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
ACCELERATING
GROWTH
2011 ANNUAL REPORT
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ABOUT WRIGHT EXPRESS
Wright Express is a global provider of
value-based business payment processing
and information management solutions.
The Company’s fl eet, corporate, and
prepaid payment solutions give customers
unparalleled security and control across a
wide spectrum of business sectors with an
expanding international presence.
Wright Express markets its services directly
to fl eets and businesses as an outsourcing
partner for its strategic relationships. The
Company’s North American business portfolio
includes its core fl eet card and corporate
payment solutions product.
For more than 25 years we have built
our closed-loop network in the U.S. 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
fl eets the ability to control purchases in
the fi eld, and delivers comprehensive
information and analysis tools that allow
fl eets to effectively manage their operations
and reduce operating costs.
We also issue open-loop corporate payment
solutions and virtual products. These
product offerings provide customers with
payment processing solutions for their
corporate purchasing and transaction
monitoring needs.
Our international operations include Wright
Express Australia Fuel Card, Australia’s
largest multi-branded fuel card issuer with
over 350,000 cards in circulation; Wright
Express Australia Prepaid, the market
leading processor of prepaid gift cards in
Australia; an offi ce in New Zealand and
various locations in Europe where we
provide payment processing and information
management services for oil companies.
Wright Express stock is traded on the
New York Stock Exchange under the ticker
symbol “WXS.”
CORPORATE INFORMATION
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
Professor, Harvard Business School
Ronald T. Maheu
Financial and Business Consultant
Larry McTavish
Chief Executive Officer
and Chairman of
Source Medical Corporation
Jack A. VanWoerkom
Former General Counsel and
Corporate Secretary of
The Home Depot, Inc.
EXECUTIVE OFFICERS
Michael E. Dubyak
Chairman, President and
Chief Executive Officer
Melissa D. Smith
President, The Americas
Steven Elder
Senior Vice President and
Chief Financial Officer
Gareth Gumbley
Executive Vice President,
Wright Express International
Kirk Pond
Former Chairman,
President and CEO of Fairchild
Semiconductor International, Inc.
Regina O. Sommer
Financial and Business Consultant
David D. Maxsimic
Executive Vice President,
Sales and Marketing
George Hogan
Senior Vice President and
Chief Information Officer
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
CORPORATE HEADQUARTERS
ATTORNEYS
INVESTOR RELATIONS
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
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116-5022
Wilmer Cutler Pickering Hale
and Dorr LLP
60 State Street
Boston, MA 02109
(617) 526-6000
STOCK HOLDERS’ MEETING
Date: May 18, 2012
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 SYMBOL
NYSE WXS
Michael E. Thomas
Vice President, Finance and Investor Relations
207-523-6743
Michael_Thomas@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.
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FINANCIAL HIGHLIGHTS
TOTAL REVENUE
($ in Millions)
TOTAL FUEL
TRANSACTIONS PROCESSED
(in Millions)
CORPORATE PAYMENT
PURCHASES
($ in Millions)
553
319
240 250
277
260 270
388
390
336
291
315
7,759
4,414
3,083
2,405
1,845
1,301
0 6
07 0 8
0 9
1 0
1 1
0 6
07 0 8
0 9
1 0
1 1
0 6
07 0 8
0 9
1 0
1 1
KEY FINANCIAL HIGHLIGHTS & RECONCILIATIONS
($ in thousands)
Revenue
GAAP net income
Reconciliation of GAAP Net Income to Adjusted Net Income
GAAP net income
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
2009
2010
2011
$
$
315,203 $
390,406
139,659 $
87,629
$
$
553,076
133,622
$
139,659 $
87,629
$
133,622
(136,485)
—
—
43,142
5,066
814
599
17,029
11,276
—
214
(10,872)
22,412
—
715
Tax impact
Adjusted Net Income
32,821
(8,847)
(4,085)
$
85,616
$
107,301
$
141,792
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. Specifi cally, 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 fl uctuations associated with fuel-price derivative contracts;
• The non-cash, mark-to-market adjustments on derivative instruments are diffi cult to forecast accurately, making comparisons across historical and future quarters diffi cult to
evaluate;
• The amortization of purchased intangibles and asset impairment have no impact on the operations of the business; and
• The changes in the tax receivable agreement 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 fl ows 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
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DEAR STOCKHOLDER:
Wright Express had another great year in 2011. We experienced
continued strength across our business and delivered revenue
growth of 42% and adjusted net income growth of 32%, amid a choppy
economic environment. Over the last several years, we maintained
our focus on driving growth and diligently investing in our core
business, products, and customer experience, while also capitalizing
on acquisition opportunities such as Wright Express Australia and
rapid! Paycard. These decisions and the subsequent returns on
our various investments have played a vital part in our fi nancial
performance. Our 2011 results also demonstrate further progression
against our multi-pronged growth strategy to expand our North
American fl eet business, diversify our revenue streams and
develop our international presence.
2
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Fleet Payment Solutions
Our Fleet Payment Solutions segment had
a strong year driven by steady growth in our
core North American business and a full year
of contribution from Wright Express Australia.
In North America, extending our leadership
position remained an important objective.
While our year-over-year performance
trended in-line with overall economic
growth, our other key performance
metrics showed growth as we continued
to sign new partners and customers in
the small fl eet market and capture share
in the mid to large fl eet marketplace. Our
closed-loop network remains a signifi cant
competitive differentiator, with our partners
and customers recognizing the value,
convenience, security and control our
solutions provide. Further, our continual
focus on customer satisfaction has led to
record low attrition.
We are always looking for additional ways
to enhance our value proposition to our
customers by adding new features and
services to help them manage their fl eets
more effi ciently and effectively. For example,
in August we launched an Over-the-Road
product aimed at the heavy truck fl eet
market. While this product is still relatively
new and site acceptance is still in the
early stages, it extends us into an adjacent
market with long-term growth potential.
Internationally, we experienced a successful
transition as we integrated our acquisition
of Wright Express Australia. Our Australian
fl eet business has been meeting our
expectations and we have expanded the
customer base. In May 2011 we began
processing transactions for BP International
in Australia, which is roughly double the size
of our BP New Zealand business.
Outside of Australia, we continue to explore
markets and opportunities where we can
extend our international fuel card presence.
This includes building stronger relationships
with major and regional oil companies and
pursuing acquisitions or strategic alliances
to further accelerate our on-the-ground
presence in new markets.
Other Payment Solutions
Diversifi cation of our business through our
Other Payment Solutions segment is another
key component of our growth strategy and
has helped contribute to the strength in our
overall results. To build off the momentum in
2010, we expanded the size of our sales force
in 2011 to further achieve our diversifi cation
objectives. This segment performed
exceptionally well in 2011 and once again
exceeded our expectations.
The predominant driver in this segment
continues to be our corporate charge card
business. After increasing 43% in 2010,
Outside of Australia, we continue to explore
markets and opportunities where we can extend
our international fuel card presence.
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Glidewell has been a Wright Express customer for fi ve
years utilizing their MasterCard purchasing card, travel and
entertainment card, and Purchase Log single-use ghost accounts.
Our Wright Express programs work seamlessly and we’ve
increased effi ciencies using these tools. We recently extended
our relationship with Wright Express in the prepaid payroll area.
Our evaluation process identifi ed rapid! PayCard as a best-in-
class product and our experience with Wright Express in payment
solutions made extending our relationship to include their
prepaid payroll solution an obvious choice. We are now rolling
out rapid! PayCard to all our employees and expect to replace
600 paper checks per pay cycle.
Paul de Leon
Accounting Professional
Glidewell Laboratories
4
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spend volume increased 76% to $7.8 billion
in 2011. This growth was largely driven by
our online travel customers and through
continued expansion into other industries
such as insurance and warranty. To leverage
off our domestic success, we adapted
our payment processing capabilities to
foreign markets and recently signed our
fi rst international online travel customer
in Europe. With tremendous expertise in
online travel and proven success with our
U.S. customers, we feel confi dent in our
ability to sign additional customers and
gain further traction internationally in 2012.
We also broadened our Other Payment
Solutions offering by acquiring the business
of rapid! PayCard, a provider of payroll
debit cards focusing on small-to-medium
sized businesses, in April 2011. This was
strategically important as it jump-started
our entrance into the domestic prepaid
payroll market. Further, its existing
customer base coincided well with our own
and their deep focus on customer service
and training was a natural complement to
our corporate culture. To date, we have seen
success cross-selling payroll cards into our
existing customer base. With the prepaid
payroll card market growing at roughly 15
percent to 20 percent, we believe prepaid
payroll, along with other prepaid corporate
programs, have the ability to become an
important contributor long-term as we
invest in the business, continue to gain
market share and expand our product offering.
DIVERSIFYING REVENUE BEYOND
NORTH AMERICAN FUEL
($ in Millions)
*
202
101
62
46
0 8
0 9 1 0 1 1
* Major components of diversifi ed revenue include
Corporate Cards, International, Pacifi c Pride, TelaPoint,
WEXSMART and rapid! PayCard.
Conclusion
As we move forward, we are well positioned
to execute on our strategic initiatives thanks
to our solid fi nancial foundation. Our multi-
pronged growth strategy continues to be
our roadmap to further grow and diversify
the business and achieve positive results.
Looking ahead, we expect continued
strong momentum in our business through
ongoing reinvestment in our Fleet and Other
Payment Solutions segments, coupled
with our unrelenting focus on providing
superior products and unmatched customer
experience. The combination of these
elements will drive revenue and earnings
growth and support our confi dence and
optimism in the future trajectory of our
business. On behalf of the management
team and our Board of Directors, we thank
you, our stockholders, for your continuing
support and investment in Wright Express.
Sincerely,
Michael E. Dubyak
Chairman, President and
Chief Executive Offi cer
March 19, 2012
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EXECUTIVE TEAM
Michael E. Dubyak
Chairman, President
and Chief Executive
Offi cer of Wright
Express Corporation
Melissa D. Smith
President,
The Americas
Steven Elder
Senior Vice President
and Chief Financial
Offi cer
Kenneth W. Janosick
Senior Vice President,
Small Business
Solutions
Hilary A. Rapkin
Senior Vice President,
General Counsel and
Corporate Secretary
Gareth Gumbley
Executive Vice
President, Wright
Express International
George Hogan
Senior Vice President
and Chief Information
Offi cer
Richard K. Stecklair
Senior Vice President,
Corporate Payment
Solutions
David D. Maxsimic
Executive Vice
President,
Sales and Marketing
Jamie Morin
Senior Vice President,
Client Services
Organization
regory
G
S. Strzegowski
Senior Vice President,
Corporate Development
Robert C. Cornett
Senior Vice President,
Human Resources
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 state-
ments. When used in this annual report, the words “may,” “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. The following factors, among others, could cause actual
results to differ materially from those contained in forward-looking statements made in this annual report: the effects of general economic conditions on fueling patterns and the
commercial activity of fl eets; the effects of the Company’s international business expansion and integration efforts and any failure of those efforts; the impact and range of credit
losses; breaches of the Company’s technology systems and any resulting negative impact on our reputation liability, or loss of relationships with customers or merchants; the
Company’s failure to successfully integrate the businesses it has acquired; 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 banking and securities regulators,
or possible changes in banking regulations impacting the Company’s industrial bank and the Company as the corporate parent; the impact of foreign currency exchange rates on
the Company’s operations, revenue and income; changes in interest rates; fi nancial loss if the Company determines it necessary to unwind its derivative instrument position prior
to the expiration of a contract; the incurrence of impairment charges if our assessment of the fair value of certain of our reporting units changes; the uncertainties of litigation;
as well as other risks and uncertainties identifi ed in Item 1A of the Company’s Annual Report on Form 10-K fi led with SEC on February 28, 2012 and any subsequent securities
fi lings. Our forward-looking statements and these factors do not refl ect the potential future impact of any merger, acquisition or disposition. The forward-looking statements
speak only as the date of the submission 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.
66
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PERFORMANCE GRAPH
The following graph assumes $100 invested on December 31, 2006 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, 2006, and ending on December 31, 2011, 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
200
175
150
125
100
75
50
25
e
u
l
a
V
x
e
d
n
I
12/31/06
12/31/07
12/31/08
12/31/09
12/31/10
12/31/11
Wright Express Corporation
Russell 2000
S&P Data Processing and Outsourced Services
Period Ending
Index
12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 12/31/11
Wright Express Corporation
Russell 2000
100.00
113.86
40.42
102.21
147.58
174.14
100.00
98.43
65.18
82.89
105.14
100.75
S&P Data Processing and Outsourced Services
100.00
102.08
71.29
95.99
91.97
114.75
Source : SNL Financial LC, Charlottesville, VA
© 2012
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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, 2011
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, 2011, the last business day of the registrant's most recently completed second fiscal quarter,
was $1,991,935,715 (based on the closing price of the registrant's common stock on that date as reported on the New York
Stock Exchange).
There were 38,691,280 shares of the registrant's common stock outstanding as of February 24, 2012.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for the 2012 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
Mine Safety Disclosures
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
36
38
82
82
84
85
85
85
85
85
86
91
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. This Annual Report includes forward-looking statements including the “Strategy” section of this Annual
Report in Item 1 and the "Outlook for the Future" section of this Annual Report in Item 7. Any statements in this Annual Report that
are not statements of historical facts may be deemed to be forward-looking statements. When used in this Annual Report, the words
"may," "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: the effects of general economic conditions on fueling
patterns and the commercial activity of fleets; the effects of the Company’s international business expansion and integration efforts
and any failure of those efforts; the impact and range of credit losses; breaches of the Company’s technology systems and any
resulting negative impact on our reputation liability, or loss of relationships with customers or merchants; the Company’s failure to
successfully integrate the businesses it has acquired; 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 banking and securities regulators, or possible changes in banking regulations impacting the
Company’s industrial bank and the Company as the corporate parent; the impact of foreign currency exchange rates on the
Company’s operations, revenue and income; changes in interest rates; financial loss if the Company determines it necessary to
unwind its derivative instrument position prior to the expiration of a contract; the incurrence of impairment charges if our assessment
of the fair value of certain of our reporting units changes; the uncertainties of litigation; 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 Payment Solutions and Other Payment Solutions segments 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 incorporated in 2005, has been publicly traded since February 16, 2005.
Before our initial public offering, we conducted business as a privately-held company beginning in 1983. Our growth over the years
has largely been organic but has also been supplemented with the following recent acquisitions:
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On March 31, 2011, we acquired certain assets of rapid! Financial Services LLC (“rapid! PayCard”), a provider of
payroll prepaid cards, e-paystubs and e-W2s to small and medium sized businesses in the United States.
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 350,000 cards in
circulation and is an issuer and processor of prepaid cards. Concurrent with the acquisition we established Wright
Express Australia Fuel and Wright Express Australia Prepaid (collectively Wright Express Australia).
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.
