MAK ING EVERY
TRANSACT ION CO UNT.
2015 WEX INC.
Annual Report
97 Darling Avenue
South Portland, Maine 04106
(207) 773-8171
newsroom@wexinc.com
www.wexinc.com
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DIRECTORS
MICHAEL E. DUBYAK
Chairman of WEX Inc.
ROWLAND T. MORIARTY
Lead Director and
Vice Chairman of WEX Inc.
Chairman, CRA International, Inc.
ERIC DUPRAT
Chief Executive Officer
of FairCare, Inc.
SHIKHAR GHOSH
Professor, Harvard Business School
RONALD T. MAHEU
Financial and Business Consultant
GEORGE L. MCTAVISH
Advisory Board of Clayton Associates
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
Operating Partner of
Highland Consumer Fund
EXECUTIVE OFFICERS
MELISSA D. SMITH
President and
Chief Executive Officer
STEPHEN R. CROWLEY
Senior Vice President,
Shared Services and
Chief Information Officer
GEORGE HOGAN
Senior Vice President,
International
KENNETH W. JANOSICK
Senior Vice President and
General Manager,
Global Fleet Direct
NICOLA S. MORRIS
Senior Vice President,
Corporate Development
JAMES PRATT
Senior Vice President and
General Manager,
Virtual Products
HILARY A. RAPKIN
Senior Vice President,
General Counsel and
Corporate Secretary
ROBERTO SIMON
Chief Financial Officer
JEFF YOUNG
Senior Vice President and
General Manager,
Evolution1
CORPORATE HEADQUARTERS
ATTORNEYS
INVESTOR RELATIONS
WEX Inc.
97 Darling Avenue
South Portland, ME 04106
(207) 773-8171
Email: newsroom@wexinc.com
www.wexinc.com
TRANSFER AGENT
American Stock Transfer
& Trust Company
6201 15th Avenue
Brooklyn, NY 11219
(866) 668-6550
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116-5022
(617) 437-2000
Wilmer Cutler Pickering Hale
and Dorr LLP
60 State Street
Boston, MA 02109
(617) 526-6000
STOCKHOLDERS’ MEETING
Date: May 13, 2016
Time: 8:00 a.m.
Location:
WEX Inc. Long Creek Campus
225 Gorham Road
South Portland, Maine
(207) 773-8171
TICKER SYMBOL
NYSE: WEX
Steve Elder
Senior Vice President, Global Investor Relations
(207) 523-7769
Steve.Elder@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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A B O U T W E X
I N C .
WEX is a leading global provider of corporate payment solutions. Since
our founding as a domestic fl eet card company in 1983, we have expanded
our scope to become a diversifi ed corporate payment solutions provider
supporting customers around the world. At WEX, our focus is to simplify
the complexities of payments systems through innovative technology,
user-friendly tools and industry-leading customer service.
Our proprietary technology allows us to harness massive amounts of
data and deliver insights that help customers make better business
decisions. Our expertise within our core Fleet, Travel, and Health verticals
is complemented by our ability to deliver solutions tailored to meet
specifi c customer needs.
Through our products and services, we provide security, control and
intelligence for the payment transactions of more than 9.4 million fl eet
vehicles, more than $19 billion of Travel and Corporate Solutions spend
and more than 12 million customer healthcare accounts annually.
WEX currently operates its business in three segments: Fleet Solutions,
Travel and Corporate Solutions, and Health and Employee Benefi t
Solutions. WEX and its subsidiaries employ more than 2,000 associates
across our network of locations in the United States, Australia, New
Zealand, Brazil, the United Kingdom, Italy, France, Germany, Norway and
Singapore. The company has been publicly traded since 2005, and is
listed on the New York Stock Exchange under the ticker symbol “WEX.”
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D E A R
F E L L O W
S H A R E H O L D E R S
2015 represented our tenth anniversary as a public company
and I’m pleased with the progress we made this year in
positioning WEX for the decades to come. We took signifi cant
steps to strengthen our business by enhancing our position
across our core verticals and extending our presence both in
the U.S. and around the globe. We also generated solid growth
in spite of continued pressure from macro-economic headwinds,
demonstrated disciplined cost control across our business and
made notable progress with our targeted investment strategy.
We will remain focused on our strategic priorities in 2016,
positioning WEX for growth, enhancing our value-added
product and service off erings and driving scale across the
entire organization. We will do this while continuing to keep
a keen eye on costs and maintaining a disciplined approach
to capital allocation. We are excited about the expansion of
our global assets and talent base and will continue to work
diligently to ensure we are maximizing the effi ciency and
value of our network.
Importantly, we continued to drive our underlying growth engine
by winning share and delivering organic growth across verticals.
We maintain a nuanced understanding of corporate payments
across both the industries and the geographies in which we
operate, enabling us to deliver solutions tailored to customer
needs. Coupled with our data-driven technology platforms,
we off er customers a complete solution that supports them in
capturing greater value from their businesses. This has enabled
us to grow our own customer network while driving compelling
double-digit organic growth for WEX.
These achievements were complemented by a number of
revenue initiatives undertaken to ensure we remain competitive
in the market and further the ongoing success of our targeted
investment strategy. The strategic acquisitions we made in
2014 – Evolution1 and WEX Europe Services – both continue to
perform above expectations, and we took another step forward
with our strategy in 2015 with three additional transactions. We
signed a deal to acquire Electronic Funds Source (EFS), our largest
transaction to date, closed the acquisition of Benaissance and
acquired the remaining stake in UNIK. The pending acquisition
of EFS (which is currently making its way through the regulatory
review process) will round out our product set in the North
American fl eet segment, extending our reach into mid and large
OTR fl eets while signifi cantly enhancing the scale of the enterprise.
