SEIZING A WORLD OF
OPPORTUNITY
97 Darling Avenue
South Portland, ME 04106
Phone: (207) 773-8171
Toll Free: (800) 761-7181
newsroom@wexinc.com
www.wexinc.com
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ABOUT WEX INC.
WEX CORPORATE INFORMATION
WEX Inc. (formerly Wright Express Corporation)
is a leading provider of corporate card payment
solutions. From our roots as a pioneer in fl eet card
payments in 1983, WEX has expanded the scope
of its business into a multi-channel provider of
corporate payment solutions. Our focus is on
providing exceptional payment security and
control across a spectrum of payment sectors
while delivering an exceptional experience so that
our customers – whether large or small –
can operate smoothly, securely and profi tably.
WEX currently operates its business in two
segments: Fleet Payment Solutions and Other
Payment Solutions. The Fleet Payment Solutions
segment provides customers with fl eet vehicle
payment processing services specifi cally
designed for the needs of commercial and
government fl eets. Our fl eet products are based
upon proprietary technology with closed-loop
networks with wide site acceptance in the United
States, Canada and Australia. The Other Payment
Solutions segment, which is comprised of our
virtual and paycard products, provides customers
with payment processing solutions for their
corporate purchasing and transaction monitoring
needs. We have operations in North and South
America, Europe, Australia and New Zealand, and
our strategic relationships include three of the
largest United States-based online travel agencies.
Our U.S. operations include WEX Inc., Fleet One,
WEX Bank, rapid! PayCard, and Pacifi c Pride. Our
international operations include Wright Express
Fuel Cards Australia, Wright Express Prepaid
Cards Australia, Wright Express New Zealand and
CorporatePay Limited, located in England. We
also hold a majority equity position in UNIK S.A.,
a Brazil-based company. WEX and its subsidiaries
employ more than 1,300 associates. WEX has
been publicly traded since February 16, 2005 and
is listed on the New York Stock Exchange under
the ticker symbol “W X.”
E
DIRECTORS
MICHAEL E. DUBYAK
Chairman, President and
Chief Executive Officer
of WEX Inc.
ROWLAND T. MORIARTY
Lead Director and
Vice Chairman of WEX Inc.
President and
Chief Executive Officer
of Cubex Corporation
SHIKHAR GHOSH
Professor, Harvard Business School
RONALD T. MAHEU
Financial and Business Consultant
LARRY MCTAVISH
Former Chief Executive Officer
and Chairman of
Source Medical Corporation
KIRK POND
Former Chairman,
President and CEO of Fairchild
Semiconductor International, Inc.
REGINA O. SOMMER
Financial and Business Consultant
JACK A. VANWOERKOM
Former General Counsel and
Corporate Secretary of
The Home Depot, Inc.
EXECUTIVE DIRECTORS
MICHAEL E. DUBYAK
Chairman, President and
Chief Executive Officer
MELISSA D. SMITH
President, The Americas
DAVID D. MAXSIMIC
President, International
STEVEN ELDER
Senior Vice President and
Chief Financial Officer
GEORGE HOGAN
Senior Vice President and
Chief Information Officer
KENNETH W. JANOSICK
Senior Vice President,
Small Business Solutions
JAMIE MORIN
Senior Vice President,
Client Services Organization
HILARY A. RAPKIN
Senior Vice President,
General Counsel and
Corporate Secretary
RICHARD K. STECKLAIR
Senior Vice President,
Corporate Payment Solutions
GREGORY S. STRZEGOWSKI
Senior Vice President,
Corporate Development
CORPORATE HEADQUARTERS
ATTORNEYS
INVESTOR RELATIONS
WEX Inc.
97 Darling Avenue
South Portland, ME 04106
Phone: (207) 773-8171
Toll Free: (800) 761-7181
Email: newsroom@wexinc.com
URL: www.wexinc.com
TRANSFER AGENT
American Stock Transfer
& Trust Company
6201 15th Avenue
Brooklyn, NY 11219
(866) 668-6550
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116-5022
(617) 437-2000
Wilmer Cutler Pickering Hale
and Dorr LLP
60 State Street
Boston, MA 02109
(617) 526-6000
STOCKHOLDERS’ MEETING
Date: May 17, 2013
Time: 8:00 a.m.
Location:
WEX Inc. Long Creek Campus
225 Gorham Road
South Portland, Maine
Phone: (207) 773-8171
Toll Free: (800) 761-7181
TICKER SYMBOL
NYSE:
WEX
Michael E. Thomas
Vice President, Treasurer and Investor Relations
(207) 523-6743
Michael.Thomas@wexinc.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: WEX Inc.
Investor Relations, 97 Darling Avenue,
South Portland, ME 04106; by calling
(866) 230-1633; or by emailing
investors@wexinc.com.
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FINANCIAL HIGHLIGHTS
TOTAL REVENUE
($ in Millions)
623
553
388
390
315
TOTAL FUEL
TRANSACTIONS PROCESSED
(in Millions)
CORPORATE PURCHASE
CARD VOLUME
($ in Millions)
319 338
277 260 270
10,689
7,759
4,414
3,083
2,405
0 8 0 9
1 0
1 1
1 2
0 8 0 9
1 0
1 1
1 2
0 8 0 9
1 0
1 1
1 2
KEY FINANCIAL HIGHLIGHTS & RECONCILIATIONS
($ in thousands)
2012
2011
2010
Revenue
$
623,151 $
553,076
$
390,406
Reconciliation of Adjusted Net Income to GAAP Net Earnings
Total adjusted net income WEX Inc.
$
158,524
$
141,792
$
107,301
Unrealized gains (losses) on derivative instruments
Amortization of acquired intangible assets
Goodwill impairment
(1,724)
(23,468)
(17,508)
Change in tax refund due to former shareholders of RD Card Holdings Australia
9,750
Non-cash adjustments related to tax receivable agreement
Write-off and other charges related to Fleet One acquisition
Net earnings attributable to noncontrolling interest
Tax impact
(2,089)
(10,550)
305
(16,318)
10,872
(22,412)
–
–
(17,029)
(11,276)
–
–
(715)
(214)
–
–
–
–
4,085
8,847
Net earnings attributable to WEX Inc.
$
96,922
$
133,622
$
87,629
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.
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 fuel price related derivative instruments, and excludes the amortization of purchased
intangibles, goodwill impairment, asset impairment, charges related to the acquisition of Fleet One, the net impact of tax rate changes on the Company’s deferred tax asset and related changes
in the tax-receivable agreement as well as tax refund amounts due to the former shareholders of RD Card Holdings Australia. 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; and
• The amortization of purchased intangibles, goodwill impairment, asset impairment and other charges related to the acquisition of Fleet One, the net impact of tax rate changes on the
Company’s deferred tax asset and related tax refund due to the former shareholders of RD Card Holdings Australia have no impact on the ongoing operations of the business.
For the same reasons, WEX 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 WEX may not be comparable to similarly titled measures employed by other companies. The tax impact of the foregoing adjustments is the diff erence
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:
2012 was a landmark year for WEX as we capitalized on a number of
opportunities across our business and further evolved into a global
payments provider. While executing against our multi-pronged growth
strategy, we delivered revenue growth of 13% and adjusted net income
growth of 12% for the full year. This performance, against an uncertain
economic environment, demonstrates the resiliency of our business model
and the merit of our investments to drive growth across the business.
Today, WEX is a growing international provider of fl eet, virtual and paycard
solutions with an innovative product suite and a strong operating model.
Based on the advances we made moving from a domestic fl eet card
provider to an international payment solutions organization, the Company
rebranded itself as WEX Inc. from Wright Express, marking the next chapter
p y
in our Company’s evolution.
WEX acquired a 51%
interest in UNIK in August
2
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EXPANSION OF OUR U.S. FLEET BUSINESS
Over the past year, we made great strides in expanding our
U.S. fl eet business, both organically and through strategic
acquisitions. On the business development front, we
signed several new customers including MAPCO, Marathon
Petroleum Company, the States of Arkansas and Montana,
and the Commonwealth of Pennsylvania.
We also signifi cantly expanded our presence in the
over-the-road market through our acquisition of
Fleet One. With the product capabilities acquired through
Fleet One, we are better positioned to serve both our
mixed fl eets and co-branded partners who service heavy
trucks. In addition, the combination creates greater scale
in our private label business. Together, we have established
a robust product off ering enabling WEX to service the
automobile, light trucks and vans, and now the heavy
truck segments of the fl eet market.
With an eye on developing innovative solutions and
providing our customers with the best possible fl eet
management tools, we created the fl eet industry’s fi rst
transaction-based fuel site locator called Octane. This free
mobile app helps drivers fi nd the nearest fueling locations
with the lowest prices based on actual transactions from
our broad network. By leveraging the trend toward mobile
applications and digital tools, WEX continues to enhance
its value proposition with customers.
Our focused approach coupled with sustained investments
in our products, services and customer service experience,
led to WEX generating in excess of 600,000 new cards
for 2012, with nearly 45% of these coming from small
businesses – a record year for the Company.
FURTHER DIVERSIFICATION OF
OUR REVENUE STREAMS
While our fl eet business is a core component of our success,
we are increasingly optimistic about the long-term trajectory
of the Other Payment Solutions segment of our business,
which includes our virtual card and paycard off erings. Since
our entrance into the corporate payments business 13
years ago, we’ve signifi cantly expanded our off erings and
augmented the growth profi le for WEX as a result of our
strategic investments, primarily in our virtual card product.
During 2012, the Company continued to invest in this area
of the business, which has proven to be very fruitful and
an area we look to further globalize. For the full year, our
Other Payment Solutions segment represented 24% of our
total revenue, an increase from 21% in 2011, as we realized
purchase volume growth of 38% from our virtual card.
Though our success in this area of our business has
been primarily driven by our virtual card for the online
travel vertical, we made greater progress in penetrating
additional vertical opportunities such as healthcare. In
2012, we announced the signing of one of the nation’s
largest healthcare payments and reimbursement
processors, which expands the usage of our virtual card
and raises the visibility of our payment solutions in this
large and growing space. Over the long-term, we believe
this account has the potential to become a meaningful
contributor to this segment.
We also saw good traction in growing our paycard off ering,
both in cross-selling to our fl eet and over-the-road
customers and selling to new fl eet prospects.
BROADENED OUR INTERNATIONAL PRESENCE
During 2012, WEX also signifi cantly broadened its
international footprint through organic and inorganic
channels. In our Fleet segment, in addition to gaining a
With opportunitites to signifi cantly expand the reach of our virtual card product,
especially within the international marketplace, investments in our business in 2013
will further progress WEX’s evolution into a global corporate payments provider.
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WEX acquired
CorporatePay in May
WEX acquired
Fleet One in October
4
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presence in Canada through Fleet One, we further grew
WEX Australia Fuel adding 50,000 new cards in 2012.
We also extended the reach of our virtual card and paycard
products in the Other Payment Solutions segment. In
May, the Company entered the U.K. through its acquisition
of CorporatePay, a leading provider of corporate prepaid
virtual cards to the travel industry. Bringing together
CorporatePay’s virtual debit card product with our virtual
charge card product provides us with a product suite
that spans the continuum of the marketplace, enabling
greater opportunity for WEX to penetrate a broader
addressable market and satisfy customers with diverse
needs and requirements. Further, we took additional steps
to globalize our virtual card and signed new online travel
customers in the U.K. and Australia.
With respect to our paycard off ering, in August we entered
Latin America through a majority equity position in UNIK, a
leading paycard provider in Brazil. UNIK had a strong 2012
compared to 2011 and we believe this bodes well for future
investment and growth opportunities within Brazil. We are
particularly excited about the opportunities for expanding
into the fl eet market and extending our virtual card and
paycard presence in this country.
By and large, we achieved several key milestones in
growing our international presence and have seen strong
performance to date, which puts us on solid footing to
propel the business forward.
THE ROAD AHEAD
Overall, our strong 2012 performance refl ects the strategic
investments we have made in the business over the years
to drive growth while advancing our competitive position
within the payments industry. In order to sustain this
momentum, we plan to increase our investments over
the coming year in a number of opportunities across the
business to broaden our footprint, diversify our revenue
streams and better position WEX for the long-term.
Coming off of a strong year and with expectations for
further revenue growth in 2013, we will be investing from
a position of strength as we plant the seeds for the next
phase of WEX’s development.
After conducting extensive research into prospective market
opportunities for the online travel vertical, we’ve identifi ed
several geographies ripe for entrance with our virtual card
– including Thailand, Singapore and Hong Kong – that are
key growth targets for our domestic travel partners and also
have attractive in-country growth and manageable barriers
to entry. In addition to these markets, we will deploy capital
to accelerate our existing and growing presence within the
U.K., Australia and Brazil, which were also identifi ed in our
research. With a $500 million revenue opportunity on the
horizon in our target geographies, we believe we are well
poised to see the returns from our eff orts. Over the course
of 2013, we will predominately concentrate our investments
on globalizing our virtual card for the online travel vertical,
though we will also make strategic investments in our U.S.
fl eet business to support the integration of Fleet One.
Given the success we’ve had with our virtual card, as
well as the traction we’ve seen with rapid! PayCard,
CorporatePay and UNIK, we believe now is the appropriate
time to increase our investments in these products to
maximize their potential. Our conviction is bolstered by
our historical track record of making investments that have
yielded impressive results. While our near-term performance
will be aff ected by elevated investments, we expect this will
lead to greater growth for our business over the long-run.
Finally, we will remain opportunistic with respect to mergers
and acquisitions as well as strategic alliances as mechanisms
to further our growth objectives. Our recent bond off ering
and expanded credit facility provide additional support to
capitalize on these opportunities at a low cost of capital.
We are excited as we embark on this strategic path for current
and future growth and believe we are well-positioned to
continue executing against our strategy and delivering value
for our shareholders now and into the foreseeable future.
Sincerely,
Michael E. Dubyak
Chairman, President and
Chief Executive Offi cer
April 4, 2013
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WEX EXECUTIVE TEAM
MICHAEL E. DUBYAK
Chairman, President and
Chief Executive Offi cer
STEVEN ELDER
Senior Vice President and
Chief Financial Offi cer
MELISSA D. SMITH
President,
The Americas
DAVID D. MAXSIMIC
President,
International
GEORGE HOGAN
Senior Vice President and
Chief Information Offi cer
JAMIE MORIN
Senior Vice President,
Client Services
Organization
HILARY A. RAPKIN
Senior Vice President,
General Counsel and
Corporate Secretary
GREGORY S. STRZEGOWSKI
Senior Vice President,
Corporate Development
KENNETH W. JANOSICK
Senior Vice President,
Small Business Solutions
RICHARD K. STECKLAIR
Senior Vice President,
Corporate Payment
Solutions
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 diff er materially from our forward-looking state-
ments, as discussed in the attached Form 10-K. This annual report contains forward-looking statements, including statements regarding: management’s expectations for the impact of recent
acquisitions and equity investments; the Company’s positioning for future growth; planned investments in growth opportunities; and, confi dence in future performance. Any statements
that are not statements of historical facts may be deemed to be forward-looking statements. When used in this annual report, the words “may,” “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. These
forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to diff er materially, including: the eff ects of general economic conditions on
fueling patterns and the commercial activity of fl eets; the eff ects of the Company’s business expansion and acquisition eff orts; the Company’s failure to successfully integrate the businesses
it has acquired; the failure of corporate investments to result in anticipated strategic value; 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; fuel price volatility; the Company’s failure to maintain or renew key agreements;
failure to expand the Company’s technological capabilities and service off erings 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; the impact of the Company’s outstanding bonds on its operations; fi nancial loss if the Company determines it neces-
sary 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 the Company’s annual report on Form 10-K fi led with the Securities and Exchange Commission on
February 28, 2013 and the Company’s subsequent periodic and current reports. The Company’s forward-looking statements and these factors do not refl ect the potential future impact of any
alliance, merger, acquisition, disposition or stock repurchases. The forward-looking statements speak only as of the date of this annual report and undue reliance should not be placed on these
statements. The Company disclaims 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, 2007 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, 2007, and ending on December 31,
2012, and (B) the diff erence 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
225
200
175
150
125
100
75
50
25
E
U
L
A
V
X
E
D
N
I
0
12/31/07
INDEX
WEX Inc.
Russell 2000
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
WEX INC.
RUSSELL 2000
S&P DATA PROCESSING AND OUTSOURCED SERVICES
PERIOD ENDING 12/31
07
08
09
10
11
12
S&P Data Processing and Outsourced Services
100.00
Source: S&P Capital IQ
100.00
100.00
35.50
66.21
69.84
89.77
129.61
152.94
84.20
106.82
102.36
94.03
90.08
112.40
212.37
119.09
145.97
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
Í ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
OR
‘ 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
WEX INC.
(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
Common Stock, $0.01 par value
Name of each exchange on which registered
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.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Í Yes
‘ Yes
‘ No
Í 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.
Í Yes
‘ 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).
Í Yes
‘ 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 incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K.
Í
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 Í
Non-accelerated filer ‘
(Do not check if a smaller reporting company)
Accelerated filer ‘
Smaller reporting company ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
‘ Yes
Í 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,
2012, the last business day of the registrant’s most recently completed second fiscal quarter, was $2,361,789,741 (based on the closing price of the
registrant’s common stock on that date as reported on the New York Stock Exchange).
There were 38,701,312 shares of the registrant’s common stock outstanding as of February 22, 2013.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s Proxy Statement for the 2013 Annual Meeting of Stockholders are incorporated by reference in Part III. With
the exception of the sections of the 2013 Proxy Statement specifically incorporated herein by reference, the 2013 Proxy Statement is not deemed
to be filed as part of the 10-K.
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
14
24
24
25
25
26
27
28
49
51
102
102
104
105
105
105
105
105
106
112
Unless otherwise indicated or required by the context, the terms “we,” “us,” “our,” “WEX,” or the
“Company,” in the Annual Report on Form 10-K mean WEX Inc. and all of its subsidiaries that are consolidated
under Generally Accepted Accounting Principles.
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, but not limited to, the “Strategy” section of this Annual Report in Item 1. 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, derivatives and securities regulators, or possible changes in banking
regulations impacting the Company’s industrial bank and WEX Inc. 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 and in connection with such forward-looking statements. Our forward-looking
statements and these factors do not reflect the potential future impact of any, alliance, 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
WEX Inc. (formerly Wright Express Corporation) is a leading provider of corporate card payment
solutions. From our roots as a pioneer in fleet card payments in 1983, WEX Inc. has expanded the scope of its
business into a multi-channel provider of corporate payment solutions. WEX Inc. has been publicly traded since
February 16, 2005 (NYSE:WXS) and currently operates in two business segments: Fleet Payment Solutions and
Other Payment Solutions. Our business model enables us to provide exceptional payment security and control
across a spectrum of payment sectors. 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 represented approximately 76 percent of our total revenue during the
year ended December 31, 2012, is earned primarily from payment processing, account servicing and transaction
processing, with the majority generated by payment processing. As of December 31, 2012, the Fleet Payment
1
Solutions segment serviced over 7.0 million vehicles. Management estimates that WEX fleet cards are accepted
at over 90 percent of fuel locations in each of the United States and Australia. The Other Payment Solutions
segment provides customers with payment processing solutions for their corporate purchasing and transaction
monitoring needs through our payment products. Other Payment Solutions revenue is earned primarily from
payment processing revenue with operations in North and South America, Europe and Australia.
The Company’s U.S. operations include WEX Inc., and our wholly-owned subsidiaries Fleet One
(acquired on October 4, 2012), WEX Bank, rapid! PayCard, and Pacific Pride. Our international operations
include our wholly-owned subsidiaries Wright Express Fuel Cards Australia, Wright Express Prepaid Cards
Australia, Wright Express New Zealand, and CorporatePay Limited, located in England, and a majority equity
position in UNIK S.A., a Brazil based company.
Prior to our IPO, the Company’s growth had been primarily organic. Our growth in the past several years
has been supplemented by acquisitions. Our recent acquisitions include the following transactions:
•
•
•
•
On October 4, 2012, we acquired Fleet One, a provider of fleet cards and fleet-related payment
solutions to the heavy truck or over-the-road segment of the fleet market.
On August 30, 2012, we acquired a 51 percent controlling interest in UNIK S.A., a provider of payroll
cards, private label and processing services in Brazil, specializing in the retail, government and
transportation sectors. We have an option to acquire the remaining shares of UNIK S.A.
On May 11, 2012, we acquired CorporatePay Limited, England, a provider of corporate prepaid
solutions to the travel industry in the United Kingdom. CorporatePay offers direct, co-branded and
private label solutions including virtual cards, currency cards and expense management solutions.
On September 10, 2010, we acquired the Australian assets of Retail Decisions, a provider of fleet and
prepaid cards in the Australian market. Operating today as Wright Express Fuel Cards Australia and
Wright Express Prepaid Cards Australia, this acquisition supports our long-term strategy of providing
both payment and processing of card issuance services internationally.
WEX Bank, a Utah industrial bank incorporated in 1998, is a Federal Deposit Insurance Corporation
(“FDIC”) insured depository institution. WEX Bank’s primary regulators are the Utah Department of Financial
Institutions and the FDIC. WEX Bank is required to maintain elements of independence from the rest of our
business to comply with its charter and applicable banking regulations, and is required to file separate financial
statements with the FDIC. The activities performed by WEX Bank are integrated into the operations of both of
the Company’s segments. The functions performed at WEX Bank contribute to the operations of both of WEX
Inc.’s segments by providing a funding mechanism, among other services. With our ownership of WEX Bank,
we have access to low-cost sources of capital. WEX Bank raises capital primarily through the issuance of
brokered deposits and NOW accounts and provides the financing and makes the credit decisions that enable both
segments to extend credit to their customers. WEX Bank approves customer applications, maintains appropriate
credit lines for each customer, is the account issuer, provides funding and is the counterparty for the customer
relationships for most of our programs. Operations such as sales, marketing, merchant relations, customer
service, software development and IT are performed within our organization but outside of WEX Bank.
Competitive Strengths
We believe the following strengths distinguish us from our competitors:
Fleet Payment Solutions
• We believe our closed-loop fuel networks in the United States and Australia are among the largest in
each country. We describe our fleet payment processing networks as “closed-loop” as we have a
direct contractual relationship with both the merchant and the fleet, and only WEX transactions
2
•
•
can be processed on these networks. We have built a network that management believes provides over
90 percent fuel location coverage in each of the United States and Australia, which provides our
customers the convenience of broad acceptance.
Our proprietary closed-loop fuel networks also afford us access to a higher level of fleet-specific
information and control than is widely available on open-loop networks. This allows us to improve
and refine the information reporting we provide to our fleet customers and strategic relationships.
• We offer a differentiated set of products and services, 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 web-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.
Our long-standing strategic relationships, multi-year contracts and high contract renewal rates have
contributed to the stability and recurring nature of our revenue base. We believe that we offer a
compelling value to our customers relative to our competitors given the breadth and quality of our
products and services and our deep understanding of our customers’ operational needs. We have a
large installed customer base, with more than 7.0 million vehicles serviced as of December 31, 2012
and co-branded strategic relationships with six of the largest U.S. fleet management companies and
with numerous oil companies that use our private label solutions. Our wide site acceptance, together
with our private-label portfolios and value-added product and service offerings, drive high customer
satisfaction levels, with a U.S. fleet retention rate in excess of 97 percent (based on the 2012 rate of
voluntary customer attrition).