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The Other Payment Solutions segment provides customers with payment processing solutions for their corporate purchasing
and transaction monitoring needs through our corporate purchase card, our prepaid and gift card products and services in Australia and
through our payroll prepaid card product and services in the United States. Other Payment Solutions revenue is earned primarily from
payment processing revenue.
Our wholly-owned banking subsidiary, Wright Express Financial Services Corporation ("FSC"), is an Industrial Bank
incorporated in 1998 which is an FDIC-regulated depository institution chartered under the laws of the State of Utah. FSC is required
to maintain elements of independence to comply with its charter and is required to file separate financial statements with its regulator.
The activities performed by FSC are integrated in the operations of each of the Company’s two segments. FSC’s operations
contribute to both segments; the bank raises capital primarily through the issuance of certificates of deposit and provides the financing
and makes the credit decisions that enable both segments to extend credit to its domestic customers. All other services are provided
by operations outside the bank. FSC approves domestic customer applications, maintains appropriate credit lines for each customer,
issues the cards, provides funding and is the counterparty for the customer relationships for most of our domestic programs.
Operations such as marketing, merchant relations, customer service, software development and IT are performed within the Wright
Express organization but outside of FSC.
We believe the following strengths distinguish us in our industry:
•
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•
•
•
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We are a leading provider of fleet fuel payment services. Our fleet payment solutions are used by 6.6 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 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 network 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 provide innovative corporate purchasing capabilities through our corporate purchase card and payroll card
products. These products can be integrated with our customer’s internal systems to streamline their payroll, accounts
payable and reconciliation processes using our information management functionality.
We offer a differentiated set of products and services, including security and purchase controls, 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 their accounts.
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 in Australia, representing over 120
clients and more than 300 card programs.
rapid! PayCard provides a comprehensive PayCard benefit and ePayroll program designed for employers choosing to
convert to electronic delivery of payroll in the United States.
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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:
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Extending our leadership position in North America and growing our core fleet business. We intend to build upon the
organic growth we achieved in prior years 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.
Further build on our international growth. Building upon the knowledge we have gained through our Wright Express
Australia Fuel 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. We also plan to build on the strength of our Wright Express Australia
Prepaid business by leveraging our current client base by offering new prepaid card products.
Diversifying our business. To support the opportunity we see in our corporate purchase card and single use account
businesses, we plan to expand our sales force and target additional markets. We also plan to grow our rapid! PayCard
product by expanding our sales force, utilizing our existing sales force to cross sell, and targeting additional markets.
We continue to explore new markets through acquisitions.
FLEET PAYMENT SOLUTIONS SEGMENT
We have created one of the largest proprietary fuel payment processing networks in the United States. 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
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. Our relationship with both fleets and
merchants enables us to provide security and controls and provide customizable reporting.
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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 2011, we had approximately 233 million domestic payment processing transactions
and approximately 15 million Australian payment processing transactions.
Transaction processing
In a transaction processing transaction we earn a fixed fee per transaction. We processed approximately 52 million domestic
transaction processing transactions and approximately 19 million international transaction processing transactions in 2011. There are a
variety of levels of services provided in transaction processing, ranging from software replacement to full outsourcing and the revenue
we recognize varies 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 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 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 customers.
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•
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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.
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 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, test 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 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.
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 in some cases 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 small and mid-size fleets are attracted to our account
management services to help manage their fleets. 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.
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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, 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
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 products 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
During 2011, approximately 47 percent of our total revenues resulted from fees paid to us by fuel providers based on a
negotiated percentage of the purchase price of fuel purchased by our customers. To address fluctuations in fleet revenue streams
resulting from changes in fuel prices, we purchase 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 North America 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, which approximates 65 percent to 70 percent
of our worldwide fuel related earnings 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, we receive 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.
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Create a ceiling price. When the current month call option contract settles, we make 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 counterparties and us.
The following table presents information about the Options as of December 31, 2011:
Percentage
(a)
North American
Weighted-Average Price
Ceiling
Floor
(b)
For the period January 1, 2012 through March 31, 2012
For the period April 1, 2012 through June 30, 2012
For the period July 1, 2012 through September 30, 2012
For the period October 1, 2012 through December 31, 2012
For the period January 1, 2013 through March 31, 2013
For the period April 1, 2013 through June 30, 2013
80% $
80% $
80% $
80% $
53% $
27% $
3.09 $
3.32 $
3.45 $
3.46 $
3.35 $
3.33 $
3.15
3.38
3.51
3.52
3.41
3.39
(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 projection of the North American retail price equivalent of the underlying strike price of the fuel price
derivatives.
OTHER PAYMENT SOLUTIONS SEGMENT
We issue corporate purchase card, prepaid card and payroll card products as described below. Our corporate purchase card
products provide commercial travel and entertainment and purchase capabilities to businesses in industries that can utilize our
information management functionality. The corporate purchase card 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. Our prepaid
card products are primarily offered in Australia through our Wright Express Australia Prepaid subsidiary. Our payroll card products
are offered through our rapid! PayCard product.
Products and Services
Corporate purchase card
Our corporate purchase 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 product
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, creating
efficiencies and cost savings for our customers.
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. The prepaid cards are restricted to a single merchant or a limited group of
retailers. This category includes gift cards, general purpose prepaid cards and travel cards. Through our website,
www.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.
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Payroll card
Payroll card products, issued through our rapid! PayCard product and using the VISA network, focus on employer payroll
programs, providing payroll prepaid cards, e-paystubs and e-W2s in the United States.
Marketing Channels
We market our other payment solutions directly to our customers in conjunction with our fleet offerings, as well as to potential
new clients with whom we have no existing relationship. Our corporate purchase products are marketed to commercial and
government organizations and we leverage the marketing, advertising and network of MasterCard.
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. Our rapid! PayCard product is marketed to small and medium sized
business in the United States, replacing paper employee payroll checks.
Employees
OTHER ITEMS
As of December 31, 2011, Wright Express Corporation and its subsidiaries had 899 employees, of which, 740 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 purchase 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 maintaining and 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 a secure 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."
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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. In
addition, we have obtained a provisional patent on our Precision Pay product and have filed an application for a patent on our adjusted
odometer reporting product. 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. We market our products and services using the Wright Express brand names in
the United States and the MotorPass and Motorcharge brand names in Australia.
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.
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 those 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 those 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
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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.
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
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 revenues.
As of December 31, 2011, approximately 47 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 of our revenues are dependent on fuel prices, which are prone to volatility in the United States. For example, we
estimate that during 2011, a one cent decline in average fuel prices below average actual prices would have resulted in approximately
a $0.8 million decline in 2011 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:
•
•
•
•
•
•
•
•
•
•
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 significant 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, 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 percentage based 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.
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 slowdown, 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.
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.
11
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 debt with new debt that carry the same
interest rates.
We had $295.3 million of variable interest rate indebtedness outstanding at December 31, 2011, under our credit agreement, of
which we had borrowings of $268 million on our credit facility that bore interest at a floating rate equal to the one-month LIBOR plus
150 basis points, and $27 million is based on the prime rate plus 50 basis points. During 2010 we entered into an interest rate swap
contract that ends in March 2012 that fixed the interest rate on $150 million of our variable rate revolving credit facility. Rising
interest rates would result in reduced net income.
Our industrial bank subsidiary, FSC, uses certificates of deposit and interest-bearing money market deposits, or collectively
Brokered Deposits, to finance payments to major oil companies. Certificate of deposits carry fixed rates from issuance to maturity.
The interest-bearing money market deposits carry variable rates. Upon maturity, the deposits will likely be replaced by issuing new
deposits to the extent that they are needed. In a rising interest rate environment, FSC would not be able to replace maturing deposits
with deposits that carry the same interest rates. Rising interest rates would result in reduced net income to the extent that certificates of
deposit and money market deposits mature and are replaced. At December 31, 2011, FSC had outstanding $490.9 million in
certificates of deposit maturing within one year and $89.3 million in certificates of deposit maturing within one to two years; and
$103.1 million in interest-bearing money market deposits.
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 business is 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 21 percent
of our total revenues in 2011. 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 may never realize the anticipated benefits of acquisitions we have completed or may undertake.
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.
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:
•
•
•
•
•
•
•
•
•
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,
bribery, financial transaction reporting and positive balance or prepaid cards;
enforceability of intellectual property and contract rights;
potentially adverse tax consequences;
local labor conditions and regulations; and
fluctuation in foreign currencies.
12
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.
We may incur impairment charges on goodwill or other intangible assets.
We account for goodwill in accordance with Financial Accounting Standards Board, or FASB, Accounting Standard
Codification, or ASC, Topic 350, Intangibles—Goodwill and Other. Our reporting units and related indefinite-lived intangible assets
are tested annually during the fourth fiscal quarter of each year in order to determine whether their carrying value exceeds their fair
value. In addition, they are tested on an interim basis if an event occurs or circumstances change between annual tests that would
more likely than not reduce their fair value below carrying value. If we determine the fair value of the goodwill or other indefinite-
lived intangible assets is less than their carrying value as a result of the tests, an impairment loss is recognized. Any such write-down
could adversely affect our results of operations.
Our goodwill resides in multiple reporting units. The profitability of individual reporting units may suffer periodically from
downturns in customer demand and other factors, the high level of competition existing within our industry, and the level of overall
economic activity. Individual reporting units may be relatively more impacted by these factors than the company as a whole. As a
result, demand for the services of one or more of the reporting units could decline which could adversely affect our operations and
cash flow, and could result in an impairment of goodwill or intangible assets. As a result of our annual impairment analysis during the
fourth quarter of fiscal 2011, we have determined that the fair value of the goodwill or other indefinite-lived intangible assets are
greater than their carrying values, thus no impairment charge was recorded. Because the acquisitions of the assets of rapid! Financial
Services LLC, or rapid! PayCard, and of RD Card Holdings Australia Pty Ltd. were completed recently, our analysis also indicated
that the fair values of rapid! PayCard and Wright Express Australia units closely approximate the carrying value. Although an
impairment charge is not warranted at this time, if actual results deteriorate versus our assumptions in the valuation, the potential
exists for an impairment in the rapid! PayCard and Wright Express Australia reporting units. Similarly, for all other reporting units,
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 impairment losses and/or
amortization expense.
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 and term note expire in May 2016 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.
Volatility in the financial markets may negatively impact FSC’s ability to attract deposits.
Adverse conditions in the credit market may limit FSC’s ability to attract deposits at a time when we would like or need to do
so. Any limitation of availability of deposits could have an impact on our ability to finance our domestic accounts receivable 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. If "hackers" or other unauthorized persons are successful in
penetrating our network security they could misappropriate our proprietary information or cause interruptions in our WEXOnline web
site. We are required to expend capital and other resources to protect against the threat of such security breaches, and may be required
to expend significant capital and other resources to alleviate problems caused by any such breaches. Moreover, any security breach or
inadvertent transmission of information about our customers could expose us to liability in excess of any applicable insurance policies,
litigation and/or cause damage to our reputation.
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.
Our industry continues to become increasingly competitive, which makes it more challenging for us to maintain profit
margins at historical levels.
We face and expect to 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 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.
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 British pound sterling. 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 fluctuations in the U.S. dollar
against other currencies, will not materially affect our financial results.
14
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.
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.
As we complete acquisitions and expand our business operations both within the United States and internationally, we will need to
maintain effective internal controls over financial reporting and disclosure control and procedures. 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.
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.
Historical transactions with our former parent company may adversely affect our financial statements.
Historical transactions involving Avis Budget Group, Inc., or 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 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, or its successor or its
current or former affiliates, could adversely affect our financial statements.
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
15
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.
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 83,500 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 5,400 square feet in Louisville, Kentucky to
support our fleet fuel operations. We lease 10,000 square feet of space in Salem, Oregon to support Pacific Pride. We lease 2,300
square feet of space in Tampa, Florida to support our rapid! PayCard operations. We lease 21,500 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 2,000 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 and 200 square feet of space in Guildford, England 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 2011. From time to time, we are subject to legal proceedings and
claims in the ordinary course of business. We do not believe the outcome of any of pending litigation will have a material adverse
effect on our financial statements.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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:
2010
First quarter
Second quarter
Third quarter
Fourth quarter
2011
First quarter
Second quarter
Third quarter
Fourth quarter
High
Low
$
$
$
$
$
$
$
$
33.53 $
35.97 $
36.58 $
46.97 $
54.35 $
57.13 $
54.77 $
56.30 $
27.63
29.14
28.58
35.41
45.27
47.03
36.79
35.74
As of February 24, 2012, the closing price of our common stock was $63.63 per share, there were 38,691,280 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 $25 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, 2011:
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, 2011
November 1 – November 30, 2011
December 1 – December 31, 2011
Total
— $
— $
— $
— $
—
—
—
—
— $
— $
— $
48,633,132
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, 2013. 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)
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
Balance sheet information, at end of period
Total assets
Liabilities and stockholders' equity
All liabilities except preferred stock
Preferred stock
Total stockholders' equity
2011
Year ended December 31,
2009
2010
2008
2007
$
$
$
$
$
$
553,076 $
319,752 $
11,676 $
(11,869 ) $
133,622 $
3.45 $
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
38,686
38,486
38,303
38,885
40,042
$ 2,278,060 $ 2,097,951 $ 1,499,662 $ 1,611,855 $ 1,785,076
$ 1,568,745 $ 1,538,944 $ 1,048,346 $ 1,307,193 $ 1,570,817
10,000
204,259
—
709,315
—
559,007
10,000
441,316
10,000
294,662
Total liabilities and stockholders' equity
$ 2,278,060 $ 2,097,951 $ 1,499,662 $ 1,611,855 $ 1,785,076
18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
2011 Highlights and Year in Review
During 2011, we focused on international growth, growing our domestic customer base and customer retention. Our results for
the year were impacted by the following significant events and accomplishments:
•
•
•
•
•
•
Total fleet transactions processed increased 15 percent from 2010 to 319.4 million. Payment processing transactions
increased 11 percent to 247.9 million, and transaction processing transactions increased 30 percent to 71.5 million.
These transactions include a full year of our Wright Express Australia operations, which was acquired on September
14, 2010, as well as the implementation of a significant private label customer in Australia and New Zealand.
Our corporate purchase card product grew to $7.8 billion in purchase volume for the year, which is a 76 percent
increase from 2010. This increase is primarily due to our single use account product used for online travel-
related purchases.
On May 23, 2011, we refinanced our 2007 credit facility and 2010 term loan with a new credit agreement. This new
credit agreement provided a five year $200 million amortizing term loan facility and a $700 million revolving credit
facility.
During 2011, we reduced borrowings under our financing facilities by approximately $112 million.
We acquired the assets of rapid! PayCard on March 31, 2011, for approximately $18 million.