Benaissance adds billing capabilities to our Healthcare off ering
that enable us to enhance our addressable market opportunity
and wallet share in the attractive, high-growth healthcare vertical.
Collectively, these transactions build on our success by enhancing
our addressable market opportunities.
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As we look ahead to 2016, we are confi dent that WEX will
successfully navigate through the challenging macro-economic
environment, which we anticipate will continue to impact our
industry. Our strategy has and will continue to include actions
that diversify our business and reduce fuel-price sensitivity,
and we will continue to pursue this path while managing those
factors that are under our control. This includes an aggressive
yet thoughtful approach to our cost structure and day-to-day
operations. We are encouraged by the opportunity to continue
to grow organically and strengthen our presence across our
core verticals around the world.
Refl ecting back on our journey to where we stand today on
our tenth anniversary as a public company, I am reminded
by the things that got us here. In a business that revolves
around transactions, everything we have done and must
do going forward is focused on ensuring that we make
every transaction count — whether that represents a single
payment running through our systems, an interaction with
one of our customers, or an acquisition of another company.
I would like to thank the WEX employees for their dedication and
contributions in 2015 and look forward to our ongoing success.
President and Chief Executive Offi cer • March 28th, 2016
3
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F I N A N C I A L H I G H L I G H T S
TOTAL REVENUE
($ in Millions)
855
818
717
623
553
TOTAL FUEL
TRANSACTIONS PROCESSED
(in Millions)
338
406
385
371
319
19,441
TRAVEL & CORPORATE
PURCHASE CARD
VOLUME
($ in Millions)
17,073
13,058
10,689
7,759
7,759
1 1
1 2
1 3
1 4
1 5
1 1 1 2 1 3 1 4 1 5
1 1 1 2 1 3 1 4
1 5
KEY FINANCIAL HIGHLIGHTS & RECONCILIATIONS
($ in thousands)
2015
2014
2013
Revenue
$
854,637
$
817,647 $
717,463
Reconciliation of Adjusted Net Income (”ANI”) to U.S. GAAP Net Earnings
Adjusted net income attributable to WEX Inc.
$
189,120 $
204,571
$
179,033
Changes in unrealized fuel-price derivatives
Net foreign currency remeasurement (loss) gain
Ammortization of acquired intangible assets
Stock-based compensation
Restructuring
Gain on divestitures
Deferred loan costs associated with the extinguishment of debt
Expenses and adjustments related to acquisitions
Non-cash adjustments related to tax receivable agreement
Regulatory reserve
ANI adjustments attributable to non-controlling interests
Tax Impact
(35,962)
(5,689)
(47,792)
(12,420)
(9,010)
1,215
–
(4,137)
2,145
(1,750)
(4,996)
31,180
48,327
(13,438)
(40,622)
(13,790)
–
27,490
–
(7,694)
(1,331)
–
2,150
(3,452)
(5,628)
964
(33,147)
(9,429)
–
–
(1,004)
658
(33)
–
1,622
16,172
Net earnings attributable to shareholders
$
101,904
$
202,211
$
149,208
The tax impact of the foregoing adjustments is the difference between the Company’s GAAP tax provision and a proforma 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. The Company is unable to reconcile our adjusted net income guidance to the comparable GAAP measure because of the difficulty in predicting the amounts to be adjusted.
In addition to providing fi nancial measurements based on GAAP, we publicly discuss additional fi nancial measures, such as adjusted net income, that are not prepared in
accordance with GAAP, or non-GAAP fi nancial measures. Although adjusted net income 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 other specifi ed items that the Company’s management excludes in evaluating the Company’s performance. 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-related 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.
• Net foreign currency gains and losses primarily result from the remeasurement to functional currency of foreign currency cash, receivable and payable balances,
certain intercompany notes and any gain or loss on foreign currency hedges relating to these items. The exclusion of these items helps management compare
changes in operating results between periods that might otherwise be obscured due to currency fl uctuations.
• The amortization of acquired intangibles, deferred loan costs associated with the extinguishment of debt, acquisition related expenses, non-cash adjustments
related to the Company’s tax receivable agreement, and adjustments attributable to non-controlling interests, including adjustments to the redemption value of
a non-controlling interest, have no signifi cant impact on the ongoing operations of the business.
• Stock-based compensation is diff erent from other forms of compensation, as it is a non-cash expense. For example, a cash salary generally has a fi xed and
unvarying cash cost. In contrast, the expense associated with an equity-based award is generally unrelated to the amount of cash ultimately received by the
employee, and the cost to us is based on a stock-based compensation valuation methodology and underlying assumptions that may vary over time.
• Restructuring charges are related to employee termination benefi ts from certain identifi ed initiatives to further streamline the business, improve the Company’s
effi ciency, and to globalize the Company’s operations, all with an objective to improve scale and increase profi tability going forward. We exclude these items when
evaluating our continuing business performance as such items are not consistently occurring and do not refl ect expected future operating expense, nor provide
meaningful insight into the fundamentals of current or past operations of our business.
• The gain or loss from a divestiture is not indicative of the performance of the ongoing operations of the business.
• The regulatory reserve refl ects charges related to the impact of a regulatory action which resulted in a penalty being paid by WEX Bank. We have excluded this
item when evaluating our continuing business performance as it is not recurring.