•
Our proprietary closed-loop network is a significant barrier to entry because a competitor would need
to establish a direct relationship with each of the merchants that comprise the network.
• With the Fleet One acquisition, we have accelerated our entrance into the over-the-road segment of
the market in the United States and Canada, enhancing our ability to serve fleet customers who
operate both heavy duty trucks and cars or light duty vehicles and blending the small fleet and private
label businesses for greater scale.
Other Payment Solutions
•
Our virtual products offer corporate customers enhanced security and control for complex payment
needs. Our strategic relationships include three of the largest United States based online travel
agencies. Our operations in the United Kingdom provide corporate prepaid solutions to the travel
industry. Additionally, we offer virtual products in the insurance/warranty and healthcare markets in
the United States.
• We offer paycard products in the United States and Brazil. These products include payroll cards
which are used to replace paper payroll checks. This is a service offered by businesses to individuals
who often do not have a bank account.
Other Competitive Strengths
•
The demand for our payment processing, account servicing and transaction processing services
combined with significant operating leverage has historically driven strong revenue growth with
consistently high margins. We have a strong track record of organic revenue growth driven by our
various marketing channels, our extensive network of fuel and service providers, and our consistent
growth in transaction volume and card placement. Further, we have completed a number of strategic
3
acquisitions to expand our product and service offerings which have contributed to our revenue
growth and diversification.
• We have an enterprise-wide risk management program that helps us to effectively address inherent
risks related to funding and liquidity, fuel price volatility, our extension of credit and interest rates.
Our ownership of WEX Bank provides us with access to low cost sources of capital (primarily
through brokered deposits and NOW accounts issued by WEX Bank), which provide liquidity to fund
our short-term domestic card receivables. We use fuel price derivatives to manage a portion of our
U.S. fuel-price-related earnings exposure, as described below under “Fuel Price Derivatives.” We
have historically maintained a long record of low credit losses due to the short-term, non-revolving
credit issued to our customer base, which is typically due within 30 days. Our credit risk management
program is enhanced by our proprietary scoring model, reducing credit lines and early suspension
policy. As of December 31, 2012, 96 percent of accounts receivables were less than 30 days past due
and 99 percent were less than 60 days past due. Interest rate risk is managed through diversified
funding sources at WEX Bank with significant non-interest bearing liabilities and merchant contracts
that include some ability to raise rates if interest rates rise.
• We have an experienced and committed management team that has substantial industry knowledge
and a proven track record of financial success. Our executive management team has significant
industry experience and an average of over 13 years of tenure with us. The team has been successful
in driving strong growth in our business and establishing a track record of strong, consistent operating
performance. We believe that our management team positions us well to continue to successfully
implement our growth strategy and capture operating efficiencies.
Strategy
We have a multi-pronged growth strategy that includes the following:
•
•
•
Expanding our core U.S. fleet business. We intend to continue to grow our business organically
through the use of our various marketing channels, leveraging our competitive advantages and
continuing to explore new strategies that bring innovative new products to market.
Diversifying our products. We plan to build upon the opportunities we see in the Other Payment
Solutions segment, including expanding our virtual card product into new markets and expanding our
paycard product offerings.
Growing our business internationally. Through our acquisitions, we have established an
international presence and extended our product suite. We intend to continue to focus on expanding
our international business by capitalizing on opportunities that enable us to leverage our competitive
strengths in the Fleet Payment Solutions and Other Payment Solutions segments. As we continue to
expand into foreign geographies, we expect investments in joint ventures to be an important element
of our strategy to take advantage of existing infrastructure in markets where we do not currently have
a presence.
FLEET PAYMENT SOLUTIONS SEGMENT
The Fleet Payment Solutions segment provides customers with fleet vehicle payment processing services
specifically designed for the needs of commercial and government fleets. We are a leading provider of fleet
vehicle payment processing services with over 7.0 million vehicles using our fleet payment solutions to purchase
fuel and maintenance services. We believe we have an approximately 13 percent market share in the United
States. Our competitive advantages in the fleet market include brand strength and product offerings, commitment
to customer satisfaction and a unique financing model with attractive credit terms. Our fleet products are based
upon proprietary technology with closed-loop networks in the United States and Australia, and wide site
acceptance.
4
As part of our value proposition, we deliver security through individualized driver identification and real-
time transaction updates, purchase controls and sophisticated reporting tools. 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 analytical tools to help them effectively manage their vehicle fleets
and control costs. We deliver value to our customers by providing customized offerings for accepting merchants,
processing payments and providing information management products and services to fleets.
Our proprietary closed-loop networks allow us to provide our customers with highly detailed, fleet-specific
information and customized controls that are not typically available on open-loop networks, such as limiting
purchases to fuel only and restricting the time of day and day of week when fuel is purchased. Our network also
enables us to avoid dependence on third-party processors. In addition, our relationships with both fleets and
merchants enable us to provide security and controls and provide customizable reporting.
The following illustrates our proprietary closed-loop network:
Products and Services
Payment processing transactions represent a majority of the revenue stream in the Fleet Payment Solutions
segment. In a payment processing transaction, we extend short-term credit to the fleet customer and pay the
purchase price for the fleet customer’s transaction, less the payment processing fees we retain, to the merchant.
We collect the total purchase price from the fleet customer, normally within one month from the billing date.
Payment processing fees are based on a percentage of the aggregate dollar amount of the customer’s
purchase, a fixed amount per transaction or a combination of both. In 2012, we processed approximately
245 million U.S. payment processing transactions and approximately 16 million Australian payment processing
transactions. In 2011, we processed approximately 233 million U.S. payment processing transactions and
approximately 15 million Australian payment processing transactions.
Additionally, we receive revenue from account servicing fees and finance fees.
We offer the following account management services:
•
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 and
partners.
5
•
•
•
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 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 helps 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 accounts, alert customers 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. We also alert the customer to unusual transactions or transactions that fall
outside of pre-established parameters. Customers, through our website, 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.
6
The following illustration depicts our business process for a typical payment processing transaction:
Action
Related Revenue Streams
1. Driver inserts card
Purchase Controls / Data capture
2. Transaction approved by WEX
3. WEX pays merchant in 10 days
Payment processing revenue
(fee withheld from Merchant)
4. WEX receives payment in 30 days
Credit management / Bank funding
Finance fee income
(for late payments)
5. Cost savings for fleet
Information management
Account servicing fees
(varies by fleet size)
Marketing Channels
We market our fleet products and services directly to commercial and government vehicle fleet customers
with small, medium and large fleets, and over-the-road long haul fleets. Our product suite includes payment
processing and transaction processing services, WEX branded fleet cards in North America and MotorPass/
Motorcharge-branded fleet cards in Australia. Our direct line of business services 3.1 million vehicles.
We also market our products and services indirectly through co-branded and private label relationships.
With a co-branded relationship product, we market our products and services for, and in collaboration with, fleet
management companies using their brand names and our logo on a co-branded fleet card. These companies seek
to offer our payment processing and information management services as a component of their total offering to
their fleet customers. Our co-branded marketing channel includes over 100 strategic relationships and services
1.6 million vehicles.
Our private label programs 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 products 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. Our private label marketing channel
includes over 20 strategic relationships and services 2.3 million vehicles.
Fuel Price Derivatives
In 2012, management estimates approximately 43 percent of our total revenue resulted from fees paid to us
by fuel providers based on a negotiated percentage of the purchase price of fuel purchased by our customers and
accordingly was impacted by fuel prices. To address these fluctuations, we intend to hedge approximately 60
percent of our U.S. fuel-price-related earnings exposure to improve management of cash flow volatility created
7
by changes in U.S. fuel prices and to enhance the visibility and predictability of our future cash flows. Prior to
2012 when we lowered our targeted hedging percentage to 60 percent, we entered into hedges intended to cover
approximately 80 percent of our U.S. fuel-price-related earnings exposure.
Our hedging program uses put and call option contracts with monthly settlement provisions that create a
“costless collar” based upon both the U.S. Department of Energy’s weekly diesel fuel price index and the
NYMEX unleaded gasoline contracts. When entering into these options, our intent is to effectively lock in a
range of prices during any given quarter on a portion of our U.S. forecasted earnings that are subject to fuel price
variations. 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:
•
•
Create a floor price. When the current month put option contract settles, we receive cash payments
from the counterparties if the average price for the current month (as defined by the option contract) is
below the strike price of the put option.
Create a ceiling price. When the current month call option contract settles, we make cash payments
to the counterparties if the average price for the current month (as defined by the option contract) is
above the strike price of the call option.
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, 2012. The approximate
percentage of exposure to fuel price sensitive related earnings exposure includes the impact from our Fleet One
operations.
Average low end of range of fuel prices per gallon
Average top end of range of fuel prices per gallon
Approximate % of exposure locked in
Q4
2012
$3.46
$3.52
Q1
2013
$3.42
$3.48
Q2
2013
$3.44
$3.50
Q3
2013
$3.47
$3.53
Q4
2013
$3.36
$3.42
Q1
2014
$3.34
$3.40
Q2
2014
$3.26
$3.32
69%
69%
71%
53%
53%
36%
18%
OTHER PAYMENT SOLUTIONS SEGMENT
Our Other Payment Solutions segment is comprised of our virtual and paycard products. We provide
innovative corporate purchasing capabilities through our virtual and paycard products, which can be integrated
with our customers’ internal systems to streamline their payroll, accounts payable and reconciliation processes.
Products and Services
Virtual Card Products
The WEX virtual card product suite allows businesses to centralize purchasing, simplify complex supply
chain processes and eliminate the paper check writing associated with traditional purchase order programs. Our
8
virtual card is used for transactions where no card is presented, including, for example, transactions conducted
over the telephone, by mail, by fax or on the Internet. Our virtual card also can be used for transactions that
require pre-authorization, such as hotel reservations. Under our virtual card program, each transaction is assigned
a unique account number with a customized credit limit and expiration date. These controls are in place to limit
fraud and unauthorized spending. The unique account number limits purchase amounts and tracks, settles and
reconciles purchases more easily, creating efficiencies and cost savings for our customers. The virtual card
products offer both credit and debit options.
The following illustration depicts our business process for a typical virtual card transaction:
Paycard Products
Paycard products are an emerging product line for WEX Inc. The rapid! PayCard product, a pre-paid
payroll card, provides a comprehensive paycard benefit and ePayroll program designed for employers choosing
to convert to electronic delivery of payroll in the United States, replacing paper employee payroll checks.
Additionally, in August 2012 we acquired a 51 percent controlling interest in UNIK S.A., a leading provider of
payroll cards, private label and processing services in Brazil, specializing in the retail, government and
transportation sectors.
We also have several other product offerings, including corporate purchase cards and pre-paid and gift
cards.
Marketing Channels
We market our Other Payment Solutions segment products and services 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
use existing open loop networks. Our rapid! PayCard product is marketed to small and medium sized businesses
in the United States.
9
Employees
OTHER ITEMS
As of December 31, 2012, WEX Inc. and its subsidiaries had 1,302 employees, of which 1,028 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 to 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
local 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 marketplace. In the United States, our closed-loop proprietary software captures detailed
information from the 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 and to respond
rapidly to changing customer needs with system upgrades, 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, New Zealand, Brazil and England, we operate standalone platforms to support operations. All
of the development, maintenance and support of each card management system are performed within the
respective business. We continue to invest in our 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”, “We are dependent on technology systems and electronic
communications networks managed by third parties, which could result in our inability to prevent service
disruptions”, and “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.”
Intellectual Property
We rely on a combination of patents, 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 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
10
to develop similar technology independently. We pursue registration and protection of our trademarks in the
United States and other countries in which we operate or plan to operate. Wright Express Fuel Cards Australia
and Wright Express Prepaid Cards Australia hold patents that are registered in Australia, as well as in the United
Kingdom, Hong Kong and New Zealand. We market our products and services using the WEX brand names in
the United States and the MotorPass and Motorcharge brand names in Australia.
Regulation – United States
The Company and WEX Bank are subject to certain state and federal laws and regulations governing
insured depository institutions and their affiliates. WEX Bank is subject to supervision and examination by both
the Utah Department of Financial Institutions and the FDIC. WEX Bank, including the Company and its other
subsidiaries, is 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 WEX Bank may make to one borrower and the types of investments
WEX Bank 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 WEX.
Exemption from certain requirements of the Bank Holding Company Act
As an industrial bank organized under the laws of Utah that does not accept demand deposits that may be
withdrawn by check or similar means, WEX Bank meets the criteria for exemption from the definition of “bank”
under the Bank Holding Company Act. As a result, the Company is generally not subject to the Bank Holding
Company Act.
Restrictions on intercompany borrowings and transactions
Sections 23A and 23B of the FRA and the implementing regulations limit the extent to which the Company
can borrow or otherwise obtain credit from or engage in other “covered transactions” with WEX Bank. “Covered
transactions” include loans or extensions of credit, purchases of or investments in securities, purchases of assets,
including assets subject to an agreement to repurchase, acceptance of securities as collateral for a loan or
extension of credit, or the issuance of a guarantee, acceptance, or letter of credit. Although the applicable rules do
not serve as an outright bar on engaging in “covered transactions,” they do require that the Company engage in
such transactions with WEX Bank only on terms and under circumstances that are substantially the same, or at
least as favorable to WEX Bank, as those prevailing at the time for comparable transactions with nonaffiliated
companies. Furthermore, with certain exceptions, each loan or extension of credit by WEX Bank to the Company
or its other affiliates must be secured by collateral with a market value ranging from 100 percent to 130 percent
of the amount of the loan or extension of credit, depending on the type of collateral.
The Consumer Financial Protection Bureau
The Dodd-Frank Act established the CFPB to regulate the offering of consumer financial products or
services under the federal consumer financial laws. In addition, the CFPB was granted general authority to
prevent covered persons or service providers from committing or engaging in unfair, deceptive or abusive acts or
practices under federal law in connection with any transaction with a consumer for a consumer financial product
or service, or the offering of a consumer financial product or service. The CFPB has broad rulemaking authority
for a wide range of consumer protection laws, including the authority to prohibit “unfair, deceptive or abusive”
acts and practices. The legislation also gives the state attorneys general the ability to enforce applicable federal
consumer protection laws.
Brokered Deposits
Under FDIC regulations, depending upon their capital classification, banks may be restricted in their
ability to accept brokered deposits. “Well capitalized” banks are permitted to accept brokered deposits, but banks
11
that are not “well capitalized” are not permitted to accept such deposits. The FDIC may, on a case-by-case basis,
permit banks that are “adequately capitalized” to accept brokered deposits if the FDIC determines that
acceptance of such deposits would not constitute an unsafe or unsound banking practice.
Other Regulatory Requirements
WEX Bank must monitor and report unusual or suspicious account activity, as well as transactions
involving amounts in excess of prescribed limits, as required by the Bank Secrecy Act and Internal Revenue
Service regulations. The USA PATRIOT Act of 2001 substantially broadened the scope of U.S. anti-money
laundering laws and regulations by imposing significant new compliance and due diligence obligations,
identifying new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. The
U.S. Treasury Department has proposed and, in some cases, issued a number of implementing regulations which
impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect,
prevent and report money laundering and terrorist financing and to verify the identity of their customers. Certain
of those regulations impose specific due diligence requirements on financial institutions that maintain
correspondent or private banking relationships with non-U.S. financial institutions or persons. Failure of a
financial institution to maintain and implement adequate programs to combat money laundering and terrorist
financing could have serious legal and reputational consequences for the institution.
The federal government has imposed economic sanctions that affect transactions with designated foreign
countries, nationals and others. These sanctions, which are administered by the U.S. Treasury’s Office of Foreign
Assets Control (“OFAC”), take many different forms but generally include one or more of the following
elements: (i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct
or indirect imports from and exports to a sanctioned country and prohibitions on “U.S. persons” engaging in
financial transactions relating to making investments in, or providing investment-related advice or assistance to, a
sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of the
sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including
property in the possession or control of U.S. persons). Blocked assets (for example, property and bank deposits)
cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to
comply with these sanctions could have serious legal and reputational consequences.
Under the Financial Services Modernization Act of 1999, also referred to as the “Graham-Leach-Bliley Act
(or “GLBA”), the Company and WEX Bank are required to maintain a comprehensive written information security
program that includes administrative, technical and physical safeguards relating to customer information. However,
this requirement does not generally apply to information about companies or about individuals who obtain financial
products or services for business, commercial, or agricultural purposes. The GLBA also requires the Company and
WEX Bank to provide initial and annual privacy notices to customers that describe in general terms their
information sharing practices. If the Company and WEX Bank intend to share nonpublic personal information about
customers with affiliates and/or nonaffiliated third parties, they must provide customers with a notice and a
reasonable period of time for each consumer to “opt out” of any such disclosure. In addition to U.S. federal privacy
laws, states also have adopted statutes, regulations and other measures governing the collection and distribution of
nonpublic personal information about customers. In some cases these state measures are preempted by federal law,
but if not, the Company and WEX Bank must monitor and comply with the laws in the conduct of its business.
Restrictions on dividends
WEX Bank is subject to various regulatory requirements relating to the payment of dividends, including
requirements to maintain capital above regulatory minimums. A banking regulator may determine that the
payment of dividends would be inappropriate and could prohibit payment. Further, WEX Bank may not pay a
dividend if it is undercapitalized or would become undercapitalized as a result of paying the dividend. Utah law
permits WEX Bank to pay dividends out of the net profits of the industrial bank after providing for all expenses,
losses, interest, and taxes accrued or due, but if WEX Bank’s surplus account is less than 100 percent of its
capital stock, WEX Bank must transfer up to 10 percent of its net profits to the surplus account prior to the
payment of any dividends.
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Company obligations to WEX Bank
Any non-deposit obligation of WEX Bank to the Company is subordinate, in right of payment, to deposits
and other indebtedness of WEX Bank. In the event of the Company’s bankruptcy, any commitment by the
Company to a federal bank regulatory agency to maintain the capital of WEX Bank will be assumed by the
bankruptcy trustee and entitled to priority of payment.
Further, until July 21, 2013, Section 603 of the Dodd-Frank Act restricts the acquisition of industrial banks by
commercial firms. A company is a “commercial firm” if the annual gross revenues derived by the company and all
of its affiliates from activities that are “financial in nature” (as defined by the Bank Holding Company Act)
represent less than 15 percent of the company’s consolidated gross revenue. There are exceptions to the change-in-
control restriction, including where: the industrial bank is in danger of default; the change-in-control results from a
merger or whole acquisition by a commercial firm in a bona fide merger or acquisition; or where the change-in-
control results from an acquisition of voting shares of a publicly traded company that controls an industrial bank and
the acquiring shareholder holds less than 25 percent of any class of the voting shares of the company.
Restrictions on ownership of WEX Inc. common stock
WEX Bank, and therefore the Company, is subject to bank regulations that impose requirements on entities
that might control WEX Bank through control of the Company. These requirements are discussed 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 laws and regulations of the Commonwealth of Australia
governing banking and payment systems, financial services, consumer credit and money laundering. Because
neither Wright Express Fuel Cards Australia nor Wright Express Prepaid Cards Australia holds an Australian
Financial Services License or credit license or is an authorized deposit-taking institution, they operate within a
framework of regulatory relief and exemptions afforded them on the basis that they satisfy the requisite conditions.
Segments and Geographic Information
For an analysis of financial information about our segments as well as our geographic areas, see
Item 8 – Note 20 of our consolidated financial statements included elsewhere in this Annual Report on
Form 10-K.
Available Information
The Company’s principal executive offices are located at 97 Darling Avenue, South Portland, ME 04106. Our
telephone number is (207) 773-8171, and our Internet address is http://www.wexinc.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.
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ITEM 1A. RISK FACTORS
The risks and uncertainties described below are not the only risks and uncertainties that we face.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also
impair our business operations. If any of those risks actually occurs, our business, financial condition and results
of operations would suffer. The risks discussed below also include forward-looking statements and our actual
results may differ substantially from those discussed in these forward-looking statements.
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, 2012, management estimates approximately 43 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 is dependent on fuel
prices, which are prone to volatility. For example, we estimate that during 2012, a one cent decline in average
fuel prices below average actual prices would have resulted in approximately a $0.8 million decline in 2012
revenue. Declines in the price of fuel could have a material adverse effect on our total revenues.
Fuel prices are dependent on many factors, all of which are beyond our control. These factors include, among
others:
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supply and demand for oil and gas, and expectations regarding supply and demand;
speculative trading;
actions by major oil exporting nations;
political conditions in other oil-producing, gas-producing or supply-route countries, including
revolution, insurgency, terrorism or war;
refinery capacity;
weather;
the prices of foreign exports and the availability of alternate fuel sources;
value of the U.S. dollar versus other major currencies;
general worldwide economic conditions; and
governmental regulations and tariffs.
Derivative transactions may not adequately stabilize our cash flows and may cause volatility in our
earnings.
Because a 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. Business. 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 the U.S. 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
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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 provision for credit loss on the income statement expense could be
significantly higher than it has been in the past.
Our exposure to counterparty credit risk could create an adverse effect 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 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.
The Dodd-Frank Act may have a significant impact on our business, results of operation and financial
condition.
On July 21, 2010, the Dodd-Frank Act Wall Street Reform and Consumer Protection Act of 2010, or the
Dodd-Frank Act, was enacted into law. The Dodd-Frank Act, among other things, when fully implemented, will
result in substantial changes in the regulation of derivatives and capital market activities. The impact of the Dodd-
Frank Act is difficult to assess because many provisions require federal agencies to adopt implementing regulations
which have not been completed and because many of its provisions are being phased in over time. In particular, the
Dodd-Frank Act establishes federal oversight and regulation of the over-the-counter derivatives market and entities
that participate in that market. For example, the Dodd-Frank Act provides the Commodity Futures Trading
Commission with broad authority to adopt combined position limits for futures contracts and over-the-counter
derivatives. We cannot assess whether those rules, which have been vacated by a U.S. District Court and are the
subject of continuing litigation, if eventually upheld, would have an adverse impact on our business.
Although the application of the Dodd-Frank Act’s provisions to us, if any, are uncertain at this time, we
could be required to change our fuel price hedging practices, to comply with new regulatory requirements.
Potential changes include clearing and execution methodology of our derivatives transactions. The Dodd-Frank
Act also requires many counterparties to derivatives instruments to spin off some of their derivatives activities to
a separate entity. These new entities may not be as creditworthy as the current counterparty. Presently, we cannot
assess the capital or margin requirements which might apply to our over-the-counter transactions. Once
implemented, these changes could result in increased transaction costs. In summary, the Dodd-Frank Act and any
new regulations could increase the cost of derivative contracts or modify the way in which we conduct those
transactions.
If we modify or reduce our use of derivatives as a result of the legislation and regulations, our results of
operations may become more volatile and our cash flows may be less predictable. Increased volatility may make
us less attractive to certain types of investors. Any of these consequences could have a material adverse effect on
our financial condition and results of operations.
