.27 144.82 209.09 100.00 118.37 116.51 77.15 98.11 124.46 S&P Data Processing and Outsourced Services 100.00 110.35 112.65 78.68 105.93 101.49 Source : SNL Financial LC, Charlottesville, VA © 2011 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) (cid:59) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2010 OR (cid:133) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-32426 WRIGHT EXPRESS CORPORATION (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 97 Darling Avenue South Portland, Maine (Address of principal executive offices) 01-0526993 (I.R.S. Employer Identification No.) 04106 (Zip Code) (207) 773-8171 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $0.01 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None (Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. (cid:59) Yes (cid:133) No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. (cid:133) Yes (cid:59) No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (cid:59) Yes (cid:133) No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). (cid:59) Yes (cid:133) No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements (cid:59) incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer (cid:59) Accelerated filer (cid:133) Non-accelerated filer (cid:133) (Do not check if a smaller reporting company) Smaller reporting company (cid:133) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). (cid:133) Yes (cid:59) No The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant (assuming for the purpose of this calculation, but without conceding, that all directors, officers and any 10 percent or greater stockholders are affiliates of the registrant) as of June 30, 2010, the last business day of the registrant's most recently completed second fiscal quarter, was $1,132,899,306 (based on the closing price of the registrant's common stock on that date as reported on the New York Stock Exchange). There were 38,438,454 shares of the registrant's common stock outstanding as of February 22, 2011. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Company's Proxy Statement for the 2011 Annual Meeting of Stockholders are incorporated by reference in Part III. TABLE OF CONTENTS Forward-Looking Statements Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Removed and Reserved Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services Part I Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Part II Item 5. Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Item 9B. Part III Item 10. Item 11. Item 12. Item 13. Item 14. Part IV Item 15. Exhibits and Financial Statement Schedules Signatures Page 1 1 11 16 16 16 16 17 18 19 38 40 79 79 81 82 82 82 82 82 83 88 All references to "we," "us," "our," "Wright Express," or the "Company," in the Annual Report on Form 10-K mean Wright Express Corporation and all entities owned or controlled by Wright Express Corporation, except where it is clear that the term means only Wright Express Corporation. FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for statements that are forward-looking and are not statements of historical facts. The “Strategy” section of this Annual Report in Item 1 and the "Outlook for the Future" section of this Annual Report in Item 7, among other sections, contain forward-looking statements. Any statements that are not statements of historical facts may be deemed to be forward-looking statements. When used in this Annual Report, the words "may," "will," "could," "anticipate," "plan," "continue," "project," "intend," "estimate," "believe," "expect" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. Forward-looking statements relate to our future plans, objectives, expectations and intentions and are not historical facts and accordingly involve known and unknown risks and uncertainties and other factors that may cause the actual results or performance to be materially different from future results or performance expressed or implied by these forward-looking statements. The following factors, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this Annual Report, in press releases and in oral statements made by our authorized officers: fuel price volatility; the Company’s failure to maintain or renew key agreements; failure to expand the Company’s technological capabilities and service offerings as rapidly as the Company’s competitors; the actions of regulatory bodies, including bank regulators, or possible changes in banking regulations impacting the Company’s industrial loan bank and the Company as the corporate parent; the uncertainties of litigation; the impact of foreign currency exchange rates on the Company’s operations; the effects of general economic conditions on fueling patterns and the commercial activity of fleets; the effects of the Company’s international business expansion efforts; the impact and range of first quarter and full year credit losses; the amount of full year interest rates; financial loss if the Company determines it necessary to unwind its derivative instrument position prior to the expiration of the contract; the failure to successfully expand business internationally; the failure to successfully intergrate the businesses the Company has acquired; as well as other risks and uncertainties identified in Item 1A of this Annual Report. Our forward-looking statements and these factors do not reflect the potential future impact of any merger, acquisition or disposition. The forward-looking statements speak only as of the date of the initial filing of this Annual Report and undue reliance should not be placed on these statements. We disclaim any obligation to update any forward-looking statements as a result of new information, future events or otherwise. PART I ITEM 1. BUSINESS Our Company Wright Express Corporation is a leading provider of value-based, business payment processing and information management solutions. We provide products and services that meet the needs of businesses in various geographic regions including North America, Asia Pacific and Europe. The Company’s fleet and other payment solutions provide its more than 350,000 customers with security and control for complex payments across a wide spectrum of business sectors. Together with our affiliates, we market our products and services directly, as well as through more than 150 strategic relationships which include major oil companies, fuel retailers and vehicle maintenance providers. Wright Express Corporation, a Delaware corporation, has been publicly traded since February 16, 2005. Our growth over the years has largely been organic but has also been supplemented with the acquisition of the following entities: (cid:117) (cid:117) (cid:117) (cid:117) On September 14, 2010, we acquired RD Card Holdings Australia Pty Ltd, (“RD”). Through its subsidiaries, RD conducted business in Australia as a multi-branded fuel card issuer which now has approximately 320,000 cards in circulation and is a processor of prepaid cards. Concurrent with the acquisition we established Wright Express Australia Fuel and Wright Express Australia Prepaid. On August 29, 2008, we acquired the net assets of Financial Automation Limited, a provider of fuel card processing software solutions located in New Zealand. Concurrent with the acquisition of Financial Automation Limited, we established a structure for international operations ("Wright Express International"). On February 29, 2008, we acquired the net assets of Pacific Pride Services, Inc. and converted it into Pacific Pride Services, LLC ("Pacific Pride"). Pacific Pride is an independent fuel distributor franchisee network, encompassing more than 300 independent fuel franchisees. We acquired TelaPoint, Inc. ("TelaPoint") on August 6, 2007. TelaPoint is a provider of supply chain software solutions for bulk petroleum distributors, retailers and fleets. 1 Our wholly-owned banking subsidiary, Wright Express Financial Services Corporation ("FSC"), a Utah industrial bank, was established in 1998. In conjunction with our domestic operations, FSC approves domestic customer applications, maintains appropriate credit lines for each customer, issues the cards and owns the customer relationships for most of our fuel and maintenance programs and offers our corporate charge card solution. Our Company is organized under two segments, Fleet Payment Solutions and Other Payment Solutions. The Fleet Payment Solutions segment provides customers with fleet vehicle payment processing services specifically designed for the needs of commercial and government fleets. Fleet Payment Solutions revenue, which represents a majority of our total revenue, is earned primarily from payment processing, account servicing and transaction processing, with the majority generated by payment processing. The Other Payment Solutions segment of our business provides customers with payment processing solutions for their corporate purchasing and transaction monitoring needs through our corporate charge card, and through our prepaid and gift card products and services. Other Payment Solutions revenue is earned primarily from payment processing revenue. We currently issue MasterCard-branded corporate charge cards and utilize their network. We believe the following strengths distinguish us in our industry: (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) We are a leading provider of fleet fuel payment services. Our fleet payment solutions are used by 5.4 million commercial and government vehicles to purchase fuel and maintenance services. We have long-standing strategic relationships with each of the six largest domestic fleet management companies, and approximately 800 fuel retailers and fuel distributors, convenience store chains and bulk and mobile fuel providers. We have built a network of over 180,000 fuel and service providers in the United States, and have acquired the largest fuel based closed-loop network in Australia, which covers more than 10,000 fuel and maintenance sites. This represents over 90 percent fuel coverage in each geography, which provides our customers the convenience of broad acceptance. Our proprietary closed-loop networks (see illustration on page 4) also affords us access to a higher level of fleet-specific information and control than is widely available on open-loop networks, which allows us to improve and refine the information reporting we provide to our fleet customers and strategic relationships. We offer a differentiated set of products and services to allow our customers and the customers of our strategic relationships to better manage their vehicle fleets. We provide customized analysis and reporting on the efficiency of fleet vehicles and the purchasing behavior of fleet vehicle drivers. We make this data available to fleet customers through both traditional reporting services and sophisticated Internet-based data analysis tools. Our proprietary software facilitates the collection of information and affords us a high level of control and flexibility in allowing fleets to restrict purchases and receive automated alerts. Through our customized websites, customers have access to account and purchase control management, data, reporting and analysis tools which allows them to better monitor and maintain fleets. With our ownership of FSC, we have excellent access to low cost sources of capital, which we make available to our domestic customers. Wright Express Australia Prepaid is a leading processor of prepaid gift cards, representing over 150 clients and more than 220 card programs. 2 Strategy Our strategy is to leverage our core competitive strengths – sales and marketing, portfolio management, customer service and product differentiation – to acquire and retain customers and to create products that add value by satisfying new and existing customers' needs. Our strategic initiatives include: (cid:117) (cid:117) (cid:117) Extending our leadership position in North America and growing our core fleet business. We intend to build upon the organic growth we achieved in 2010 through the use of our various marketing channels. We expect to drive organic growth in our existing customer base by leveraging our competitive advantages and continuing to explore new strategies that bring innovative new products to market. Growing Other Payment Solutions purchase volume. To support the opportunity we see for the corporate charge card business, we plan to expand our sales force and target additional verticals for our single use electronic payment product. We also plan to further explore opportunities to leverage our current client base by offering new prepaid card products, such as payroll cards. Further build on our international growth. Building upon the knowledge we have gained through our Wright Express Australia acquisition, we intend to continue to focus on bolstering our international business. We will look for additional opportunities to leverage our competitive strengths to expand our international business and open avenues for both organic and acquisition driven growth. FLEET PAYMENT SOLUTIONS SEGMENT We have created one of the largest proprietary payment processing networks. We collect a broad array of information at the point of sale including the amount of the expenditure, the identity of the driver and vehicle, the odometer reading, the identity of the fuel or vehicle maintenance provider and the items purchased. We use this information to provide customers with purchase controls and analytical tools to help them effectively manage their vehicle fleets and control costs. We deliver value to our customers by providing customized offerings with accepting merchants, processing payments and providing information management products and services to our fleets. Our payment processing network, which is deployed at fuel and maintenance locations that use our proprietary software, is referred to as a closed-loop network because we have a direct contractual relationship with the merchant and the fleet; only Wright Express transactions can be processed on this network. The following illustrates our proprietary closed-loop network: Wright Express Direct relationship with fleet and merchant Merchant Fleet Fleet driver Our proprietary closed-loop network affords us access to a higher level of fleet-specific information and control than is widely available on open-loop networks and enables us to avoid dependence on third-party processors. 3 Products and Services Payment processing In a payment processing transaction, we pay the purchase price for the fleet customer's transaction, less the payment processing fees we retain, to the fuel or vehicle maintenance provider, and we collect the total purchase price from the fleet customer, normally within one month from the billing date. Payment processing fees are based on either a combination of both a percentage of the aggregate dollar amount of the customer's purchase and a fixed amount charged per transaction or on a percentage of the aggregate dollar amount of the customer’s purchase alone. In 2010, we had approximately 215 million payment processing transactions. Transaction processing In a transaction processing transaction we earn a fixed fee per transaction. We processed nearly 55 million transaction processing transactions in 2010. There are a variety of levels of services provided in transaction processing, ranging from software replacement to full outsourcing and the revenue we recognize will vary with the level of service provided. The following illustration depicts our business process for a typical payment processing transaction: In most transaction processing transactions, steps 3 and 4 typically do not apply. However, data capture and information management remain an important part of the value proposition for fleets for whom we perform transaction processing. Account management We also provide the following account management services: (cid:117) (cid:117) Customer service, account activation and account retention. We offer customer service, account activation and account retention services to fleets and fleet management companies (collectively, “strategic relationships”) and the fuel and vehicle maintenance providers on our network. Our services include promoting the adoption and use of our products and programs and account retention programs on behalf of our strategic relationships. Authorization and billing inquiries and account maintenance. We handle authorization and billing questions, account changes and other issues for fleets through our dedicated customer contact centers, which are available 24 hours a day, seven days a week. Fleet customers also have self service options available to them through our WEXOnline®, MotorPass® and Motorcharge® websites. 4 (cid:117) (cid:117) (cid:117) Premium fleet services. We assign designated account managers to businesses and government agencies with large fleets. These representatives have in-depth knowledge of both our programs and the operations and objectives of the fleets they service. Credit and collections services. We have developed proprietary account approval, credit management and fraud detection programs. Our underwriting model produces a proprietary score, which we use to predict the likelihood of an account becoming delinquent within 12 months of activation. We also use a credit line maintenance model to manage ongoing accounts, which allows us to predict the likelihood of account delinquency over an ongoing 18 month time horizon. We have developed a collections scoring model that we use to rank and prioritize past due accounts for collection activities. We also employ fraud specialists who monitor, alert and provide case management expertise to minimize losses and reduce program abuse. Merchant services. Our representatives work with fuel and vehicle maintenance providers to enroll them in our network, certify all network and terminal software and hardware, and train them on our sale, transaction authorization and settlement processes. Information management We provide standard and customized information to customers through monthly vehicle analysis reports, custom reports and our websites, WEXOnline®, MotorPass® and Motorcharge®. We also alert the customer to any unusual transactions or transactions that fall outside of pre-established parameters. Customers can access their account information, including account history and recent transactions, and download the details. In addition, through our websites, fleet managers can elect to be notified by email when limits are exceeded in specified purchase categories, including limits on transactions within a time range and gallons per day. Utilizing our WEXSmartTM product which leverages telematics, a vehicle system that combines global positioning satellite tracking and other wireless technology, fleet managers can track the movements and the locations of their vehicles. We generally recognize revenue from these services under account servicing revenue. Marketing Channels We market our payment processing and information management products and services to fleets directly and indirectly. Our experienced inside and outside sales forces and our marketing team, which has expertise in direct marketing, database analysis and marketing strategy and execution, facilitate our sales and marketing efforts. We also utilize industry tradeshows, advertising and other awareness campaigns to market our services. By collecting and analyzing customer data acquired over many years, we have created a detailed profile of representative fleet customers and have also developed a proprietary database that allows us to better market to the fleet industry. We provide market opportunity analyses, customer acquisition models and detailed marketing plans to our sales force and the sales forces of companies with which we have co-branded, affinity, distributor or private label relationships. Direct We market our products and services using the Wright Express brand name in North America and the Motorpass and Motorcharge brand names in Australia, directly to our commercial and government vehicle fleet customers. These direct customers include fleets of all sizes and vehicle categories. We use our inside sales force to attract small fleets, such as contracting, landscaping and plumbing businesses. Our mid-size fleet customers are typically regional businesses, such as dairies, beverage companies and grocery chains. We use our outside sales force to market to these customers. Our large fleet customers consist of national and large regional fleets. In marketing our products and services to these customers, we emphasize our ability to offer national site acceptance, a high level of customer service, and on-line tools to monitor, control and customize their fleet management capabilities. To attract and retain large fleet customers, we use both our outside sales force, focusing on the acquisition of new customers, and internal account managers, who focus on servicing and growing revenue from existing customers. Indirect We market our products and services indirectly through co-branded, affinity, distributor and private label relationships. (cid:117) Co-branded. Through our co-branded relationships, we market our products and services for, and in collaboration with, fleet management companies, automotive manufacturers, fuel providers and convenience store chains using their brand names and our Wright Express logo. These companies seek to offer our payment processing and information management services to their fleet customers. We use our co-branded relationships to reach all sizes of fleet customers. We are able to expand the base of customers to whom we provide our products and services by combining the marketing and sales efforts of our own sales force 5 (cid:117) (cid:117) (cid:117) with the efforts of the sales forces of our co-branded partners. Our co-branded relationships are able to take advantage of our closed-loop network and our ability to offer national site acceptance. Affinity. Similar to the co-branded relationships, our affinity relationships are marketed in collaboration with fuel providers and convenience store chains. The products and services we deliver are designed to foster loyalty to the fuel provider or convenience store chain as the program is marketed as their own. However, these products allow for the same level of payment processing and information management products and services as are received by the companies using our co-branded programs. Our affinity relationships are able to take advantage of our closed-loop network. Distributor. Through our distributor relationships, we market our products and services through a network of independent Pacific Pride fuel franchisees. Franchisees issue their own Pacific Pride commercial fueling cards to fleet customers. Vehicles in this program have access to fuel at Pacific Pride and strategic partner locations in the United States and Canada. We increase penetration to these customers by leveraging Pacific Pride's local market presence and brand recognition, as well as its platform and products for commercial and government fleets. We also service distributors through the Wright Express Distributor program, which provides fuel merchants with payment processing and information management products and services for their own fleets. Private Label. We market our product and services for, and in collaboration with, fuel retailers, using only their brand names. The fuel retailers with which we have formed strategic relationships offer our payment processing and information management product and services to their fleet customers in order to establish and enhance customer loyalty. These fleets use these product and services to purchase fuel at locations of the fuel retailer with whom we have the private label relationship. Customers of our private label partners are typically small fleets. The fleet drivers often do not travel beyond a defined geographic area and are not unduly burdened by limiting their fuel purchases to the fuel locations of a particular fuel retailer within that area. We primarily rely on the marketing efforts of our private label relationships to attract customers; however, many of these fuel retailers also rely on our sales and marketing expertise to further their efforts. Fuel Price Derivatives Approximately 50 percent of our total revenues result from fees paid to us by fuel providers based on a negotiated percentage of the purchase price of fuel purchased by our customers. However, we own fuel price sensitive derivative instruments to manage volatility created by changes in domestic fuel prices on our cash flows and to enhance the visibility and predictability of future cash flows. We have entered into put and call option contracts ("Options") indexed to the wholesale price of unleaded gasoline and the retail price of diesel fuel, both of which contain monthly settlement provisions. When entering into the Options, our intent is to effectively lock in a range of prices during any given quarter on a portion of our forecasted earnings that are subject to fuel price variations. We have estimated the effect on our forecasted earnings exposure associated with changes in fuel prices and entered into derivative agreements designed to cover 80 percent of this estimated impact for our North American exposure. Differences between the indices underlying the Options and the actual retail prices may create a disparity between the actual revenues we earn and the gains or losses realized on the Options. Our derivative instruments do not qualify for hedge accounting under accounting guidance. Accordingly, gains and losses on our fuel price-sensitive derivative instruments, whether they are realized or unrealized, affect our current period earnings. The Options are intended to limit the impact fuel price fluctuations have on our cash flows. The Options that we have entered into: (cid:117) (cid:117) Create a floor price. When the current month put option contract settles, the Company receives cash payments from the counterparties of the Options when the average price for the current month (as defined by the option contract) is below the strike price of the put option contract. Create a ceiling price. When the current month call option contract settles, the Company makes cash payments to the counterparties of the Options when the average price for the current month (as defined by the option contract) is above the strike price of the call option contract. When the current month put and call option contracts settle and the average price for the current month (as defined by the option contract) is between the strike price of the put option contract and the strike price of the call option contract, no cash is exchanged between the Company and the counterparties of the Options. 6 The following table presents information about the Options as of December 31, 2010: North American Percentage (a) Weighted-Average Price Ceiling Floor (b) For the period January 1, 2011 through March 31, 2011 For the period April 1, 2011 through June 30, 2011 For the period July 1, 2011 through September 30, 2011 For the period October 1, 2011 through December 31, 2011 For the period January 1, 2012 through March 31, 2012 For the period April 1, 2012 through June 30, 2012 80% $ 80% $ 80% $ 80% $ 53% $ 27% $ 2.77 $ 2.87 $ 2.93 $ 2.97 $ 2.95 $ 2.98 $ 2.83 2.93 2.99 3.03 3.01 3.04 (a) Represents the estimated hedge percentage of the Company's forecasted North American earnings subject to fuel price variations at the time of purchase. (b) Weighted-average price is the Company's estimate of the North American retail price equivalent of the underlying strike price of the fuel price derivatives. OTHER PAYMENT SOLUTIONS SEGMENT We issue corporate charge products and prepaid products. Our corporate charge products provide commercial travel and entertainment and purchase capabilities to businesses in industries that can utilize our information management functionality. The corporate charge products can be sold jointly with the fleet card product to offer a total payment solution to companies. Additionally, our single use account product allows businesses to centralize purchasing, simplify complex supply chain processes and eliminate the paper check writing associated with traditional purchase order systems. Products and Services Corporate charge card Our corporate charge card provides commercial travel and entertainment and purchase capabilities to businesses that benefit from our information management functionality. The product can be sold jointly with the fleet card product to offer a total corporate payment solution to companies. Single use account Our single use account product allows businesses to centralize purchasing, simplify complex supply chain processes and eliminate the paper check writing associated with traditional purchase order programs. Our single use account product is used for transactions where no card is presented, including, for example, transactions conducted over the telephone, by mail, fax or on the Internet. They also can be used for transactions that require pre-authorization, such as hotel reservations. Under this program, each transaction is assigned a unique account number and expiration date. These controls are in place to limit fraud and unauthorized spending. The unique account number limits purchase amounts, tracks, settles and reconciles purchases more easily, while eliminating the risks associated with using multiple cards. Prepaid card Wright Express Australia Prepaid is a leading prepaid gift card payment solution provider in Australia, with a full-service product offering and a patented technology platform. Through our website, Giftvouchers.com®, customers are able to purchase third party retailer gift vouchers that can be redeemed in-store or on-line at retailers' web sites. Marketing Channels We market our other payment solutions directly to our customers in conjunction with our fleet offerings, as well as potential new clients with whom we have no existing relationship. Our corporate charge products are marketed to commercial and government organizations and we leverage the marketing and advertising efforts of MasterCard, Inc. We market our prepaid and corporate incentive payment solutions in Australia directly to a large number of “blue chip” brand stores, government departments and service organizations. 