• The Company considers certain acquisition-related costs, investment banking fees, fi nancing fees and warranty and indemnity insurance, to be unpredictable, dependent
on factors that may be outside of our control and unrelated to the continuing operations of the acquired business or the Company. In addition, the size and complexity
of an acquisition, which often drives the magnitude of acquisition-related costs, may not be indicative of such future costs. The Company believes that excluding
acquisition-related costs facilitates the comparison of our fi nancial results to the Company’s historical operating results and to other companies in our industry.
4
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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P E R F O R M A N C E G R A P H
The following graph assumes $100 invested December 31, 2010 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 periods presented, 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 Data Processing &
Outsourced Services index.
Outsourced Services index.
TOTAL RETURN PERFORMANCE
350
300
250
200
150
100
50
E
U
L
A
V
X
E
D
N
I
0
12/31/10
INDEX
WEX Inc.
Russell 2000
12/31/11
12/31/12
12/31/13
12/31/14
12/31/15
WEX INC.
RUSSELL 2000
S&P DATA PROCESSING AND OUTSOURCED SERVICES
PERIOD ENDING 12/31
10
11
12
13
14
15
100.00
118.00
163.85
215.28
215.04
100.00
95.82
111.49
154.78
162.35
S&P Data Processing and Outsourced Services
100.00
124.77
162.03
248.61
281.98
Source: S&P Capital IQ
48417_Guts.indd 5
192.17
155.18
314.99
5
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W E X L E A D E R S H I P T E A M
MELISSA D. SMITH
President and
Chief Executive Offi cer
STEPHEN R. CROWLEY
Senior Vice President,
Shared Services and
Chief Information Offi cer
GEORGE HOGAN
Senior Vice President,
International
KENNETH W. JANOSICK
Senior Vice President and
General Manager,
Global Fleet Direct
NICOLA S. MORRIS
Senior Vice President,
Corporate Development
66
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JAMES PRATT
Senior Vice President and
General Manager,
Virtual Products
HILARY A. RAPKIN
Senior Vice President,
General Counsel and
Corporate Secretary
ROBERTO SIMON
Chief Financial Offi cer
JEFF YOUNG
Senior Vice President and
General Manager,
Evolution1
Cautionary Note Regarding Forward-Looking Statements
This Annual Report includes forward-looking statements including, but not limited to, statements about
management’s plan and goals, and the “Strategy” section of this Annual Report. 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 and in oral statements
made by our authorized offi cers: the eff ects of general economic conditions on fueling patterns as well as payment
and transaction processing activity; the impact of foreign currency exchange rates on the Company’s operations,
revenue and income; changes in interest rates; the impact of fl uctuations in fuel prices; 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 or plans to acquire; the Company’s failure to successfully operate and expand ExxonMobil’s European
commercial fuel card program, or Esso Card; the failure of corporate investments to result in anticipated strategic
value; the impact and size of credit losses; the impact of changes to the Company’s credit standards; breaches of
the Company’s technology systems and any resulting negative impact on our reputation, liabilities or relationships
with customers or merchants; 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 or fi nancial regulations
impacting the Company’s industrial bank, the Company as the corporate parent or other subsidiaries or affi liates; the
impact of the Company’s outstanding notes on its operations; the impact of increased leverage on the Company’s
operations, results or capacity generally, and as a result of potential acquisitions specifi cally; fi nancial loss if the
Company determines it necessary to unwind its derivative instrument position prior to the expiration of a contract;
the incurrence of impairment charges if our assessment of the fair value of certain of our reporting units changes; the
uncertainties of litigation; as well as other risks and uncertainties identifi ed in Item 1A of the 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.
7
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, 2015
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).
Yes
No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant (assuming for the purpose of this
calculation, but without conceding, that all directors, officers and any 10 percent or greater stockholders are affiliates of the registrant) as of June 30, 2015, the
last business day of the registrant’s most recently completed second fiscal quarter, was $4,347,908,772 (based on the closing price of the registrant’s common
stock on that date as reported on the New York Stock Exchange).
There were 38,644,041 shares of the registrant’s common stock outstanding as of February 24, 2016.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s Proxy Statement for the 2016 Annual Meeting of Stockholders are incorporated by reference in Part III. With the
exception of the sections of the 2016 Proxy Statement specifically incorporated herein by reference, the 2016 Proxy Statement is not deemed to be filed
as part of the 10-K.
TABLE OF CONTENTS
Forward-Looking Statements
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits and Financial Statement Schedules
Signatures
Page
1
1
14
26
27
27
28
29
29
31
57
59
111
111
113
113
113
113
113
113
114
115
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.
Unless otherwise indicated or required by the context, the terms “we,” “us,” “our,” “WEX,” or the “Company,” in this
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, 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 and in oral statements made by our authorized officers:
the effects of general economic conditions on fueling patterns as well as payment and transaction processing activity; the
impact of foreign currency exchange rates on the Company’s operations, revenue and income; changes in interest rates; the
impact of fluctuations in fuel prices; the effects of the Company’s business expansion and acquisition efforts; the Company’s
failure to successfully integrate the businesses it has acquired or plans to acquire; the Company's failure to successfully
operate and expand ExxonMobil's European commercial fuel card program, or Esso Card; the failure of corporate investments
to result in anticipated strategic value; the impact and size of credit losses; the impact of changes to the Company's credit
standards; breaches of the Company’s technology systems and any resulting negative impact on our reputation, liabilities or
relationships with customers or merchants; 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 or financial regulations impacting the
Company’s industrial bank, the Company as the corporate parent or other subsidiaries or affiliates; the impact of the
Company’s outstanding notes on its operations; the impact of increased leverage on the Company's operations, results or
capacity generally, and as a result of potential acquisitions specifically; 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, our predecessor, Wright Express, was sold to Avis Group Holdings, Inc., which
was acquired by Cendant Corporation in March 2001. In anticipation of our initial public offering, the Company’s operations
were transferred to a Delaware LLC, which was converted into a Delaware corporation in 2005 in conjunction with our initial
public offering. Over the past 30 years, we have expanded the scope of our business from a fleet payment provider into a multi-
channel provider of corporate payment solutions.
