FOCUS ED FOR G ROW TH
2013 WEX Inc. Annual Report
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ABOUT WEX INC.
WEX Inc. is a leading global provider of corporate
payment solutions. From our roots as a pioneer in
fl eet card payments in 1983, we have expanded
our scope to become a multi-channel provider
of corporate payment solutions representing
almost eight million cardholders and expanding
into growing market sectors such as travel and
is on reducing
employee benefi ts. Our focus
complexity and increasing control across a wide
spectrum of payment sectors while delivering an
exceptional experience so that our customers –
whether large or small – can operate effi ciently,
securely and profi tably.
its business
in two
WEX currently operates
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.
The foundation of WEX’s marketplace leadership is
our precision technology, which lets fl eets control
purchases in the fi eld and gives them detailed
information and analytical tools to eff ectively
manage their operations and reduce costs. Our
fl eet products enjoy 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 payment and transaction
monitoring needs. Our strategic relationships
include three of the largest United States-based
online travel agencies.
We have operations in North and South America,
Europe, Australia and New Zealand. Our U.S.
operations consist of WEX Inc., Fleet One, WEX Bank,
rapid! PayCard, and Pacifi c Pride. Our international
operations include WEX Australia, WEX New Zealand,
and WEX Europe, located in England, as well as a
majority equity position in UNIK S.A., Brazil. WEX and
its subsidiaries employ more than 1,400 associates.
WEX has been publicly traded since February 16,
2005, and is listed on the New York Stock Exchange
under the ticker symbol “WEX.”
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FINANCIAL HIGHLIGHTS
TOTAL REVENUE
($ in Millions)
717
623
553
390
315
TOTAL FUEL
TRANSACTIONS PROCESSED
(in Millions)
PURCHASE CARD VOLUME
($ in Millions)
13,058
371
319 338
260 270
10,689
7,759
4,414
3,083
0 9
1 0
1 1
1 2
1 3
0 9
1 0
1 1
1 2
1 3
0 9
1 0
1 1
1 2
1 3
KEY FINANCIAL HIGHLIGHTS & RECONCILIATIONS
($ in thousands)
2013
2012
2011
Revenue
$
717,463
$
623,151 $
553,076
Reconciliation of Adjusted Net Income (”ANI”) to GAAP Net Earnings
Total adjusted net income attributable to WEX Inc.
$
173,867 $
158,524
$
141,792
Unrealized (losses) gains on derivative instruments
Amortization of acquired intangible assets
Goodwill impairment
Deferred loan cost associated with the extinguishment of debt
Change in tax refund due to former shareholders of RD Card Holdings Australia
Non-cash adjustments related to tax receivable agreement
Other adjustments related to Fleet One acquisition
ANI adjustments attributable to noncontrolling interest
Tax impact
(5,628)
(33,147)
–
(1,004)
–
(33)
658
1,443
13,052
(1,724)
(23,468)
(17,508)
–
9,750
(2,089)
(10,550)
305
(16,318)
10,872
(22,412)
–
–
–
(715)
–
–
4,085
Net earnings attributable to WEX Inc.
$
149,208
$
96,922
$
133,622
The tax impact of the foregoing adjustments is the difference between the Company’s GAAP (generally accepted accounting principles) 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 ANI is not calculated in accordance with 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 as well as the goodwill impairment, the
deferred loan costs associated with the extinguishment of debt, the net impact of tax rate changes on the Company’s deferred tax asset and related changes in the tax-receivable agreements with
the former shareholder of RD Card Holdings Australia, the adjustments related to the acquisition of Fleet One and the adjustments attributable to noncontrolling interest. 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 as well as the goodwill impairment, the deferred loan costs associated with the extinguishment of debt, the net impact of tax rate changes on the
Company’s deferred tax asset and related changes in the tax-receivable agreements with the former shareholder of RD Card Holdings Australia, the adjustments related to the acquisition of
Fleet One and the adjustments attributable to noncontrolling interest 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.
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TO OUR
SHAREHOLDERS:
2013 was a year of signifi cant progress and
achievement for WEX. We made strides in further
globalizing our business, took strategic actions to
support our long-term growth, and continued to
execute well – accelerating both fl eet and virtual
volumes. As a result, we delivered another year
of strong fi nancial performance and positioned
the Company for accelerated growth longer term.
For the full year 2013, revenues increased 15% to
$717.5 million, and adjusted net income increased
10% to $173.9 million, both of which were ahead of
the expectations we set for the year.
These results would not have been achievable
without our dedicated employees. Their
professionalism and ability to maintain focus
on delivering compelling solutions for our
customers provides WEX with considerable
competitive advantages. In addition, I would
like to sincerely thank Mike Dubyak for his
contributions over the last 28 years, as well
as the Board of Directors for thoughtfully
executing our leadership succession.
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HIGHLIGHTS
FLEET SEGMENT
Our Fleet segment maintained its track record of consistent
growth – driven by increased volumes from new customer
wins and benefi ts associated with the Fleet One integration.
We secured several marquee customer wins during the year,
and added more than 700,000 new fl eet vehicles on a global
basis. The integration of Fleet One progressed ahead of
schedule, resulting in a return to our shareholders that was
ahead of our initial projections. It also bolstered our overall
product off erings, positioning us to better meet the needs
of over-the-road fl eet customers and fl eets with mixed-
size portfolios. At the same time, we were able to further
develop our international over-the-road functionality in the
Brazilian market, with the acquisition of FastCred.
We continued to extend the strong relationships we have
established with ExxonMobil in the U.S. and Canada into the
broader European marketplace. In November, we announced
plans to acquire the assets of ExxonMobil’s European
commercial fuel card program, the Esso Card, through a
majority owned joint venture, WEX Europe Services Ltd. The
deal is distinctive in the fl eet payment space, as ExxonMobil
will be fully outsourcing the ownership and management of
the customer relationship to the joint venture upon closing
of the transaction, which is targeted for late 2014 or early
2015. The portfolio represents a fantastic opportunity, as it
spans nine countries within Europe and will be an important
part of establishing our fl eet payment capability within the
broader European marketplace.
We are energized by the consistent solid performance of our Fleet business, as we added more than 700,000 new fl eet
cards globally in 2013, as well as the long-term prospects for our virtual card product. We remain focused on expanding
our business globally and expect client wins in 2013 will contribute substantial purchase volumes in 2014 and beyond.
OTHER PAYMENT SOLUTIONS
Our Other Payment Solutions segment, which largely
consists of our virtual card travel business, generated
strong momentum in 2013 as key customer wins
spanned the globe and led to spend volume growth
of 22%. We continued to build the foundation to
successfully issue and settle in multiple currencies, which
has enhanced the control functionality of our products.
We made signifi cant progress within South East Asia,
Western Europe, and Australia, resulting in contract
signings that included Globalia, Grupo Transhotel,
and Wotif. Our product features, coupled with the
exceptional service experience we provide, have driven
these contract wins and directly contributed to our
traction in international markets.
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2014 BEYOND
d
n
a
We exited 2013 in a position of strength. WEX has a
proven capability to develop a deep understanding of
intricate industries, such as Fleet and Travel, and create
customized solutions to reduce complexity and increase
control across all our products. Similar to our entrance
into the Fleet and Travel space, we will continue to
execute our proven go-to-market strategy by targeting
high-value markets, using our products to stimulate
positive change, and operating with systemic effi ciency.
In 2014, WEX is specifi cally focused on increasing the
geographical footprint of the organization, enhancing
the overall scale of the business, and making targeted
investments to facilitate the globalization of the
Company. The work with ExxonMobil to carve out its
European operations will be extensive in 2014 as
we leverage our expertise in managing private label
portfolios and capitalize on opportunities in the
European market. Not only will this provide signifi cant
customer benefi ts, but the transaction will provide us
solid footing from which we can expand WEX’s European
presence with oil companies in the future.
Our European arrangement with ExxonMobil serves as a
prime example of targeting, identifying, and executing on
a specifi c objective that off ers outsized potential for WEX.
In 2014, we will be looking for opportunities that help to
diff erentiate our products and improve our off ering, as
well as those that help us create scale and better enable
us to expand internationally.
CONCLUSION
The transition over the last year has been a humbling
experience. I am honored to be in a position to build on
our success and I am excited and energized to lead WEX
into this next stage of growth. Mike’s leadership and vision
have set a strong tone at WEX and provided us with a
solid foundation for future growth. Since going public in
2005, we have delivered consistently strong returns to our
shareholders. Our prospects for continuing to create value
and accelerate our growth are bright.
Thank you for your continued investment in and support
of WEX.
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President and Chief Executive Offi cer • April 15, 2014
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RETROSPECT
n
i
OVER THE LAST 28 YEARS, WEX has grown from a domestic
fl eet card business into a global payments solution provider. While
• Our selection by ExxonMobil to purchase its European Fleet
Card business in nine countries, which is an unprecedented
establishing a leading position in our core fl eet business, we have
private label card business arrangement
also created new platforms and entered new markets enabling
us to strengthen our core business, add new opportunities for
I take great pride in the success we have had as an organization
growth and extend our operations beyond North America. In
to date, and want to thank our employees, customers, partners
2013, specifi cally, we further advanced our initiatives through:
and shareholders for their support over the years. 2014,
• The continued successful integration of Fleet One, as we
Melissa Smith to President and CEO of WEX. I have had the
further establish our presence in the over-the-road heavy
pleasure to work closely with Melissa over the past 16 years
truck market and develop our upstream capabilities
in which, time and again, Melissa has distinguished herself as
however, marks a new chapter for WEX, wherein we promoted
• The accelerated growth of WEX’s Other Payment Solutions, as
this segment now generates over 26% of total revenues as we
apply our products and off erings to new markets and verticals
• Our emergence as a global leader in the Online Travel Agency
(“OTA”) vertical, fortifying our position in the US and Australia
and penetrating the European OTA market with the signing
of Grupo Transhotel and Globalia
a capable and ambitious leader. I am looking forward to WEX
further expanding its leadership positions globally under
Melissa’s leadership.
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Executive Chairman • April 15, 2014
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WEX EXECUTIVE TEAM
MELISSA D. SMITH
President and
Chief Executive Offi cer
STEVEN ELDER
Senior Vice President and
Chief Financial Offi cer
STEPHEN R. CROWLEY
Senior Vice President,
Shared Services and
Chief Information Offi cer
NICOLA S. MORRIS
Senior Vice President,
Corporate Development
DAVID D. MAXSIMIC
President,
International
HILARY A. RAPKIN
Senior Vice President,
General Counsel and
Corporate Secretary
ALISON VANDERHOOF
Senior Vice President and
General Manager, Emerging
Industries
GEORGE HOGAN
Senior Vice President
and General Manager,
Fleet OTR and Partner
Channels
KENNETH W. JANOSICK
Senior Vice President and
General Manager,
Global Fleet Direct
Cautionary Note Regarding Forward-Looking Statements
This annual report contains forward-looking statements, including, but not limited to, statements about management’s plan and goals, statements about potential business expansion plans,
including the Company’s anticipated European expansion. Any statements in this annual report that are not statements of historical facts are 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 diff erent from future results or
performance expressed or implied by these forward-looking statements. The following factors, among others, could cause actual results to diff er materially from those contained in forward-
looking statements made in this annual report, in press releases and in oral statements made by our authorized offi cers: 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, among other operations, the Company’s industrial bank and the Company as the corporate parent and the Company’s other subsidiaries; 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 necessary to unwind a derivative instrument position prior to the expiration of a contract; the incurrence of impairment charges if our assessment of the fair value of
certain of our reporting units changes; the uncertainties of litigation; as well as other risks and uncertainties identifi ed in Item 1A of the attached annual report on Form 10-K and in connection
with such forward-looking statements. Our 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 made and undue reliance should not be placed on these statements. We disclaim any obligation to update any forward-
looking statements as a result of new information, future events or otherwise.
66
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PERFORMANCE GRAPH
The following graph assumes $100 invested on December 31, 2008 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, 2008, and ending on December 31,
2013, 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
800
700
600
500
400
300
200
100
E
U
L
A
V
X
E
D
N
I
0
12/31/08
INDEX
WEX Inc.
Russell 2000
12/31/09
12/31/10
12/31/11
12/31/12
12/31/13
WEX INC.
RUSSELL 2000
S&P DATA PROCESSING AND OUTSOURCED SERVICES
PERIOD ENDING 12/31
08
09
10
11
12
13
100.00
252.86
365.08
430.79
598.17
100.00
127.17
161.32
154.59
179.86
S&P Data Processing and Outsourced Services
100.00
134.64
129.00
160.95
209.01
Source: S&P Capital IQ
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785.95
249.69
320.69
7
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2013
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.
Yes
No
Yes
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.
Yes
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).
No
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.
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
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).
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 28, 2013, the
last business day of the registrant’s most recently completed second fiscal quarter, was $2,944,526,729 (based on the closing price of the registrant’s common
stock on that date as reported on the New York Stock Exchange).
There were 38,890,626 shares of the registrant’s common stock outstanding as of February 20, 2014.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s Proxy Statement for the 2014 Annual Meeting of Stockholders are incorporated by reference in Part III. With the
exception of the sections of the 2014 Proxy Statement specifically incorporated herein by reference, the 2014 Proxy Statement is not deemed to be filed
as part of the 10-K.
Yes
No
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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
Exhibits and Financial Statement Schedules
Signatures
Page
1
1
12
22
22
23
23
24
25
26
46
48
93
93
95
95
95
95
95
95
96
104
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.
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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,
statements about management’s plan and goals, statements about consummation of pending transactions and the “Strategy”
section of this Annual Report in Item 1. Any statements in this Annual Report that are not statements of historical facts are
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 business expansion and acquisition efforts; 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 offerings as rapidly as the Company’s competitors; the actions of regulatory bodies, including banking and securities
regulators, or possible changes in banking regulations impacting the Company’s industrial bank and the Company as the
corporate parent; the impact of foreign currency exchange rates on the Company’s operations, revenue and income; changes in
interest rates; the impact of the Company’s outstanding bonds on its operations; 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, disposition or stock repurchases. 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.
ITEM 1. BUSINESS
Our Company
PART I
WEX Inc. is a leading provider of corporate payment solutions. WEX Inc. began operations in 1983 as a Maine
corporation and was acquired in February 1996 by an entity that subsequently merged with HFS Incorporated to form
Cendant Corporation in December 1997. In June 1999, Wright Express was sold to Avis Group Holdings, Inc., which was
acquired by Cendant in March 2001. In anticipation of our IPO, the Company’s operations were transferred to a Delaware
LLC, which was converted into a Delaware corporation in 2005 in conjunction with our IPO. For over the past 30 years, we
have expanded the scope of our business into a multi-channel provider of corporate payment solutions.
WEX Inc. has been publicly traded since February 16, 2005 (NYSE:WEX) 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 wide 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 74 percent of our total revenue during the year
ended December 31, 2013, is earned primarily from payment processing, account servicing and transaction processing, with
the majority generated by payment processing. As of December 31, 2013, the Fleet Payment Solutions segment services over
7.7 million vehicles. Management estimates that WEX fleet cards are accepted at over 90 percent of fuel locations in each of
the United States ("U.S.") and Australia. The Other Payment Solutions segment provides customers with payment processing
solutions for their corporate payment and transaction monitoring needs. Other Payment Solutions revenue, which represented
approximately 26 percent of our total revenue during the year ended December 31, 2013, is earned primarily from payment
processing revenue from our virtual card product. The Other Payment Solutions segment has operations in North America,
Europe, Australia and Brazil.
1
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The Company’s U.S. operations include WEX Inc. and rapid! PayCard and our wholly-owned subsidiaries Fleet One,
WEX Bank, and Pacific Pride. Our international operations include our wholly-owned subsidiaries, WEX Fuel Cards
Australia (formerly Wright Express Fuel Cards Australia,) WEX PrePaid Cards Australia (formerly Wright Express Prepaid
Cards Australia), WEX New Zealand (formerly Wright Express New Zealand), WEX Europe Services, WEX Europe
(formerly CorporatePay Limited), located in England, and a majority equity position in UNIK S.A., a Brazil-based company.
Prior to our Initial Public Offering in 2005, the Company’s growth had primarily been organic. Our growth in the past
several years has been supplemented by acquisitions. Our recent acquisitions include the following transactions:
• On October 15, 2013, UNIK S.A. acquired FastCred, a provider of fleet cards to the heavy truck or over-the-road
segment of the fleet market in Brazil.
• On October 4, 2012, we acquired Fleet One, a provider of fleet cards and fleet-related payment solutions to the 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, located in London, 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.
In addition to the transactions described above, on November 8, 2013, we announced plans to acquire the assets of
ExxonMobil’s European commercial fuel card program through a 75 percent majority owned subsidiary, WEX Europe
Services Limited. The anticipated transaction is subject to completion of the employee information and consultation
processes, and obtaining of competition authority approvals, as appropriate.
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’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 negotiable order of withdrawal (“NOW”) accounts and provides the
financing and makes the credit decisions that enable both segments to extend credit to customers. WEX Bank approves
customer applications, maintains appropriate credit lines for each customer, is the account issuer, 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 as a service 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 U.S. 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 can be processed on these networks. We have built
networks that management believes provides over 90 percent fuel location coverage in each of the U.S. and
Australia, as well as wide acceptance in Canada and Brazil, which provides our customers with the convenience of
broad acceptance.
• Our proprietary closed-loop fuel networks also provide us with access to a higher level of fleet-specific information
and control as compared to what is typically available on an open-loop network. This allows us to improve and
refine the information reporting we provide to our fleet customers and customers of our strategic relationships.
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• 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 provides us with 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 7.7 million vehicles
serviced as of December 31, 2013 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 98 percent (based on the 2013 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.
• Our entrance into the over-the-road segment of the market, as bolstered by the acquisition of Fleet One in 2012,
enhances our ability to serve fleet customers who operate both heavy duty trucks and cars or light duty vehicles in
the U.S. and Canada as well as to blend the small fleet and private label businesses for greater scale.
Other Payment Solutions
• Our virtual payment products offer corporate customers enhanced security and control for complex payment needs.
Our strategic relationships include three of the largest U.S. based online travel agencies. Our operations in the
United Kingdom provide corporate prepaid solutions to the travel industry. We have expanded our online travel
capabilities and geographies, including Asia-Pacific, South America and Europe and settle transaction in over 14
currencies. Additionally, we offer virtual products in the insurance/warranty and healthcare markets in the
United States.
• We offer paycard products in the U.S. 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
an extensive history of organic revenue growth driven by our various marketing channels, our extensive network of
fuel and service providers, and our growth in transaction volume and card placement. Further, we have completed a
number of strategic 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, which provide liquidity to fund our short-term 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, 2013, 95 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.
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• 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 10 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
As we cultivate our Company’s path forward, there are three key priorities for 2014:
• Position the Company to accelerate growth organically and through mergers and acquisitions. 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. The
Company’s merger and acquisition strategy is focused on creating and enhancing scale in our business and adding
product differentiation and functionality that improves our offering, primarily in the fleet and travel markets.