7 Employees OTHER ITEMS As of December 31, 2010, Wright Express Corporation and its subsidiaries had 881 employees, of which, 717 were located in the United States. None of our employees are subject to a collective bargaining agreement. Competition We have a strong competitive position in our Fleet Payment Solutions and Other Payment Solutions segments. Our product features and extensive account management services are key factors behind our position in the fleet industry. We face competition in both of our segments. Our competitors vie with us for prospective direct fleet customers as well as for companies with which we form strategic relationships. We compete with companies that perform payment and transaction processing or similar services. Financial institutions that issue Visa, MasterCard and American Express credit and charge cards currently compete against us primarily in the small fleet category of our Fleet Payment Solutions segment and in the corporate charge card category of our Other Payment Solutions segment. The most significant competitive factors are breadth of features, functionality, servicing capability and price. For more information regarding risks related to competition, see the information in Item 1A, under the heading "Our industry continues to become increasingly competitive, which makes it more difficult for us to maintain profit margins at historical levels." Technology We believe investment in technology is a crucial step in enhancing our competitive position in the market place. In the United States, our closed loop proprietary software captures comprehensive information from the more than 180,000 domestic fuel and maintenance locations within our network. Operating a proprietary network not only enhances our value proposition, it enables us to avoid dependence on third-party processors in the Fleet Payment Solutions segment and to respond rapidly to changing customer needs with system upgrades and new specifications, while maintaining our security in a SAS 70 certified environment. Our infrastructure has been designed around industry-standard architectures to reduce downtime in the event of outages or catastrophic occurrences. In Australia we operate standalone platforms to service Wright Express Australia Fuel and Wright Express Australia Prepaid transactions. All of the development, maintenance and support of each card management system are performed within the respective business. We continue to invest in both infrastructures. We are continually improving our technology to enhance the customer relationship and to increase efficiency and security. We also review technologies and services provided by others in order to maintain the high level of service expected by our customers. For information regarding technology related risks, see the information in Item 1A under the headings "Our failure to effectively implement new technology could jeopardize our position as a leader in our industry," and "We are dependent on technology systems and electronic communications networks managed by third parties, which could result in our inability to prevent service disruptions." Intellectual Property We rely on a combination of copyright, trade secret and trademark laws, confidentiality procedures, contractual provisions and other similar measures to protect proprietary information and technology used in our business. We generally enter into confidentiality or license agreements with our consultants and corporate partners, and generally control access to and distribution of our technology, documentation and other proprietary information. Despite the efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain the use of our products or technology that we consider proprietary and third parties may attempt to develop similar technology independently. We pursue registration and protection of our trademarks primarily in the United States. Wright Express Australia Fuel and Prepaid holds patents which are registered in Australia, as well as in the United Kingdom, Hong Kong and New Zealand. Regulation – United States The Company and FSC are subject to certain state and federal laws and regulations governing insured depository institutions and their affiliates. FSC is subject to supervision and examination by both the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation. The Company and FSC are also subject to certain restrictions on transactions with affiliates set forth in the Federal Reserve Act ("FRA"). The Company is subject to anti-tying provisions in the Bank Holding Company Act. State and Federal laws and regulations limit the loans FSC may make to one borrower and the types of investments FSC may make. 8 Set forth below is a description of the material elements of the laws, regulations, policies and other regulatory matters affecting the North America operations of Wright Express. Restrictions on intercompany borrowings and transactions The FRA restricts the extent to which the Company may borrow or otherwise obtain credit from, sell assets to or engage in certain other transactions with FSC. In general, these restrictions require that any such extensions of credit by FSC to the parent company must be fully secured. There is no limit on such transactions to the extent they are secured by a cash deposit or pledged United States government securities. It is also possible to pledge designated amounts of other specified kinds of collateral if the aggregate of such transactions are limited to 10 percent of FSC's capital stock and surplus with respect to any single affiliate and to 20 percent of FSC's capital stock and surplus with respect to all affiliates. Restrictions on dividends The FRA also limits the dividends FSC may pay to the Company. In addition, FSC is subject to various regulatory policies and requirements relating to the payment of dividends, including requirements to maintain capital above regulatory minimums. A state or federal regulatory authority can determine, under certain circumstances relating to the financial condition of a bank, that the payment of dividends would be an unsafe or unsound practice and can prohibit payment. FSC may not pay a dividend to the Company if it is undercapitalized or would become undercapitalized as a result of paying the dividend. Utah law permits an industrial bank to pay dividends only from undivided earnings. Company obligations to FSC Any non-deposit obligation of FSC to the Company is subordinate, in right of payment, to deposits and other indebtedness of FSC. In the event of the Company's bankruptcy, any commitment by the Company to a federal bank regulatory agency to maintain the capital of FSC will be assumed by the bankruptcy trustee and entitled to priority of payment. Restrictions on ownership of Wright Express common stock FSC, and therefore the Company, is subject to bank regulations that impose requirements on entities that control 10 percent or more of Wright Express common stock. These requirements are discussed in detail in Item 1A under the heading "If any entity controls 10 percent or more of our common stock and such entity has caused a violation of applicable banking laws by its failure to obtain any required approvals prior to acquiring that common stock, we have the power to restrict such entity's ability to vote shares held by it." Regulation – Australia The Company’s Australian operations are subject to certain laws and regulations of the Commonwealth of Australia governing banking and payment systems, financial services, consumer credit and money laundering. Because neither Wright Express Australia Fuel nor Prepaid holds an Australian Financial Services License or credit license or is an authorized deposit-taking institution, they operate within a framework of regulatory relief and exemptions afforded them on the basis that they satisfy the requisite conditions. Segments and Geographic Information For an analysis of financial information about our segments as well as our geographic areas, see Item 8 – Note 20 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Available Information The Company's principal executive offices are located at 97 Darling Avenue, South Portland, ME 04106. Our telephone number is (207) 773-8171, and our Internet address is http://www.wrightexpress.com. The Company's annual, quarterly and current reports, proxy statements and certain other information filed with the SEC, as well as amendments thereto, may be obtained free of charge from our web site. These documents are posted to our web site as soon as reasonably practicable after we have filed or furnished these documents with the SEC. These documents are also available at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. The Company's Audit Committee Charter, Compensation Committee Charter, Finance Committee Charter, Corporate Governance Committee Charter, Corporate Governance Guidelines and codes of conduct are available without charge through the "Corporate Governance" portion of the Investor Relations page of the Company's web site, as well. 9 Copies will also be provided, free of charge, to any stockholder upon written request to Investor Relations at the address above or by telephone at (866) 230-1633. The Company's Internet site and the information contained on it are not incorporated into this Form 10-K. 10 ITEM 1A. RISK FACTORS The risks and uncertainties described below are not the only ones facing us. Other events that we do not currently anticipate or that we currently deem immaterial also may affect our results of operations and financial condition. Risks Relating to Our Company A significant portion of our revenues are related to the dollar amount of fuel purchased by our customers, and, as a result, volatility in fuel prices could have an adverse effect on our payment processing revenues. As of December 31, 2010, approximately 50 percent of our total revenues result from fees paid to us by fuel providers based on a negotiated percentage of the purchase price of fuel purchased by our customers. Our customers primarily purchase fuel. Accordingly, part our revenues are dependent on fuel prices, which are prone to volatility in the United States. For example, we estimate that during 2010, a 10 cent decline in average fuel prices below average actual prices would have resulted in approximately an $7.4 million decline in 2010 revenue. Declines in the price of fuel could have a material adverse effect on our total revenues. Fuel prices are dependent on many factors, all of which are beyond our control. These factors include, among others: (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) supply and demand for oil and gas, and expectations regarding supply and demand; speculative trading; actions by major oil exporting nations; political conditions in other oil-producing , gas-producing or supply-route countries, including revolution, insurgency, terrorism or war; refinery capacity; weather; the prices of foreign exports and the availability of alternate fuel sources; value of the U.S. dollar versus other major currencies; general worldwide economic conditions; and governmental regulations and tariffs. Derivative transactions may not adequately stabilize our cash flows and may cause volatility in our earnings. Because a portion of our revenues are subject to fuel price volatility, we utilize fuel price sensitive derivative instruments to manage our exposure to this volatility in North America by seeking to limit fluctuations in our cash flows. For a more detailed discussion of these derivative instruments see our "Fuel Price Derivatives" discussion in Item 1. These instruments may expose us to the risk of financial loss if, for example, the counterparties fail to perform under the contracts governing those arrangements, we unwind our position before the expiration of the contract or there is a significant change in fuel prices. The success of our fuel price derivatives program depends upon, among other things, our ability to forecast the amount of fuel purchased by fleets using our services in North America and the percent fee we will earn from merchants. To the extent our forecasts are inaccurate these derivative contracts may be inadequate to protect us against significant changes in fuel prices or over-expose us to fuel price volatility. Realized and unrealized gains and losses on these contracts are recorded each quarter to reflect changes in the market value of the underlying contracts. As a result, our quarterly net income may be prone to significant volatility. In an increasing interest rate environment, interest expense on the variable rate portion of our borrowings on our credit facility would increase and we may not be able to replace our maturing certificates of deposit with new certificates of deposit that carry the same interest rates. We had $407 million of indebtedness outstanding at December 31, 2010, under our credit agreements, of which we had borrowings of $390 million on our credit facility that bore interest at a floating rate equal to the one-month LIBOR plus 70.0 basis points. During 2009 we entered into an interest rate swap contract that ends in July 2011 that fixed the interest rate on $50 million of the variable rate revolving credit facility. During 2010 we entered into another interest rate swap contract that ends in March 2012 that fixed the interest rate on an additional $150 million of our variable rate revolving credit facility. Rising interest rates would result in reduced net income. The certificates of deposit that our industrial bank subsidiary, FSC, uses to finance payments to major oil companies carry fixed rates from issuance to maturity. Upon maturity, the certificates of deposit will be replaced by issuing new certificates of deposit to the extent that they are needed. In a rising interest rate environment, FSC would not be able to replace maturing certificates of deposit with new certificates of deposit that carry the same interest rates. Rising interest rates would result in reduced net income to the extent that certificates of deposit mature and need to be replaced. At December 31, 2010, FSC had outstanding $370.4 million in certificates of deposit maturing within one year and $87.5 million in certificates of deposit maturing within one to two years. 11 Our exposure to counterparty credit risk could create an adverse affect on our financial condition. We engage in a number of transactions where counterparty credit risk is a relevant factor. Specifically, we have fuel price derivatives and interest rate swaps whose values at any point in time are dependent upon not only the market but also the viability of the counterparty. The failure or perceived weakness of any of our counterparties has the potential to expose us to risk of loss in these situations. Financial institutions, primarily banks, have historically been our most significant counterparties. Our industry continues to become increasingly competitive, which makes it more challenging for us to maintain profit margins at historical levels. We face and may continue to face increased levels of competition in each category of the overall industry from several companies that seek to offer competing capabilities and services. Historically, we have been able to provide customers with a wide spectrum of services and capabilities and, therefore, we have not considered price to be the exclusive or even the primary basis on which we compete. As our competitors have continued to develop their service offerings, it has become increasingly more challenging for us to compete solely on the basis of superior capabilities or service. In some areas of our business we have been forced to respond to competitive pressures by reducing our fees. We have seen erosion of our historical profit margins as we use alternative pricing to encourage existing strategic relationships to sign long-term contracts. If these trends continue and if competition intensifies, our profitability may be adversely impacted. While we have traditionally offered our services to all categories of the fleet industry, some of our competitors have successfully garnered significant share in particular categories of the overall industry. To the extent that our competitors are regarded as leaders in specific categories, they may have an advantage over us as we attempt to further penetrate these categories. We also face increased competition in our efforts to enter into new strategic relationships and renew existing strategic relationships on the same terms. Our business and operating results are dependent on several key strategic relationships, the loss of which could adversely affect our results of operations. Revenue we received from services we provided to our top five strategic relationships accounted for approximately 17 percent of our total revenues in 2010. Accordingly, we are dependent on maintaining our strategic relationships and our results of operations would be lower in the event that these relationships were terminated. Likewise, we have agreements with the major oil companies and fuel retailers whose locations accept our payment processing services. The termination of any of these agreements would reduce the number of locations where our payment processing services are accepted; therefore, we could lose our competitive advantage and our operating results could be adversely affected. We are exposed to risks associated with operations outside of the United States, which could harm both our domestic and international operations. We conduct operations in North America, Asia Pacific and Europe. As part of our business strategy and growth plan, we plan to further expand internationally. Expansion of our international operations could impose substantial burdens on our resources, divert management’s attention from domestic operations and otherwise harm our business. In addition, there are many barriers to competing successfully in the international market, including: (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) changes in the relations between the United States and foreign countries; actions of foreign or United States governmental authorities affecting trade and foreign investment; regulations on repatriation of funds; increased infrastructure costs including complex legal, tax, accounting and information technology laws and treaties; interpretation and application of local laws and regulations including, among others, those impacting anti-money laundering, financial transaction reporting and positive balance or prepaid cards ; enforceability of intellectual property and contract rights; potentially adverse tax consequences; and local labor conditions and regulations. fluctuation in foreign currencies We cannot assure you that our investments outside the United States will produce desired levels of revenue or costs, or that one or more of the factors listed above will not harm our business. 12 Decreased demand for fuel and other vehicle products and services could harm our business and results of operations. Demand for fuel and other vehicle products and services may be reduced by factors that are beyond our control, such as the implementation of fuel efficiency standards and the development by vehicle manufacturers and adoption by our fleet customers of vehicles with greater fuel efficiency or alternative fuel sources. Our failure to effectively implement new technology could jeopardize our position as a leader in our industry. As a provider of information management and payment processing services, we must constantly adapt and respond to the technological advances offered by our competitors and the informational requirements of our customers, including those related to the Internet, in order to maintain and improve upon our competitive position. We may not be able to expand our technological capabilities and service offerings as rapidly as our competitors, which could jeopardize our position as a leader in our industry. We are dependent on technology systems and electronic communications networks managed by third parties, which could result in our inability to prevent service disruptions. Our ability to process and authorize transactions electronically depends on our ability to electronically communicate with our fuel and vehicle maintenance providers through point-of-sale devices and electronic networks that are owned and operated by third parties. The electronic communications networks upon which we depend are often subject to disruptions of various magnitudes and durations. Any severe disruption of one or all of these networks could impair our ability to authorize transactions or collect information about such transactions, which, in turn, could harm our reputation for dependable service and adversely affect our results of operations. In addition, our ability to collect enhanced data relating to our customers' purchases may be limited by the use of older point-of-sale devices by fuel and vehicle maintenance providers. To the extent that fuel and vehicle maintenance providers within our network are slow to adopt advanced point-of-sale devices, we may not be able to offer the services and capabilities our customers demand. If we fail to adequately assess and monitor credit risks of our customers, we could experience an increase in credit loss. We are subject to the credit risk of our customers, many of which are small to mid-sized businesses. We use various formulae and models to screen potential customers and establish appropriate credit limits, but these formulae and models cannot eliminate all potential bad credit risks and may not prevent us from approving applications that are fraudulently completed. Moreover, businesses that are good credit risks at the time of application may become bad credit risks over time and we may fail to detect such change. In times of economic recession, the number of our customers who default on payments owed to us tends to increase. If we fail to adequately manage our credit risks, our bad debt expense could be significantly higher than it has been in the past. Volatility in the financial markets may negatively impact our ability to access credit. Adverse conditions in the credit market may limit our ability to access credit at a time when we would like or need to do so. Our revolving credit facility expires in May 2012 and our term note expires in August 2011 when the outstanding balance will be due. Any limitation of availability of funds or credit facilities could have an impact on our ability to refinance the maturing debt or react to changing economic and business conditions which could adversely impact us. The loss or suspension of the charter for our Utah industrial bank or changes in regulatory requirements could be disruptive to operations and increase costs. FSC's bank regulatory status enables FSC to issue certificates of deposit, accept money market deposits and borrow on a federal funds rate basis. These funds are used to support our domestic payment processing operations, which require the Company to make payments to fuel and maintenance providers on behalf of fleets. FSC operates under a uniform set of state lending laws, and its operations are subject to extensive state and federal regulation. FSC is regulated and examined by the Utah Department of Financial Institutions on the state level, and the Federal Deposit Insurance Corporation on the federal level. Continued licensing and federal deposit insurance are subject to ongoing satisfaction of compliance and safety and soundness requirements. FSC must be well capitalized and satisfy a range of additional capital requirements. If FSC were to lose its bank charter, Wright Express would either outsource its credit support activities or perform these activities itself, which would subject the Company to the credit laws of each individual state in which Wright Express conducts business. Furthermore, Wright Express could not be a MasterCard issuer and would have to work with another financial institution to issue the product or sell the portfolio. Any such change would be disruptive to Wright Express' operations and could result in significant incremental costs. In addition, changes in the bank regulatory environment, including the implementation of new or varying measures or interpretations by the State of Utah or the federal government, may significantly affect or restrict the manner in which the Company conducts business domestically in the future. 13 We may not be able to adequately protect the data we collect about our customers, which could subject us to liability and damage our reputation. We collect and store data about our customers and their fleets, including bank account information and spending data. Our customers expect us to keep this information in our confidence. Attempts by experienced programmers or "hackers" to penetrate our network security could misappropriate our proprietary information or cause interruptions in our WEXOnline® web site. We may be required to expend significant capital and other resources to protect against the threat of such security breaches or to alleviate problems caused by such breaches. Moreover, any security breach or inadvertent transmission of information about our customers could expose us to liability and/or litigation and cause damage to our reputation. We may incur substantial losses due to fraudulent use of our charge cards. Under certain circumstances, when we fund customer transactions, we bear the risk of substantial losses due to fraudulent use of our charge cards. We do not maintain any insurance to protect us against any such losses. Fluctuations in foreign currency exchange rates could affect our financial results. We earn revenues, pay expenses, own assets and incur liabilities in countries using currencies other than the U.S. dollar. Such currencies include the Australian dollar, euro, New Zealand dollar and the Great Britain Pound. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar against other major currencies will affect our revenues, operating income and the value of balance sheet items denominated in foreign currencies. We cannot assure that fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against other currencies, will not materially affect our financial results. If we fail to maintain effective systems of internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results or prevent fraud, which could cause current and potential shareholders to lose confidence in our financial reporting, adversely affect the trading price of our securities or harm our operating results. Effective internal control over financial reporting and disclosure controls and procedures are necessary for us to provide reliable financial reports and effectively prevent fraud and operate successfully as a public company. Our financial reporting and disclosure controls and procedures are reliant, in part, on information we receive from third parties that supply information to us regarding transactions that we process. Any failure to develop or maintain effective internal control over financial reporting and disclosure controls and procedures could harm our reputation or operating results, or cause us to fail to meet our reporting obligations. If we are unable to adequately maintain our internal control over financial reporting, our external auditors will not be able to issue an unqualified opinion on the effectiveness of our internal control over financial reporting. Ineffective internal control over financial reporting and disclosure controls and procedures could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our securities or affect our ability to access the capital markets and could result in regulatory proceedings against us by, among others, the SEC. In addition, a material weakness in internal control over financial reporting, which may lead to deficiencies in the preparation of financial statements, could lead to litigation claims against us. The defense of any such claims may cause the diversion of management's attention and resources, and we may be required to pay damages if any such claims or proceedings are not resolved in our favor. Any litigation, even if resolved in our favor, could cause us to incur significant legal and other expenses. Such events could harm our business, affect our ability to raise capital and adversely affect the trading price of our securities. Historical transactions with our former parent company may adversely affect our financial statements. Historical transactions involving Avis Budget Group, Inc. (“Avis”) (formerly Cendant Corporation), our former corporate parent, and our other former affiliates such as Realogy Corporation and Wyndham Worldwide Corporation, may be reviewed from time to time by external parties that may include, but are not limited to, former subsidiaries or operating companies of Avis Budget Group, Inc., as well as government regulatory organizations and tax authorities. The decision by one or more of these organizations to undertake a review is beyond our control. While management does not believe, nor has any knowledge of, any transaction that would be in error or otherwise adjusted, corrections to the financial statements of Avis Budget Group, Inc., or its successor or its current or former affiliates, could adversely affect our financial statements. 14 Our ability to attract and retain qualified employees is critical to the success of our business and the failure to do so may materially adversely affect our performance. We believe our employees, including our executive management team, are our most important resource and, in our industry and geographic area, competition for qualified personnel is intense. If we were unable to retain and attract qualified employees, our performance could be materially adversely affected. If we engage in acquisitions, we will incur costs and may never realize the anticipated benefits of the acquisitions. We have acquired and may attempt to acquire businesses, technologies, services, products or licenses in technologies that we believe are a strategic fit with our business. The process of integrating any acquired business, technology, service or product may result in unforeseen operating difficulties and expenditures and may divert significant management attention from our ongoing business operations. As a result, we may incur a variety of costs in connection with acquisitions and may never realize the anticipated benefits. Risks Relating to Our Common Stock If any entity controls 10 percent or more of our common stock and such entity has caused a violation of applicable banking laws by its failure to obtain any required approvals prior to acquiring that common stock, we have the power to restrict such entity's ability to vote shares held by it. As owners of a Utah industrial bank, we are subject to banking regulations that require any entity that controls 10 percent or more of our common stock to obtain the prior approval of Utah banking authorities and the federal banking regulators. A failure to comply with these requirements could result in sanctions, including the loss of our Utah industrial bank charter. Our certificate of incorporation requires that if any stockholder fails to provide us with satisfactory evidence that any required approvals have been obtained, we may, or will if required by state or federal regulators, restrict such stockholder's ability to vote such shares with respect to any matter subject to a vote of our stockholders. Provisions in our charter documents, Delaware law and applicable banking law may delay or prevent our acquisition by a third party. Our certificate of incorporation, by-laws and our rights plan contain several provisions that may make it more difficult for a third party to acquire control of us without the approval of our board of directors. These provisions include, among other things, a classified board of directors, the elimination of stockholder action by written consent, advance notice for raising business or making nominations at meetings of stockholders and "blank check" preferred stock. Blank check preferred stock enables our board of directors, without stockholder approval, to designate and issue additional series of preferred stock with such special dividend, liquidation, conversion, voting or other rights, including the right to issue convertible securities with no limitations on conversion, and rights to dividends and proceeds in a liquidation that are senior to the common stock, as our board of directors may determine. These provisions may make it more difficult or expensive for a third party to acquire a majority of our outstanding voting common stock. We also are subject to certain provisions of Delaware law, which could delay, deter or prevent us from entering into an acquisition, including Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in a business combination with an interested stockholder unless specific conditions are met. These provisions also may delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our stockholders receiving a premium over the market price for their common stock. In addition, because we own a Utah industrial bank, any purchaser of our common stock who would own 10 percent or more of our common stock after such purchase would be required to obtain the prior consent of Utah banking authorities and the federal banking authorities prior to consummating any such acquisition. These regulatory requirements may preclude or delay the purchase of a relatively large ownership stake by certain potential investors. Our stockholder rights plan could prevent you from receiving a premium over the market price for your shares of common stock from a potential acquirer. Our board of directors approved a stockholder rights plan, which entitles our stockholders to acquire shares of our common stock at a price equal to 50 percent of the then current market value in limited circumstances when a third party acquires 15 percent or more of our outstanding common stock or announces its intent to commence a tender offer for at least 15 percent of our common stock, in each case, in a transaction that our board of directors does not approve. The existence of these rights would significantly increase the cost of acquiring control of our Company without the support of our board of directors because, under these limited circumstances, all of our stockholders, other than the person or group who caused the rights to become exercisable, would become entitled to purchase shares of our common stock at a discount. The existence of the rights plan could therefore deter potential acquirers and thereby reduce the likelihood that our stockholders will receive a premium for their common stock in an acquisition. 