WEX Inc. has been publicly traded since February 16, 2005 (NYSE:WEX) and beginning in the fourth quarter of 2015,
operates in three business segments: Fleet Solutions, Travel and Corporate Solutions and Health and Employee Benefit
Solutions. Previously, the Company had reported two business segments, Fleet Payment Solutions and Other Payment
Solutions. Fleet Solutions remains on the same basis as the historical Fleet Payment Solutions business segment. Travel and
Corporate Solutions includes the Travel business as well as other verticals. Health and Employee Benefit Solutions includes the
Healthcare and Employee related businesses. This change will enhance the Company's transparency and align our reporting
with how we now operate our business. Financial reporting under this new structure is included within this report on Form 10-K
and historical financial segment information has been recast to conform to this new presentation.
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Our business model enables us to provide exceptional payment security and control across a wide spectrum of payment
sectors. The Fleet Solutions segment provides customers with fleet vehicle payment processing services specifically designed
for the needs of commercial and government fleets. During the year ended December 31, 2015, Fleet Solutions revenue
represented approximately 63 percent of our total revenue. As of December 31, 2015, the Fleet Solutions segment services over
9.4 million vehicles. Management estimates that WEX fleet cards are accepted at over 90 percent of fuel locations in each of
the United States and Australia. With the acquisition of ExxonMobil’s European commercial fleet card portfolio ("Esso
portfolio in Europe") in December 2014, WEX fleet cards are now accepted at all ExxonMobil stations throughout Europe. The
Travel and Corporate Solutions segment focuses on the complex payment environment of business-to-business payments,
providing customers with payment processing solutions for their corporate payment and transaction monitoring needs. Travel
and Corporate Solutions revenue, which represented approximately 23 percent of our total revenue during the year ended
December 31, 2015, is generated primarily in the online travel market. The Travel and Corporate Solutions segment has
operations in North America, Europe, South America and Asia-Pacific. The Health and Employee Benefit Solutions segment,
which represented approximately 14 percent of our total revenue during the year ended December 31, 2015, is generated
primarily from the healthcare payment products and our software as a service ("SaaS") consumer directed platform. The Health
and Employee Benefit Solutions segment also provides payroll related benefits to customers in Brazil.
The Company’s U.S. operations include WEX Inc. and our wholly-owned subsidiaries WEX Bank, WEX FleetOne,
Evolution1 and Benaissance. Our international operations include our wholly-owned subsidiaries, WEX Fuel Cards Australia,
WEX Prepaid Cards Australia, WEX New Zealand, WEX Europe Limited, formerly CorporatePay Limited, UNIK S.A., a
Brazil-based company, and a majority equity position in WEX Europe Services Limited and its subsidiaries.
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 acquisitions over the last few years include:
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On November 18, 2015, our wholly-owned subsidiary Evolution1 acquired Benaissance, a leading provider of
integrated SaaS technologies and services for healthcare premium billing, payment and workflow management, to
complement our healthcare payments products and services.
On August 31, 2015, we acquired the remaining 49 percent ownership in UNIK S.A., a majority-owned subsidiary
prior to this transaction.
On December 1, 2014, our majority owned subsidiary, WEX Europe Services Limited, acquired the assets of
ExxonMobil's European commercial fuel card program, which includes operations, funding, pricing, sales and
marketing in nine countries in Europe.
On July 16, 2014, we acquired Evolution1, a leading provider of payment solutions within the healthcare industry.
On October 15, 2013, our subsidiary 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 FleetOne, 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.
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 October 18, 2015, we entered into a purchase agreement to acquire
Electronic Funds Source LLC ("EFS"), a provider of customized corporate payment solutions for fleet and corporate customers
with a focus on the large and mid-sized flee segments. Pursuant to the purchase agreement, and subject to the terms and
conditions contained therein, at the closing of this acquisition, the Company will acquire all of the outstanding membership
interests of WP Mustang Topco LLC, the indirect parent of EFS, and Warburg Pincus Private Equity XI (Lexington), LLC, an
affiliated entity, from investment funds affiliated with Warburg Pincus LLC (the "EFS Sellers") for an aggregate purchase price
comprised of $1.1 billion in cash and 4,011,672 shares of the Company’s common stock, subject to certain working capital and
other adjustments as described in the purchase agreement. The parties’ obligations to consummate the acquisition are subject to
customary closing conditions, including the expiration or termination of the applicable antitrust waiting period under the Hart-
Scott Rodino Antitrust Improvements Act of 1976, as amended.
On July 29, 2014, we sold our Pacific Pride subsidiary for $49.7 million, which resulted in a pre-tax book gain of $27.5
million. The Company decided to sell the operations of Pacific Pride as it did not align with the long-term strategy of the core
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fleet business. The Company has entered into a multi-year agreement with the buyer that will continue to allow WEX branded
card acceptance at Pacific Pride locations.
On January 7, 2015, we sold the operations of rapid! PayCard for $20.0 million, which resulted in a pre-tax book gain
of $1.2 million. Our primary focus in the U.S. continues to be in the fleet, travel, and healthcare industries. As such, we
divested the operations of rapid! PayCard, which were not material to our annual revenue, net income or earnings per share.