The Dodd-Frank Act also created the Consumer Financial Protection Bureau, or CFPB, to regulate the
offering of consumer financial products or services under the federal consumer financial laws. The CFPB
assumed rulemaking authority under the existing federal consumer financial protection laws, and will enforce
those laws against and examine certain non-depository institutions and insured depository institutions with total
assets greater than $10 billion and their affiliates. In addition, the CFPB was granted general authority to prevent
covered persons or service providers from committing or engaging in unfair, deceptive or abusive acts or
practices under federal law in connection with any transaction with a consumer for a consumer financial product
or service, or the offering of a consumer financial product or service. The CFPB also has broad rulemaking
authority for a wide range of consumer protection laws. It is unclear what changes will be promulgated by the
CFPB and what effect, if any, such changes would have on our business and operations.
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As required under the Dodd-Frank Act, the Government Accountability Office issued its study on the
implications of any elimination of the exemption to the definition of “bank” for industrial banks under the Bank
Holding Company Act. The study did not make a recommendation regarding the elimination of this exemption.
However, if this exemption were eliminated without any grandfathering or accommodations for existing
institutions, we could be required to become a bank holding company which could require us to either cease
certain activities or divest WEX Bank.
Until July 21, 2013, the Dodd-Frank Act restricts the change-in-control and acquisition of industrial banks
by commercial firms. This restriction, as more fully discussed under the heading “Other Items — Regulation —
United States” in Item 1. Business, may make it more difficult for us to engage in transactions that have the
effect of changing the ownership structure of WEX Bank.
The Dodd-Frank Act and any related legislation or regulations may have a material impact on our business,
results of operations and financial condition. In addition, we may be required to invest significant management
time and resources to address the various provisions of the Dodd-Frank Act and the numerous regulations that are
required to be issued under it.
In an increasing interest rate environment, interest expense on the variable rate portion of our
borrowings on our amended and restated credit agreement that we entered into on January 18, 2013
(the “2013 Credit Agreement”) would increase and we may not be able to replace our maturing debt
with new debt that carry the same interest rates. We may be adversely affected by significant changes in
the brokered deposit market.
We had $621 million of variable interest rate indebtedness outstanding at December 31, 2012, consisting of
borrowings under our senior secured credit facility that bore interest at either a floating rate equal to the one-
month LIBOR plus 150 basis points or at the prime rate plus 50 basis points. Our industrial bank subsidiary,
WEX Bank, uses certificates of deposit and interest-bearing money-market deposits, or collectively brokered
deposits, as well as NOW accounts, to finance payments to major oil companies. Certificates of deposit carry
fixed interest 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, WEX Bank would not be able to replace maturing deposits with deposits that
carry the same or lower interest rates. Therefore, 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, 2012,
WEX Bank had outstanding $441.1 million in certificates of deposit maturing within one year and $48.3 million
in certificates of deposit maturing within one to two years; and $123.6 million in interest-bearing money market
deposits. Also at December 31, 2012, WEX Bank had $261.1 million of NOW account deposits outstanding
associated with the Higher One program, which are currently non-interest bearing.
We have substantial indebtedness, which may materially and adversely affect our financial flexibility
and our ability to meet our debt service obligations under our 4.750% senior notes, due 2023 (the
“notes”).
This indebtedness consists of secured indebtedness under our 2013 Credit Agreement and the notes, deposits
and other liabilities outstanding. We also have had the ability to borrow an additional funds under our 2013
Credit Agreement, subject to compliance with all applicable covenants under our 2013 Credit Agreement. Our
indebtedness could, among other things:
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require us to dedicate a substantial portion of our cash flow to repaying our indebtedness, thus
reducing the amount of funds available for other general corporate purposes;
limit our ability to borrow additional funds necessary for working capital, capital expenditures or
other general corporate purposes;
increase our vulnerability to adverse general economic or industry conditions; and
limit our flexibility in planning for, or reacting to changes in, our business.
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There can be no assurance that we will be able to meet our debt service obligations, including any of our
obligations under the notes. In addition, we may need to incur substantial additional indebtedness in the future to
fund our operations or certain strategic objectives. However, we may not be able to incur the additional financing
necessary for these purposes.
In addition, under our 2013 Credit Agreement we are required to remain in compliance with a maximum
consolidated leverage ratio and a consolidated interest coverage ratio and other covenants. If our earnings
decline, or if we incur additional indebtedness, we may be unable to comply with these financial ratios. Failure to
comply with the financial covenants or any other non-financial or restrictive covenant in our 2013 Credit
Agreement could create a default under our 2013 Credit Agreement. Upon a default, our lenders could accelerate
the indebtedness under the facilities, foreclose against their collateral or seek other remedies, which would
jeopardize our ability to continue our current operations.
Despite our substantial indebtedness, we may still be able to incur more debt, intensifying the risks
described above.
Subject to restrictions in our 2013 Credit Agreement, we may incur additional indebtedness, which could
increase the risks associated with our already substantial indebtedness. Subject to certain limitations, we have the
ability to borrow additional funds under our 2013 Credit Agreement, subject to meeting the covenants in our
2013 Credit Agreement.
To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash
depends on many factors beyond our control.
Our ability to make payments on and to refinance our indebtedness, and to fund capital expenditures,
acquisitions and research and development efforts will depend on our ability to generate cash. This, to a certain
extent, is subject to economic, financial, competitive, legislative, regulatory and other factors that are beyond our
control.
We cannot assure you, however, that our business will generate sufficient cash flows from operations, that
anticipated cost savings and operating improvements will be realized on schedule or at all, that future borrowings
will be available to us under our 2013 Credit Agreement, or that we can obtain alternative financing proceeds in
an amount sufficient to enable us to pay our indebtedness, including the notes, or to fund our other liquidity
needs. We may need to refinance all or a portion of our indebtedness, including the notes, at or before maturity.
We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable
terms or at all.
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 customers and strategic relationships
accounted for approximately 24 percent of our total revenues in 2012. 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. In addition, as of December 31,
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2012, we had $261.1 million of NOW account deposits outstanding associated with the Higher One program, the
company that originates the NOW accounts. If that relationship terminated, we would need to seek additional
sources of funding or further utilize other existing sources of funding. There could be no assurance that we would
be able to find new or use existing sources of funding on terms acceptable to us. If we were unable to secure such
funding, our results of operations 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 redundancies, 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 U.S. and international operations.
We conduct operations in North America, South 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 U.S. operations and
otherwise harm our business. In addition, there are many barriers to competing successfully in the international
market, including:
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changes in the relations between the United States and foreign countries;
actions of foreign or United States governmental authorities affecting trade and foreign investment;
regulations on repatriation of funds;
increased infrastructure costs including complex legal, tax, accounting and information technology
laws and treaties;
interpretation and application of local laws and regulations including, among others, those impacting
anti-money laundering, 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.
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
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an impairment of goodwill or intangible assets. As a result of our interim and annual period impairment analyses
during 2012, we determined that lower future earnings than forecasted resulted in goodwill impairment losses of
approximately $17.5 million related to certain reporting units. We use a discounted cash flow model of the
projected earnings of reporting units to determine the amount of goodwill impairment. Materially different
assumptions regarding future performance of our reporting units or the weighted-average cost of capital used in
the valuations could result in future 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 senior secured credit facility expires in January 2018 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 WEX Bank’s ability to attract and retain
deposits.
Adverse conditions in the credit market may limit WEX Bank’s ability to attract deposits at a time when it
would like or need to do so. A significant credit ratings downgrade, material capital market disruptions,
significant withdrawals by depositors at WEX Bank, or adverse changes to its industrial bank charter could
impact our ability to maintain adequate liquidity and impact our ability to provide competitive offerings to our
customers. Any limitation of availability of deposits could have an impact on our ability to finance our U.S.
accounts receivable which could adversely impact us.
If our industrial bank subsidiary fails to meet certain criteria, we may become subject to regulation
under the Bank Holding Company Act, which could force us to cease all of our non-banking activities
and thus could have an adverse effect on our revenue and business.
WEX Bank meets the criteria for exemption of an industrial bank from the definition of “bank” under the
Bank Holding Company Act. WEX Bank’s failure to qualify for this exemption would cause us to become
subject to regulation under the Bank Holding Company Act. This would require us to divest WEX Bank or
become a Bank Holding Company and to possibly cease certain impermissible activities. Failure to qualify for
this exemption could have an adverse effect on our revenue and business.
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.
WEX Bank’s bank regulatory status enables WEX Bank to issue certificates of deposit, accept money
market deposits and NOW accounts, and borrow on a federal funds rate basis from other banks. These funds are
used to support our U.S. payment processing operations, which require the Company to make payments, as well
as for our virtual and paycard products. WEX Bank operates under a uniform set of state lending laws, and its
operations are subject to extensive state and federal regulation. WEX Bank, a Utah industrial bank incorporated
in 1998, is an FDIC-insured depository institution. The bank’s primary regulators are the Utah Department of
Financial Institutions and the FDIC. Continued licensing and federal deposit insurance are subject to ongoing
satisfaction of compliance and safety and soundness requirements. WEX Bank must be adequately capitalized as
defined in the banking regulations and satisfy a range of additional capital requirements. If WEX Bank were to
lose its bank charter, we would either outsource our credit support activities or perform these activities ourselves,
which would subject us to the credit laws of each individual state in which we conduct business. Furthermore, we
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 our 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 we conduct business in the future.
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We are subject to extensive supervision and regulation that could restrict our activities and impose
financial requirements or limitations on the conduct of our business and limit our ability to generate
income.
We are subject to extensive federal and state regulation and supervision, including that of the FDIC, the
CFPB, and the Utah Department of Financial Institutions. Banking regulations are primarily intended to protect
depositors’ funds, federal deposit insurance funds and the banking system as a whole, not shareholders or
noteholders. These regulations affect our payment operations, capital structure, investment practices, dividend
policy and growth, among other things. Failure to comply with laws, regulations or policies could result in
sanctions by regulatory agencies, damages, civil money penalties or reputational damage, which could have a
material adverse effect on our business, financial condition and results of operations. While we have policies and
procedures designed to prevent any such violations, there can be no assurance that such violations will not occur.
The U.S. Congress and federal regulatory agencies frequently revise banking and securities laws, regulations and
policies. We cannot predict whether or in what form any other proposed regulations or statutes will be adopted or
the extent to which our business may be affected by any new regulation or statute. Such changes could subject
our business to additional costs, limit the types of financial services and products we may offer and increase the
ability of non-banks to offer competing financial services and products, among other things.
Our industrial bank subsidiary is subject to regulatory capital requirements that may require us to
make capital contributions to it, and that may restrict the ability of the subsidiary to make cash
available to us.
WEX Bank must maintain minimum amounts of regulatory capital. If WEX Bank does not meet these
capital requirements, its regulators have broad discretion to institute a number of corrective actions that could
have a direct material effect on our financial statements. WEX Bank, as an institution insured by the FDIC, must
maintain certain capital ratios, paid-in capital minimums and adequate allowances for loan losses. Under the
Dodd-Frank Act, we are also required to serve as a source of financial strength for WEX Bank. If WEX Bank
were to fail to meet any of the capital requirements to which it is subject, or if required under Dodd-Frank’s
source of strength requirements, we may be forced to provide WEX Bank with additional capital, which could
impair our ability to service our indebtedness. To pay any dividend, WEX Bank must maintain adequate capital
above regulatory guidelines. Accordingly, WEX Bank may be unable to make any of its cash or other assets
available to us, including to service our indebtedness.
Our industrial bank subsidiary is subject to funding risks associated with its reliance on brokered
deposits.
Under applicable regulations, if WEX Bank were no longer “well capitalized,” it would not be able to
accept brokered deposits without the approval of the FDIC. WEX Bank’s inability to accept brokered deposits, or
a loss of a significant amount of its brokered deposits, could adversely affect our liquidity. Additionally, such
circumstances could require it to raise deposit rates in an attempt to attract new deposits, or to obtain funds
through other sources at higher rates, which would adversely affect our results of operations.
We are subject to restrictions on transactions with our industrial bank subsidiary, which may limit our
ability to engage in transactions with and obtain credit from our industrial bank.
Sections 23A and 23B of the Federal Reserve Act and the implementing regulations limit the extent to
which we can borrow or otherwise obtain credit from or engage in other “covered transactions” with WEX Bank.
These limitations do not operate as an outright bar, but for us to engage in a transaction with WEX Bank, the
transaction must meet certain requirements for fairness and must be secured by certain types of collateral.
Accordingly, WEX Bank may be unable to provide credit or engage in transactions with us, including
transactions intended to help us service our indebtedness.
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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.
Under the Gramm-Leach-Bliley Act (“GLBA”), we and WEX Bank are required to maintain a
comprehensive written information security program that includes administrative, technical and physical safeguards
relating to consumer information. This requirement generally does not extend to information about companies or
about individuals who obtain financial products or services for business, commercial, or agricultural purposes.
GLBA also requires us and WEX Bank to provide initial and annual privacy notices to customers that
describe in general terms our information sharing practices. If we or WEX Bank intend to share nonpublic
personal information about consumers with affiliates and/or nonaffiliated third parties, we and WEX Bank must
provide customers with a notice and a reasonable period of time for each customer to “opt out” of any such
disclosure. In addition to U.S. federal privacy laws with which it must comply, states also have adopted statutes,
regulations and other measures governing the collection and distribution of nonpublic personal information about
customers. In some cases these state measures are preempted by federal law, but if not, we and WEX Bank must
monitor and seek to comply with individual state privacy laws in the conduct of our businesses.
Any security breach or inadvertent transmission of information about our customers or any violation of
federal or state privacy laws could expose us to liability in excess of any applicable insurance policies, litigation,
regulatory scrutiny, 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 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
21
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.
Compliance with anti-money laundering laws and regulations creates additional compliance costs and
reputational risk.
WEX Bank must monitor and report unusual or suspicious account activity, as well as transactions
involving amounts in excess of prescribed limits, as required by the Bank Secrecy Act and Internal Revenue
Service regulations. The USA PATRIOT Act of 2001 (the “USA Patriot Act”) imposes significant anti-money
laundering compliance and due diligence obligations on financial institutions, including WEX Bank. Financial
regulators have issued various implementing regulations and have made enforcement a top priority. Failure to
maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply
with all of the relevant laws or regulations, could result in the imposition of fines or penalties and other serious
legal and reputational consequences which may impact our financial results.
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, British pound sterling, New Zealand dollar
and Brazilian Real. 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.
Our increased presence in foreign jurisdictions increases the possibility of foreign law violations or
violation of the Foreign Corrupt Practices Act (“FCPA”).
We are subject to the FCPA, which generally prohibits U.S. companies and their intermediaries from
making improper payments to foreign officials for the purpose of obtaining or retaining business, and the anti-
bribery laws of other jurisdictions. Any violation of the FCPA or similar laws and regulations could result in
significant expenses, divert management attention, and otherwise have a negative impact on us. Any
determination that we have violated the FCPA or laws of any other jurisdiction could subject us to, among other
things, penalties and legal expenses that could harm our reputation and have a material adverse effect on our
financial condition and results of operation. Because our foreign presence expanded due to recent acquisitions
and investments outside of the U.S., the possibility of violations of foreign law or the FCPA may increase.
We may incur substantial losses due to fraudulent use of our card products.
Under certain circumstances, when we fund customer transactions, we bear the risk of substantial losses
due to fraudulent use of our card products. We do not maintain any insurance to protect us against any such
losses.
22
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.
The internal control over financial reporting of Fleet One was not audited in connection with the audit of our
internal control over financial reporting for the fiscal year ended December 31, 2012. 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, which 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 Utah 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.
Federal law also prohibits a person or group of persons from acquiring “control” of us unless the FDIC has been
23
notified and has not objected to the transaction. Under the FDIC’s regulations, the acquisition of 10% or more of
a class of our voting stock would generally create a rebuttable presumption of control.
Our certificate of incorporation requires that if any stockholder fails to provide us with satisfactory
evidence that any required approvals have been obtained, we may, or will if required by state or federal
regulators, restrict such stockholder’s ability to vote such shares with respect to any matter subject to a vote of
our stockholders.
Provisions in our charter documents, Delaware law and applicable banking law may delay or prevent
our acquisition by a third party.
Our certificate of incorporation, by-laws and our rights plan contain several provisions that may make it
more difficult for a third party to acquire control of us without the approval of our board of directors. These
provisions include, among other things, a classified board of directors, the elimination of stockholder action by
written consent, advance notice for raising business or making nominations at meetings of stockholders and
“blank check” preferred stock. Blank check preferred stock enables our board of directors, without stockholder
approval, to designate and issue additional series of preferred stock with such special dividend, liquidation,
conversion, voting or other rights, including the right to issue convertible securities with no limitations on
conversion, and rights to dividends and proceeds in a liquidation that are senior to the common stock, as our
board of directors may determine. These provisions may make it more difficult or expensive for a third party to
acquire a majority of our outstanding voting common stock. We also are subject to certain provisions of
Delaware law, which could delay, deter or prevent us from entering into an acquisition, including Section 203 of
the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in a business
combination with an interested stockholder unless specific conditions are met. These provisions also may delay,
prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result
in our stockholders receiving a premium over the market price for their common stock.
In addition, because we own a Utah industrial bank, any purchaser of our common stock who would own
10 percent or more of our common stock after such purchase would be required to obtain the prior consent of
Utah banking authorities and the federal banking authorities prior to consummating any such acquisition. These
regulatory requirements may preclude or delay the purchase of a relatively large ownership stake by certain
potential investors.
Our stockholder rights plan could prevent you from receiving a premium over the market price for your
shares of common stock from a potential acquirer.
Our board of directors approved a stockholder rights plan, which entitles our stockholders to acquire shares
of our common stock at a price equal to 50 percent of the then current market value in limited circumstances
when a third party acquires 15 percent or more of our outstanding common stock or announces its intent to
commence a tender offer for at least 15 percent of our common stock, in each case, in a transaction that our board
of directors does not approve. The existence of these rights would significantly increase the cost of acquiring
control of our Company without the support of our board of directors because, under these limited circumstances,
all of our stockholders, other than the person or group who caused the rights to become exercisable, would
become entitled to purchase shares of our common stock at a discount. The existence of the rights plan could
therefore deter potential acquirers and thereby reduce the likelihood that our stockholders will receive a premium
for their common stock in an acquisition.
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 83,000 square
24
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 66,800 square feet of space in Nashville, Tennessee to support Fleet One. We lease
10,000 square feet of space in Salem, Oregon to support Pacific Pride. We lease 5,300 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, 15,000 square feet of space in
São Paulo, Brazil and 9,000 square feet of space in London, 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 18 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 2012. 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.
25
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:
2011
First quarter
Second quarter
Third quarter
Fourth quarter
2012
First quarter
Second quarter
Third quarter
Fourth quarter
High
Low
$
$
$
$
$
$
$
$
54.35
57.13
54.77
56.30
66.23
65.68
75.10
75.76
$
$
$
$
$
$
$
$
45.27
47.03
36.79
35.74
51.59
53.14
58.58
66.43
As of February 22, 2013, the closing price of our common stock was $75.22 per share, there were
38,701,312 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 a rolling 4-quarter basis, on the dividends it may pay under its
revolving credit agreement. If the Company’s trailing 12 month 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, 2012:
October 1 – October 31, 2012
November 1 – November 30, 2012
December 1 – December 31, 2012
Total
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
Programs (a)
— $
— $
— $
— $
—
—
—
—
— $
— $
— $
37,345,340
37,345,340
37,345,340
— $
37,345,340
26
(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.
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)
2012
2011
2010
2009
2008
Year ended December 31,
Income statement information
Total revenues
Total operating expenses
Financing interest expense
Net realized and unrealized (losses) gains on fuel price
derivatives
Net earnings attributable to WEX Inc.
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
Redeemable noncontrolling interest
Total stockholders’ equity
$
$
$
$
$
$
$
$
623,151
401,532
10,433
$
$
$
553,076
319,752
11,676
$
$
$
390,406
239,697
5,314
$
$
$
315,203
197,053
6,210
$
$
$
(12,365) $
96,922
$
2.50
$
(11,869) $
$
133,622
$
3.45
(7,244) $
$
87,629
$
2.28
(22,542) $
$
139,659
$
3.65
388,159
226,727
11,859
55,206
127,640
3.28
38,840
38,686
38,486
38,303
38,885
3,106,684
2,267,091
—
21,662
817,931
$
$
2,278,060
1,568,745
—
—
709,315
$
$
2,097,951
1,538,944
—
—
559,007
$
$
1,499,662
1,048,346
10,000
—
441,316
$
$
1,611,855
1,307,193
10,000
—
294,662
Total liabilities and stockholders’ equity
$
3,106,684
$
2,278,060
$
2,097,951
$
1,499,662
$
1,611,855
27
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
2012 Highlights and Year in Review
During 2012, we focused on international growth and growing our domestic customer base. Our results for
the year were impacted by the following significant events and accomplishments:
•
•
•
•
•
•
On May 11, 2012, we acquired the stock of CorporatePay Limited (“CorporatePay”), a provider of
corporate prepaid solutions to the travel industry in the United Kingdom for approximately GBP
17 million (US $27.8 million), net of cash acquired. We acquired CorporatePay to further diversify
our revenues and expand our Other Payment Solution segment.
On August 30, 2012, we acquired a 51 percent ownership interest in UNIK S.A. (“UNIK”), a
privately-held provider of payroll cards in Brazil for approximately $22.8 million. We purchased our
interest in UNIK to expand our Other Payment Solution segment. UNIK is a provider of payroll cards,
private label and processing services in Brazil specializing in the retail, government and transportation
sectors.
On October 4, 2012, we acquired FleetOne Holding LLC and Subsidiaries (“Fleet One”), an over-the-
road and local retail fueling business for approximately $376.0 million, net of cash acquired. The tax
amortization of acquired intangibles and goodwill associated with the transaction is expected to
generate over fifteen years, approximately $100 million, in present value of tax benefits for WEX Inc.
The all cash transaction was financed through the Company’s then existing credit facility (the “2011
Credit Agreement”). Fleet One provides fuel cards and fleet management information services that
address the entire fuel card supply chain and have a meaningful presence in both the over-the-road
and local fleet markets.
Total fleet transactions processed increased 6 percent from 2011 to 338.0 million. Payment processing
transactions increased 5 percent to 260.7 million, and transaction processing transactions increased 8
percent to 77.3 million. These transactions include the operations from Fleet One, subsequent to the
date of acquisition.
Our corporate purchase card product grew to $10.3 billion in purchase volume for the year, which is a
32 percent increase from 2011. This increase is primarily due to our single use account product used
for online travel-related purchases.
Domestic fuel prices averaged $3.73 per gallon during 2012. Domestic fuel prices averaged $3.62 per
gallon during 2011. Australian fuel prices increased 3 percent as compared to 2011, to US $5.66 per
gallon.