15 ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 2. PROPERTIES All of our facilities are leased, including our 67,000 square foot corporate headquarters in South Portland, Maine. We lease five smaller buildings in the South Portland area. Four of these buildings, totaling 86,000 square feet, are used for technical and customer service employees. The fifth building is 7,500 square feet and is our warehouse. We lease 11,500 square feet of office space in Midvale, Utah to support our bank operations and a second call center location. We lease 4,000 square feet in Louisville, Kentucky to support TelaPoint. We lease 10,000 square feet of space in Salem, Oregon to support Pacific Pride. We lease 12,800 square feet of space in Melbourne, Australia to support Wright Express Australia Fuel, 7,400 square feet of space in Sydney, Australia to support Wright Express Australia Prepaid and 2000 square feet of space in Perth, Australia to support Wright Express Australia Fuel. We lease 13,500 square feet of space in Auckland, New Zealand to support Wright Express International. These facilities are adequate for our current use. Additional financial information about our leased facilities appears in Item 8 – Note 17 of our consolidated financial statements. ITEM 3. LEGAL PROCEEDINGS As of the date of this filing, we are not involved in any material legal proceedings. We also were not involved in any material legal proceedings that were terminated during the fourth quarter of 2010. From time to time, we are subject to legal proceedings and claims in the ordinary course of business, none of which we believe are likely to have a material adverse effect on our financial position, results of operations or cash flows. ITEM 4. REMOVED AND RESERVED 16 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The principal market for the Company's common stock is the New York Stock Exchange ("NYSE") and our ticker symbol is WXS. The following table sets forth, for the indicated calendar periods, the reported intraday high and low sales prices of the common stock on the NYSE Composite Tape: 2009 First quarter Second quarter Third quarter Fourth quarter 2010 First quarter Second quarter Third quarter Fourth quarter High Low $ $ $ $ $ $ $ $ 18.77 $ 28.12 $ 32.14 $ 32.72 $ 33.53 $ 35.97 $ 36.58 $ 46.97 $ 10.72 17.51 22.58 27.39 27.63 29.14 28.58 35.41 As of February 22, 2011, the closing price of our common stock was $50.95 per share, there were 38,438,454 shares of our common stock outstanding and there were 6 holders of record of our common stock. Dividends The Company has not declared any dividends on its common stock since it commenced trading on the NYSE on February 16, 2005. The timing and amount of future dividends will be (i) dependent upon the Company's results of operations, financial condition, cash requirements and other relevant factors, (ii) subject to the discretion of the Board of Directors of the Company and (iii) payable only out of the Company's surplus or current net profits in accordance with the General Corporation Law of the State of Delaware. The Company has certain restrictions on the dividends it may pay under its revolving credit agreement. If the Company's leverage ratio is higher than 1.75, the Company may pay no more than $10 million per annum for restricted payments, including dividends. Share Repurchases The following table provides information about the Company's purchases of shares of the Company's common stock during the quarter ended December 31, 2010: Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or (a) Programs October 1 – October 31, 2010 November 1 – November 30, 2010 December 1 – December 31, 2010 Total — $ — $ — $ — $ — — — — 48,633,132 48,633,132 48,633,132 — $ — $ — $ — (a) On February 7, 2007, the Company announced a share repurchase program authorizing the purchase of up to $75 million of its common stock over the next 24 months. In July 2008, our board of directors approved an increase of $75 million to the share repurchase authorization. In addition, our board of directors extended the share repurchase program to July 25, 2011. We have been authorized to purchase, in total, up to $150 million of our common stock. Share repurchases will be made on the open market and may be commenced or suspended at any time. The Company's management, based on its evaluation of market and economic conditions and other factors, will determine the timing and number of shares repurchased. 17 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth our summary historical financial information for the periods ended and as of the dates indicated. You should read the following historical financial information along with Item 7 contained in this Form 10-K and the consolidated financial statements and related notes thereto. The financial information included in the table below is derived from audited financial statements: (in thousands, except per share data) 2010 Year ended December 31, 2008 2009 2007 2006 Income statement information Total revenues Total operating expenses Financing interest expense Net realized and unrealized (losses) gains on fuel price derivatives Net income Basic earnings per share Weighted average basic shares of common stock outstanding $ $ $ $ $ $ 390,406 $ 239,697 $ 5,314 $ (7,244 ) $ 87,629 $ 2.28 $ 315,203 $ 197,053 $ 6,210 $ (22,542 ) $ 139,659 $ 3.65 $ 388,159 $ 226,727 $ 11,859 $ 55,206 $ 127,640 $ 3.28 $ 336,128 $ 184,036 $ 12,677 $ (53,610 ) $ 51,577 $ 1.29 $ 291,247 156,144 14,447 (4,180 ) 74,609 1.85 38,486 38,303 38,885 40,042 40,373 Balance sheet information, at end of period Total assets Liabilities and stockholders' equity All liabilities except preferred stock Preferred stock Total stockholders' equity $ 2,097,951 $ 1,499,662 $ 1,611,855 $ 1,785,076 $ 1,551,015 $ 1,538,944 $ 1,048,346 $ 1,307,193 $ 1,570,817 $ 1,357,888 10,000 183,127 — 559,007 10,000 441,316 10,000 204,259 10,000 294,662 Total liabilities and stockholders' equity $ 2,097,951 $ 1,499,662 $ 1,611,855 $ 1,785,076 $ 1,551,015 18 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The consolidated statements of income for the periods presented have been corrected for an immaterial error related to the classification of customer discounts for electronic payments. Payment processing revenue decreased from $215.6 million to $212.6 million and operating interest expense decreased from $13.3 million to $10.3 million in 2009. Payment processing revenue decreased from $297.4 million to $292.0 million and operating interest expense decreased from $35.0 million to $29.6 million in 2008. Operating income and net income were not impacted by this change, nor was there any impact on either cash flows or the balance sheet. 2010 Highlights and Year in Review During 2010, we focused on international growth, growing our domestic customer base and customer retention. As a result of our efforts, we acquired RD Card Holdings Australia Pty Ltd, increased the size of our fleet portfolio and grew our Other Payment Solutions segment. Our results for the year were impacted by the following significant events and accomplishments: (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) As stated above, we acquired RD Card Holdings Australia Pty Ltd. on September 14, 2010, for approximately $340 million USD. Total fleet transactions processed increased 4 percent from 2009 to 269.8 million. Payment processing transactions increased 5 percent to 214.8 million, and transaction processing transactions decreased 2 percent to 55 million. Our corporate charge card product grew to $4.4 billion in purchase volume for the year, which is a 43 percent increase. This increase is primarily due to our single use account product used for online travel-related purchases. Domestic fuel prices averaged $2.84 per gallon during 2010. Domestic fuel prices averaged $2.39 per gallon during 2009. During 2010, we repurchased approximately 595,000 shares of our common stock at a cost of approximately $18.4 million. During the first quarter of 2010, the Company offered to redeem all of the outstanding shares of its Series A non- voting convertible, redeemable preferred stock for $101 per share, plus all accrued but unpaid dividends. Each holder elected to exercise its right to convert its holdings into common stock. As a consequence of these elections, the Company issued 445,000 shares of its common stock and retired 100 shares of preferred stock. 19 Outlook for the Future Looking forward, we expect that the following items will impact our financial results: (cid:135)(cid:3) (cid:135)(cid:3) (cid:135)(cid:3) (cid:135) (cid:135)(cid:3) A full year of operations of Wright Express Australia will impact our overall corporate performance. We will build upon the organic growth we achieved in 2010 as we target in excess of 400,000 gross new domestic vehicles serviced for 2011. We intend to grow corporate charge card purchase volume and pursue new prepaid products. As our revolving credit facility will expire in May 2012 and our term loan will expire in August, we will negotiate either an extension of our line of credit or a new line of credit. We are currently evaluating our foreign earnings repatriation strategy. Changes to that strategy could lead to a lower effective tax rate in the future. 20 Results of Operations YEAR ENDED DECEMBER 31, 2010, AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2009 The following table reflects comparative operating results and key operating statistics within our Fleet Payment FLEET PAYMENT SOLUTIONS SEGMENT Solutions segment: (in thousands) Revenues Payment processing revenue Transaction processing revenue Account servicing revenue Finance fees Other Total revenues Total operating expenses Operating income Financing interest expense Gain (loss) on foreign currency transactions Gain on settlement portion of amounts due under tax receivable agreement Net realized and unrealized (losses) on domestic fuel price derivative instruments (Increase) in amount due under tax receivable agreement Income before taxes Income taxes Net income (in thousands, except per transaction and per gallon data) Key operating statistics Payment processing revenue: Payment processing transactions Average expenditure per payment processing transaction Average U.S. price per gallon of fuel Average AUD price per gallon of fuel Transaction processing revenue: Transaction processing transactions Account servicing revenue: Average number of vehicles serviced NM – Not Meaningful Revenues 2010 2009 Increase (decrease) $ 220,154 $ 16,591 39,692 37,264 15,538 179,509 17,532 36,943 32,321 11,691 329,239 277,996 201,547 173,417 127, 692 104,579 23 % (5)% 7 % 15 % 33 % 18 % 16 % 22 % (5,314 ) 7,141 (6,210) (40) (14)% NM — 136,485 NM (7,244 ) (214 ) (22,542) (599) 122,061 48,337 73,724 $ 211,673 80,436 131,237 $ (68)% (64)% (42)% (40)% (44)% 2010 2009 Increase (decrease) $ $ $ 214,803 58.33 $ 2.84 $ 4.64 $ 204,147 48.71 2.39 — 5 % 20 % 19 % — 54,980 55,921 (2)% 5,397 4,648 10 % Payment processing revenue increased $40.6 million for 2010, as compared to 2009. Approximately $29 million of this increase is due to a 19 percent increase in the average price per gallon of fuel. Also contributing to the increase is the increase in the number of domestic payment processing transactions, which contributed approximately $5.9 million. The remaining variance is primarily due to our acquisition of Wright Express Australia Fuel. Account servicing revenue increased $2.7 million for 2010, as compared to 2009. Approximately $6.5 million of the increase is due to Wright Express Australia Fuel activity, offset by a decrease in revenues from software development activity. A greater proportion of Wright Express Australia Fuel revenues is attributable to monthly servicing fees than is experienced in the U.S. We anticipate that continued growth in account servicing revenue will be primarily attributable to our operations in Australia. Our finance fees have increased $4.9 million for 2010, as compared to 2009. The increase in finance fees is attributable to higher accounts receivable balances, as a result of higher fuel prices and transaction volumes. 21 Expenses The following table compares selected expense line items within our Fleet Payment Solutions segment: (in thousands) Expense Salary and other personnel Service fees Provision for credit loss Depreciation and amortization Operating interest expense 2010 2009 Increase (decrease) $ $ $ $ $ 82,445 $ 20,750 $ 18,747 $ 28,331 $ 4,494 $ 72,256 12,895 15,854 21,721 8,702 14 % 61 % 18 % 30 % (48)% (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) Salary and other personnel expenses increased $10.2 million for 2010, as compared to 2009. Salary expenses related to our international operations increased by approximately $4.6 million compared to the prior year. The increase in domestic salary expense is due to additional expense associated with our commissions, stock compensation plans and the annual bonus incentive, which increased approximately $1.0 million as compared to 2009. The remaining increase is due to additional contractor expense, annual salary and benefit increases and employee travel. Service fees increased $7.9 million during 2010, as compared to 2009. The increase in fees is primarily related to the acquisition costs of RD Card Holdings Australia Pty Ltd. Provision for credit loss increased $2.9 million for 2010, as compared 2009. The increase is associated with higher levels of expenditures throughout the year. We generally measure our credit loss performance by calculating credit losses as a percentage of total fuel expenditures on payment processing transactions. Our credit losses as a percentage of expenditures declined from 15.9 basis points in the prior year to 14.9 basis points in the current year. Depreciation and amortization expenses increased $6.6 million for 2010, as compared to 2009. This increase is primarily due to approximately $5 million of additional amortization associated with the intangible assets related to the purchase of RD Card Holdings Australia Pty Ltd. The remaining difference is due to additional depreciation on new assets placed into service. Operating interest expense is interest on our deposits and borrowed federal funds. This interest expense decreased $4.2 million during 2010, as compared to 2009. We finance the receivables arising from our domestic payment processing transactions with our operating debt (deposits and borrowed federal funds). Our average debt balance for 2010 totaled $527.3 million as compared to our average debt balance of $434.5 million for 2009. While this increase in borrowings resulted in approximately a $2 million increase in operating interest, our weighted average interest rates decreased to 1.0 percent in 2010 from 2.2 percent in 2009. The decrease in interest rates reduced operating interest expense year over year by approximately $6 million. 22 Financing interest expense is related primarily to our revolving credit facility. Interest expense for 2010 decreased $0.9 million from 2009, due to lower interest rates and a reduction in the outstanding balance on our revolving credit facility during a majority of the year. The increase in our financing debt occurred during the second half of the year in conjunction with our acquisition and funding of operations for Wright Express Australia. We own fuel price sensitive derivative instruments that we purchase on a periodic basis to manage the impact of volatility in domestic fuel prices on our cash flows. Our derivative instruments do not qualify for hedge accounting. Accordingly, realized and unrealized gains and losses on our fuel price sensitive derivative instruments affect our net income. We recognized an unrealized loss of $17.0 million in 2010 compared to unrealized loss of $43.1 million in 2009. We recognized a realized gain of $9.8 million in 2010 and a realized gain of $20.6 million in 2009. Our effective tax rate was 39.6 percent for 2010 and 38.0 percent for 2009. Changes in the domestic price of fuel, impacts of our fuel price derivatives, as well as changes in the mix of earnings between our legal entities, especially between U.S. and international subsidiaries, may cause fluctuations in our effective tax rates. Our tax rate also fluctuates due to the impacts that rate mix changes have on our net deferred tax assets. Adjustments to net deferred tax assets for rate changes can cause volatility in our effective tax rates. The 2010 provision for income taxes reflects income tax benefits on losses in foreign jurisdictions as opposed to the 2009 provision that reflects losses incurred in foreign jurisdictions where no benefits were recognized. As discussed in our critical accounting policies section, our tax rate assumes that the majority of our foreign earnings will be remitted back to the U.S. That assumption leads to incremental tax charges. We are currently evaluating our foreign earnings repatriation strategy. Changes to that strategy could lead to a lower effective tax rate in the future. Gain on foreign currency transactions In anticipation of our closing of the purchase of RD Card Holdings Australia Pty Ltd, the Company purchased $365 million Australian dollars during the month of August. The exchange rate moved in our favor during the remainder of the year, resulting in a currency gain of approximately $7.1 million. Fuel price derivatives We own fuel price-sensitive derivative instruments that we purchase on a periodic basis to manage the impact of volatility in fuel prices on our cash flows. These fuel price-sensitive derivative instruments do not qualify for hedge accounting. Accordingly, gains and losses on our fuel price-sensitive derivative instruments affect our net income. During 2010, we recognized $7.2 million in net realized and unrealized losses due to the increase in the price of fuel in relation to our hedged fuel prices. 23 The following table reflects comparative operating results and key operating statistics within our Other Payment OTHER PAYMENT SOLUTIONS SEGMENT Solutions segment: (in thousands) Revenues Payment processing revenue Transaction processing revenue Account servicing revenue Finance fees Other Total revenues Total operating expenses Operating income Income taxes Net income (in thousands) Key operating statistics Payment processing revenue: Corporate charge card purchase volume 2010 2009 Increase (decrease) $ 46,034 $ 2,935 753 497 10,948 33,090 — 58 495 3,564 61,167 37,207 38,146 23,636 23,021 9,116 $ 13,905 $ 13,571 5,149 8,422 39 % — 1,198 % —% 207 % 64 % 61 % 70 % 77 % 65 % 2010 2009 Increase (decrease) $ 4,414,145 $ 3,082,779 43 % Payment processing revenue increased approximately $12.9 million over 2009, primarily due to additional business derived from our single use account product. Our corporate charge card purchase volume grew by over $1.3 billion in 2010 compared to 2009. Transaction processing revenue is a result of the transaction based fees from Wright Express Australia Prepaid commencing with operations after our acquisition on September 14, 2010. Other revenue increased during 2010 as the volume of cross-border fees increased over the prior year. This increase is partially offset by an increase in associated service fees expense. Operating expenses increased by $14.5 million during 2010 primarily due to the following: (cid:117) (cid:117) (cid:117) (cid:117) Service fees increased by $10.8 million as compared to 2009 due to cross-border fees and other fees associated with the higher purchase volume. Salary and other personnel expenses increased $2.0 million primarily due to additional payroll costs assumed upon the acquisition of Wright Express Australia Prepaid. Operating interest decreased $0.7 million primarily due to lower interest rates. Credit loss reserve expense decreased $0.7 million. We measure our credit loss performance by calculating credit losses as a percentage of total card purchases. This metric for credit losses was 2.4 basis points of total corporate charge purchase volume for 2010 compared to 6.0 basis points for 2009. 24 YEAR ENDED DECEMBER 31, 2009, AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2008 The following table reflects comparative operating results and key operating statistics within our Fleet Payment FLEET PAYMENT SOLUTIONS SEGMENT Solutions segment: (in thousands) Revenues Payment processing revenue Transaction processing revenue Account servicing revenue Finance fees Other Total revenues Total operating expenses Operating income Financing interest expense Loss on foreign currency transactions Gain on settlement portion of amounts due under tax receivable agreement Net realized and unrealized gains (losses) on fuel price derivative instruments (Increase) in amount due under tax receivable agreement Income before taxes Income taxes Net income (in thousands, except per transaction and per gallon data) Key operating statistics Payment processing revenue: Payment processing transactions Average expenditure per payment processing transaction Average price per gallon of fuel Transaction processing revenue: Transaction processing transactions Account servicing revenue: Average number of vehicles serviced Revenues 2009 2008 Increase (decrease) $ 179,509 $ 17,532 36,943 32,321 11,691 267,078 19,339 30,573 30,716 13,481 277,996 361,187 173,417 206,127 104,579 155,060 (6,210 ) (40 ) (11,859) — (33)% (9)% 21 % 5 % (13)% (23)% (16)% (33)% (48)% — 136,485 — — (22,542 ) (599 ) 211,673 80,436 $ 131,237 $ 55,206 (9,014) (141)% (93)% 189,393 65,908 123,485 12 % 22 % 6 % 2009 2008 Increase (decrease) $ $ 204,147 48.71 $ 2.39 $ 216,193 69.80 3.47 (6)% (30)% (31)% 55,921 60,831 (8)% 4,648 4,492 20 % Payment processing revenue decreased $87.6 million for 2009, as compared to 2008. This decrease is primarily due to a 31 percent decrease in the average price per gallon of fuel as well as a 6 percent decrease in the number of payment processing transactions. A majority of our contracts contain both a fixed fee and a percentage fee component. The remainder of our contracts has just a percentage fee component. This combined fixed fee and percentage fee structure reduces the impact of fuel price volatility on our payment processing revenues. Payment processing transactions were down as a result in the economic recession during the year. Transaction processing revenue decreased $1.8 million for 2009, as compared to 2008. This decrease in revenue is due primarily to one customer changing from transaction processing to payment processing. 25 Account servicing revenue increased $6.4 million for 2009, as compared to 2008. This increase is due both to our expansion into international markets following our August 2008 acquisition of Financial Automation Limited and our WEXSmartTM telematics program. Our finance fees have increased $1.6 million for 2009, as compared to 2008. During December of 2008, we adjusted our late fee charged to delinquent customers to encourage timely payments. While delinquencies declined, our adjustment to late fees still caused finance fees to increase, contributing approximately $12 million during 2009. This increase in revenue was largely offset by a decline in delinquent balances due to an improvement in aging and lower receivable balances, as compared to the same period in the prior year. Expenses The following table compares selected expense line items within our Fleet Payment Solutions segment: (in thousands) Expense Salary and other personnel Service fees Provision for credit loss Depreciation and amortization Operating interest expense 2009 2008 Increase (decrease) $ $ $ $ $ 72,256 $ 12,895 $ 15,854 $ 21,721 $ 8,702 $ 63,899 10,669 42,971 19,483 26,725 13 % 21 % (63)% 11 % (67)% (cid:117) (cid:117) (cid:117) (cid:117) (cid:117) Salary and other personnel expenses increased $8.4 million over last year. This increase is primarily due to higher stock-based compensation and short-term incentive program bonuses for 2009 over 2008, as we did not pay bonuses under our short-term incentive program in 2008, as program targets were not achieved. Service fees increased $2.2 million for 2009. This increase is primarily due to professional service fees for legal and accounting work related to costs associated with our international activities and our WEXSmartTM telematics program. Our metric for credit losses was 15.9 basis points of Fuel Expenditures for 2009, compared to 28.5 basis points of Fuel Expenditures for 2008. We use a roll rate methodology to calculate the amount necessary for our ending receivable reserve balance. This methodology takes into account total receivable balances, recent charge off experience, recoveries on previously charged off accounts and the dollars that are delinquent to calculate the total reserve. In addition, management undertakes a detailed evaluation of the receivable balances to help ensure further overall reserve adequacy. The expense we recognized in the period is the amount necessary to bring the reserve to its required level after charge offs. Provision for credit loss decreased $27.1 million for the year ended December 31, 2009, as compared to the same period in 2008. Approximately $11 million of this decrease is associated with lower fuel expenditures, primarily as a result of decreases in the price of fuel. Improvements in receivables aging and ultimate charge offs as well as strong recoveries on previously charged off accounts accounted for the remainder of the change. Depreciation and amortization expenses increased $2.2 million. This increase is primarily due to higher depreciation expense as a result of additional expenditures for internally-developed software. We continue to carefully monitor the recoverability of software asset values. Operating interest expense decreased $20.4 million during 2009, compared to 2008. We finance the receivables arising from our payment processing transactions with our operating debt (deposits and borrowed federal funds). Our average debt balance for 2009 totaled $434.5 million as compared to our average debt balance of $664.6 million for 2008. This resulted in approximately a $10 million decrease in operating interest. Our operating interest expense is also lower due to a decrease in weighted average interest rates to 2.2 percent in 2009 from 4.3 percent in 2008. The decrease in interest rates reduced operating interest expense year over year by approximately $9 million. 26 During 2009, we incurred $0.8 million in impairment charges related to partially completed internal-use software. During 2008, we incurred a $1.5 million impairment charge related to partially completed internal-use software. These non-cash charges for both years have been included in occupancy and equipment expense. Financing interest expense is related primarily to our revolving credit facility and secondarily, to our preferred stock that we issued as part of our initial public offering. Interest expense for 2009 decreased $5.6 million from 2008, due to lower interest rates and a reduction in the outstanding balance on our revolving credit facility. We recognized an unrealized loss of $43.1 million in 2009 compared to unrealized gain of $90.9 million in 2008. We recognized a realized gain of $20.6 million in 2009 and a realized loss of $35.7 million in 2008. Our effective tax rate was 38.0 percent for 2009 and 34.8 percent for 2008. The 2009 provision for income taxes reflects losses incurred in foreign jurisdictions where no benefits are recognized. The 2008 provision for income taxes reflects a net benefit of approximately $8.9 million as a result of rate change impacts on the deferred tax asset balance. These rate changes also increased the associated liability to Avis, resulting in a $9.0 million charge to non-operating expense in 2008. 27 The following table reflects comparative operating results and key operating statistics within our Other Payment OTHER PAYMENT SOLUTIONS SEGMENT Solutions segment: (in thousands) Revenues Payment processing revenue Account servicing revenue Finance fees Other Total revenues Total operating expenses Operating income Income taxes Net income (in thousands) Key operating statistics Payment processing revenue: MasterCard purchase volume 2009 2008 Increase (decrease) $ 33,090 $ 58 495 3,564 24,940 58 327 1,647 37,207 26,972 23,636 20,600 13,571 5,149 8,422 $ 6,372 2,217 4,155 $ 33 % — 51% 116 % 38 % 15 % 113 % 132 % 103 % 2009 2008 Increase (decrease) $ 3,082,779 $ 2,404,646 28 % Payment processing revenue increased approximately $8.2 million over 2008, primarily due to additional business derived from our single use account product. Our corporate charge card purchase volume grew by over $678 million in 2009 compared to 2008. Other revenue increased during 2009 as the volume of cross-border fees increased over the prior year. These fees are primarily associated with our single use account product being used for online travel-related purchases. This increase is offset by an increase in associated service fees expense. Operating expenses increased by $3.0 million during 2009 primarily due to the following: (cid:117) (cid:117) (cid:117) Service fees increased by $5.1 million as compared to 2008 due to higher purchase volumes. Operating interest decreased $1.3 million primarily due to lower interest rates. Credit loss reserve expense decreased $0.2 million. Our metric for credit losses was 6.0 basis points of total corporate charge card purchase volume for 2009 compared to 8.5 basis points for 2008. 28 Liquidity, Capital Resources and Cash Flows We focus on management operating cash as a key element in achieving maximum stockholder value, and it is the primary measure we use internally to monitor cash flow performance from our core operations. Since deposits and borrowed federal funds are used to finance our accounts receivable, we believe that they are a recurring and necessary use and source of cash. As such, we consider deposits and borrowed federal funds when evaluating our operating activities. For the same reason, we believe that management operating cash may also be useful to investors as one means of evaluating our performance. However, management operating cash is a non-GAAP measure and should not be considered a substitute for, or superior to, net cash provided by (used for) operating activities as presented on the consolidated statement of cash flows in accordance with GAAP. The table below reconciles net cash provided by (used for) operating activities to management operating cash: (in thousands) Net cash (used for) provided by operating activities Net increase (decrease) increase in deposits Net (decrease) increase in borrowed federal funds Management operating cash Year ended December 31, 2009 2010 2008 $ (10,550 ) $ 106,504 (12,238 ) (33,167) $ (116,859) 71,723 339,179 (58,943 ) (8,175 ) $ 83,716 $ (78,303) $ 272,061 The change in management operating cash in the comparative periods can be explained as follows: (cid:117) During 2010, we generated approximately $83.7 million in management operating cash as compared to using approximately $78.3 million in 2009, and generating $272.1 million in 2008. During 2010, our accounts receivable, net of the account receivable balance acquired with the Acquisition of RD Card Holdings Australia Pty Ltd. increased by $128 million. This increase is a result of higher spend over the prior year. This increase in account receivable is funded by net income as well as a $94 million overall increase in borrowed federal funds and deposits, and a $49 million increase in our accounts payable, net of accounts payable acquired with our acquisition. The significant change in 2009 is attributable to activity at our bank subsidiary, FSC, which utilizes certificates of deposit to finance our accounts receivable. At the end of 2008, FSC was overfunded by approximately $140 million. This overfunding was the result of lower receivable balances brought about by the rapid decline in fuel prices during the second half of 2008. (cid:117) During the first quarter of 2009 this overfunding was eliminated. Hence, there was a significant decrease in outstanding certificates of deposit as 2008 amounts matured. Additionally, during the second quarter of 2009, we prepaid a portion of our liabilities under our tax receivable agreement for $51 million, which resulted in a pre-tax gain of approximately $136 million. (cid:117) The significant increase in management operating cash in 2008 is largely due to an approximately $670 million drop in our accounts receivable balances in the fourth quarter of 2008 (see above). Our excess cash position at the end of 2008 diminished in the first half of 2009 as certificates of deposit matured during the first quarter of 2009. 2010 Cash Utilization Summary 2010 Highlights (cid:117) (cid:117) (cid:117) During 2010, we completed the acquisition of RD Card Holding Australia Pty Ltd for approximately $340 million. The acquisition was funded through our revolving credit facility and term loan. We used $18.4 million during 2010 to repurchase our own common stock. During 2010, we had approximately $29 million of capital expenditures. A significant portion of our capital expenditures are for the development of internal-use computer software, primarily to enhance product features and functionality in the United States and abroad. We expect total capital expenditures for 2011 to be approximately $28 to $35 million. Our capital 29 Capital expenditures $28.7 Share repurchases $18.4 Acquisition $340.0 Other, net, $5.1 Financing debt, net, $279.3 Management operating cash $83.7 Source of Cash Use of Cash (in millions) spending is financed primarily through internally generated funds. 