WEX Bank, a Utah industrial bank incorporated in 1998, is a Federal Deposit Insurance Corporation (“FDIC”) insured
depository institution. The functions performed at WEX Bank contribute to the operations of the Fleet Solutions and Travel and
Corporate Solutions 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 deposit
accounts and provides the financing and makes credit decisions that enable the Fleet Solutions and Travel and Corporate
Solutions 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. 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 our Fleet Solutions and Travel and
Corporate Solutions segments.
Competitive Strengths
We believe the following strengths distinguish us from our competitors:
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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
estimates to provide coverage to over 90 percent of fuel locations in the U.S. and Australia, as well as wide acceptance
in Canada and Brazil. This provides our customers with the convenience of broad acceptance.
Our proprietary closed-loop fuel networks 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 purchase
controls at the point of sale and to refine the information reporting we provide to our fleet customers and customers of
our strategic relationships.
Our proprietary closed-loop network is a competitive strength because it enables us to establish a direct relationship
with each of the merchants that comprise our network.
• 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.
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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 9.4 million vehicles
serviced as of December 31, 2015 and co-branded strategic relationships with six of the largest U.S. fleet management
providers and with numerous oil companies that use our private label solutions. Our wide site acceptance, together
with our private-label portfolios and value-added product and service offerings, drive high customer satisfaction levels,
with a U.S. fleet retention rate in excess of 97 percent (based on the 2015 rate of voluntary customer attrition).
Our capabilities in the over-the-road segment of the market enhance 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.
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Our purchase of ExxonMobil's commercial fuel card program which uses a closed-loop network in Europe, combined
with the long term supply agreement to serve the current and future Esso portfolio in Europe, provides us with a strong
foundation in the large European fleet market.
Our travel and corporate 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, and our
operations in the United Kingdom provide corporate payment solutions to the travel and healthcare industries. We
continue to expand our online travel payment solution capabilities and geographies, which currently include North
America, Europe, South America and Asia-Pacific. As of December 31, 2015, we settle transactions in 21 different
currencies.
The demand for our payment processing, account servicing and transaction processing services combined with
significant operating scale has historically driven strong revenue growth and earnings potential. 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. 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, 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 have maintained a
long record of low credit losses due to the short-term, non-revolving credit issued to our customer base. Our credit risk
management program is enhanced by our proprietary scoring models, managing credit lines and early suspension
policy. Interest rate risk is managed through diversified funding sources at WEX Bank with significant non-interest
bearing liabilities and merchant contracts that include some ability to raise rates if interest rates rise.
• We have become a leading provider of cloud-based healthcare payments technology through the acquisitions of
Evolution1 in 2014 and Benaissance in 2015. Our large partner network expands our opportunities in a growing
healthcare payments market.
• We have an experienced and committed management team that has substantial industry knowledge and a proven track
record of financial success. The team has been successful in driving strong growth with consistent operating
performance. We believe that our management team positions us well to continue successfully implementing our
growth strategy and capture operating efficiencies.
Strategy
Our Company’s path forward will be shaped by the following three strategic priorities:
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Accelerating growth in our core verticals. We have built a robust set of products and services within our Fleet, Travel,
and Health verticals. We will continue to grow our business organically in these core verticals through excellence in
our marketing and sales force as well a focus on our revenue management practices. Our acquisition strategy will
complement our organic growth by both enhancing scale and adding differentiation to our current offerings.
Capturing efficiencies and new scaling opportunities across the organization. We will build new product functionality
while rationalizing our technology platforms to enable us to deliver greater customer value and enhanced margins. We
are also focused on streamlining our delivery model to ensure we have the flexibility to meet a diversity of customer
needs as well as efficiently integrate our acquisitions.
Develop and drive market leading offerings globally. Within our Fleet, Travel, and Health verticals, we are focusing
on rapidly growing our presence in attractive geographies and enhancing our product suite. Revenue originated from
non-US markets increased to 19% of 2015 total revenue, driven largely by our successful entry into Europe and Brazil.
We will continue to target new regions such as Asia, where we see the potential for long-term growth. We are also
focused on innovating with new products such as data analytics, which harness the power of our proprietary closed
loop data network in our Fleet vertical.
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Overview
FLEET SOLUTIONS SEGMENT
The Fleet 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 9.4 million vehicles at year end 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., Australia and Europe, 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.
The following illustrates our proprietary closed-loop network:
Payment processing transactions represent a majority of the revenue stream in the Fleet 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. Revenue from our WEX Europe Services operations is
primarily generated by transactions where our revenue is derived from the difference between the negotiated price of the fuel
from the supplier and the price charged to the fleet customer. We collect the total purchase price from the fleet customer,
normally within 30 days from the billing date.
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The following illustration depicts our business process for a typical domestic fuel payment processing transaction:
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. Additionally, payment processing revenue related to our WEX Europe
Services operations is specifically derived from the difference between the negotiated price of the fuel from the supplier and the
agreed upon price paid by the fleets. In 2015, we processed approximately 343 million payment processing transactions,
compared to 311 million payment processing transactions in 2014. Additionally, we receive revenue from account servicing
fees, factoring receivables and finance fees.
We offer the following services:
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Customer service, account activation and account retention: We offer customer service, account activation and
account retention services to fleets and fleet management companies and the fuel and vehicle maintenance providers
on our network. Our services include promoting the adoption and use of our products and programs and account
retention programs on behalf of our customers 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 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.
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• 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 related details. In addition, 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 approximately 3.8 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 fuel providers 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 approximately 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 approximately 3.8 million vehicles.