On January 30, 2013, we completed a $400 million offering in aggregate principal amount of our 4.750
percent senior notes due February 1, 2023, at an issue price of 100.0 percent of the principal amount, plus
accrued interest, if any, from January 30, 2013, in a private placement. In connection with the $400 million
offering, we entered into an Amended and Restated Credit Agreement (the “2013 Credit Agreement”), among the
Company, as borrower, Wright Express Card Holdings Australia Pty Ltd, a wholly-owned subsidiary of the
Company, as specified designated borrower (“Card Holdings Australia”, and, together with the Company, the
“Borrowers”), Bank of America, N.A., as administrative agent, swing line lender and L/C issuer (“Bank of
America”), and the other lenders party thereto (the “Lenders”). The Credit Agreement provides for a five-year
$300 million amortizing term loan facility, and a five-year $700 million secured revolving credit facility with a
$150 million sub-limit for letters of credit and a $20 million sub-limit for swingline loans.
28
Results of Operations
YEAR ENDED DECEMBER 31, 2012, AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2011
FLEET PAYMENT SOLUTIONS SEGMENT
The following table reflects comparative operating results and key operating statistics within our Fleet
Payment 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)
Decrease in tax refund due to former shareholder of RD Card Holdings in Australia
Increase in amount due under tax receivable agreement
Income before taxes
Income taxes
2012
2011
Increase
(decrease)
$
$
316,480
16,943
66,842
49,977
20,349
470,591
274,236
293,756
16,553
60,569
46,084
19,742
436,704
244,910
8%
2%
10%
8%
3%
8%
12%
196,355
191,794
2%
(10,433)
(395)
(12,365)
6,968
(2,089)
178,041
88,063
(11,676)
(368)
(11,869)
—
(715)
167,166
59,925
(11)%
7%
4%
—
192%
7%
47%
Net earnings attributable to WEX Inc.
$
89,978
$
107,241
(16)%
(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
2012
2011
Increase
(decrease)
260,714
77.78
3.73
5.66
$
$
$
247,928
71.73
3.62
5.47
$
$
$
77,279
71,501
5%
8%
3%
3%
8%
6,969
6,322
10%
(a) As described in Item 8—Note 21 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.
Revenues
Payment processing revenue increased $22.7 million for 2012, as compared to 2011. Approximately $8.7
million of this increase is due to an increase in the number of domestic payment processing transactions. In
addition, the 3 percent increase in the average domestic price per gallon of fuel, as compared to 2011, contributed
approximately $3.9 million to this increase. The remaining increase is primarily due to the operations of Fleet
29
One, acquired in the beginning of the fourth quarter of 2012. Assuming no significant drop in fuel prices, we
expect payment processing revenues to increase in 2013 as a full year of operations of Fleet One will be included
in our operations.
Account servicing revenue increased $6.3 million for 2012, as compared to 2011. The increase in number
of vehicles serviced in 2012 as compared to 2011, resulted in additional revenue in North America and Australia,
combined, of approximately $2.3 million. Approximately $2.0 million of the increase is due to the monthly fees
received from our WEXSmart units, which have increased, as compared to 2011. The remaining increase is
primarily due to the operations of Fleet One, acquired in the beginning of the fourth quarter of 2012.
Our finance fees increased $3.9 million for 2012, as compared to 2011. With the acquisitions of Fleet One
during the fourth quarter of 2012, their factoring revenue has been included in finance fee revenue as well as the
late fee revenue historically reported by the Company. Factoring revenue at Fleet One for the fourth quarter of
2012 was approximately $1.4 million. Payments for customer receivables are due within thirty days or less. Late
fee revenue is earned when a customer’s receivable balance becomes delinquent. The late 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. Late 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 2012 is primarily due the addition of
(i) factoring revenue and (ii) higher accounts receivable balances, as a result of higher fuel prices and transaction
volumes, resulting in an increase of approximately $2.0 million over 2011.
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
2012
2011
Increase
(decrease)
$
$
$
$
106,552
32,641
20,190
52,500
$
$
$
$
93,876
21,926
26,625
39,904
14%
49%
(24)%
32%
•
•
•
Salary and other personnel expenses increased $12.7 million for 2012, as compared to 2011.
Approximately $10.9 million of this increase is due to additional employees from ongoing operations
and from our acquisition of Fleet One, at the beginning of the fourth quarter of 2012. The remaining
increase is due to a decrease in capitalized payroll of approximately $2.6 million in 2012 as compared
to 2011, resulting in higher salary expense. We expect salaries to increase in 2013 as a full year of
operations of Fleet One will be included in our operations.
Service fees increased $10.7 million during 2012, as compared to 2011. The increase is primarily due
to expenses related to the 2012 acquisitions. Service fees associated with the WEXSmart product line
increased $1.3 million for 2012, as compared to 2011.
Provision for credit loss decreased $6.4 million for 2012, as compared to 2011. Domestic credit loss
decreased by approximately $6.8 million as compared to 2011. We use a roll rate methodology to
calculate the amount necessary for our ending receivable reserve balance. This methodology takes
into account total receivable balances, recent charge off experience, recoveries on previously charged
off accounts, and the dollars that are delinquent to calculate the total reserve. In addition, management
undertakes a detailed evaluation of the receivable balances to help ensure further overall reserve
adequacy. 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 decreased to 10.0 basis points as compared to 14.9 basis points for
2011. This decrease is primarily associated with lower charge offs as compared to 2011.
30
•
Depreciation and amortization expenses increased $12.6 million for 2012, as compared to 2011. We
incurred an $8.9 million write-off of the internally developed software for our over-the-road product
during 2012. The write-off was a consequence of our decision to utilize the software acquired with the
acquisition of Fleet One, during the fourth quarter of 2012, as the processing platform for our over-
the-road product. Approximately $2.1 million of this increase is due to additional amortization
associated with the intangible assets related to the acquisition of Fleet One, acquired at the beginning
of the fourth quarter of 2012.
Financing interest expense is related to our 2011 Credit Agreement as well as our 2007 credit facility and
2010 term loan. Interest expense for 2012 decreased $1.2 million from 2011, due to lower interest rates on our
financing debt, including the impacts of the interest rate swap that expired in March 2012. Finance interest
expense in 2011 also includes approximately $0.7 million in unamortized loan costs that was expensed at the
time the 2007 credit facility was replaced. As a consequence of the issuance of the 10 year, fixed rate of 4.750
percent, $400 million senior notes due 2023 in January 2013, we expect to incur higher interest expense in 2013.
Our effective tax rate was 49.5 percent for 2012 and 35.9 percent for 2011. The increase in the effective
tax rate compared to the prior year is primarily due to changes in Australian tax consolidation laws. During the
second quarter of 2012, we recorded a charge of approximately $26.3 million due to the impact of this tax
legislation enacted on June 29, 2012, in Australia. We expect our effective tax rate to return to historical levels in
2013.
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 2012 we recorded a loss of $12.4 million, consisting of a realized loss
of $10.7 million and an unrealized loss of $1.7 million. 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. The increase in losses is
due to the overall increase in the price of fuel relative to our hedged fuel prices.
31
OTHER PAYMENT SOLUTIONS SEGMENT
The following table reflects comparative operating results and key operating statistics within our Other
Payment Solutions segment:
(in thousands)
Revenues
Payment processing revenue
Transaction processing revenue
Account servicing revenue
Finance fees
Other
Total revenues
Total operating expenses
Operating income
Decrease in tax refund due to former shareholder of RD Card Holdings Australia
Loss on foreign currency transactions
Income before income taxes
Income taxes
$
2012
2011
Increase
(decrease)
$
101,482
7,420
6,518
2,330
34,810
152,560
127,296
25,264
2,782
96
28,142
21,411
77,570
8,185
3,432
731
26,454
116,372
74,842
31%
(9)%
90%
219%
32%
31%
70%
41,530
(39)%
—
(91)
—
(205)%
41,439
(32)%
15,058
42%
Net income before noncontrolling interest
$
6,731
$
26,381
(74)%
Less: Net earnings from noncontrolling interest
Net earnings attributable to WEX Inc.
(in thousands)
Key operating statistics
Payment processing revenue:
Corporate purchase card volume
(213)
6,944
—
—
26,381
(74)%
2012
2011
Increase
(decrease)
$
10,279,699
$
7,759,466
32%
Payment processing revenue increased approximately $23.9 million for 2012, as compared to 2011.
Approximately $6.9 million of this increase is due to the acquisition of UNIK and Corporate Pay during 2012.
The remaining increase is primarily due to additional business derived from our single use account product,
partially offset with a reduction in the interchange rate in 2012, as compared to 2011 due to contract mix,
increased foreign spend, which generally has a lower interchange rate than domestic transactions, and a reduction
in customer specific incentives received. Our corporate purchase card volume grew by over $2.53 billion in 2012
compared to 2011.
Transaction processing revenue decreased approximately $0.8 million for 2012, as compared to 2011,
primarily due to lower transaction based fees from Wright Express Australia Prepaid.
Account servicing revenue increased approximately $3.1 million for 2012, as compared to 2011.
Approximately $1.1 million of this increase is due to the acquisition of UNIK and CorporatePay during 2012.
The remaining increase is due to primarily due to the inclusion of a full year of operation of rapid!, which was
acquired at the end of the first quarter of 2011.
Other revenue increased $8.4 million for 2012 as compared to 2011, primarily due to the increase in the
volume of cross-border fees over the prior year. This increase is partially offset by an increase in associated
service fees expense.
32
On November 9, 2012 the U.S District Court granted preliminary approval to the merchant interchange
settlement. Under the terms of this settlement the domestic interchange rate for MasterCard branded credit card
transactions would be reduced by 10 basis points for a period of 8 months. Currently this reduction is anticipated
to begin sometime in the second half of 2013. During 2013, approximately two-thirds of our corporate purchase
and volume was domestic.
Expenses
The following table compares selected expense line items within our Other Payment Solutions segment:
(in thousands)
Expense
Salary and other personnel
Service fees
Provision for credit loss
Depreciation and amortization
Technology leasing and support
2012
2011
Increase
(decrease)
$
$
$
$
$
16,828
70,548
2,349
22,763
7,070
$
$
$
$
$
10,734
48,276
902
5,465
5,015
57%
46%
160%
317%
41%
•
•
•
•
•
Salary and other personnel expenses increased $6.1 million for 2012, as compared to 2011.
Approximately $3.6 million of the increase is due to additional payroll costs associated with the
operations of UNIK and CorporatePay acquired during 2012. Approximately $1.7 million of the
increase is due to additional sales staff at our rapid! Paycard subsidiary. The remaining increase is due
to additional staff and increased benefit expense.
Service fees increased by $22.3 million for 2012, as compared to 2011. Approximately $4.4 million of
this increase is due to additional expense associated with the operations of UNIK and CorporatePay,
acquired during 2012. Approximately $2.5 million of the increase is a result of the full year of
operation of rapid!, which was acquired at the end of the first quarter in 2011. The remaining increase
is primarily due to higher fees associated with higher overall purchase volume in our domestic virtual
card product.
Provision for credit loss increased $1.4 million for 2012, as compared to 2011. The increase is
primarily due to a bankruptcy from one customer during 2012.
Depreciation and amortization expenses increased $17.3 million for 2012, as compared to 2011. This
increase is primarily due to the $16.2 million impairment of goodwill associated with Wright Express
Australia Prepaid, which was impaired on September 30, 2012. During the third quarter of 2012, the
Company determined that pricing pressure in the prepaid giftcard product in Australia would result in
lower future earnings than forecasted at the time of the purchase of Wright Express Prepaid Australia.
Technology leasing and support expenses increased $2.1 million for 2012, as compared to 2011. This
increase is primarily related to the volume increase in our corporate purchase card products.
Our effective tax rate was 76.1 percent for 2012 and 36.3 percent for 2011. The increase in the effective
tax rate compared to the prior year is primarily due to changes in Australian tax consolidation laws. During 2012,
we recorded a charge of approximately $5.1 million due to impact of the tax legislation enacted on June 29,
2012, in Australia. We expect our effective tax rate to return to historical levels in 2013.
33
YEAR ENDED DECEMBER 31, 2011, AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2010
FLEET PAYMENT SOLUTIONS SEGMENT
The following table reflects comparative operating results and key operating statistics within our Fleet
Payment Solutions segment:
(in thousands)
Revenues
Payment processing revenue
Transaction processing revenue
Account servicing revenue
Finance fees
Other
Total revenues
Total operating expenses
Operating income
Financing interest expense (a)
(Loss) gain on foreign currency transactions
Net realized and unrealized losses on domestic fuel price derivative instruments (a)
Increase in amount due under tax receivable agreement
Income before taxes
Income taxes
Net income
(in thousands, except per transaction and per gallon data)
Key operating statistics
Payment processing revenue:
Payment processing transactions
Average expenditure per payment processing transaction
Average price per gallon of fuel – Domestic – ($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
436,704
244,910
220,154
16,591
39,692
37,264
15,538
329,239
201,547
191,794
127, 692
33%
—
53%
24%
27%
33%
22%
50%
(11,676)
(368)
(11,869)
(715)
167,166
59,925
(5,314)
7,141
(7,244)
(214)
(120)%
NM
(64)%
(234)%
122,061
48,337
37%
24%
45%
$
107,241
$
73,724
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 21 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.
34
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.
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.
35
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. The inclusion of 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 the inclusion of 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.
•
•
•
•
Financing interest expense was related to the 2011 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 2010 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.
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.
36
Fuel price derivatives
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.
37
OTHER PAYMENT SOLUTIONS SEGMENT
The following table reflects comparative operating results and key operating statistics within our Other
Payment 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
116,372
74,842
41,530
(91)
41,439
15,058
46,034
2,935
753
497
10,948
61,167
38,146
23,021
—
23,021
9,116
$
26,381
$
13,905
69%
179%
356%
47%
142%
90%
96%
80%
—
80%
65%
90%
2011
2010
Increase
(decrease)
$
7,759,466
$
4,414,145
76%
Payment processing revenue increased approximately $31.5 million for 2011 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 for 2011 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 for 2011 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 for 2011 as compared to 2010 primarily due to the
following:
•
•
Service fees increased by $22.7 million for 2011 as compared to 2010 due to higher fees associated
with higher overall purchase volume.
Salary and other personnel expenses increased $5.8 million for 2011 as compared to 2010 primarily
due to additional payroll costs assumed upon the acquisition of Wright Express Australia Prepaid.
38
•
•
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.
39
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, WEX Bank, utilizes brokered deposits, negotiable order of withdrawal
(“NOW”) deposits and borrowed federal funds to finance our domestic accounts receivable. Since brokered
deposits, NOW 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, NOW
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 deposits
Net (decrease) increase in borrowed federal funds
Management operating cash
Year ended December 31,
2012
2011
2010
$
$
$
71,811
193,726
41,500
$
51,168
163,853
(52,584)
(10,550)
106,504
(12,238)
307,037
$
162,437
$
83,716
The change in management operating cash in the comparative periods can be explained as follows:
•
•
•
During 2012, our increase in accounts receivable, net of the account receivable balances acquired with
our acquisitions, is funded by operating activities as well as a $235 million overall increase in
borrowed federal funds and deposits. The excess of NOW deposits is a result of the influx of capital
associated with the Higher One program. Accounts receivable increased in 2012 over 2011 as a result
of increased customer spend levels, primarily due to higher fuel prices.
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.
40
2012 Highlights
• On May 11, 2012, we acquired all of the stock of
CorporatePay, a provider of corporate prepaid
solutions to the travel industry in the United Kingdom
for approximately $27.8, net of cash acquired. The
acquisition was funded through our revolving credit
facility and term loan.
• On August 30, 2012, we acquired a 51 percent
ownership interest in UNIK, a privately-held provider
of payroll cards in Brazil, for approximately $22.8
million. The acquisition was funded through our
revolving credit facility and term loan.
• On October 4, 2012, we acquired certain assets of Fleet
One a privately-held provider of value-based business
payment processing and information management
solutions for approximately $376 million, net of cash
acquired. The acquisition was funded through our
revolving credit facility and term loan.
• We used $11.3 million during 2012 to repurchase our
own common stock.
• During 2012, we had approximately $28 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
2013 to be approximately $35 to $42 million. Our
capital spending is financed primarily through
internally generated funds.
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.
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.
2012 Cash Utilization Summary
Financing
debt net
$307.9
Management
operating cash
$307.0
Other net $12.5
Capital
expenditures
$28.0
Acquisitions
$402.5
Source of Cash
Use of Cash
(in millions)
2011 Cash Utilization Summary
Management
operating cash
$162.4
Other net
$9.7
Capital
Expenditures
$25.1
Acquisitions
$7.7
Financing
debt net
$112.2
Source of Cash
Use of Cash
(in millions)
2010 Cash Utilization Summary
Other net
$5.3
Financing
debt net
$277.0
Management
operating cash
$83.7
Share
repurchase
$18.4
Capital
Expenditures
$28.9
Acquisitions
$340.0
Source of Cash Use of Cash
(in millions)
41
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, NOW deposits and borrowed federal funds.
WEX Bank issued certificates of deposit in various maturities ranging between one month and two years
and with fixed interest rates ranging from 0.26 percent to 1.15 percent as of December 31, 2012, as compared to
fixed interest rates ranging from 0.25 percent to 1.60 percent as of December 31, 2011, and 0.30 percent to
1.95 percent as of December 31, 2010. WEX Bank also issues interest-bearing money market deposits with
variable interest rates ranging from 0.35 percent to 0.41 percent as of December 31, 2012, as compared to
variable interest rates ranging from 0.60 percent to 0.73 percent as of December 31, 2011, and 0.40 percent to
0.60 percent as of December 31, 2010. As of December 31, 2012, we had approximately $613.1 million of
Brokered Deposits outstanding at a weighted average interest rate of 0.53 percent, compared to $683.3 million of
Brokered Deposits at a weighted average interest rate of 0.68 percent as of December 31, 2011, and
approximately $520.4 million of Brokered Deposits outstanding at a weighted average interest rate of
0.90 percent as of December 31, 2010.
WEX Bank may issue Brokered Deposits without limitation on the balance outstanding. However, WEX
Bank must maintain minimum financial ratios, which include risk-based asset and capital requirements, as
prescribed by the FDIC. As of December 31, 2012, all Brokered Deposits were in denominations of $250,000 or
less, corresponding to FDIC deposit insurance limits. 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.
Beginning during the second quarter of 2012, we received non-interest bearing NOW account deposits
associated with the Higher One program. As of December 31, 2012, we had $261.1 million of non-interest
bearing NOW account deposits. These deposits were in excess of our operating cash requirements to fund
account receivables, which resulted in a larger than typical cash balance on our balance sheet for the current
period. We anticipate this balance to decline based on historical patterns of the non-interest bearing NOW
account deposits and scheduled maturities of our deposits. Deposits are subject to regulatory capital
requirements.
Non-interest bearing deposits are required for certain customers as collateral for their credit accounts. We
had $16.2 million of these deposits on hand at December 31, 2012, $10.4 million at December 31, 2011, and $9.4
million at December 31, 2010.
WEX Bank 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 2012, 2011and 2010, with
$48.4 million outstanding as of December 31, 2012.
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, 2012, approximately 96 percent of the outstanding balance of $1.6 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 a wide range of industries. No customer makes up more than 4 percent of the
outstanding receivables at December 31, 2012.
42
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. WEX Bank 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. WEX Bank 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, WEX Bank may not pay any dividend if, following the payment of
the dividend, WEX Bank would be “undercapitalized,” as defined under the Federal Deposit Insurance Act and
applicable regulations.
Our 2011 Credit Agreement
On May 23, 2011, we entered into a Credit Agreement (the “2011 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 2011 Credit Agreement was secured by pledges of the stock
of our foreign subsidiaries. The 2011 Credit Agreement provided for a five-year $200 million amortizing term
loan facility and a five-year $700 million revolving credit facility with a $100 million sub-limit for letters of
credit and a $20 million sub-limit 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 was due. As of December 31, 2012, we had
$621 million of loans outstanding under the 2011 Credit Agreement. As of December 31, 2012, we also had
approximately $2.4 million in letters of credit outstanding. Accordingly, at December 31, 2012, we had
$236.9 million of availability under the 2011 Credit Agreement, subject to the covenants as described below.
Proceeds from the 2011 Credit Agreement 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 was 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 2011 Credit Agreement bore 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 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 2011 Credit Agreement matured on
May 23, 2016.
Our 2011 Credit Agreement contained various financial covenants requiring us to maintain certain
financial ratios. Specifically, it limited 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 2011 Credit Agreement also required 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 2011 Credit Agreement contained various customary restrictive
covenants that limited 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. WEX Bank was not subject to certain of
these restrictions. We were in compliance with all material covenants and restrictions at December 31, 2012.
43
Our interest rate swap arrangements which effectively converted $150 million of variable rate borrowing to
fixed rate borrowing at a rate of approximately 0.56 percent expired 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.
On January 18, 2013, the Company entered into an Amended and Restated Credit Agreement (the “2013
Credit Agreement”), among the Company, as borrower, Wright Express Card Holdings Australia Pty Ltd, a
wholly-owned subsidiary of the Company, as specified designated borrower, Bank of America, N.A., as
administrative agent, swing line lender and L/C issuer, and the other lenders party thereto. The 2013 Credit
Agreement provides for a five-year $300 million term loan facility, and a five-year $700 million secured
revolving credit facility with a $150 million sub-limit for letters of credit and a $20 million sub-limit for
swingline loans. Subject to certain conditions, including obtaining relevant commitments, the Company has the
option to increase the facility by up to an additional $100 million. The remaining terms and conditions are
materially similar to the 2011 Credit Agreement.
On January 30, 2013, the Company, completed a $400 million offering in aggregate principal amount of its
4.750 percent senior notes due 2023 (the “Notes”) at an issue price of 100.0 percent of the principal amount, plus
accrued interest, if any, from January 30, 2013. Proceeds from the Notes were used to pay down the entire
outstanding balance of the revolver portion of our 2013 Credit Agreement. The remaining proceeds are available
for general corporate purposes.
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 $1.7 million. During the course of the year we paid $10.6
million from the net settlement of expiring derivative contracts. Our long-term cash requirements, apart from
amounts owing on our 2013 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 $1.8 million at
December 31, 2012, and $6.0 million at December 31, 2011. These earnings are considered to be indefinitely
reinvested, and accordingly, no U.S. federal and 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 2013. Through December 31, 2012, we have used $112.7 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 2013 Credit Agreement. 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.
44
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, 2012:
•
•
•
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 $4.7 billion of commitments to extend credit at
December 31, 2012, as part of established customer agreements. These amounts may increase or
decrease during 2013 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. As
of December 31, 2012, we have 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, 2012, for the periods specified:
(in thousands)
2013
2014
2015
2016
2017 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
Fuel price derivative contracts
Contingent obligation (b)
$
6,389
1,268
438,500
10,000
3,054
9,545
842,002
48,400
1,407
313
$
5,978
574
—
10,000
2,883
9,654
48,343
—
322
—
$
5,564
240
—
10,000
2,713
10,461
—
—
—
—
$
3,221
18
—
152,500
972
11,032
—
—
—
—
$
5,694
—
—
—
—
45,858
—
—
—
—
$
26,846
2,100
438,500
182,500
9,622
86,550
890,345
48,400
1,729
313
Total
$
1,360,878
$
77,754
$
28,978
$
167,743
$
51,552
$
1,686,905
(a) Our 2011 Credit Facility was set to expire in May of 2016. Amounts in table exclude interest payments. See Item 8 – Note 11, Financing Debt. This facility
was amended and restated on January 18, 2013, and will expire in January 2018. See Item 8, – Note 22 Subsequent Event.