2009 Highlights 2009 Cash Utilization Summary (cid:117) (cid:117) (cid:117) (cid:117) During 2009, we reduced the outstanding balance on our revolving credit facility by $43 million. We used $6.3 million during 2009 to acquire our own common stock. We paid Realogy $51 million, less our bank fees and legal expenses, as a prepayment in full to settle the remaining obligations to Realogy under the 2005 Tax Receivable Agreement. These obligations were recorded on our balance sheet at approximately $187 million and this transaction resulted in a gain of approximately $136 million. We remain obligated to pay Wyndham the remainder of the obligation under our tax receivable agreement. During 2009, we had approximately $18 million of capital expenditures. A significant portion of our capital expenditures are for the development of internal-use computer software, primarily to enhance product features and functionality. Other, Net $5.0 Capital expenditures $17.9 Financing debt, net, $42.6 Management operating cash, $78.3 Source of Cash Use of Cash (in millions) 2008 Highlights 2008 Cash Utilization Summary (cid:117) (cid:117) (cid:117) We used approximately $41 million from our credit facility for the acquisition of Pacific Pride and Financial Automation Limited. During the fourth quarter of 2008, we used excess cash to pay down approximately $30 million on our credit facility to a balance of $170.6 million at the end of the year. We used $39 million during 2008 to acquire our own common stock. Managem ent operating cash $272.1 We had approximately $16 million of capital expenditures. A significant portion of our capital expenditures are for the development of internal-use computer software, primarily to enhance product features and functionality. Source of Cash Use of Cash (in m illions) Other, net, $4.9 Capital expenditures $16.1 Share repurchases $39.0 Acquisition $41.6 Financing debt, net, $30.4 30 Management Operating Cash Management operating cash is not a measure in accordance with generally accepted accounting principles ("GAAP"). In order to reconcile from management operating cash to the classifications of cash flow activities presented on our consolidated statement of cash flows, we have adjusted our cash flows from financing activities for the changes in deposits and borrowed federal funds. Our bank subsidiary, FSC, utilizes certificates of deposit to finance our domestic accounts receivable. FSC issued certificates of deposit in various maturities ranging between three months and two years and with fixed interest rates ranging from 0.30 percent to 1.95 percent as of December 31, 2010, as compared to fixed interest rates ranging from 0.35 percent to 4.00 percent as of December 31, 2009 and 2.85 percent to 5.45 percent as of December 31, 2008. As of December 31, 2010, we had approximately $457.9 million of certificates of deposit outstanding at a weighted average rate of 0.95 percent, compared to $415.0 million of certificates of deposit at a weighted average rate of 1.25 percent as of December 31, 2009, and approximately $532.0 million of certificates of deposit outstanding at a weighted average rate of 3.85 percent as of December 31, 2008. FSC may issue certificates of deposit without limitation on the balance outstanding. However, FSC must maintain minimum financial ratios, which include risk-based asset and capital requirements, as prescribed by the FDIC. As of December 31, 2010, all certificates of deposit were in denominations of $250,000 or less, corresponding to FDIC deposit insurance limits. The certificates of deposit are only payable prior to maturity in the case of death or legally declared mental incompetence. We believe that our certificates of deposit are paying competitive yields and that there continues to be consumer demand for these instruments. Non-interest bearing deposits are required for certain customers as collateral for their credit accounts. We had $9.4 million of these deposits on hand at December 31, 2010, $8.3 million at December 31, 2009, and $8.1 million at December 31, 2008. FSC also borrows from lines of credit on a federal funds rate basis to supplement the financing of our accounts receivable. Our outstanding federal funds lines of credit were $140 million during 2010 and $155 million during 2009 and 2008. Liquidity Our short-term cash requirements consist primarily of payments to major oil companies for purchases made by our fleet customers, payments on maturing certificates of deposit, interest payments on our credit facility, cash payments for derivative instruments and other operating expenses. FSC is responsible for substantially all domestic payments to major oil companies and payments on maturing certificates of deposit. FSC can fund our short-term cash requirements through the issuance of certificates of deposit and borrowed federal funds. Any remaining cash needs are primarily funded through operations. Under FDIC regulations, FSC may not pay any dividend if, following the payment of the dividend, FSC would be "undercapitalized," as defined under the Federal Deposit Insurance Act and applicable regulations. Our credit facilities provide a $450 million revolving line-of-credit and a $75 million term loan. Borrowings on the revolving line-of-credit bear interest equal to (a) the British Bankers Association LIBOR plus a margin of 0.45 percent to 1.125 percent based on our consolidated leverage ratio or (b) the higher of the Federal Funds Rate plus 0.50 percent or the prime rate announced by Bank of America, N.A., plus a margin of up to 0.125 percent based on our consolidated leverage ratio. The revolving line-of-credit facility expires in May 2012, when the outstanding balance will be due. Our revolving credit facility had an available balance of approximately $115.6 million at December 31, 2010. We are beginning to explore the renewal of our revolving credit facility and anticipate that we will negotiate either an extension of our line of credit or a new line of credit during 2011. Our credit agreements contain various financial covenants requiring us to maintain certain financial ratios. Specifically, our credit agreements limit us to a maximum consolidated leverage ratio of 3.00 to 1.00 at the end of each fiscal quarter until the maturity date. The credit agreement also requires us to maintain a minimum consolidated interest coverage ratio of 3.00 to 1.00 at the end of each fiscal quarter until the maturity date. In addition to the financial covenants, the credit agreements contain various customary restrictive covenants that limit our ability to pay dividends, sell or transfer all or substantially all of our property or assets, incur more indebtedness or make guarantees, grant or incur liens on our assets, make investments, loans, advances or acquisitions, engage in mergers, consolidations, liquidations or dissolutions, enter into sales or leasebacks and change our accounting policies or reporting practices. FSC is not subject to certain of these restrictions. We were in compliance with all material covenants and restrictions at December 31, 2010, and expect to continue to be. We discuss our hedging strategies relative to commodity and interest rate risk in Item 7A below. Our fuel price derivatives, which we entered into to mitigate the volatility that domestic fuel prices introduce to our revenue streams, are currently in a loss position due to the increase in oil prices during the year. The current fuel price is above the ceiling prices set in the previous year. As a result, we have a liability related to these derivatives of approximately $10.9 million. During the course of the year we received $9.8 million from the settlement of expiring derivative contracts. 31 We have entered into two interest rate swap arrangements. The first interest rate swap arrangement effectively converts $50 million of variable rate borrowing to fixed rate borrowing at a rate of approximately 1.35 percent. This arrangement will expire in July of 2011. The second interest rate swap arrangement effectively converts $150 million of variable rate borrowing to fixed rate borrowing at a rate of approximately 0.56 percent. This arrangement will expire in March of 2012. Our long-term cash requirements, apart from amounts owing on our revolving line of credit, consist primarily of amounts due to Wyndham as part of our tax receivable agreement. As a consequence of our separation from Avis, we increased the tax bases of our tangible and intangible assets to their fair market value (the "Tax Basis Increase"). This Tax Basis Increase allows us to reduce the amount of future tax payments to the extent that we generate sufficient taxable income. We were contractually obligated, pursuant to our tax receivable agreement with Avis, to remit to Avis 85 percent of any such cash savings, subject to repayment if it is determined that these savings should not have been available to us. In 2009 we entered into a Tax Receivable Prepayment Agreement to settle a portion of the obligation with one of Avis’ successors. These obligations were previously valued at $187.5 million and this transaction resulted in a gain of $136.5 million. As a result we are now entitled to receive, without obligation to a third party, approximately 68 percent of the future estimated tax benefit of the Tax Basis Increase. This will be reflected over time in increases in operating cash. We currently have authorization from our Board to purchase up to $150 million of our common stock up to July 25, 2011. Through December 31, 2010, we have used $101.4 million of the authorized amount to acquire shares of our common stock. The program will be funded either through our future cash flows or through borrowings on our credit facility. Share repurchases will be made on the open market and may be commenced or suspended at any time. The Company’s management, based on its evaluation of market and economic conditions and other factors, will determine the timing and number of shares repurchased. Management believes that we can adequately fund our cash needs during the next 12 months. Off-balance Sheet Arrangements We have the following off-balance sheet arrangements as of December 31, 2010: (cid:117) (cid:117) (cid:117) Operating leases. We lease office space, office equipment and computer equipment under long-term operating leases, which are recorded in occupancy and equipment or technology leasing and support. Extension of credit to customers. We have entered into commitments to extend credit in the ordinary course of business. We had approximately $3.4 billion of commitments to extend credit at December 31, 2010, as part of established lending product agreements. These amounts may increase or decrease during 2011 as we extend or contract credit to customers, subject to our appropriate credit reviews, as part of our lending product agreements. Many of these commitments are not expected to be utilized; therefore, we do not believe total unused credit available to customers and customers of strategic relationships represents future cash requirements. We can increase or decrease our customers’ credit lines at our discretion at any time. We believe that we can adequately fund actual cash requirements related to these credit commitments through the issuance of certificates of deposit, borrowed federal funds and other debt facilities. Letters of credit. We are required to post collateral to secure our fuel price sensitive derivative instruments based on any unrealized loss, less any unsecured credit granted by our counter party. At December 31, 2010, we had no unsecured credit nor had we posted a letter of credit for collateral even though these instruments were in an unrealized loss position. We have posted a $2.1 million letter of credit as collateral under the terms of our lease agreement for our corporate offices. 32 Contractual Obligations The table below summarizes the estimated dollar amounts of payments under contractual obligations as of December 31, 2010, for the periods specified: (in thousands) 2011 2012 2013 2014 2015 and Thereafter Total Operating leases: Facilities Equipment, including vehicles Revolving line-of-credit, term loan (a) Tax receivable agreement Deposits Borrowed federal funds Interest rate swap arrangements (b) Fuel price derivative contracts Purchase obligations: Technology services $ 3,360 $ 5,238 75,000 8,335 370,410 59,484 755 7,307 2,944 $ 3,783 332,300 8,518 87,481 — 102 3,570 2,978 $ 2,330 — 8,870 — — — 3,001 $ 2,222 — 9,318 — — — 8,348 $ 2,077 — 65,104 — — — 20,631 15,650 407,300 100,145 457,891 59,484 857 10,877 1,178 115 — — — 1,293 Total $ 531,067 $ 438,813 $ 14,178 $ 14,541 $ 75,529 $ 1,074,128 (a) Our term loan is set to expire in August 2011 and our revolving line-of-credit is set to expire in May of 2012. Amounts in table exclude interest payments. See Item 8 – Note 11, Financing Debt. (b) Payments on interest rate swap arrangements have been estimated using the December 31, 2010 LIBOR rates. Any change to this rate will impact future payments. 33 Application of Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with Generally Accepted Accounting Principles. Preparation of these financial statements requires us to make estimates and judgments that affect reported amounts of assets and liabilities, revenue and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. We continually evaluate our judgments and estimates in determination of our financial condition and operating results. We base our estimates on historical experience and on various other assumptions that we believe 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. Estimates are based on information available as of the date of the financial statements and, accordingly, actual results could differ from these estimates, sometimes materially. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of our financial condition and operating results and require management's most subjective judgments. Our consolidated financial statements are based on the selection and application of critical accounting policies and estimates, the most significant of which are included in the tables below. Reserve for Credit Losses Description Assumptions/Approach Used Assumptions Effect if Actual Results Differ from The reserve for losses relating to accounts receivable represents management's estimate of the losses inherent in the Company's outstanding portfolio of receivables. The reserve for credit losses reduces the Company's accounts receivable balances as reported in its financial statements to the net realizable value. Reserves for these losses are primarily based on a model that analyzes specific portfolio statistics, including average charge-off rates for various stages of receivable aging (i.e. current, 30 days, 60 days, 90 days) over historical periods and average bankruptcy and recovery rates. Receivables are generally written off when they are 150 days past due or declaration of bankruptcy by the customer. Also, the reserve reflects management's judgment regarding overall reserve adequacy. Management considers whether to adjust the reserve that is calculated by the analytic model based on other factors, such as the actual charge-offs for the preceding reporting periods, expected charge-offs and recoveries for the subsequent reporting periods, a review of accounts receivable balances which become past due, changes in customer payment patterns, known fraudulent activity in the portfolio, as well as leading economic and market indicators. To the extent historical credit experience is not indicative of future performance, actual loss experience could differ significantly from management's judgments and expectations, resulting in either higher or lower future provisions for credit losses, as applicable. As of December 31, 2010, we have estimated a reserve for credit losses which is 0.9 percent of the total gross accounts receivable balance. An increase to this reserve by 0.5 percent to approximately 1.4 percent would increase the provision for credit losses for the year by $6.0 million. Conversely, a decrease to this reserve by 0.5 percent to approximately 0.4 percent would decrease the provision for credit losses for the year by $5.6 million. 34 Deferred Tax Asset Valuation and Undistributed Foreign Earnings Description Assumptions/Approach Used Assumptions Effect if Actual Results Differ from The Company regularly reviews its deferred tax assets for recoverability. Management's determination of whether an allowance is required is based on historical taxable income or loss, projected future taxable income or loss, the expected timing of the reversals of existing temporary differences and the implementation of tax planning strategies. Management also periodically reviews its international tax planning strategies. Assumptions about whether or not foreign earnings will be repatriated significantly impact the Company’s overall tax rate. The Company recognizes deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. Future realization of the tax benefit of existing deductible temporary differences is contingent upon our ability to generate sufficient future taxable income within the carry back and carry forward periods available under tax law. No valuation allowances have been established at this time as management believes that it is more likely than not that the Company will realize the benefits of its deferred tax assets. As the Company has increased its international presence, it has also had to contemplate whether or not earnings from its foreign subsidiaries will be repatriated in the short-term. At this point in time a formal international tax strategy has not yet been established. Accordingly, management has accounted for the undistributed earnings of its foreign subsidiaries as a temporary difference, except that deferred tax liabilities are not recorded for undistributed earnings for a very small portion of its earnings that are deemed to be indefinitely reinvested in foreign jurisdictions. 35 If the Company is unable to generate sufficient future taxable income, or if there is a significant change in the time period within which the underlying temporary differences become taxable or deductible, the Company may be required to establish additional valuation allowances against its deferred tax assets. At December 31, 2010, the Company had approximately $1,080 million of gross deferred tax assets. These deferred tax assets consisted primarily of temporary differences related to tax deductible goodwill. The Company also had gross deferred tax liabilities of approximately $297 million primarily consisting of temporary non-tax deductible goodwill with an indefinite reversal period. A determination that no deferred tax assets would be realized at December 31, 2010, would require the establishment of valuation allowances determined without regard to existing deferred tax liabilities with indefinite reversal periods. This would increase the provision for income taxes by approximately $261 million. However, this exposure is somewhat mitigated on the Company’s financial statements because of the terms of the tax receivable agreement with Wyndham. To the extent that the Company is unable to utilize the tax benefits created as a consequence of the Company's separation from Avis, as modified by the June 26, 2009 Ratification Agreement, the Company would realize a gain of approximately $83 million due to the reduction of the estimated future payments to Wyndham. Therefore, a valuation allowance against 100% of our deferred tax assets coupled with a like judgment concerning the likelihood of the payment of amounts owing to Wyndham, would decrease net income by approximately $178 million. The Company has currently provided incremental U.S taxes for most of its foreign earnings, except for a very small portion of its earnings, $1.5 million, deemed to be indefinitely reinvested. If it were to change its determination as to the repatriation of such earnings, specifically asserting that these earnings were invested in a foreign subsidiary for an indefinite period, it would enjoy a onetime benefit of $2.5 million as its estimated effective tax rate would decreased from 39.6 percent to 37.9 percent. Acquired Intangible Assets and Goodwill Description Assumptions/Approach Used Assumptions Effect if Actual Results Differ from Goodwill is comprised of the cost of business acquisitions in excess of the fair value assigned to the net tangible and identifiable intangible assets acquired. Goodwill is not amortized but is reviewed for impairment annually, or when events or changes in the business environment indicate that the carrying value of the reporting unit may exceed its fair value. Acquired intangible assets result from the allocation of the cost of an acquisition. These acquired intangibles include assets that amortize, primarily software and customer relationships, and those that do not amortize, specifically trademarks and trade names. The annual review of goodwill and non-amortizing intangibles values is performed as of October 1 of each year. For the reporting units that carry goodwill balances, our impairment test consists of a comparison of each reporting unit’s carrying value to its estimated fair value. A reporting unit, for the purpose of the impairment test, is one level below the operating segment level. We have two reporting segments that are further broken into several reporting units for the impairment review. The estimated fair value of a reporting unit is primarily based on discounted estimated future cash flows. We generally validate the model by considering other factors such as the fair value of comparable companies, if available, to our reporting units, and a reconciliation of the fair value of all our reporting units to our overall market capitalization. The assumptions used to estimate the discounted cash flows are based on our best estimates about payment processing fees/interchange rates, sales volumes, costs (including fuel prices), future growth rates, capital expenditures and market conditions over an estimate of the remaining operating period at the reporting unit level. The discount rate at each reporting unit is based on the weighted average cost of capital that is determined by evaluating the risk free rate of return, cost of debt, and expected equity premiums. We review the carrying values of the amortizing assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be recoverable. Such circumstances would include, but are not limited to, a significant decrease in the perceived market price of the intangible, a significant adverse change in the way the asset is being used, or a history of operating or cash flow losses associated with the use of the intangible. (cid:1) (cid:1) Our goodwill resides in multiple reporting units. The profitability of individual reporting units may suffer periodically from downturns in customer demand or other economic factors. Individual reporting units may be relatively more impacted than the Company as a whole. Specifically, during times of economic slowdown, our customers may reduce their expenditures. As a result, demand for the services of one or more of the reporting units could decline which could adversely affect our operations, cash flow, and liquidity and could result in an impairment of goodwill or intangible assets. (cid:1) As of December 31, 2010, the Company had an aggregate of approximately $662 million on its balance sheet related to goodwill and intangible assets of acquired entities. While we currently believe that the fair value of all of our intangibles substantially exceeds carrying value and that those intangibles so classified will contribute indefinitely to the cash flows of the Company, materially different assumptions regarding future performance of our reporting units or the weighted-average cost of capital used in the valuations could result in significant impairment losses and/or amortization expense. 36 Valuation of Derivatives Description Assumptions/Approach Used Assumptions Effect if Actual Results Differ from The Company has entered into several None of the derivatives that exist have As of December 31, 2010, the readily determinable fair market values. Management determines fair value through alternative valuation approaches, primarily modeling that considers the value of the underlying index or commodity (where appropriate), over-the-counter market quotations, time value, volatility factors and counterparty credit risk. On a periodic basis, management reviews the statements provided by the counterparty to ensure the fair market values are reasonable when compared to the one it derived. Company had established that the net fair value of the derivatives was a liability of approximately $10.9 million. Changes in fuel prices, interest rates and other variables have a significant impact on the value of the derivatives. Should either (i) the variables underlying pricing methodologies; (ii) the creditworthiness of the counterparty or (iii) the methodologies themselves substantially change, our results of operations could significantly change. financial arrangements that are considered to be derivative transactions. Where the Company has entered into interest rate swaps, the derivatives have been designated as cash flow hedges. Accordingly, the interest rate swaps are recorded at their fair value on the consolidated balance sheet. The changes in fair value of the interest rate swaps are recorded as a component of other comprehensive income rather than in earnings. Where the Company has entered into fuel price derivatives, no hedging relationship has been designated. Accordingly, when the derivatives are marked to their market value, the related gains or losses are recognized currently in earnings. Changes to Accounting Policies None. 37 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has entered into market risk sensitive instruments for purposes other than trading. The discussion below highlights quantitative and qualitative matters related to these instruments. Interest Rate Risk At December 31, 2010, we had borrowings of $390 million on our credit facility that bore interest at a floating rate equal to the one-month LIBOR plus 70.0 basis points. During 2009 we entered into an interest rate swap contract that ends in July 2011 that fixed the interest rate on $50 million of the variable rate revolving credit facility. During 2010 we entered into another interest rate swap contract that ends in March 2012 that fixed the interest rate on an additional $150 million of our variable rate revolving credit facility. We periodically review our projected borrowing under our credit facility in order to ascertain whether additional swaps should be entered into to either increase our coverage of our overall borrowings or extend the period which our hedges cover. The following table presents the impact of changes in LIBOR on interest expense on our revolving credit facility and term loan for 2010 on the unhedged portion of the principal outstanding under the credit facility (see the discussion of our interest rate swaps in Item 7 in the "Liquidity, Capital Resources and Cash Flows" section): (in thousands) Projected annual financing interest expense on variable rate portion of debt (one-month LIBOR equal to 0.26063 %) Increases to LIBOR of: 2.00% 5.00% 10.00% (a) Impact $ 495 $ $ $ 3,800 9,500 19,000 (a) Changes to financing interest expense presented in this table are based on interest payments on the revolving credit facility that bear interest based on one-month LIBOR, based on outstanding balance and rate at December 31, 2010. 38 Commodity Price Risk As discussed in the "Fuel Price Derivatives" section of Item 1, we use derivative instruments to manage the impact of volatility in fuel prices. We have entered into put and call option contracts ("Options") based on the wholesale price of unleaded gasoline and retail price of diesel fuel, which settle on a monthly basis through the second quarter of 2012. The Options are intended to lock in a range of prices during any given quarter on a portion of our forecasted earnings subject to fuel price variations. Our fuel price risk management program is designed to purchase derivative instruments to manage our fuel price-related earnings exposure. The following table presents information about the Options: (In thousands) December 31, 2010 Put Option Strike Price of Underlying (per gallon) (a) Call Option Strike Price of Underlying (per gallon) (a) Aggregate Notional (gallons) (b) Fair Value Fuel price derivative instruments – unleaded fuel Options settling October 2011 – June 2012 Options settling July 2011 – March 2012 Options settling April 2011 – December 2011 Options settling January 2011 – September 2011 Options settling October 2010 – June 2011 Options settling July 2010 – March 2011 $ $ $ $ $ $ 2.247 $ 2.176 $ 2.334 $ 2.170 $ 2.013 $ 1.953 $ 2.307 2.236 2.394 2.230 2.073 2.013 6,934 $ 7,888 5,831 6,663 3,909 1,909 (788 ) (1,545 ) (435 ) (1,826 ) (1,750 ) (890 ) Total fuel price derivative instruments – unleaded fuel 33,134 $ (7,234 ) Fuel price derivative instruments – diesel Options settling October 2011 – June 2012 Options settling July 2011 – March 2012 Options settling April 2011 – December 2011 Options settling January 2011 – September 2011 Options settling October 2010 – June 2011 Options settling July 2010 – March 2011 $ $ $ $ $ $ 3.293 $ 3.239 $ 3.268 $ 3.068 $ 3.000 $ 3.000 $ 3.353 3.299 3.328 3.128 3.060 3.060 3,115 $ 3,544 2,619 2,994 1,756 858 (499 ) (738 ) (406 ) (990 ) (684 ) (326 ) Total fuel price derivative instruments – diesel Total fuel price derivative instruments 14,886 $ (3,643 ) 48,020 $ (10,877 ) (a) The settlement of the Options is based upon the New York Mercantile Exchange's New York Harbor Reformulated Gasoline Blendstock for Oxygen Blending and the U.S. Department of Energy's weekly retail on-highway diesel fuel price for the month. (b) The Options settle on a monthly basis. 39 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets at December 31, 2010 and 2009 Consolidated Statements of Income for the Years Ended December 31, 2010, 2009 and 2008 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2010, 2009 and 2008 Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008 Notes to Consolidated Financial Statements Page 41 42 43 44 45 46 40 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Wright Express Corporation South Portland, Maine We have audited the accompanying consolidated balance sheets of Wright Express Corporation and subsidiaries (the "Company") as of December 31, 2010 and 2009, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Wright Express Corporation and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2011 expressed an unqualified opinion on the Company's internal control over financial reporting. /s/ DELOITTE & TOUCHE LLP Boston, MA February 28, 2011 41 WRIGHT EXPRESS CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) Assets Cash and cash equivalents Accounts receivable (less reserve for credit losses of $10,237 in 2010 and $10,660 in 2009) Available-for-sale securities Fuel price derivatives, at fair value Property, equipment and capitalized software, net Deferred income taxes, net Goodwill Other intangible assets, net Other assets Total assets Liabilities and Stockholders' Equity Accounts payable Accrued expenses Income taxes payable Deposits Borrowed federal funds Revolving line-of-credit facilities and term loan Amounts due under tax receivable agreement Fuel price derivatives, at fair value Other liabilities Redeemable preferred stock Total liabilities Commitments and contingencies (Note 17) Stockholders' Equity Common stock $0.01 par value; 175,000 shares authorized; 41,924 in 2010 and 41,167 in 2009 shares issued; 38,437 in 2010 and 38,196 in 2009 shares outstanding Additional paid-in capital Retained earnings Other comprehensive income (loss), net of tax: Net unrealized gain on available-for-sale securities Net unrealized loss on interest rate swaps Net foreign currency translation adjustment Accumulated other comprehensive income (loss) Less treasury stock at cost; 3,566 shares in 2010 and 2,971 shares in 2009 Total stockholders' equity Total liabilities and stockholders' equity See notes to consolidated financial statements. December 31, 2010 2009 $ 18,045 $ 1,160,482 9,202 — 60,785 161,156 537,055 124,727 26,499 39,304 844,152 10,596 6,152 44,991 183,602 315,227 34,815 20,823 $ 2,097,951 $ 1,499,662 $ 379,855 $ 41,133 3,638 529,800 59,484 407,300 100,145 10,877 6,712 — 283,149 30,861 1,758 423,287 71,723 128,000 107,753 — 1,815 10,000 1,538,944 1,058,346 419 132,583 499,767 92 (368 ) 27,881 27,605 412 112,063 412,138 23 (176 ) (134 ) (287 ) (101,367 ) (83,010 ) 559,007 441,316 $ 2,097,951 $ 1,499,662 42 WRIGHT EXPRESS CORPORATION CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) Year ended December 31, 2009 2010 2008 Revenues Fleet payment solutions Other payment solutions Total revenues Expenses Salary and other personnel Service fees Provision for credit losses Technology leasing and support Occupancy and equipment Advertising Marketing Postage and shipping Communications Depreciation and amortization Operating interest expense Other Total operating expenses Operating income Financing interest expense Net gain (loss) on foreign currency transactions Gain on settlement of portion of amounts due under tax receivable agreement Net realized and unrealized (losses) gains on fuel price derivatives (Increase) in amount due under tax receivable agreement Income before income taxes Income taxes Net income Earnings per share: Basic Diluted Weighted average common shares outstanding: Basic Diluted See notes to consolidated financial statements. $ 329,239 $ 277,996 $ 61,167 37,207 361,187 26,972 390,406 315,203 388,159 87,364 46,368 19,838 12,881 8,654 8,118 2,197 3,413 3,631 29,893 5,370 11,970 75,123 27,666 17,715 9,327 8,718 4,974 2,737 3,105 2,703 21,930 10,253 12,802 66,969 20,361 45,021 8,510 9,159 5,283 3,215 3,248 2,527 20,123 29,570 12,741 239,697 197,053 226,727 150,709 118,150 161,432 (5,314) 7,145 — (7,244) (214) (6,210 ) (40 ) 136,485 (22,542 ) (599 ) (11,859 ) — — 55,206 (9,014 ) 145,082 225,244 195,765 57,453 85,585 68,125 87,629 $ 139,659 $ 127,640 2.28 $ 2.25 $ 3.65 $ 3.55 $ 3.28 3.22 38,486 39,052 38,303 39,364 38,885 39,787 $ $ $ 43 WRIGHT EXPRESS CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands) Year ended December 31, 2009 2010 2008 Number of common shares issued Balance, beginning of period Stock issued to employees exercising stock options Stock issued to employees for vesting of restricted stock units Conversion of preferred stock Balance, end of period Common stock Balance, beginning of period Stock issued to employees exercising stock options Stock issued to employees for vesting of restricted stock units Conversion of preferred stock Balance, end of period Additional paid-in capital Balance, beginning of period Net adjustment resulting from tax impact of the initial public offering Stock issued to employees exercising stock options Tax benefit from employees' stock option and restricted stock plans Stock-based compensation Conversion of preferred stock Balance, end of period Retained earnings Balance, beginning of period Net income Balance, end of period Accumulated other comprehensive (loss) income Balance, beginning of period Changes in available-for-sale securities, net of tax effect of, $41 in 2010, $42 in 2009 and $(3) in 2008 Changes in interest rate swaps, net of tax effect of $(111) in 2010, $904 in 2009 and $(208) in 2008 Foreign currency translation Net other comprehensive (loss) income adjustments Balance, end of period Treasury stock Balance, beginning of period Purchase of shares of treasury stock; 595 shares in 2010, 249 shares in 2009 and 1,549 shares in 2008 Balance, end of period Total stockholders' equity Comprehensive income Net income Net other comprehensive (loss) income adjustments Total comprehensive income See notes to consolidated financial statements. 