Fuel Price Derivatives
Management estimates that approximately 25 percent of our company-wide revenue in 2015 resulted from fees paid to
us by fuel providers based on a negotiated percentage of the purchase price of fuel purchased by our customers. Accordingly,
this revenue is impacted by fuel prices. To address fluctuations in fuel prices, we have previously hedged a portion of our U.S.
fuel-price related earnings exposure to improve the management of potential cash flow volatility created by changes in U.S.
fuel prices and to enhance the visibility and predictability of our anticipated future cash flows.
During the fourth quarter of 2014 we suspended purchases under our fuel derivatives program due to unusually low
prices in the commodities market. We continue to hold fuel price derivative instruments for the first quarter of 2016 that were
executed in the third quarter of 2014 for approximately 20 percent of the anticipated quarterly exposure to domestic earnings
based on assumptions at time of purchase. After the first quarter of 2016, we will no longer be hedged for changes in fuel
prices. Management will continue to monitor the fuel price market and evaluate our alternatives as it relates to this hedging
program.
Our fuel price derivative instruments are in the form of 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 was 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 could create a disparity between the effects of price changes on the actual
revenues we earn and the gains or losses realized on the options.
Our derivative instruments do not qualify for hedge accounting under accounting guidance. Accordingly, gains and
losses on our fuel price-sensitive derivative instruments, whether they are realized or unrealized, affect our current period
earnings.
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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, 2015. The approximate percentage of
hedged fuel price-sensitive earnings exposure is based on assumptions at time of purchase and includes the earnings from our
U.S. operations only.
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
2016
$3.28
$3.34
20%
Overview
TRAVEL AND CORPORATE SOLUTIONS SEGMENT
Our Travel and Corporate Solutions segment is comprised of our virtual and prepaid products with which we provide
innovative corporate purchasing and payment capabilities that can be integrated with our customers’ internal systems to
streamline their corporate payments, accounts payable and reconciliation processes.
Products and Services
The Travel and Corporate Solutions segment allows businesses to centralize purchasing, simplify complex supply chain
processes and eliminate the paper check writing associated with traditional purchase order programs. Our product suite includes
virtual and prepaid products.
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. 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 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.
Our prepaid and gift card products are offered through WEX Prepaid Card Australia and WEX Europe Services to
companies throughout Australia and Europe. 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.
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The following illustration depicts our business process for a typical travel virtual card product transaction:
1 Guest books a hotel through a travel website owned by an online travel company
2 Online travel company reserves room at hotel through reservation system. A WEX virtual card number is used to reserve the room.
3 Upon checkout, hotel authorizes WEX virtual card number. The WEX virtual card restricts charge to predetermined cost of room,
incidental expenses are paid for by guest.
4 Online travel company pays WEX. WEX provides consolidated payment process to multiple hotel franchises. WEX earns fee by retaining
percentage of the online travel company reimbursement payment.
Marketing Channels
We market our Travel and Corporate Solutions segment products and services directly to new and existing customers.
Our products are marketed to commercial and government organizations and we use existing open-loop networks.
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HEALTH AND EMPLOYEE BENEFIT SOLUTIONS SEGMENT
Overview
Our Health and Employee Benefit Solutions segment is comprised of our healthcare payment products and SaaS
platforms with which we provide simplified payment capabilities in a complex healthcare market as well as employee benefit
products in Brazil.
Products and Services
The Health and Employee Benefit Solutions segment product suite includes our 1Pay and 1Plan payment solution
products and our ExchangePoint, 1Cloud and 1Direct SaaS platforms.
With our healthcare payment products, we provide payments in the complex healthcare market. We partner with health
plans, third-party administrators, financial institutions, payroll companies and software providers to provide a software as a
service product to support employers' healthcare benefits programs and to administer flexible spending, health saving and
reimbursement accounts, and other healthcare related employee and dependent benefits.
We currently have approximately 500 partners with relationships with 125,000 employers, reaching 12 million
customers. Revenue is generated by SaaS based monthly fees to partners and interchange fees from spending on customer debit
cards issued under flexible spending, health savings and reimbursement accounts. Cards are branded with either Visa or
MasterCard and operate on a restricted open loop network.
Our paycard products are offered through our wholly-owned subsidiary, UNIK S.A., a provider of employee benefit
cards, private label and processing services in Brazil, specializing in the retail, government and transportation sectors. Revenue
is generated by card usage fees and interchange fees from spending on the paycard products.
Marketing Channels
We market our Health Solutions products and services to consumers through an extensive partner network, that includes
employers and healthcare providers. Our employee benefit products are marketed to consumers through employers in Brazil.
Employees
OTHER ITEMS
As of December 31, 2015, WEX Inc. and its subsidiaries had 2,265 employees, of which 1,545 were located in the
United States. None of our U.S.-based employees are subject to a collective bargaining agreement. In Europe, certain
employees are members of trade unions or works councils. In Brazil, certain employees are members of unions. The Company
believes that its relations with its employees are generally satisfactory.
Competition
We have a strong competitive position in our Fleet Solutions, Travel and Corporate Solutions and Health and Employee
Benefit Solutions segments. Our product features and extensive account management services are key factors behind our
position in the fleet industry. We face competition in all of our segments. Our competitors vie with us for prospective direct
fleet customers as well as for companies with which to form strategic relationships. We compete with companies that perform
payment and transaction processing or similar services. Financial institutions that issue Visa, MasterCard and American Express
credit and charge cards currently compete against us primarily in the fleet category of our Fleet Solutions segment and in the
corporate purchase card category of our Travel and Corporate Solutions segment. We also compete with other healthcare
payment service providers.
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 challenging for us to maintain profit margins at
historical levels.”