(b) During the first quarter of 2013, we expect to pay the remaining purchase price of the UNIK 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.
45
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.
Effect if Actual Results Differ from
Assumptions
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, 2012, we
have estimated a reserve for credit losses
which is 0.75 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
$7.8 million. For the past three years, our
reserve for credit losses in an annual period
has not been in excess of 1.0 percent of the
total receivable.
Reserve for Credit Losses
Description
Assumptions/Approach Used
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.
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 (including: 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.
46
Business Combinations, Acquired Intangible Assets and Goodwill
Description
Assumptions/Approach Used
Business combinations are accounted for at
fair value. Deferred tax asset valuation
allowances and income tax uncertainties
after the acquisition date generally affect
income tax expense. The accounting for
business combinations requires estimates
and judgment as to expectations for future
cash flows of the acquired business, and the
allocation of those cash flows to identifiable
intangible assets, in determining the
estimated fair value for assets and liabilities
acquired.
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.
The fair values assigned to tangible and
intangible assets acquired and liabilities
assumed are based on management’s
estimates and assumptions, as well as other
information compiled by management,
including valuations that utilize customary
valuation procedures and techniques.
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, as well as risk premium for
specific business units, 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.
Non goodwill intangible assets are
considered not recoverable because their
carrying amount exceeds the sum of
undiscounted cash flows expected to result
from the use of the assets. The recoverability
test is based on management’s intended use
of the assets. If the asset fails the
recoverability test, impairment is measured
as the amount by which the carrying amount
of the asset group exceeds its fair value. Fair
value measurements under ASC 820 are
based on the assumptions of market
participants. When determining the fair value
of the asset group, entities must consider the
highest and best use of the assets from a
market-participant perspective.
47
Effect if Actual Results Differ from
Assumptions
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, 2012, the Company had
an aggregate of approximately $844 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 support their
carrying values as of December 31, 2012. As
noted in Item 1A, because the acquisitions of
CorporatePay and UNIK were completed
during 2012, their market values
approximate their carrying values. The
goodwill associated with these reporting
units are as follows; CorporatePay, $19.8
million, UNIK, $19.9 million. Wright
Express Australia Fuel has a fair value of
approximately 120 percent of its carrying
value and a goodwill balance of
approximately $210.7 million. The
Company’s remaining reporting units have
fair market values substantially in excess of
their carrying values. Although an
impairment charge is not required at this
time, if actual results deteriorate versus our
assumptions in the valuation, the potential
exists for an impairment in our reporting
units.
Valuation of Derivatives
Description
Assumptions/Approach Used
The Company has entered into several
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.
None of the derivatives that exist have
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.
Effect if Actual Results Differ from
Assumptions
As of December 31, 2012, the Company
had established that the net fair value of the
derivatives was a liability of less than $2
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.
Changes to Accounting Policies
On June 16, 2011, the FASB issued Accounting Standards Update No. 2011-05, Comprehensive Income
(Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”). The amendments in ASU 2011-05
require entities to present the total of comprehensive income, the components of net income, and the components
of other comprehensive income either in a single continuous statement of comprehensive income or in two
separate but consecutive statements. Additionally, the amendments in ASU 2011-05 require an entity to present
on the face of the financial statements reclassification adjustments for items that are reclassified from other
comprehensive income to net income in the statement(s) where the components of net income and the
components of other comprehensive income are presented. ASU 2011-05 is effective for interim and annual
periods beginning after December 15, 2011. On December 23, 2011, the FASB issued Accounting Standards
Update No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the
Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting
Standards Update No. 2011-05 to defer the new requirement to present components of reclassifications of other
comprehensive income on the face of the financial statements. Companies are still required to adopt the other
requirements contained in ASU 2011-05. The Company adopted ASU 2011-05 and has provided the required
disclosures in two consecutive statements.
48
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, 2012, we had borrowings of $621 million under our 2011 Credit Facility that bore
interest at variable rates. During 2010 we entered into an interest rate swap contract that ended in March 2012
that fixed the interest rate on $150 million of our variable rate revolving 2011 Credit Agreement. We periodically
review our projected borrowing under our 2011 Credit Agreement 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, 2012, WEX Bank had deposits (includes certificates of deposits, interest bearing money
market deposits and borrowed federal funds) outstanding of $661 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 2012 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 1.7087%) (b)
Increase of:
1.00%
2.00%
Projected annual operating interest expense on WEX Bank deposits (certificates of deposits at 0.57%, interest bearing money
market deposits at 0.39% and borrowed federal funds at 0.39%)
Increase of:
1.00%
2.00%
Impact(a)
$10,611
$ 6,210
$12,420
$ 3,461
$ 6,615
$13,229
(a) Changes to interest expense presented in this table are based on interest payments, outstanding balance and rate as of December 31, 2012.
(b) The table above does not reflect the impact of the January 30, 2013, $400 million offering in aggregate principal amount of 4.750 percent
senior notes, which was used to reduce amounts outstanding under our 2011 Credit Agreement in 2013.
At December 31, 2012, WEX Bank had negotiable order of withdrawal account deposits outstanding of
$261.1 million.
(in thousands)
Impact(b)
Projected annual interest expense (based on the federal fund rate) on NOW account deposits using federal funds rate of 0.39%
$ —
Increase of:
1.00%
2.00%
$ —
$509
(b) Changes to interest expense presented in this table are based on the outstanding balance and rate as of December 31, 2012.
49
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 2014. 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)
Put Strike
Price of
Underlying
Option
(per gallon)
(a)
Call Strike
Price of
Underlying
Option
(per gallon)
(a)
December 31, 2012
Aggregate
Notional
Amount
(gallons) (b)
Fair Value
Fuel price derivative instruments – unleaded fuel – wholesale strike price
Options settling October 2013 – June 2014
Options settling July 2013 – March 2014
Options settling April 2013 – December 2013
Options settling January 2013 – September 2013
Options settling October 2012 – June 2013
Options settling July 2012 – March 2013
$
$
$
$
$
$
2.485
2.633
2.670
2.843
2.540
2.605
Total fuel price derivative instruments – unleaded fuel
Fuel price derivative instruments – diesel fuel – retail strike price
Options settling October 2013 – June 2014
Options settling July 2013 – March 2014
Options settling April 2013 – December 2013
Options settling January 2013 – September 2013
Options settling October 2012 – June 2013
Options settling July 2012 – March 2013
$
$
$
$
$
$
3.713
3.878
3.823
3.990
3.835
3.792
$
$
$
$
$
$
$
$
$
$
$
$
2.545
2.693
2.730
2.903
2.600
2.665
6,269
4,643
10,436
7,291
4,803
2,310
$ (514)
308
(398)
457
(1,161)
(314)
35,752
$(1,622)
3.773
3.938
3.883
4.050
3.895
3.852
2,816
2,086
4,689
3,276
2,158
1,038
$ (224)
108
(162)
363
(89)
(103)
Total fuel price derivative instruments – diesel
Total fuel price derivative instruments
16,063
$ (107)
51,815
$(1,729)
(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.
50
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, 2012 and 2011
Consolidated Statements of Income for the Years Ended December 31, 2012, 2011 and 2010
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2012, 2011 and 2010
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2012, 2011 and 2010
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012, 2011 and 2010
Notes to Consolidated Financial Statements
Page
52
53
54
55
56
57
58
51
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of WEX Inc.
South Portland, Maine
We have audited the accompanying consolidated balance sheets of WEX Inc. and subsidiaries, formerly Wright
Express Corporation (the “Company”), as of December 31, 2012 and 2011, and the related consolidated
statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in
the period ended December 31, 2012. 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 WEX Inc. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and
their cash flows for each of the three years in the period ended December 31, 2012, 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, 2012, 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, 2013 expressed an unqualified
opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 28, 2013
52
WEX INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
Assets
Cash and cash equivalents
Accounts receivable (less reserve for credit losses of $11,709 in 2012 and $11,526 in 2011)
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 18)
Redeemable noncontrolling interest (Note 17)
Stockholders’ Equity
Common stock $0.01 par value; 175,000 shares authorized; 42,586 in 2012 and 42,252 in 2011
shares issued; 38,908 in 2012 and 38,765 in 2011 shares outstanding
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
Less treasury stock at cost; 3,766 shares in 2012 and 3,566 in 2011
Total stockholders’ equity
Total liabilities and stockholders’ equity
See notes to consolidated financial statements.
December 31,
2012
2011
$
197,662
1,555,814
—
16,350
—
60,097
100,128
844,285
241,810
90,538
$
25,791
1,323,915
7,755
17,044
410
62,078
143,524
549,504
109,656
38,383
$
3,106,684
$
2,278,060
$
$
527,838
60,532
10,151
890,345
48,400
621,000
86,550
1,729
20,546
409,226
54,738
—
693,654
6,900
295,300
92,763
415
15,749
2,267,091
1,568,745
21,662
—
426
162,470
730,311
37,379
423
146,282
633,389
30,588
(112,655)
(101,367 )
817,931
709,315
$
3,106,684
$
2,278,060
53
WEX INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
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, amortization and impairments
Operating interest expense
Other
Total operating expenses
Operating income
Financing interest expense
Net (loss) gain on foreign currency transactions
Net realized and unrealized losses on fuel price derivatives
Decrease in tax refund due to former shareholder of RD Card Holdings Australia
Increase in amount due under tax receivable agreement
Income before income taxes
Income taxes
Net income
Less: Net loss from noncontrolling interest
Net earnings attributable to WEX Inc.
Net earnings attributable to WEX Inc. per share:
Basic
Diluted
Weighted average common shares outstanding:
Basic
Diluted
See notes to consolidated financial statements.
Year ended December 31,
2011
2012
2010
$
470,591
152,560
$
436,704
116,372
$
329,239
61,167
623,151
553,076
390,406
123,380
103,189
22,539
18,537
12,361
10,155
3,679
4,347
5,373
75,263
4,990
17,719
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
401,532
319,752
239,697
221,619
233,324
150,709
(10,433)
(299)
(12,365)
9,750
(2,089)
206,183
109,474
(11,676)
(459)
(11,869)
—
(715)
208,605
74,983
(5,314)
7,145
(7,244)
—
(214)
145,082
57,453
96,709
133,622
87,629
$
$
$
(213)
96,922
2.50
2.48
38,840
39,092
$
$
$
—
133,622
3.45
3.43
38,686
38,998
—
87,629
2.28
2.25
38,486
39,052
$
$
$
54
WEX INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Year ended December 31,
2012
2011
2010
Net income
Changes in available-for-sale securities, net of tax effect of $(3) in 2012, $66 in 2011 and $41 in
$
96,709
$
133,622
$
87,629
2010
Changes in interest rate swap, net of tax effect of $35 in 2012, $179 in 2011 and $(111) in 2010
Foreign currency translation
(3)
60
6,705
108
308
2,567
69
(192)
28,015
Comprehensive income
Less: comprehensive income attributable to noncontrolling interest (Note 17)
103,471
(242)
136,605
—
115,521
—
Comprehensive income attributable to WEX Inc.
$ 103,713
$
136,605
$ 115,521
55
WEX INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
Common Stock
Shares Amount
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Retained
Earnings
Total
Equity
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 earnings attributable to WEX Inc.
211
—
101
—
445
—
—
—
—
—
Balance at December 31, 2010
41,924
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 earnings attributable to WEX Inc.
216
—
112
—
—
—
—
—
Balance at December 31, 2011
42,252
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
Other
Purchase of shares of treasury stock
Changes in available-for-sale securities, net
of tax effect of $(3)
Changes in interest rate swaps, net of tax
effect of $35
Foreign currency translation
Net earnings attributable to WEX Inc.
234
—
100
—
—
—
—
—
—
—
2
—
1
—
4
—
—
—
—
—
419
3
—
1
—
—
—
—
—
423
2
—
1
—
—
—
—
—
—
—
3,177
1,698
—
5,646
9,999
—
—
—
—
—
132,583
2,913
3,970
—
6,816
—
—
—
—
—
—
—
—
—
—
69
(192)
28,015
—
27,605
—
—
—
—
108
308
2,567
—
—
—
—
—
—
(18,357)
—
—
—
—
—
—
—
—
—
—
—
—
—
87,629
3,179
1,698
1
5,646
10,003
(18,357)
69
(192)
28,015
87,629
(101,367)
499,767
559,007
—
—
—
—
—
—
—
—
—
—
—
—
—
2,916
3,970
1
6,816
108
—
—
133,622
308
2,567
133,622
146,282
30,588
(101,367)
633,389
709,315
4,623
4,466
—
8,093
(994)
—
—
—
—
—
—
—
—
—
—
—
(3)
60
6,734
—
—
—
—
—
—
(11,288)
—
—
—
—
—
—
—
—
—
—
—
—
—
96,922
4,625
4,466
1
8,093
(994)
(11,288)
(3)
60
6,734
96,922
Balance at December 31, 2012
42,586
$
426
$
162,470
$
37,379
$(112,655)
$
730,311
$
817,931
See notes to consolidated financial statements.
56
WEX INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year ended December 31,
2012
2011
2010
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
$ 96,709
$ 133,622
$ 87,629
Net unrealized loss (gain) on derivative instruments
Stock-based compensation
Depreciation and amortization
Goodwill Impairment
Deferred taxes
Provision for credit losses
Loss on disposal of internal-use software
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
1,724
11,016
50,267
17,508
35,907
22,539
9,503
(86,763)
(43,665)
(41,040)
(1,582)
17,360
(11,459)
(6,213)
(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)
Net cash provided by (used for) operating activities
71,811
51,168
(10,550)
Cash flows from investing activities
Purchases of property and equipment
Purchases of available-for-sale securities
Maturities of available-for-sale securities
Acquisition of CorporatePay, net of cash
Acquisition of Fleet One, net of cash
Cash assumed in UNIK acquisition
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 in deposits
Net increase (decrease) 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
Other financing debt
Contingent consideration paid for rapid!
Purchase of shares of treasury stock
Net cash provided by (used for) financing activities
Effect of exchange rates on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
See notes to consolidated financial statements.
57
(28,036)
(864)
1,551
(27,783)
(376,258)
1,566
—
—
—
(25,145)
(8,509)
841
—
—
—
(3,344)
(8,081)
3,734
(28,944)
(150)
1,654
—
—
—
—
—
(339,994)
(429,824)
(40,504)
(367,434)
4,466
(2,926)
4,625
193,726
41,500
3,970
(2,551)
2,913
163,853
(52,584)
— (332,300)
—
(75,000)
—
(6,184)
335,700
102,800
—
200,000
(10,000)
(7,500)
(17,753)
—
(8,486)
—
(11,288)
—
1,698
(1,476)
3,177
106,504
(12,238)
204,300
75,000
(2,269)
—
—
—
—
—
(18,357)
529,564
(2,583)
356,339
320
(335)
386
171,871
25,791
7,746
18,045
(21,259)
39,304
$ 197,662
$ 25,791
$ 18,045
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
1. Summary of Significant Accounting Policies
Business Description
WEX Inc. (“Company”) is a provider of corporate card payment solutions. The Company provides products
and services that meet the needs of businesses in various geographic regions including North and South 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. In October 2012, Wright Express Corporation
changed its name to WEX Inc. and Wright Express Financial Services Corporation, the Company’s wholly-owned
subsidiary, changed its name to WEX Bank.
Basis of Presentation
The accompanying consolidated financial statements of WEX Inc. for the years ended December 31, 2012,
2011 and 2010, include the accounts of WEX Inc. and its subsidiaries. All intercompany accounts and transactions
have been eliminated in consolidation.
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 uncollectable 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
58
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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. Available-for-sale securities
held by the Company were purchased and are held by WEX Bank in order to meet the requirements of the
Community Reinvestment Act.
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. 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. As of December 31, 2012, the Company does not
have any interest rate swaps outstanding.
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
59
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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. Amounts capitalized for software were
$14,069 in 2012, $16,726 in 2011 and $19,637 in 2010. Amortization for software totaled $20,694 in 2012,
$18,690 in 2011 and $16,348 in 2010.
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 are recorded in depreciation
and amortization expense on the consolidated statements of income. On September 30, 2012, the Company
impaired $16,171 of goodwill associated with Wright Express Australia Prepaid. The Company’s annual
goodwill and intangible assets impairment test, performed as of October 1, 2012, identified an impairment of
$1,337 of goodwill associated with the acquisition of Financial Automation Limited, acquired in August of 2008.
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 and Disposals 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
60
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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
recognized an expense of $8,903 during the year ended December 31, 2012. This expense is a consequence of the
Company’s decision to utilize the software acquired with the acquisition of Fleet One, during the fourth quarter
of 2012, as the processing platform for its over-the-road product. The Company also recognized approximately
$600 in impairments and disposals of various other long-lived assets during the year, some of which were related
to the Fleet One acquisition. The Company did not recognize any significant impairment expense on the
Company’s long-lived assets during the years ended December 31, 2011 and 2010. Write-offs due to the
acquisition of Fleet One are recorded in depreciation, amortizations and impairments in the consolidated
statements of income. Disposals over the ordinary course of business are 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 $1,534 for the year
ended December 31, 2012. For all other years presented, the investment was $1,562. The investment 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, 2012, the Company has concluded that the investment is not
impaired.
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.
61
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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.
With regard to payment processing revenue, the Company is generally responsible for the collection of the
total transaction amount and the payment to the merchant of their sales amount, net of the payment processing
revenue earned by the Company. As a consequence the Company’s accounts receivable and accounts payable
related to its payment processing revenues are reflective of the total transaction amount processed by the
Company not the Company’s revenue.
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 charged 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. The Company’s established reserve for such waived amounts is estimated and offset against the late fee
revenue recognized. These waived fees amounted to $3,905 in 2012 and $3,845 in 2011. The Company’s
subsidiary, Fleet One, engages in factoring, the purchase of accounts receivable from a third party at a discount.
Revenue earned in this transaction is recorded in finance fees. We also recognize fees for interest associated with
the Company’s fuel desk product and interest earned on the Company’s foreign paycard product.
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.
From time to time the Company enters into contracts that provide for 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 period earned.
62
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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.
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.
63
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Income available for common stockholders used to calculate earnings per share is as follows:
Net earnings attributable to WEX Inc. available for common stockholders – Basic
Convertible, redeemable preferred stock
Net earnings attributable to WEX Inc. available for common stockholders – Diluted
Year ended December 31,
2012
2011
2010
$
$
96,922
—
$
133,622
—
$
87,629
40
96,922
$
133,622
$
87,669
Weighted average common shares outstanding used to calculate earnings per share are as follows:
Year ended December 31,
2011
2012
2010
Weighted average common shares outstanding – Basic
Unvested restricted stock units
Stock options
Convertible, redeemable preferred stock
38,840
138
114
—
38,686
128
184
—
38,486
209
255
102
Weighted average common shares outstanding – Diluted
39,092
38,998
39,052
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 where repayment is
not anticipated for the foreseeable future. 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.
Recently Adopted Accounting Standards
On June 16, 2011, the FASB issued Accounting Standards Update No. 2011-05, Comprehensive Income
(Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”). The amendments in ASU 2011-05
require entities to present the total of comprehensive income, the components of net income, and the components
of other comprehensive income either in a single continuous statement of comprehensive income or in two
64
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
separate but consecutive statements. Additionally, the amendments in ASU 2011-05 require an entity to present
on the face of the financial statements reclassification adjustments for items that are reclassified from other
comprehensive income to net income in the statement(s) where the components of net income and the
components of other comprehensive income are presented. ASU 2011-05 is effective for interim and annual
periods beginning after December 15, 2011. On December 23, 2011, the FASB issued Accounting Standards
Update No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the
Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting
Standards Update No. 2011-05 to defer the new requirement to present components of reclassifications of other
comprehensive income on the face of the financial statements. Companies are still required to adopt the other
requirements contained in ASU 2011-05. The Company adopted ASU 2011-05 and has provided the required
disclosures in two consecutive statements.
2. Supplemental Cash Flow Information
Interest paid
Income taxes paid
Conversion of preferred stock shares and accrued preferred dividends to common stock
shares
Year ended December 31,
2012
2011
2010
$
$
$
13,916
51,768
$
$
15,704
52,930
$
$
8,770
36,300
— $
— $
10,004
Significant Non-cash Transactions
The purchase price for the Company’s acquisition of UNIK included $991 of contingent consideration for
future performance milestones (discussed further in Note 3). On December 31, 2012, the Company estimates
approximately $313 will be paid during the first quarter of 2013 based on current performance milestones. 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). On December 31, 2011, the
Company estimated approximately $9,325 as the amount to be paid based on projected performance milestones.
During the second quarter of 2012, the Company lowered the estimate to $8,486 and settled the contingent
consideration. There were no significant non-cash transactions during 2010.
3. Business Acquisitions and Other Intangible Assets Acquisitions
Acquisition of CorporatePay
On May 11, 2012, the Company acquired all of the stock of CorporatePay, a provider of corporate prepaid
solutions to the travel industry in the United Kingdom for approximately GBP 17,000 (US $27,800 at the time of
acquisition), net of cash acquired. The Company purchased CorporatePay to expand its Other Payment Solution
segment. During the second quarter of 2012, 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. The valuations of
intangible assets have not been finalized as the Company is still reviewing statutory net operating losses prior to
acquisition. The goodwill is not expected to be deductible for income tax purposes. The results of operations of
CorporatePay are reflected in the Other Payment Solutions segment from the date of acquisition.
65
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The following is a summary of the preliminary allocation of the purchase price to the assets and liabilities
acquired:
Consideration paid (net of cash)
Less:
Accounts receivable
Accounts payable
Other tangible liabilities, net
Acquired software(a)
Customer relationships(b)
Trademarks and trade name(c)
Recorded goodwill
(a) Weighted average life – 6.2 years.
(b) Weighted average life – 6.3 years.
(c) Weighted average life – 5.3 years.
December 31,
2012
$
27,783
1,077
(629)
(3,639)
7,760
2,000
1,400
$
19,814
No pro forma information has been included in these financial statements as the operations of
CorporatePay 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 UNIK
On August 30, 2012, the Company acquired a 51 percent ownership interest in UNIK S.A. (“UNIK”), a
privately-held provider of payroll cards in Brazil. The Company purchased its interest in UNIK to expand its
Other Payment Solutions segment. UNIK is a provider of payroll cards, private label and processing services in
Brazil specializing in the retail, government and transportation sectors.