• Focus on further globalizing our business by making targeted investments. Investments are core to achieving our
growth objectives over the near and long term. An example of this is our recently announced plans to acquire the
Esso commercial fuel card portfolio in Europe. We are also continuing to invest in our issuing and settlement
capabilities internationally for virtual payments, specifically to service online travel agencies.
• Drive scale across the organization. We will operate with systemic efficiency by allocating and optimizing resources
to drive the greatest results and volume across market segments.
Overview
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 7.7 million vehicles, as of December 31, 2013, using our fleet payment solutions to purchase fuel and
maintenance services. 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 U.S. and Australia, and wide site acceptance domestically
and abroad.
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 the 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.
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The following illustrates our proprietary closed-loop network:
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 30 days from the billing date.
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)
Products and Services
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 2013, we processed approximately 292 million payment processing
transactions, compared to 261 million payment processing transactions in 2012.
Additionally, we receive revenue from account servicing fees, factoring receivables and finance fees.
We offer the following 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.
• 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
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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 these providers
in our network, test all network and terminal software and hardware, and to provide training 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 customers of 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.
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 3.5 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, both oil merchants and
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 services 1.8 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 services 2.4 million vehicles.
Fuel Price Derivatives
Management estimates approximately 42 percent of our total revenue in 2013 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 hedge, and expect to continue to hedge, approximately 60 percent
of our U.S. fuel-price-related earnings exposure to improve management of potential cash flow volatility created by changes
in U.S. fuel prices and to enhance the visibility and predictability of our future cash flows. Prior to 2012, 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 actual retail prices may create a disparity between the effects of price changes on the actual revenues we earn
and the gains or losses realized on the options.
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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, 2013. The approximate percentage of
hedged fuel price-sensitive earnings exposure includes the earnings 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
Q1
2014
$3.38
$3.44
60%
Q2
2014
$3.36
$3.42
60%
Q3
2014
$3.37
$3.43
60%
Q4
2014
$3.34
$3.40
60%
Q1
2015
$3.32
$3.38
40%
Q2
2015
$3.34
$3.40
20%
Overview
OTHER PAYMENT SOLUTIONS SEGMENT
Our Other Payment Solutions segment is comprised of our virtual and paycard products where we provide innovative
corporate purchasing capabilities 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 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. Our virtual card programs consist of:
• WEX Travel - Since 2000, travel wholesalers and resellers have used WEX to deliver efficiencies
through precise payment control and reconciliations.
• WEX Health - Healthcare companies are embracing the migration to electronic payments as a strategic
move to streamline processes and reduce costs.
• WEX Insurance - WEX’s electronic claims solution allows auto claim payment to preferred and out-
of-network suppliers.
• WEX Education - WEX virtual payment solutions facilitate streamlining of the payment process and
reduction of costs.
Under our virtual card programs, 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
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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 in the travel industry:
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, we own a 51 percent
controlling interest in UNIK S.A., a provider of employee benefit cards, private label and processing services in Brazil,
specializing in the retail, government and transportation sectors.
Prepaid and gift cards
WEX Prepaid Card Australia offers prepaid and gift cards products to companies throughout Australia. These
products provide secure payment and financial management solutions with single card options, access to open or closed loop
redemption, load limits and variable expirations.
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.
Employees
OTHER ITEMS
As of December 31, 2013, WEX Inc. and its subsidiaries had 1,431 employees, of which 1,201 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
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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 include the breadth of features offered, 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.”
Seasonality
Our businesses are affected by seasonal variations as fuel prices are typically higher during the summer and online
travel sales are typically higher during the third quarter. However, this seasonality does not have a material impact on our
financial results.
Technology
We believe that investment in technology is a crucial step in maintaining and enhancing our competitive position in
the marketplace. In the United States, our fleet fuel-based 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 limit dependence on third-party processors and to respond rapidly to changing customer needs
with system upgrades, while maintaining a secure environment. Our virtual card open-loop network uses internally developed
software and third-party processors. 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 the United Kingdom, we use 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 infrastructure.
We are continually improving our technology to enhance customer relationships 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 “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”, “Our failure to effectively implement new technology could jeopardize our position as a leader in our
industry” and “We are dependent on technology systems and electronic communications networks managed by third parties,
which could result in our inability to prevent service disruptions.”
Intellectual Property
We rely on a combination of patent, copyright, trade secret and trademark laws, confidentiality procedures,
contractual provisions and other similar measures to protect the proprietary information and technology used in our business.
We generally enter into confidentiality, professional services and/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 to develop similar technology
independently. We pursue registration and protection of our trademarks in the U.S. and other countries in which we operate or
plan to operate. We market our products and services using the WEX and Fleet One brand names in the U.S., the MotorPass
and Motorcharge brand names in Australia and the UNIK S.A. brand name in Brazil.
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. The Company and WEX Bank, as well as its subsidiaries are subject to supervision
and examination by both the Utah Department of Financial Institutions and the FDIC. The Company and its affiliates are
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.
Below is a description of the material elements of the laws, regulations, policies and other regulatory matters affecting
the operations of WEX.
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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 limit the amount of covered transactions WEX Bank may have with any one affiliate and
with all affiliates in the aggregate. The applicable rules also requires 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 Consumer Financial Protection Bureau ("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 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 United States 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 United States 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,
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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.
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.
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 - Foreign
The conduct of our businesses, and the use of our products and services are subject to various foreign laws and
regulations administered by government entities and agencies where we operate. It is our policy to abide by the applicable
laws and regulations in the jurisdictions around the world in which we do business.
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 WEX
Fuel Cards Australia nor WEX 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.
Europe
The Company’s European operations are subject to laws and regulations of the European Union and the countries in
which we operate including, among others, those governing payment services, data protection and information security,
consumer credit and anti-money laundering.
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Brazil
The Company’s Brazilian operations are subject to laws and regulations of the Brazilian government. Brazil’s labor
systems are governed by the Consolidation of Brazilian Labor Laws. Brazil is a signatory of the World Trade Organization’s
Trade-Related Aspects of Intellectual Property Rights agreement. This agreement establishes a minimum protection standard
to property rights and requires signatory countries to review and adapt national laws that meet that standard.
Segments and Geographic Information
For an analysis of financial information about our segments as well as our geographic areas, see Item 8 - Note 21 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 website. These documents are posted to our website 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 website.
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 and should
not be considered part of this report.
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, results of operations and cash flows could suffer. The
risks discussed below also include forward-looking statements and our actual results may differ materially 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, 2013, management estimates approximately 42 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 revenue is dependent on fuel prices, which are prone to
volatility. For example, we estimate that during 2013, a one cent decline in average fuel prices below average actual prices
would have resulted in approximately a $0.8 million decline in 2013 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;
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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
formulas and models to screen potential customers and establish appropriate credit limits, but these formulas 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 losses on the
income statement could be significantly higher.
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.
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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.
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.
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 environment of increasing interest rates, interest expense on the variable rate portion of our borrowings
would increase and we may not be able to replace our maturing debt with new debt that carries the same
interest rates. We may be adversely affected by significant changes in the brokered deposit market.
We had $685 million of fixed and variable interest rate indebtedness outstanding at December 31, 2013, consisting
of $400 million of borrowings under our bond facility at a fixed rate of 4.750% and $285 million of borrowings under our
senior secured credit facility that bore interest at a floating rate equal to the one-month LIBOR plus 175 basis points. An
increase in interest rates would increase the cost of borrowing under our senior secured credit facility.
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, 2013, WEX Bank had outstanding $453.5
million in certificates of deposit maturing within one year, $117.9 million in certificates of deposit maturing within one to
two years, and $222.5 million in interest-bearing money market deposits. Also at December 31, 2013, WEX Bank had
$276.4 million of NOW account deposits outstanding, 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”).
Our indebtedness consists of secured indebtedness under our 2013 Amended and Restated Credit Agreement ("2013
Credit Agreement"), the notes, deposits issued by WEX Bank and other liabilities outstanding. 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 obtain 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 could trigger a default under the notes and 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, including compliance with 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 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 23 percent of our total revenues in 2013. Accordingly, we are dependent on maintaining our strategic
relationships and our results of operations would be lower in the event that any of relationships cease to exist. 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, 2013, we had $276.4 million of NOW account deposits outstanding with a single program. 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.
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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;
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 due to, but not limited to, the repatriation of cash and negative
consequences from changes in or interpretations of tax laws;
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.
Laws or regulations developed in one jurisdiction or for one product could result in new laws or regulations in
other jurisdictions or for other products.
Regulators often monitor other approaches to the governance of the payment industry. As a result, law or regulation
in one jurisdiction could result in similar developments in another. In addition, law and regulation involving one product
could influence the extension of regulations to other product offerings.
The expansion of certain regulations could negatively impact our business in other geographies or for other
products. Rules and regulations concerning interchange and business operations regulations, for example, may differ from
country to country which adds complexity and expense to our operations.
These varying and increasingly complex regulations could limit our ability to globalize our products and negatively
impact our business. These factors could significantly and adversely affect our business, financial condition and results
of operations.
New laws, regulations and enforcement activities could negatively impact our business and the markets we
presently operate in or could limit our expansion opportunities.
Our industry is subject to substantial regulation both domestically and internationally. There are often new
regulatory efforts which could result in significant constraints and may impact our operations. These existing and emerging
regulations can make the expansion of our business very difficult and negatively impact our revenue. Among the
regulations that impact us or could impact us are those governing: interchange rates; interest rate and fee restrictions; credit
access and disclosure requirements; collection and pricing regulations; compliance obligations; data security and data
breach requirements; identity theft avoidance programs; and anti-money laundering compliance programs. We also often
must obtain permission to conduct business in new locations from government regulators. Changes to these regulations,
including expansion of consumer-oriented regulation to business-to-business transactions, could negatively impact our
operations and financial condition and results of operations and further increase compliance costs and limit our ability to
expand to new markets.
We also conduct business with other highly regulated businesses such as banks and payment card issuers. There
continues to be significant potential reforms that could negatively affect their businesses, ability to maintain or expand their
products and services, and the costs associated with doing so. These developments could also negatively impact
our business.
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The acquisition of the ESSO Card program may have a significant impact on our business and results
of operation.
In November 2013 we announced our plans to acquire the assets of ExxonMobil's’ European commercial card
program. The transaction is expected to close in late 2014 or early 2015 and upon its completion, we expect that this
portfolio will contribute approximately $35 million in annual revenue. While this transaction is a significant milestone for
us, we expect to make significant investments to integrate the Esso Card into our operations and systems. If we fail to
complete the work necessary to support the integration, we may face project management and execution risks and may take
longer than expected and delay when and if we realize the revenue from this transaction. This work may also impact our
existing operations as resources are utilizes to support the ESSO Card integration and maintain the projected schedule.
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 would adversely affect our results of operations.
Our goodwill resides in multiple reporting units. The profitability of individual reporting units may suffer
periodically from downturns in customer demand and other factors, the high level of competition existing within our
industry, and the level of overall economic activity. Individual reporting units may be relatively more impacted by these
factors than the Company as a whole. As a result, demand for the services of one or more of the reporting units could
decline which could adversely affect our operations and cash flow, and could result in an impairment of goodwill or
intangible assets. As a result of our annual impairment analyses during the fourth quarter of fiscal 2013, we have determined
that the fair value of the goodwill and other indefinite-lived intangible assets are greater than their carrying values, thus no
impairment charge was recorded. For all reporting units, we use a discounted cash flow model of the projected earnings of
reporting units to determine the amount of goodwill impairment. While we currently believe that the fair value of all of our
intangibles substantially exceeds carrying value and that those intangibles so classified will contribute indefinitely to the
cash flows of the Company, materially different assumptions regarding future performance of our reporting units or the
weighted-average cost of capital used in the valuations could result in impairment losses and/or additional
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.
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WEX Bank’s bank regulatory status enables WEX Bank to issue certificates of deposit, accept money market
deposits and NOW account deposits, 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
card 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.
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 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
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“covered transactions,” they do limit the amount of covered transactions WEX Bank may have with any one affiliate and
with all affiliates in the aggregate. Accordingly, WEX Bank may be unable to provide credit or engage in transactions with
us, including transactions intended to help us service our indebtedness.
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. In certain instances, the information we collect
includes social security numbers. As a result of applicable laws, we are required to take commercially reasonable measures
to prevent the unauthorized access, acquisition, release and use of “personally identifiable information, such as social
security numbers. While social security numbers constitute a very small part of the data we keep, in the event of a security
breach we would be required to determine the types of information which was comprised and determine corrective actions
and next steps under applicable laws, which would require us to expend capital and other resources to address the security
breach and protect against future breaches.
Any security breach or inadvertent transmission of information about our customers or any violation of applicable
privacy laws could expose us to liability in excess of any applicable insurance policies, litigation, regulatory scrutiny, and/or
cause damage to our reputation.
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 we 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.
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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
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.
We 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 and other
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
U.S. Foreign Corrupt Practices Act (“FCPA”) and United Kingdom Bribery Act of 2010 (“UKBA”).
We are subject to both the FCPA and the United Kingdom Bribery Act, as we own subsidiaries organized under UK
law, which serve as a holding company for other subsidiaries. While the FCPA generally prohibits U.S. companies and their
intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business, the
UKBA is broader in its reach and prohibits bribery in purely commercial contexts. Any violation of the FCPA, the UKBA
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, UKBA 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. The possibility of violations of the FCPA, UKBA or similar laws
or regulations may increase as we expand globally and into countries with recognized corruption problems.
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.
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.
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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 control over financial reporting and disclosure controls
and procedures. If we are unable to adequately maintain our internal control over financial reporting, our external auditors
will not be able to issue an unqualified opinion on the effectiveness of our internal control over financial reporting.
Ineffective internal control over financial reporting and disclosure controls and procedures could cause investors to
lose confidence in our reported financial information, which could have a negative effect on the trading price of our
securities or affect our ability to access the capital markets and could result in regulatory proceedings against us by, among
others, the SEC. In addition, a material weakness in internal control over financial reporting, which may lead to deficiencies
in the preparation of financial statements, could lead to litigation claims against us. The defense of any such claims may
cause the diversion of management’s attention and resources, and we may be required to pay damages if any such claims or
proceedings are not resolved in our favor. Any litigation, even if resolved in our favor, could cause us to incur significant
legal and other expenses. Such events could harm our business, affect our ability to raise capital and adversely affect the
trading price of our securities.
Our ability to attract and retain qualified employees is critical to the success of our business and the failure to do
so may materially adversely affect our performance.
We believe our employees, including our executive management team, are our most important resource and, in our
industry and geographic area, competition for qualified personnel is intense. If we were unable to retain and attract qualified
employees, our performance could be materially adversely affected.
Historical transactions with our former parent company may adversely affect our financial statements.
The accounting and tax treatment of 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 due to the interrelated nature of how these past transactions impact 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, and may be required 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 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 and by-laws 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
21
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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 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 potential investors.
Our stockholder rights plan could prevent a stockholder from receiving a premium over the market price for
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. The following table presents the details of our leased properties:
Property location
Square footage
Purpose of leased property
South Portland, Maine
South Portland, Maine
South Portland, Maine
Midvale, Utah
Louisville, Kentucky
Nashville, Tennessee
Salem, Oregon
Tampa, Florida
Melbourne, Australia
Sydney, Australia
Perth, Australia
Auckland, New Zealand
São Paulo, Brazil
London, England
67,000 Corporate headquarters
83,000 Technical and customer service employees (4 buildings combined)
7,500 Warehouse
11,500 Bank operations and call center
5,400
Fleet fuel operations
66,800
Fleet One operations
10,000
Pacific Pride operations
5,300
rapid! PayCard operations
14,000 Australia Fuel operations
7,400 Australia Other Payment Solutions operations
2,000 Australia Fuel operations
13,500
International operations
15,000
International operations
9,000
International operations
Additional financial information about our leased facilities appears in Item 8 – Note 17 of our consolidated
financial statements.
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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 2013. 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.
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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 WEX. 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:
2012
First quarter
Second quarter
Third quarter
Fourth quarter
2013
First quarter
Second quarter
Third quarter
Fourth quarter
High
Low
$
$
$
$
$
$
$
$
66.23
65.68
75.10
75.76
80.52
80.72
91.84
101.58
$
$
$
$
$
$
$
$
51.59
53.14
58.58
66.43
70.50
66.43
76.85
83.66
As of February 20, 2014, the closing price of our common stock was $90.76 per share, there were 38,890,626 shares of
our common stock outstanding and there were five holders of record of our common stock. The actual number of stockholders
is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in
street name by brokers or nominees.
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, if any, 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.
Share Repurchases
We used $17.9 million during 2013 to repurchase our own common stock. We did not purchase shares of our common
stock during the fourth quarter of 2013. The approximate dollar value of shares that were available to be purchased under the
our share repurchase program was $150.0 million as of December 31, 2013.
On February 7, 2007, we announced a share repurchase program authorizing the purchase of up to $75 million of our
common stock over a 24 month period. In July 2008, our Board of Directors approved an increase of $75 million to the share
repurchase authorization, and then extended the share repurchase program through July 25, 2013. We were authorized to
purchase, in total, up to $150 million of our common stock. This extended share repurchase program expired on July 25, 2013.
On September 23, 2013, we announced a new share repurchase program authorizing the purchase of up to $150 million worth
of our common stock from time to time until September 30, 2017. Share repurchases are to be made on the open market and
can be commenced or suspended at any time. Through December 31, 2013, we have not used any of the authorized amount to
acquire shares of our common stock under the new repurchase program.
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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 and the consolidated financial
statements and related notes thereto contained in this Form 10-K. The financial information included in the table below is
derived from audited financial statements:
(in thousands, except per share data)
Income statement information, for the year ended
Total revenues
Total operating expenses
Financing interest expense
Net realized and unrealized losses 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
Total liabilities and stockholders’ equity
2013
2012
2011
2010
2009
December 31,
$
$
$
$
$
$
$
$
717,463
440,724
$
$
29,419
$
(9,851) $
$
149,208
3.83
$
38,946
96,922
2.50
38,840
3,433,043
2,511,017
—
18,729
903,297
$
$
3,131,865
2,292,272
—
21,662
817,931
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) $
(11,869) $
(7,244) $
(22,542)
$
$
$
$
133,622
3.45
38,686
2,278,060
1,568,745
—
—
$
$
$
$
87,629
2.28
38,486
2,097,951
1,538,944
—
—
709,315
559,007
$
$
$
$
139,659
3.65
38,303
1,499,662
1,048,346
10,000
—
441,316
$
3,433,043
$
3,131,865
$
2,278,060
$
2,097,951
$
1,499,662
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ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
2013 Highlights and Year in Review
WEX stands as a premier global payments solution provider in the fleet fuel market. Our opportunities for growth
extend well beyond this market, and in particular to the online travel space. Building on a leading market position in our core
fleet business, we continue to expand our company.