Seasonality
Our businesses are affected by seasonal variations. For example fuel prices are typically higher during the summer and
online travel sales are typically higher during the third quarter. In addition, we experience seasonality in our healthcare vertical,
as the spend is correlated to customers' insurance deductibles with typically higher spend in the early part of the year until
employees meet their deductibles.
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Technology
We believe that investment in technology is a crucial step in maintaining and enhancing our competitive position in the
marketplace. Our data center network and infrastructure is supported by secure data centers with redundant locations. We have
data centers in various locations in the United States including South Portland, Maine and Aurora, Colorado. We also have data
centers and infrastructure located in various locations throughout Europe, Australia, New Zealand and Brazil.
Our fleet fuel-based closed-loop proprietary platforms capture 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 more secure environment than an open-loop network typically allows. 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. At our Evolution1 subsidiary, we maintain
an integrated multi-account payment platform, including a mobile application. In Australia, New Zealand, Brazil and the United
Kingdom, we use standalone platforms to support operations.
Our secure networks are designed to isolate our databases from unauthorized access. We use security protocols among
all applications, and our employees access critical components on a need-only basis. As of December 31, 2015, we have not
experienced any significant incidents in network, application or data security. 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 and continue to invest in our infrastructure.
For information regarding technology related risks, see the information in Item 1A under the headings “We may not be
able to adequately protect our information systems, including 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, FleetOne, Benny, 1Cloud, 1Direct, 1Pay, 1Mobile, 1Plan and 1View brand names in
the U.S., the Motorpass and Motorcharge brand names in Australia and the UNIK S.A. and FastCred brand names in Brazil.
Regulation - United States
The Company and its affiliates are subject to certain state and federal laws and regulations which govern insured
depository institutions and their affiliates as well as our operations in the healthcare market. WEX Bank is 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 limitations 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.
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Below is a description of the material elements of the laws, regulations, policies and other regulatory matters affecting
the operations of WEX in the United States.
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, except as stated above, 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 require that the Company engage in such transactions with WEX Bank only
on terms and under circumstances that are substantially the same, or at least as favorable to WEX Bank, as those prevailing at
the time for comparable transactions with nonaffiliated companies. Furthermore, with certain exceptions, each loan or extension
of credit by WEX Bank to the Company or its other affiliates must be secured by collateral with a market value ranging from
100 percent to 130 percent of the amount of the loan or extension of credit, depending on the type of collateral.
The Consumer Financial Protection Bureau
The Dodd-Frank Act established the 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. The
CFPB has broad rulemaking authority for a wide range of consumer protection laws. 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 Financial 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 U.S. 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, property and bank
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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 “Gramm-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 such 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, and may be required to,
restrict such entity’s ability to vote shares held by it.”
Healthcare Regulation
The federal and state governments in the U.S. continue to enact and consider many broad-based legislative and
regulatory proposals that could materially impact various aspects of our health-related business.
The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (collectively
referred to as "Health Care Reform") mandates broad changes affecting insured and self-insured health benefit plans that impact
our current business model, including our relationship with current and future customers, producers and health care providers,
products, services, processes and technology. Health Care Reform left many details to be established through regulations. While
federal agencies have published proposed and final regulations with respect to most provisions, some issues remain uncertain.
In connection with the processing of data, we frequently undertake or are subject to specific compliance obligations
under privacy and data security-related laws, including HIPAA, the Gramm-Leach-Bliley Act, and similar state and federal laws
governing the collection, use, protection and disclosure of nonpublic personally identifiable information, including individually
identifiable health information.
HIPAA and its implementing regulations, as amended by the Health Information Technology for Economic and
Clinical Health Act, or the HITECH Act, impose requirements relating to the privacy, security and transmission of individually
identifiable health information. Among other things, HIPAA, as amended by the HITECH Act, and its implementing
regulations, subjects us to regulations and contractual obligations that impose privacy and security standards and breach
notification and reporting requirements.
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In addition to federal data privacy and security laws and regulations, we are subject to state laws governing
confidentiality and security of personally identifiable information and additional state-imposed breach notification and
reporting requirements.
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.
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 23 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 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 www.sec.gov. The Company’s Audit Committee
Charter, Compensation Committee Charter, Finance Committee Charter, Corporate Governance Committee Charter, Corporate
Governance Guidelines and Code of Business Conduct and Ethics 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.
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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, 2015, management estimates approximately 25 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, a significant part of our revenue is dependent on fuel prices, which are
prone to volatility. For example, we estimate that during 2015, each one cent decline in average domestic fuel prices below
average actual prices would result in approximately a $1.1 million decline in 2015 revenue. Therefore, extended declines in
the price of fuel would have a material adverse effect on our total revenues. In the fourth quarter of 2014 we suspended our
fuel price hedging program. The suspension of our fuel price hedging program will increase the impact of fuel price declines
and our net income in future quarters will be increasingly exposed to fuel price volatility until the program is reinstated. If
fuel prices remain at a reduced level, the lack of a hedge will negatively impact our revenue and income.
Fuel prices are dependent on many factors, all of which are beyond our control. These factors include, among others:
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supply and demand for oil and gas, and expectations regarding supply and demand;
speculative trading;
actions by major oil exporting nations;
political conditions in other oil-producing, gas-producing or supply-route countries, including revolution,
insurgency, terrorism or war;
refinery capacity;
weather;
the prices of foreign exports and the availability of alternate fuel sources;
value of the U.S. dollar versus other major currencies;
general worldwide economic conditions; and
governmental regulations and tariffs.
A portion of our revenue in Europe is derived from the difference between the negotiated price of the fuel from
the supplier and the price charged to the fleet customer. As a result, a contraction in these differences would reduce
revenues and could adversely affect our operating results.