Domestic fuel prices averaged $3.62 per gallon during 2011. Domestic fuel prices averaged $2.84 per gallon during
2010. Australian fuel prices increased 17 percent to $5.47 ($USD) per gallon, from the fourth quarter of the prior year.
19
Results of Operations
YEAR ENDED DECEMBER 31, 2011, AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2010
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 (a)
(Loss) gain on foreign currency transactions
Net realized and unrealized losses on domestic fuel price
derivative instruments (a)
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 - Domestic – ($USD/gal)
Average price per gallon of fuel - Australia – ($USD/gal)
Transaction processing revenue:
Transaction processing transactions
Account servicing revenue:
Average number of vehicles serviced
NM – Not Meaningful
2011
2010
Increase
(decrease)
$
293,756 $
16,553
60,569
46,084
19,742
220,154
16,591
39,692
37,264
15,538
436,704
329,239
244,910
201,547
191,794
127, 692
(11,676)
(368)
(11,869)
(715)
(5,314)
7,141
(7,244)
(214)
167,166
59,925
122,061
48,337
$
107,241 $
73,724
33 %
—
53 %
24 %
27 %
33 %
22 %
50 %
(120)%
NM
(64)%
(234)%
37 %
24 %
45 %
2011
2010
Increase
(decrease)
247,928
71.73 $
3.62 $
5.47 $
222,769 (b)
56.25(b)
2.84
4.70
$
$
$
11 %
28 %
27 %
16 %
71,501
54,980
30 %
6,322
5,580(b)
13 %
(a) As described in Item 8—Note 20 to our Financial Statements, financing interest expense and net realized and unrealized gains and losses on derivative instruments
are allocated solely to the Fleet Payment Solutions segment.
(b) Payment processing transaction and vehicle count data, as well as related calculated metrics associated with this data, for 2010 have been revised to reflect
information provided from an improved business intelligence reporting process that was implemented in the second quarter of 2011. These changes do not impact our
revenue or earnings. 2010 data has also been updated to remove non-fuel payment processing transactions from Wright Express Australia operations.
Revenues
Payment processing revenue increased $73.6 million for 2011, as compared to 2010. Approximately $44.7 million of this
increase is due to a 27 percent increase in the average domestic price per gallon of fuel. Also contributing to the increase is the
increase in the number of domestic payment processing transactions, which contributed approximately $12.7 million. The remaining
variance is primarily due to our acquisition of Wright Express Australia Fuel, acquired late in the third quarter of 2010.
Account servicing revenue increased $20.9 million for 2011, as compared to 2010. Approximately $18.5 million of the increase
is due to Wright Express Australia Fuel activity. The remaining increase is primarily due to monthly fees received for our WEXSmart
product line. A greater proportion of Wright Express Australia Fuel revenues is attributable to monthly servicing fees than is
experienced in the United States.
20
Our finance fees have increased $8.8 million for 2011, as compared to 2010. Payments for customer receivables are due within
thirty days or less. Finance fee revenue is earned when a customer’s receivable balance becomes delinquent. The finance fee is
calculated using a stated late fee rate based on the outstanding balance. The absolute amount of such outstanding balances can be
attributed to (i) changes in fuel prices; (ii) customer specific transaction volume; and (iii) customer specific delinquencies. Finance fee
revenue can also be impacted by changes in (i) late fee rates and (ii) increases or decreases in the number of customers with overdue
balances. The change in 2011 is primarily due to higher accounts receivable balances, as a result of higher fuel prices and transaction
volumes, resulting in an increase of approximately $5.2 million over 2010. The remainder of the increase, approximately $3.6 million,
was due to the operations of Wright Express Australia Fuel which was acquired late in the third quarter of 2010.
Other revenue increased $4.2 million for 2011, as compared to 2010. Approximately $2.2 million of this increase is due to our
acquisition of Wright Express Australia Fuel, acquired late in the third quarter of 2010. Also contributing to the increase was $1.2
million of additional sales of WEXSmart telematics units during 2011, as compared to 2010.
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
Other expense
2011
2010
Increase
(decrease)
$
$
$
$
$
$
93,876 $
21,926 $
26,625 $
39,904 $
4,488 $
12,791 $
82,445
20,750
18,747
28,331
4,494
8,658
14 %
6 %
42 %
41 %
—
48%
•
•
•
•
•
•
Salary and other personnel expenses increased $11.4 million for 2011, as compared to 2010. Salary expenses related to
our Australian operations increased by approximately $6.7 million compared to the prior year, as we had a full year of
operation in 2011 compared to 2010. Salary expense associated with our stock compensation plans and the annual
bonus incentive increased approximately $2.5 million as compared to 2010. The remaining increase is primarily due to
annual salary and benefit increases.
Service fees increased $1.2 million during 2011, as compared to 2010. Service fees associated with the WEXSmart
product line increased $1.3 million over the prior year due to additional units sold. Operations at Wright Express
Australia, which was acquired late in the third quarter of 2010, resulted in an increase of service fees of $3.4 million,
as compared to the prior year. Offsetting these increases were the fees incurred in 2010 related to the acquisition of
Wright Express Australia.
Provision for credit loss increased $7.9 million for 2011, as compared to 2010. Domestic credit loss increased by
approximately $6.0 million as compared to 2010. This increase is primarily associated with higher levels of domestic
customer spend throughout the year, associated with the increase in fuel prices. A full year of operations of Wright
Express Australia, acquired late in the third quarter of 2010, contributed $1.9 million of the increase. 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 customers spend remained flat at 14.9 basis points for
both 2011 and 2010.
Depreciation and amortization expenses increased $11.6 million for 2011, as compared to 2010. This increase is
primarily due to approximately $8.8 million of additional amortization associated with the intangible assets related to
the acquisition of RD Card Holdings Australia Pty Ltd, acquired late in the third quarter of 2010.
Operating interest expense is interest on our certificates of deposit and interest-bearing money market deposits
(collectively, “Brokered Deposits”), as well as interest on borrowed federal funds, which we use to finance the
receivables arising from our domestic payment processing transactions. This interest expense for 2011 remained
relatively flat as compared to 2010. Our average debt balance for 2011 totaled $695.7 million as compared to our
average debt balance of $527.3 million for 2010. The impact of the increase in the average debt balance was
essentially offset by lower interest rates on the debt.
Other expense increased $4.1 million for 2011, as compared to 2010. Approximately $1.3 million of this increase is
due to a full year of operations of Wright Express Australia acquired late in the third quarter of 2010. The remaining
increase over 2010 is primarily due to special projects and customer incentives.
21
Financing interest expense is related to our current Credit Agreement as well as our 2007 credit facility and 2010 term loan.
Interest expense for 2011 increased $6.4 million from 2010, due to an increase in the average outstanding balance on our financing
debt. The increase in our financing debt occurred during the second half of 2010 in conjunction with our acquisition and funding of
operations for Wright Express Australia. Finance interest expense is also impacted by our consolidated leverage ratio, which increased
subsequent to the 2010 acquisition. Finance interest expense also includes approximately $0.7 million in unamortized loan costs that
was expensed at the time the 2007 credit facility was replaced.
Our effective tax rate was 35.9 percent for 2011 and 39.6 percent for 2010. The decrease in the effective tax rate compared to
the prior year is primarily due to non-deductible acquisition expenses associated with our Australian acquisition in 2010, and our
decision to indefinitely reinvest our Australian profits outside the United States in 2011. We are aware that during the fourth quarter of
2011, proposed changes in Australia tax consolidation laws were announced. Such changes could impact the deductibility of
approximately $68 million in amortization expense in Australia and hence have a one-time impact on our recorded tax rate in the
coming year.
Gain on foreign currency transactions
During 2010, in anticipation of our closing of the acquisition 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 2010,
resulting in a currency gain of approximately $7.1 million during 2010. No such activity was recorded in 2011, as the Australian
dollars were used to complete the acquisition of RD Card Holdings Australia Pty Ltd in 2010.
Fuel price derivatives
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. During 2011 we recorded a loss of
$11.8 million, consisting of a realized loss of $22.7 million and an unrealized gain of $10.9 million. During 2010 we recorded a loss of
$7.2 million, consisting of a realized gain of $9.8 million and an unrealized loss of $17.0 million. The increase in losses is due to the
overall increase in the price of fuel relative to our hedged fuel prices.
22
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
Loss on foreign currency transactions
Income before income taxes
Income taxes
Net income
(in thousands)
Key operating statistics
Payment processing revenue:
Corporate purchase card volume
2011
2010
Increase
(decrease)
$
77,570 $
8,185
3,432
731
26,454
46,034
2,935
753
497
10,948
116,372
61,167
74,842
38,146
41,530
23,021
69 %
179 %
356 %
47%
142 %
90 %
96 %
80 %
(91)
—
—
41,439
15,058
23,021
9,116
$
26,381 $
13,905
80 %
65 %
90 %
2011
2010
Increase
(decrease)
$ 7,759,466 $ 4,414,145
76 %
Payment processing revenue increased approximately $31.5 million over 2010, primarily due to additional business derived
from our single use account product. Our corporate purchase card volume grew by over $3.3 billion in 2011 compared to 2010.
Transaction processing revenue increased approximately $5.2 million over 2010, primarily due to the transaction based fees
from Wright Express Australia Prepaid commencing with operations after our acquisition late in the third quarter of 2010.
Account servicing revenue increased approximately $2.7 million over 2010. Approximately $2.0 million of this increase is due
to the rapid! PayCard operations, acquired late in the first quarter of 2011. The remaining increase is due to operations at our Wright
Express Australia Prepaid subsidiary, acquired late in the third quarter of 2010.
Other revenue increased $15.5 million over 2010, as the volume of cross-border fees increased over the prior year. This
increase is offset by an increase in associated service fees expense.
Operating expenses increased by $36.7 million during 2011 primarily due to the following:
•
•
•
•
Service fees increased by $22.7 million as compared to 2010 due to higher fees associated with higher overall
purchase volume.
Salary and other personnel expenses increased $5.8 million as compared to 2010 primarily due to additional payroll
costs assumed upon the acquisition of Wright Express Australia Prepaid.
Depreciation and amortization expenses increased $3.9 million for 2011, as compared to 2010. This increase is
primarily due to approximately $2.5 million of additional amortization associated with the intangible assets related to
the purchase of RD Card Holdings Australia Pty Ltd, acquired late in the third quarter of 2010. The remaining increase
is due to additional assets placed into service.
Technology leasing and support expenses increased $2.6 million for 2011, as compared to 2010. This increase is
primarily related to the volume increase in our corporate purchase card products.
23
YEAR ENDED DECEMBER 31, 2010, AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2009
The following table reflects comparative operating results and key operating statistics within our Fleet Payment
FLEET PAYMENT SOLUTIONS SEGMENT
Solutions segment:
(in thousands)
Revenues
Payment processing revenue
Transaction processing revenue
Account servicing revenue
Finance fees
Other
Total revenues
Total operating expenses
Operating income
Financing interest expense (a)
Gain (loss) on foreign currency transactions
Gain on settlement portion of amounts due under tax
receivable agreement
Net realized and unrealized losses on fuel price
derivative instruments
Increase in amount due under tax receivable agreement
Income before taxes
Income taxes
Net income
(in thousands, except per transaction and per gallon data)
Key operating statistics
Payment processing revenue:
Payment processing transactions
Average expenditure per payment processing transaction
Average price per gallon of fuel – Domestic – ($USD/gal)
Average price per gallon of fuel – Australia – ($USD/gal)
Transaction processing revenue:
Transaction processing transactions
Account servicing revenue:
Average number of vehicles serviced
NM – Not Meaningful
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
211,673
80,436
$
73,724 $
131,237
(68)%
(64)%
(42)%
(40)%
(44)%
2010
2009
Increase
(decrease)
222,769(b)
56.25(b) $
2.84 $
4.70 $
204,147
48.71
2.39
—
$
$
$
9 %
15 %
19 %
—
54,980
55,921
(2)%
5,580(b)
4,648
20 %
(a) As described in Item 8—Note 20 to our Financial Statements, financing interest expense and net realized and unrealized gains and losses on derivative instruments
are allocated solely to the Fleet Payment Solutions segment.
(b) Payment processing transaction and vehicle count data, as well as related calculated metrics associated with this data, for 2010 have been revised to reflect
information provided from an improved business intelligence reporting process that was implemented in the second quarter of 2011. These changes do not impact our
revenue or earnings. 2010 data has also been updated to remove non-fuel payment processing transactions from Wright Express Australia operations.
Revenues
Payment processing revenue increased $40.6 million for 2010, as compared to 2009. Approximately $29 million of this
increase was due to a 19 percent increase in the average price per gallon of fuel. Also contributing to the increase was the increase in
the number of domestic payment processing transactions, which contributed approximately $5.9 million. The remaining variance was
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
was 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 was attributable to monthly servicing fees than is experienced in the
United States.
24
Our finance fees increased $4.9 million for 2010, as compared to 2009. The change in the period was primarily due to higher
accounts receivable balances, as a result of higher fuel prices and transaction volumes.
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)%
•
•
•
•
•
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 as compared to 2009. The increase in domestic
salary expense was 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 was
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 was 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 to 2009. The increase was associated with
higher levels of expenditures throughout the year. Our credit losses as a percentage of expenditures declined from 15.9
basis points in 2009 to 14.9 basis points in 2010.
Depreciation and amortization expenses increased $6.6 million for 2010, as compared to 2009. This increase was
primarily due to approximately $5 million of additional amortization associated with the intangible assets related to the
acquisition of RD Card Holdings Australia Pty Ltd. The remaining difference was due to additional depreciation on
assets placed into service in 2010.
Operating interest expense is interest on our Brokered 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.
Financing interest expense was 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 2010. The increase in our financing debt occurred during the second half of 2010 in conjunction with our acquisition and
funding of operations for Wright Express Australia.
Our effective tax rate was 39.6 percent for 2010 and 38.0 percent for 2009. 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.
Gain on foreign currency transactions
In anticipation of our closing of the acquisition of RD Card Holdings Australia Pty Ltd, the Company purchased $365 million
Australian dollars in August 2010. The exchange rate moved in our favor during the remainder of 2010, resulting in a currency gain of
approximately $7.1 million for that year.
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.
25
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 purchase card 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
13,571
5,149
$
13,905 $
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 in 2010 over 2009, primarily due to additional business
derived from our single use account product. Our corporate purchase card 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 2009. This increase was partially offset
by an increase in associated service fees expense.
Operating expenses increased by $14.5 million during 2010 primarily due to the following:
•
•
•
•
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 as compared to 2009, 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
purchase card volume for 2010 compared to 6.0 basis points for 2009.
26
LIQUIDITY, CAPITAL RESOURCES AND CASH FLOWS
We focus on management operating cash as the primary measure we use internally to monitor cash flow performance from our
core operations and we believe it is a key element in achieving maximum stockholder value. Our industrial bank subsidiary, FSC,
utilizes Brokered Deposits as well as borrowed federal funds to finance our domestic accounts receivable. Since Brokered 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 Brokered 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 provided by (used for) operating activities
Net increase (decrease) in Brokered Deposits
Net (decrease) increase in borrowed federal funds
Management operating cash
Year ended December 31,
2010
2011
2009
$
51,168 $
163,853
(52,584 )
(10,550) $
106,504
(12,238)
(33,167)
(116,859)
71,723
$
162,437 $
83,716 $
(78,303)
The change in management operating cash in the comparative periods can be explained as follows:
• During 2011, our increase in accounts receivable, net of the account receivable balance acquired with the acquisition
of rapid! PayCard, as well as acquisition adjustments to RD Card Holdings Australia Pty Ltd., is funded by operating
activities as well as a $111 million overall increase in borrowed federal funds and Brokered Deposits. Accounts
receivable increased in 2011 over 2010 as a result of increased customer spend levels, due to higher fuel prices.