Our strategic approach to entering new markets is focused on three steps:
•
•
•
Identify complicated markets facing complex challenges and inefficiencies,
Develop products and services that address these unmet market needs, and,
Operate with systemic efficiency through scale and cost management.
We have a proven model in the fleet space where we have developed a leading market position and a strong margin
profile. We have done the same in the online travel industry where we continue to grow the business and create scale on a
global basis. WEX is a leader in global virtual payments in the travel space.
Our Company was impacted by the following significant events and accomplishments in 2013:
•
•
•
On November 8, 2013, we announced plans to acquire the assets of ExxonMobil’s European commercial fuel
card (“Esso Card”) program through a majority owned subsidiary, WEX Europe Services Limited. The
anticipated transaction is subject to completion of the employee information and consultation processes, and
obtaining of competition authority approvals, as appropriate. Upon completion of the employee information
and consultation process, WEX expects to enter into a definitive purchase and sale agreement related to the
proposed acquisition with ExxonMobil. In addition, both parties plan to enter into a long term supply
agreement to serve the current and future Esso Card customers and to grow the business. Under the terms of
the proposed transaction, we will purchase ExxonMobil’s commercial fleet fuel card program which includes
operations, funding, pricing, and sales and marketing in nine countries in Europe. In anticipation of an
expected closing in late fourth quarter 2014 or first quarter 2015, we will make investments relating to the
integration of operations and systems. It is anticipated that these investments will occur over a two year
period, and are expected to impact 2014 earnings by $10 to $13 million after taxes. Upon completion of the
deal, we estimate this portfolio will contribute approximately $35 million in annual revenue.
On October 15, 2013, the Company's Brazilian subsidiary UNIK, which we own a 51 percent controlling
interest in, acquired FastCred, a company specializing in the management of electronic payment of freight. In
addition to expanding the customer base, the acquisition complements the range of UNIK products,
facilitating UNIK's entry into the freight payment card industry in the Brazilian market.
On January 30, 2013, we completed a $400 million offering in aggregate principal amount of our 4.750%
senior notes due on February 1, 2023, at an issue price of 100.0 percent of the principal amount, plus accrued
interest, 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, WEX Card Holdings Australia Pty Ltd (formerly 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 and letter of credit issuer (“Bank of America”), and the other lenders party thereto (the
“Lenders”). The 2013 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.
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•
•
•
Total fleet transactions processed increased 10 percent from 2012 to 370.6 million in 2013. Payment
processing transactions increased 12 percent from 2012 to 292.1 million in 2013, and transaction processing
transactions increased 2 percent from 2012 to 78.5 million in 2013. These transactions include the operations
from Fleet One, subsequent to the date of acquisition of October 4, 2012.
Our payment solutions purchase card product grew to $13.1 billion in purchase volume for 2013, which is a
22 percent increase from 2012. This increase is primarily due to our single use account product used for
online travel-related purchases.
Domestic fuel prices averaged $3.67 per gallon during 2013, down from an average of $3.73 per gallon
during 2012. Australian fuel prices decreased 5 percent in 2013 as compared to 2012, to US $5.39 per gallon.
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Results of Operations
YEAR ENDED DECEMBER 31, 2013, AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2012
FLEET PAYMENT SOLUTIONS SEGMENT
The following table reflects comparative operating results and key operating statistics within our Fleet Payment
Solutions segment:
(in thousands, except per transaction and per gallon data)
2013
2012
Increase
(decrease)
Revenues
Payment processing revenue
Transaction processing revenue
Account servicing revenue
Finance fees
Other
Total revenues
Total operating expenses
Operating income
Financing interest expense
(a)
Gain (loss) on foreign currency transactions
Net realized and unrealized losses on domestic fuel price derivative instruments
(a)
Decrease in tax refund due to former shareholder of RD Card Holdings in Australia
Increase in amount due under tax receivable agreement
Income before taxes
Income taxes
Net income
Less: Net loss from noncontrolling interest
Net earnings attributable to WEX Inc.
Key operating statistics
Payment processing revenue:
Payment processing transactions
Average expenditure per payment processing transaction
Average price per gallon of fuel - Domestic – ($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 during the year
$
348,291
$
316,480
19,444
75,123
59,520
25,046
527,424
314,313
213,111
(29,419)
263
(9,851)
—
(33)
174,071
66,900
107,171
$
(423) $
16,943
66,842
49,977
20,349
470,591
274,236
196,355
(10,433)
(395)
(12,365)
6,968
(2,089)
178,041
88,063
89,978
—
107,594
$
89,978
292,079
260,714
85.58
3.67
5.39
$
$
$
77.78
3.73
5.66
78,501
77,279
7,538
6,969
$
$
$
$
$
$
10 %
15 %
12 %
19 %
23 %
12 %
15 %
9 %
182 %
(167)%
(20)%
(100)%
(98)%
(2)%
(24)%
19 %
—
20 %
12 %
10 %
(2)%
(5)%
2 %
8 %
(a)
As described in Item 8—Note 21 to our Financial Statements, financing interest expense through our corporate debt including the term loan and bond
issuance, as well as net realized and unrealized gains and losses on derivative instruments are allocated solely to the Fleet Payment Solutions segment.
Revenues
Payment processing revenue increased $31.8 million for 2013, as compared to 2012. This increase is primarily due to
the organic growth from our domestic fleet business and the acquisition of Fleet One during the fourth quarter of 2012.
Reducing the overall increase was a 2 percent decrease in the average domestic price per gallon of fuel, as compared to 2012.
Transaction processing revenue increased $2.5 million for 2013, as compared to 2012. This increase is primarily due to
network fees at Fleet One, which was acquired during the fourth quarter of 2012.
Account servicing revenue increased $8.3 million for 2013, as compared to 2012. This increase is primarily due to the
acquisition of Fleet One during the fourth quarter of 2012 as well as an increase in WEX Telematics units service revenue.
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Our finance fees increased $9.5 million for 2013, as compared to 2012. With the acquisition of Fleet One during the
fourth quarter of 2012, its factoring revenue has been included in finance fee revenue as well as the late fee revenue historically
reported by the Company. The increase in finance fees is primarily due factoring revenue at Fleet One for 2013. Payments for
customer receivables are due within thirty days or less. Late fee revenue, which is included in finance fees, 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
2013 is primarily due to the addition of (i) factoring revenue and (ii) higher accounts receivable balances, as a result of higher
transaction volumes, resulting in an increase of approximately $3.3 million over 2012.
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 losses
Technology leasing and support
Depreciation, amortization and impairments
2013
2012
Increase
(decrease)
$
$
$
$
$
137,669
31,563
19,726
15,384
51,437
$
$
$
$
$
106,552
32,641
20,190
11,468
52,500
29 %
(3)%
(2)%
34 %
(2)%
•
•
•
•
•
Salary and other personnel expenses increased $31.1 million for 2013, as compared to 2012. The increase is
primarily due to additional employees from ongoing operations and from our acquisition of Fleet One, at the
beginning of the fourth quarter of 2012.
Service fees decreased $1.1 million during 2013, as compared to 2012. The decrease is primarily due to
higher acquisition related expenses in 2012. This decrease is partially offset by higher fees associated with an
increase in the numbers of WEX Telematics units, as compared to 2012, as well as a full year of fees incurred
at Fleet One.
Provision for credit losses decreased $0.5 million for 2013, as compared to 2012. 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 7.9 basis points as compared to 10.0 basis points for 2012. This decrease is primarily associated
with lower net charge offs as compared to 2012.
Technology leasing and support expenses increased $3.9 million for 2013, as compared to 2012. The increase
is primarily the result of additional software maintenance costs associated with new license agreements.
Depreciation, amortization and impairments expenses decreased $1.1 million for 2013, as compared to 2012.
During 2012, we incurred an $8.9 million write-off of the internally developed software for our over-the-road
product. The write-off was a consequence of our decision to utilize the software acquired with the acquisition
of Fleet One as the processing platform for our over-the-road product. Offsetting this decrease was 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 credit agreements, as well as our 2007 credit facility and 2010 term loan.
Interest expense for 2013 increased $19.0 million from 2012, due to higher interest rates on our financing debt associated with
our $400 million 4.750% fixed rate notes outstanding issued on January 30, 2013, (the "Notes"). The proceeds of these Notes
were primarily used to pay down borrowings under our 2011 Credit Agreement, which had a variable interest rate that was
lower at the time of repayment. Financing interest expense in 2013 includes a $1 million write-off of deferred loan fees
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associated with the extinguishment of debt. The 2012 financing interest expense 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 38.4 percent for 2013 and 49.5 percent for 2012. The decrease in the effective tax rate
compared to the prior year is primarily due to the impact of changes in the Australian tax consolidation laws in 2012. 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.
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 2013 we recorded a loss of $9.9 million, consisting of a realized loss of $4.2 million and an unrealized loss of $5.6
million. 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. These losses are due to the overall increase in the price of fuel relative to our hedged fuel prices.
ESSO Card program
On November 8, 2013, the Company announced that it plans to acquire the assets of ExxonMobil’s European
commercial fuel card program through a majority owned subsidiary, WEX Europe Services Limited. The anticipated Esso Card
program transaction is expected to close in late fourth quarter 2014 or first quarter 2015. We will make investments relating to
the integration of operations and systems. It is anticipated that these investments will occur over a two year period, and are
expected to impact 2014 earnings by $10 to $13 million after taxes.
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The following table reflects comparative operating results and key operating statistics within our Other Payment
OTHER PAYMENT SOLUTIONS SEGMENT
Solutions segment:
(in thousands)
Revenues
Payment processing revenue
Transaction processing revenue
Account servicing revenue
Finance fees
Other
Total revenues
Total operating expenses
Operating income
Decrease in tax refund due to former shareholder of RD Card Holdings Australia
Gain on foreign currency transactions
Income before income taxes
Income taxes
Net income
Less: Net loss from noncontrolling interest
Net earnings attributable to WEX Inc.
Key operating statistics
Payment processing revenue:
2013
2012
Increase
(decrease)
$
133,615
$
101,482
5,627
11,883
6,368
32,546
190,039
126,411
63,628
—
701
64,329
23,202
$
41,127
$
(487)
41,614
7,420
6,518
2,330
34,810
152,560
127,296
25,264
2,782
96
28,142
21,411
6,731
(213)
6,944
32 %
(24)%
82 %
173 %
(7)%
25 %
(1)%
152 %
(100)%
630 %
129 %
8 %
511 %
129 %
499 %
Payment solutions purchase card volume
$ 13,057,666
$ 10,688,775
22 %
Payment processing revenue increased approximately $32.1 million for 2013, as compared to 2012. The primary driver
of the increase in payment processing revenue is the increase in our corporate purchase card volume, which grew by
approximately 2.4 billion in 2013 compared to 2012. Additionally, we experienced an increase in the charge card net
interchange rate of 5 basis points during 2013 as compared to 2012, primarily due to customer specific incentives from our
network provider.
Transaction processing revenue decreased approximately $1.8 million for 2013, as compared to 2012, primarily due to
lower transaction based fees from WEX Prepaid Cards Australia (formerly Wright Express Prepaid Cards Australia).
Account servicing revenue increased approximately $5.4 million for 2013, as compared to 2012. Approximately $3.7
million of this increase is due to the acquisition of UNIK during 2012. The remaining increase is primarily due to domestic
growth in our payroll card product.
Other revenue decreased $2.3 million for 2013 as compared to 2012, primarily due to the decrease in the of cross-border
fees from the prior year as we process these transaction with local accounts. As a result of this decrease, our associated service
fees have also decreased.
On November 9, 2012, the U.S District Court granted preliminary approval to a settlement between retailer, payment
networks and card issuers regarding merchant interchange settlement fees. Under the terms of this settlement the domestic
interchange rate for MasterCard branded credit card transactions was reduced by 10 basis points for a period of 8 months,
beginning on July 29, 2013. This resulted in a revenue reduction of approximately $3.6 million in the second half of 2013.
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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 losses
Depreciation, amortization and impairments
Technology leasing and support
2013
2012
Increase
(decrease)
$
$
$
$
$
26,852
71,865
474
6,771
8,833
$
$
$
$
$
16,828
70,548
2,349
22,763
7,070
60 %
2 %
(80)%
(70)%
25 %
•
•
•
•
•
Salary and other personnel expenses increased $10.0 million for 2013, as compared to 2012. Approximately
$7.7 million of the increase is due to additional payroll costs associated with the operations of UNIK and
CorporatePay acquired during 2012. The remaining increase is due to additional staff and increased
benefit expense.
Service fees increased by $1.3 million for 2013, as compared to 2012. Service fees increased by
approximately $3.6 million as compared to the prior year due to additional expense associated with the
operations of UNIK and CorporatePay, acquired during 2013. The increase is offset due to lower cross border
fees as compared to the prior year.
Provision for credit losses decreased $1.9 million for 2013, as compared to 2012. The decrease is primarily
due to a bankruptcy from one customer during 2012.
Depreciation, amortization and impairment expenses decreased $16.0 million for 2013, as compared to 2012.
This decrease is primarily due to the $16.2 million impairment of goodwill associated with WEX Prepaid
Cards Australia in 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 WEX Prepaid Cards Australia.
Technology leasing and support expenses increased $1.8 million for 2013, as compared to 2012. This increase
is primarily related to the volume increase in our corporate purchase card products.
Our effective tax rate was 36.1 percent for 2013 and 76.1 percent for 2012. The decrease in the effective tax rate
compared to the prior year is partially due to changes in Australian tax consolidation laws. During 2012, we recorded a charge
of approximately $5.1 million due to impact of the tax legislation enacted on June 29, 2012, in Australia. In addition, we did not
recognize a tax benefit associated the goodwill impairment expense recorded in 2012.
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YEAR ENDED DECEMBER 31, 2012, AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2011
FLEET PAYMENT SOLUTIONS SEGMENT
The following table reflects comparative operating results and key operating statistics within our Fleet Payment
Solutions segment:
(in thousands, except per transaction and per gallon data)
2012
2011
Increase
(decrease)
Revenues
Payment processing revenue
Transaction processing revenue
Account servicing revenue
Finance fees
Other
Total revenues
Total operating expenses
Operating income
Financing interest expense
(a)
(Loss) gain on foreign currency transactions
Net realized and unrealized losses on domestic fuel price derivative instruments
(a)
Decrease in tax refund due to former shareholder of RD Card Holdings in Australia
Increase in amount due under tax receivable agreement
Income before taxes
Income taxes
Net earnings attributable to WEX Inc.
Key operating statistics
Payment processing revenue:
Payment processing transactions
Average expenditure per payment processing transaction
Average price per gallon of fuel - Domestic – ($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
$
316,480
$
293,756
16,943
66,842
49,977
20,349
470,591
274,236
196,355
(10,433)
(395)
(12,365)
6,968
(2,089)
178,041
88,063
16,553
60,569
46,084
19,742
436,704
244,910
191,794
(11,676)
(368)
(11,869)
—
(715)
167,166
59,925
$
89,978
$
107,241
260,714
247,928
$
$
$
77.78
3.73
5.66
$
$
$
71.73
3.62
5.47
77,279
71,501
8 %
2 %
10 %
8 %
3 %
8 %
12 %
2 %
(11)%
7 %
4 %
—
192 %
7 %
47 %
(16)%
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 One, acquired in the beginning of the fourth quarter of 2012.
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 of approximately $2.3 million. Approximately $2.0
million of the increase is due to the monthly fees received from our WEX Telematics 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, its factoring revenue has been included in finance fee revenue as well as the late fee revenue historically
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reported by the Company. Factoring revenue at Fleet One for the fourth quarter of 2012 was approximately $1.4 million. 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 losses
Depreciation, amortization and impairments
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.
Service fees increased $10.7 million during 2012, as compared to 2011. The increase is primarily due to
expenses related to the 2012 acquisitions. Additionally, service fees associated with the WEX Telematics
product line increased $1.3 million for 2012, as compared to 2011.
Provision for credit losses decreased $6.4 million for 2012, as compared to 2011. 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.
Depreciation, amortization and impairment 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 were expensed at the time the 2007 credit facility was replaced.
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.
Fuel price derivatives
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.
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The following table reflects comparative operating results and key operating statistics within our Other Payment
OTHER PAYMENT SOLUTIONS SEGMENT
Solutions segment:
(in thousands)
Revenues
Payment processing revenue
Transaction processing revenue
Account servicing revenue
Finance fees
Other
Total revenues
Total operating expenses
Operating income
Decrease in tax refund due to former shareholder of RD Card Holdings Australia
Gain (loss) on foreign currency transactions
Income before income taxes
Income taxes
Net income
Less: Net loss from noncontrolling interest
Net earnings attributable to WEX Inc.
Key operating statistics
Payment processing revenue:
Payment solutions purchase card volume
2012
2011
Increase
(decrease)
$
101,482
$
77,570
7,420
6,518
2,330
34,810
152,560
127,296
25,264
2,782
96
28,142
21,411
$
6,731
$
(213)
6,944
8,185
3,432
731
26,454
116,372
74,842
41,530
—
(91)
41,439
15,058
26,381
—
26,381
31 %
(9)%
90 %
219 %
32 %
31 %
70 %
(39)%
—
(205)%
(32)%
42 %
(74)%
—
(74)%
$ 10,688,775
$
7,759,466
38 %
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 virtual card 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 WEX Prepaid Cards Australia.
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! PayCard, 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.
Expenses
The following table compares selected expense line items within our Other Payment Solutions segment:
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(in thousands)
Expense
Salary and other personnel
Service fees
Provision for credit losses
Depreciation, amortization and impairments
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 for our payroll card product. 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!
PayCard, 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 losses increased $1.4 million for 2012, as compared to 2011. The increase is primarily
due to a bankruptcy from one customer during 2012.
Depreciation, amortization and impairment expenses increased $17.3 million for 2012, as compared to 2011.
This increase is primarily due to the September 30, 2012, $16.2 million impairment of goodwill associated
with WEX Prepaid Cards Australia. 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 WEX Prepaid Card 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.
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LIQUIDITY, CAPITAL RESOURCES AND CASH FLOWS
We believe that our cash generating capability and financial condition, together with our revolving credit agreement,
term loan and $400 million notes outstanding, as well as other available methods of financing (including deposit and borrowed
federal funds), are adequate to meet our operating, investing and financing needs. As part of our overall financial structure, 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.
The table below summarizes our cash activities:
(in thousands)
Net cash provided by operating activities
Net cash used for investing activities
Net cash provided by (used for) financing activities
2013 Highlights
Year ended December 31,
2013
2012
2011
$
39,551
$
71,811
$
51,168
(51,342)
179,242
(429,824)
529,564
(40,504)
(2,583)
•
•
•
•
During 2013, our increase in accounts receivable, net of the account receivable balances acquired with our
acquisitions, is funded by operating activities as well as a $150 million overall increase in borrowed federal
funds and deposits. Accounts receivable increased in 2013 over 2012 as a result of increased customer
spend levels.