44 40,798 30 138 — 40,966 408 — 2 — 410 98,174 (1,379 ) 415 113 3,036 — 100,359 41,167 211 101 445 41,924 40,966 44 157 — 41,167 $ 412 $ 2 1 4 419 410 $ — 2 — 412 100,359 7,358 585 (516 ) 4,277 — 112,063 112,063 — 3,177 1,698 5,646 9,999 132,583 412,138 87,629 499,767 272,479 139,659 412,138 144,839 127,640 272,479 (287) (1,844 ) (1,451 ) 69 (192) 28,015 27,892 27,605 76 1,560 (79 ) 1,557 (287 ) (4 ) (319 ) (70 ) (393 ) (1,844 ) (83,010) (76,742 ) (37,711 ) (18,357) (101,367) (6,268 ) (83,010 ) (39,031 ) (76,742 ) $ 559,007 $ 441,316 $ 294,662 $ $ 87,629 $ 27,892 115,521 $ 139,659 $ 1,557 141,216 $ 127,640 (393 ) 127,247 WRIGHT EXPRESS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year ended December 31, 2009 2010 2008 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash (used for) provided by operating activities: $ 87,629 $ 139,659 $ 127,640 Net unrealized loss (gain) on derivative instruments Stock-based compensation Depreciation and amortization Gain on settlement of portion of amounts due under tax receivable agreement Loss on sale of investment Deferred taxes Provision for credit losses Loss on disposal and impairment of property and equipment Loss on impairment of internal-use software under development Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable Other assets Accounts payable Accrued expenses Income taxes Other liabilities Amounts due under tax receivable agreement 17,029 7,425 31,504 — — 21,536 19,838 — — (236,100) (1,241) 41,919 7,534 (2,072) 2,057 (7,608) 43,142 5,736 22,559 (136,485 ) 15 59,558 17,715 44 814 (159,623 ) (4,641 ) 34,053 (1,651 ) 12,348 (1,282 ) (65,128 ) (90,892 ) 5,216 20,588 — — 41,967 45,021 108 1,538 362,444 (328 ) (156,463 ) (1,105 ) (4,934 ) (1,475 ) (10,146 ) Net cash (used for) provided by operating activities (10,550) (33,167 ) 339,179 Cash flows from investing activities Purchases of property and equipment Sale of available-for-sale securities Purchases of available-for-sale securities Maturities of available-for-sale securities Purchase of trade name Acquisitions, net of cash acquired and prior to finalization of the working capital adjustment Net cash used for investing activities Cash flows from financing activities Excess tax benefits from equity instrument share-based payment arrangements Repurchase of share-based awards to satisfy tax withholdings Proceeds from stock option exercises Net increase (decrease) in deposits Net (decrease) increase in borrowed federal funds Net borrowings (repayments) on 2007 revolving line-of-credit facility, term loan Loan origination fees paid for 2007 revolving line-of-credit facility Purchase of shares of treasury stock Net cash provided by (used for) financing activities Effect of exchange rates on cash and cash equivalents Net change in cash and cash equivalents Cash and cash equivalents, beginning of period (28,944) — (150) 1,654 — (339,994) (17,848 ) 7 (160 ) 2,194 — — (16,111 ) — (4,301 ) 1,255 (44 ) (41,613 ) (367,434) (15,807 ) (60,814 ) 1,698 (1,476) 3,177 106,504 (12,238) 279,300 (2,269) (18,357) — (1,464 ) 585 (116,859 ) 71,723 (42,600 ) — (6,268 ) 113 (2,225 ) 415 (58,943 ) (8,175 ) (28,800 ) (1,556 ) (39,031 ) 356,339 (94,883 ) (138,202 ) 386 44 (65 ) (21,259) 39,304 (143,813 ) 183,117 140,098 43,019 Cash and cash equivalents, end of period $ 18,045 $ 39,304 $ 183,117 See notes to consolidated financial statements. 45 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) 1. Summary of Significant Accounting Policies Business Description Wright Express Corporation is a leading provider of payment processing and information management products and services to the United States and Australian commercial and government vehicle fleet industry. The Company provides products and services in the United States and Australia, as well as Canada, New Zealand and Europe. Together with the Company’s affiliates, Wright Express markets its products and services directly, as well as through more than 150 strategic relationships which include major oil companies, fuel retailers and vehicle maintenance providers. Wright Express also offers a MasterCard-branded corporate card. Basis of Presentation The accompanying consolidated financial statements of Wright Express for the years ended December 31, 2010, 2009 and 2008, include the accounts of Wright Express and its wholly- owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. For the years ended December 31, 2010 and 2009, marketing expense exceeded the Company's threshold for individual disclosure and were shown separately on the consolidated statements of income. In prior periods marketing expense had been included in other expenses. Prior period statements have been conformed to the 2010 presentation. The consolidated statements of income for the periods presented have been corrected for an immaterial error related to the classification of customer discounts for electronic payments. Fleet Payment Solutions revenue decreased from $281.0 to $278.0 and operating interest expense decreased from $13.3 to $10.3 in 2009. Fleet Payment Solutions revenue decreased from $366.6 to $361.2 and operating interest expense decreased from $35.0 to $29.6 in 2008. Operating income and net income were not impacted by this change, nor was there any impact on either cash flows or the balance sheet. Use of Estimates and Assumptions The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates and those differences may be material. Cash and Cash Equivalents Highly liquid investments with remaining maturities at the time of purchase of three months or less (that are readily convertible to cash) are considered to be cash equivalents and are stated at cost, which approximates market value. Cash equivalents include federal funds sold, which are unsecured short-term investments entered into with financial institutions. Accounts Receivable and Reserve for Credit Losses Accounts receivable balances are stated at net realizable value. The balance includes a reserve for credit losses which reflects management's estimate of uncollectible balances resulting from credit and fraud losses. The reserve for credit losses is established based on the determination of the amount of probable credit losses inherent in the accounts receivable as of the reporting date. Management reviews delinquency reports, historical collection rates, economic trends, and other information in order to make the necessary judgments as to probable credit losses. Management also uses historical charge off experience to determine the amount of losses inherent in accounts receivable at the reporting date. Assumptions regarding probable credit losses are reviewed periodically and may be impacted by actual performance of accounts receivable and changes in any of the factors discussed above. Available-for-sale Securities The Company records certain of its investments as available-for-sale securities. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported on the consolidated balance sheet in accumulated other comprehensive income (loss). Realized gains and losses and declines in fair value judged to be other-than-temporary on available-for-sale securities 46 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) are included in non-operating revenues and expenses. The cost basis of securities is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in other revenues. Derivatives The Company uses derivative instruments as part of its overall strategy to manage its exposure to fluctuations in fuel prices and to reduce the impact of interest rate volatility. As a matter of policy, the Company does not use derivatives for trading or speculative purposes. All derivatives are recorded at fair value on the consolidated balance sheet. The Company's fuel price derivative instruments do not qualify for hedge accounting treatment. Gains or losses related to fuel price derivative instruments, both realized and unrealized, are recognized currently in earnings. These instruments are presented on the consolidated balance sheet as fuel price derivatives, at fair value. The Company's interest rate derivatives are designated as cash flow hedges and, accordingly, the change in fair value associated with the effective portion of these derivative instruments that qualify for hedge accounting treatment is recorded as a component of other comprehensive income (loss) and the ineffective portion, if any, is reported currently in earnings. Amounts included in other comprehensive income (loss) are reclassified into earnings in the same period during which the hedged item affects earnings. These instruments are presented as either other assets or accrued expenses on the consolidated balance sheet. The Company assesses the hedge effectiveness of the interest rate swaps in accordance with the requirements outlined in the accounting standards. For these hedges, management documents, both at inception and over the life of the hedge, at least quarterly, its analysis of actual and expected hedge effectiveness. For those hedging relationships in which the critical terms of the entire debt instrument and the derivative are identical, and the creditworthiness of the counterparty to the hedging instrument remains sound, there is no hedge ineffectiveness so long as those conditions continue to be met. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Replacements, renewals and improvements are capitalized and costs for repair and maintenance are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives shown below. Leasehold improvements are depreciated using the straight-line method over the lesser of the useful life of the asset or remaining lease term. Furniture, fixtures and equipment Computer software Leasehold improvements Capitalized Software Estimated Useful Lives 5 to 7 years 18 months to 7 years 5 to 15 years The Company develops software that is used in providing processing and information management services to customers. A significant portion of the Company's capital expenditures is devoted to the development of such internal-use computer software. Software development costs are capitalized once technological feasibility of the software has been established. Costs incurred prior to establishing technological feasibility are expensed as incurred. Technological feasibility is established when the Company has completed all planning, designing, coding and testing activities that are necessary to determine that the software can be produced to meet its design specifications, including functions, features and technical performance requirements. Capitalization of costs ceases when the software is ready for its intended use. Software development costs are amortized using the straight-line method over the estimated useful life of the software. Capitalized costs include interest costs incurred while developing internal-use computer software. Amounts capitalized for software were $19,637 in 2010, $14,030 in 2009, and $14,962 in 2008. Amortization for software totaled $16,348 in 2010, $15,698 in 2009, and $13,650 in 2008. 47 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) Goodwill and Other Intangible Assets The Company classifies intangible assets into three categories: (1) intangible assets with definite lives subject to amortization, (2) intangible assets with indefinite lives not subject to amortization and (3) goodwill. The Company tests intangible assets with definite lives for impairment if conditions exist that indicate the carrying value may not be recoverable. Such conditions may include a reduction in operating cash flow or a dramatic change in the manner in which the asset is intended to be used. The Company records an impairment charge when the carrying value of the definite-lived intangible asset is not recoverable from the undiscounted cash flows generated from the use of the asset. Intangible assets with indefinite lives and goodwill are not amortized. The Company tests these intangible assets and goodwill for impairment at least annually or more frequently if facts or circumstances indicate that such intangible assets or goodwill might be impaired. All goodwill and intangible assets are assigned to reporting units, which are one level below the Company's operating segments. Goodwill and intangible assets are assigned to the reporting unit which benefits from the synergies arising from each business combination. The Company performs its impairment tests at its reporting unit level. Such impairment tests include comparing the fair value of the respective reporting unit with its carrying value, including goodwill. The Company uses a variety of methodologies to estimate fair value, including discounted cash flow analyses. Certain assumptions are used in determining the fair value, including assumptions about future cash flows and terminal values. When appropriate, the Company considers the assumptions that it believes hypothetical marketplace participants would use in estimating future cash flows. In addition, where applicable, an appropriate discount rate is used, based on the Company's cost of capital or reporting unit-specific economic factors. When the fair value is less than the carrying value of the intangible assets or the reporting unit, the Company records an impairment charge to reduce the carrying value of the assets to fair value. Impairment charges are recorded in depreciation and amortization expense on the consolidated statement of income. The Company's annual goodwill and intangible assets impairment test, performed as of October 1, did not identify any impairment in any of the years presented. The Company determines the useful lives of its identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors management considers when determining useful lives include the contractual term of any agreement, the history of the asset, the Company's long-term strategy for the use of the asset, any laws or other local regulations which could impact the useful life of the asset and other economic factors, including competition and specific market conditions. Intangible assets that are deemed to have definite lives are amortized over their useful lives, which is the period of time that the asset is expected to contribute directly or indirectly to future cash flows. An evaluation of the remaining useful lives of the definite-lived intangible assets is performed periodically to determine if any change is warranted. Impairment of Long-lived Assets Long-lived assets are tested for impairment whenever facts or circumstances, such as a reduction in operating cash flow or a dramatic change in the manner the asset is intended to be used, indicate the carrying amount of the asset may not be recoverable. If indicators exist, the Company compares the estimated undiscounted future cash flows associated with these assets or operations to their carrying value to determine if a write-down to fair value (normally measured by the expected present value technique) is required. The Company did not recognize any significant impairment expense on its long-lived assets during the year ended December 31, 2010. Impairment expense of $858 was recognized during the year ended December 31, 2009, and $1,646 of impairment expense was recognized during the year ended December 31, 2008. These amounts were recorded in occupancy and equipment in the consolidated statements of income. Other Assets The Company has an investment in the stock of the Federal Home Loan Bank totaling $1,562 for all years presented which is carried at cost and not considered a readily marketable security. This investment is included in other assets on the consolidated balance sheet. As of December 31, 2010, the Company has concluded that the investment is not impaired. 48 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) Fair Value of Financial Instruments The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, deposits, borrowed federal funds and other liabilities approximate their respective fair values due to the short-term nature of such instruments. The carrying values of the revolving line-of-credit facilities and preferred stock approximate their respective fair values as the interest rates on these financial instruments are variable. The rates are tied to the London Interbank Offered Rate ("LIBOR") and adjust at least quarterly. All other financial instruments are reflected at fair value on the consolidated balance sheet. Revenue Recognition The majority of the Company's revenues are comprised of transaction-based fees, which generally are calculated based on measures such as (i) percentage of dollar value of volume processed; (ii) number of transactions processed; or (iii) some combination thereof. The Company has entered into agreements with major oil companies, fuel retailers and vehicle maintenance providers which provide products or products and services to the Company’s customers. These agreements specify that a transaction is deemed to be captured when the Company has validated that the transaction has no errors and has accepted and posted the data to the Company's records. The Company recognizes revenues when persuasive evidence of an arrangement exists, the products and services have been provided to the client, the sales price is fixed or determinable and collectability is reasonably assured. A description of the major components of revenue is as follows: Payment Processing Revenue. Revenue consists of transaction fees assessed to major oil companies, fuel retailers and vehicle maintenance providers. The fee charged is generally based upon a percentage of the total transaction amount; however, it may also be based on a fixed amount charged per transaction or, on a combination of both measures. The fee is deducted from the Company's payment to the major oil company, fuel retailer or vehicle maintenance provider and recorded as revenue at the time the transaction is captured. Interchange income is earned by the Company's corporate charge card products and is included in payment processing revenue. Interchange income is a fee paid by a merchant bank to the card-issuing bank through the interchange network. Interchange fees are set by the credit card providers. The Company recognizes interchange income as earned. Transaction Processing Revenue. The Company earns transaction fees, which are principally based on the number of transactions processed; however, the fees may be a percentage of the total transaction amount. These fees are recognized at the time the transaction is captured. Account Servicing Revenue. Revenue is primarily comprised of monthly fees based on fleet accounts on file, both active and inactive. These fees are primarily in return for providing monthly vehicle data reports. Account servicing revenue is recognized monthly, as the Company fulfills its contractual service obligations. Finance Fees. The Company earns revenue by assessing monthly finance fees on accounts with overdue balances. These fees are recognized as revenue, net of a provision for uncollectible accounts, at the time the fees are assessed. The reserve for uncollectible finance fee income totaled $443 at December 31, 2010, $392 at December 31, 2009, and $1,117 at December 31, 2008. This reserve is in addition to the Company’s reserve for credit losses. Other. The Company assesses fees for providing ancillary services, such as information products and services, professional services and marketing services. Other revenues also include cross-border fees, fees for overnight shipping, certain customized electronic reporting and customer contact services provided on behalf of certain of the Company's customers. The Company also assesses fees for holding receivables related to certain transaction processing transactions. Service-related revenues are recognized in the period that the work is performed. Interest and dividends earned on investments in available-for-sale securities also are included in other revenues, as well as realized gains and losses on such investments. Investment-related income is recognized in the period that it is earned. The Company sells telematics devices as part of its WEXSmartTM telematics program. In addition, the Company sells assorted equipment to its Pacific Pride franchisees. The Company recognizes revenue from these sales when the customer has accepted delivery of the product and collectability of the sales amount is reasonably assured. 49 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) From time to time the Company provides rebates and/or incentives to certain customers and selected strategic relationships in order to induce them to use the Company's payment processing or transaction processing services. The revenues described above are net of rebates and incentives provided to customers. Rebates are recorded in the period in which they are earned. Incentives are recognized on a pro rata basis over the term of the contract and derecognized only when a determination is made that the targeted objective will not be achieved. Stock-Based Compensation The Company sponsors restricted stock award plans and stock option plans. The Company recognizes compensation expense related to employee stock-based compensation over their vesting periods based upon the fair value of the award on the date of grant. In instances where vesting is dependent upon the realization of certain performance goals, compensation is estimated and amortized over the vesting period. Advertising Costs Advertising and marketing costs are expensed in the period the advertising occurs. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. The realizability of deferred tax assets must also be assessed. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the associated temporary differences became deductible. A valuation allowance must be established for deferred tax assets which are not believed to more likely than not be realized in the future. Deferred taxes are not provided for the undistributed earnings of the Company's foreign subsidiaries that are considered to be indefinitely reinvested outside of the United States; currently, only a very small portion of earnings is considered to be indefinitely reinvested ($1,533). The impact of an uncertain income tax position on the income tax return is recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50 percent likelihood of being sustained. The Company has not currently recognized a material liability for unrecognized tax benefits. The Company will recognize interest and penalties associated with uncertain tax positions as part of its income tax provision should such liabilities arise. 50 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) Earnings per Common Share When diluted earnings per common share is calculated, weighted-average outstanding shares are adjusted for the dilutive effect of shares issuable upon the assumed conversion of the Company's convertible, redeemable preferred stock and common stock equivalents, which consist of outstanding stock options and unvested restricted stock units. The dividends expensed on convertible, redeemable preferred stock are added back to net income when the related common stock equivalents are included in the computation of diluted earnings per common share. In 2010, the preferred stock was converted to common stock. Holders of unvested restricted stock units are not entitled to participate in dividends, should they be declared. Income available for common stockholders used to calculate earnings per share is as follows: Year ended December 31, 2009 2010 2008 Income available for common stockholders – Basic Convertible, redeemable preferred stock $ 87,629 $ 40 139,659 $ 248 127,640 474 Income available for common stockholders – Diluted $ 87,669 $ 139,907 $ 128,114 Weighted average common shares outstanding used to calculate earnings per share are as follows: Year ended December 31, 2009 2010 2008 Weighted average common shares outstanding – Basic Unvested restricted stock units Stock options Convertible, redeemable preferred stock 38,486 209 255 102 38,303 396 221 444 38,885 419 39 444 Weighted average common shares outstanding – Diluted 39,052 39,364 39,787 Foreign Currency Movement The financial statements of the Company's foreign subsidiaries, whose functional currencies are other than the U.S. dollar, are translated to U.S. dollars as prescribed by the accounting literature. Assets and liabilities are translated at the year end spot exchange rate, revenue and expenses at average exchange rates and equity transactions at historical exchange rates. Exchange differences arising on translation are recorded as a component of accumulated other comprehensive income (loss). Realized and unrealized gains and losses on foreign currency transactions are recorded directly in the statement of income except when such gains or losses result from intercompany transactions that are considered to be long term in nature. In these situations, the gains or losses are deferred and included as a component of accumulated other comprehensive income (loss). Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) includes unrealized gains and losses on available-for-sale securities, the changes in fair values of derivative instruments designated as hedges of future cash flows related to interest rate variability and foreign currency translation adjustments pertaining to the net investment in foreign operations. Amounts are recognized net of tax to the extent applicable. 51 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) 2. Supplemental Cash Flow Information Year ended December 31, 2009 2010 2008 Interest paid Income taxes paid Conversion of preferred stock shares and accrued preferred dividends to common stock shares $ $ $ 8,770 $ 36,300 $ 10,004 $ 28,230 $ 13,672 $ — $ 47,120 31,000 — Significant Non-cash Transactions There were no significant non-cash transactions during 2008, 2009 or 2010. 3. Business Acquisitions Acquisition of RD Card Holdings Australia Pty Ltd. On September 14, 2010, the Company, through its wholly-owned subsidiary, Wright Express Australia Holdings Pty Ltd, completed its acquisition of all of the outstanding shares of RD Card Holdings Australia Pty Ltd. from RD Card Holdings Limited and an intra-group note receivable from RD Card Holdings Limited (the “ReD Transaction”). This acquisition extends the Company’s international presence and provides global revenue diversification. Consideration paid for the transaction was $363,000 Australian Dollars (“AUD”) (which was equivalent to approximately $340,000 USD at the time of closing). This consideration included $11,000 AUD the Company paid pursuant to preliminary working capital adjustments. The final purchase price and related allocations for the ReD Transaction have not been finalized as the Company is currently in the process of finalizing its valuation of acquired tangible and intangible assets as well as certain liabilities assumed as part of the acquisition. In addition, the purchase document contemplated an adjustment of the purchase price based upon final working capital amounts. This adjustment is not yet agreed between the parties. 52 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) The following is a summary of the preliminary allocation of the purchase price to the assets and liabilities acquired: Consideration paid (net of cash acquired and prior to the finalization of the working capital adjustment) Less: Accounts receivable Accounts payable Other tangible assets, net Software (a) Patent (b) Customer relationships (c) Brand name (d) Recorded goodwill (a) Weighted average life – 3.9 years. (b) Weighted average life – 4.6 years. (c) Weighted average life – 4.5 years. (d) Indefinite-lived intangible asset. USD $ 339,994 91,638 (50,534 ) 1,970 10,986 2,869 73,939 5,374 $ 203,752 The weighted average life of the combined definite-lived intangible assets is 4.5 years. The following represents unaudited pro forma operational results as if Wright Express Australia had been included in the Company’s condensed consolidated statements of operations as of the beginning of the fiscal years: $ USD Net revenue Net income Pro forma net income per common share: Net income per share – basic Net income per share – diluted 2010 2009 2008 $ 430,261 $ 88,171 362,690 $ 143,598 440,838 127,659 2.29 2.26 3.75 3.65 3.28 3.22 The pro forma financial information assumes the companies were combined as of January 1, 2010, 2009, and 2008, and includes business combination accounting effects from the acquisition including amortization charges from acquired intangible assets, interest expense for debt incurred in the acquisition and net income tax effects. The pro forma results of operations do not include any cost savings or other synergies that may result from the acquisition or any estimated costs that have been or will be incurred by the Company to integrate Wright Express Australia. The pro forma information as presented above is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2010, 2009 or 2008. Acquisition of Pacific Pride Services, Inc. In February 2008, the Company acquired certain assets and assumed certain liabilities of Pacific Pride Services, Inc. and established Pacific Pride Services, LLC ("Pacific Pride") for approximately $32,000 cash. At the time of purchase, Pacific Pride's franchise network encompassed more than three-hundred forty independent fuel franchisees who issued their own Pacific Pride commercial fueling cards to fleet customers. These cards provide access to fuel at more than two thousand Pacific Pride and strategic partner locations in the United States and Canada. 53 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) The following is a reconciliation of the cost of the net assets acquired from Pacific Pride Services, Inc. and the ultimate allocation to goodwill: Consideration paid (including acquisition costs and net of cash acquired) Less: Accounts receivable Accounts payable Other tangible assets, net Acquired software Non-compete agreement Customer relationships Trademarks and trade names Recorded goodwill $ 31,540 39,396 (42,341 ) 148 300 100 13,400 1,400 $ 19,137 Acquisition of Financial Automation Limited. In August 2008, the Company acquired certain assets of Financial Automation Limited for approximately $9,250 cash and established Wright Express New Zealand ("Wright Express New Zealand") to operate the business of Financial Automation Limited. Financial Automation Limited provides fuel card processing software solutions to oil companies in geographic markets outside the United States. The following is a reconciliation of the cost of the net assets acquired from Financial Automation Limited and the ultimate allocation to goodwill: Consideration paid (including acquisition costs and net of cash acquired) Less: Tangible assets, net Acquired software Customer relationship Trade name Recorded goodwill $ 10,073 96 7,000 1,500 100 $ 1,377 Significant goodwill amounts are present in the Pacific Pride and RD Card Holdings Australia Pty Ltd. acquisitions based on the Company's belief that the business models and practices followed were sufficiently distinct to warrant the payment of a purchase price premium. No pro forma information for 2008 has been included in these financial statements as the results of operations of Pacific Pride and Financial Automation Limited for the periods that they were not part of the Company, are immaterial to the Company's revenues, net income and earnings per share. See Note 7 for further discussion of the goodwill and intangible balances that arose as a result of the above transactions. 