• During 2010, our increase in accounts receivable, net of the account receivable balance acquired with the Acquisition
of RD Card Holdings Australia Pty Ltd. is funded by operating activities as well as a $94 million overall increase in
borrowed federal funds and Brokered Deposits. Accounts receivable increased over the prior year as a result of
increased customer spend, due to higher fuel prices.
• 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. During the first
quarter of 2009 this overfunding was eliminated. Hence, there was a significant decrease in outstanding Brokered
Deposits. 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 non-cash pre-tax gain of approximately $136 million.
27
2011 Highlights
•
•
•
During 2011, we entered into a new credit facility and paid
down $112 million of our financing debt.
On March 31, 2011, we completed the acquisition of the
assets of rapid! PayCard for approximately $18 million,
which includes a $10 million projected earn-out payment at
the end of the first quarter of 2012. The acquisition was
funded through our revolving credit facility and term loan.
During 2011, we had approximately $25 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 2012 to be
approximately $28 to $32 million. Our capital spending is
financed primarily through internally generated funds.
2010 Highlights
•
•
•
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.
$83.7
2009 Highlights
•
•
•
•
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.
28
2009 Cash Utilization Summary
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)
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 Brokered Deposits and borrowed federal
funds.
FSC issued certificates of deposit in various maturities ranging between three months and two years and with fixed interest
rates ranging from 0.25 percent to 1.60 percent as of December 31, 2011, as compared to fixed interest rates ranging from 0.30 percent
to 1.95 percent as of December 31, 2010, and 0.35 percent to 4.00 percent as of December 31, 2009. FSC also issues interest-bearing
money market deposits with variable interest rates ranging from 0.60 percent to 0.73 percent as of December 31, 2011, as compared to
variable interest rates ranging from 0.40 percent to 0.60 percent as of December 31, 2010. We did not have any interest-bearing
money market deposits as of December 31, 2009. As of December 31, 2011, we had approximately $683.3 million of Brokered
Deposits outstanding at a weighted average interest rate of 0.68 percent, compared to $520.4 million of Brokered Deposits at a
weighted average interest rate of 0.90 percent as of December 31, 2010, and approximately $415.0 million of Brokered Deposits
outstanding at a weighted average interest rate of 1.25 percent as of December 31, 2009.
FSC may issue Brokered Deposits 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, 2011, all
Brokered Deposits 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. Interest-bearing money market
funds may be withdrawn at any time. We believe that our Brokered Deposits 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 $10.4 million of
these deposits on hand at December 31, 2011, $9.4 million at December 31, 2010, and $8.3 million at December 31, 2009.
FSC also borrows from lines of credit on a federal funds rate basis to supplement the financing of our accounts receivable. Our
federal funds lines of credit were $140 million during 2011 and 2010, and $155 million during 2009.
Liquidity
General
In general, our trade receivables provide for payment terms of 30 days or less. We do not extend revolving credit to our
customers with respect to these receivables. Receivables not paid within the terms of the customer agreement are generally subject to
finance fees based upon the outstanding customer receivable balance. At December 31, 2011, approximately 97 percent of the
outstanding balance of $1.3 billion was current and approximately 99 percent of the outstanding balance was less than 60 days past
due. The outstanding balance is made up of receivables from approximately 350,000 customers across a wide range of industries. No
customer makes up more than 4 percent of the outstanding receivables at December 31, 2011.
Our short-term cash requirements consist primarily of payments to major oil companies for purchases made by our fleet
customers, payments to merchants for other payment solutions, payments on maturing and withdrawals of Brokered Deposits and
borrowed federal funds, interest payments on our credit facility, cash payments for derivative instruments and other operating
expenses. FSC is responsible for the majority of domestic payments to major oil companies, merchants, and payments on maturing
and withdrawals of Brokered Deposits and borrowed federal funds. FSC can fund our short-term domestic cash requirements through
the issuance of Brokered Deposits 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.
29
Our Credit Agreement
On May 23, 2011, we entered into a Credit Agreement (the “Credit Agreement”), by and among us and certain of our
subsidiaries, as borrowers, and Wright Express Card Holdings Australia Pty Ltd, as specified designated borrower, with a lending
syndicate. The Credit Agreement is secured by pledges of the stock of our foreign subsidiaries. The Credit Agreement provides for a
five-year $200 million amortizing term loan facility and a five-year $700 million revolving credit facility with a $100 million sublimit
for letters of credit and a $20 million sublimit for swingline loans. Term loan payments in the amount of $2.5 million were due
beginning on June 30, 2011, and thereafter on the last day of each September, December, March and June thereafter, through and
including March 31, 2016, and on the maturity date for the term agreement, May 23, 2016, the remaining outstanding principal
amount of $150 million is due. As of December 31, 2011, we had $295.3 million of loans outstanding under the Credit Agreement. As
of December 31, 2011, we also had approximately $4.3 million in letters of credit outstanding. Accordingly, at December 31, 2011,
we had $592.8 million of availability under the Credit Agreement, subject to the covenants as described below. In conjunction with
the establishment of the new credit facility, we capitalized approximately $6.2 million of deferred loan costs in association with this
borrowing and wrote-off approximately $0.7 million of previous issuance costs.
Proceeds from the new credit facility were used to repay our indebtedness under the 2007 credit facility with a lending
syndicate, and indebtedness under the 2010 term loan facility with a bank. The 2011 Credit Agreement funding is available for
working capital purposes, acquisitions, payment of dividends and other restricted payments, refinancing of indebtedness, and other
general corporate purposes.
Amounts outstanding under the Credit Agreement bear interest at a rate equal to, at our option, (a) the Eurocurrency Rate, as
defined, plus a margin of 1.25 percent to 2.25 percent based on the ratio of consolidated funded indebtedness of the Company and its
subsidiaries to consolidated EBITDA or (b) the highest of (i) the Federal Funds Rate plus 0.50 percent, (ii) the prime rate announced
by the lead lender, or (iii) the Eurocurrency Rate plus 1.00 percent, in each case plus a margin of 0.25 percent to 1.25 percent based on
the ratio of consolidated funded indebtedness of the Company and its subsidiaries to consolidated EBITDA. In addition, we have
agreed to pay a quarterly commitment fee at a rate per annum ranging from 0.20 percent to 0.40 percent of the daily unused portion of
the credit facility. Any outstanding loans under the Credit Agreement mature on May 23, 2016, unless extended pursuant to the terms
of the Credit Agreement.
Our Credit Agreement contains various financial covenants requiring us to maintain certain financial ratios. Specifically, it
limits 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 Agreement contains 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, 2011, and expect to continue
to be in compliance.
We have entered into an interest rate swap arrangements which 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. We regularly review our
projected borrowings under our credit facility and the current interest rate environment to determine if additional swaps should be
executed.
Other Liquidity Matters
We discuss our hedging strategies relative to commodity and interest rate risk in Item 7A below. Our fuel price derivatives are
entered into to mitigate the volatility that domestic fuel prices introduce to our revenue streams. The current fuel price is essentially in
the collar range set in the previous year. As a result, we have a net liability related to these derivatives of approximately $5 thousand.
During the course of the year we paid $22.7 million from the settlement of expiring derivative contracts.Our long-term cash
requirements, apart from amounts owing on our Credit Agreement, 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.
Undistributed earnings of certain foreign subsidiaries of the Company amounted to $6.0 million at December 31, 2011, and
$1.5 million at December 31, 2010. These earnings are considered to be indefinitely reinvested, and accordingly, no U.S. federal and
30
state income taxes have been provided thereon. If we were to distribute such 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.
We currently have authorization from our Board to purchase up to $150 million of our common stock up to July of 2013.
Through December 31, 2011, 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 for at least the next 12 months.
Off-balance Sheet Arrangements
We have the following off-balance sheet arrangements as of December 31, 2011:
•
•
•
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 $4.1 billion of commitments to extend credit at December 31, 2011, as part of
established customer agreements. These amounts may increase or decrease during 2012 as we increase or decrease
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 adjust 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, 2011 we posted a $2.0
million letter of credit under the terms of our fuel derivative program. We have also posted a $2.1 million letter of
credit as collateral under the terms of our lease agreement for our corporate offices.
Contractual Obligations
The table below summarizes the estimated dollar amounts of payments under contractual obligations as of December 31, 2011,
for the periods specified:
(in thousands)
2012
2013
2014
2015
2016 and
Thereafter
Total
Operating leases:
Facilities
Equipment, including vehicles
Revolving line-of-credit (a)
Term Loan
Interest payments on term loan
Tax receivable agreement
Deposits
Borrowed federal funds
Interest rate swap arrangements (b)
Fuel price derivative contracts
Contingent obligation
$
4,309 $
4,144
102,800
10,000
3,389
8,859
604,394
6,900
95
1,405
9,325
4,269 $
2,980
—
10,000
3,209
8,980
89,260
—
—
—
—
4,186 $
2,870
—
10,000
3,030
9,359
—
—
—
—
—
3,870 $
2,171
—
10,000
2,850
10,252
—
—
—
—
—
8,945 $
4,156
—
152,250
1,020
55,313
—
—
—
—
—
25,579
16,321
102,800
192,250
13,498
92,763
693,654
6,900
95
1,405
9,325
Total
$
755,620 $
118,698 $
29,445 $
29,143 $
221,684 $ 1,154,590
(a) Our credit facility is set to expire in May of 2016. 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, 2011 LIBOR rates. Any change to this rate will impact
future payments.
(c) During the second quarter of 2012, we expect to pay the remaining purchase price of the rapid! PayCard acquisition.
At this time, the Company is unable to make a reasonably reliable estimate of the timing of payments in individual years in
connection with uncertain tax liabilities; therefore, such amounts are not included in the above contractual obligation table.
31
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.
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, 2011, we have
estimated a reserve for credit losses
which is 0.9 percent of the total gross
accounts receivable balance. An
increase or decrease to this reserve by
0.5 percent would increase or decrease
the provision for credit losses for the
year by $6.7 million. For the past three
years, our reserve for credit losses in an
annual period has not been in excess of
1.3 percent of the total receivable.
Management has consistently considered
its portfolio of charge card receivables
as a large group of smaller balance
accounts that it has collectively
evaluated for impairment. Reserves for
losses on these receivables 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
including average bankruptcy and
recovery rates. Receivables are generally
written off when they are 150 days past
due or declaration of bankruptcy by
the customer.
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.
32
Deferred Tax Asset Valuation and Undistributed Foreign Earnings
Description
Assumptions/Approach Used
Assumptions
Effect if Actual Results Differ from
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 in the
different jurisdictions in which it
operates. 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 the tax law in each of
the relevant jurisdictions.
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.
The Company regularly reviews its
deferred tax assets for recoverability by
jurisdiction. 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.
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 valuation
allowances against its deferred
tax assets.
At December 31, 2011, the Company
had approximately $1,081 million of
gross deferred tax assets, of which 98
percent is in the United States. These
deferred tax assets consisted primarily
of temporary differences related to tax
deductible goodwill. The Company also
had gross deferred tax liabilities of
approximately $301 million primarily
consisting of temporary non-tax
deductible goodwill with an indefinite
reversal period all in the United States.
A determination that no deferred tax
assets would be realized at
December 31, 2011, 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 $244 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
$75 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 $169 million.
33
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 certain
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. An
appropriate discount rate is used, based on the
Company's cost of capital or reporting unit-
specific economic factors. 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.
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.
As of December 31, 2011, the Company had
an aggregate of approximately $659 million
on its balance sheet related to goodwill and
intangible assets of acquired entities. Our
analysis indicates that the calculated fair
value of our reporting units exceed their
carrying values as of December 31, 2011.
As noted in section 1A, because the
acquisitions of rapid! Financial Services
LLC (“rapid! PayCard”) and RD Holdings
(“Wright Express Australia”) were
completed recently, our analysis also
indicated that the fair values of the rapid!
PayCard and Wright Express Australia units
closely approximate the carrying value.
Although an impairment charge is not
warranted at this time, if actual results
deteriorate versus our assumptions in the
valuation, the potential exists for an
impairment in the rapid! PayCard and
Wright Express Australia reporting units.
Similarly, for all other reporting units, 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 impairment losses
and/or amortization expense.
34
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, 2011, the
financial arrangements that are
considered to be derivative
transactions. 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.
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 less than $1 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.
35
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, 2011, we had borrowings of $295.3 million under our credit facility that bore interest at variable rates. During
2010 we entered into an 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 and the current
interest rate environment 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.
At December 31, 2011, we had FSC deposits (includes certificates of deposits, interest bearing money market deposits and
borrowed federal funds) outstanding of $690.2 million. The deposits are generally short-term in nature. Upon maturity, the deposits
will likely be replaced by issuing new deposits to the extent they are needed.
The following table presents the impact of changes in LIBOR on interest expense on our revolving credit facility and term loan
for 2011 on the principal outstanding under the credit facility, as well as the impact of changes in interest rates on certificates of
deposits, interest bearing money market deposits and borrowed federal funds:
(in thousands)
Projected annual financing interest expense on credit agreement borrowings (assumes
one-month LIBOR plus 150 basis points equal to 1.79530%)
Increase of:
1.00%
2.00%
5.00%
(a)
Impact
$
5,302
$
$
$
2,953
5,906
14,765
Projected annual operating interest expense on FSC deposits (certificates of deposits at 0.68%, interest bearing money market
deposits at 0.69% and borrowed federal funds at 0.35%)
$
4,681
Increase of:
1.00%
2.00%
5.00%
$
$
$
6,902
13,804
34,510
(a) Changes to interest expense presented in this table are based on interest payments are based on outstanding balance and rate at
December 31, 2011.
36
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 North American 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 2013. 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 except per gallon data)
December 31,
2011
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 – wholesale strike price
Options settling October 2012 – June 2013
Options settling July 2012 – March 2013
Options settling April 2012 – December 2012
Options settling January 2012 – September 2012
Options settling October 2011 – June 2012
Options settling July 2011 – March 2012
$
$
$
$
$
$
2.540 $
2.650 $
2.932 $
2.608 $
2.247 $
2.176 $
2.600
2.665
2.992
2.668
2.307
2.236
6,857 $
7,108
7,666
7,816
4,573
2,190
280
573
2,437
(407 )
(1,893 )
(970 )
Total fuel price derivative instruments – unleaded fuel
36,210 $
20
Fuel price derivative instruments – diesel fuel – retail strike price
Options settling October 2012 – June 2013
Options settling July 2012 – March 2013
Options settling April 2012 – December 2012
Options settling January 2012 – September 2012
Options settling October 2011 – June 2012
Options settling July 2011 – March 2012
$
$
$
$
$
$
3.835 $
3.792 $
4.061 $
3.695 $
3.293 $
3.239 $
3.895
3.852
4.121
3.755
3.353
3.299
Total fuel price derivative instruments – diesel
Total fuel price derivative instruments
3,081 $
3,193
3,444
3,511
2,055
984
16,268 $
52,478 $
413
134
1,093
(238 )
(927 )
(500 )
(25 )
(5 )
(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.