On October 15, 2013, the Company's Brazilian subsidiary UNIK, in which we own a 51 percent controlling
interest, acquired FastCred, a provider of fleet cards to the heavy truck or over-the-road segment of the fleet
market in Brazil, for $12.3 million. The acquisition was funded through our term loan.
On September 23, 2013, our Board of Directors authorized a new share repurchase program under which up
to $150 million worth of our common stock may be repurchased from time to time until September 30, 2017,
through open market purchases. We used $17.9 million during 2013 to repurchase our own common stock.
During 2013, we had $39.5 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. During 2013, we also capitalized approximately $13 million
related to the consolidation of our data centers. We expect total capital expenditures for 2014 to be
approximately $40 to $45 million. Our capital spending is financed primarily through internally
generated funds.
2012 Highlights
•
•
•
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
Company's program with Higher One, Inc., a technology and payment processing company, through which
the Company to a portion of Higher One Inc.'s customers. Accounts receivable increased in 2012 over 2011
as a result of increased customer spend levels, primarily due to higher fuel prices.
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 $27.8 million, 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 $22.8 million. The acquisition was funded through our revolving credit facility and
term loan.
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•
•
•
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 $376.3 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 $28.0 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.
2011 Highlights
•
•
•
•
During 2011, our increase in accounts receivable, net of the account receivable balance acquired with the
acquisition of rapid! PayCard, 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 2011, we entered into a new credit facility and paid down $112.0 million of our financing debt.
On March 31, 2011, we completed the acquisition of the assets of rapid! PayCard for $18.1 million, which
included 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 $25.1 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.
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, 2013, approximately 95
percent of the outstanding balance of $1,722 million of total trade accounts receivable was current and approximately 99
percent of the outstanding balance of total trade accounts receivable 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, 2013.
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.
2013 Credit Agreement
On January 18, 2013, the Company entered into an Amended and Restated Credit Agreement (the “2013 Credit
Agreement”), among the Company, as borrower, WEX Card Holdings Australia Pty Ltd, a wholly-owned subsidiary of the
Company, as specified designated borrower, Bank of America, N.A., as administrative agent and letter of credit issuer, and the
other lenders party thereto. The 2013 Credit Agreement is secured by pledges of the stock of our foreign subsidiaries.
The 2013 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. The 2013 Credit Agreement replaced
the 2011 Credit Agreement, dated as of May 23, 2011. Subject to certain conditions, including obtaining relevant commitments,
the Company has the option to increase the facility by up to an additional $100 million. As of December 31, 2013, we also had
approximately $11.9 million in letters of credit outstanding. At December 31, 2013, we had $285 million of borrowed funds,
and $688 million available, under the 2013 Credit Agreement, subject to the covenants as described below. Proceeds from the
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2013 Credit Agreement may be used for working capital purposes, acquisitions, payment of dividends and other restricted
payments, refinancing of indebtedness, and other general corporate purposes.
Amounts outstanding under the 2013 Credit Agreement bear interest at a rate equal to, at the Company’s option, (a) the
Eurocurrency Rate, as defined, plus a margin of 1.25 percent to 2.25 percent based on the ratio of consolidated funded
indebtedness of the Company and its subsidiaries to consolidated EBITDA or (b) the highest of (i) the Federal Funds Rate plus
0.50 percent (ii) the prime rate announced by the lead lender, and (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 based on the ratio of consolidated funded indebtedness of the Company and
its subsidiaries to consolidated EBITDA of the daily unused portion of the credit facility. Any outstanding loans under the 2013
Credit Agreement mature on January of 2018, unless extended pursuant to the terms of the 2013 Credit Agreement.
Our 2013 Credit Agreement contains financial covenants requiring us to maintain certain financial ratios. Specifically, it
limits us to a maximum consolidated leverage ratio of 3.25 to 1.00 at the end of each fiscal quarter until the maturity date. The
2013 Credit Agreement also requires us to maintain a minimum consolidated interest coverage ratio of 3.00 to 1.00 at the end of
each fiscal quarter until the maturity date.
In addition to the financial covenants, the 2013 Credit Agreement contains 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 and enter into sales or leasebacks. We were in compliance with all material
covenants and restrictions at December 31, 2013.
At December 31, 2013, we did not have any interest rate swap arrangements in place, however we regularly review our
projected borrowings under our credit facility and the current interest rate environment to determine if additional swaps should
be executed.
$400 million notes outstanding
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,
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 working capital purposes, acquisitions, payment of
dividends and other restricted payments, refinancing of indebtedness, and other general corporate purposes.
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 WEX 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. 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.
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. The 2011 Credit Agreement also contained
financial covenants and customary restrictive covenant that were material similar to the 2013 Credit Agreement.
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The Company maintained interest rate swap arrangements in conjunction with the 2011 Credit Agreement that
effectively converted $150 million of variable rate borrowing to fixed rate borrowing at a rate of approximately 0.56 percent
that expired in March of 2012.
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 0.30 percent to 0.80 percent as of December 31, 2013, as compared to fixed interest rates ranging
from 0.26 percent to 1.15 percent as of December 31, 2012, and 0.25 percent to 1.60 percent as of December 31, 2011. WEX
Bank also issues interest-bearing money market deposits with variable interest rates ranging from 0.15 percent to 0.35 percent
as of December 31, 2013, as compared to variable interest rates ranging from 0.35 percent to 0.41 percent as of December 31,
2012, and 0.60 percent to 0.73 percent as of December 31, 2011. As of December 31, 2013, we had approximately $222.5
million of brokered deposits outstanding at a weighted average interest rate of 0.25 percent, compared to $613.1 million of
brokered deposits at a weighted average interest rate of 0.53 percent as of December 31, 2012, and approximately $683.3
million of brokered deposits outstanding at a weighted average interest rate of 0.68 percent as of December 31, 2011.
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, 2013, 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. As of
December 31, 2013, we had $276.4 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
consolidated 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.
We also carry non-interest bearing deposits that are required for certain customers as collateral for their credit accounts.
We had $18.6 million of these deposits on hand at December 31, 2013, $16.2 million at December 31, 2012, and $10.4 million
at December 31, 2011.
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 $125.0 million as of December 31, 2013, and $140.0 million as of December
31, 2012 and 2011, respectively, with no outstanding balance as of December 31, 2013.
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 effect of
these derivatives is to restrict a portion of our fuel price exposure to a collar range set in the previous year. As a result, at
December 31, 2013, we have a liability related to these derivatives of approximately $7.4 million. During the course of the year
we paid $4.2 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 Worldwide Corporation (see
Note 13 - Tax Receivable Agreement, in Part II, Item 8) as part of our tax receivable agreement.
Undistributed earnings of certain foreign subsidiaries of the Company amounted to $4.7 million at December 31, 2013,
and $1.8 million at December 31, 2012. 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. The Company’s primary tax jurisdictions are the United States
and Australia.
Earnings outside of the United States are accompanied by certain financial risks, such as changes in foreign currency
exchange rates. Changes in foreign currency exchange rates may reduce the reported value of our foreign currency revenues,
net of expenses, and cash flows. We cannot predict changes in currency exchange rates, the impact of exchange rate changes, or
the degree to which we will be able to manage the impact of currency exchange rate changes.
As of December 31, 2013, we have approximately $38.6 million in cash located in our foreign entities, outside of the
United States.
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We currently have authorization from our Board to purchase up to $150 million of our common stock until September
30, 2017. Through December 31, 2013, we have not used any 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.
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, 2013:
• 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 $5.65 billion of commitments to extend credit at December 31, 2013, as part of
established customer agreements. These amounts may increase or decrease during 2013 as we increase or decrease
credit to customers, subject to 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 primarily related to facility lease agreements and virtual card and
fuel payment processing activity at our foreign subsidiaries. As of December 31, 2013, we have posted a $11.9 million
letter of credit as collateral.
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Contractual Obligations
The table below summarizes the estimated dollar amounts of payments under contractual obligations as of
December 31, 2013, for the periods specified:
(in thousands)
Operating leases:
Facilities
Equipment, including vehicles
Executive compensation - signing bonuses
Term Loan
Interest payments on term loan
$400 Million notes offering
Interest on $400 million notes offering
Tax receivable agreement
Certificates of deposit
Fuel price derivative contracts
Total
2014
2015
2016
2017
2018 and
Thereafter
Total
$
6,898
$
6,159
$
4,019
$
3,299
$
3,502
$
23,877
669
235
15,000
5,498
—
19,000
10,415
387
50
15,000
5,201
—
19,000
10,697
453,539
117,857
6,435
923
151
—
15,000
4,918
—
19,000
11,003
—
—
52
—
15,000
4,608
—
—
225,000
219
—
400,000
19,000
11,784
—
—
96,583
33,886
—
—
1,259
285
285,000
20,444
400,000
172,583
77,785
571,396
7,358
$
517,689
$
175,274
$
54,091
$
53,743
$
759,190
$ 1,559,987
Uncertain tax liabilities - 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.
Letters of credit - As of December 31, 2013, we had $11.9 million outstanding in undrawn irrevocable letters of credit issued
by us in favor of third-party beneficiaries, primarily related to facility lease agreements and virtual card and fuel payment
processing activity at our foreign subsidiaries. These irrevocable letters of credit are unsecured and are renewed on an annual
basis unless the Company chooses not to renew them.
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Application of Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated
financial statements, which have been prepared in accordance with Generally Accepted Accounting Principles. Preparation of
these financial statements requires us to make estimates and judgments that affect reported amounts of assets and liabilities,
revenue and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. We
continually evaluate our judgments and estimates in determination of our financial condition and operating results. We base our
estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Estimates are based on information available as of the date of the financial statements and,
accordingly, actual results could differ from these estimates, sometimes materially. Critical accounting policies and estimates
are defined as those that are both most important to the portrayal of our financial condition and operating results and require
management’s most subjective judgments. Our consolidated financial statements are based on the selection and application of
critical accounting policies and estimates, the most significant of which are included in the tables below.
Reserve for Credit Losses
Description
Assumptions/Approach Used
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.
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, 2013, we
have estimated a reserve for credit losses
which is 0.60 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
$8.6 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.
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Effect if Actual Results Differ from
Assumptions
We review the carrying values of the
unamortizing and amortizing assets for
impairment annually and 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, 2013, the Company had
an aggregate of approximately $1,027 million
on its consolidated 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, 2013.
Business Combinations, Acquired Intangible Assets and Goodwill
Description
Assumptions/Approach Used
Business combinations are accounted for at fair
value. 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 through 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
non-recoverable if the 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 FASB
Accounting Standards Codification ("ASC")
820 - Fair Value Measurements and
Disclosures, 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.
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Valuation of Derivatives
Description
Assumptions/Approach Used
The Company has entered into several financial
arrangements that are considered to be derivative
transactions. In the case that 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, 2013, the Company had
established that the net fair value of the
derivatives was a liability of $7.4 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
In July 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2013-11
Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar
Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11"). The amendments in ASU 2013-11 require entities to present
an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred
tax asset for a net operating loss ("NOL") carryforward, a similar tax loss, or a tax credit carryforward except when the
following exist: (i) an NOL carryforward, a similar tax loss, or a tax credit carryforward is not available as of the reporting date
under the governing tax law to settle taxes that would result from the disallowance of the tax position, and (ii) the entity does
not intend to use the deferred tax asset for this purpose (provided the tax law permits a choice). If any of these conditions exist,
entities should present an unrecognized tax benefit in the financial statements as a liability and should not net the unrecognized
tax benefit with a deferred tax asset. ASU 2013-11 is effective for interim and annual periods beginning after December 15,
2013. We do not believe that the adoption of ASU 2013-11 will have a material impact on its results of operations when adopted
in 2014.
In February 2013, the FASB issued Accounting Standards Update No. 2013-02 Comprehensive Income (Topic 220):
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This guidance is intended to provide
disclosure on items reclassified out of accumulated other comprehensive income either in the notes or parenthetically on the
face of the income statement. The required disclosure is in Note 18, Accumulated Other Comprehensive Income.
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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. All of the potential changes noted below are based
on sensitivity analyses performed on our financial position at December 31, 2013. Actual results may differ materially.
Interest Rate Risk
At December 31, 2013, we had borrowings of $285 million under our 2013 Credit Agreement that bore interest at
variable rates. We periodically review our projected borrowing under our 2013 Credit Agreement and the current interest rate
environment in order to ascertain whether interest rate swaps should be entered into to either increase our coverage of our
overall borrowings.
At December 31, 2013, WEX Bank had deposits (includes certificates of deposits, interest bearing money market
deposits and borrowed federal funds) outstanding of $1,071 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 2013 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 175 basis points equal to
1.917%)
Increase of:
1.00%
2.00%
Projected annual operating interest expense on WEX Bank deposits (certificates of deposits at 0.53% and interest bearing money market
deposits at 0.25%)
Increase of:
1.00%
2.00%
(a)
Impact
$
$
$
$
$
$
5,463
2,850
5,700
3,585
7,939
15,879
(a)
Changes to interest expense presented in this table are based on interest payments, outstanding balance and rate as of December 31, 2013.
At December 31, 2013, WEX Bank had negotiable order of withdrawal account deposits outstanding of $276 million.
(in thousands)
Projected annual interest expense (based on the federal fund rate) on NOW account deposits using federal funds rate of 0.25%
Increase of:
1.00%
2.00%
(b)
Impact
$
$
$
—
—
346
(b)
Changes to interest expense presented in this table are based on the outstanding balance and rate as of December 31, 2013.
Foreign Currency Risk
Growth in our international operations will incrementally increase our exposure to foreign currency fluctuations as well
as other risks typical of international operations, including, but not limited to, differing economic conditions, changes in
political climate, differing tax structures and other regulations and restrictions. Foreign exchange rate fluctuations may
adversely impact our consolidated results of operations as exchange rate fluctuations on transactions denominated in currencies
other than our functional currencies result in gains and losses that are reflected in our consolidated statements of operations. To
the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency-denominated
transactions will result in increased net revenues and operating expenses. Conversely, our net revenues and operating expenses
will decrease when the U.S. dollar strengthens against foreign currencies.
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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 2015.
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)
Fuel price derivative instruments – unleaded fuel – wholesale strike price
Options settling October 2014 – June 2015
Options settling July 2014 – March 2015
Options settling April 2014 – December 2014
Options settling January 2014 – September 2014
Options settling October 2013 – June 2014
Options settling July 2013 – March 2014
Total fuel price derivative instruments – unleaded fuel
Fuel price derivative instruments – diesel fuel – retail strike price
Options settling October 2014 – June 2015
Options settling July 2014 – March 2015
Options settling April 2014 – December 2014
Options settling January 2014 – September 2014
Options settling October 2013 – June 2014
Options settling July 2013 – March 2014
Total fuel price derivative instruments – diesel
Total fuel price derivative instruments
Put Strike
Price of
Underlying
Option
(per gallon) (a)
Call Strike
Price of
Underlying
Option
(per gallon) (a)
December 31, 2013
Aggregate
Notional
Amount
(gallons)
(b)
Fair Value
$
$
$
$
$
$
$
$
$
$
$
$
2.568
2.510
2.615
2.700
2.485
2.633
3.785
3.788
3.800
3.810
3.713
3.878
$
$
$
$
$
$
$
$
$
$
$
$
2.628
2.570
2.675
2.760
2.545
2.693
3.845
3.848
3.860
3.870
3.773
3.938
$
$
$
7,582
7,732
7,861
8,182
4,144
2,364
37,865
3,609
3,691
3,745
4,046
1,862
1,062
(481)
(1,076)
(1,051)
(911)
(1,407)
(290)
(5,216)
(318)
(385)
(436)
(516)
(413)
(74)
18,015
55,880
$
$
(2,142)
(7,358)
(a)
The settlement of the Options is based upon the New York Mercantile Exchange’s New York Harbor Reformulated Gasoline Blendstock for Oxgenate
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.
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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, 2013 and 2012
Consolidated Statements of Income for the Years Ended December 31, 2013, 2012 and 2011
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2013, 2012 and 2011
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2013, 2012 and 2011
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012 and 2011
Notes to Consolidated Financial Statements
Page
49
50
51
52
53
54
55
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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 (the “Company”) as of
December 31, 2013 and 2012, 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, 2013. 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, 2013 and 2012, and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2013, 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, 2013, based on the criteria established in Internal
Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission and
our report dated February 27, 2014 expressed an unqualified opinion on the Company’s internal control over financial
reporting.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 27, 2014
49
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WEX INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
Assets
Cash and cash equivalents
Accounts receivable (less reserve for credit losses of $10,396 in 2013 and $11,709 in 2012)
Available-for-sale securities
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
Deferred income taxes, net
Notes outstanding
Amounts due under tax receivable agreement
Fuel price derivatives, at fair value
Other liabilities
Total liabilities
Commitments and contingencies (Note 17)
Redeemable noncontrolling interest
Stockholders’ Equity
Common stock $0.01 par value; 175,000 shares authorized; 42,901 in 2013 and 42,586 in 2012 shares issued;
38,987 in 2013 and 38,908 in 2012 shares outstanding
Additional paid-in capital
Noncontrolling interest
Retained earnings
Accumulated other comprehensive (loss) income
Treasury stock at cost; 4,007 shares in 2013 and 3,766 shares in 2012
Total stockholders’ equity
Total liabilities and stockholders’ equity
See notes to consolidated financial statements.
December 31,
2013
2012
$
361,486
$
197,662
1,712,061
1,556,275
$
$
$
$
15,963
72,277
88,965
818,402
208,997
154,892
3,433,043
512,878
92,335
16,066
1,088,930
—
285,000
14,293
400,000
77,785
7,358
16,372
16,350
60,097
121,007
847,986
241,950
90,538
3,131,865
527,838
67,419
10,038
890,345
48,400
621,000
18,407
—
86,550
1,729
20,546
2,511,017
2,292,272
18,729
21,662
429
168,891
519
879,519
(15,495)
(130,566)
903,297
426
162,470
—
730,311
37,379
(112,655)
817,931
$
3,433,043
$
3,131,865
50
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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 gain (loss) 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 non-controlling interests
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,
2013
2012
2011
$
527,424
$
470,591
$
190,039
717,463
164,521
103,428
20,200
24,217
15,967
11,176
3,684
5,140
7,069
58,208
4,287
22,827
440,724
276,739
(29,419)
964
(9,851)
—
(33)
238,400
90,102
148,298
(910)
149,208
3.83
3.82
38,946
39,103
$
$
$
152,560
623,151
123,380
103,189
22,539
18,537
12,361
10,155
3,679
4,347
5,373
75,263
4,990
17,719
401,532
221,619
(10,433)
(299)
(12,365)
9,750
(2,089)
206,183
109,474
96,709
(213)
96,922
2.50
2.48
38,840
39,092
$
$
$
$
$
$
436,704
116,372
553,076
104,610
70,202
27,527
15,423
11,803
9,713
3,240
4,325
5,115
45,369
5,453
16,972
319,752
233,324
(11,676)
(459)
(11,869)
—
(715)
208,605
74,983
133,622
—
133,622
3.45
3.43
38,686
38,998
51
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WEX INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Changes in available-for-sale securities, net of tax effect of $(367) in 2013, $(3) in 2012 and $66 in
2011
Changes in interest rate swap, net of tax effect of $0 in 2013, $35 in 2012 and $179 in 2011
Foreign currency translation
Comprehensive income
Less: comprehensive loss attributable to noncontrolling interest
Comprehensive income attributable to WEX Inc.