The investment was consummated through the purchase of newly issued shares of UNIK for approximately
R$44,800 (approximately US$22,800). The purchase agreement also includes a potential contingent
consideration component based on performance milestones. Although the contingent consideration is not capped,
the Company has estimated the amount of the liability, at the time of acquisition, to be approximately
R$2,000 (approximately US$1,000). On December 31, 2012, the Company revised the estimate based on current
performance milestones to be approximately $313, to be paid during the first quarter of 2013. The agreement
further provides the Company with a call option which would enable it to acquire the remaining shares at specific
times over a three-year period. Additionally the purchase agreement provides the noncontrolling shares with the
right to put their interest back to the Company at specific times. The put options are exercisable at specific dates
subject to the achievement of performance hurdles. Pricing for both the call and put options are based upon
multiples of UNIK’s trailing twelve month EBITDA. Subsequent to the acquisition of UNIK, UNIK paid down
approximately $19,600 of existing financing debt. As of December 31, 2012, UNIK has approximately $10,500
of financing debt, classified in other liabilities on the Company’s consolidated balance sheets.
Based on its ownership position the Company has concluded that it has acquired a controlling interest in
UNIK. During the third quarter of 2012, 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, which have not been
finalized as the Company is still reviewing statutory net operating losses prior to acquisition, as well as other
non-income tax matters. Goodwill associated with the transaction is not expected to be deductible for income tax
66
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
purposes. In addition, the Company has recognized and measured a redeemable noncontrolling interest. The
redeemable noncontrolling interest represents the portion of UNIK’s net assets owned by the noncontrolling
shareholders and is presented in the mezzanine section on the Company’s consolidated balance sheets. The
results of operations of UNIK are reflected in the Other Payment Solutions segment.
The following is a summary of the preliminary allocation of the purchase price to the assets and liabilities
acquired:
Total UNIK value
Less: Redeemable noncontrolling interest
Total purchase price (includes estimated earn out of $991)
Less:
Cash
Accounts receivable
Accounts payable
Other tangible liabilities, net
Acquired software(a)
Customer relationships(b)
Trademarks and trade name(c)
Recorded goodwill
(a) Weighted average life – 6.2 years.
(b) Weighted average life – 5.9 years.
(c) Weighted average life – 5.5 years.
December 31,
2012
$
$
44,701
21,904
22,797
1,566
11,726
(12,640)
(32,511)
14,193
15,171
1,272
$
24,020
No pro forma information has been included in these financial statements as the operations of UNIK 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 Fleet One
On October 4, 2012, the Company acquired certain assets of Fleet One a privately-held provider of value-
based business payment processing and information management solutions. The Company purchased Fleet One
to expand its fuel card and fleet management information services, as well as accelerate its presence in the over
the road market.
Fleet One was purchased from the private equity firms of LLR Partners and FTV Capital for approximately
$376,258, net of cash acquired. During the fourth quarter of 2012, 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, 2012, as the
Company is currently reviewing the allocation of intangible assets. The operations at Fleet One contributed net
revenues of approximately $14,200 and net earnings of approximately $1,400 from October 4, 2012, through
December 31, 2012.The goodwill is expected to be deductible for tax purposes. Operations from Fleet One are
reflected in the Fleet Payment Solutions segment from the date of acquisition.
67
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The following is a summary of the allocation of the purchase price to the assets and liabilities acquired:
Consideration paid (net of cash)
Less:
Accounts receivable
Accounts payable
Other tangible liabilities, net
Acquired software(a)
Customer relationships(b)
Trademarks and trade name(c)
Recorded goodwill
(a) Weighted average life – 6.7 years.
(b) Weighted average life – 5.5 years.
(c) Weighted average life – 5.5 years.
December 31,
2012
$
376,258
152,574
(151,647)
(1,147)
35,000
74,000
4,000
$
263,478
The following represents unaudited pro forma operational results as if Fleet One 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
2012
2011
$
$
$
$
668,548
91,065
2.34
2.33
$
$
$
$
603,904
123,940
3.20
3.18
The pro forma financial information assumes the companies were combined as of January 1, 2012 and 2011,
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. 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 2012 or 2011.
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.
During the first quarter of 2012, the Company revised the intangible assets associated with the trade name. These
valuations of intangible assets have been finalized. The goodwill is expected to be deductible for tax purposes.
68
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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 were entitled to receive additional
consideration based upon the achievement of certain performance criteria, measured over the twelve-month
period from the date of purchase. The payment was 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. During the second quarter of 2012, the Company lowered the estimate to $8,486 and settled
the contingent consideration.
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.
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 US$340,000 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. The goodwill is not expected to be deductible for tax purposes.
69
WEX INC.
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 fiscal 2010:
$ USD
Net revenue
Net income
Pro forma net income per common share:
Net income per share – basic
Net income per share – diluted
2010
430,261
88,171
2.29
2.26
$
$
$
$
The pro forma financial information assumes the companies were combined as of January 1, 2010, 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.
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.
70
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
See Note 7 for further discussion of the goodwill and intangible balances that arose as a result of the above
transactions.
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:
Age Analysis of Past Due Financing Receivables, Gross as of
December 31, 2012, and 2011
Current
30-59 Days
Past Due
60-89 Days
Past Due
Greater
Than
90 Days
Past Due
Total
2012
Accounts receivable, trade
$
1,505,113
$
46,158
$
7,767
$
8,485
$
1,567,523
Percent of total
96.0%
3.0%
0.5%
0.5%
2011
Accounts receivable, trade
Percent of total
$
1,289,752
$
30,030
$
7,430
$
8,229
$
1,335,441
96.6 %
2.2 %
0.6 %
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,
2012
2011
2010
$
$
11,526
22,539
(27,961)
5,605
$
10,237
27,527
(31,578)
5,340
10,960
19,838
(24,685)
4,124
$
11,709
$
11,526
$
10,237
71
WEX INC.
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:
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Cost
Fair Value
2012
Mortgage-backed securities
Asset-backed securities
Municipal bonds
Equity securities (a)
Total available-for-sale securities
2011
Mortgage-backed securities
Asset-backed securities
Municipal bonds
Equity securities (a)
$
$
$
$
$
$
$
$
$
1,780
1,652
630
11,974
16,036
3,046
1,927
140
11,611
79
3
13
241
336
164
3
9
157
Total available-for-sale securities
$
16,724
$
333
$
20
—
2
—
22
13
—
—
—
13
$
$
$
1,839
1,655
641
12,215
16,350
3,197
1,930
149
11,768
$
17,044
(a)
These securities exclude $2,921 in equity securities designated as trading as of December 31, 2012, and $2,218 as of December 31, 2011, 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, 2012 and 2011 are temporary in nature. The Company reviews its investments to identify and
evaluate investments that have indications of possible impairment. The Company’s techniques used to measure the
fair value of its investments are 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 $1,551 for the year ended December 31,
2012, $841 for the year ended December 31, 2011, and $1,654 for the year ended December 31, 2010.
The maturity dates of the Company’s available-for-sale securities are as follows:
December 31,
2012
2011
Cost
Fair Value
Cost
Fair Value
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
$
— $
348
543
1,391
1,780
11,974
— $
348
543
1,404
1,839
12,216
— $
417
695
955
3,046
11,611
—
417
696
966
3,197
11,768
Total
$
16,036
$
16,350
$
16,724
$
17,044
72
WEX INC.
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,
2012
2011
$
$
32,923
142,021
5,740
5,072
22,437
139,689
5,673
3,412
185,756
(125,659)
171,211
(109,133)
Total property, equipment and capitalized software, net
$
60,097
$
62,078
The Company wrote-off $8,903 of software and software under development related to the over-the-road
line of business. The write-off was a consequence of the Company’s decision to utilize the software acquired
with the acquisition of Fleet One, during the fourth quarter of 2012, as the processing platform for its over-the-
road product. This charge has been included in occupancy and equipment expense on the consolidated statement
of income. The Company did not incur impairment charges during 2011. Depreciation expense was $25,384,
$22,957 and $18,617 in 2012, 2011 and 2010, respectively.
7. Goodwill and Other Intangible Assets
The changes in goodwill during the period January 1 to December 31, 2012 were as follows:
Gross goodwill, beginning of period
Impact of foreign currency translation
rapid! Purchase adjustment
Acquisition of UNIK
Acquisition of CorporatePay
Acquisition of Fleet One
Gross goodwill, end of period
Accumulated impairment, beginning of period
Impairment charge during period
Accumulated impairment, end of period
Fleet Payment
Solutions
Segment
Other
Payment
Solutions
Segment
$
$
512,184
4,399
—
—
—
263,478
$
37,320
(22)
600
24,020
19,814
—
Total
549,504
4,377
600
24,020
19,814
263,478
780,061
81,732
861,793
—
(1,337)
—
(16,171)
—
(17,508)
(1,337)
(16,171)
(17,508)
Net goodwill, end of period
$
778,724
$
65,561
$
844,285
73
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The changes in goodwill during the period January 1 to December 31, 2011 were as follows:
Gross goodwill, beginning of period
RD Card Holdings Australia Pty Ltd. final purchase price allocation
Acquisition of rapid! PayCard
Impact of foreign currency translation
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
Gross goodwill, end of period
$
512,184
$
37,320
$
549,504
During the third quarter of 2012, the Company determined that pricing pressure in the prepaid giftcard
product in Australia would result in lower future earnings than forecasted at the time of the purchase of Wright
Express Prepaid Australia. On September 30, 2012, the Company recorded an estimated goodwill impairment
loss of $16,171 related to the purchase of Wright Express Prepaid Australia. The Company used a discounted
cash flow model of the projected earnings of Wright Express Prepaid Australia, which is a level 3 fair value
measurement, to determine the amount of goodwill impairment. This amount was finalized during the fourth
quarter of 2012. During the fourth quarter of 2012, the Company recorded a goodwill impairment loss of $1,337,
which is a level 3 fair value measurement, related to the purchase of Financial Automation Limited, acquired in
August of 2008.
The changes in intangible assets during the period January 1 to December 31, 2012, were as follows:
Definite-lived intangible assets
Acquired software
Customer relationships
Patent
Trade name
Indefinite-lived intangible assets
Trademarks, trade names and brand
names
Total
Net Carrying
Amount,
Beginning of
Period
$
19,034
75,827
2,766
1,600
Acquisition
Purchase Price
Adjustment
Amortization
Impacts of
Foreign
Currency
Translation
Net Carrying
Amount,
End of
Period
56,953
91,171
—
6,672
—
—
—
(600)
(4,745)
(18,023)
(349)
(351)
(372)
1,701
(52)
33
70,870
150,676
2,365
7,354
10,429
—
—
—
116
10,545
$
109,656
$
154,796
(600)
(23,468)
1,426
241,810
74
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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
Total
Net Carrying
Amount,
Beginning of
Period
Acquisition
Purchase Price
Adjustment
Amortization
Impacts of
Foreign
Currency
Translation
Net Carrying
Amount, End
of Period
$ 22,640
88,788
2,982
—
—
7,944
—
1,600
$
540
(3,216)
217
—
$
$
(4,650)
(17,421)
(341)
—
$
504
(268)
(92)
—
19,034
75,827
2,766
1,600
10,317
—
96
—
16
10,429
$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: $33,857 for 2013; $32,403 for 2014; $29,498 for 2015; $25,443 for 2016 and $21,784 for 2017.
Other intangible assets consist of the following:
December 31, 2012
December 31, 2011
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
$
$
86,054
100
202,447
3,430
7,774
(15,184) $
(100)
(51,771)
(1,065)
(420)
$
70,870
—
150,676
2,365
7,354
$
28,867
100
109,772
3,365
1,700
$
(9,833)
(100)
(33,945)
(599)
(100)
19,034
—
75,827
2,766
1,600
$
299,805
$
(68,540)
231,265
$
143,804
$ (44,577)
99,227
10,545
$
241,810
10,429
$
109,656
Definite-lived intangible assets
Acquired software
Non-compete agreement
Customer relationships
Patent
Trade name
Indefinite-lived intangible assets
Trademarks, trade names and brand
names
Total
75
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
8. Accounts Payable
Accounts payable consists of:
Merchants payable
Other payables
Total accounts payable
9. Deposits and Borrowed Federal Funds
The following table presents information about deposits:
Certificates of deposit with maturities within 1 year
Certificates of deposit with maturities greater than 1 year and less than 5 years
Interest-bearing money market deposits
Negotiable order of withdrawal 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
Weighted average cost of negotiable order of withdrawal deposits
December 31,
2012
2011
$
$
500,723
27,115
$
388,129
21,097
527,838
$
409,226
December 31,
2012
2011
$
441,100
48,343
123,614
261,126
16,162
$490,929
89,260
103,072
—
10,393
$
890,345
$693,654
0.57 %
0.39 %
—
0.68 %
0.69%
—
WEX Bank has issued certificates of deposit in various maturities ranging between one month and two
years and with fixed interest rates ranging from 0.26 percent to 1.15 percent as of December 31, 2012. WEX
Bank may issue certificates of deposit without limitation on the balance outstanding. However, WEX Bank must
maintain minimum financial ratios, which include risk-based asset and capital requirements, as prescribed by the
FDIC. As of December 31, 2012, certificates of deposit were in denominations of $250 or less.
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, 2012, and
December 31, 2011. There was $48,400 in outstanding borrowings against these lines-of-credit at December 31,
2012 and $6,900 in outstanding borrowings against these lines-of-credit at December 31, 2011. The average rate
on the outstanding borrowings under lines-of-credit was 0.375 percent at December 31, 2012.
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 Funds rate. Money market deposits may be withdrawn by the
holder
76
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
at any time, although notification may be required and monthly number of transactions is limited. As of
December 31, 2012, the weighted average interest rate on interest-bearing money market deposits was 0.39
percent.
On January 11, 2012, the Company entered into an agreement with Higher One, Inc. (“Higher One”), a
technology and payment services company focused on higher education, to offer negotiable order of withdrawal
(“NOW”) accounts to a portion of Higher One’s customers. Higher One will provide processing and other
administrative services while the Company, through its bank subsidiary WEX Bank (formerly Wright Express
Financial Services Corporation), will establish and maintain the NOW accounts. During the second and third
quarters of 2012, the Company received non-interest bearing NOW account deposits. As of December 31, 2012,
the Company has $261,126 of non-interest bearing NOW account deposits outstanding.
The following table presents the average interest rates for deposits and borrowed federal funds:
Average interest rate:
Deposits
Borrowed federal funds
Negotiable order of withdrawal deposits
Interest-bearing money market deposits
Year ended December 31,
2011
2012
2010
0.65 %
0.42%
—
0.49%
0.81 %
0.44 %
—
0.55 %
1.04%
0.48%
—
0.58%
Average deposits and borrowed federal funds balance
$
888,135
$
695,765
$
527,345
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, 2012, 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 2013 – June 2014
Fuel price derivative instruments – diesel
Put and call option contracts settling January 2013 – June 2014
Total fuel price derivative instruments
Aggregate
Notional
Amount
(gallons) (a)
35,752
16,063
51,815
(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.
77
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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.
Derivatives Designated as Hedging Instruments - Interest Rate Swaps
In September 2010, the Company entered into an 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 expired in March of 2012.
The following table presents information about the Company’s interest rate swap arrangements:
December 31,
2012
2011
Weighted-
Average
Base Rate
Aggregate
Notional
Fair Value
Weighted-
Average
Base Rate
Aggregate
Notional
Fair Value
September 2010 Swap
Total
—
—
$ —
$ —
$ —
$ —
0.56 %
0.56 %
$150,000
$150,000
$(95)
$(95)
78
WEX INC.
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, 2012
Balance
Sheet
Location
Fair
Value
December 31, 2011
Balance
Sheet
Location
Fair
Value
December 31, 2012
Balance
Sheet
Location
Fair
Value
December 31, 2011
Balance
Sheet
Location
Fair
Value
Derivatives designated as
hedging instruments
Interest rate contracts
Other assets
$— Other assets
$ —
Accrued
expenses
$ —
Accrued
expenses
$95
Derivatives not designated
as hedging instruments
Commodity contracts
Total derivatives
Fuel price
derivatives,
at fair value
Fuel price
derivatives,
at fair value
410
$410
—
$ —
Fuel price
derivatives,
at fair value
1,729
$1,729
Fuel price
derivatives,
at fair value
415
$510
The following table presents information on the location and amounts of derivative gains and losses in the
condensed consolidated statements of income:
Amount of Gain or
(Loss) Recognized in
OCI on Derivative
(Effective Portion) (a) Location of Gain or
(Loss) Reclassified
from Accumulated
OCI into Income
(Effective Portion)
For
the period ended
December 31,
2011
2012
Amount of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
For the period
ended
December 31,
2011
2012
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,
2012
2011
Derivatives
Designated as
Hedging Instruments
Interest rate contracts
$
60
$308
Financing interest
expense
$
(109)
$
(830)
Financing interest
expense
$—
$—
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,
2012
2011
$ (12,365 )
$(11,869 )
(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 $35 in 2012 and
$179 in 2011.
(b) No ineffectiveness was reclassified into earnings nor was any amount excluded from effectiveness testing.
79
WEX INC.
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 2014. 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,
2012
2011
Put Strike
Price of
Underlying
Option
(per gallon) (a)
Call Strike
Price of
Underlying
Option
(per gallon) (a)
Aggregate
Notional
Amount
(gallons) (b)
Aggregate
Notional
Amount
(gallons)
Fair
Value
Fair
Value
Fuel price derivative instruments – unleaded fuel
Options settling October 2013 – June 2014
Options settling July 2013 – March 2014
Options settling April 2013 – December 2013
Options settling January 2013 – September 2013
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
$2.485
$2.633
$2.670
$2.843
$2.540
$2.605
$2.932
$2.608
$2.247
$2.176
$2.545
$2.693
$2.730
$3.903
$2.600
$2.665
$2.992
$2.668
$2.307
$2.236
6,269
4,643
10,436
7,291
4,803
2,310
—
—
—
—
$ (514)
308
(398)
457
(1,161)
(314)
—
—
—
—
— $ —
—
—
—
—
—
—
280
6,857
573
7,108
2,437
7,666
(407)
7,816
(1,893)
4,573
(970)
2,190
Total fuel price derivative instruments – unleaded fuel
35,752
$(1,622)
36,210
$
20
Fuel price derivative instruments – diesel
Options settling October 2013 – June 2014
Options settling July 2013 – March 2014
Options settling April 2013 – December 2013
Options settling January 2013 – September 2013
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
Total fuel price derivative instruments – diesel
Total fuel price derivative instruments
$3.713
$3.878
$3.823
$3.990
$3.835
$3.792
$4.061
$3.695
$3.293
$3.239
$3.773
$3.938
$3.883
$4.050
$3.895
$3.852
$4.121
$3.755
$3.353
$3.299
2,816
2,086
4,689
3,276
2,158
1,038
—
—
—
—
$ (224)
108
(162)
363
(89)
(103)
—
—
—
—
— $ —
—
—
—
—
—
—
413
3,081
134
3,193
1,093
3,444
(238)
3,511
(927)
2,055
(500)
984
16,063
$ (107)
16,268
51,815
$(1,729)
52,478
(25)
(5)
(a)
(b)
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.
The Options settle on a monthly basis.
80
WEX INC.
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,
2012
2011
2010
$
$
(10,641) $
(1,724)
(22,741) $
10,872
9,785
(17,029)
(12,365) $
(11,869) $
(7,244)
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 (“2010 term loan”). The rate on
the 2010 term loan was 250 basis points above LIBOR. In connection with the 2010 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 “2011 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 2011 Credit Agreement was secured by
pledges of the stock of the Company’s foreign subsidiaries. The 2011 Credit Agreement provided for a five-year
$200,000 amortizing term loan facility and a five-year $700,000 revolving credit facility with a $100,000 sub-
limit for letters of credit and a $20,000 sub-limit 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, 2012, the Company had $621,000 of loans outstanding under the 2011 Credit
Agreement (including $182,500 under the term loan and $438,500 under the revolving credit facility). As of
December 31, 2012, the Company has posted approximately $2,350 letters of credit as collateral for fuel
81
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
derivatives and lease agreements. Accordingly, at December 31, 2012, the Company had $264,150 of availability
under the 2011 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 2011 Credit Agreement were used to refinance the Company’s existing indebtedness
under its 2007 Revolver, and its existing indebtedness under its 2010 term loan. The 2011 Credit Agreement was
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 2011 Credit Agreement bore 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 2011 Credit
Agreement mature on May 23, 2016, unless extended pursuant to the terms of the 2011 Credit Agreement. As of
December 31, 2012, the interest rate for the borrowings under the 2011 Credit Agreement was 1.81 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
Total outstanding balance on revolving line-of-credit facility and term loan
Weighted average rate based on LIBOR (including impact of interest rate swaps)
Rate based on the prime rate
December 31,
2012
2011
$592,500
28,500
$267,500
27,800
$621,000
$295,300
1.71%
3.75%
1.99%
3.68%
82
WEX INC.
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 2010 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
Total financing interest expense
Average interest rate (including impact of interest rate swaps):
Based on LIBOR
Based on prime
Average debt balance at LIBOR
Average debt balance at prime
Debt Covenants
$
$
$
$
$
Year ended December 31,
2011
2012
2010
— $
—
—
—
1,084
270
100
249
$
1,621
470
324
628
— $
1,703
$
3,043
— $
—
911
863
— $
1,774
3,103
1,083
1,369
1,100
3,339
297
$
1,758
566
1,047
667
2,330
208
$ 10,291
$
6,576
$
$
109
—
33
830
—
793
$
$
$
$
$
741
748
1,489
—
—
—
—
—
—
—
663
40
79
$ 10,433
$ 11,676
$
5,314
1.79%
3.75%
1.91 %
3.68 %
1.33%
3.25%
$366,387
$ 28,885
$362,014
$ 22,615
$228,370
$ 18,390
The 2011 Credit Agreement contains various financial covenants requiring the Company to maintain
certain financial ratios. In addition, the 2011 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. WEX Bank is not subject to certain of these restrictions.
Other
As of December 31, 2012, WEX Bank pledged approximately $544,289 of fleet receivables held by WEX
Bank to the Federal Reserve Bank as collateral for potential borrowings. WEX Bank has a line of credit through
83
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
the Federal Reserve Bank Discount Window. Amounts that can be borrowed are based on the amount of
collateral pledged to the Federal Reserve Bank and were approximately $321,130 as of December 31, 2012. As
of December 31, 2012, WEX Bank had no borrowings on this line of credit through the Federal Reserve Bank
Discount Window.
Subsequent to the acquisition of UNIK, UNIK paid approximately $19,600 of UNIK’s existing financing
debt. As of December 31, 2012, UNIK has approximately $10,500 of financing debt, classified in other liabilities
on the Company’s consolidated balance sheets.
In January 2013, the Company entered into an Amended and Restated Credit Agreement and completed a
$400,000 note offering. See Note 22. Subsequent Event.