37
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, 2011 and 2010
Consolidated Statements of Income for the Years Ended December 31, 2011, 2010 and 2009
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2011, 2010 and 2009
Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010 and 2009
Notes to Consolidated Financial Statements
Page
39
40
41
42
43
44
38
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, 2011 and 2010, and the related consolidated statements of income, stockholders' equity and comprehensive income
and cash flows for each of the three years in the period ended December 31, 2011. 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, 2011 and 2010, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2011, 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, 2011, 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, 2012 expressed an unqualified opinion on the Company's internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Boston, MA
February 28, 2012
39
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 $11,526 in 2011 and $10,237 in 2010)
Income taxes receivable
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
Total liabilities
Commitments and contingencies (Note 17)
Stockholders' Equity
Common stock $0.01 par value; 175,000 shares authorized; 42,252 in 2011
and 41,924 in 2010 shares issued; 38,765 in 2011 and 38,437 in 2010 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
Less treasury stock at cost; 3,566 shares in 2011 and 2010
Total stockholders' equity
Total liabilities and stockholders' equity
See notes to consolidated financial statements.
December 31,
2011
2010
$
25,791 $
1,323,915
7,755
17,044
410
62,078
143,524
549,504
109,656
38,383
18,045
1,160,482
—
9,202
—
60,785
161,156
537,055
124,727
26,499
$ 2,278,060 $ 2,097,951
$
409,226 $
54,738
—
693,654
6,900
295,300
92,763
415
15,749
379,855
41,133
3,638
529,800
59,484
407,300
100,145
10,877
6,712
1,568,745
1,538,944
423
146,282
633,389
200
(60)
30,448
419
132,583
499,767
92
(368)
27,881
30,588
27,605
(101,367)
(101,367)
709,315
559,007
$ 2,278,060 $ 2,097,951
40
WRIGHT EXPRESS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Year ended December 31,
2010
2011
2009
$
436,704 $
116,372
329,239 $
61,167
277,996
37,207
553,076
390,406
315,203
104,610
70,202
27,527
15,423
11,803
9,713
3,240
4,325
5,115
45,369
5,453
16,972
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
319,752
239,697
197,053
233,324
150,709
118,150
(11,676)
(459)
—
(11,869)
(715)
(5,314)
7,145
—
(7,244)
(214)
(6,210)
(40)
136,485
(22,542)
(599)
208,605
145,082
225,244
74,983
57,453
85,585
133,622 $
87,629 $
139,659
3.45 $
3.43 $
2.28 $
2.25 $
3.65
3.55
38,686
38,998
38,486
39,052
38,303
39,364
$
$
$
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 (loss) gain on foreign currency transactions
Gain on settlement of portion of amounts due under tax receivable agreement
Net realized and unrealized losses 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.
41
WRIGHT EXPRESS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(in thousands)
Common Stock
Shares
Amount
Additional
Paid-in Capital
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Retained
Earnings
Total
Equity
Comprehensive
Income
Balances at December 31, 2008
40,966 $
410 $
100,359 $
(1,844 ) $
(76,742 ) $
272,479 $ 294,662
Net adjustment resulting from tax
impact of initial public offering
Stock issued to employees exercising
stock options
Tax benefit from employees’ stock
option and restricted stock units
Stock issued to employees for vesting
of restricted stock units
Stock-based compensation
Purchase of shares of treasury stock
Changes in available-for-sale
securities, net of tax effect of $42
Changes in interest rate swaps, net of
tax effect of $904
Foreign currency translation
Net income
Comprehensive income
—
44
—
157
—
—
—
—
—
—
—
—
—
2
—
—
—
—
—
—
7,358
585
(516
)
—
4,277
—
—
—
—
—
—
—
—
—
—
—
76
1,560
(79 )
—
—
—
—
—
—
(6,268 )
—
—
—
—
—
—
—
—
—
—
—
7,358
585
(516
)
2
4,277
(6,268 )
76
$
76
—
—
139,659
1,560
(79 )
139,659
$
1,560
(79 )
139,659
141,216
Balance at December 31, 2009
41,167
412
112,063
(287 )
(83,010 )
412,138
441,316
Stock issued to employees exercising
stock options
Tax benefit from employees’ stock
option and restricted stock units
Stock issued to employees for vesting
of restricted stock units
Stock-based compensation
Conversion of preferred stock
Purchase of shares of treasury stock
Changes in available-for-sale
securities, net of tax effect of $41
Changes in interest rate swaps, net of
tax effect of $(111)
Foreign currency translation
Net income
Comprehensive income
211
—
101
—
445
—
—
—
—
—
2
—
1
—
4
—
—
—
—
—
3,177
1,698
—
5,646
9,999
—
—
—
—
—
—
—
—
—
—
—
69
(192 )
28,015
—
—
—
—
—
—
(18,357 )
—
—
—
—
—
—
—
—
—
—
—
3,179
1,698
1
5,646
10,003
(18,357 )
69
$
69
—
—
87,629
)
(192
28,015
87,629
$
(192 )
28,015
87,629
115,521
Balance at December 31, 2010
41,924
419
132,583
27,605
(101,367 )
499,767
559,007
Stock issued to employees
exercising stock options
Tax benefit from employees’ stock
option and restricted stock units
Stock issued to employees for
vesting of restricted stock units
Stock-based compensation
Changes in available-for-sale
securities, net of tax effect of $66
Changes in interest rate swaps, net
of tax effect of $179
Foreign currency translation
Net income
Comprehensive income
216
—
112
—
—
—
—
—
3
—
1
—
—
—
—
—
2,913
3,970
—
6,816
—
—
—
—
—
—
—
—
108
308
2,567
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,916
3,970
1
6,816
108
$
108
—
—
133,622
308
2,567
133,622
$
308
2,567
133,622
136,605
Balance at December 31, 2011
42,252 $
423 $
146,282 $
30,588 $ (101,367 ) $
633,389 $ 709,315
See notes to consolidated financial statements.
42
WRIGHT EXPRESS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Net unrealized (gain) loss 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 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
Year ended December 31,
2010
2011
2009
$
133,622 $
87,629 $
139,659
(10,872)
9,367
48,112
—
—
21,749
27,527
—
(198,417)
(11,133)
29,274
3,839
(3,703)
9,185
(7,382)
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
22,603
(136,485)
15
59,558
17,715
814
(159,623)
(4,641)
34,053
(1,651)
12,348
(1,282)
(65,128)
Net cash provided by (used for) operating activities
51,168
(10,550)
(33,167)
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
Acquisition of customer relationship intangible
Acquisition of rapid! PayCard
Acquisition of RD Card Holdings Australia Pty Ltd., net of cash acquired
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 (repayments) borrowings on 2007 revolving line-of-credit facility
(Repayments) borrowings on term loan
Loan origination fees
Net borrowings on 2011 revolving line-of-credit
Borrowings on 2011 term note agreement
Repayments of 2011 term note agreement
Purchase of shares of treasury stock
Net cash (used for) provided by 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
(25,145)
—
(8,509)
841
(3,344)
(8,081)
3,734
(28,944)
—
(150)
1,654
—
—
(339,994)
(17,848)
7
(160)
2,194
—
—
—
(40,504)
(367,434)
(15,807)
3,970
(2,551)
2,913
163,853
(52,584)
(332,300)
(75,000)
(6,184)
102,800
200,000
(7,500)
—
1,698
(1,476)
3,177
106,504
(12,238)
204,300
75,000
(2,269)
—
—
—
(18,357)
—
(1,464)
585
(116,859)
71,723
(42,600)
—
—
—
—
—
(6,268)
(2,583)
356,339
(94,883)
(335)
386
44
7,746
18,045
(21,259)
39,304
(143,813)
183,117
Cash and cash equivalents, end of period
$
25,791 $
18,045 $
39,304
See notes to consolidated financial statements.
43
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 (“Company”) is a provider of value-based, business payment processing and information
management solutions. The Company provides products and services that meet the needs of businesses in various geographic regions
including North America, Asia Pacific and Europe. The Company’s Fleet Payment Solutions and Other Payment Solutions segments
provide its customers with security and control for complex payments across a wide spectrum of business sectors. The Company
markets its products and services directly, as well as through strategic relationships which include major oil companies, fuel retailers
and vehicle maintenance providers.
Basis of Presentation
The accompanying consolidated financial statements of Wright Express for the years ended December 31, 2011, 2010 and
2009, include the accounts of Wright Express and its wholly-owned subsidiaries. All intercompany accounts and transactions have
been eliminated in consolidation. Prior period statements have been conformed to the 2011 presentation; this includes corrections to
add Australia to the geographic segments footnote and to separately disclose activity on the term loan in 2010 in the Statement of
Cash Flows.
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. Management has consistently considered its
portfolio of charge card receivables as a large group of smaller balance accounts that it has collectively evaluated for impairment. The
reserve for credit losses is established based on the determination of the amount of expected credit losses inherent in the accounts
receivable as of the reporting date. Management reviews delinquency reports, historical collection rates, economic trends, geography
and other information in order to make 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
are included in non-operating revenues and expenses. The cost basis of securities is based on the specific identification method.
Interest and dividends earned on securities classified as available-for-sale are included in other revenues.
44
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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. For the purposes of cash flow presentation, realized gains or losses
are included in operating cash flows, as they are intended to hedge operating cash flows.
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 $16,726 in 2011, $19,637 in 2010, and $14,030 in 2009. Amortization for software totaled
$18,690 in 2011, $16,348 in 2010, and $15,698 in 2009.
45
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 would
record 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. 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, but primarily relies on discounted cash flow analyses. Such analyses are corroborated using market analytics.
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, 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, should they arise, would be
recorded in depreciation and amortization expense on the consolidated statements 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 years ended
December 31, 2011 and 2010. Impairment expense of $858 was recognized during the year ended December 31, 2009. 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 sheets. As of December 31, 2011, the Company has concluded that the investment is not impaired.
46
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, and other liabilities
approximate their respective fair values due to the short-term nature of such instruments. The carrying values of certificates of deposit,
interest-bearing money market deposits, borrowed federal funds and credit agreement borrowings, approximate their respective fair
values as the interest rates on these financial instruments are variable. 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 and/or 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 purchase card and payroll 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 vehicles serviced. 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. We also recognize service fees related to rapid! PayCard services for card fees charges to
the cardholder.
Finance Fees. The Company earns revenue by assessing monthly finance fees on accounts with overdue balances. These fees
are recognized as revenue at the time the fees are assessed. The finance fee is calculated using a stated late fee rate based on the entire
balance outstanding from the customer. On occasion, these fees are waived; such waived amounts are offset against the revenue
recognized at the time such waivers are granted. These waived fees amounted to $3,845 in 2011 and $4,096 in 2010.
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. 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. Such 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.
47
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 the underlying transactions are
recorded. Incentives are recognized, to extent they are earned, on a pro rata basis over the term of the contract.
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.
Current accounting guidance prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. This accounting guidance also provides
guidance on derecognition, classification, interest and penalties, accounting in the interim periods, disclosure, and transition. Penalties
and interest related to uncertain tax positions are recognized as a component of income tax expense. To the extent penalties and
interest are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the
overall income tax position.
48
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 as the related common stock equivalents are included in the denominator 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:
Income available for common stockholders – Basic
Convertible, redeemable preferred stock
Income available for common stockholders – Diluted
Year ended December 31,
2010
2011
2009
$
$
133,622 $
—
87,629 $
40
139,659
248
133,622 $
87,669 $
139,907
Weighted average common shares outstanding used to calculate earnings per share are as follows:
Weighted average common shares outstanding – Basic
Unvested restricted stock units
Stock options
Convertible, redeemable preferred stock
Year ended December 31,
2010
2011
2009
38,686
128
184
—
38,486
209
255
102
38,303
396
221
444
Weighted average common shares outstanding – Diluted
38,998
39,052
39,364
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 statements 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. Realized gains or losses on securities transactions are classified as non-operating in the Consolidated Statements
of Income.
49
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
2. Supplemental Cash Flow Information
Interest paid
Income taxes paid
Conversion of preferred stock shares and accrued preferred dividends to common stock shares
Significant Non-cash Transactions
Year ended December 31,
2010
2011
2009
$
$
$
15,704 $
52,930 $
— $
8,770 $
36,300 $
10,004 $
28,230
13,672
—
The purchase price for the Company’s acquisition of rapid! Financial Services included $10,000 of contingent consideration for
future performance milestones (discussed further in Note 3). As of December 31, 2011, the Company estimates approximately $9,325
will be paid during the second quarter of 2012 based on current and projected performance milestones. There were no significant non-
cash transactions during 2010 or 2009.
3. Business Acquisitions and Other Intangible Assets Acquisitions
Acquisition of rapid! Financial Services LLC
On March 31, 2011, the Company acquired certain assets of rapid! Financial Services LLC ("rapid! PayCard") for
approximately $18,000 including an estimate of contingent consideration for future performance milestones of $10,000. rapid!
PayCard is a provider of payroll prepaid cards, e-paystubs and e-W2s, and is focused on small and medium sized businesses. The
Company purchased rapid! PayCard to expand its Other Payment Solutions segment. During the first quarter of 2011, the Company
allocated the purchase price of the acquisition based upon a preliminary estimate of the fair values of the assets acquired and liabilities
assumed. These valuations of intangible assets are still based on a preliminary assessment as of December 31, 2011, as the Company
is currently reviewing the allocation of intangible assets. The goodwill is expected to be deductible for tax purposes.
A contingent consideration agreement was entered into in connection with the purchase of rapid! PayCard. Under the terms of
the agreement the former owners of rapid! PayCard will receive additional consideration based upon the achievement of certain
performance criteria, measured over the twelve-month period from the date of purchase. The payment is anticipated to be made during
the second quarter of 2012. During the fourth quarter of 2011, the Company revised the estimate of contingent consideration to
approximately $9,325. The resulting impact of this adjustment ($675) was an offset to other operating expense in our Other Payment
Solutions segment.
50
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 acquired assets and liabilities assumed:
Consideration (including estimated $10,000, contingent consideration)
Less:
Accounts receivable
Accounts payable
Other tangible assets, net
Customer relationships (a)
Trade name (a)
Recorded goodwill
(a) Weighted average life - 4.7 years.
Preliminary
Purchase
Price Allocation
December 31,
2011
$
18,081
75
(85)
105
4,600
1,600
$
11,786
No pro forma information for 2010 has been included in these financial statements as the operations of rapid! PayCard for the
period that they were not part of the Company are not material to the Company’s revenues, net income and earnings per share.