See notes to consolidated financial statements.
Year ended December 31,
2013
2012
2011
$
148,298
$
96,709
$
133,622
(630)
—
(54,776)
92,892
(910)
(3)
60
6,705
103,471
(242)
108
308
2,567
136,605
—
$
93,802
$
103,713
$
136,605
52
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WEX INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
Balance at December 31, 2010
38,437
$
419
$ 132,583
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
27,605
$
Treasury
Stock
Retained
Earnings
Noncontrolling
interest in
subsidiaries
Total
Equity
$(101,367) $ 499,767
$
— $ 559,007
Stock issued upon exercise of stock
options
Tax benefit from stock option and
restricted stock units
Stock issued upon vesting of restricted
and deferred stock units
Stock-based compensation, net of
shares repurchased for tax
withholdings
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
—
—
—
—
—
3
—
1
—
—
—
—
—
2,913
3,970
—
6,816
—
—
—
—
—
—
—
—
108
308
2,567
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
133,622
Balance at December 31, 2011
38,765
423
146,282
30,588
(101,367)
633,389
Stock issued upon exercise of stock
options
Tax benefit from stock option and
restricted stock units
Stock issued upon vesting of restricted
and deferred stock units
Stock-based compensation, net of
shares repurchased for tax
withholdings
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
—
109
—
—
(200)
—
—
—
—
2
—
1
—
—
—
—
—
—
—
4,623
4,466
—
8,093
(994)
—
—
—
—
—
—
—
—
—
—
—
(3)
60
6,734
—
—
—
—
—
—
(11,288)
—
—
—
—
—
—
—
—
—
—
—
—
—
96,922
—
—
—
—
—
—
—
2,916
3,970
1
6,816
108
308
2,567
— 133,622
— 709,315
—
—
—
—
—
—
—
—
—
—
4,625
4,466
1
8,093
(994)
(11,288)
(3)
60
6,734
96,922
Balance at December 31, 2012
38,908
426
162,470
37,379
(112,655)
730,311
— 817,931
Stock issued upon exercise of stock
options
Tax benefit from stock option and
restricted stock units
Stock issued upon vesting of
restricted and deferred stock units
Stock-based compensation, net of
shares repurchased for tax
withholdings
Purchase of shares of treasury stock
Changes in available-for-sale
securities, net of tax effect of $(367)
Noncontrolling interest investment
Noncontrolling interest net earnings
Foreign currency translation
Net earnings attributable to WEX
Inc.
70
—
250
—
(241)
—
—
—
—
—
1
—
2
—
—
—
—
—
—
—
1,679
6,539
(2)
(1,795)
—
—
—
—
—
—
—
—
—
—
—
(630)
—
—
(52,244)
—
—
—
—
—
(17,911)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,032
(513)
1,680
6,539
—
(1,795)
(17,911)
(630)
1,032
(513)
—
(52,244)
149,208
149,208
Balance at December 31, 2013
38,987
$
429
$ 168,891
$
(15,495) $(130,566) $ 879,519
$
519
$ 903,297
See notes to consolidated financial statements.
53
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WEX INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by (used for) operating
activities:
Net unrealized loss (gain) on derivative instruments
Stock-based compensation
Depreciation, amortization and asset impairments
Goodwill impairment
Deferred taxes
Provision for credit losses
Loss on disposal of property, equipment and capitalized 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
Net cash provided by operating activities
Cash flows from investing activities
Purchases of property, equipment and capitalized software
Purchases of available-for-sale securities
Maturities of available-for-sale securities
Acquisitions and investment, net of cash
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 change in deposits
Net (decrease) increase in borrowed federal funds
Net repayments on 2007 revolving line-of-credit facility
Repayments borrowings on term loan
Loan origination fees
Net (repayments) borrowings on 2011 revolving line-of-credit facility
Borrowings on 2011 term note agreement
Repayments of 2011 term note agreement
Borrowings on 2013 term note agreement
Repayments on 2013 term note agreement
Borrowings on notes outstanding
Other financing debt
Contingent consideration paid for rapid! PayCard
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.
Year ended December 31,
2012
2011
2013
$
148,298
$
96,709
$
133,622
5,628
9,429
60,563
—
26,956
20,200
1,122
(194,418)
(55,440)
(6,365)
25,500
7,586
(743)
(8,765)
39,551
(39,455)
(1,802)
1,192
(11,277)
(51,342)
6,539
(11,222)
1,679
198,596
(48,400)
—
—
(12,023)
(438,500)
—
(182,500)
300,000
(15,000)
400,000
(2,016)
—
(17,911)
179,242
(3,627)
163,824
197,662
361,486
$
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)
71,811
(28,036)
(864)
1,551
(402,475)
(429,824)
4,466
(2,926)
4,625
193,726
41,500
—
—
—
335,700
—
(10,000)
—
—
—
(17,753)
(8,486)
(11,288)
529,564
320
171,871
25,791
197,662
$
(10,872)
9,367
48,112
—
21,749
27,527
—
(198,417)
(11,133)
29,274
3,839
(3,703)
9,185
(7,382)
51,168
(25,145)
(8,509)
841
(7,691)
(40,504)
3,970
(2,551)
2,913
163,853
(52,584)
(332,300)
(75,000)
(6,184)
102,800
200,000
(7,500)
—
—
—
—
—
—
(2,583)
(335)
7,746
18,045
25,791
$
54
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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.
Basis of Presentation
The accompanying consolidated financial statements of WEX Inc. for the years ended December 31, 2013, 2012 and
2011, include the accounts of WEX Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated
in consolidation.
The Company adjusted the consolidated balance sheet amounts as of December 31, 2012, to account for the
measurement period adjustments related to the CorporatePay, UNIK and Fleet One purchase price allocations discussed in Note
3, Business Acquisitions, and Other Intangible Asset Acquisitions below. The Company adjusted the statement of stockholders'
equity amounts as of December 31, 2010, and for the years ended December 31, 2011 and 2012, to present treasury shares
purchased and deferred stock units vested. The Company adjusted the statements of cash flow for the years ended December
31, 2011 and 2012, to combine acquisitions and investments into one single line item presentation.
The presentation of the Company’s consolidated balance sheet as of December 31, 2012 has been corrected for an
immaterial error in the classification of foreign deferred tax liabilities. As of December 31, 2012, the foreign jurisdiction
deferred tax liability balance was erroneously netted with the domestic deferred tax asset balance and presented on the
consolidated balance sheet as a deferred tax asset. This correction of the error resulted in an increase in deferred tax assets and
total assets of $18,407 and a corresponding increase in deferred tax liabilities, total liabilities, and total liabilities and
stockholders’ equity of $18,407. The result of this correction did not impact the Company’s consolidated statements of income,
comprehensive income, stockholders’ equity and cash flows for any period presented.
Use of Estimates and Assumptions
The Company prepares its consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America. These principles require 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.
55
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Available-for-sale Securities
The Company records certain investments as available-for-sale securities. Available-for-sale securities are carried at fair
value, with unrealized gains and losses, net of tax, reported on the consolidated balance sheet in accumulated other
comprehensive income (loss). Realized gains and losses and declines in fair value determined 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; therefore, gains or
losses related to fuel price derivative instruments, both realized and unrealized, are recognized 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.
In prior years, the Company used interest rate derivatives designated as cash flow hedges and, accordingly, the change
in fair value associated with the effective portion of these derivative instruments that qualified for hedge accounting treatment
was recorded as a component of other comprehensive income (loss) and the ineffective portion, if any, was reported in earnings.
Amounts included in other comprehensive income (loss) were reclassified into earnings in the same period during which the
hedged item affected earnings. These instruments were presented as either other assets or accrued expenses on the consolidated
balance sheet.
The Company assessed the hedge effectiveness of the interest rate swaps in accordance with the requirements outlined
in the accounting standards. For these hedges, management documented, 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 were identical, and the creditworthiness of the counterparty to the hedging
instrument remained sound, there was no hedge ineffectiveness as long as those conditions continue to be met. As of
December 31, 2013, 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 primarily computed using the
straight-line method over the estimated useful lives shown below. Leasehold improvements are primarily depreciated using the
straight-line method over the lesser of the useful life of the asset or over the remaining lease term.
Below is the estimated useful lives for assets placed in service during 2013 and beyond:
Furniture, fixtures and equipment
Computer software
Leasehold improvements
Capitalized Software
Estimated Useful Lives
3 to 5 years
18 months to 7 years
up to 5 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 beginning when technological feasibility of the software has
been established. Costs incurred prior to establishing technological feasibility are expensed as incurred. Technological
feasibility is established when the Company has completed all planning, designing, coding and testing activities that are
necessary to determine that the software can be produced to meet its design specifications, including functions, features and
technical performance requirements. Capitalization of costs ceases when the software is ready for its intended use. Software
development costs are amortized using the straight-line method over the estimated useful life of the software.
56
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Below are the amounts of internal-use software capitalized and amortized:
Amounts capitalized for internal-use computer software
Amounts expensed for amortization of internal-use computer software
Goodwill and Other Intangible Assets
Year ended December 31,
2013
2012
2011
$
18,360
$
17,341
$
18,830
20,694
17,463
18,690
The Company classifies intangible assets in the following 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 impairment tests at the 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, amortization and impairment expense on the consolidated
statements of income. The Company's annual goodwill and intangible asset impairment tests performed as of October 1, 2013
did not identify any impairment. The Company’s annual goodwill and intangible assets impairment tests, 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. On September 30, 2012, the Company impaired $16,171 of goodwill associated with
Wright Express Australia Prepaid.
The Company determines the useful lives of its identifiable intangible assets after considering the specific facts and
circumstances related to each intangible asset. The factors that management considers when determining useful lives include
the contractual term of agreements, 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 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 ended December 31, 2012,
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, 2013 and 2011. Write-offs due to the acquisition of
Fleet One were recorded in depreciation, amortization 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.
57
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Other Assets
The Company has an investment in the stock of the Federal Home Loan Bank totaling $1,479 for the year ended
December 31, 2013, $1,534 for the year ended December 31, 2012 and $1,562 for the year ended December 31, 2011. 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, 2013, 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. 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. 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
Company records revenue at the time the transaction is captured.
Interchange income is earned by the Company’s corporate purchase card and payroll card products and is included in
payment processing revenue. Interchange income is a fee paid by a merchant bank to the card-issuing bank through the
interchange network. Interchange fees are set by the credit card providers. The Company recognizes interchange income
as earned.
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, and as such, recognizes revenue net of the wholesale cost of the underlying products and services. 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. The Company also recognizes service fees related to rapid! PayCard
services for card fees charged to the cardholder.
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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
$4,557 in 2013 and $3,905 in 2012. 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 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 WEX 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.
The Company enters into contracts with certain large customers or strategic relationships that provide for fee rebates
tied to performance milestones. Rebates are recorded as a reduction in revenue in the same period that revenue is earned or
performance occurs. Rebates and incentives are calculated based on estimated performance and the terms of the related
business agreements.
Stock-Based Compensation
The Company recognizes the fair value of all stock-based payments to employees in its financial statements. The
Company measures stock-based compensation expense at the grant date, based on the estimated fair value of the award and
uses the straight-line method of attribution, net of estimated forfeitures, for expensing awards over the employee requisite
service period. The Company estimates the fair value of stock option awards using a Black-Scholes-Merton valuation model.
The fair value of Restricted Stock Units (RSUs), including Performance Based Restricted Stock Units (PBRSUs), is determined
and fixed on the grant date based on the Company's stock price. Stock-based compensation is recorded in salary and other
personnel expense.
Advertising Costs
Advertising and marketing costs are expensed in the period the advertising activity occurs.
Income Taxes
Income taxes are accounted for under the asset and liability method. Under this method, 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 are reduced and reflected
as a reduction of the overall income tax provision.
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Earnings per Common Share
When diluted earnings per common share is calculated, weighted-average outstanding shares are adjusted for the
dilutive effect of shares issuable upon the assumed conversion of the Company’s common stock equivalents, which consist of
outstanding stock options and unvested restricted stock units. Holders of unvested restricted stock units are not entitled to
participate in dividends, should they be declared.
Income available for common stockholders used to calculate earnings per share is as follows:
Net earnings attributable and available for common stockholders –Basic and Diluted
$
149,208
$
96,922
$
133,622
Weighted average common shares outstanding used to calculate earnings per share are as follows:
Year ended December 31,
2013
2012
2011
Weighted average common shares outstanding – Basic
Unvested restricted stock units
Stock options
Weighted average common shares outstanding – Diluted
Foreign Currency Movement
Year ended December 31,
2013
2012
2011
38,946
38,840
38,686
117
40
138
114
128
184
39,103
39,092
38,998
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. 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 consolidated
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
In July 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2013-11
Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar
Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11"). The amendments in ASU 2013-11 require entities to present
an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred
tax asset for a net operating loss ("NOL") carryforward, a similar tax loss, or a tax credit carryforward except when the
following exist: (i) an NOL carryforward, a similar tax loss, or a tax credit carryforward is not available as of the reporting date
under the governing tax law to settle taxes that would result from the disallowance of the tax position, and (ii) the entity does
not intend to use the deferred tax asset for this purpose (provided the tax law permits a choice). If any of these conditions exist,
entities should present an unrecognized tax benefit in the financial statements as a liability and should not net the unrecognized
tax benefit with a deferred tax asset. ASU 2013-11 is effective for interim and annual periods beginning after December 15,
2013. The Company does not believe that the adoption of ASU 2013-11 will have a material impact on its results of operations
when adopted in 2014.
In February 2013, the FASB issued Accounting Standards Update No. 2013-02 Comprehensive Income (Topic 220):
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This guidance is intended to provide
60
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
disclosure on items reclassified out of accumulated other comprehensive income either in the notes or parenthetically on the
face of the income statement. The required disclosure is in Note 18, Accumulated Other Comprehensive Income.
2. Supplemental Cash Flow Information
Interest paid
Income taxes paid
Significant Non-cash Transactions
Year ended December 31,
2013
2012
2011
$
$
23,646
48,869
$
$
13,916
51,768
$
$
15,704
52,930
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 estimated that approximately $313
would be paid on projected performance milestones. On June 30, 2013, the Company revised the estimate based on current
performance milestones to be approximately $511, which was paid on July 1, 2013. 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.
3. Business Acquisitions and Other Intangible Asset Acquisitions
Acquisition of FastCred
On October 15, 2013, the Company's Brazilian 51 percent majority-owned subsidiary UNIK S.A. (“UNIK”) acquired
all of the stock of FastCred, a provider of fleet cards to the heavy truck or over-the-road segment of the fleet market, for
approximately $12,309, net of cash acquired. The Company purchased FastCred to expand its Fleet Payment Solutions
segment. During the fourth quarter of 2013, the Company allocated $4,282 of the cost of the acquisition to goodwill and
$12,594 to other intangible assets, primarily customer relationships. The allocation of the purchase price is preliminary as the
Company is still reviewing the intangible asset valuation. The total weighted average useful life of the intangible assets
acquired from FastCred is 5 years. Goodwill recorded as a result of the FastCred acquisition is not currently deductible for
income tax purposes. No pro forma information has been included in these financial statements as the operations of FastCred
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 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 $27,800, 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. During the first quarter of 2013, the Company obtained information to assist in determining the fair values of certain
tangible and intangible assets acquired and liabilities assumed as of the CorporatePay acquisition date. Based on such
information, the Company retrospectively adjusted the fiscal year 2012 comparative information resulting in an increase in
accounts receivable of $508, a decrease in deferred taxes of $32, an increase in intangible assets of $140, a decrease in goodwill
of $247, and an increase in accrued expenses of $369. There were no changes to the previously reported consolidated
statements of operations or statements of cash flows. With the initial purchase of CorporatePay, the Company established a full
valuation allowance of $1,219 on the acquired net operating losses. The Company believes it is more likely than not that the
losses will not be utilized. The valuations of all assets and liabilities have been finalized.
Goodwill related to the CorporatePay acquisition 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.
61
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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)
(b)
(c)
Weighted average life – 6.2 years.
Weighted average life – 6.3 years.
Weighted average life – 5.3 years.
$
27,783
1,585
(629)
(4,040)
8,233
1,614
1,453
19,567
$
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, 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 $22,800.
The purchase agreement also included a potential contingent consideration component based on performance milestones.
Although the contingent consideration was not capped, the Company estimated the amount of the liability, at the time of
acquisition, to be approximately $991 at the time of acquisition. On December 31, 2012, the Company revised the estimate
based on current performance milestones to be approximately $313. On June 30, 2013, the Company finalized the contingent
consideration amount based on current performance milestones and determined it to be approximately $511, which was paid on
July 1, 2013. The purchase agreement further provides the Company with a call option which allows the Company to acquire
the remaining shares at specific times over a three-year period. Additionally the 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. Using the proceeds from the acquisition of UNIK, UNIK paid down approximately
$19,600 of existing financing debt. As of December 31, 2013, UNIK has approximately $7,278 of financing debt, classified in
other liabilities on the Company’s consolidated balance sheets.
Based on its ownership position, the Company 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. Goodwill associated with the transaction is not expected to be deductible
for income tax 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. During the third quarter of 2013, the Company obtained information to assist
in determining the fair values of certain tangible and intangible assets acquired and liabilities assumed as of the UNIK
acquisition date. Based on such information, the Company retrospectively adjusted the fiscal year 2012 comparative
information resulting in an increase in deferred taxes of $2,243, an increase in goodwill of $4,355, and an increase in accrued
expenses of $6,598. There were no changes to the previously reported consolidated statements of operations or statements of
cash flows. The valuations of all assets and liabilities have been finalized.
62
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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:
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
Customer relationships
Trademarks and trade name
(b)
(a)
(c)
Recorded goodwill
(a)
(b)
(c)
Weighted average life – 6.2 years.
Weighted average life – 5.9 years.
Weighted average life – 5.5 years.
$
$
$
44,701
21,904
22,797
1,566
11,726
(12,640)
(36,866)
14,193
15,171
1,272
28,375
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 to 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. During the third quarter of 2013, the
Company obtained information to assist in determining the fair values of certain tangible and intangible assets acquired and
liabilities assumed as of the Fleet One acquisition date. Based on such information, the Company retrospectively adjusted the
fiscal year 2012 comparative information resulting in a decrease in accounts receivable of $47, an increase in deferred taxes of
$261, a decrease in goodwill of $407, a decrease in taxes payable of $113 and a decrease in accrued expenses of $80. There
were no changes to the previously reported consolidated statements of operations or statements of cash flows. The valuations of
all assets and liabilities have been finalized.
