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:
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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.
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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.
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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
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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:
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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:
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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:
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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