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 purchase price and related allocations for the ReD Transaction have been finalized.
51
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The following is a summary of the final allocation of the purchase price to the acquired assets and liabilities assumed:
Consideration paid (net of cash)
Less:
Accounts receivable
Accounts payable
Other tangible assets, net
Software (a)
Patent (b)
Customer relationships (c)
Brand name (d)
Recorded goodwill
USD
$
336,260
91,394
(50,816)
768
11,526
3,086
70,723
5,470
$
204,109
(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. Due to the strength and wide acceptance of the brands within Australia, management does not forsee economic, competitive or other
factors that would limit the useful life of the brands.
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 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
430,261 $
88,171 $
362,690
143,598
2.29 $
2.26 $
3.75
3.65
$
$
$
$
The pro forma financial information assumes the companies were combined as of January 1, 2010 and 2009, 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 or 2009.
Acquisition of Other Intangible Assets.
On October 31, 2011, the Company purchased the SunTrak Fleet Card Program from Sunoco, Inc., which resulted in customer
relationship intangible assets of $3,344. This intangible is being amortized over seven years. With this purchase, the Company retains
a long term relationship with Sunoco customers.
See Note 7 for further discussion of the goodwill and intangible balances that arose as a result of the above transactions.
52
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
4. Reserves for Credit Losses
In general, the terms of the Company’s trade receivables provide for payment terms of 30 days or less. The Company does not
extend revolving credit to its customers with respect to these receivables. The portfolio of receivables is considered to be a large
group of smaller balance homogeneous amounts that are collectively evaluated for impairment.
The following table presents the Company’s aging of accounts receivable:
2011
Accounts receivable, trade
Age Analysis of Past Due Financing Receivables, Gross
as of December 31, 2011, and 2010
Current
30-59 Days
Past Due
60-89 Days
Past Due
Greater
Than
90 Days
Total
$ 1,289,752
$
30,030
$
7,430
$
8,229
$ 1,335,441
Percent of total
96.6%
2.2%
0.6%
0.6%
2010
Accounts receivable, trade
Percent of total
$ 1,118,097
$
33,383
$
12,142
$
7,098
$ 1,170,719
95.5%
2.9%
1.0%
0.6%
The following table presents changes in reserves for credit losses related to accounts receivable:
Balance, beginning of period
Provision for credit losses
Charge-offs
Recoveries of amounts previously charged-off
Balance, end of period
Year ended December 31,
2010
2011
2009
$
10,237 $
27,527
(31,578)
5,340
10,960 $
19,838
(24,685)
4,124
18,435
17,715
(32,519)
7,329
$
11,526 $
10,237 $
10,960
53
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
5. Investments
Available-for-sale Securities
The Company's available-for-sale securities as of December 31 are presented below:
2011
Mortgage-backed securities
Asset-backed securities
Municipal bonds
Equity securities (a)
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Cost
Fair Value
$
3,046 $
1,927
140
11,611
164 $
3
9
157
13 $
—
—
—
3,197
1,930
149
11,768
Total available-for-sale securities
$
16,724 $
333 $
13 $
17,044
2010
Mortgage-backed securities
Asset-backed securities
Equity securities (a)
$
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
(a) These securities exclude $2,218 in equity securities designated as trading as of December 31, 2011, and $2,015 as of December 31, 2010, 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, 2011,
and 2010 are temporary in nature. The Company reviews its investments to identify and evaluate investments that have indications of
possible impairment. The Company’s fair value assessment of its investments is in Note 16, Fair Value. 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 $841 for the year ended December 31, 2011, $1,654 for the year
ended December 31, 2010, and $2,194 for the year ended December 31, 2009.
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,
2011
2010
Cost
Fair Value
Cost
Fair Value
$
— $
417
695
955
3,046
11,611
$
—
417
696
966
3,197
11,768
— $
—
520
875
1,741
1,594
4,326
519
873
1,768
1,638
4,404
Total
$
16,724 $
17,044 $
9,056 $
9,202
54
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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,
2011
2010
$
22,437 $
139,689
5,673
3,412
171,211
(109,133)
22,279
114,636
9,742
3,098
149,755
(88,970)
Total property, equipment and capitalized software, net
$
62,078 $
60,785
The Company did not incur impairment charges during 2011 and 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 statement of income. Depreciation expense was $22,957, $18,617 and $16,876 in 2011, 2010 and 2009, respectively.
55
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
7. Goodwill and Other Intangible Assets
The changes in goodwill during the period January 1 to December 31, 2011 were as follows:
Goodwill, beginning of period
RD Card Holdings Australia Pty Ltd. final purchase price allocation
Acquisition of rapid! PayCard
Impact of foreign currency translation
Goodwill, end of period
Fleet
Payment
Solutions
Segment
Other
Payment
Solutions
Segment
Total
$
510,396 $
1,408
—
380
26,659 $
(1,051 )
11,786
(74 )
537,055
357
11,786
306
$
512,184 $
37,320 $
549,504
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
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
Goodwill, end of period
$
510,396 $
26,659 $
537,055
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, 2011, were as follows:
Definite-lived intangible assets
Acquired software
Customer relationships
Patent
Trade name
Indefinite-lived intangible assets
Trademarks, trade names and brand names
Net Carrying
Amount,
Beginning of
Period
$
22,640
88,788
2,982
—
Acquisition
Purchase Price
Adjustment
Amortization
Impacts of
Foreign
Currency
Translation
Net Carrying
Amount,
End of
Period
— $
540 $
(4,650) $
7,944
—
1,600
(3,216)
217
—
(17,421)
(341)
—
504 $
(268)
(92)
—
19,034
75,827
2,766
1,600
10,317
—
96
—
16
10,429
Total
$
124,727 $
9,544 $
(2,363) $
(22,412) $
160 $
109,656
The Company expects amortization expense related to the definite-lived intangible assets above as follows: $18,801 for 2012;
$15,725 for 2013; $13,089 for 2014; $10,859 for 2015 and $8,813 for 2016.
56
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Other intangible assets consist of the following:
Definite-lived intangible assets
Acquired software
Non-compete agreement
Customer relationships
Trade name
Patent
December 31, 2011
December 31, 2010
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
$
28,867 $
100
109,772
1,700
3,365
(9,833) $
(100)
(33,945)
(100)
(599)
19,034 $
—
75,827
1,600
2,766
28,263 $
100
105,262
100
3,124
(5,623) $
(100)
(16,474)
(100)
(142)
22,640
—
88,788
—
2,982
$
143,804 $
(44,577)
99,227 $
136,849 $
(22,439)
114,410
Indefinite-lived intangible assets
Trademarks, trade names and brand names
10,429
10,317
Total
$
109,656
$
124,727
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
Weighted average cost of funds on certificates of deposit outstanding
Weighted average cost of interest-bearing money market deposits
December 31,
2011
2010
$
388,129 $
21,097
359,017
20,838
$
409,226 $
379,855
December 31,
2011
2010
$
490,929 $
89,260
103,072
10,393
370,410
87,481
62,513
9,396
$
693,654 $
529,800
0.68 %
0.69 %
0.95 %
0.54 %
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 0.25 percent to 1.60 percent as of December 31, 2011. 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, 2011, certificates of deposit
57
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
were in denominations of $250 or less. The certificates of deposit are only payable prior to maturity in the case of death or legally
declared mental incompetence of the holder.
The Company requires non-interest bearing deposits for certain customers as collateral for credit that has been extended.
The Company also had federal funds lines-of-credit totaling $140,000 at December 31, 2011, and December 31, 2010. There
was $6,900 in outstanding borrowings against these lines-of-credit at December 31, 2011 and $59,484 in outstanding borrowings
against these lines-of-credit at December 31, 2010. The average rate on the outstanding borrowings under lines-of-credit was
0.35 percent at December 31, 2011.
Interest-bearing money market deposits are issued in denominations of $250 or less, and pay interest at variable rates based on
LIBOR or the Federal Fund rate. Money market deposits may be withdrawn by the holder at any time, although notification may be
required and monthly number of transactions is limited. As of December 31, 2011, the weighted average interest rate on interest-
bearing money market deposits was 0.69%.
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,
2010
2011
2009
0.81 %
0.44 %
0.55 %
1.04 %
0.48 %
0.58 %
2.39 %
0.42 %
—
Average debt balance
$
695,765 $
527,345 $
434,529
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, 2011, 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 2012 – June 2013
Fuel price derivative instruments – diesel
Put and call option contracts settling January 2012 – June 2013
Total fuel price derivative instruments
Aggregate
Notional
Amount
(gallons) (a)
36,210
16,268
52,478
(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.
58
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
As of December 31, 2010, 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 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.
Derivatives Designated as Hedging Instruments - Interest Rate Swaps
In July 2009, the Company entered into an interest rate swap arrangement for $50,000. In September 2010, the Company
entered into an additional interest rate swap arrangement for $150,000. 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 the Company’s borrowings under its
credit agreement. The interest rate swap entered into July of 2009 for $50,000 expired in 2011.
The following table presents information about the Company’s interest rate swap arrangements:
December 31,
Weighted-
Average
Base Rate
2011
Aggregate
Notional
Fair Value
Weighted-
Average
Base Rate
2010
Aggregate
Notional
Fair Value
July 2009 Swap
September 2010 Swap
—
0.56%
$
— $
150,000
—
(95)
1.35%
0.56%
50,000
150,000
309
272
Total
0.56% $
150,000 $
(95)
0.76% $
200,000 $
581
59
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 consolidated balance
sheets:
Asset Derivatives
Liability Derivatives
December 31, 2011
Balance
Sheet
Location
Fair
Value
December 31, 2010
Balance
Sheet
Location
Fair
Value
December 31, 2011
Balance
Sheet
Location
Fair
Value
December 31, 2010
Balance
Sheet
Location
Fair
Value
Derivatives designated as
hedging instruments
Interest rate contracts
Other assets
$
—
Other assets
$
—
Accrued
expenses
Accrued
$
95
expenses
$
581
Derivatives not designated
as hedging instruments
Commodity contracts
Fuel price
derivatives,
at fair value
Fuel price
derivatives,
at fair value
410
Total derivatives
$
410
$
Fuel price
derivatives,
at fair value
Fuel price
derivatives,
at fair value
415
10,877
$
510
$ 11,458
—
—
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,
2011
2010
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,
2011
2010
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,
2011
2010
Interest rate contracts
$
308
$
)
(192
expense
$
(830) $
(663)
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,
2011
2010
$ (11,869) $ (7,244)
(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 $179 in 2011 and $(111)
in 2010.
(b) No ineffectiveness was reclassified into earnings nor was any amount excluded from effectiveness testing.
60
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 2013. 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,
2011
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
Aggregate
Notional
(gallons)
Fair Value
Fuel price derivative instruments – unleaded fuel
Options settling October 2012 – June 2013
Options settling July 2012 – March 2013
Options settling April 2012 – December 2012
Options settling January 2012 – September 2012
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
$
$
$
$
$
$
$
$
$
$
2.540 $
2.650 $
2.932 $
2.608 $
2.247 $
2.176 $
2.334 $
2.170 $
2.013 $
1.953 $
2.600
2.665
2.992
2.668
2.307
2.236
2.394
2.230
2.073
2.013
6,857 $
7,108
7,666
7,816
4,573
2,190
—
—
—
—
280
573
2,437
(407 )
(1,893 )
(970 )
—
—
—
—
— $
—
—
—
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
36,210 $
20
33,134 $
(7,234 )
Fuel price derivative instruments – diesel
Options settling October 2012 – June 2013
Options settling July 2012 – March 2013
Options settling April 2012 – December 2012
Options settling January 2012 – September 2012
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
$
$
$
$
$
$
$
$
$
$
3.835 $
3.792 $
4.061 $
3.695 $
3.293 $
3.239 $
3.268 $
3.068 $
3.000 $
3.000 $
3.895
3.852
4.121
3.755
3.353
3.299
3.328
3.128
3.060
3.060
3,081 $
3,193
3,444
3,511
2,055
984
—
—
—
—
413
134
1,093
(238 )
(927 )
(500 )
—
—
—
—
— $
—
—
—
3,115
3,544
2,619
2,994
1,756
858
—
—
—
—
(499 )
(738 )
(406 )
(990 )
(684 )
(326 )
Total fuel price derivative instruments – diesel
16,268 $
(25 )
14,886 $
(3,643 )
Total fuel price derivative instruments
52,478 $
(5 )
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.
61
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:
Realized (losses) gains
Unrealized gains (losses)
Net realized and unrealized (losses) gains on derivative instruments
11. Financing Debt
2007 Revolving Credit Facility and 2010 Term Loan Note
Year ended December 31,
2010
2011
2009
$
$
(22,741) $
10,872
9,785 $
(17,029)
20,600
(43,142)
(11,869) $
(7,244) $
(22,542)
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 were recorded as other assets on the consolidated balance sheet and were
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 were amortized over the remaining term of the 2007 Revolver.
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 2007 Revolver and the 2010 term loan were refinanced in 2011 as described below.
2011 Credit Agreement
On May 23, 2011, the Company entered into a Credit Agreement (the “Credit Agreement”), by and among the Company and
certain of its subsidiaries, as borrowers, and Wright Express Card Holdings Australia Pty Ltd, as specified designated borrower, with a
lending syndicate. The Credit Agreement is secured by pledges of the stock of the Company’s foreign subsidiaries. The Credit
Agreement provides for a five-year $200,000 amortizing term loan facility and a five-year $700,000 revolving credit facility with a
$100,000 sublimit for letters of credit and a $20,000 sublimit for swingline loans. Term loan payments in the amount of $2,500 per
quarter began on June 30, 2011, and are scheduled to continue on the last day of each September, December, March and June
thereafter, through and including March 31, 2016. On the maturity date for the term agreement, May 23, 2016, the remaining
outstanding principal amount of $150,000 is due.
As of December 31, 2011, the Company had $295,300 of loans outstanding under the Credit Agreement (including $192,500
under the term loan facility and $102,800 under the revolving credit facility). As of December 31, 2011, the Company has posted
approximately $4,300 letters of credit as collateral for fuel derivatives and lease agreements. Accordingly, at December 31, 2011, the
Company had $592,800 of availability under the Credit Agreement, subject to the covenants as described below. The Company
capitalized approximately $6,200 in loan origination fees in association with this borrowing and wrote-off approximately $700 of
previous issuance costs in the second quarter of 2011.
Proceeds from the new credit facility were used to refinance the Company’s existing indebtedness under its 2007 credit facility,
and its existing indebtedness under its 2010 term loan facility. The new credit facility is available for working capital purposes,
acquisitions, payment of dividends and other restricted payments, refinancing of indebtedness, and other general corporate purposes.