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.
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
(a)
Acquired software
Customer relationships
Trademarks and trade name
(b)
(c)
Recorded goodwill
(a)
(b)
(c)
Weighted average life – 6.7 years.
Weighted average life – 5.5 years.
Weighted average life – 5.5 years.
$
376,258
152,527
(151,647)
(693)
35,000
74,000
4,000
263,071
$
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:
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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, 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 finalized the valuation of the intangible assets
associated with the trade name. The goodwill is expected to be deductible for tax purposes.
A contingent consideration agreement was entered into in connection with the purchase of rapid! PayCard. Under the
terms of the agreement the former owners of rapid! PayCard 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. 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 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
(a)
Customer relationships
Trade name
Recorded goodwill
(a)
$
$
18,081
75
(85)
105
4,600
1,600
11,786
(a)
Weighted average life – 4.7 years
See Note 7 for further discussion of the goodwill and intangible balances that arose as a result of the above transactions.
4. Accounts Receivable and 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.
At December 31, 2013, approximately 95 percent of the outstanding balance of total trade accounts receivable was
current and approximately 99 percent of the outstanding balance of total trade accounts receivable was less than 60 days past
due. At December 31, 2012, approximately 96 percent of the outstanding balance of total trade accounts receivable was current
and approximately 99 percent of the outstanding balance was less than 60 days past due.The outstanding balance is made up of
64
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
receivables from a wide range of industries. No customer makes up more than 4 percent of the outstanding receivables at
December 31, 2013.
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
Currency translation
Balance, end of period
5. Investments
Available-for-sale Securities
Year ended December 31,
2013
2012
2011
$
$
$
11,709
$
11,526
$
20,200
(27,781)
6,663
(395) $
10,396
$
22,539
(27,961)
5,605
— $
11,709
$
10,237
27,527
(31,578)
5,340
—
11,526
The Company’s available-for-sale securities as of December 31, 2013 and 2012, are presented below:
2013
Mortgage-backed securities
Asset-backed securities
Municipal bonds
Equity securities (a)
Total available-for-sale securities
2012
Mortgage-backed securities
Asset-backed securities
Municipal bonds
Equity securities (a)
Total available-for-sale securities
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
$
$
$
$
867
$
1,393
610
13,777
16,647
1,780
1,652
630
11,974
$
$
16,036
$
16
—
4
—
20
79
3
13
241
336
$
$
$
$
44
2
95
563
704
20
—
2
—
22
$
$
$
$
839
1,391
519
13,214
15,963
1,839
1,655
641
12,215
16,350
(a) These securities exclude $4,339 in equity securities designated as trading as of December 31, 2013, and $2,921 as of December 31, 2012, included in
other assets on the consolidated balance sheets. See Note 15 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, 2013 and 2012 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 15, 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 $1,192 for the year ended December 31, 2013, $1,551
for the year ended December 31, 2012, and $841 for the year ended December 31, 2011.
65
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The maturity dates of the Company’s available-for-sale securities are as follows:
Due within 1 year
Due after 1 year through year 5
Due after 5 years through year 10
Due after 10 years
Mortgage-backed securities with original maturities of 30 years
Equity securities with no maturity dates
Total
December 31,
2013
2012
Cost
Fair Value
Cost
Fair Value
$
— $
— $
— $
729
—
1,274
867
13,777
728
—
1,182
839
13,214
348
543
1,391
1,780
11,974
$
16,647
$
15,963
$
16,036
$
—
348
543
1,404
1,839
12,216
16,350
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
Total property, equipment and capitalized software, net
December 31,
2013
2012
$
44,111
$
160,796
7,675
5,095
217,677
(145,400)
32,923
142,021
5,740
5,072
185,756
(125,659)
$
72,277
$
60,097
In 2012, 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 is included in
depreciation, amortization and impairments in the consolidated statements of income. The Company did not incur significant
impairment charges during 2013 and 2011. Depreciation expense was $25,061, $25,384 and $22,957 in 2013, 2012 and
2011, respectively.
66
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
7. Goodwill and Other Intangible Assets
The changes in goodwill during the period January 1 to December 31, 2013 were as follows:
Gross goodwill, beginning of period (a)
Impact of foreign currency translation
Acquisition of FastCred
Gross goodwill, end of period
Accumulated impairment, end of period
Net goodwill, end of period
Fleet Payment
Solutions
Segment (a)
Other
Payment
Solutions
Segment (a)
Total (a)
$
779,654
$
85,840
$
865,494
(30,540)
4,282
753,396
(1,337)
(3,326)
—
82,514
(16,171)
(33,866)
4,282
835,910
(17,508)
$
752,059
$
66,343
$
818,402
(a)
The prior years amounts have been adjusted to reflect changes as a result of finalizing the purchase accounting.
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
Acquisition of UNIK (a)
Acquisition of CorporatePay (a)
Acquisition of Fleet One (a)
Gross goodwill, end of period (a)
Accumulated impairment, beginning of period
Impairment charge during period
Accumulated impairment, end of period
Net goodwill, end of period
Fleet Payment
Solutions
Segment (a)
Other
Payment
Solutions
Segment (a)
Total (a)
$
512,184
$
37,920
$
550,104
4,399
—
—
263,071
(22)
28,375
19,567
—
$
779,654
$
85,840
$
—
(1,337)
(1,337)
—
(16,171)
(16,171)
4,377
28,375
19,567
263,071
865,494
—
(17,508)
(17,508)
$
778,317
$
69,669
$
847,986
(a)
The prior years amounts have been adjusted to reflect changes as a result of finalizing the purchase accounting.
The Company adjusted the consolidated balance sheet amount for goodwill and intangible assets at December 31,
2012, and December 31, 2011, to account for the measurement period adjustments related to the CorporatePay, UNIK, Fleet
One and rapid! PayCard purchase price allocations.
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 WEX Prepaid Cards Australia.
On September 30, 2012, the Company recorded an estimated goodwill impairment loss of $16,171 related to the purchase of
WEX Prepaid Cards 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.
67
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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, 2013, were as follows:
Definite-lived intangible assets
Acquired software (a)
Customer relationships (a)
Patent
Trade name (a)
Indefinite-lived intangible assets
Trademarks, trade names and brand names
Net Carrying
Amount,
Beginning of
Period (a)
$
71,343
150,290
2,365
7,407
10,545
Transfer from
indefinite-lived
intangible assets
to definite-lived
intangible assets
Acquisition
Amortization
Impacts of
Foreign
Currency
Translation
Net Carrying
Amount,
End of
Period
—
12,594
—
—
—
—
—
—
2,421
(8,417)
(23,552)
(465)
(713)
(2,162)
(8,850)
(228)
(280)
(2,421)
—
—
(880)
(33,147)
(12,400)
60,764
130,482
1,672
8,835
7,244
208,997
Total
$
241,950
$
12,594
$
(a)
The prior years amounts have been adjusted to reflect changes as a result of finalizing the purchase accounting.
During the third quarter of 2013, the Company determined that the intangible asset recorded for the trade name
associated with Wright Express Corporation should be reclassified from an indefinite-lived intangible asset to a definite-lived
intangible asset due to the current re-branding efforts of changing from the Wright Express brand to the WEX brand initiated
domestically and abroad. The Company determined that a 10 year life would be appropriate in conjunction with the re-
branding strategy initiated during the third quarter of this year.
The changes in intangible assets during the period January 1 to December 31, 2012, were as follows:
Acquisition (a)
Amortization
Impacts of
Foreign
Currency
Translation
Net Carrying
Amount, End
of Period
Net Carrying
Amount,
Beginning of
Period
$
19,034
75,827
2,766
1,000
10,429
Definite-lived intangible assets
Acquired software (a)
Customer relationships (a)
Patent
Trade name (a)
Indefinite-lived intangible assets
Trademarks, trade names and brand names
Total
57,426
$
(4,745) $
(372) $
(18,023)
1,701
90,785
—
6,725
(349)
(351)
(52)
33
116
71,343
150,290
2,365
7,407
10,545
241,950
$
109,056
$
154,936
$
(23,468) $
1,426
$
—
—
(a)
The prior years amounts have been adjusted to reflect changes as a result of finalizing the purchase accounting.
The following table presents the estimated amortization expense related to the definite-lived intangible assets listed
above for each of the next five fiscal years:
Estimated Amortization Expense
2014
2015
2016
2017
2018
44881_10k.pdf Page 72
$
$
$
$
$
33,449
30,905
27,414
23,734
20,277
68
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Other intangible assets consist of the following:
Definite-lived intangible assets
Acquired software
Non-compete agreement
Customer relationships
Patent
Trade name
Indefinite-lived intangible assets
Trademarks, trade names and brand names
Total
December 31, 2013
December 31, 2012
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross
Carrying
Amount (a)
Accumulated
Amortization
Net Carrying
Amount (a)
$
83,018
$
(22,254) $
60,764
$
86,527
$
(15,184) $
71,343
100
200,503
2,935
10,112
(100)
(70,021)
(1,263)
(1,277)
—
100
130,482
202,061
1,672
8,835
3,430
7,827
(100)
(51,771)
(1,065)
(420)
—
150,290
2,365
7,407
$
296,668
$
(94,915)
201,753
$
299,945
$
(68,540)
231,405
7,244
$
208,997
10,545
$
241,950
(a)
The prior years amounts have been adjusted to reflect changes as a result of finalizing the purchase accounting.
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 customer 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,
2013
2012
$
$
481,325
31,553
512,878
$
$
500,723
27,115
527,838
December 31,
2013
2012
$
453,539
$
441,100
117,857
222,546
276,422
18,566
48,343
123,614
261,126
16,162
$
1,088,930
$
890,345
0.53%
0.25%
—
0.57%
0.39%
—
WEX Bank has issued certificates of deposit in various maturities ranging between 1 month and 2 years and with fixed
interest rates ranging from 0.30 percent to 0.80 percent as of December 31, 2013. WEX Bank may issue certificates of deposit
without limitation on the balance outstanding. WEX Bank must maintain minimum financial ratios, which include risk-based
asset and capital requirements, as prescribed by the FDIC. As of December 31, 2013, 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.
69
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The Company also had federal funds lines of credit totaling $125,000 at December 31, 2013 and $140,000 at December
31, 2012. There were no borrowings against these lines of credit at December 31, 2013 and $48,400 in outstanding borrowings
against these lines of credit 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 at any time, although
notification may be required and the monthly number of transactions is limited. As of December 31, 2013, the weighted average
interest rate on interest-bearing money market deposits was 0.25 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, will establish and maintain the NOW accounts. During 2013 and the last three quarters of 2012,
the Company received non-interest bearing NOW account deposits. As of December 31, 2013, the Company has $276,422 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,
2013
2012
2011
0.51%
0.41%
—
0.31%
0.65%
0.42%
—
0.49%
0.81%
0.44%
—
0.55%
Average deposits and borrowed federal funds balance
$
1,012,806
$
888,135
$
695,765
10. Derivative Instruments
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, 2013, 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 2014 – June 2015
Fuel price derivative instruments – diesel
Put and call option contracts settling January 2014 – June 2015
Total fuel price derivative instruments
Aggregate
Notional
Amount
(gallons)
(a)
37,865
18,015
55,880
(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 Oxgenate Blending and the U.S. Department of
Energy’s weekly retail on-highway diesel fuel price for the month.
70
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
As of December 31, 2012, 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 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 Oxgenate Blending and the U.S. Department of
Energy’s weekly retail on-highway diesel fuel price for the month.
Derivatives not designated
as hedging instruments
Commodity contracts
Asset Derivatives
Liability Derivatives
December 31, 2013
December 31, 2012
December 31, 2013
December 31, 2012
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
Fuel price
derivatives,
at fair value
$
—
Fuel price
derivatives,
at fair value
Fuel price
derivatives,
at fair value
Fuel price
derivatives,
at fair value
$ 7,358
$
—
$ 1,729
The following table presents information on the location and amounts of derivative gains and losses in the consolidated
statements of income:
Amount of Gain or
(Loss) Recognized in
OCI on Derivative
(a)
(Effective Portion)
For
the period ended
December 31,
2013
2012
Location of Gain
or
(Loss)
Reclassified
from
Accumulated
OCI into Income
(Effective
Portion)
Amount of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
For the period
ended
December 31,
2013
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,
2013
2012
Derivatives
Designated as
Hedging Instruments
Interest rate contracts
$
— $
60
Financing interest
expense
$
— $
(109)
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,
2013
2012
$
(9,851) $
(12,365)
(a)
(b)
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 $0 in 2013
and $35 in 2012.
No ineffectiveness was reclassified into earnings nor was any amount excluded from effectiveness testing.
71
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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 2015. 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.
72
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The following table presents information about the Options:
December 31,
2013
2012
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 2014 – June 2015
Options settling July 2014 – March 2015
Options settling April 2014 – December 2014
Options settling January 2014 – September 2014
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
Total fuel price derivative instruments – unleaded fuel
Fuel price derivative instruments – diesel
Options settling October 2014 – June 2015
Options settling July 2014 – March 2015
Options settling April 2014 – December 2014
Options settling January 2014 – September 2014
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
Total fuel price derivative instruments – diesel
Total fuel price derivative instruments
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2.568
2.510
2.615
2.700
2.485
2.633
2.670
2.843
2.540
2.605
3.785
3.788
3.800
3.810
3.713
3.878
3.823
3.990
3.835
3.792
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2.628
2.570
2.675
2.760
2.545
2.693
2.730
3.903
2.600
2.665
3.845
3.848
3.860
3.870
3.773
3.938
3.883
4.050
3.895
3.852
7,582
$
(481)
— $
7,732
7,861
8,182
4,144
2,364
—
—
—
—
(1,076)
(1,051)
(911)
(1,407)
(290)
—
—
—
—
—
—
—
6,269
4,643
10,436
7,291
4,803
2,310
—
—
—
—
(514)
308
(398)
457
(1,161)
(314)
37,865
$ (5,216)
35,752
$ (1,622)
3,609
$
3,691
3,745
4,046
1,862
1,062
—
—
—
—
(318)
(385)
(436)
(516)
(413)
(74)
—
—
—
—
18,015
$ (2,142)
55,880
$ (7,358)
— $
—
—
—
2,816
2,086
4,689
3,276
2,158
1,038
16,063
51,815
—
—
—
—
(224)
108
(162)
363
(89)
(103)
(107)
(1,729)
(a)
(b)
The settlement of the Options is based upon the New York Mercantile Exchange’s New York Harbor Reformulated Gasoline Blendstock for Oxgenate
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.
The following table summarizes the changes in fair value of the fuel price derivatives which have been recorded in net
realized and unrealized losses on derivative instruments on the consolidated statements of income:
Realized (losses)
Unrealized (losses) gains
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,
2013
2012
2011
$
$
(4,223) $
(10,641) $
(22,741)
(5,628)
(1,724)
(9,851) $
(12,365) $
10,872
(11,869)
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
73
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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. Term loan payments in the
amount of $2,500 per quarter began on June 30, 2011, and were 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 would have been 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 had posted approximately $2,350 letters of credit as collateral for fuel 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 the existing indebtedness under the 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 bears 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 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 would have matured on May 23, 2016.
The 2011 Credit Agreement was replaced in January of 2013 by an Amended and Restated Credit Agreement (the “2013
Credit Agreement”).
74
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
2013 Credit Agreement and $400 Million Notes Outstanding
On January 18, 2013, the Company entered into 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 and
letter of credit 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. 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, 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.
Amounts outstanding under the 2013 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, and (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 2013 Credit Agreement mature in January of 2018, unless extended pursuant to the terms of the 2013 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, from
January 30, 2013, in a private placement to “qualified institutional buyers” as 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. 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 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.
75
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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.
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 capitalized approximately $15,547 in loan origination fees in association with these borrowings and
wrote-off approximately $1,000 of previous issuance costs in the first quarter of 2013.
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.
As of December 31, 2013, the Company had $685,000 of loans outstanding. This includes $285,000 under the 2013
Credit Agreement and $400,000 of notes outstanding. As of December 31, 2013, the interest rate for the borrowings under the
2013 Credit Agreement was 1.93 percent
As of December 31, 2013, the Company has posted approximately $11,947 letters of credit as collateral for lease
agreements and virtual card and fuel payment processing activity at our foreign subsidiaries. Accordingly, at December 31,
2013, the Company had $688,000 of availability under the 2013 Credit Agreement, subject to the covenants as described below.
The following table presents information about the outstanding borrowings under the 2013 Credit Agreement:
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
Outstanding balance on $400 million 4.750% interest rate notes outstanding
Total outstanding balance on revolving line-of-credit facility, term loan and notes
Weighted average rate based on LIBOR (including impact of interest rate swaps)
Rate based on the prime rate
December 31,
2013
2012
$
285,000
$
592,500
—
400,000
28,500
—
$
685,000
$
621,000
1.93%
3.75%
1.71%
3.75%
76
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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
2013 Credit Agreement
$700 Million Revolver:
Interest expense based on LIBOR
Fees
Amortization of loan origination fees
$300 Million Term Loan:
Interest expense based on LIBOR
Amortization of loan origination fees
$400 Million Notes Outstanding:
4.750% interest expense
Amortization of loan origination fees
Realized losses on interest rate swaps (Note 10)
Deferred loan costs associated with the extinguishment of debt
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,
2013
2012
2011
— $
— $
1,084
—
—
—
—
—
—
270
100
249
— $
— $
1,703
— $
— $
—
—
911
863
— $
— $
1,774
350
$
54
36
43
170
11
664
400
2,098
1,122
5,496
491
17,469
674
27,750
$
$
$
$
$
$
$
$
$
$
3,103
1,083
1,369
1,100
3,339
297
10,291
$
— $
— $
— $
— $
— $
— $
— $
— $
— $
109
$
1,004
1
—
33
1,758
566
1,047
667
2,330
208
6,576
—
—
—
—
—
—
—
—
830
—
793
29,419
$
10,433
$
11,676
1.93%
3.75%
1.79%
3.75%
1.91%
3.68%
300,056
19,162
$
$
366,387
28,885
$
$
362,014
22,615
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
The 2013 Credit Agreement and Indenture contain 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
77
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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, 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 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.
Other
As of December 31, 2013, WEX Bank pledged approximately $531,592 of fleet receivables held by WEX Bank to the
Federal Reserve Bank as collateral for potential borrowings, through 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 $313,639
as of December 31, 2013. As of December 31, 2013, WEX Bank had no borrowings on this line of credit through the Federal
Reserve Bank Discount Window.
As of December 31, 2013, UNIK has approximately $7,278 of financing debt, classified in other liabilities on the
Company’s consolidated balance sheets.