54 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) 4. Reserves for Credit Losses The following table presents changes in reserves for credit losses related to accounts receivable: Year ended December 31, 2009 2010 2008 Balance, beginning of period Provision for credit losses Charge-offs Recoveries of amounts previously charged-off Balance, end of period 5. Investments Available-for-sale Securities $ 10,960 $ 19,838 (24,685) 4,124 18,435 $ 17,715 (32,519 ) 7,329 9,466 45,021 (42,625 ) 6,573 $ 10,237 $ 10,960 $ 18,435 The Company's available-for-sale securities as of December 31 are presented below: 2010 Mortgage-backed securities Asset-backed securities Equity securities (a) Gross Unrealized Gains Gross Unrealized Losses Cost Fair Value $ 2,330 $ 2,400 4,326 83 $ — 78 8 $ 7 — 2,405 2,393 4,404 Total available-for-sale securities $ 9,056 $ 161 $ 15 $ 9,202 2009 Mortgage-backed securities Asset-backed securities Municipal bonds Equity securities (a) $ 2,843 $ 3,176 365 4,176 61 $ — — 36 18 $ 43 — — 2,886 3,133 365 4,212 Total available-for-sale securities $ 10,560 $ 97 $ 61 $ 10,596 (a) These securities exclude $2,015 in equity securities designated as trading as of December 31, 2010, and $1,593 as of December 31, 2009, included in other assets on the consolidated balance sheets. See Note 16 for additional information about the securities designated as trading. The Company's management has determined that the gross unrealized losses on its investment securities at December 31, 2010, and 2009 are temporary in nature. The Company reviews its investments to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company's intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. Substantially all of the Company's fixed income securities are rated investment grade or better. The Company had maturities of available-for-sale securities of $1,654 for the year ended December 31, 2010, $2,194 for the year ended December 31, 2009, and $1,255 for the year ended December 31, 2008. 55 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) The maturity dates of the Company's available-for-sale securities are as follows: Due within 1 year Due after 1 year through year 5 Due after 5 years through year 10 Due after 10 years Mortgage-backed securities with original maturities of 30 years Equity securities with no maturity dates December 31, 2010 2009 Cost Fair Value Cost Fair Value $ — $ — $ 520 875 1,741 1,594 4,326 519 873 1,768 1,638 4,404 — $ — 2,150 1,391 2,843 4,176 — — 2,130 1,368 2,886 4,212 Total $ 9,056 $ 9,202 $ 10,560 $ 10,596 6. Property, Equipment and Capitalized Software, Net Property, equipment and capitalized software, net consist of the following: Furniture, fixtures and equipment Computer software Software under development Leasehold improvements Total Less accumulated depreciation and amortization December 31, 2010 2009 $ 22,279 $ 114,636 9,742 3,098 15,073 98,764 2,649 1,460 149,755 (88,970 ) 117,946 (72,955 ) Total property, equipment and capitalized software, net $ 60,785 $ 44,991 The Company did not incur impairment charges during 2010. In 2009 the Company incurred an $814 impairment charge related to partially completed internal-use software. This charge has been included in occupancy and equipment expense on the consolidated statements of income. 7. Goodwill and Other Intangible Assets The changes in goodwill during the period January 1 to December 31, 2010 were as follows: Goodwill, beginning of period Acquisition of RD Card Holdings Australia Pty Ltd. Impact of foreign currency translation Goodwill, end of period Fleet Payment Solutions Segment Other Payment Solutions Segment Total $ 305,514 $ 188,190 16,692 9,713 $ 15,562 1,384 315,227 203,752 18,076 $ 510,396 $ 26,659 $ 537,055 56 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) The changes in goodwill during the period January 1 to December 31, 2009 were as follows: Goodwill, beginning of period Impact of foreign currency translation Fleet Payment Solutions Segment Other Payment Solutions Segment Total $ 305,517 $ (3 ) 9,713 $ — 315,230 (3 ) Goodwill, end of period $ 305,514 $ 9,713 $ 315,227 No goodwill was impaired during any of the periods presented in these financial statements. The changes in intangible assets during the period January 1 to December 31, 2010, were as follows: Definite-lived intangible assets Acquired software Customer relationships Trade name Patent Indefinite-lived intangible assets Trademarks and trade names Total Net Carrying Amount, Beginning of Period Acquisition Amortization Impacts of Foreign Currency Translation Net Carrying Amount, End of Period $ 13,565 16,731 54 — 10,986 $ 73,939 — 2,869 (2,890 ) $ (8,190 ) (54 ) (142 ) 979 $ 6,308 — 255 22,640 88,788 — 2,982 4,465 5,374 $ 34,815 $ 93,168 $ — (11,276 ) $ 478 8,020 $ 10,317 124,727 The Company expects amortization expense related to the definite-lived intangible assets above as follows: $22,177 for 2011; $17,445 for 2012; $15,015 for 2013; $12,183 for 2014 and $10,253 for 2015. Other intangible assets consist of the following: Definite-lived intangible assets Acquired software Non-compete agreement Customer relationships Trade name Patent Indefinite-lived intangible assets Trademarks and trade names Total December 31, 2010 December 31, 2009 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount $ 28,263 100 105,262 100 3,124 (5,623 ) (100 ) (16,474 ) (100 ) (142 ) 22,640 $ — 88,788 — 2,982 16,300 100 24,858 100 — (2,735 ) (100 ) (8,127 ) (46 ) — 13,565 — 16,731 54 — $ 136,849 22,439 114,410 $ 41,358 (11,008 ) 30,350 10,317 4,465 $ 124,727 $ 34,815 57 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) 8. Accounts Payable Accounts payable consists of: Merchants payable Other payables Total accounts payable 9. Deposits and Borrowed Federal Funds The following table presents information about deposits: Certificates of deposit with maturities within 1 year Certificates of deposit with maturities greater than 1 year and less than 5 years Interest-bearing money market deposits Non-interest bearing deposits Total deposits December 31, 2010 2009 $ 359,017 $ 20,838 271,307 11,842 $ 379,855 $ 283,149 December 31, 2010 2009 $ 370,410 $ 87,481 62,513 9,396 308,266 106,730 — 8,291 $ 529,800 $ 423,287 Weighted average cost of funds on certificates of deposit outstanding 0.95 % 1.25 % Wright Express Financial Services Corporation ("FSC") has issued certificates of deposit in various maturities ranging between three months and two years and with fixed interest rates ranging from 0.30 percent to 1.95 percent as of December 31, 2010. FSC may issue certificates of deposit without limitation on the balance outstanding. However, FSC must maintain minimum financial ratios, which include risk-based asset and capital requirements, as prescribed by the FDIC. As of December 31, 2010, certificates of deposit were in denominations of $250 or less, corresponding to the increase in the FDIC insurance limits to $250 as authorized by the Emergency Economic Stabilization Act of 2008. The certificates of deposit are only payable prior to maturity in the case of death or legally declared mental incompetence of the holder. Non-interest bearing deposits are required for certain customers as collateral for their credit accounts. The Company also had federal funds lines-of-credit totaling $140,000 at December 31, 2010, and $155,000 at December 31, 2009. There was $59,484 in outstanding borrowings against these lines-of-credit at December 31, 2010 and $71,723 in outstanding borrowings against these lines-of-credit at December 31, 2009. The average rate on the outstanding borrowings under lines-of-credit was 0.45 percent at December 31, 2010. Interest-bearing money market deposits are issued in denominations of $100 or less, and pay interest at variable rates based on LIBOR. Money market deposits may be withdrawn by the holder at any time, although notification requirements may be required and monthly number of transactions is limited. As of December 31, 2010, the weighted average interest rate on interest-bearing money market deposits was 0.54%. 58 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) The following table presents the average interest rates for deposits and borrowed federal funds: Average interest rate: Deposits Borrowed federal funds Interest-bearing money market deposits Year ended December 31, 2009 2010 2008 1.04 % 0.48 % 0.58 % 2.39 % 0.42 % — 4.42 % 2.44 % — Average debt balance $ 527,345 $ 434,529 $ 664,646 10. Derivative Instruments Fuel Price Derivatives Derivatives Not Designated as Hedging Instruments-Fuel Price Derivatives For derivative instruments that are not designated as hedging instruments, the gain or loss on the derivative is recognized in current earnings. As of December 31, 2010, the Company had the following put and call option contracts which settle on a monthly basis and do not have formal hedging designations: Fuel price derivative instruments – unleaded fuel Put and call option contracts settling January 2011 – June 2012 Fuel price derivative instruments – diesel Put and call option contracts settling January 2011 – June 2012 Total fuel price derivative instruments Aggregate Notional Amount (gallons) (a) 33,134 14,886 48,020 (a) The settlement of the put and call option contracts (in all instances, notional amount of puts and calls are equal; strike prices are different) is based upon the New York Mercantile Exchange's New York Harbor Reformulated Gasoline Blendstock for Oxygen Blending and the U.S. Department of Energy's weekly retail on-highway diesel fuel price for the month. 59 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) As of December 31, 2009, the Company had the following put and call option contracts which settle on a monthly basis which do not have formal hedging designations: Fuel price derivative instruments – unleaded fuel Put and call option contracts settling January 2010 – June 2011 Fuel price derivative instruments – diesel Put and call option contracts settling January 2010 – June 2011 Total fuel price derivative instruments Aggregate Notional Amount (gallons) (a) 29,781 13,380 43,161 (a) The settlement of the put and call option contracts (in all instances, notional amount of puts and calls are equal; strike prices are different) is based upon the New York Mercantile Exchange's New York Harbor Reformulated Gasoline Blendstock for Oxygen Blending and the U.S. Department of Energy's weekly retail on-highway diesel fuel price for the month. Derivatives Designated as Hedging Instruments - Interest Rate Swaps In July 2009, the Company entered into an interest rate swap arrangement for $50 million. In September 2010, the Company entered into an additional interest rate swap arrangement for $150 million. These interest rate swap arrangements were designated as cash flow hedges intended to reduce a portion of the variability of the future interest payments on our credit agreements. Two of our previous interest rate swap agreements totaling $80 million expired on July 22, 2009. The Company’s $25 million interest rate swap expired on August 24, 2009. The following table presents information about the Company’s interest rate swap arrangements: December 31, Weighted- Average Base Rate 2010 Aggregate Notional Fair Value Weighted- Average Base Rate 2009 Aggregate Notional Fair Value July 2009 Swap September 2010 Swap 1.35 % $ 0.56 % 50,000 $ 150,000 309 272 1.35 % — 50,000 — 278 — Total 0.76 % $ 200,000 $ 581 1.35 % $ 50,000 $ 278 60 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) The following table presents information on the location and amounts of derivative fair values in the condensed consolidated balance sheets: Asset Derivatives Liability Derivatives December 31, 2010 Balance Sheet Location Fair Value December 31, 2009 Balance Sheet Location Fair Value December 31, 2010 Balance Sheet Location Fair Value December 31, 2009 Balance Sheet Location Fair Value Derivatives designated as hedging instruments Interest rate contracts Other assets $ — Other assets $ — Accrued expenses Accrued $ 581 expenses $ 278 Derivatives not designated as hedging instruments Commodity contracts Fuel price derivatives, at fair value Total derivatives $ — — Fuel price derivatives, at fair value Fuel price derivatives, at fair value Fuel price derivatives, at fair value 10,877 6,152 — $ 6,152 $ 11,458 $ 278 The following table presents information on the location and amounts of derivative gains and losses in the condensed consolidated statements of income: Derivatives Designated as Hedging Instruments Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) (a) For the period ended December 31, 2010 2009 Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) For the period ended December 31, 2010 2009 Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) (b) Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)(b) For the period ended December 31, 2010 2009 Interest rate contracts $ ) (192 $ 1,560 expense $ ) (663 $ (3,223 ) expense $ — $ — Financing interest Financing interest Derivatives Not Designated as Hedging Instruments Commodity contracts Location of Gain or (Loss) Recognized in Income on Derivative Net realized and unrealized (losses) gains on fuel price derivatives Amount of Gain or (Loss) Recognized in Income on Derivative For the period ended December 31, 2010 2009 $ (7,244 ) $ ) (22,542 (a) The amount of gain or (loss) recognized in OCI on the Company's interest rate swap arrangements has been recorded net of tax impacts of $(111) in 2010 and $904 in 2009. (b) No ineffectiveness was reclassified into earnings nor was any amount excluded from effectiveness testing. 61 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) For the Company’s North America operations, the Company uses derivative instruments to manage the impact of volatility in fuel prices. The Company enters into put and call option contracts ("Options") based on the wholesale price of unleaded gasoline and retail price of diesel fuel, which settle on a monthly basis through the second quarter of 2012. The Options are intended to lock in a range of prices during any given quarter on a portion of the Company's forecasted earnings subject to fuel price variations. The Company's fuel price risk management program is designed to purchase derivative instruments to manage its fuel price-related earnings exposure. The fair value of these instruments is recorded in fuel price derivative instruments, at fair value on the consolidated balance sheets. The following table presents information about the Options: December 31, 2010 2009 Put Option Strike Price of Underlying (per gallon) (a) Call Option Strike Price of Underlying (per gallon) (a) Aggregate Notional (gallons) (b) Fair Value Aggregate Notional (gallons) Fair Value Fuel price derivative instruments – unleaded fuel Options settling October 2011 – June 2012 Options settling July 2011 – March 2012 Options settling April 2011 – December 2011 Options settling January 2011 – September 2011 Options settling October 2010 – June 2011 Options settling July 2010 – March 2011 Options settling April 2010 – December 2010 Options settling January 2010 – September 2010 Options settling October 2009 – June 2010 Options settling July 2009 – March 2010 $ $ $ $ $ $ $ $ $ $ 2.247 $ 2.176 $ 2.334 $ 2.170 $ 2.013 $ 1.953 $ 1.906 $ 2.860 $ 2.430 $ 2.443 $ 2.307 2.236 2.394 2.230 2.073 2.013 1.966 2.920 2.490 2.503 6,934 $ 7,888 5,831 6,663 3,909 1,909 — — — — (788 ) (1,545 ) (435 ) (1,826 ) (1,750 ) (890 ) — — — — — $ — — — 5,836 6,209 4,642 5,219 5,302 2,573 — — — — (578 ) (754 ) (776 ) 3,349 1,418 852 Total fuel price derivative instruments – unleaded fuel 33,134 $ (7,234 ) 29,781 $ 3,511 Fuel price derivative instruments – diesel Options settling October 2011 – June 2012 Options settling July 2011 – March 2012 Options settling April 2011 – December 2011 Options settling January 2011 – September 2011 Options settling October 2010 – June 2011 Options settling July 2010 – March 2011 Options settling April 2010 – December 2010 Options settling January 2010 – September 2010 Options settling October 2009 – June 2010 Options settling July 2009 – March 2010 $ $ $ $ $ $ $ $ $ $ 3.293 $ 3.239 $ 3.268 $ 3.068 $ 3.000 $ 3.000 $ 2.936 $ 4.040 $ 3.515 $ 3.500 $ 3.353 3.299 3.328 3.128 3.060 3.060 2.996 4.100 3.575 3.560 3,115 $ 3,544 2,619 2,994 1,756 858 — — — — (499 ) (738 ) (406 ) (990 ) (684 ) (326 ) — — — — — $ — — — 2,622 2,790 2,085 2,345 2,382 1,156 — — — — (437 ) (342 ) (292 ) 2,186 1,034 492 Total fuel price derivative instruments – diesel 14,886 $ (3,643 ) 13,380 $ 2,641 Total fuel price derivative instruments 48,020 $ (10,877 ) 43,161 $ 6,152 (a) The settlement of the Options is based upon the New York Mercantile Exchange's New York Harbor Reformulated Gasoline Blendstock for Oxygen Blending and the U.S. Department of Energy's weekly retail on-highway diesel fuel price for the month. (b) The Options settle on a monthly basis. 62 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) The following table summarizes the changes in fair value of the fuel price derivatives which have been recorded in net realized and unrealized gains (losses) on derivative instruments on the consolidated statements of income: Year ended December 31, 2009 2010 2008 Realized gains (losses) Unrealized (losses) gains Net realized and unrealized (losses) gains on derivative instruments $ $ 9,785 $ (17,029) 20,600 $ (43,142 ) (35,686 ) 90,892 (7,244) $ (22,542 ) $ 55,206 11. Financing Debt Revolving Credit Facility On May 22, 2007, the Company entered into a revolving credit facility (the "2007 Revolver") with a lending syndicate. The 2007 Revolver initially provided for a five-year $350,000 unsecured revolving line-of-credit. In connection with the 2007 Revolver, the Company paid loan origination fees of $998. These fees have been recorded as other assets on the consolidated balance sheet and are being amortized on a straight-line basis (which approximates the effective interest rate method) over the term of the 2007 Revolver. On May 29, 2008, the Company entered into an incremental amendment agreement (the "Incremental Amendment Agreement") of the 2007 Revolver to increase the aggregate unsecured revolving line-of-credit from $350,000 to $450,000. The Company incurred $1,556 in loan origination fees in conjunction with entering into the Incremental Amendment Agreement. These fees have been recorded as other assets on the consolidated balance sheet and are being amortized over the remaining term of the 2007 Revolver. Amounts outstanding under the 2007 Revolver bear interest at a rate equal to (a) the British Bankers Association LIBOR plus a margin of 0.45 percent to 1.125 percent based on the Company's consolidated leverage ratio or (b) the higher of the Federal Funds Rate plus 0.50 percent or the prime rate announced by Bank of America, N.A., plus a margin of up to 0.125 percent based on the Company's consolidated leverage ratio. In addition, the Company has agreed to pay a quarterly commitment fee at a rate per annum ranging from 0.10 percent to 0.20 percent of the daily unused portion of the 2007 Revolver. The Company also has a letter of credit associated with the 2007 Revolver. The letter of credit reduces the amount available for borrowings and may collateralize certain of the Company's derivative instruments. The Company is assessed a fee on the liquidation value of the letter of credit. This fee was 0.7 percent at December 31, 2010, and 0.45 percent at December 31, 2009. The balance under the letter of credit was $2,100 at December 31, 2010, and December 31, 2009. Any outstanding loans under the 2007 Revolver mature on May 22, 2012, unless extended pursuant to the terms of the 2007 Revolver. As of December 31, 2010, the Company had approximately $115,600 available under this facility. Term Loan Note On July 25, 2010, the Company entered into a $75,000 term credit facility (“term loan”). The rate on the term credit facility is 250 basis points above LIBOR. In connection with the term loan, the Company paid loan origination fees of $2,269. The agreement did not change any of the Company’s existing financial covenants. The balance outstanding on the term loan at December 31, 2010, is $75,000. 63 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) The following table presents information about the 2007 Revolver: Outstanding balance on revolving line-of-credit and term loan with interest based on LIBOR Outstanding balance on revolving line-of-credit with interest based on the prime rate $ 390,000 $ 17,300 120,000 8,000 Total outstanding balance on revolving line-of-credit facility and term loan $ 407,300 $ 128,000 Weighted average rate based on LIBOR (including impact of interest rate swaps) Rate based on the prime rate 1.58 % 3.25 % 1.26 % 3.25 % December 31, 2010 2009 Financing Interest The following table presents the components of financing interest expense: Year ended December 31, 2009 2010 2008 2007 Revolver: Interest expense based on LIBOR Interest expense based on the prime rate Fees Amortization of loan origination fees Term Loan: Interest expense based on LIBOR Amortization of loan origination fees Realized losses (gains) on interest rate swaps (Note 10) Dividends on preferred stock (Note 12) Other Total financing interest expense Average interest rate (including impact of interest rate swaps): Based on LIBOR Based on prime Average debt balance at LIBOR Average debt balance at prime $ 1,621 $ 470 324 628 1,444 $ 219 422 628 3,043 2,713 741 748 1,489 — — — 7,793 261 508 465 9,027 — — — 663 3,223 2,240 40 79 248 26 474 118 $ 5,314 $ 6,210 $ 11,859 1.33 % 3.25 % 2.95 % 3.26 % 4.54 % 5.01 % $ $ 228,370 $ 18,390 $ 158,268 $ 6,729 $ 221,044 5,210 64 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) Debt Covenants The 2007 Revolver and term loan contains various financial covenants requiring the Company to maintain certain financial ratios. In addition, the 2007 Revolver and term loan contain various customary restrictive covenants that limit the Company's ability to pay dividends, sell or transfer all or substantially all of its property or assets, incur more indebtedness or make guarantees, grant or incur liens on its assets, make investments, loans, advances or acquisitions, engage in mergers, consolidations, liquidations or dissolutions, enter into sales or leasebacks or change its accounting policies or reporting practices. FSC is not subject to certain of these restrictions. 12. Preferred Stock On March 6, 2010, the Company initiated redemption of the outstanding shares of Series A non-voting convertible, redeemable preferred stock for $101 per share, plus all accrued but unpaid dividends. Each holder elected to exercise its right to convert its holdings into common stock. As a consequence of these elections, the Company issued 445 shares of its common stock and retired 0.1 shares of preferred stock. There were 0.1 shares of Series A non-voting convertible, redeemable preferred stock issued and outstanding at December 31, 2009, with a par value of $0.01 per share and a purchase price per share and liquidation value per share of $100,000. Given its specific features, the Company treated the preferred stock as a liability. Accordingly, dividends were recorded as financing interest expense on the consolidated statements of income. 13. Income Taxes Income before income taxes consisted of the following: Year ended December 31, 2009 2008 2010 United States Foreign Total $ 153,958 $ (8,876 ) 228,841 $ (3,597 ) 196,329 (564 ) $ 145,082 $ 225,244 $ 195,765 65 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) Income tax expense (benefit) from continuing operations consisted of the following for the years ended December 31: 2010 Current Deferred 2009 Current Deferred 2008 Current Deferred United States State and Local Foreign Total $ $ 31,811 $ 19,723 $ 4,916 $ 960 $ (886 ) $ 929 $ 35,841 21,612 $ $ 22,947 $ 55,646 $ 2,911 $ 3,973 $ 172 $ (64 ) $ 26,030 59,555 $ $ 22,896 $ 47,302 $ 3,245 $ (5,231 ) $ 11 $ (98 ) $ 26,152 41,973 The reconciliation between the income tax computed by applying the U.S. federal statutory rate and the reported effective tax rate on income from continuing operations is as follows: Year ended December 31, 2009 2008 2010 Federal statutory rate State income taxes (net of federal income tax benefit) and foreign income tax rate differential Revaluation of deferred tax assets for tax rate changes and blending differences, net Dividend exclusion Other Effective tax rate 35.0 % 4.0 — — 0.6 35.0 % 3.4 (0.1) — (0.3) 35.0 % 1.9 (2.7) 0.1 0.5 39.6 % 38.0 % 34.8 % 66 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) The tax effects of temporary differences in the recognition of income and expense for tax and financial reporting purposes that give rise to significant portions of the deferred tax assets and the deferred tax liabilities are presented below: Deferred assets related to: Reserve for credit losses Stock-based compensation, net State net operating loss carry forwards Other assets Unrealized losses on interest rate swaps and available-for-sale securities, net Derivatives Tax deductible intangibles, primarily goodwill, net Deferred tax liabilities related to: Other assets Property, equipment and capitalized software Derivatives Valuation allowance on state net operating loss carry forwards $ December 31, 2010 2009 4,717 $ 4,792 992 136 159 3,997 156,339 4,078 3,790 973 2,394 89 — 183,632 171,132 194,956 17 9,959 — — 8,875 2,259 9,976 11,134 — 220 Deferred income taxes, net $ 161,156 $ 183,602 Net deferred tax assets by jurisdiction are as follows: United States Australia New Zealand The Netherlands Total December 31, 2010 2009 $ 160,243 $ 848 46 19 183,538 — 43 21 $ 161,156 $ 183,602 The deferred tax assets and deferred tax liabilities are included in deferred income taxes, net on the consolidated balance sheet. The Company had approximately $341,572 of state and $113 of foreign net operating loss carry forwards at December 31, 2010 and approximately $302,819 of state and $57 of foreign net operating loss carry forwards at December 31, 2009. These expire at various times through 2029. Valuation allowances have been established for those state net operating losses that the Company believes it is more likely than not that they will not be utilized within the carry forward period. Undistributed earnings of certain foreign subsidiaries of the Company amounted to $1,533 at December 31, 2010, and $713 at December 31, 2009. These earnings are considered to be indefinitely reinvested, and accordingly, no U.S. federal and state income taxes have been provided thereon. Upon distribution of these earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries The amount of taxes attributable to these undistributed earnings is not practicably determinable. In 2009 the Company (i) received additional information from Avis relative to basis differences at the time of the initial public offering; and (ii) corrected an improperly recorded basis difference. This resulted in adjustments to additional paid in capital, the 67 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) majority of which (approximately $6,500) were offset by credits to deferred taxes and taxes payable. In 2008 the Company also corrected an improperly recorded basis difference arising from the Avis transaction. The credit to additional paid in capital was offset by a charge to deferred taxes. The Company determined that, due to the immateriality of the corrections, revisions to the prior year financial statements were not necessary. 14. Tax Receivable Agreement As a consequence of the Company’s separation from its former parent company, the tax basis of the Company’s net tangible and intangible assets increased (the “Tax Basis Increase”). The Tax Basis Increase reduced the amount of tax that the Company would pay in the future to the extent the Company generated taxable income in sufficient amounts. The Company was contractually obligated, pursuant to its 2005 Tax Receivable Agreement with the Company’s former parent company (Cendant Corporation), to remit 85 percent of any such cash savings. The estimated total payments owed to Cendant Corporation based on facts available at that time, was reflected as a liability titled “Amounts due under tax receivable agreement.” The amount of these estimated future payments is dependent upon future statutory tax rates and the Company’s ability to generate sufficient taxable income adequate to cover the tax depreciation, amortization and interest expense associated with the Tax Basis Increase. The Company regularly reviews its estimated blended tax rates and projections of future taxable earnings to determine whether changes in the estimated liability are required. Any changes to the estimated future payments due to changes in estimated blended tax rates are recorded in the income statement as changes in amounts due under tax receivable agreement. In both 2010 and 2009 there had been reassessment of the blended tax rates that are projected into the future. In 2010 and 2009, the net future benefits increased, which increased the associated liability to Wyndham Worldwide Corporation (“Wyndham”), resulting in a $214 and $599 charge to non-operating expense for the years ended December 31, 2010 and 2009, respectively. Pursuant to the Separation and Distribution Agreement dated as of July 27, 2006, by and among Cendant Corporation (now known as Avis Budget Group, Inc. or “Avis”), Realogy Corporation (“Realogy”), Wyndham and Travelport Inc., Realogy acquired from Cendant the right to receive 62.5 percent of the payments by Wright Express to Cendant and Wyndham acquired from Cendant the right to receive 37.5 percent of the payments by Wright Express to Cendant under the 2005 Tax Receivable Agreement. On June 26, 2009, the Company entered into a Tax Receivable Prepayment Agreement with Realogy, pursuant to which the Company paid Realogy $51,000, including bank fees and legal expenses, as prepayment in full to settle the remaining obligations to Realogy under the 2005 Tax Receivable Agreement. These obligations were previously recorded at $187,485 and this transaction resulted in a gain of $136,485 in the second quarter of 2009. In connection with the Tax Receivable Prepayment Agreement with Realogy, the Company entered into a Ratification Agreement on June 26, 2009, (the “Ratification Agreement”) with Avis, Realogy and Wyndham which amended the 2005 Tax Receivable Agreement to require the Company to pay 31.875 (which is 85 percent of the original benefit of 37.5 percent) percent of the future tax savings related to the Tax Basis Increase to Wyndham. 15. Employee Benefit Plans The Company sponsors a 401(k) retirement and savings plan. The Company's employees who are at least 18 years of age, have worked at least 1,000 hours in the past year, and have completed one year of service are eligible to participate in this plan. The Company matches 100 percent of each employee's contributions up to a maximum of 6 percent of each employee's eligible compensation. All contributions vest immediately. Wright Express has the right to discontinue this plan at any time. Contributions to the plan are voluntary. The Company contributed $1,921 for the year ended December 31, 2010, $1,740 for the year ended December 31, 2009, and $1,860 for the year ended December 31, 2008. The Company also sponsors a defined contribution plan for certain employees designated by the Company. Participants may elect to defer receipt of designated percentages or amounts of their compensation. The Company maintains a grantor's trust to hold the assets under the Company's defined contribution plan. The obligation related to the defined contribution plan totaled $2,015 at December 31, 2010, and $1,593 at December 31, 2009. These amounts are included in other liabilities on the consolidated balance sheet. The assets held in trust are designated as trading securities and, as such, these trading securities are to be recorded at fair value with any changes recorded currently to earnings. The aggregate market value of the securities within the trust was $2,015 at December 31, 2010, and $1,593 at December 31, 2009. Such amounts are included in other assets on the consolidated balance sheet. 68 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) 16. Fair Value The Company holds mortgage-backed and other asset-backed securities, fixed income and equity securities, derivatives and certain other financial instruments which are carried at fair value. The Company determines fair value based upon quoted prices when available or through the use of alternative approaches, such as model pricing, when market quotes are not readily accessible or available. The Company carries certain of its liabilities at fair value, including its derivative liabilities. In determining the fair value of the Company's obligations, various factors are considered including: closing exchange or over-the-counter market price quotations; time value and volatility factors underlying options and derivatives; price activity for equivalent instruments; the Company's own- credit standing; and counterparty credit risk. These valuation techniques may be based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs create the following fair value hierarchy: (cid:117) (cid:117) (cid:117) Level 1 – Quoted prices for identical instruments in active markets. Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3 – Instruments whose significant value drivers are unobservable. 69 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) The following table presents the Company's assets and liabilities that are measured at fair value and the related hierarchy levels for 2010: Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Unobservable Inputs (Level 3) December 31, 2010 Assets: Mortgage-backed securities Asset-backed securities Equity securities $ 2,405 $ 2,393 4,404 — $ — 4,404 2,405 $ 2,393 — Total available-for-sale securities $ 9,202 $ 4,404 $ 4,798 $ Executive deferred compensation plan trust (a) $ 2,015 $ 2,015 $ — $ — — — — — Liabilities: Fuel price derivatives – diesel Fuel price derivatives – unleaded fuel 3,643 7,234 — — — 7,234 3,643 — Total fuel price derivatives $ 10,877 $ — $ 7,234 $ 3,643 July 2009 interest rate swap arrangement with a base rate of 1.35% and a notional amount of $50,000 September 2010 interest rate swap arrangement with a base rate of 0.56% and an aggregate notional amount of $150,000 309 272 — — 309 272 Total interest rate swap arrangements (b) $ 581 $ — $ 581 $ — — — (a) The fair value of these instruments is recorded in other assets. (b) The fair value of these instruments is recorded in accrued expenses. 70 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) The following table presents a reconciliation of the beginning and ending balances for assets (liabilities) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the year ended December 31, 2010: Beginning balance Total gains or (losses) – realized/unrealized Included in earnings (a) Included in other comprehensive income Purchases, issuances and settlements Transfers in/(out) of Level 3 Ending balance Fuel Price Derivatives – Diesel $ 2,641 (6,284 ) — — — $ (3,643 ) (a) Gains and losses (realized and unrealized) included in earnings for the year ended December 31, 2010, are reported in net realized and unrealized gain and (losses) on fuel price derivatives on the consolidated statements of income. The following table presents the Company's assets and liabilities that are measured at fair value and the related hierarchy levels for 2009: Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Unobservable Inputs (Level 3) December 31, 2009 Assets: Mortgage-backed securities Asset-backed securities Municipal bonds Equity securities $ 2,886 $ 3,133 365 4,212 — $ — — 4,212 2,886 $ 3,133 365 — Total available-for-sale securities $ 10,596 $ 4,212 $ 6,384 $ Executive deferred compensation plan trust (a) $ 1,593 $ 1,593 $ — $ — — — — — — Fuel price derivatives – diesel Fuel price derivatives – unleaded fuel $ 2,641 $ 3,511 — $ — — $ 3,511 2,641 — Total fuel price derivatives $ 6,152 $ — $ 3,511 $ 2,641 Liabilities: July 2009 interest rate swap arrangement with a base rate of 1.35% and a notional amount of $50,000 278 — 278 Total interest rate swap arrangements (b) $ 278 $ — $ 278 $ — — (a) The fair value of these instruments is recorded in other assets. (b) The fair value of these instruments is recorded in accrued expenses. 71 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) The following table presents a reconciliation of the beginning and ending balances for assets (liabilities) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the year ended December 31, 2009: Beginning balance Total gains or (losses) – realized/unrealized Included in earnings (a) Included in other comprehensive income Purchases, issuances and settlements Transfers in/(out) of Level 3 Ending balance Fuel Price Derivatives – Diesel $ 9,960 (7,319 ) — — — $ 2,641 (a) Gains and losses (realized and unrealized) included in earnings for the year ended December 31, 2009, are reported in net realized and unrealized losses on fuel price derivatives on the consolidated statements of income. Available-for-sale securities and executive deferred compensation plan trust When available, the Company uses quoted market prices to determine the fair value of available-for-sale securities; such items are classified in Level 1 of the fair-value hierarchy. These securities primarily consist of exchange-traded equity securities. For mortgage-backed and asset-backed debt securities and bonds, the Company generally uses quoted prices for recent trading activity of assets with similar characteristics to the debt security or bond being valued. The securities and bonds priced using such methods are generally classified as Level 2. Fuel price derivatives and interest rate swap arrangements The majority of derivatives entered into by the Company are executed over the counter and so are valued using internal valuation techniques as no quoted market prices exist for such instruments. The valuation technique and inputs depend on the type of derivative and the nature of the underlying instrument. The principal technique used to value these instruments is a comparison of the spot price of the underlying instrument to its related futures curve adjusted for the Company's assumptions of volatility and present value, where appropriate. The fair values of derivative contracts reflect the expected cash the Company will pay or receive upon settlement of the respective contracts. The key inputs depend upon the type of derivative and the nature of the underlying instrument and include interest rate yield curves, the spot price of the underlying instrument, volatility, and correlation. The item is placed in either Level 2 or Level 3 depending on the observability of the significant inputs to the model. Correlation and items with longer tenures are generally less observable. 17. Commitments and Contingencies Litigation The Company is involved in pending litigation in the usual course of business. In the opinion of management, such litigation will not have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows. Extension of Credit to Customers The Company had aggregate commitments of approximately $3,420,000 at December 31, 2010, and $2,818,000 at December 31, 2009, related to payment processing services, primarily related to commitments to extend credit to customers and customers of strategic relationships as part of the Company’s established lending product agreements. Many of these commitments are not expected to be used; therefore, total unused credit available to customers and customers of strategic relationships does not 72 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) represent future cash requirements. The Company can increase or decrease its customers' credit lines at our discretion at any time. These amounts are not recorded on the consolidated balance sheet. Operating Leases The Company leases office space, equipment, and vehicles under non-cancelable operating leases that expire at various dates through 2019. One of the Company's office space lease agreements was renewed during 2010. In addition, the Company rents office equipment under agreements that may be canceled at any time. Rental expense related to office space, equipment, and vehicle leases amounted to $3,583 for the year ended December 31, 2010, $3,420 for the year ended December 31, 2009, and $3,569 for the year ended December 31, 2008. These amounts were included in occupancy and equipment on the consolidated statements of income. The Company leases information technology hardware and software under agreements that may be terminated by the Company at any time. Lease expense related to information technology hardware and software leases totaled $3,164 for the year ended December 31, 2010, $2,627 for the year ended December 31, 2009, and $2,625 for the year ended December 31, 2008. These amounts were included in technology leasing and support on the consolidated statements of income. Future minimum lease payments under non-cancelable operating leases are as follows: 2011 2012 2013 2014 2015 2016 and thereafter Total 18. Cash and Dividend Restrictions Cash Payment $ 8,598 6,727 5,308 5,223 4,813 5,612 $ 36,281 Federal Reserve Board regulations may require reserve balances on certain deposits to be maintained with the Federal Reserve Bank. No such reserves were required at December 31, 2010 or 2009. Dividends FSC is chartered under the laws of the State of Utah and the FDIC insures its deposits. Under Utah law, FSC may only pay a dividend out of undivided profits after it has (i) provided for all expenses, losses, interest and taxes accrued or due from FSC and (ii) transferred to a surplus fund 10 percent of its net profits before dividends for the period covered by the dividend, until the surplus reaches 100 percent of its capital stock. For purposes of these Utah dividend limitations, FSC's capital stock is $5,250 and its capital surplus exceeds 100 percent of capital stock. The Company has certain restrictions on the dividends it may pay under its revolving credit agreement. If the Company's leverage ratio is higher than 1.75, the Company may pay no more than $10 million per annum for restricted payments, including dividends. Under FDIC regulations, FSC may not pay any dividend if, following the payment of the dividend, FSC would be "undercapitalized," as defined under the Federal Deposit Insurance Act and applicable regulations. FSC complied with the aforementioned dividend restrictions for the years ended December 31, 2010, 2009, and 2008. 73 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) 19. Stock-Based Compensation In April of 2010, the Company adopted the Wright Express Corporation 2010 Equity Incentive Plan (the “Plan”). This Plan replaced the Company’s 2005 Equity and Incentive Plan. The Plan, which is stockholder-approved, permits the grant of share options, stock appreciation rights, restricted stock, restricted stock units and other stock- or cash-based awards to non-employee directors, officers, employees, advisors or consultants for up to 3,800 shares of common stock. The Company believes that such awards increase efforts on behalf of the Company and promote the success of the Company's business. On December 31, 2010, the Company had four share-based compensation programs, which are described below. The compensation cost that has been charged against income for these programs totals $7,425 for 2010, $5,736 for 2009, and $5,216 for 2008. The total income tax benefit recognized in the income statement for share-based compensation arrangements was $ 2,814 for 2010, $2,180 for 2009, and $1,815 for 2008. Restricted Stock Units The Company awards restricted stock units ("RSUs") to non-employee directors and certain employees periodically under the Plan. An RSU is a right granted to receive stock at the end of a specified period. RSU awards generally vest evenly over a period of three or four years. The awards provide for accelerated vesting if there is a change of control (as defined in the Plan). The fair value of each RSU award is based on the closing market price of the Company's stock one business day prior to the grant date as reported by the New York Stock Exchange ("NYSE"). A summary of the status of the Company's RSUs as of December 31, 2010, and changes during the year then ended is presented below: Restricted Stock Units Balance at January 1, 2010 Granted Vested – shares issued Vested – shares deferred Forfeited Withheld for taxes (b) (a) Balance at December 31, 2010 Weighted- Average Grant-Date Fair Value Units 353 $ 92 (101 ) (6 ) (7 ) (48 ) 21.31 30.09 23.37 28.61 23.23 22.28 283 $ 23.08 (a) The Company issued fully vested and non-forfeitable restricted stock units to certain non-employee directors and certain employees that are payable in shares of the Company's common stock at a later date as specified by the award (deferred stock units or "DSUs"). (b) The Company has elected to pay cash equal to the minimum amount required to be withheld for income tax purposes instead of issuing the shares of common stock. The cash is remitted to the appropriate taxing authority and the shares are never issued. As of December 31, 2010, there was $3,751 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted as RSUs. That cost is expected to be recognized over a weighted-average period of 1.1 years. The total fair value of shares vested was $4,595 during 2010, $4,185 during 2009, and $5,117 during 2008. Deferred Stock Units Under the Plan, the Company also grants DSUs to non-employee directors. A DSU is a fully vested right to receive stock at a certain point in time in the future. DSUs do not require any future service or performance obligations to be met. DSUs may be granted immediately or may initially be granted as RSUs which become DSUs once a previously determined service obligation has been met. The fair value of each granted DSU award is based on the closing market price of the Company's stock on the grant date as reported by the NYSE. 74 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) A summary of the status of the Company's DSUs as of December 31, 2010, and changes during the year is presented below: Deferred Stock Units Balance at January 1, 2010 Granted as DSUs Converted from RSUs Balance at December 31, 2010 Weighted- Average Grant-Date Fair Value Units 69 $ 4 5 23.23 35.25 28.61 94 $ 24.26 There is no unrecognized compensation cost related to awards granted as, or converted to, DSUs. The Company has determined that the award was earned when granted and is expensed at that time. The total fair value of shares granted and vested was $331 during 2010, $228 during 2009, and $242 during 2008. Performance Based Restricted Stock Units The Company also awards performance based restricted stock units ("PBRSUs") to employees periodically under the Plan. A PBRSU is a right granted to receive stock at the end of a specified period. In a PBRSU, the number of shares earned varies based upon meeting certain corporate-wide performance goals, including revenue and earnings in excess of targets. PBRSU awards generally have performance goals tracking a one to four year period, depending on the nature of the performance goal. The fair value of each PBRSU award is based on the closing market price of the Company's stock one business day prior to the grant date as reported by the NYSE. A summary of the status of certain of the Company's PBRSUs at threshold and target performance as of December 31, 2010, and changes during the year then ended is presented below: Performance Based Restricted Stock Units Balance at January 1, 2010 Granted Forfeited Cancelled Balance at December 31, 2010 Units at Threshold Units at Target Weighted- Average Grant-Date Fair Value 44 82 (3 ) (42 ) 81 88 $ 164 (7 ) (84 ) 35.45 30.06 33.30 35.45 161 $ 30.06 The range of unrecognized compensation cost related to the awards is from $339 at threshold, (50 percent below targeted performance), $2,610 at target, (100 percent of targeted performance) and up to $7,154 at maximum, (200 percent of targeted performance), as of December 31, 2010, depending whether certain performance conditions are met. No portion of these awards have vested as of December 31, 2010. 75 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) Stock Options On February 22, 2005, the Company granted options to purchase the Company's common stock to certain employees as part of its initial public offering. Employee stock options granted by the Company had terms ranging from one to seven years, were fully vested, with exercise prices ranging from $5.72 to $14.98. On February 13, 2009, and on March 5, 2009, the Company approved the grant of stock options to certain officers and employees under the Plan. Stock options granted generally become exercisable over three years (with approximately 33 percent of the total grant vesting each year on the anniversary of the grant date) and expire 8 years from the date of grant. On March 3, 2010, the Company approved the grant of stock options to an officer under the Plan. The stock options granted generally become exercisable over three years (with approximately 33 percent of the total grant vesting each year on the anniversary of the grant date) and expires 8 years from the date of grant. The fair value of each option award is estimated on the grant date using a Black-Scholes-Merton option-pricing model that uses the assumptions noted in the following table. The expected term of the options represents the period of time that options granted are expected to be outstanding. Expected volatilities are based on implied volatilities from traded options on the Company's stock, historical volatility of the Company's stock, and other factors. The risk-free interest rate for the period matching the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The dividend yield is the calculated yield on the Company's stock at the time of the grant. The table below summarizes the assumptions used to calculate the fair value: Weighted average expected life (in years) Weighted average exercise price Weighted average volatility Weighted average risk-free rate Weighted average dividend yield Weighted average fair value February 13, 2009 March 5, March 3, 2009 2010 $ $ 4.75 13.51 $ 45.76% 1.70 % 0.00% 5.50 $ 5.00 13.60 $ 46.06 % 1.80 % 0.00 % 5.72 $ 6.00 30.06 46.00 % 2.70 % 0.00 % 14.15 The activity of the stock option plan related to the Company's employees consisted of: Stock Options Outstanding at January 1, 2010 Granted Exercised Forfeited or expired Weighted- Average Remaining Contractual Term (in years) Weighted- Average Exercise Price Aggregate Intrinsic Value Shares 666 $ 131 (211 ) (10 ) 13.79 30.06 14.29 13.57 Outstanding and exercisable at December 31, 2010 576 $ 17.32 5.4 $ 22,308 76 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) No stock options were awarded by the Company during 2008. The total intrinsic value of options exercised during the years ended December 31, 2010 and 2009 was $3,592 and $728, respectively. 20. Segment Information Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company's chief operating decision maker is its Chief Executive Officer. The operating segments are reviewed separately because each operating segment represents a strategic business unit that generally offers different products and serves different markets. The Company's chief operating decision maker evaluates the operating results of the Company's reportable segments based upon revenues and "adjusted net income," which is defined by the Company as net income adjusted for fair value changes of derivative instruments, the amortization of purchased intangibles, the net impact of tax rate changes on the Company’s deferred tax asset and related changes in the tax-receivable agreement, non-cash asset impairment charges and the gains on the extinguishment of a portion of the tax receivable agreement. These adjustments are reflected net of the tax impact. The Company operates in two reportable segments, Fleet Payment Solutions and Other Payment Solutions. The Fleet Payment Solutions segment provides customers with payment and transaction processing services specifically designed for the needs of vehicle fleet customers. This segment also provides information management services to these fleet customers. The Other Payment Solutions segment provides customers with a payment processing solution for their corporate purchasing and transaction monitoring needs. Revenue in this segment is derived from our corporate charge cards, single use accounts and prepaid card products. The corporate charge card products are used by businesses to facilitate purchases of products and utilize the Company's information management capabilities. The accounting policies of the reportable segments are generally the same as those described in the summary of significant accounting policies. Financing interest expense and net realized and unrealized losses on derivative instruments are not allocated to the Other Payment Solutions segment in the computation of segment results for internal evaluation purposes. Total assets are not allocated to the segments. The following table presents the Company's reportable segment results for the years ended December 31, 2010, 2009 and 2008: Total Revenues Operating Interest Expense Depreciation and Amortization Provision for Income Taxes Adjusted Net Income Year ended December 31, 2010 Fleet Payment Solutions Other Payment Solutions $ 329,239 $ 61,167 4,494 $ 876 17,982 $ 635 57,154 $ 9,146 92,499 14,802 Total $ 390,406 $ 5,370 $ 18,617 $ 66,300 $ 107,301 Year ended December 31, 2009 Fleet Payment Solutions Other Payment Solutions $ 277,996 $ 37,207 8,702 $ 1,551 16,655 $ 210 47,615 $ 5,149 77,194 8,422 Total $ 315,203 $ 10,253 $ 16,865 $ 52,764 $ 85,616 Year ended December 31, 2008 Fleet Payment Solutions Other Payment Solutions $ 361,187 $ 26,725 $ 26,972 2,845 19,483 $ 640 34,900 $ 2,217 69,993 4,155 Total $ 388,159 $ 29,570 $ 20,123 $ 37,117 $ 74,148 77 WRIGHT EXPRESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except per share data) The following table reconciles adjusted net income to net income: Year ended December 31, 2009 2008 2010 Adjusted net income Unrealized gains (losses) on derivative instruments Amortization of acquired intangible assets Asset impairment charge Non-cash adjustments related to tax receivable agreement Gain on extinguishment of liability Tax impact Net income $ 107,301 $ (17,029 ) (11,276 ) — (214 ) — 8,847 85,616 $ (43,142 ) (5,066 ) (814 ) (599 ) 136,485 (32,821 ) 74,148 90,892 (4,854 ) (1,538 ) — — (31,008 ) $ 87,629 $ 139,659 $ 127,640 The tax impact of the foregoing adjustments is the difference between the Company’s GAAP tax provision and a pro forma tax provision based upon the Company’s adjusted net income before taxes. The methodology utilized for calculating the Company’s adjusted net income tax provision is the same methodology utilized in calculating the Company’s GAAP tax provision. Geographic Data Total revenues: United States International Total revenues Year ended December 31, 2009 2010 2008 $ 368,922 $ 21,484 311,787 $ 3,416 387,714 445 $ 390,406 $ 315,203 $ 388,159 21. Quarterly Financial Results (Unaudited) Summarized quarterly results for the two years ended December 31, 2010 and 2009, are as follows: 2010 Total revenues Operating income Net income (loss) Earnings (loss) per share: Basic Diluted 2009 Total revenues Operating income Net income Earnings per share: Basic Diluted March 31 June 30 September 30 December 31 Three months ended $ $ $ $ $ $ $ $ $ $ 83,846 $ 32,193 $ 18,554 $ 91,435 $ 39,347 $ 30,036 $ 100,229 $ 36,192 $ 20,571 $ 114,896 42,977 18,468 0.48 $ 0.48 $ 0.77 $ 0.77 $ 0.54 $ 0.53 $ 0.48 0.47 68,498 $ 19,324 $ 10,977 $ 77,875 $ 32,372 $ 93,190 $ 85,828 $ 36,346 $ 23,363 $ 83,002 30,108 12,129 0.29 $ 0.28 $ 2.43 $ 2.36 $ 0.61 $ 0.60 $ 0.32 0.31 78 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The principal executive officer and principal financial officer of Wright Express Corporation evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. "Disclosure controls and procedures" are controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Securities Exchange Act of 1934, within the time periods specified in the SEC's rules and forms, is recorded, processed, summarized and reported, and is accumulated and communicated to the company's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on their evaluation, the principal executive officer and principal financial officer of Wright Express Corporation concluded that the Company's disclosure controls and procedures were effective as of December 31, 2010. Management's Annual Report on Internal Control Over Financial Reporting Wright Express' management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Under the supervision and with the participation of management, including the principal executive officer and principal financial officer, an evaluation was conducted of the effectiveness of the internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by The Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework, management concluded that Wright Express' internal control over financial reporting was effective as of December 31, 2010. Management excluded the internal control over financial reporting of RD Card Holdings Australia Pty Ltd., which we refer to as Wright Express Australia, which was acquired by the Company September 14, 2010, from its assessment of the Company’s internal control over financial reporting as of December 31, 2010. Wright Express Australia represent approximately 7 percent of the Company’s consolidated total assets as of December 31, 2010, and 5 percent of its consolidated revenues for the year ended December 31, 2010. The effectiveness of our internal control over financial reporting as of December 31, 2010, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2010, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 79 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Wright Express Corporation South Portland, Maine We have audited the internal control over financial reporting of Wright Express Corporation and subsidiaries (the "Company") as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in “Management’s Annual Report on Internal Control Over Financial Reporting” appearing at Item 9A, management excluded from its assessment the internal control over financial reporting at Wright Express Card Holdings Australia Pty Ltd, which was acquired on September 14, 2010 and whose financial statements constitute 8 % and 33 % of net and total assets, respectively 5 % of revenues, and (1) % of net income of the consolidated financial statement amounts as of and for the year ended December 31, 2010. Accordingly, our audit did not include the internal control over financial reporting at Wright Express Card Holdings Australia Pty Ltd. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Annual Report on Internal Control Over Financial Reporting” appearing at Item 9A. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2010 of the Company and our report dated February 28, 2011 expressed an unqualified opinion on those financial statements. /s/ DELOITTE & TOUCHE LLP Boston, MA February 28, 2011 80 ITEM 9B. OTHER INFORMATION Not applicable. 81 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE See the information in the Company's proxy statement for the 2011 Annual Meeting of Stockholders captioned "Members of the Board of Directors," "Non-Director Members of the Executive Management Team," "Section 16(a) Beneficial Ownership Reporting Compliance," "Director Nominations," "Communications with the Board of Directors," "Board and Committee Meetings" and "Corporate Governance Information," which information is incorporated herein by reference. Website Availability of Corporate Governance and Other Documents The following documents are available on the Corporate Governance page of the investor relations section of the Company's website, www.wrightexpress.com: (1) the Code of Business Conduct and Ethics for Directors, (2) the Code of Ethics for Chief Executive and Senior Financial Officers, (3) the Company's Corporate Governance Guidelines and (4) key Board Committee charters, including charters for the Audit, Corporate Governance and Compensation Committees. Stockholders also may obtain printed copies of these documents by submitting a written request to Investor Relations, Wright Express, 97 Darling Avenue, South Portland, Maine USA 04106. The Company intends to post on its website, www.wrightexpress.com, all disclosures that are required by law or New York Stock Exchange listing standards concerning any amendments to, or waivers from, the provisions of the documents referenced in (1) and (2) above. ITEM 11. EXECUTIVE COMPENSATION See the information in the Company's proxy statement for the 2011 Annual Meeting of Stockholders captioned "Executive Compensation" and the related subsections, "Director Compensation" and "Compensation Committee Interlocks and Insider Participation," which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS See the information in the Company's proxy statement for the 2011 Annual Meeting of Stockholders captioned "Securities Authorized for Issuance Under Equity Compensation Plans" and "Principal Stockholders" and the related subsections, which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE See the information in the Company's proxy statement for the 2011 Annual Meeting of Stockholders captioned "Director Independence" and "Certain Relationships and Related Transactions," which information is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES See the section of the Company's proxy statement for the 2011 Annual Meeting of Stockholders captioned "Auditor Selection and Fees," which information is incorporated herein by reference. 82 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The following documents are filed as part of this report: 1. Financial Statements (see Index to Financial Statements on page 40). Exhibit No. Description 2.1 Share Purchase Agreement among RD Card Holdings Limited, Wright Express Australia Holdings PTY LTD and Wright Express Corporation (incorporated by reference to Exhibit No. 2.1 to our Current Report on Form 8-K filed with the SEC on September 20, 2010, File No. 001-32426) 3.1 Certificate of Incorporation (incorporated by reference to Exhibit No. 3.1 to our Current Report on Form 8-K filed with the SEC on March 1, 2005, File No. 001-32426) 3.2 Amended and Restated By-Laws (incorporated by reference to Exhibit No. 3.1 to our Current Report on Form 8-K filed with the SEC on November 20, 2008, File No. 001-32426) 4.1 Rights Agreement dated as of February 16, 2005, by and between Wright Express Corporation and Wachovia Bank, National Association (incorporated by reference to Exhibit No. 4.1 to our Current Report on Form 8-K filed with the SEC on March 1, 2005, File No. 001-32426) 10.1 Form of director indemnification agreement (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8- K filed with the SEC on June 8, 2009, File No. 001-32426) 10.2 Tax Receivable Agreement, dated as of February 22, 2005, by and between Cendant Corporation and Wright Express Corporation (incorporated by reference to Exhibit No. 10.3 to our Current Report on Form 8-K filed with the SEC on March 1, 2005, File No. 001-32426) 10.3 Tax Receivable Prepayment Agreement dated June 26, 2009 by and between Wright Express Corporation and Realogy Corporation (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on July 7, 2009, File No. 001-32426) 10.4 Ratification Agreement dated June 26, 2009 by and among Wright Express Corporation, Realogy Corporation, Wyndham Worldwide Corporation and Avis Budget Group, Inc. (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on July 7, 2009, File No. 001-32426) 10.5 Guarantee, dated as of June 26, 2009, by Apollo Investment Fund VI, L.P., Apollo Overseas Partners VI, L.P., Apollo Overseas Partners (Delaware) VI, L.P., Apollo Overseas Partners (Delaware892) VI, L.P. and Apollo Overseas Partners (Germany) VI, L.P. in favor of Wright Express Corporation (incorporated by reference to Exhibit No. 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 7, 2009, File No. 001-324426) (incorporated by reference to Exhibit No. 10.3 to our Quarterly Report on Form 10-Q filed with the SEC on July 30, 2009, File No. 001-324426) 10.6 Credit Agreement, dated as of May 22, 2007, among Wright Express Corporation, as borrower, Bank of America, N.A., as administrative agent, swing line lender and L/C issuer, Banc of America Securities LLC and SunTrust Robinson Humphrey, a division of SunTrust Capital Markets, Inc., as joint lead arrangers and joint book managers, SunTrust Bank, Inc., as syndication agent, BMO Capital Markets, KeyBank National Association, and TD Banknorth, N.A., as co-documentation agents, and the other lenders party thereto (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8- K filed with the SEC on May 29, 2007, File No. 001-32426) 10.7 Guaranty, dated as of May 22, 2007, by and among Wright Express Corporation, the subsidiary guarantors party thereto, and Bank of America, N.A., as administrative agent for the lenders party to the Credit Agreement (incorporated by reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on May 29, 2007, File No. 001-32426) 10.8 10.9 Incremental Amendment Agreement among Wright Express Corporation, as borrower; Bank of America, N.A., as administrative agent, swing line lender and L/C issuer; Banc of America Securities LLC; SunTrust Robinson Humphrey, a division of SunTrust Capital Markets, Inc., as joint lead arrangers and joint book managers; SunTrust Bank, Inc., as syndication agent; and with other lenders (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on June 3, 2008, File No. 001-32426) Amendment to Credit Agreement, dated as of June 26, 2009, among Wright Express Corporation, as borrower, each lender from time to time party thereto and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer (incorporated by reference to Exhibit No. 10.4 to our Quarterly Report on Form 10-Q filed with the SEC on July 30, 2009, File No. 001-324426) 83 10.10 Commitment Letter, dated July 25, 2010, from Bank of America, N.A. and Banc of America Securities LLC (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on July 30, 2010, File No. 001-32426) 10.11 Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426) 10.12 Amended Wright Express Corporation 2010 Equity and Incentive Plan 10.13 Wright Express Corporation Employee Stock Purchase Plan (incorporated by reference to Exhibit No. 10.7 to our Registration Statement on Form S-1 filed with the SEC on February 10, 2005, File No. 333-120679) 10.14 Wright Express Corporation Amended and Restated Non-Employee Directors Deferred Compensation Plan (incorporated by reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001- 32426) 10.15 Amended and Restated Wright Express Corporation Executive Deferred Compensation Plan (incorporated by reference to Exhibit No. 10.3 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426) 10.16 Amended and Restated Wright Express Corporation Short Term Incentive Program (incorporated by reference to Exhibit No. 