62
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Amounts outstanding under the Credit Agreement bear interest at a rate equal to, at the Company’s option, (a) the Eurocurrency
Rate, as defined, plus a margin of 1.25 percent to 2.25 percent based on the ratio of consolidated funded indebtedness of the Company
and its subsidiaries to consolidated EBITDA or (b) the highest of (i) the Federal Funds Rate plus 0.50 percent, (ii) the prime rate
announced by lead lender, or (iii) the Eurocurrency Rate plus 1.00 percent, in each case plus a margin of 0.25 percent to 1.25 percent
based on the ratio of consolidated funded indebtedness of the Company and its subsidiaries to consolidated EBITDA. In addition, the
Company has agreed to pay a quarterly commitment fee at a rate per annum ranging from 0.20 percent to 0.40 percent of the daily
unused portion of the credit facility. Any outstanding loans under the Credit Agreement mature on May 23, 2016, unless extended
pursuant to the terms of the Credit Agreement. As of December 31, 2011, the interest rate for the borrowings under the credit facility
was 2.15 percent.
The following table presents information about the outstanding borrowings:
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
$
267,500 $
27,800
390,000
17,300
Total outstanding balance on revolving line-of-credit facility and term loan
$
295,300 $
407,300
Weighted average rate based on LIBOR (including impact of interest rate swaps)
Rate based on the prime rate
1.99 %
3.68 %
1.58 %
3.25 %
December 31,
2011
2010
63
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Financing Interest
The following table presents the components of financing interest expense:
2007 Revolver:
Interest expense based on LIBOR
Interest expense based on the prime rate
Fees
Amortization of loan origination fees
$75 Million Term Loan:
Interest expense based on LIBOR
Amortization of loan origination fees
2011 Credit Agreement
$700 Million Revolver:
Interest expense based on LIBOR
Interest expense based on the prime rate
Fees
Amortization of loan origination fees
$200 Million Term Loan:
Interest expense based on LIBOR
Amortization of loan origination fees
Realized losses on interest rate swaps (Note 10)
Dividends on preferred stock (Note 12)
Other
Year ended December 31,
2010
2011
2009
1,084 $
270
100
249
1,621 $
470
324
628
1,444
219
422
628
1,703 $
3,043 $
2,713
911 $
863
741 $
748
1,774 $
1,489 $
1,758 $
566
1,047
667
2,330
208
— $
—
—
—
—
—
6,576 $
— $
—
—
—
—
—
—
—
—
—
—
830 $
663 $
3,223
—
793
40
79
248
26
$
$
$
$
$
$
$
Total financing interest expense
$
11,676 $
5,314 $
6,210
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
1.91 %
3.68 %
1.33 %
3.25 %
2.95 %
3.26 %
$
$
362,014 $
22,615 $
228,370 $
18,390 $
158,268
6,729
64
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Debt Covenants
The 2011 Credit Agreement contains various financial covenants requiring the Company to maintain certain financial ratios. In
addition, the Credit Agreement contains 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,
2010
2011
2009
United States
Foreign
Total
$
$
224,448 $
(15,843 )
153,958 $
(8,876 )
228,841
(3,597 )
208,605 $
145,082 $
225,244
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:
2011
Current
Deferred
2010
Current
Deferred
2009
Current
Deferred
United States
State
and Local
Foreign
Total
$
$
$
$
$
$
43,886 $
25,875 $
6,697 $
299 $
1,050 $
(2,824) $
51,633
23,350
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
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,
2010
2009
2011
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
Other
Effective tax rate
35.0 %
1.2
—
(0.3)
35.0 %
4.0
—
0.6
35.0 %
3.4
(0.1)
(0.3)
35.9 %
39.6 %
38.0 %
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
Foreign tax credit
Stock-based compensation, net
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
$
December 31,
2011
2010
4,346 $
1,603
7,872
3,443
3,954
—
2
133,394
4,717
—
4,792
992
136
159
3,997
156,339
154,614
171,132
190
10,900
17
9,959
11,090
9,976
Deferred income taxes, net
$
143,524 $
161,156
Net deferred tax assets by jurisdiction are as follows:
United States
Australia
New Zealand
The Netherlands
Total
December 31,
2011
2010
$
138,001 $
5,354
105
64
160,243
848
46
19
$
143,524 $
161,156
The deferred tax assets and deferred tax liabilities are included in deferred income taxes, net on the consolidated balance sheet.
The Company’s primary tax jurisdictions are the United States and Australia. The Company had approximately $394,899 of
state and $6,504 of foreign net operating loss carry forwards at December 31, 2011 and approximately $341,572 of state and $113 of
foreign net operating loss carry forwards at December 31, 2010. These expire at various times through 2029. Australia losses have
indefinite carry forward periods. No valuation allowances have been established as the Company believes it is more likely than not
that its deferred tax assets will be utilized within the carry forward periods.
Undistributed earnings of certain foreign subsidiaries of the Company amounted to $5,991 at December 31, 2011, and $1,533 at
December 31, 2010. 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.
Current accounting guidance prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. This accounting guidance also provides
67
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
guidance on derecognition, classification, interest and penalties, accounting in the interim periods, disclosure, and transition. The
unrecognized tax benefit at December 31, 2011, total $6,059. A reconciliation of the beginning and ending amount of unrecognized
tax benefits is as follows:
Year ended December 31,
2010
2009
2011
Beginning balance
Increases related to prior year tax position
Decreases related to prior year tax positions
Increased related to current year tax positions
Settlements
Lapse of statute
Ending balance
$
— $
6,059
—
—
—
—
$
6,059 $
— $
—
—
—
—
—
— $
—
—
—
—
—
—
—
As of December 31, 2011, The Company has accrued $500 of penalties and interest related to uncertain tax positions. As of
December 31, 2010 and 2009, the Company has no uncertain tax positions subject to penalties and interest.
In 2009 the Company (i) received additional information from Avis relative to basis differences at the time of the Company’s
initial public offering; and (ii) corrected an improperly recorded basis difference. This resulted in adjustments to additional paid in
capital, the majority of which (approximately $6,500) were offset by credits to deferred taxes and taxes payable.
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.
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 Worldwide Corporation (“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.
68
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
For each year presented, there had been reassessment of the blended tax rates that are projected into the future. The net future
benefits increased, which increased the associated liability to Wyndham, resulting in a $714, $214 and $599 charge to non-operating
expense for the years ended December 31, 2011, 2010 and 2009, respectively.
15. Employee Benefit Plans
The Company sponsors a 401(k) retirement and savings plan. Employees are eligible to participate in the plan immediately. 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 for Company matching contributions 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 $2,094,
$1,921, and $1,740 for the years ended December 31, 2011, 2010 and 2009, respectively.
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 $2,218 at
December 31, 2011, and $2,015 at December 31, 2010. 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 $2,218 at December
31, 2011, and $2,015 at December 31, 2010. Such amounts are included in other assets on the consolidated balance sheet.
69
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:
•
•
•
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.
70
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 2011:
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,
2011
Assets:
Mortgage-backed securities
Asset-backed securities
Municipal bonds
Equity securities
$
3,197 $
1,930
149
11,768
— $
—
—
11,768
3,197 $
1,930
149
—
Total available-for-sale securities
$
17,044 $
11,768 $
5,276 $
—
—
—
—
—
—
—
$
$
2,218 $
2,218 $
— $
20 $
— $
20 $
$
25 $
— $
— $
25
$
$
95 $
— $
95 $
—
9,325
—
— $
9,325
Executive deferred compensation plan trust (a)
Fuel price derivatives – unleaded fuel (c)
Liabilities:
Fuel price derivatives – diesel (c)
September 2010 interest rate swap arrangement with a
base rate of 0.56% and an aggregate notional amount of $150,000(b)
Contingent consideration
(a) The fair value of these instruments is recorded in other assets.
(b) The fair value of these instruments is recorded in accrued expenses.
(c) The balance sheet presentation combines unleaded fuel and diesel fuel positions.
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, 2011:
Beginning balance
Total gains or (losses) – realized/unrealized
Included in earnings (a)(b)
Included in other comprehensive income
Purchases, issuances and settlements
Transfers in/(out) of Level 3
Ending balance
Contingent
Consideration
Fuel Price
Derivatives –
Diesel
$
— $
(3,643 )
675
(10,000 )
3,618
—
—
—
$
(9,325 ) $
(25 )
(a) Gain and losses on the change of estimate on the contingent consideration are included in other expense.
(b) Gains and losses (realized and unrealized) included in earnings for the year ended December 31, 2011, 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 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
Total available-for-sale securities
Executive deferred compensation plan trust (a)
Liabilities:
Fuel price derivatives – diesel
Fuel price derivatives – unleaded fuel
$
$
$
2,405 $
2,393
4,404
— $
—
4,404
2,405 $
2,393
—
9,202 $
4,404 $
4,798 $
2,015 $
2,015 $
— $
—
—
—
—
—
$
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
July 2009 interest rate swap arrangement with a
base rate of 1.35% and a notional amount of $50,000
$
309 $
— $
309 $
272
—
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.
72
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 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. The obligations related to the deferred compensation plan trust are classified as Level 1 of
the fair value hierarchy because the fair value is determined using quoted prices for identical instruments in active markets.
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.
Contingent consideration
The Company has classified its liability for contingent consideration related to its acquisition of rapid! PayCard within Level 3
of the fair value hierarchy because the fair value is determined using significant unobservable inputs, which include the projected
revenues of rapid! PayCard over a twelve month period.
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 effect on the Company's consolidated financial position, results of operations or cash flows.
73
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Extension of Credit to Customers
The Company had aggregate commitments of approximately $4,114,000 at December 31, 2011, and $3,420,000 at
December 31, 2010, 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
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 $4,794 for the year ended December 31, 2011, $3,583 for the year ended December 31, 2010, and $3,420 for the year
ended December 31, 2009. 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 $5,342 for the year ended December 31,
2011, $3,164 for the year ended December 31, 2010, and $2,627 for the year ended December 31, 2009. 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:
2012
2013
2014
2015
2016
2017 and thereafter
Total
18. Cash and Dividend Restrictions
Cash
$
Payment
8,453
7,249
7,058
6,041
5,144
7,957
$
41,902
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, 2011 or 2010.
74
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Dividends
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 $25,000 per annum for restricted payments, including
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.
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, 2011, 2010, and 2009.
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-based 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, 2011, 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 $9,367 for 2011, $7,425 for 2010, and $5,736 for 2009. The total income tax benefit recognized in the income
statement for share-based compensation arrangements was $3,456 for 2011, $2,814 for 2010, and $2,180 for 2009.
Restricted Stock Units
The Company awards restricted stock units ("RSU") 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").
75
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
A summary of the status of the Company's RSUs as of December 31, 2011, and changes during the year then ended is presented
below:
Restricted Stock Units
Balance at January 1, 2011
Granted
Vested – shares issued
Vested – shares deferred
Forfeited
Withheld for taxes (b)
(a)
Balance at December 31, 2011
Weighted-
Average
Grant-Date
Fair Value
Units
$
283
89
(107)
(5)
(6)
(50)
23.08
46.26
24.46
28.03
22.86
23.42
204
$
32.25
(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.
As of December 31, 2011, there was $3,968 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 $2,617 during 2011, $4,595 during 2010, and $4,185 during 2009.
Deferred Stock Units
Under the Plan, the Company also grants deferred stock units (“DSU”) 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.
76
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, 2011, and changes during the year is presented below:
Deferred Stock Units
Balance at January 1, 2011
Awards
Converted from RSUs
Balance at December 31, 2011
Weighted-
Average
Grant-Date
Fair Value
Units
78 $
1
5
24.26
53.10
28.03
84 $
24.70
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 $173
during 2011, $331 during 2010, and $228 during 2009.
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, 2011,
and changes during the year then ended is presented below:
Performance Based Restricted Stock Units
Balance at January 1, 2011
Granted
Forfeited
Cancelled
Balance at December 31, 2011
Units at
Threshold
Units at
Target
Units at
Maximum
Weighted-
Average
Grant-Date
Fair Value
125
41
(4 )
(52 )
110
249
82
(7 )
(103 )
221
500 $
164
(16 )
(208 )
31.96
50.84
32.91
34.45
440 $
37.76
The range of unrecognized compensation cost related to the awards is from $2,124 at threshold (50 percent below targeted
performance), $4,247 at target (100 percent of targeted performance) and up to $8,488 at maximum (200 percent of targeted
performance), as of December 31, 2011, depending whether certain performance conditions are met. 11 shares of these awards have
vested as of December 31, 2011.
77
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,
2009
March 3,
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, 2011
Granted
Exercised
Forfeited or expired
Weighted-
Average
Remaining
Contractual
Term (in
years)
Weighted-
Average
Exercise
Price
Aggregate
Intrinsic
Value
Shares
576 $
—
(216 )
(7 )
17.32
—
13.52
13.43
Outstanding at December 31, 2011
353 $
19.72
5.5 $
12,211
As of December 31, 2011, 221 shares of the total shares outstanding have not vested and are expected to vest.
The total intrinsic value of options exercised during the years ended December 31, 2011, December 31, 2010 and 2009 was
$7,829, $3,592 and $728, respectively.
78
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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 purchase cards, single use accounts and prepaid card products. The corporate
purchase 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.
79
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The following table presents the Company's reportable segment results for the years ended December 31, 2011, 2010 and 2009:
Total
Revenues
Operating
Interest
Expense
Depreciation
and
Amortization
Provision for
Income Taxes
Adjusted Net
Income
Year ended December 31, 2011
Fleet Payment Solutions
Other Payment Solutions
$
436,704 $
116,372
4,488 $
965
21,331 $
1,626
62,913 $
16,155
112,668
29,124
Total
$
553,076 $
5,453 $
22,957 $
79,068 $
141,792
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
The following table reconciles adjusted net income to net income:
Year ended December 31,
2010
2009
2011
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
$
141,792 $
10,872
(22,412)
—
(715)
—
4,085
107,301 $
(17,029)
(11,276)
—
(214)
—
8,847
85,616
(43,142)
(5,066)
(814)
(599)
136,485
(32,821)
$
133,622 $
87,629 $
139,659
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.
80
WRIGHT EXPRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded)
(in thousands, except per share data)
Geographic Data
Total revenues:
United States
International
Total revenues
Goodwill:
United States
International
Total goodwill
Other intangible assets, net
United States
International
Total other intangibles assets, net
Year ended December 31,
2010
2009
2011
$
$
$
$
$
$
482,536 $
70,540
368,922 $
21,484
311,787
3,416
553,076 $
390,406 $
315,203
325,647 $
223,857
313,853 $
223,202
313,853
1,374
549,504 $
537,055 $
315,227
29,204 $
80,452
23,564 $
101,163
27,337
7,478
109,656 $
124,727 $
34,815
21. Quarterly Financial Results (Unaudited)
Summarized quarterly results for the years ended December 31, 2011 and 2010, are as follows:
2011
Total revenues
Operating income
Net income
Earnings per share:
Basic
Diluted
2010
Total revenues
Operating income
Net income
Earnings per share:
Basic
Diluted
March 31
June 30
September 30 December 31
Three months ended
$
$
$
$
$
$
$
$
$
$
120,090 $
46,172 $
12,115 $
141,272 $
61,175 $
40,615 $
151,878 $
65,244 $
48,100 $
139,836
60,733
32,792
0.31 $
0.31 $
1.05 $
1.04 $
1.24 $
1.23 $
0.85
0.84
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
81
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 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, 2011.