12. Income Taxes
Income before income taxes consisted of the following:
United States
Foreign
Total
Year ended December 31,
2013
2012
2011
$
$
249,311
(10,911)
238,400
$
$
224,029
(17,846)
206,183
$
$
224,448
(15,843)
208,605
Income tax expense (benefit) from continuing operations consisted of the following for the years ended December 31:
2013
Current
Deferred
2012
Current
Deferred
2011
Current
Deferred
United States
State
and Local
Foreign
Total
$
$
$
$
$
$
52,118
31,020
48,632
22,560
43,886
25,875
$
$
$
$
$
$
5,176
1,562
3,460
$
$
$
(1,301) $
6,697
299
$
$
5,255
$
(5,029) $
18,681
17,442
1,050
$
$
$
(2,824) $
62,549
27,553
70,773
38,701
51,633
23,350
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:
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
78
44881_10k.pdf Page 82
Year ended December 31,
2013
2012
2011
35.0%
1.9
0.8
—
0.1
37.8%
35.0%
1.0
16.8
(0.5)
0.8
53.1%
35.0%
1.2
—
—
(0.3)
35.9%
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The tax effects of temporary differences in the recognition of income and expense for tax and financial reporting
purposes that give rise to significant portions of the deferred tax assets and the deferred tax liabilities are presented below:
Deferred assets related to:
Reserve for credit losses
Foreign tax credit
Stock-based compensation, net
Net operating loss carry forwards
Other assets
Derivatives
Intangibles, net
Deferred tax liabilities related to:
Derivatives
Other assets
Property, equipment and capitalized software
Valuation allowance primarily on net operating loss carryfowards
Deferred income taxes, net
Net deferred tax assets (liabilities) by jurisdiction are as follows:
United States
Australia
New Zealand
The Netherlands
United Kingdom
Brazil
Total
December 31,
2013
2012
$
4,193
$
3,303
9,111
11,765
4,588
1,862
51,563
86,385
—
1,379
9,042
10,421
1,292
4,935
2,862
10,304
9,766
5,880
—
79,995
113,742
194
1,299
8,430
9,923
1,219
$
74,672
$
102,600
December 31,
2013
2012
$
87,940
$
118,797
(9,438)
(13,053)
45
89
57
(4,021)
48
73
(2,370)
(895)
$
74,672
$
102,600
The deferred tax assets and deferred tax liabilities are included in deferred income taxes, net on the consolidated
balance sheet where a right of offset exists.
The Company’s primary tax jurisdictions are the United States and Australia. The Company had approximately
$561,469 of state and $31,489 of foreign net operating loss carry forwards at December 31, 2013 and approximately $462,396
of state and $22,183 of foreign net operating loss carry forwards at December 31, 2012. These U.S. losses expire at various
times through 2033. Foreign losses in Brazil and the U.K. have indefinite carry forward periods. The Company has established
a valuation allowance primarily for acquired net operating losses in the UK for which the Company has determined it is more
likely than not that the losses will not 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 $4,665 at December 31, 2013, and
$1,756 at December 31, 2012. These earnings are considered to be indefinitely reinvested, and accordingly, no U.S. federal and
state income taxes have been provided thereon. Upon distribution of these earnings in the form of dividends or otherwise, the
Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes
payable to the various foreign countries. The Company has determined that the amount of taxes attributable to these
undistributed earnings is not practicably determinable.
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
79
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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 or separate
income tax returns in most states. The Company also files consolidated or separate income tax returns in non-U.S. jurisdictions
where required. In the normal course of business, the Company is no longer subject to income tax examination for the years
prior to 2010.
A reconciliation of the beginning and ending amount of unrecognized tax benefits excluding interest and penalties is
as follows:
Beginning balance
Increases related to prior year tax position
(Decreases) increases related to prior year tax positions, due to foreign currency exchange
Ending balance
Year ended December 31,
2013
2012
2011
$
$
6,176
$
6,059
$
—
(893)
—
117
5,283
$
6,176
$
—
6,059
—
6,059
At December 31, 2013, the Company had $6,908 of net unrecognized tax benefits. If recognized, $6,908 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 $1,625 as of December 31, 2013, $1,313 as of December 31, 2012 and $500 as of December 31, 2011,
for penalties and interest related to uncertain tax positions.
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. The Company also 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.
13. Tax Receivable Agreement
As a consequence of the Company’s separation from its former parent company in 2005, the tax basis of the Company’s
net tangible and intangible assets increased (the “Tax Basis Increase”). The Tax Basis Increase reduced the amount of tax that
the Company would pay in the future to the extent the Company generated taxable income in sufficient amounts. The Company
was contractually obligated, pursuant to its 2005 Tax Receivable Agreement with the Company’s former parent company
(Cendant Corporation), to remit 85 percent of any such cash savings. The estimated total payments owed to Cendant
Corporation based on facts available at that time, was reflected as a liability titled “Amounts due under tax
receivable agreement.”
The amount of these estimated future payments is dependent upon future statutory tax rates and the Company’s ability
to generate sufficient taxable income adequate to cover the tax depreciation, amortization and interest expense associated with
the Tax Basis Increase. The Company regularly reviews its estimated blended tax rates and projections of future taxable
earnings to determine whether changes in the estimated liability are required. Any changes to the estimated future payments due
to changes in estimated blended tax rates are recorded in the income statement as changes in amounts due under tax
receivable agreement.
80
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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, net of bank fees and legal expenses, as prepayment in full to settle the remaining
obligations to Realogy under the 2005 Tax Receivable Agreement. 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
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 $33, $2,089 and $715 charge to
non-operating expense for the years ended December 31, 2013, 2012 and 2011, respectively.
14. 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 the 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 the plan at any time. Contributions to the plan are
voluntary. The Company contributed $2,991, $2,295 and $2,094 in matching funds to the plan for the years ended
December 31, 2013, 2012 and 2011, respectively.
During 2012, the Company acquired Fleet One which, as of the date of the acquisition, had its own employee savings
plan, the Fleet One 401(k) Retirement Plan (“Fleet One Plan”). As of December 31, 2012, the Fleet One Plan was merged with
the existing WEX plan, and the existing plan recorded a receivable for the amount of net assets available for benefits it expected
to receive from the Fleet One Plan. Subsequent to year end, net assets available for benefits totaling $2,787 were received by
the plan on January 15, 2013, in a transfer from the Fleet One Plan. On January 1, 2013, Fleet One employees became eligible
to participate in the existing WEX plan.
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 $4,339 at December 31, 2013, and $2,921 at December 31, 2012. 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 $4,339 at December 31, 2013, and $2,921 at December 31, 2012. Such amounts are included in other assets on the
consolidated balance sheet.
15. Fair Value
The Company holds mortgage-backed and other asset-backed securities, fixed income and equity securities, derivatives
and certain other financial instruments which are carried at fair value. The Company determines fair value based upon quoted
prices when available or through the use of alternative approaches, such as model pricing, when market quotes are not readily
accessible or available. The Company carries certain of its liabilities at fair value, including its derivative liabilities. In
determining the fair value of the Company’s obligations, various factors are considered including: closing exchange or over-
the-counter market price quotations; time value and volatility factors underlying options and derivatives; price activity for
equivalent instruments; the Company’s own-credit standing; and counterparty credit risk.
These valuation techniques may be based upon observable and unobservable inputs. Observable inputs reflect market
data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types
of inputs create the following fair value hierarchy:
81
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
•
•
•
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 2013:
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
Fair Value Measurements at Reporting Date
Using
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
December 31,
2013
$
$
$
$
$
839
$
— $
839
$
1,391
519
13,214
15,963
4,339
5,216
2,142
7,358
$
$
$
$
—
—
13,214
13,214
4,339
$
$
— $
—
— $
1,391
519
—
2,749
$
— $
5,216
—
5,216
$
$
—
—
—
—
—
—
—
2,142
2,142
(a)
(b)
The fair value of these instruments is recorded in other assets.
The consolidated balance sheet presentation combines unleaded fuel and diesel fuel positions.
82
44881_10k.pdf Page 86
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 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
Fair Value Measurements at Reporting Date
Using
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs (Level 3)
December 31,
2012
$
$
$
$
$
$
1,839
$
— $
1,839
$
1,654
641
12,216
16,350
2,921
1,622
107
1,729
313
$
$
$
$
—
—
12,216
12,216
2,921
$
$
— $
—
— $
—
1,654
641
—
4,134
$
— $
1,622
—
1,622
$
$
— $
—
—
—
—
—
—
—
107
107
313
(a)
(b)
The fair value of these instruments is recorded in other assets.
The consolidated balance sheet presentation combines unleaded fuel and diesel fuel positions.
The following table presents a reconciliation of the beginning and ending balances for assets and liabilities measured at
fair value on a recurring basis using significant unobservable inputs (Level 3) during the year ended December 31, 2013:
Beginning balance
Total gains or (losses) – realized/unrealized
Included in earnings
(a)
Included in other comprehensive income
Purchases, issuances and settlements
Transfers (in)/out of Level 3
Ending balance
Contingent
Consideration
Fuel Price
Derivatives –
Diesel
(313) $
(107)
(198)
—
—
511
(2,035)
—
—
—
— $
(2,142)
$
$
(a) Gains and losses (realized and unrealized) included in earnings for the year ended December 31, 2013, are reported in net realized and unrealized gains
and (losses) on fuel price derivatives on the consolidated statements of income. Gains and losses on the change of estimate on the contingent
consideration are included in other expenses and and loss of foreign currency transactions on the consolidated statements of income.
83
44881_10k.pdf Page 87
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The following table presents a reconciliation of the beginning and ending balances for assets and 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)
Included in other comprehensive income
Purchases, issuances and settlements
Transfers in/(out) of Level 3
Ending balance
Contingent
Consideration
$
(9,325) $
1,517
—
7,495
—
Fuel Price
Derivatives
– Diesel
(25)
(82)
—
—
—
$
(313) $
(107)
(a)
Gains and losses (realized and unrealized) included in earnings for the year ended December 31, 2012, are reported in net realized and unrealized gains
and (losses) on fuel price derivatives on the consolidated statements of income. Gains and losses on the change of estimate on the contingent
consideration are included in other expenses and and loss of foreign currency transactions 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
The majority of derivatives entered into by the Company are executed over-the-counter and 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.
Fuel price derivatives – diesel. The assumptions used in the valuation of the diesel fuel price derivatives use both
observable and unobservable inputs. There is a lack of price transparency with respect to forward prices for diesel fuel. 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
$
2,142
Option model
Fair Value at
December 31, 2013
Valuation
Technique
Unobservable Input
Future retail price of diesel
fuel after December 31,
2013
Range $
per gallon
3.71 – 3.94
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
84
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
diesel fuel from the first quarter of 2014 through the second quarter of 2015. Significant changes in these unobservable inputs
in isolation would result in a significant change in the fair value measurement.
Contingent consideration
The Company classified its liability for contingent consideration related to its acquisition of UNIK within Level 3 of the
fair value hierarchy because the fair value was determined using significant unobservable inputs, which include the projected
revenues of UNIK over a four month period. These assumptions included assessing the probability of meeting certain
milestones required to earn the contingent consideration.
On June 30, 2013, the Company finalized the contingent consideration amount based on current performance
milestones and determined it to be approximately $511, which was paid on July 1, 2013.
The Company 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 ending on March 31, 2012. On March 31, 2012, the amount
due was determined to be $8,486 and was paid on April 30, 2012.
16. Noncontrolling interest
On August 30, 2012, the Company acquired a 51 percent ownership interest in UNIK, a provider of payroll cards in
Brazil. The purchase agreement provides the Company with a call option which allows the Company to acquire the remaining
shares at specific times over a three-year period. Additionally, the agreement provides the noncontrolling shareholders with the
right to put their interest back to the Company at specific times. This redeemable noncontrolling interest was measured at fair
value at the date of acquisition. The Company believes that it is probable that the noncontrolling interest in UNIK will become
redeemable. However, as of December 31, 2013, the Company has determined that no accretion to the fair value of the minority
interest is necessary as the fair value of the put option at the time of redemption is expected to approximates the value of the
minority interest.
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 years ended December 31, 2013 and 2012, is as follows:
Balance, beginning of period
Acquisition of subsidiary at fair value
Net loss attributable to redeemable noncontrolling interest
Currency translation adjustment
Ending balance
2013
2012
$
$
21,662
$
—
(401)
(2,532)
18,729
—
21,904
(213)
(29)
21,662
On November 8, 2013, the Company announced that it plans to acquire the assets of ExxonMobil’s European
commercial fuel card (“Esso Card”) program through a majority owned subsidiary, WEX Europe Services Limited. The
Company formed this entity during 2013 and has 75 percent ownership.
A reconciliation of noncontrolling interest for the years ended December 31, 2013 is as follows:
Balance, beginning of period
Noncontrolling interest investment
Net loss attributable to noncontrolling interest
Currency translation adjustment
Ending balance
85
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2013
—
1,032
(509)
(4)
519
$
$
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
17. 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 $5,650,000 at December 31, 2013, and $4,665,000 at
December 31, 2012, 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 $7,257 for the year ended December 31,
2013, $5,601 for the year ended December 31, 2012 and $4,794 for the year ended December 31, 2011. 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 $8,249 for the year ended December 31, 2013, $6,959 for the year
ended December 31, 2012, and $5,342 for the year ended December 31, 2011. 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:
2014
2015
2016
2017
2018
2019 and thereafter
Total
Payment
7,567
6,546
4,170
3,351
2,952
550
25,136
$
$
18. Accumulated Other Comprehensive Income
A reconciliation of accumulated other comprehensive income for the twelve month periods ended December 31, 2013 and
2012, is as follows:
Beginning balance
Other comprehensive (loss) income
Ending balance
2013
2012
Unrealized
Gains and
Losses on
Available-
for-Sale
Securities
Foreign
Currency
Items
Unrealized
Gains and
Losses on
Available-
for-Sale
Securities
Interest
Rate Swap
Foreign
Currency
Items
$
$
197
$
37,182
$
200
$
(60) $
30,448
(630)
(52,244)
(3)
60
6,734
(433) $
(15,062) $
197
$
— $
37,182
No significant amounts were reclassified from accumulated other comprehensive income in the periods presented.
The change in foreign currency items is primarily due to the foreign currency translation of non-cash assets such as
goodwill and other intangible assets related to the Company's foreign subsidiaries.
86
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The total tax effect on accumulated unrealized loss as of December 31, 2013 was $173 and the total tax effect on
accumulated unrealized gain was $874 as of December 31, 2012.
19. Cash and Dividend Restrictions
Cash
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, 2013 and 2012 was $28,384 and
$26,246, respectively.
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, after execution of a restricted payment, the Company may pay no more than
$25,000 per annum for restricted payments, including dividends. The Company has not declared any dividends on its common
stock since it commenced trading on the NYSE on February 16, 2005.
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 will continue to be a source of operating funds to the
Company. 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, 2013, 2012,
and 2011.
20. Stock-Based Compensation
In May of 2010, the Company adopted the WEX Inc. 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, 2013,
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 $9,429 for 2013, $11,016 for 2012, and $9,367 for 2011.
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 on the day of grant as
reported by the New York Stock Exchange (“NYSE”).
A summary of the status of the Company’s RSUs as of December 31, 2013, and changes during the year then ended is
presented below:
87
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Restricted Stock Units
Balance at January 1, 2013
Granted
Vested – shares issued
Vested – shares deferred (a)
Forfeited
Withheld for taxes (b)
Balance at December 31, 2013
Weighted-
Average
Grant-
Date Fair
Value
Units
185
111
$
$
(73) $
(3) $
(8) $
(35) $
177
$
51.08
88.01
71.81
43.48
60.80
49.63
67.28
(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, 2013, there was $5,652 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 $9,757 during 2013, $7,830 during 2012, and $4,107 during 2011.
The total fair value of shares vested (issued) was $5,259 during 2013, $6,347 during 2012, and $5,435 during 2011.
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, 2013, and changes during the year is
presented below:
Deferred Stock Units
Balance at January 1, 2013
Awards
Converted from RSUs
Balance at December 31, 2013
Weighted-
Average
Grant-Date
Fair Value
Units
89
1
3
93
$
$
$
$
25.16
80.91
43.48
26.35
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 $137 during 2013, $150 during 2012, and $173 during 2011.
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 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 on the grant date as reported by
the NYSE.
88
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
A summary of the status of certain of the Company’s PBRSUs at threshold and target performance as of December 31,
2013, and changes during the year then ended is presented below:
Performance Based Restricted Stock Units
Balance at January 1, 2013
Granted
Forfeited
Canceled / Converted to RSUs
Balance at December 31, 2013
Units at
Threshold
Units at
Target
Units at
Maximum
Weighted-
Average
Grant-Date
Fair Value
106
17
(1)
(106)
16
211
69
(2)
(211)
67
422
135
$
$
(4) $
(422) $
131
$
41.39
77.95
78.24
40.14
77.94
The range of unrecognized compensation cost related to the PBRSU awards is from $635 at threshold (25 percent below
targeted performance), $2,601 at target (100 percent of targeted performance) and up to $5,082 at maximum (200 percent of
targeted performance), as of December 31, 2013, depending on whether certain performance conditions are met. That cost is
expected to be recognized over a weighted-average period of 1.4 years The total grant-date fair value of shares granted at target
was $5,356 during 2013, $4,308 during 2012, and $4,157 during 2011. The total grant-date fair value of shares converted to
RSUs and subsequently vested was $9,075 during 2013, $1,382 during 2012, and $327 during 2011.
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.
The stock options granted under the plan related to the Company’s employees consisted of:
Stock Options
Outstanding at January 1, 2013
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2013
Exercisable on December 31, 2013
Vested and expected to vest at December 31, 2013
Weighted-
Average
Exercise
Price
Shares
Weighted-
Average
Remaining
Contractual
Term (in
years)
Aggregate
Intrinsic
Value
119
$
—
(70) $
—
49
49
49
$
$
$
19.65
—
23.83
—
13.59
13.59
13.59
3.17
3.17
3.17
$
$
$
4,159
4,159
4,159
The total intrinsic value of options exercised during the years ended December 31, 2013, 2012 and 2011 was $3,632,
$10,555 and $7,829, 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.
89
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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, deferred loan costs associated with the
extinguishment of debt, certain non-cash asset impairment charges, the gains on the extinguishment of a portion of the tax
receivable agreement and adjustments related to the noncontrolling interest. These adjustments are reflected net of the
tax impact.
The Company operates in two reportable segments, Fleet Payment Solutions and Other Payment Solutions. The Fleet
Payment Solutions segment provides customers with payment and transaction processing services specifically designed for the
needs of vehicle fleet customers. This segment also provides information management services to these fleet customers. The
Other Payment Solutions segment provides customers with a payment processing solution for their corporate purchasing and
transaction monitoring needs. Revenue in this segment is derived from our corporate purchase cards and virtual and prepaid
card products. The corporate purchase card products are used by businesses to facilitate purchases of products and to utilize the
Company’s information management capabilities. Revenue from one customer represents approximately 11 percent of the
Company’s total 2013 revenue. Revenue from this customer is included in Other Payment Solutions revenue.