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,
2011
2012
2010
United States
Foreign
Total
$
224,029
(17,846)
$
224,448
(15,843 )
$
153,958
(8,876 )
$
206,183
$
208,605
$
145,082
Income tax expense (benefit) from continuing operations consisted of the following for the years ended
December 31:
2012
Current
Deferred
2011
Current
Deferred
2010
Current
Deferred
United States
State
and Local
Foreign
Total
$
$
$
$
$
$
48,632
22,560
43,886
25,875
31,811
19,723
$
$
$
$
$
$
$
3,460
(1,301) $
18,681
17,442
$
$
70,773
38,701
6,697
299
4,916
960
$
$
$
$
$
1,050
(2,824) $
51,633
23,350
(886) $
$
929
35,841
21,612
84
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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,
2011
2012
2010
Federal statutory rate
State income taxes (net of federal income tax benefit)
Foreign income tax rate differential
Revaluation of deferred tax assets for tax rate changes and blending differences, net
Other
Effective tax rate
35.0 %
1.0
16.8
(0.5)
0.8
35.0 %
1.2
—
—
(0.3)
35.0 %
4.0
—
—
0.6
53.1 %
35.9 %
39.6 %
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:
December 31,
2012
2011
$
4,935
$
4,346
2,862
10,304
8,894
3,375
—
1,603
7,872
3,443
3,954
2
107,207
133,394
137,577
154,614
194
1,299
8,430
27,179
—
190
10,900
37,102
11,090
347
—
$100,128
$143,524
Deferred assets related to:
Reserve for credit losses
Foreign tax credit
Stock-based compensation, net
Net operating loss carry forwards
Other assets
Derivatives
Intangibles, primarily goodwill
Deferred tax liabilities related to:
Derivatives
Other assets
Property, equipment and capitalized software
Foreign intangibles
Valuation allowance on net operating loss carryfowards
Deferred income taxes, net
85
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Net deferred tax assets by jurisdiction are as follows:
United States
Australia
New Zealand
The Netherlands
United Kingdom
Brazil
Total
December 31,
2012
2011
$
$
118,535
(13,053)
48
73
(2,337)
(3,138)
138,001
5,354
105
64
—
—
$
100,128
$
143,524
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
$462,396 of state and $22,183 of foreign net operating loss carry forwards at December 31, 2012 and approximately
$394,899 of state and $6,504 of foreign net operating loss carry forwards at December 31, 2011. These U.S. losses
expire at various times through 2030. Foreign losses in Brazil and the U.K. have indefinite carry forward periods. A
valuation allowance in the amount of $347 was established through purchase accounting for acquired net operating
losses of CorporatePay Limited, as the Company believes that it is not more likely than not the losses will be utilized.
No valuation allowances have been established for all other deferred assets 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 $1,756 at December 31,
2012, and $5,991 at December 31, 2011. 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 guidance on derecognition, classification, interest and penalties, accounting in
the interim periods, disclosure, and transition.
The Company files a consolidated federal income tax return in the United States, as well as consolidated
and separate income tax returns in various states. The Company also files consolidated and separate income tax
returns in various non-U.S. jurisdictions. In the normal course of business, the Company is no longer subject to
income tax examination for the years prior to 2009. The Company is currently being audited for its Australian
return for the tax years 2007 through 2009.
86
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
A reconciliation of the beginning and ending amount of unrecognized tax benefits excluding interest and
penalties is as follows:
Year ended December 31,
2011
2012
2010
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
117
—
—
—
—
$
— $
6,059
—
—
—
—
$
6,176
$
6,059
$
—
—
—
—
—
—
—
At December 31, 2012, the Company had $7,489 of net unrecognized tax benefits. If recognized, $7,489
would reduce the Company’s effective tax rate. The Company does not anticipate settling any unrecognized tax
benefit within the next 12 months.
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense.
The Company has accrued $1,313 as of December 31, 2012, and $500 as of December 31, 2011 for penalties and
interest related to uncertain tax positions. As of December 31, 2010, the Company has no uncertain tax positions
subject to penalties and interest.
On June 29, 2012, tax legislation was enacted in Australia that affected the tax deductibility of certain
intangible assets acquired as part of the 2010 acquisition of Wright Express Australia. The Company performed a
review of the legislation to determine which of these intangible assets would be impacted. Based upon this
review the Company recorded a tax charge of $31,432 in June of 2012 to reflect these impacts. The Company
wrote-off an associated refund claim payable to the former shareholder of RD Card Holding Australia for $9,750,
included in non-operating income. This payable was contingent on the receipt of the tax refunds generated by tax
deductions associated with the amortization of above mentioned intangible assets.
During 2012 the Company recorded an impairment charge related to goodwill in the amount of $17,508.
This charge did not result in any tax provision benefit. Also the Company recorded a tax charge of approximately
$2,400 due to the impact of a retroactive tax legislation enacted on September 8, 2012, in Australia. This
legislation impacted the potential deductibility of intercompany interest expense allowable in past and future tax
years and hence resulted in a discrete charge in our recorded tax expense in the current year and a higher
Australian effective tax rate in future periods.
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
87
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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 WEX Inc. to Cendant and Wyndham acquired from Cendant the right to receive
37.5 percent of the payments by WEX Inc. 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.
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
$2,089, $714 and $214 charge to non-operating expense for the years ended December 31, 2012, 2011 and 2010,
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. WEX Inc. has the right to discontinue this
plan at any time. Contributions to the plan are voluntary. The Company contributed $2,295, $2,094 and $1,921
for the years ended December 31, 2012, 2011 and 2010, 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 $2,921 at December 31, 2012, and $2,218 at
December 31, 2011. 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 $2,921 at December 31, 2012, and $2,218 at December 31, 2011. Such amounts are included in other
assets on the consolidated balance sheet.
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
88
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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.
The following table presents the Company’s assets and liabilities that are measured at fair value and the
related hierarchy levels for 2012:
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,
2012
Assets:
Mortgage-backed securities
Asset-backed securities
Municipal bonds
Equity securities
Total available-for-sale securities
Executive deferred compensation plan trust (a)
Liabilities:
Fuel price derivatives – unleaded fuel (b)
Fuel price derivatives – diesel (b)
Total fuel price derivatives
Contingent consideration
(a)
(b)
The fair value of these instruments is recorded in other assets.
The balance sheet presentation combines unleaded fuel and diesel fuel positions.
89
$
$
$
$
$
$
$
$
$
$
1,839
1,654
641
12,216
16,350
2,921
1,622
107
— $
—
—
12,216
12,216
2,921
$
$
$
1,839
1,654
641
—
4,134
$
— $
— $
1,622
$
—
—
1,729
$
— $
1,622
$
313
—
— $
—
—
—
—
—
—
—
107
107
313
WEX INC.
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
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
December 31,
2011
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs (Level 3)
$
$
$
$
$
$
$
3,197
1,930
149
11,768
17,044
2,218
20
25
95
$
$
$
$
$
$
— $
—
—
11,768
11,768
2,218
$
$
$
3,197
1,930
149
—
5,276
$
— $
— $
20
$
— $
— $
— $
95
$
—
—
—
—
—
—
—
25
—
9,325
—
— $
9,325
Assets:
Mortgage-backed securities
Asset-backed securities
Municipal bonds
Equity securities
Total available-for-sale securities
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)
(b)
(c)
The fair value of these instruments is recorded in other assets.
The fair value of these instruments is recorded in accrued expenses.
The balance sheet presentation combines unleaded fuel and diesel fuel positions.
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, 2012:
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
90
Contingent
Consideration
Fuel Price
Derivatives –
Diesel
$
(9,325)
$
1,517
—
7,495
—
(25)
(82)
—
—
—
$
(313)
$
(107)
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
(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, 2012, are reported in net realized and unrealized gain and
(losses) on fuel price derivatives on the consolidated statements of income.
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.
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.
91
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Fuel price derivatives – diesel. The assumptions used in the valuation of the diesel fuel price derivatives
use both observable and unobservable inputs. With respect to forward prices for diesel fuel, there is a lack of
price transparency. Such unobservable inputs are significant to the diesel fuel derivative contact valuation
methodology.
Quantitative Information About Level 3 Fair Value Measurements. The significant unobservable inputs
used in the fair value measurement of the Company’s diesel fuel price derivative instruments designated as Level
3 are as follows:
Fuel price derivatives – diesel
Fair Value at
December 31, 2012
Valuation
Technique
$107
Option model
Unobservable Input
Future retail price of diesel
fuel after December 31,
2012
Range $
per gallon
$3.71 – 4.05
Sensitivity To Changes In Significant Unobservable Inputs. As presented in the table above, the significant
unobservable inputs used in the fair value measurement of the Company’s diesel fuel price derivative instruments
are the future retail price of diesel fuel from the first quarter of 2013 through the second quarter of
2014. Significant changes in these unobservable inputs in isolation would result in a significant change in the fair
value measurement.
Contingent consideration
The Company has classified its liability for contingent consideration related to its acquisition of UNIK
within Level 3 of the fair value hierarchy because the fair value is determined using significant unobservable
inputs, which include the projected revenues of UNIK over a four month period.
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. Redeemable noncontrolling interest
On August 30, 2012, the Company acquired a 51 percent ownership interest in UNIK, a provider of payroll
cards in Brazil. Redeemable noncontrolling interest is measured at fair value at the date of acquisition. The
redeemable noncontrolling interest is reported on the Company’s consolidated balance sheets as “Redeemable
noncontrolling interest”.
A reconciliation of redeemable noncontrolling interests for the year December 31, 2012 and 2011, is
as follows:
Balance, beginning of period
Acquisition of subsidiary at fair value
Net loss attributable to noncontrolling interest
Currency translation adjustment
Ending balance
92
2012
$
—
21,904
(213)
(29)
$
21,662
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
18. Commitments and Contingencies
Litigation
The Company is involved in pending litigation in the ordinary 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.
Extension of Credit to Customers
The Company had aggregate commitments of approximately $4,665,000 at December 31, 2012, and
$4,114,000 at December 31, 2011, 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 its 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. 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
$5,601 for the year ended December 31, 2012, $4,794 for the year ended December 31, 2011 and $3,583 for the
year ended December 31, 2010. 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 $6,959 for the year ended December 31, 2012, $5,342 for the year ended December 31,
2011, and $3,164 for the year ended December 31, 2010. 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:
2013
2014
2015
2016
2017
2018 and thereafter
Total
19. Cash and Dividend Restrictions
Cash
$
Payment
7,657
6,552
5,804
3,239
2,640
3,054
$
28,946
WEX Bank is required to maintain reserves against certain customer deposits by keeping cash on hand or
balances with the Federal Reserve Bank. The required amount of those reserves at December 31, 2102 and 2011
was $26,246 and $0, respectively.
93
WEX INC.
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.
Dividends paid by WEX Bank have provided a substantial part of the Company’s operating funds and for
the foreseeable future it is anticipated that dividends paid by WEX Bank to the Company will continue to be the
Company’s principal source of operating funds. Capital adequacy requirements serve to limit the amount of
dividends that may be paid by WEX Bank. WEX Bank is chartered under the laws of the State of Utah and the
FDIC insures its deposits. Under Utah law, WEX Bank may only pay a dividend out of net profits after it
has (i) provided for all expenses, losses, interest and taxes accrued or due from WEX Bank 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, WEX Bank’s
capital stock is $5,250 and its capital surplus exceeds 100 percent of capital stock.
Under FDIC regulations, WEX Bank may not pay any dividend if, following the payment of the dividend, WEX
Bank would be “undercapitalized,” as defined under the Federal Deposit Insurance Act and applicable regulations. The
FDIC also has the authority to prohibit WEX Bank from engaging in business practices that the FDIC considers to be
unsafe or unsound, which, depending on the financial condition of WEX Bank, could include the payment of
dividends.
WEX Bank complied with the aforementioned dividend restrictions for the years ended December 31,
2012, 2011, and 2010.
20. 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 stock 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, 2012, the Company had four
stock-based compensation programs, which are described below. The compensation cost that has been charged
against income for these programs totals $11,016 for 2012, $9,367 for 2011, and $7,425 for 2010.
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”).
94
WEX INC.
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, 2012, and changes during the year
then ended is presented below:
Restricted Stock Units
Balance at January 1, 2012
Granted
Vested – shares issued
Vested – shares deferred (a)
Forfeited
Withheld for taxes (b)
Balance at December 31, 2012
Weighted-
Average
Grant-
Date Fair
Value
Units
204
$
$
140
(104) $
(4) $
(3) $
(48) $
32.25
55.76
30.58
26.57
50.15
31.23
185
$
51.08
(a)
(b)
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”).
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, 2012, there was $4,743 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 grant-date fair value of shares granted was $7,830 during 2012,
$4,107 during 2011, and $2,777 during 2010. The total fair value of shares vested (issued) was $6,347 during
2012, $5,435 during 2011, and $3,136 during 2010.
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.
A summary of the status of the Company’s DSUs as of December 31, 2012, and changes during the year is
presented below:
Deferred Stock Units
Balance at January 1, 2012
Awards
Converted from RSUs
Balance at December 31, 2012
95
Weighted-
Average
Grant-Date
Fair Value
Units
84
1
4
89
$24.70
$63.32
$26.57
$25.16
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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 it is expensed at that time. The total fair
value of shares granted and vested was $150 during 2012, $173 during 2011, and $331 during 2010.
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, 2012, and changes during the year then ended is presented below:
Performance Based Restricted Stock Units
Balance at January 1, 2012
Granted
Forfeited
Cancelled
Balance at December 31, 2012
Units at
Threshold
Units at
Target
Units at
Maximum
Weighted-
Average
Grant-Date
Fair Value
110
34
(5)
(33)
106
221
67
(11)
(66)
211
440
134
(21)
(131)
$37.76
$64.34
$49.05
$51.41
422
$41.39
The range of unrecognized compensation cost related to the awards is from $1,178 at threshold (50 percent
below targeted performance), $2,356 at target (100 percent of targeted performance) and up to $4,713 at
maximum (200 percent of targeted performance), as of December 31, 2012, depending whether certain
performance conditions are met. The total grant-date fair value of shares granted at target was $4,308 during
2012, $4,157 during 2011, and $4,929 during 2010. The total grant-date fair value of shares vested was $1,382
during 2012, $327 during 2011, and $0 during 2010.
Stock Options
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.
96
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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
The stock options granted under the plan related to the Company’s employees consisted of:
March 3,
2010
6.00
30.06
46.00%
2.70%
0.00%
14.15
$
$
Stock Options
Outstanding at January 1, 2012
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2012
Exercisable on December 31, 2012
Vested and expected to vest at December 31, 2012
Weighted-
Average
Remaining
Contractual
Term (in
years)
Weighted-
Average
Exercise
Price
Aggregate
Intrinsic
Value
$
$
$
$
$
19.72
—
19.76
—
19.65
13.59
19.65
4.5
4.2
4.5
$6,641
$4,655
$6,641
Shares
353
—
(234)
—
119
75
119
The total intrinsic value of options exercised during the years ended December 31, 2012, December 31,
2011 and 2010 was $10,555, $7,829 and $3,592, respectively. No options have been granted since March of
2010.
21. 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
97
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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.
The following table presents the Company’s reportable segment results for the years ended December 31,
2012, 2011 and 2010:
Year ended December 31, 2012
Fleet Payment Solutions
Other Payment Solutions
Total
Year ended December 31, 2011
Fleet Payment Solutions
Other Payment Solutions
Total
Year ended December 31, 2010
Fleet Payment Solutions
Other Payment Solutions
Total
Total
Revenues
Operating
Interest
Expense
Depreciation
and
Amortization
Provision for
Income
Taxes
Adjusted Net
Income
$
$
$
$
$
$
470,591
152,560
$
$
3,377
1,613
23,721
1,663
$
75,404
17,752
$
128,259
30,265
623,151
$
4,990
$
25,384
$
93,156
$
158,524
436,704
116,372
553,076
329,239
61,167
$
$
$
$
$
$
4,488
965
5,453
4,494
876
21,331
1,626
22,957
17,982
635
$
$
$
62,913
16,155
79,068
57,154
9,146
$
$
$
112,668
29,124
141,792
92,499
14,802
390,406
$
5,370
$
18,617
$
66,300
$
107,301
The following table reconciles adjusted net income to net income:
Total adjusted net income WEX Inc.
Unrealized gains (losses) on derivative instruments
Amortization of acquired intangible assets
Goodwill impairment
Change in tax refund due to former shareholders of RD Card Holdings Australia
Non-cash adjustments related to tax receivable agreement
Write-off and other charges related to Fleet One acquisition
Net earnings attributable to noncontrolling interest
Tax impact
Year ended December 31,
2011
2012
2010
$
$
158,524
(1,724)
(23,468)
(17,508)
9,750
(2,089)
(10,550)
305
(16,318)
$
141,792
10,872
(22,412)
—
—
(715)
—
—
4,085
107,301
(17,029)
(11,276)
—
—
(214)
—
—
8,847
Net earnings attributable to WEX Inc.
$
96,922
$
133,622
$
87,629
98
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The tax impact of the foregoing adjustments is the difference between the Company’s GAAP tax provision
and a pro forma tax provision based upon the Company’s adjusted net income before taxes. The methodology
utilized for calculating the Company’s adjusted net income tax provision is the same methodology utilized in
calculating the Company’s GAAP tax provision.
Geographic Data
Total revenues:
United States
International
Total revenues
Goodwill:
United States
International
Total goodwill
Other intangible assets, net
United States
International
Total other intangibles assets, net
22. Subsequent Event
Year ended December 31,
2011
2012
2010
$
$
$
$
$
$
541,404
81,747
623,151
589,726
254,559
844,285
135,386
106,424
241,810
$
$
$
$
$
$
482,536
70,540
553,076
325,647
223,857
549,504
29,204
80,452
109,656
$
$
$
$
$
$
368,922
21,484
390,406
313,853
223,202
537,055
23,564
101,163
124,727
On January 18, 2013, the Company entered into an Amended and Restated Credit Agreement (the “2013 Credit
Agreement”), among the Company, as borrower, Wright Express Card Holdings Australia Pty Ltd, a wholly-owned
subsidiary of the Company, as specified designated borrower (“Card Holdings Australia”, and, together with the
Company, the “Borrowers”), Bank of America, N.A., as administrative agent, swing line lender and L/C issuer (“Bank
of America”), and the other lenders party thereto (the “Lenders”). The 2013 Credit Agreement provides for a five-year
$300,000 term loan facility, and a five-year $800,000 secured revolving credit facility with a $150,000 sub-limit for
letters of credit and a $20,000 sub-limit for swingline loans. The indebtedness covenant under the 2013 Credit
Agreement requires that the Company reduce the revolving commitments under the 2013 Credit Agreement on a
dollar-for-dollar basis to the extent that the Company issues more than $300,000 in principal amount of senior or senior
subordinated notes of the Company. Subject to certain conditions, including obtaining relevant commitments, the
Company has the option to increase the facility by up to an additional $100,000.
The 2013 Credit Agreement amends, restates and substitutes for the 2011 Credit Agreement, dated as of
May 23, 2011 (the “2011 Credit Agreement”), among the Company, Card Holdings Australia, Bank of America,
as administrative agent, the joint lead arrangers and other agents named therein, and a syndicate of lenders. The
2013 Credit Agreement increases the outstanding amount of the term loan from $185,000 to $300,000 and
increases the amount of the revolving loan from $700,000 to $800,000. A portion of the indebtedness owing
under the 2013 Credit Agreement is the same indebtedness as formerly evidenced by the 2011 Credit Agreement.
On January 30, 2013, the Company, completed a $400,000 offering in aggregate principal amount of 4.750
percent senior notes due 2023 (the “Notes”) at an issue price of 100.0 percent of the principal amount, plus
accrued interest, if any, from January 30, 2013, in a private placement to “qualified institutional buyers” as
99
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and in offshore
transactions pursuant to Regulation S under the Securities Act. The Notes were issued pursuant to an indenture
dated as of January 30, 2013 (the “Indenture”) among the Company, the guarantors listed therein, and The Bank
of New York Mellon Trust Company, N.A., as trustee (the “Trustee”).
The Notes will mature on February 1, 2023, and interest will accrue at the rate of 4.750 percent per annum.
Interest is payable semiannually in arrears on February 1 and August 1 of each year, commencing on August 1, 2013.
The Notes are guaranteed on a senior unsecured basis by each of the Company’s restricted subsidiaries and
each of the Company’s regulated subsidiaries that guarantees the Company’s 2013 Credit Agreement, which, as
of the issue date, consist of four of the Company’s restricted subsidiaries. Certain of the guarantees by these
subsidiaries are expected to be released after the issue date. WEX Bank, which represents a substantial amount of
the Company’s operations, is not a guarantor and is not be subject to many of the restrictive covenants in the
indenture governing the Notes.
The Notes and guarantees described above are general senior unsecured obligations ranking equally with
the Company’s existing and future senior debt, senior in right of payment to all of the Company’s subordinated
debt, and effectively junior in right of payment to all of the Company’s existing and future secured debt,
including the Company’s 2013 Credit Agreement, to the extent of the value of the collateral securing such debt.
In addition, the Notes and the guarantees are structurally subordinated to all liabilities of the Company’s
subsidiaries that are not guarantors, including WEX Bank.
At any time on or after February 1, 2018, the Company may redeem the Notes, in whole or in part, at any
time at the following redemption prices (expressed as a percentage of principal amount of the Notes) if redeemed
during the twelve month period beginning on February 1 of the following years: (i) 102.375 percent in 2018,
(ii) 101.583 percent in 2019, (iii) 100.792 percent in 2020, and (iv) 100.0 percent in 2021 and thereafter; plus, in
each case, accrued and unpaid interest, if any, to, but excluding, the date of redemption. At any time prior to
February 1, 2018, the Company may redeem the Notes, in whole or in part, at a redemption price equal to 100.0
percent of the principal amount of such Notes redeemed plus a “make-whole” premium (as described in the
Indenture), together with any accrued and unpaid interest, if any, to, but excluding, the date of redemption.
In addition, at any time prior to February 1, 2016, the Company may, subject to certain conditions, redeem up
to 35 percent of the Notes from the proceeds of certain equity offerings at a redemption price of 104.75 percent of
the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.
Upon the occurrence of a change of control of the Company (as described in the Indenture), the Company
must offer to repurchase the Notes at 101 percent of the principal amount of the Notes, plus accrued and unpaid
interest, if any, to, but excluding, the date of repurchase.
The Indenture contains covenants that, among other things, limit the Company’s ability and the ability of
its restricted subsidiaries and, in certain limited circumstances, WEX Bank and the Company’s other regulated
subsidiaries, to (i) incur additional debt, (ii) pay dividends or make other distributions on, redeem or repurchase
capital stock, or make investments or other restricted payments, (iii) enter into transactions with affiliates,
(iv) dispose of assets or issue stock of restricted subsidiaries or regulated subsidiaries; (v) create liens on assets,
or (vi) effect a consolidation or merger or sell all, or substantially all, of the Company’s assets. These covenants
are subject to important exceptions and qualifications. At any time that the Notes are rated investment grade
(which is not currently the case), which is not currently the case, and subject to certain conditions, certain
covenants will be suspended with respect to the Notes. WEX Bank and the Company’s other regulated
subsidiaries will not be subject to some of the restrictive covenants in the Indenture that place limitations on the
100
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Company and its restricted subsidiaries’ actions, and where WEX Bank and the Company’s regulated
subsidiaries are subject to covenants, there are significant exceptions and limitations on the application of those
covenants to WEX Bank and the Company’s regulated subsidiaries.
Under the terms of the 2013 Credit Agreement, the $800,000 secured revolving credit facility was reduced
to $700,000 as a result of the $400,000 Notes offering.
The Company used the net proceeds of this offering to repay the outstanding amount under the revolving
portion of its 2013 Credit Agreement and to pay related fees and expenses and for general corporate purposes.