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, 2011.
The effectiveness of our internal control over financial reporting as of December 31, 2011, 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, 2011, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over
financial reporting.
82
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, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. 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,
2011, 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, 2011 of the Company and our report dated February 28,
2012 expressed an unqualified opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
Boston, MA
February 28, 2012
83
ITEM 9B. OTHER INFORMATION
Not applicable.
84
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
See the information in the Company's proxy statement for the 2012 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 2012 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 2012 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 2012 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 2012 Annual Meeting of Stockholders captioned "Auditor Selection
and Fees," which information is incorporated herein by reference.
85
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 38).
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. 10.3 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
Credit Agreement, dated as of May 23, 2011, by and among Wright Express Corporation and certain of its subsidiaries, as
86
borrowers, Wright Express Card Holdings Australia Pty Ltd, Bank of America, N.A., as administrative agent, swing line
lender and L/C issuer, 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 26, 2011, File No. 001-32426)
10.11
10.12
Guaranty, dated as of May 23, 2011, by and among Wright Express Corporation and Bank of America, N.A. (incorporated
by reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on May 26, 2011, File No. 001-
32426)
Domestic Subsidiary Guaranty, dated as of May 23, 2011, by and among Wright Express Corporation, certain Subsidiary
Guarantors and Bank of America, N.A. (incorporated by reference to Exhibit No. 10.3 to our Current Report on Form 8-K
filed with the SEC on May 26, 2011, File No. 001-32426)
10.13
Pledge Agreement, dated as of May 23, 2011, by and among Wright Express Corporation, certain Domestic Subsidiary
Guarantors and Bank of America, N.A. (incorporated by reference to Exhibit No. 10.4 to our Current Report on Form 8-K
filed with the SEC on May 26, 2011, File No. 001-32426)
10.14
Share Mortgage, dated as of May 23, 2011, by and among Wright Express Corporation and Bank of America, N.A.
(incorporated by reference to Exhibit No. 10.5 to our Current Report on Form 8-K filed with the SEC on May 26, 2011, File
No. 001-32426)
10.15
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)
10.16
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)
10.17
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)
10.18
10.19
10.20
10.21
10.22
2010 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)**
2010 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)**
Wright Express Corporation Amended and Restated 2010 Growth Grant Long Term Incentive Program (incorporated by
reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 5, 2011, File No. 001-32426)**
2011 Amended and Restated Wright Express Corporation Short-Term Incentive Program (incorporated by reference to
Exhibit 10.2 to our Quarterly Report on Form 10-Q filed with the SEC on May 5, 2011, File No. 001-32426)**
2011 Annual Grant Long-Term Incentive Program (incorporated by reference to Exhibit 10.3 to our Quarterly Report on
Form 10-Q filed with the SEC on May 5, 2011, File No. 001-32426)**
10.23
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)
10.24
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)
10.25
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)
10.26
Executive Retention Agreement, dated April 6, 2011, between David Maxsimic and Wright Express Corporation
(incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on April 12, 2011, File
No. 001-32426)
10.27
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)
10.28
Form of Employment Agreement for George Hogan and Richard Stecklair (incorporated by reference to Exhibit No. 10.20
to our Annual Report on Form 10-K filed with the SEC on February 26, 2010, File No. 001-32426)
10.29
Wright Express UK Limited and Gareth Gumbley Service Agreement, effective January 1, 2011 (incorporated by reference
to Exhibit 10.4 to our Quarterly Report on Form 10-Q filed with the SEC on May 5, 2011, File No. 001-32426)
10.30
Form of Long Term Incentive Program Award Agreement under the Amended and Restated Wright Express Corporation
†
†
†
†
†
†
†
†
†
†
†
†
†
†
†
†
87
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)
†
10.31
†
10.32
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)
†
10.33
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)
†
10.34
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)
†
10.35
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)
†
10.36
Form of Wright Express Corporation Option Agreement under the Wright Express Corporation 2010 Equity and Incentive
Plan (incorporated by reference to Exhibit No. 10.29 to our Annual Report on Form 10-K filed with the SEC on February 28,
2011, File No. 001-32426)
†
10.37
Form of Wright Express Corporation Restricted Stock Unit Agreement under the Wright Express Corporation 2010 Equity
and Incentive Plan (incorporated by reference to Exhibit No. 10.30 to our Annual Report on Form 10-K filed with the SEC
on February 28, 2011, File No. 001-32426)
†
10.38
Form of Wright Express Corporation Non-Employee Director Compensation Plan Award Agreement under the Wright
Express Corporation 2010 Equity and Incentive Plan (incorporated by reference to Exhibit No. 10.31 to our Annual Report
on Form 10-K filed with the SEC on February 28, 2011, File No. 001-32426)
10.39
10.40
10.41
10.42
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)
10.43
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)
10.44
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)
10.45
10.46
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)
88
10.47
10.48
10.49
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)
10.50
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. (incorporated by reference to Exhibit No. 10.35 to our Annual Report
on Form 10-K filed with the SEC on February 26, 2010, File No. 001-32426)
10.51
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)
10.52
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)
10.53
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)
10.54
Amendment to ISDA Master Agreement, dated as of May 20, 2011, between SunTrust Bank and Wright Express
Corporation (incorporated by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q filed with the SEC on August
8, 2011, File No. 001-32426)
10.55
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)
10.56
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)
10.57
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)
10.58
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)
10.59
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)
10.60
10.61
10.62
10.63
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)
10.64
Credit Support Annex to the Schedule to the ISDA Master Agreement between Barclays Bank PLC and Wright Express
89
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)
ISDA Master Agreement and Schedule between Bank of Montreal and Wright Express Corporation, dated as of July 8,
2010
10.65
10.66
10.67
10.68
10.69
10.70
Credit Support Annex to the Schedule to the ISDA Master Agreement between Bank of Montreal and Wright Express
Corporation, dated as of July 8, 2010
10.71
Form of Confirmation evidencing purchases of commodities options by Wright Express Corporation from the Bank of
21.1
23.1
31.1
Montreal
Subsidiaries of the registrant
Consent of Independent Registered Accounting Firm – Deloitte & Touche LLP
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
*
**
***
†
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.
90
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, 2012
WRIGHT EXPRESS CORPORATION
By: /s/ Steven A. Elder
Steven A. Elder
Senior Vice President and Chief Financial Officer
(principal financial and accounting officer)
91
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, 2012
February 28, 2012
February 28, 2012
February 28, 2012
February 28, 2012
February 28, 2012
February 28, 2012
February 28, 2012
February 28, 2012
/s/ Michael E. Dubyak
Michael E. Dubyak
President, Chief Executive Officer and
Chairman of the Board of Directors
(principal executive officer)
/s/ Steven A. Elder
Steven A. Elder
Senior Vice President and Chief Financial Officer
(principal financial and accounting 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
92
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. 10.3 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
10.10
10.11
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)
Credit Agreement, dated as of May 23, 2011, by and among Wright Express Corporation and certain of its subsidiaries, as
borrowers, Wright Express Card Holdings Australia Pty Ltd, Bank of America, N.A., as administrative agent, swing line
lender and L/C issuer, 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 26, 2011, File No. 001-32426)
Guaranty, dated as of May 23, 2011, by and among Wright Express Corporation and Bank of America, N.A. (incorporated
by reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on May 26, 2011, File No. 001-
32426)
93
10.12
Domestic Subsidiary Guaranty, dated as of May 23, 2011, by and among Wright Express Corporation, certain Subsidiary
Guarantors and Bank of America, N.A. (incorporated by reference to Exhibit No. 10.3 to our Current Report on Form 8-K
filed with the SEC on May 26, 2011, File No. 001-32426)
10.13
Pledge Agreement, dated as of May 23, 2011, by and among Wright Express Corporation, certain Domestic Subsidiary
Guarantors and Bank of America, N.A. (incorporated by reference to Exhibit No. 10.4 to our Current Report on Form 8-K
filed with the SEC on May 26, 2011, File No. 001-32426)
10.14
Share Mortgage, dated as of May 23, 2011, by and among Wright Express Corporation and Bank of America, N.A.
(incorporated by reference to Exhibit No. 10.5 to our Current Report on Form 8-K filed with the SEC on May 26, 2011, File
No. 001-32426)
10.15
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)
10.16
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)
10.17
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)
10.18
10.19
10.20
10.21
10.22
2010 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)**
2010 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)**
Wright Express Corporation Amended and Restated 2010 Growth Grant Long Term Incentive Program (incorporated by
reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 5, 2011, File No. 001-32426)**
2011 Amended and Restated Wright Express Corporation Short-Term Incentive Program (incorporated by reference to
Exhibit 10.2 to our Quarterly Report on Form 10-Q filed with the SEC on May 5, 2011, File No. 001-32426)**
2011 Annual Grant Long-Term Incentive Program (incorporated by reference to Exhibit 10.3 to our Quarterly Report on
Form 10-Q filed with the SEC on May 5, 2011, File No. 001-32426)**
10.23
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)
10.24
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)
10.25
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)
10.26
Executive Retention Agreement, dated April 6, 2011, between David Maxsimic and Wright Express Corporation
(incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on April 12, 2011, File
No. 001-32426)
10.27
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)
10.28
Form of Employment Agreement for George Hogan and Richard Stecklair (incorporated by reference to Exhibit No. 10.20
to our Annual Report on Form 10-K filed with the SEC on February 26, 2010, File No. 001-32426)
10.29
Wright Express UK Limited and Gareth Gumbley Service Agreement, effective January 1, 2011 (incorporated by reference
to Exhibit 10.4 to our Quarterly Report on Form 10-Q filed with the SEC on May 5, 2011, File No. 001-32426)
10.30
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)
†
†
†
†
†
†
†
†
†
†
†
†
†
†
†
†
†
10.31
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)
94
†
10.32
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)
†
10.33
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)
†
10.34
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)
†
10.35
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)
†
10.36
Form of Wright Express Corporation Option Agreement under the Wright Express Corporation 2010 Equity and Incentive
Plan (incorporated by reference to Exhibit No. 10.29 to our Annual Report on Form 10-K filed with the SEC on February 28,
2011, File No. 001-32426)
†
10.37
Form of Wright Express Corporation Restricted Stock Unit Agreement under the Wright Express Corporation 2010 Equity
and Incentive Plan (incorporated by reference to Exhibit No. 10.30 to our Annual Report on Form 10-K filed with the SEC
on February 28, 2011, File No. 001-32426)
†
10.38
Form of Wright Express Corporation Non-Employee Director Compensation Plan Award Agreement under the Wright
Express Corporation 2010 Equity and Incentive Plan (incorporated by reference to Exhibit No. 10.31 to our Annual Report
on Form 10-K filed with the SEC on February 28, 2011, File No. 001-32426)
10.39
10.40
10.41
10.42
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)
10.43
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)
10.44
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)
10.45
10.46
10.47
10.48
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
95
SEC on August 7, 2007, File No. 001-32426)
10.49
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)
10.50
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. (incorporated by reference to Exhibit No. 10.35 to our Annual Report
on Form 10-K filed with the SEC on February 26, 2010, File No. 001-32426)
10.51
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)
10.52
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)
10.53
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)
10.54
Amendment to ISDA Master Agreement, dated as of May 20, 2011, between SunTrust Bank and Wright Express
Corporation (incorporated by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q filed with the SEC on August
8, 2011, File No. 001-32426)
10.55
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)
10.56
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)
10.57
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)
10.58
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)
10.59
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)
10.60
10.61
10.62
10.63
10.64
10.65
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)
96
10.66
10.67
10.68
10.69
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)
ISDA Master Agreement and Schedule between Bank of Montreal and Wright Express Corporation, dated as of July 8,
2010
10.70
Credit Support Annex to the Schedule to the ISDA Master Agreement between Bank of Montreal and Wright Express
Corporation, dated as of July 8, 2010
10.71
Form of Confirmation evidencing purchases of commodities options by Wright Express Corporation from the Bank of
21.1
23.1
31.1
Montreal
Subsidiaries of the registrant
Consent of Independent Registered Accounting Firm – Deloitte & Touche LLP
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
*
**
***
†
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.
97
ABOUT WRIGHT EXPRESS
Wright Express is a global provider of
value-based business payment processing
and information management solutions.
The Company’s fl eet, corporate, and
prepaid payment solutions give customers
unparalleled security and control across a
wide spectrum of business sectors with an
expanding international presence.
Wright Express markets its services directly
to fl eets and businesses as an outsourcing
partner for its strategic relationships. The
Company’s North American business portfolio
includes its core fl eet card and corporate
payment solutions product.
For more than 25 years we have built
our closed-loop network in the U.S. 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
fl eets the ability to control purchases in
the fi eld, and delivers comprehensive
information and analysis tools that allow
fl eets to effectively manage their operations
and reduce operating costs.
We also issue open-loop corporate payment
solutions and virtual products. These
product offerings provide customers with
payment processing solutions for their
corporate purchasing and transaction
monitoring needs.
Our international operations include Wright
Express Australia Fuel Card, Australia’s
largest multi-branded fuel card issuer with
over 350,000 cards in circulation; Wright
Express Australia Prepaid, the market
leading processor of prepaid gift cards in
Australia; an offi ce in New Zealand and
various locations in Europe where we
provide payment processing and information
management services for oil companies.
Wright Express stock is traded on the
New York Stock Exchange under the ticker
symbol “WXS.”
CORPORATE INFORMATION
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
Professor, Harvard Business School
Ronald T. Maheu
Financial and Business Consultant
Larry McTavish
Chief Executive Officer
and Chairman of
Source Medical Corporation
Jack A. VanWoerkom
Former General Counsel and
Corporate Secretary of
The Home Depot, Inc.
EXECUTIVE OFFICERS
Michael E. Dubyak
Chairman, President and
Chief Executive Officer
Melissa D. Smith
President, The Americas
Steven Elder
Senior Vice President and
Chief Financial Officer
Gareth Gumbley
Executive Vice President,
Wright Express International
Kirk Pond
Former Chairman,
President and CEO of Fairchild
Semiconductor International, Inc.
Regina O. Sommer
Financial and Business Consultant
David D. Maxsimic
Executive Vice President,
Sales and Marketing
George Hogan
Senior Vice President and
Chief Information Officer
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
CORPORATE HEADQUARTERS
ATTORNEYS
INVESTOR RELATIONS
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
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116-5022
Wilmer Cutler Pickering Hale
and Dorr LLP
60 State Street
Boston, MA 02109
(617) 526-6000
STOCK HOLDERS’ MEETING
Date: May 18, 2012
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 SYMBOL
NYSE WXS
Michael E. Thomas
Vice President, Finance and Investor Relations
207-523-6743
Michael_Thomas@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.
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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
ACCELERATING
GROWTH
2011 ANNUAL REPORT
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