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, 2013, 2012
and 2011:
Year ended December 31, 2013
Fleet Payment Solutions
Other Payment Solutions
Total
Year ended December 31, 2012
Fleet Payment Solutions
Other Payment Solutions
Total
Year ended December 31, 2011
Fleet Payment Solutions
Other Payment Solutions
Total
Total
Revenues
Operating
Interest
Expense
Depreciation
and
Amortization
Provision for
Income
Taxes
Adjusted Net
Income
$
$
$
$
$
$
527,424
190,039
717,463
470,591
152,560
623,151
436,704
116,372
553,076
$
$
$
$
$
$
1,802
2,485
4,287
3,377
1,613
4,990
4,488
965
5,453
$
$
$
$
$
$
23,351
1,710
25,061
23,721
1,663
25,384
21,331
1,626
22,957
$
$
$
$
$
$
78,567
24,587
103,154
75,404
17,752
93,156
62,913
16,155
79,068
$
$
$
$
$
$
129,825
44,042
173,867
128,259
30,265
158,524
112,668
29,124
141,792
90
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The following table reconciles adjusted net income to net income:
Total adjusted net income attributable to WEX Inc.
Unrealized losses on derivative instruments
Amortization of acquired intangible assets
Goodwill impairment
Deferred loan costs associated with the extinguishment of debt
Change in tax refund due to former shareholders of RD Card Holdings Australia
Non-cash adjustments related to tax receivable agreement
Other adjustments related to Fleet One acquisition
ANI adjustments attributable to noncontrolling interest
Tax impact
Net earnings attributable to WEX Inc.
Year ended December 31,
2013
2012
2011
$
173,867
$
158,524
$
141,792
(5,628)
(33,147)
—
(1,004)
—
(33)
658
1,443
13,052
(1,724)
(23,468)
(17,508)
—
9,750
(2,089)
(10,550)
305
(16,318)
10,872
(22,412)
—
—
—
(715)
—
—
4,085
$
149,208
$
96,922
$
133,622
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
Australia
Other international
Total revenues
Goodwill:
United States
Australia
Other international
Total goodwill
Other intangible assets, net
United States
Australia
Other international
Total other intangibles assets, net
Property, equipment and capitalized software
United States
Australia
International
Total property, equipment and capitalized software
Year ended December 31,
2013
2012
2011
627,282
$
541,404
$
482,536
61,645
28,536
717,463
589,319
180,274
48,809
818,402
118,808
43,385
46,804
208,997
59,817
5,988
6,472
$
$
$
$
$
$
68,932
12,815
623,151
589,319
210,746
47,921
847,986
135,386
62,757
43,807
241,950
47,915
7,383
4,799
$
$
$
$
$
$
67,360
3,180
553,076
325,647
222,545
1,312
549,504
29,204
76,019
4,433
109,656
51,172
6,419
4,487
72,277
$
60,097
$
62,078
$
$
$
$
$
$
$
$
The Company adjusted the table above for the years ended December 31, 2011 and 2012, to present property, equipment
and capitalized software.
No single county, other than the United States and Australia, made up more than 3 percent of total revenues for any of the
years presented.
91
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WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
22. Quarterly Financial Results (Unaudited)
Summarized quarterly results for the years ended December 31, 2013 and 2012, are as follows:
2013
Total revenues
Operating income
Net earnings attributable to WEX Inc.
Earnings per share:
Basic
Diluted
2012
Total revenues
Operating income
Net earnings attributable to WEX Inc.
Earnings per share:
Basic
Diluted
Three months ended
March 31
June 30
September 30 December 31
$
$
$
$
$
$
$
$
$
$
165,370
60,530
28,689
0.74
0.73
140,122
57,963
23,236
0.60
0.59
$
$
$
$
$
$
$
$
$
$
178,285
67,081
42,213
1.08
1.08
153,064
62,880
30,335
0.78
0.78
$
$
$
$
$
$
$
$
$
$
191,525
77,893
43,838
1.12
1.12
160,967
51,277
14,298
0.37
0.37
$
$
$
$
$
$
$
$
$
$
182,283
71,235
34,468
0.88
0.88
168,998
49,499
29,053
0.75
0.74
92
44881_10k.pdf Page 96
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, 2013.
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 and accounting officer, an evaluation was conducted of the
effectiveness of the internal control over financial reporting based on the framework in Internal Control – Integrated
Framework (1992) issued by The Committee of Sponsoring Organizations of the Treadway Commission. Based on our
evaluation under the framework in Internal Control – Integrated Framework (1992), management concluded that WEX Inc.’s
internal control over financial reporting was effective as of December 31, 2013.
The effectiveness of our internal control over financial reporting as of December 31, 2013, 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, 2013, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
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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, 2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying “Management’s Annual Report on Internal Control Over Financial Reporting” appearing at Item
9A. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s
principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s
board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future
periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2013, based on the criteria established in Internal Control - Integrated Framework (1992) 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, 2013 of the Company and our report dated
February 27, 2014 expressed an unqualified opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 27, 2014
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ITEM 9B. OTHER INFORMATION
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
See the information in the Company’s proxy statement for the 2014 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, which covers all employees, officers and
our board of directors, (2) the Company’s Corporate Governance Guidelines and (3) 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 Code of Business Conduct and
Ethics.
ITEM 11. EXECUTIVE COMPENSATION
See the information in the Company’s proxy statement for the 2014 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 2014 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 2014 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 2014 Annual Meeting of Stockholders captioned “Auditor
Selection and Fees,” which information is incorporated herein by reference.
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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 47).
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
10.7
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)
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10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
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
† 10.17
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)
† 10.18
Wright Express Corporation Employee Stock Purchase Plan (incorporated by reference to Exhibit No. 10.7 to our Registration
Statement on Form S-1 filed with the SEC on February 10, 2005, File No. 333-120679)
† 10.19
Wright Express Corporation Amended and Restated Non-Employee Directors Deferred Compensation Plan (incorporated by
reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426)
†* 10.20
2013 Amended and Restated WEX Inc. Short-Term Incentive Program
†* 10.21
2013 FleetOne Integration 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 2, 2013, File No. 001-32426)**
†* 10.22
2013 Corporate Annual Grant Long-Term Incentive Program
†* 10.23
2013 International Annual Grant Long-Term Incentive Program
† 10.24
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)
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† 10.25
Employment Agreement with Michael E. Dubyak (incorporated by reference to Exhibit No. 10.5 to our Current Report on Form 8-K
filed with the SEC on January 7, 2009, File No. 001-32426)
† 10.26
Transition Agreement by and between the Company and Michael E. Dubyak, dated April 29, 2013 (incorporated by reference to
Exhibit No. 99.1 to our Current Report on Form 8-K filed with the SEC on May 1, 2013, File No. 001-32426)
† 10.27
Form of Employment Agreement for David Maxsimic and Melissa Smith (incorporated by reference to Exhibit No. 10.6 to our
Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426)
† 10.28
Executive Retention Agreement, dated April 6, 2011, between David Maxsimic and Wright Express Corporation (incorporated by
reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on April 12, 2011, File No. 001-32426)
† 10.29
Form of Employment Agreement for Robert Cornett, Hilary Rapkin and Jamie Morin (incorporated by reference to Exhibit No. 10.7
to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426)
† 10.30
Form of Employment Agreement for George Hogan and Richard Stecklair (incorporated by reference to Exhibit No. 10.20 to our
Annual Report on Form 10-K filed with the SEC on February 26, 2010, File No. 001-32426)
† 10.31
Wright Express UK Limited and Gareth Gumbley Service Agreement, effective January 1, 2011 (incorporated by reference to
Exhibit 10.4 to our Quarterly Report on Form 10-Q filed with the SEC on May 5, 2011, File No. 001-32426)
† 10.32
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)
† 10.33
Form of Long Term Incentive Program Award Agreement under the Amended and Restated Wright Express Corporation 2005 Equity
and Incentive Plan (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on April 6,
2006, File No. 001-32426)
† 10.34
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)
† 10.35
Form of Non-Employee Director Long Term Incentive Program Award Agreement under the Amended and Restated Wright Express
Corporation 2005 Equity and Incentive Plan (for grants received subsequent to December 31, 2006) (incorporated by reference to
Exhibit 10.3 to our Quarterly Report on Form 10-Q filed with the SEC on August 5, 2008, File No. 001-32426)
† 10.36
Form of Wright Express Corporation Long Term Incentive Program 2010 Growth Grant Restricted Stock Unit Award Agreement
under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by reference to Exhibit
No. 10.3 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426)
† 10.37
Form of Wright Express Corporation Long Term Incentive Program 2010 Growth Grant Performance-Based Restricted Stock Unit
Award Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by
reference to Exhibit No. 10.4 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426)
† 10.38
Form of Wright Express Corporation Long Term Incentive Program 2010 Growth Grant Stock Non-Statutory Stock Option Award
Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by reference
to Exhibit No. 10.5 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426)
† 10.39
Form of Wright Express Corporation Option Agreement under the Wright Express Corporation 2010 Equity and Incentive Plan
(incorporated by reference to Exhibit No. 10.29 to our Annual Report on Form 10-K filed with the SEC on February 28, 2011, File
No. 001-32426)
† 10.40
Form of Wright Express Corporation Restricted Stock Unit Agreement under the Wright Express Corporation 2010 Equity and
Incentive Plan (incorporated by reference to Exhibit No. 10.30 to our Annual Report on Form 10-K filed with the SEC on February
28, 2011, File No. 001-32426)
† 10.41
Form of Wright Express Corporation Non-Employee Director Compensation Plan Award Agreement under the Wright Express
Corporation 2010 Equity and Incentive Plan (incorporated by reference to Exhibit No. 10.31 to our Annual Report on Form 10-K
filed with the SEC on February 28, 2011, File No. 001-32426)
10.42
ISDA Master Agreement and Schedule between CITIBANK, National Association and Wright Express Corporation, dated as of
April 20, 2005 (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on April 27,
2005, File No. 001-32426)
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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
10.58
10.59
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)
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)
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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
10.74
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)
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)
* 21.1
Subsidiaries of the registrant
* 23.1
Consent of Independent Registered Accounting Firm – Deloitte & Touche LLP
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* 31.1
Certification of Chief Executive Officer of WEX INC. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of
1934, as amended
* 31.2
Certification of Chief Financial Officer of WEX INC. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of
1934, as amended
* 32.1
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
* 32.2
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
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.
101
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Exhibit No.
Description
10.68
10.69
10.70
10.71
10.72
10.73
10.74
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)
* 21.1
Subsidiaries of the registrant
* 23.1
Consent of Independent Registered Accounting Firm – Deloitte & Touche LLP
* 31.1
Certification of Chief Executive Officer of WEX INC. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of
1934, as amended
* 31.2
Certification of Chief Financial Officer of WEX INC. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of
1934, as amended
* 32.1
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
* 32.2
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
102
44881_10k.pdf Page 106
*
**
†
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.
103
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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
WEX INC.
February 27, 2014
By:
/s/ Steven A. Elder
Steven A. Elder
Senior Vice President and Chief Financial Officer
(principal financial and accounting officer)
104
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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 27, 2014
February 27, 2014
February 27, 2014
February 27, 2014
February 27, 2014
February 27, 2014
February 27, 2014
February 27, 2014
February 27, 2014
February 27, 2014
/s/ Melissa D. Smith
Melissa D. Smith
President, Chief Executive Officer and Director
(principal executive officer)
/s/ Steven A. Elder
Steven A. Elder
Senior Vice President and Chief Financial Officer
(principal financial and accounting officer)
/s/ Michael E. Dubyak
Michael E. Dubyak
Chairman of the Board
/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
105
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Exhibit No.
Description
EXHIBIT INDEX
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
10.9
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)
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)
106
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10.10
10.11
10.12
10.13
10.14
10.15
10.16
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
† 10.17
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)
† 10.18
Wright Express Corporation Employee Stock Purchase Plan (incorporated by reference to Exhibit No. 10.7 to our Registration
Statement on Form S-1 filed with the SEC on February 10, 2005, File No. 333-120679)
† 10.19
Wright Express Corporation Amended and Restated Non-Employee Directors Deferred Compensation Plan (incorporated by
reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426)
†* 10.20
2013 Amended and Restated WEX Inc. Short-Term Incentive Program
†* 10.21
2013 FleetOne Integration 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 2, 2013, File No. 001-32426)**
†* 10.22
2013 Corporate Annual Grant Long-Term Incentive Program
†* 10.23
2013 International Annual Grant Long-Term Incentive Program
† 10.24
Amended and Restated Wright Express Corporation Severance Pay Plan for Officers (incorporated by reference to Exhibit No. 10.4
to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426)
† 10.25
Employment Agreement with Michael E. Dubyak (incorporated by reference to Exhibit No. 10.5 to our Current Report on Form 8-K
filed with the SEC on January 7, 2009, File No. 001-32426)
† 10.26
Transition Agreement by and between the Company and Michael E. Dubyak, dated April 29, 2013 (incorporated by reference to
Exhibit No. 99.1 to our Current Report on Form 8-K filed with the SEC on May 1, 2013, File No. 001-32426)
† 10.27
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)
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† 10.28
Executive Retention Agreement, dated April 6, 2011, between David Maxsimic and Wright Express Corporation (incorporated by
reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on April 12, 2011, File No. 001-32426)
† 10.29
Form of Employment Agreement for Robert Cornett, Hilary Rapkin and Jamie Morin (incorporated by reference to Exhibit No. 10.7
to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426)
† 10.30
Form of Employment Agreement for George Hogan and Richard Stecklair (incorporated by reference to Exhibit No. 10.20 to our
Annual Report on Form 10-K filed with the SEC on February 26, 2010, File No. 001-32426)
† 10.31
Wright Express UK Limited and Gareth Gumbley Service Agreement, effective January 1, 2011 (incorporated by reference to
Exhibit 10.4 to our Quarterly Report on Form 10-Q filed with the SEC on May 5, 2011, File No. 001-32426)
† 10.32
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)
† 10.33
Form of Long Term Incentive Program Award Agreement under the Amended and Restated Wright Express Corporation 2005 Equity
and Incentive Plan (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on April 6,
2006, File No. 001-32426)
† 10.34
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)
† 10.35
Form of Non-Employee Director Long Term Incentive Program Award Agreement under the Amended and Restated Wright Express
Corporation 2005 Equity and Incentive Plan (for grants received subsequent to December 31, 2006) (incorporated by reference to
Exhibit 10.3 to our Quarterly Report on Form 10-Q filed with the SEC on August 5, 2008, File No. 001-32426)
† 10.36
Form of Wright Express Corporation Long Term Incentive Program 2010 Growth Grant Restricted Stock Unit Award Agreement
under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by reference to Exhibit
No. 10.3 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426)
† 10.37
Form of Wright Express Corporation Long Term Incentive Program 2010 Growth Grant Performance-Based Restricted Stock Unit
Award Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by
reference to Exhibit No. 10.4 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426)
† 10.38
Form of Wright Express Corporation Long Term Incentive Program 2010 Growth Grant Stock Non-Statutory Stock Option Award
Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by reference
to Exhibit No. 10.5 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426)
† 10.39
Form of Wright Express Corporation Option Agreement under the Wright Express Corporation 2010 Equity and Incentive Plan
(incorporated by reference to Exhibit No. 10.29 to our Annual Report on Form 10-K filed with the SEC on February 28, 2011, File
No. 001-32426)
† 10.40
Form of Wright Express Corporation Restricted Stock Unit Agreement under the Wright Express Corporation 2010 Equity and
Incentive Plan (incorporated by reference to Exhibit No. 10.30 to our Annual Report on Form 10-K filed with the SEC on February
28, 2011, File No. 001-32426)
† 10.41
Form of Wright Express Corporation Non-Employee Director Compensation Plan Award Agreement under the Wright Express
Corporation 2010 Equity and Incentive Plan (incorporated by reference to Exhibit No. 10.31 to our Annual Report on Form 10-K
filed with the SEC on February 28, 2011, File No. 001-32426)
10.42
10.43
10.44
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)
108
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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
10.58
10.59
10.60
10.61
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)
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)
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10.62
10.63
10.64
10.65
10.66
10.67
10.68
10.69
10.70
10.71
10.72
10.73
10.74
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)
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)
* 21.1
Subsidiaries of the registrant
* 23.1
Consent of Independent Registered Accounting Firm – Deloitte & Touche LLP
* 31.1
Certification of Chief Executive Officer of WEX INC. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of
1934, as amended
* 31.2
Certification of Chief Financial Officer of WEX INC. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of
1934, as amended
110
44881_10k.pdf Page 114
* 32.1
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
* 32.2
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
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.
111
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WEX CORPORATE INFORMATION
DIRECTORS
MICHAEL E. DUBYAK
Executive Chairman
of WEX Inc.
ROWLAND T. MORIARTY
Lead Director and
Vice Chairman of WEX Inc.
President and
Chief Executive Officer
of Cubex Corporation
ERIC DUPRAT
President and
Chief Executive Officer
of Verayo, Inc.
SHIKHAR GHOSH
Professor, Harvard Business School
RONALD T. MAHEU
Financial and Business Consultant
GEORGE L. MCTAVISH
Former Chief Executive Officer
and Chairman of
Source Medical Corporation
CORPORATE HEADQUARTERS
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
KIRK POND
Former Chairman,
President and CEO of Fairchild
Semiconductor International, Inc.
MELISSA D. SMITH
President and
Chief Executive Officer
of WEX Inc.
REGINA O. SOMMER
Financial and Business Consultant
JACK VANWOERKOM
Former General Counsel and
Corporate Secretary of
The Home Depot, Inc.
EXECUTIVE OFFICERS
MELISSA D. SMITH
President and
Chief Executive Officer
DAVID D. MAXSIMIC
President, International
STEVEN ELDER
Senior Vice President and
Chief Financial Officer
ATTORNEYS
Wilmer Cutler Pickering Hale
and Dorr LLP
60 State Street
Boston, MA 02109
(617) 526-6000
STOCKHOLDERS’ MEETING
Date: May 16, 2014
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
HILARY A. RAPKIN
Senior Vice President,
General Counsel and
Corporate Secretary
STEPHEN R. CROWLEY
Senior Vice President,
Shared Services and
Chief Information Officer
GEORGE HOGAN
Senior Vice President and
General Manager, Fleet OTR
and Partner Channels
KENNETH W. JANOSICK
Senior Vice President and
General Manager, Global
Fleet Direct
NICOLA S. MORRIS
Senior Vice President,
Corporate Development
ALISON VANDERHOOF
Senior Vice President and
General Manager,
Emerging Industries
INVESTOR RELATIONS
Michael E. Thomas
Vice President, Investor Relations and
Treasurer
(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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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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