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-324426)** 10.17 Wright Express Corporation Long Term Incentive Program (incorporated by reference to Exhibit No. 10.2 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426)** 10.18 Amended and Restated Wright Express Corporation Severance Pay Plan for Officers (incorporated by reference to Exhibit No. 10.4 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426) 10.19 Employment Agreement with Michael E. Dubyak (incorporated by reference to Exhibit No. 10.5 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426) 10.20 Form of Employment Agreement for David Maxsimic and Melissa Smith (incorporated by reference to Exhibit No. 10.6 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426) 10.21 Form of Employment Agreement for Robert Cornett, Hilary Rapkin and Jamie Morin (incorporated by reference to Exhibit No. 10.7 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426) 10.22 Form of Employment Agreement for George Hogan and Richard Stecklair 10.23 Form of Long Term Incentive Program Award Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on April 6, 2006, File No. 001-32426) † † † † † † † † † † † † † † 10.24 † 10.25 Form of Non-Employee Director Long Term Incentive Program Award Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (for grants received prior to December 31, 2006) (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q filed with the SEC on August 5, 2008, File No. 001-32426) Form of Non-Employee Director Long Term Incentive Program Award Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (for grants received subsequent to December 31, 2006) (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q filed with the SEC on August 5, 2008, File No. 001- 32426) † 10.26 Form of Wright Express Corporation Long Term Incentive Program 2010 Growth Grant Restricted Stock Unit Award Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by reference to Exhibit No. 10.3 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001- 32426) † 10.27 Form of Wright Express Corporation Long Term Incentive Program 2010 Growth Grant Performance-Based Restricted Stock Unit Award Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by reference to Exhibit No. 10.4 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) †* 10.28 Form of Wright Express Corporation Long Term Incentive Program 2010 Growth Grant Stock Non-Statutory Stock Option Award Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by reference to Exhibit No. 10.5 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) †* 10.29 Form of Wright Express Corporation Option Agreement under the Wright Express Corporation 2010 Equity and Incentive Plan †* 10.30 Form of Wright Express Corporation Restricted Stock Unit Agreement under the Wright Express Corporation 2010 Equity 84 and Incentive Plan †* 10.31 Form of Wright Express Corporation Non-Employee Director Compensation Plan Award Agreement under the Wright Express Corporation 2010 Equity and Incentive Plan 10.32 10.33 10.34 10.35 ISDA Master Agreement and Schedule between CITIBANK, National Association and Wright Express Corporation, dated as of April 20, 2005 (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on April 27, 2005, File No. 001-32426) Confirmation of transaction between CITIBANK, National Association and Wright Express Corporation, dated April 21, 2005 (incorporated by reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on April 27, 2005, File No. 001-32426) ISDA Master Agreement between Fleet National Bank and Wright Express Corporation, dated as of April 20, 2005 (incorporated by reference to Exhibit No. 10.3 to our Current Report on Form 8-K filed with the SEC on April 27, 2005, File No. 001-32426) ISDA Schedule to the Master Agreement between Fleet National Bank and Wright Express Corporation, dated as of April 20, 2005 (incorporated by reference to Exhibit No. 10.4 to our Current Report on Form 8-K filed with the SEC on April 27, 2005, File No. 001-32426) 10.36 Confirmation of transaction between Fleet National Bank and Wright Express Corporation, dated April 21, 2005 (incorporated by reference to Exhibit No. 10.5 to our Current Report on Form 8-K filed with the SEC on April 27, 2005, File No. 001-32426) 10.37 Form of confirmation evidencing purchases of Nymex Unleaded Regular Gasoline put options and call options by Wright Express Corporation from J. Aron & Company (incorporated by reference to Exhibit 10.18 to our Quarterly Report on Form 10-Q filed with the SEC on October 28, 2005, File No. 001-32426) 10.38 10.39 10.40 10.41 10.42 Form of confirmation evidencing purchases of Nymex Diesel put options and call options by Wright Express Corporation from J. Aron & Company (incorporated by reference to Exhibit 10.19 to our Quarterly Report on Form 10-Q filed with the SEC on October 28, 2005, File No. 001-32426) ISDA Credit Support Annex to the Schedule Master Agreement between Bank of America, N.A. (successor to Fleet National Bank) and Wright Express Corporation, dated as of August 28, 2006 (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on November 20, 2006, File No. 001-32426) Amendment to the ISDA Master Agreement between Bank of America, N.A. (successor to Fleet National Bank) and Wright Express Corporation, dated as of August 28, 2006 (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed with the SEC on November 20, 2006, File No. 001-32426) Form of confirmation evidencing purchases and sales of Diesel put options and call options by Wright Express Corporation from Bank of America, N.A. (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed with the SEC on August 7, 2007, File No. 001-32426) Form of confirmation evidencing purchases and sales of Nymex Unleaded Regular Gasoline put options and call options by Wright Express Corporation from Bank of America, N.A. (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on August 7, 2007, File No. 001-32426) 10.43 Novation Agreement and New ISDA Agreement, dated as of October 23, 2009, among Wright Express Corporation, Bank of America, N.A., and Merrill Lynch Commodities, Inc. 10.44 ISDA Master Agreement and Schedule between Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch and Wright Express Corporation, dated as of June 14, 2007 (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007, File No. 001-32426) 10.45 Confirmation of transaction between Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch and Wright Express Corporation, dated as of July 18, 2007 (incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007, File No. 001-32426) 10.46 ISDA Master Agreement and Schedule between SunTrust Bank and Wright Express Corporation, dated as of April 5, 2005 (incorporated by reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007, File No. 001-32426) 10.47 Confirmation of transaction between SunTrust Bank and Wright Express Corporation, dated as of July 18, 2007 (incorporated by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007, File No. 001-32426) 10.48 Confirmation of transaction between SunTrust Bank and Wright Express Corporation, dated as of July 22, 2009 (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on July 24, 2009, File 85 No. 001-32426) 10.49 Confirmation of transaction between SunTrust Bank and Wright Express Corporation, dated as of September 20, 2010 evidencing purchase of interest rate swap (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on September 22, 2010, File No. 001-32426) 10.50 ISDA Master Agreement and Schedule between KeyBank National Association and Wright Express Corporation, dated as of June 15, 2007 (incorporated by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007, File No. 001-32426) 10.51 Confirmation of transaction between KeyBank National Association and Wright Express Corporation, dated as of August 22, 2007 (incorporated by reference to Exhibit 10.8 to our Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007, File No. 001-32426) 10.52 10.53 10.54 10.55 10.56 10.57 10.58 10.59 10.60 21.1 23.1 31.1 ISDA Master Agreement and Schedule between Wachovia Bank, National Association and Wright Express Corporation, dated as of July 18, 2007 (incorporated by reference to Exhibit No. 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 8, 2008, File No. 001-32426) Form of confirmation evidencing purchases of Nymex Unleaded Regular Gasoline put options and call options by Wright Express Corporation from Wachovia Bank, National Association (incorporated by reference to Exhibit No. 10.2 to our Quarterly Report on Form 10-Q filed with the SEC on May 8, 2008, File No. 001-32426) ISDA Master Agreement between Barclays Bank PLC and Wright Express Corporation, dated as of March 10, 2010 (incorporated by reference to Exhibit No. 10.6 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) ISDA Schedule to the Master Agreement between Barclays Bank PLC and Wright Express Corporation, dated as of March 10, 2010 (incorporated by reference to Exhibit No. 10.7 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) Credit Support Annex to the Schedule to the ISDA Master Agreement between Barclays Bank PLC and Wright Express Corporation, dated as of March 10, 2010 (incorporated by reference to Exhibit No. 10.8 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) The First Amendment, dated as of March 23, 2010, to the Schedule to the ISDA Master Agreement dated as of July 18, 2007 between Wells Fargo Bank, N.A. (formerly known as Wachovia Bank, National Association) and Wright Express Corporation (incorporated by reference to Exhibit No. 10.9 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) ISDA Master and Consolidation Agreement, dated as of March 23, 2010, to the Schedule to the Master Agreement dated as of July 18, 2007 between Wells Fargo Bank, N.A. (formerly known as Wachovia Bank, National Association) and Wright Express Corporation (incorporated by reference to Exhibit No. 10.10 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) Credit Support Annex to the Schedule to the ISDA Master Agreement, dated as of July 18, 2007, between Wachovia Bank, National Association, and Wright Express Corporation (incorporated by reference to Exhibit No. 10.11 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) Form of confirmation evidencing purchases of diesel fuel put options and call options by Wright Express Corporation from Wells Fargo Bank, NA (incorporated by reference to Exhibit No. 10.12 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) Subsidiaries of the registrant Consent of Independent Registered Accounting Firm – Deloitte & Touche LL Certification of Chief Executive Officer of Wright Express Corporation pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended 31.2 Certification of Chief Financial Officer of Wright Express Corporation pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended 32.1 32.2 Certification of Chief Executive Officer of Wright Express Corporation pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code Certification of Chief Financial Officer of Wright Express Corporation pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code * * * * * * *** 101.INS XBRL Instance Document 86 *** 101.SCH XBRL Taxonomy Extension Schema Document *** 101.CAL XBRL Taxonomy Calculation Linkbase Document *** 101.LAB XBRL Taxonomy Label Linkbase Document *** 101.PRE XBRL Taxonomy Presentation Linkbase Document * ** *** † Filed with this report Portions of exhibit have been omitted pursuant to a request for confidential treatment, which has been granted. In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Annual Report on Form 10-K shall be deemed to be “furnished” and not “filed”. Denotes a management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(b) of this Form 10-K. 87 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SIGNATURES February 28, 2011 WRIGHT EXPRESS CORPORATION By: /s/ Melissa D. Smith Melissa D. Smith CFO and Executive Vice President, Finance and Operations (principal financial and accounting officer) 88 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. February 28, 2011 February 28, 2011 February 28, 2011 February 28, 2011 February 28, 2011 February 28, 2011 February 28, 2011 February 28, 2011 /s/ Michael E. Dubyak Michael E. Dubyak President, Chief Executive Officer and Chairman of the Board of Directors (principal executive officer) /s/ Rowland T. Moriarty Rowland T. Moriarty Lead Director /s/ Shikhar Ghosh Shikhar Ghosh Director /s/ Ronald T. Maheu Ronald T. Maheu Director /s/ George L. McTavish George L. McTavish Director /s/ Kirk Pond Kirk Pond Director /s/ Regina O. Sommer Regina O. Sommer Director /s/ Jack A. VanWoerkom Jack A. VanWoerkom Director 89 Exhibit No. Description EXHIBIT INDEX 2.1 Share Purchase Agreement among RD Card Holdings Limited, Wright Express Australia Holdings PTY LTD and Wright Express Corporation (incorporated by reference to Exhibit No. 2.1 to our Current Report on Form 8-K filed with the SEC on September 20, 2010, File No. 001-32426) 3.1 Certificate of Incorporation (incorporated by reference to Exhibit No. 3.1 to our Current Report on Form 8-K filed with the SEC on March 1, 2005, File No. 001-32426) 3.2 Amended and Restated By-Laws (incorporated by reference to Exhibit No. 3.1 to our Current Report on Form 8-K filed with the SEC on November 20, 2008, File No. 001-32426) 4.1 Rights Agreement dated as of February 16, 2005, by and between Wright Express Corporation and Wachovia Bank, National Association (incorporated by reference to Exhibit No. 4.1 to our Current Report on Form 8-K filed with the SEC on March 1, 2005, File No. 001-32426) 10.1 Form of director indemnification agreement (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8- K filed with the SEC on June 8, 2009, File No. 001-32426) 10.2 Tax Receivable Agreement, dated as of February 22, 2005, by and between Cendant Corporation and Wright Express Corporation (incorporated by reference to Exhibit No. 10.3 to our Current Report on Form 8-K filed with the SEC on March 1, 2005, File No. 001-32426) 10.3 Tax Receivable Prepayment Agreement dated June 26, 2009 by and between Wright Express Corporation and Realogy Corporation (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on July 7, 2009, File No. 001-32426) 10.4 Ratification Agreement dated June 26, 2009 by and among Wright Express Corporation, Realogy Corporation, Wyndham Worldwide Corporation and Avis Budget Group, Inc. (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on July 7, 2009, File No. 001-32426) 10.5 Guarantee, dated as of June 26, 2009, by Apollo Investment Fund VI, L.P., Apollo Overseas Partners VI, L.P., Apollo Overseas Partners (Delaware) VI, L.P., Apollo Overseas Partners (Delaware892) VI, L.P. and Apollo Overseas Partners (Germany) VI, L.P. in favor of Wright Express Corporation (incorporated by reference to Exhibit No. 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 7, 2009, File No. 001-324426) (incorporated by reference to Exhibit No. 10.3 to our Quarterly Report on Form 10-Q filed with the SEC on July 30, 2009, File No. 001-324426) 10.6 Credit Agreement, dated as of May 22, 2007, among Wright Express Corporation, as borrower, Bank of America, N.A., as administrative agent, swing line lender and L/C issuer, Banc of America Securities LLC and SunTrust Robinson Humphrey, a division of SunTrust Capital Markets, Inc., as joint lead arrangers and joint book managers, SunTrust Bank, Inc., as syndication agent, BMO Capital Markets, KeyBank National Association, and TD Banknorth, N.A., as co-documentation agents, and the other lenders party thereto (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8- K filed with the SEC on May 29, 2007, File No. 001-32426) 10.7 Guaranty, dated as of May 22, 2007, by and among Wright Express Corporation, the subsidiary guarantors party thereto, and Bank of America, N.A., as administrative agent for the lenders party to the Credit Agreement (incorporated by reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on May 29, 2007, File No. 001-32426) 10.8 10.9 Incremental Amendment Agreement among Wright Express Corporation, as borrower; Bank of America, N.A., as administrative agent, swing line lender and L/C issuer; Banc of America Securities LLC; SunTrust Robinson Humphrey, a division of SunTrust Capital Markets, Inc., as joint lead arrangers and joint book managers; SunTrust Bank, Inc., as syndication agent; and with other lenders (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on June 3, 2008, File No. 001-32426) Amendment to Credit Agreement, dated as of June 26, 2009, among Wright Express Corporation, as borrower, each lender from time to time party thereto and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer (incorporated by reference to Exhibit No. 10.4 to our Quarterly Report on Form 10-Q filed with the SEC on July 30, 2009, File No. 001-324426) 10.10 Commitment Letter, dated July 25, 2010, from Bank of America, N.A. and Banc of America Securities LLC (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on July 30, 2010, File No. 001-32426) 10.11 Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426) 10.12 Amended Wright Express Corporation 2010 Equity and Incentive Plan † † 90 † † † † † † † † † † † 10.13 Wright Express Corporation Employee Stock Purchase Plan (incorporated by reference to Exhibit No. 10.7 to our Registration Statement on Form S-1 filed with the SEC on February 10, 2005, File No. 333-120679) 10.14 Wright Express Corporation Amended and Restated Non-Employee Directors Deferred Compensation Plan (incorporated by reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001- 32426) 10.15 Amended and Restated Wright Express Corporation Executive Deferred Compensation Plan (incorporated by reference to Exhibit No. 10.3 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426) 10.16 Amended and Restated Wright Express Corporation Short Term Incentive Program (incorporated by reference to Exhibit No. 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-324426)** 10.17 Wright Express Corporation Long Term Incentive Program (incorporated by reference to Exhibit No. 10.2 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426)** 10.18 Amended and Restated Wright Express Corporation Severance Pay Plan for Officers (incorporated by reference to Exhibit No. 10.4 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426) 10.19 Employment Agreement with Michael E. Dubyak (incorporated by reference to Exhibit No. 10.5 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426) 10.20 Form of Employment Agreement for David Maxsimic and Melissa Smith (incorporated by reference to Exhibit No. 10.6 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426) 10.21 Form of Employment Agreement for Robert Cornett, Hilary Rapkin and Jamie Morin (incorporated by reference to Exhibit No. 10.7 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426) 10.22 Form of Employment Agreement for George Hogan and Richard Stecklair 10.23 Form of Long Term Incentive Program Award Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on April 6, 2006, File No. 001-32426) † 10.24 † 10.25 Form of Non-Employee Director Long Term Incentive Program Award Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (for grants received prior to December 31, 2006) (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q filed with the SEC on August 5, 2008, File No. 001-32426) Form of Non-Employee Director Long Term Incentive Program Award Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (for grants received subsequent to December 31, 2006) (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q filed with the SEC on August 5, 2008, File No. 001- 32426) † 10.26 Form of Wright Express Corporation Long Term Incentive Program 2010 Growth Grant Restricted Stock Unit Award Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by reference to Exhibit No. 10.3 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001- 32426) † 10.27 Form of Wright Express Corporation Long Term Incentive Program 2010 Growth Grant Performance-Based Restricted Stock Unit Award Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by reference to Exhibit No. 10.4 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) †* 10.28 Form of Wright Express Corporation Long Term Incentive Program 2010 Growth Grant Stock Non-Statutory Stock Option Award Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by reference to Exhibit No. 10.5 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) †* 10.29 Form of Wright Express Corporation Option Agreement under the Wright Express Corporation 2010 Equity and Incentive Plan †* 10.30 Form of Wright Express Corporation Restricted Stock Unit Agreement under the Wright Express Corporation 2010 Equity and Incentive Plan †* 10.31 Form of Wright Express Corporation Non-Employee Director Compensation Plan Award Agreement under the Wright Express Corporation 2010 Equity and Incentive Plan 10.32 ISDA Master Agreement and Schedule between CITIBANK, National Association and Wright Express Corporation, dated as of April 20, 2005 (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on 91 April 27, 2005, File No. 001-32426) 10.33 10.34 10.35 Confirmation of transaction between CITIBANK, National Association and Wright Express Corporation, dated April 21, 2005 (incorporated by reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on April 27, 2005, File No. 001-32426) ISDA Master Agreement between Fleet National Bank and Wright Express Corporation, dated as of April 20, 2005 (incorporated by reference to Exhibit No. 10.3 to our Current Report on Form 8-K filed with the SEC on April 27, 2005, File No. 001-32426) ISDA Schedule to the Master Agreement between Fleet National Bank and Wright Express Corporation, dated as of April 20, 2005 (incorporated by reference to Exhibit No. 10.4 to our Current Report on Form 8-K filed with the SEC on April 27, 2005, File No. 001-32426) 10.36 Confirmation of transaction between Fleet National Bank and Wright Express Corporation, dated April 21, 2005 (incorporated by reference to Exhibit No. 10.5 to our Current Report on Form 8-K filed with the SEC on April 27, 2005, File No. 001-32426) 10.37 Form of confirmation evidencing purchases of Nymex Unleaded Regular Gasoline put options and call options by Wright Express Corporation from J. Aron & Company (incorporated by reference to Exhibit 10.18 to our Quarterly Report on Form 10-Q filed with the SEC on October 28, 2005, File No. 001-32426) 10.38 10.39 10.40 10.41 10.42 Form of confirmation evidencing purchases of Nymex Diesel put options and call options by Wright Express Corporation from J. Aron & Company (incorporated by reference to Exhibit 10.19 to our Quarterly Report on Form 10-Q filed with the SEC on October 28, 2005, File No. 001-32426) ISDA Credit Support Annex to the Schedule Master Agreement between Bank of America, N.A. (successor to Fleet National Bank) and Wright Express Corporation, dated as of August 28, 2006 (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on November 20, 2006, File No. 001-32426) Amendment to the ISDA Master Agreement between Bank of America, N.A. (successor to Fleet National Bank) and Wright Express Corporation, dated as of August 28, 2006 (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed with the SEC on November 20, 2006, File No. 001-32426) Form of confirmation evidencing purchases and sales of Diesel put options and call options by Wright Express Corporation from Bank of America, N.A. (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed with the SEC on August 7, 2007, File No. 001-32426) Form of confirmation evidencing purchases and sales of Nymex Unleaded Regular Gasoline put options and call options by Wright Express Corporation from Bank of America, N.A. (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on August 7, 2007, File No. 001-32426) 10.43 Novation Agreement and New ISDA Agreement, dated as of October 23, 2009, among Wright Express Corporation, Bank of America, N.A., and Merrill Lynch Commodities, Inc. 10.44 ISDA Master Agreement and Schedule between Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch and Wright Express Corporation, dated as of June 14, 2007 (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007, File No. 001-32426) 10.45 Confirmation of transaction between Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch and Wright Express Corporation, dated as of July 18, 2007 (incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007, File No. 001-32426) 10.46 ISDA Master Agreement and Schedule between SunTrust Bank and Wright Express Corporation, dated as of April 5, 2005 (incorporated by reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007, File No. 001-32426) 10.47 Confirmation of transaction between SunTrust Bank and Wright Express Corporation, dated as of July 18, 2007 (incorporated by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007, File No. 001-32426) 10.48 Confirmation of transaction between SunTrust Bank and Wright Express Corporation, dated as of July 22, 2009 (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on July 24, 2009, File No. 001-32426) 10.49 Confirmation of transaction between SunTrust Bank and Wright Express Corporation, dated as of September 20, 2010 evidencing purchase of interest rate swap (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on September 22, 2010, File No. 001-32426) 10.50 ISDA Master Agreement and Schedule between KeyBank National Association and Wright Express Corporation, dated as 92 of June 15, 2007 (incorporated by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007, File No. 001-32426) 10.51 Confirmation of transaction between KeyBank National Association and Wright Express Corporation, dated as of August 22, 2007 (incorporated by reference to Exhibit 10.8 to our Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007, File No. 001-32426) 10.52 10.53 10.54 10.55 10.56 10.57 10.58 10.59 10.60 21.1 23.1 31.1 ISDA Master Agreement and Schedule between Wachovia Bank, National Association and Wright Express Corporation, dated as of July 18, 2007 (incorporated by reference to Exhibit No. 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 8, 2008, File No. 001-32426) Form of confirmation evidencing purchases of Nymex Unleaded Regular Gasoline put options and call options by Wright Express Corporation from Wachovia Bank, National Association (incorporated by reference to Exhibit No. 10.2 to our Quarterly Report on Form 10-Q filed with the SEC on May 8, 2008, File No. 001-32426) ISDA Master Agreement between Barclays Bank PLC and Wright Express Corporation, dated as of March 10, 2010 (incorporated by reference to Exhibit No. 10.6 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) ISDA Schedule to the Master Agreement between Barclays Bank PLC and Wright Express Corporation, dated as of March 10, 2010 (incorporated by reference to Exhibit No. 10.7 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) Credit Support Annex to the Schedule to the ISDA Master Agreement between Barclays Bank PLC and Wright Express Corporation, dated as of March 10, 2010 (incorporated by reference to Exhibit No. 10.8 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) The First Amendment, dated as of March 23, 2010, to the Schedule to the ISDA Master Agreement dated as of July 18, 2007 between Wells Fargo Bank, N.A. (formerly known as Wachovia Bank, National Association) and Wright Express Corporation (incorporated by reference to Exhibit No. 10.9 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) ISDA Master and Consolidation Agreement, dated as of March 23, 2010, to the Schedule to the Master Agreement dated as of July 18, 2007 between Wells Fargo Bank, N.A. (formerly known as Wachovia Bank, National Association) and Wright Express Corporation (incorporated by reference to Exhibit No. 10.10 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) Credit Support Annex to the Schedule to the ISDA Master Agreement, dated as of July 18, 2007, between Wachovia Bank, National Association, and Wright Express Corporation (incorporated by reference to Exhibit No. 10.11 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) Form of confirmation evidencing purchases of diesel fuel put options and call options by Wright Express Corporation from Wells Fargo Bank, NA (incorporated by reference to Exhibit No. 10.12 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426) Subsidiaries of the registrant Consent of Independent Registered Accounting Firm – Deloitte & Touche LL Certification of Chief Executive Officer of Wright Express Corporation pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended 31.2 Certification of Chief Financial Officer of Wright Express Corporation pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended 32.1 32.2 Certification of Chief Executive Officer of Wright Express Corporation pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code Certification of Chief Financial Officer of Wright Express Corporation pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code * * * * * * *** 101.INS XBRL Instance Document *** 101.SCH XBRL Taxonomy Extension Schema Document *** 101.CAL XBRL Taxonomy Calculation Linkbase Document *** 101.LAB XBRL Taxonomy Label Linkbase Document *** 101.PRE XBRL Taxonomy Presentation Linkbase Document 93 * ** *** † Filed with this report Portions of exhibit have been omitted pursuant to a request for confidential treatment, which has been granted. In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Annual Report on Form 10-K shall be deemed to be “furnished” and not “filed”. Denotes a management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(b) of this Form 10-K. 94 Directors Michael E. Dubyak Chairman, President and Chief Executive Officer of Wright Express Corporation Rowland T. Moriarty President and Chief Executive Officer of Cubex Corporation Shikhar Ghosh The Harvard Business School Ronald T. Maheu Financial and Business Consultant Larry McTavish Chief Executive Officer and Chairman of Source Medical Corporation Kirk Pond Former Chairman, President and CEO of Fairchild Semiconductor International, Inc. Regina O. Sommer Financial and Business Consultant corporate HeaDquart ers Wright Express Corporation 97 Darling Avenue South Portland, ME 04106 Phone: (207) 773-8171 Toll Free: (800) 761-7181 Email: newsroom@wrightexpress.com URL: www.wrightexpress.com transfer agent American Stock Transfer & Trust Company 59 Maiden Lane, Plaza Level New York, NY 10038 (866) 668-6550 inDepe nDent registereD publi c accounting firm Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116-5022 (617) 437-2000 Jack A. VanWoerkom Executive Vice President, General Counsel and Corporate Secretary of The Home Depot, Inc. exe cu ti ve offi ce rs Michael E. Dubyak Chairman, President and Chief Executive Officer Melissa D. Smith Chief Financial Officer and Executive Vice President, Finance and Operations David D. Maxsimic Executive Vice President, Sales and Marketing Gareth Gumbley Executive Vice President, Wright Express International George Hogan Senior Vice President and Chief Information Officer attorneys Wilmer Cutler Pickering Hale and Dorr LLP 60 State Street Boston, MA 02109 (617) 526-6000 stockHolDers’ meeting Date: May 20, 2011 Time: 8:00 a.m. Location: Wright Express Long Creek Campus 225 Gorham Road South Portland, Maine Phone: (207) 773-8171 Toll Free: (800) 761-7181 ticker sym bol NYSE WXS Jamie Morin Senior Vice President, Client Services Organization Kenneth W. Janosick Senior Vice President, Small Business Solutions Richard K. Stecklair Senior Vice President, Corporate Payment Solutions Gregory S. Strzegowski Senior Vice President, Corporate Development Hilary A. Rapkin Senior Vice President, General Counsel and Corporate Secretary Robert C. Cornett Senior Vice President, Human Resources investor relations Steven Elder Vice President, Corporate Finance (866) 230-1633 Email: steve_elder@wrightexpress.com form 10-k A copy of the Company’s Form 10-K, filed with the Securities and Exchange Commission, is available without charge upon written request to: Wright Express Corporation, Investor Relations, 97 Darling Avenue, South Portland, ME 04106; by calling (866) 230-1633; or by emailing investors@wrightexpress.com. Wright express corporation 97 Darling avenue south portland, me 04106 phone: (207) 773-8171 toll free: (800) 761-7181 newsroom@wrightexpress.com www.wrightexpress.com
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