23. Quarterly Financial Results (Unaudited)
Summarized quarterly results for the years ended December 31, 2012 and 2011, are as follows:
2012
Total revenues
Operating income
Net income
Earnings per share:
Basic
Diluted
2011
Total revenues
Operating income
Net income
Earnings per share:
Basic
Diluted
Three months ended
March 31
June 30
September 30 December 31
$140,122
$ 57,963
$ 23,236
$153,064
$ 62,880
$ 30,335
$160,967
$ 51,277
$ 14,298
$
$
0.60
0.59
$
$
0.78
0.78
$
$
0.37
0.37
$120,090
$ 46,172
$ 12,115
$141,272
$ 61,175
$ 40,615
$151,878
$ 65,244
$ 48,100
$
$
0.31
0.31
$
$
1.05
1.04
$
$
1.24
1.23
$168,998
$ 49,499
$ 29,053
$
$
0.75
0.74
$139,836
$ 60,733
$ 32,792
$
$
0.85
0.84
101
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The principal executive officer and principal financial officer of WEX Inc. 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
WEX Inc. concluded that the Company’s disclosure controls and procedures were effective as of December 31,
2012.
Management’s Annual Report on Internal Control Over Financial Reporting
WEX Inc.’s 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 WEX Inc.’s internal control over financial reporting was
effective as of December 31, 2012.
Management excluded from its assessment the internal control over financial reporting at CorporatePay,
which was acquired on May 11, 2012, UNIK S.A., which was acquired on August 30, 2012 and Fleet One, which
was acquired on October 4, 2012, and whose financial statements constitute, collectively, 5 percent of total assets
and 4 percent of revenues, of the consolidated financial statement amounts as of and for the year ended
December 31, 2012.
The effectiveness of our internal control over financial reporting as of December 31, 2012, 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, 2012, that have materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
102
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of WEX Inc.
South Portland, Maine
We have audited the internal control over financial reporting of WEX Inc. and subsidiaries (the “Company”) as
of December 31, 2012, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. As described in “Management’s Annual
Report on Internal Control Over Financial Reporting,” management excluded from its assessment the internal
control over financial reporting at CorporatePay, which was acquired on May 11, 2012, UNIK S.A., which was
acquired on August 30, 2012 and Fleet One, which was acquired on October 4, 2012, and whose financial
statements constitute, collectively, 5 % of total assets and 4 % of revenues, of the consolidated financial
statement amounts as of and for the year ended December 31, 2012. Accordingly, our audit did not include the
internal control over financial reporting at Corporate Pay, UNIK S.A. and Fleet One. 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, 2012, 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, 2012 of the
Company and our report dated February 28, 2013 expressed an unqualified opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
Boston, MA
February 28, 2013
103
ITEM 9B. OTHER INFORMATION
Not applicable.
104
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
See the information in the Company’s proxy statement for the 2013 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.wexinc.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, WEX Inc., 97 Darling Avenue, South Portland, Maine USA 04106. The
Company intends to post on its website, www.wexinc.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 2013 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 2013 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 2013 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 2013 Annual Meeting of Stockholders captioned
“Auditor Selection and Fees,” which information is incorporated herein by reference.
105
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 46).
Exhibit No.
Description
2.1
3.1
3.2
3.3
4.1
4.2
10.1
10.2
10.3
10.4
10.5
10.6
Share Purchase Agreement among RD Card Holdings Limited, Wright Express Australia Holdings PTY LTD and Wright
Express Corporation1 (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)
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)
Certificate of Ownership and Merger merging WEX Transitory Corporation with and into Wright Express Corporation
(incorporated by reference to Exhibit No. 3.1 to our Current Report on Form 8-K filed with the SEC on October 30, 2012,
File No. 001-32426)
Amended and Restated By-Laws of WEX Inc. (incorporated by reference to Exhibit No. 3.1 to our Current Report on Form
8-K filed with the SEC on October 30, 2012, File No. 001-32426)
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)
Indenture, dated as of January 30, 2013, among WEX Inc., the Guarantors named therein, and The Bank of New York
Mellon Trust Company, N.A. (incorporated by reference to Exhibit No. 4.1 to our Current Report on Form 8-K filed with
the SEC on February 1, 2013, File No. 001-32426)
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)
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)
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)
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)
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)
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)
1
On October 25, 2012, Wright Express Corporation changed its name to WEX Inc. and on October 24, 2012,
Wright Express Financial Services Corporation changed its name to WEX Bank.
106
Exhibit No.
Description
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
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)
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)
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)
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)
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)
Reaffirmation Agreement, dated as of January 18, 2013, among WEX INC., Wright Express Card Holdings Australia PTY
LTD., and certain guarantors and Bank of America, N.A., as Administrative Agent
Amended and Restated Credit Agreement, dated as of January 18, 2013, among WEX Inc. and Certain Subsidiaries, as
borrowers, Bank of America, N.A., as administrative agent, swing line lender and L/C issuer, and the Other Lenders Party
hereto Merrill Lynch, Pierce Fenner & Smith Incorporated, SunTrust Robinson Humphrey, Inc. and Wells Fargo
Securities, LLC, as joint lead arrangers and joint book managers, SunTrust Bank, and Wells Fargo Bank, National
Association as co-syndication agents, RBS Citizens, N.A., KeyBank National Association, and Bank of Montreal, as co-
documentation agents, and the other lenders party thereto
Wright Express Corporation Amended 2010 Equity and Incentive Plan (incorporated by reference to Exhibit No. 99.1 to
our Current Report on Form 8-K filed with the SEC on May 21, 2010, File No. 001-32426)
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)
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)
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)
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)**
107
*
*
†
†
†
†
†
Exhibit No.
Description
†
†
†
†
†
†
†
†
†
†
†
†
†
†
†
†
†
†
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
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)**
2012 Amended and Restated Wright Express Corporation Short-Term Incentive Program (incorporated by reference to
Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 3, 2012, File No. 001-32426)**
2012 Corporate Annual Grant Long-Term Incentive Program (incorporated by reference to Exhibit 10.2 to our Quarterly
Report on Form 10-Q filed with the SEC on May 3, 2012, File No. 001-32426)**
2012 International Annual Grant Long-Term Incentive Program (incorporated by reference to Exhibit 10.2 to our
Quarterly Report on Form 10-Q filed with the SEC on May 3, 2012, File No. 001-32426)**
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)
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)
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)
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)
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)
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)
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)
Change of Control Agreement, dated April 13, 2012, between Steven A. Elder 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 18, 2012,
File No. 001-32426)
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)
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)
108
Exhibit No.
Description
†
†
†
†
†
†
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
10.50
10.51
10.52
10.53
10.54
10.55
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)
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)
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)
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)
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)
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)
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)
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)
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)
Form of confirmation evidencing purchases of Nymex Diesel put options and call options by Wright Express Corporation
from J. Aron & Company (incorporated by reference to Exhibit 10.19 to our Quarterly Report on Form 10-Q filed with
the SEC on October 28, 2005, File No. 001-32426)
ISDA Credit Support Annex to the Schedule Master Agreement between Bank of America, N.A. (successor to Fleet
National Bank) and Wright Express Corporation, dated as of August 28, 2006 (incorporated by reference to Exhibit 10.1
to our Quarterly Report on Form 10-Q filed with the SEC on November 20, 2006, File No. 001-32426)
Amendment to the ISDA Master Agreement between Bank of America, N.A. (successor to Fleet National Bank) and
Wright Express Corporation, dated as of August 28, 2006 (incorporated by reference to Exhibit 10.2 to our Quarterly
Report on Form 10-Q filed with the SEC on November 20, 2006, File No. 001-32426)
Form of confirmation evidencing purchases and sales of Diesel put options and call options by Wright Express
Corporation from Bank of America, N.A. (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-
Q filed with the SEC on August 7, 2007, File No. 001-32426)
109
Exhibit No.
Description
10.56
10.57
10.58
10.59
10.60
10.61
10.62
10.63
10.64
10.65
10.66
10.67
10.68
10.69
10.70
10.71
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)
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)
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)
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)
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)
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)
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)
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)
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)
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)
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)
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)
110
Exhibit No.
Description
10.72
10.73
10.74
10.75
10.76
10.77
10.78
21.1
23.1
31.1
31.2
32.1
32.2
*
*
*
*
*
*
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 (incorporated by reference to Exhibit No. 10.69 to our Annual Report on Form 10-K filed with the SEC on
February 28, 2012, File No. 001-32426)
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 (incorporated by reference to Exhibit No. 10.70 to our Annual Report on Form 10-
K filed with the SEC on February 28, 2012, File No. 001-32426)
Form of Confirmation evidencing purchases of commodities options by Wright Express Corporation from the Bank of
Montreal (incorporated by reference to Exhibit No. 10.70 to our Annual Report on Form 10-K filed with the SEC on
February 28, 2012, File No. 001-32426)
Subsidiaries of the registrant
Consent of Independent Registered Accounting Firm – Deloitte & Touche LLP
Certification of Chief Executive Officer of WEX INC. pursuant to Rule 13a-14(a) promulgated under the Securities
Exchange Act of 1934, as amended
Certification of Chief Financial Officer of WEX INC. pursuant to Rule 13a-14(a) promulgated under the Securities
Exchange Act of 1934, as amended
Certification of Chief Executive Officer of WEX INC. 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 WEX INC. 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
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
Filed with this report.
*
** Portions of Exhibit have been omitted pursuant to a request for confidential treatment, which has been
†
granted.
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.
111
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, 2013
WEX INC.
By:
/s/ Steven A. Elder
Steven A. Elder
Senior Vice President and Chief Financial Officer
(principal financial and accounting officer)
112
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, 2013
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
February 28, 2013
/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
113
Exhibit No.
EXHIBIT INDEX
Description
2.1
3.1
3.2
3.3
4.1
4.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
Share Purchase Agreement among RD Card Holdings Limited, Wright Express Australia Holdings PTY LTD and Wright
Express Corporation1 (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)
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)
Certificate of Ownership and Merger merging WEX Transitory Corporation with and into Wright Express Corporation
(incorporated by reference to Exhibit No. 3.1 to our Current Report on Form 8-K filed with the SEC on October 30, 2012,
File No. 001-32426)
Amended and Restated By-Laws of WEX Inc. (incorporated by reference to Exhibit No. 3.1 to our Current Report on Form
8-K filed with the SEC on October 30, 2012, File No. 001-32426)
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)
Indenture, dated as of January 30, 2013, among WEX Inc., the Guarantors named therein, and The Bank of New York
Mellon Trust Company, N.A. (incorporated by reference to Exhibit No. 4.1 to our Current Report on Form 8-K filed with
the SEC on February 1, 2013, File No. 001-32426)
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)
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)
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)
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)
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)
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)
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)
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)
1
On October 25, 2012, Wright Express Corporation changed its name to WEX Inc. and on October 24, 2012,
Wright Express Financial Services Corporation changed its name to WEX Bank.
114
Exhibit No.
Description
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
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)
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)
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)
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)
Reaffirmation Agreement, dated as of January 18, 2013, among WEX INC., Wright Express Card Holdings Australia PTY
LTD., and certain guarantors and Bank of America, N.A., as Administrative Agent
Amended and Restated Credit Agreement, dated as of January 18, 2013, among WEX Inc. and Certain Subsidiaries, as
borrowers, Bank of America, N.A., as administrative agent, swing line lender and L/C issuer, and the Other Lenders Party
hereto Merrill Lynch, Pierce Fenner & Smith Incorporated, SunTrust Robinson Humphrey, Inc. and Wells Fargo
Securities, LLC, as joint lead arrangers and joint book managers, SunTrust Bank, and Wells Fargo Bank, National
Association as co-syndication agents, RBS Citizens, N.A., KeyBank National Association, and Bank of Montreal, as co-
documentation agents, and the other lenders party thereto
Wright Express Corporation Amended 2010 Equity and Incentive Plan (incorporated by reference to Exhibit No. 99.1 to
our Current Report on Form 8-K filed with the SEC on May 21, 2010, File No. 001-32426)
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)
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)
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)
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)**
10.24
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)**
115
*
*
†
†
†
†
†
†
†
†
Exhibit No.
Description
†
†
†
†
†
†
†
†
†
†
†
†
†
†
†
†
†
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
10.40
10.41
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)**
2012 Amended and Restated Wright Express Corporation Short-Term Incentive Program (incorporated by reference to
Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 3, 2012, File No. 001-32426)**
2012 Corporate Annual Grant Long-Term Incentive Program (incorporated by reference to Exhibit 10.2 to our Quarterly
Report on Form 10-Q filed with the SEC on May 3, 2012, File No. 001-32426)**
2012 International Annual Grant Long-Term Incentive Program (incorporated by reference to Exhibit 10.2 to our
Quarterly Report on Form 10-Q filed with the SEC on May 3, 2012, File No. 001-32426)**
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)
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)
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)
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)
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)
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)
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)
Change of Control Agreement, dated April 13, 2012, between Steven A. Elder 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 18, 2012,
File No. 001-32426)
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)
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)
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)
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)
116
Exhibit No.
Description
†
†
†
†
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
10.50
10.51
10.52
10.53
10.54
10.55
10.56
10.57
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)
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)
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)
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)
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)
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)
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)
Form of confirmation evidencing purchases of Nymex Diesel put options and call options by Wright Express Corporation
from J. Aron & Company (incorporated by reference to Exhibit 10.19 to our Quarterly Report on Form 10-Q filed with
the SEC on October 28, 2005, File No. 001-32426)
ISDA Credit Support Annex to the Schedule Master Agreement between Bank of America, N.A. (successor to Fleet
National Bank) and Wright Express Corporation, dated as of August 28, 2006 (incorporated by reference to Exhibit 10.1
to our Quarterly Report on Form 10-Q filed with the SEC on November 20, 2006, File No. 001-32426)
Amendment to the ISDA Master Agreement between Bank of America, N.A. (successor to Fleet National Bank) and
Wright Express Corporation, dated as of August 28, 2006 (incorporated by reference to Exhibit 10.2 to our Quarterly
Report on Form 10-Q filed with the SEC on November 20, 2006, File No. 001-32426)
Form of confirmation evidencing purchases and sales of Diesel put options and call options by Wright Express
Corporation from Bank of America, N.A. (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-
Q filed with the SEC on August 7, 2007, File No. 001-32426)
Form of confirmation evidencing purchases and sales of Nymex Unleaded Regular Gasoline put options and call options
by Wright Express Corporation from Bank of America, N.A. (incorporated by reference to Exhibit 10.1 to our Quarterly
Report on Form 10-Q filed with the SEC on August 7, 2007, File No. 001-32426)
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)
117
Exhibit No.
Description
10.58
10.59
10.60
10.61
10.62
10.63
10.64
10.65
10.66
10.67
10.68
10.69
10.70
10.71
10.72
10.73
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)
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)
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)
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)
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)
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)
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)
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)
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)
ISDA Master Agreement and Schedule between Wachovia Bank, National Association and Wright Express Corporation,
dated as of July 18, 2007 (incorporated by reference to Exhibit No. 10.1 to our Quarterly Report on Form 10-Q filed with
the SEC on May 8, 2008, File No. 001-32426)
Form of confirmation evidencing purchases of Nymex Unleaded Regular Gasoline put options and call options by Wright
Express Corporation from Wachovia Bank, National Association (incorporated by reference to Exhibit No. 10.2 to our
Quarterly Report on Form 10-Q filed with the SEC on May 8, 2008, File No. 001-32426)
ISDA Master Agreement between Barclays Bank PLC and Wright Express Corporation, dated as of March 10, 2010
(incorporated by reference to Exhibit No. 10.6 to our Quarterly Report on Form 10-Q filed with the SEC on April 30,
2010, File No. 001-32426)
ISDA Schedule to the Master Agreement between Barclays Bank PLC and Wright Express Corporation, dated as of
March 10, 2010 (incorporated by reference to Exhibit No. 10.7 to our Quarterly Report on Form 10-Q filed with the SEC
on April 30, 2010, File No. 001-32426)
Credit Support Annex to the Schedule to the ISDA Master Agreement between Barclays Bank PLC and Wright Express
Corporation, dated as of March 10, 2010 (incorporated by reference to Exhibit No. 10.8 to our Quarterly Report on Form
10-Q filed with the SEC on April 30, 2010, File No. 001-32426)
The First Amendment, dated as of March 23, 2010, to the Schedule to the ISDA Master Agreement dated as of July 18,
2007 between Wells Fargo Bank, N.A. (formerly known as Wachovia Bank, National Association) and Wright Express
Corporation (incorporated by reference to Exhibit No. 10.9 to our Quarterly Report on Form 10-Q filed with the SEC on
April 30, 2010, File No. 001-32426)
ISDA Master and Consolidation Agreement, dated as of March 23, 2010, to the Schedule to the Master Agreement dated
as of July 18, 2007 between Wells Fargo Bank, N.A. (formerly known as Wachovia Bank, National Association) and
Wright Express Corporation (incorporated by reference to Exhibit No. 10.10 to our Quarterly Report on Form 10-Q filed
with the SEC on April 30, 2010, File No. 001-32426)
118
Exhibit No.
Description
10.74
10.75
10.76
10.77
10.78
21.1
23.1
31.1
31.2
32.1
32.2
*
*
*
*
*
*
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 (incorporated by reference to Exhibit No. 10.69 to our Annual Report on Form 10-K filed with the SEC on
February 28, 2012, File No. 001-32426)
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 (incorporated by reference to Exhibit No. 10.70 to our Annual Report on Form 10-
K filed with the SEC on February 28, 2012, File No. 001-32426)
Form of Confirmation evidencing purchases of commodities options by Wright Express Corporation from the Bank of
Montreal (incorporated by reference to Exhibit No. 10.70 to our Annual Report on Form 10-K filed with the SEC on
February 28, 2012, File No. 001-32426)
Subsidiaries of the registrant
Consent of Independent Registered Accounting Firm – Deloitte & Touche LLP
Certification of Chief Executive Officer of WEX INC. pursuant to Rule 13a-14(a) promulgated under the Securities
Exchange Act of 1934, as amended
Certification of Chief Financial Officer of WEX INC. pursuant to Rule 13a-14(a) promulgated under the Securities
Exchange Act of 1934, as amended
Certification of Chief Executive Officer of WEX INC. 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 WEX INC. 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
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
Filed with this report.
*
** Portions of Exhibit have been omitted pursuant to a request for confidential treatment, which has been
†
granted.
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.
119
ABOUT WEX INC.
WEX CORPORATE INFORMATION
WEX Inc. (formerly Wright Express Corporation)
is a leading provider of corporate card payment
solutions. From our roots as a pioneer in fl eet card
payments in 1983, WEX has expanded the scope
of its business into a multi-channel provider of
corporate payment solutions. Our focus is on
providing exceptional payment security and
control across a spectrum of payment sectors
while delivering an exceptional experience so that
our customers – whether large or small –
can operate smoothly, securely and profi tably.
WEX currently operates its business in two
segments: Fleet Payment Solutions and Other
Payment Solutions. The Fleet Payment Solutions
segment provides customers with fl eet vehicle
payment processing services specifi cally
designed for the needs of commercial and
government fl eets. Our fl eet products are based
upon proprietary technology with closed-loop
networks with wide site acceptance in the United
States, Canada and Australia. The Other Payment
Solutions segment, which is comprised of our
virtual and paycard products, provides customers
with payment processing solutions for their
corporate purchasing and transaction monitoring
needs. We have operations in North and South
America, Europe, Australia and New Zealand, and
our strategic relationships include three of the
largest United States-based online travel agencies.
Our U.S. operations include WEX Inc., Fleet One,
WEX Bank, rapid! PayCard, and Pacifi c Pride. Our
international operations include Wright Express
Fuel Cards Australia, Wright Express Prepaid
Cards Australia, Wright Express New Zealand and
CorporatePay Limited, located in England. We
also hold a majority equity position in UNIK S.A.,
a Brazil-based company. WEX and its subsidiaries
employ more than 1,300 associates. WEX has
been publicly traded since February 16, 2005 and
is listed on the New York Stock Exchange under
the ticker symbol “W X.”
E
DIRECTORS
MICHAEL E. DUBYAK
Chairman, President and
Chief Executive Officer
of WEX Inc.
ROWLAND T. MORIARTY
Lead Director and
Vice Chairman of WEX Inc.
President and
Chief Executive Officer
of Cubex Corporation
SHIKHAR GHOSH
Professor, Harvard Business School
RONALD T. MAHEU
Financial and Business Consultant
LARRY MCTAVISH
Former Chief Executive Officer
and Chairman of
Source Medical Corporation
KIRK POND
Former Chairman,
President and CEO of Fairchild
Semiconductor International, Inc.
REGINA O. SOMMER
Financial and Business Consultant
JACK A. VANWOERKOM
Former General Counsel and
Corporate Secretary of
The Home Depot, Inc.
EXECUTIVE DIRECTORS
MICHAEL E. DUBYAK
Chairman, President and
Chief Executive Officer
MELISSA D. SMITH
President, The Americas
DAVID D. MAXSIMIC
President, International
STEVEN ELDER
Senior Vice President and
Chief Financial Officer
GEORGE HOGAN
Senior Vice President and
Chief Information Officer
KENNETH W. JANOSICK
Senior Vice President,
Small Business Solutions
JAMIE MORIN
Senior Vice President,
Client Services Organization
HILARY A. RAPKIN
Senior Vice President,
General Counsel and
Corporate Secretary
RICHARD K. STECKLAIR
Senior Vice President,
Corporate Payment Solutions
GREGORY S. STRZEGOWSKI
Senior Vice President,
Corporate Development
CORPORATE HEADQUARTERS
ATTORNEYS
INVESTOR RELATIONS
WEX Inc.
97 Darling Avenue
South Portland, ME 04106
Phone: (207) 773-8171
Toll Free: (800) 761-7181
Email: newsroom@wexinc.com
URL: www.wexinc.com
TRANSFER AGENT
American Stock Transfer
& Trust Company
6201 15th Avenue
Brooklyn, NY 11219
(866) 668-6550
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116-5022
(617) 437-2000
Wilmer Cutler Pickering Hale
and Dorr LLP
60 State Street
Boston, MA 02109
(617) 526-6000
STOCKHOLDERS’ MEETING
Date: May 17, 2013
Time: 8:00 a.m.
Location:
WEX Inc. Long Creek Campus
225 Gorham Road
South Portland, Maine
Phone: (207) 773-8171
Toll Free: (800) 761-7181
TICKER SYMBOL
NYSE:
WEX
Michael E. Thomas
Vice President, Treasurer and Investor Relations
(207) 523-6743
Michael.Thomas@wexinc.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: WEX Inc.
Investor Relations, 97 Darling Avenue,
South Portland, ME 04106; by calling
(866) 230-1633; or by emailing
investors@wexinc.com.
43017_Cover.indd 2
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3/29/13 6:43 PM
3/29/13 6:43 PM
SEIZING A WORLD OF
OPPORTUNITY
97 Darling Avenue
South Portland, ME 04106
Phone: (207) 773-8171
Toll Free: (800) 761-7181
newsroom@wexinc.com
www.wexinc.com
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