Revenue from our fuel portfolio in Europe is derived from transactions where our revenue is tied to the difference
between the negotiated price of the fuel from the supplier and the price charged to the fleet customer. The merchant’s cost of
fuel is dependent on several factors including, among others, the factors described above affecting fuel prices. We
experience fuel-price related revenue contraction when the merchant’s cost of fuel increases at a faster rate than the fuel
price we charge to our fleet customers, or the fuel-price we charge to our fleet customers decreases at a faster rate than the
merchant’s cost of fuel. Accordingly, we generate less revenue, which could adversely affect our operating results.
If we fail to adequately assess and monitor credit risks posed by our customers, we could experience an increase in
credit loss.
We are subject to credit risk posed by 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 addition, changes to our policies on the types and profiles of
businesses to which we extend credit could also have an adverse impact on our credit losses. 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.
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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, but are not limited to, the Australian dollar, the 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. Realized and unrealized gains and losses on foreign currency transactions as well as the re-
measurement of our cash, receivable and payable balances that are denominated in foreign currencies, are recorded directly
in the consolidated statements of income. In addition, gains and losses associated with the Company's foreign currency
exchange derivatives are recorded on the consolidated statements of income.
Therefore, increases or decreases in the value of the U.S. dollar against other major currencies that we use to
conduct our business will affect our revenues, operating income and the value of balance sheet items denominated in those
currencies. We cannot ensure 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 exposure to counterparty risk could create an adverse effect on our financial condition.
We engage in a number of transactions where counterparty risk is a relevant factor, including transactions with
customers, derivatives counterparties and those businesses we work with to provide services, among others. These risks are
dependent upon market conditions and also the real and perceived 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 certain situations. Certain contracts and
arrangements that we enter into with counterparties may provide us with indemnification clauses to protect us from financial
loss. If the counterparty fails to, or is unable to fulfill these indemnification clauses, we may incur losses as well as harm to
our reputation.
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 percent senior notes, due 2023, or the Notes.
Our 2014 Credit Agreement provides for a term loan facility in an amount equal to $500 million that matures on
January 31, 2018, and a $700 million secured revolving credit facility, with a $150 million sublimit for letters of credit and a
$20 million sublimit for swingline loans, that terminates on January 31, 2018. In addition to the 2014 Credit Agreement, our
indebtedness consists of 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.
There can be no assurance that we will be able to meet our indebtedness 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 the 2014 Credit Agreement, we are required to remain in compliance with a consolidated EBIT to
consolidated interest charges ratio of no less than 3.00 to 1.00, measured quarterly; and a consolidated funded indebtedness
(excluding the amount of consolidated funded indebtedness due to permitted securitization transactions) to consolidated
EBITDA ratio of no more than 3.25 to 1.00, measured quarterly. The Company may elect to increase the permissible ratio
under the latter financial covenant to 3.75 to 1.00 (for four fiscal quarters) or to 4.25 to 1.00 (for two fiscal quarters) in
connection with certain acquisitions. In connection with the acquisition of the Esso portfolio in Europe, the Company has
elected to increase the permissible ratio under the latter financial covenant to 4.25 to 1.00.
Failure to comply with the financial covenants or any other non-financial or restrictive covenant in our 2014 Credit
Agreement could create a default. 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.
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Despite our substantial indebtedness, we may still be able to incur more debt, intensifying the risks described
above.
Subject to restrictions in our 2014 Credit Agreement, we may incur additional indebtedness, which could increase the
risks associated with our already substantial indebtedness. Subject to certain limitations, including compliance with the
covenants in our 2014 Credit Agreement, we have the ability to borrow additional funds under our 2014 Credit Agreement.
In connection with the planned acquisition of EFS, we have obtained financing commitments from Bank of America,
N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, SunTrust Bank, SunTrust Robinson Humphrey, Inc., MUFG
Union Bank, N.A. and Citizens Bank, National Association, for senior secured credit facilities in the aggregate amount of
$2.125 billion, consisting of a $1.775 billion seven-year term loan facility and a $350 million five-year revolving credit
facility. The new senior secured credit facilities would replace our existing senior secured credit facilities under the 2014
Credit Agreement.
This indebtedness could have the effect, among other things, of reducing our flexibility to respond to changing
business and economic conditions and increasing interest expense. We will also incur various costs and expenses associated
with our indebtedness. The amount of cash required to pay interest on our increased indebtedness levels following
completion of the acquisition, and thus the demands on our cash resources, will be greater than the amount of cash flows
required to service our indebtedness prior to the transaction. The increased levels of indebtedness following completion of
the acquisition could also reduce funds available for working capital, capital expenditures, acquisitions and other general
corporate purposes and may create competitive disadvantages relative to other companies with lower debt levels. If we do
not achieve the expected benefits and cost savings from the acquisition, or if the financial performance of the combined
company does not meet current expectations, then our ability to service our indebtedness may be adversely impacted.
Certain indebtedness to be incurred in connection with the acquisition may bear interest at variable interest rates. If
interest rates increase, variable rate debt will create higher debt service requirements, which could adversely affect our cash
flows.
The agreements that will govern the indebtedness to be incurred in connection with the acquisition may contain
various affirmative and negative covenants that may, subject to certain customary exceptions, restrict our ability to, among
other things, create liens over our property, incur additional indebtedness, enter into sale and lease-back transactions, make
loans, advances or other investments, make non-ordinary course asset sales, declare or pay dividends or make other
distributions with respect to equity interests, change the nature of our business, enter into certain agreements which restrict
our ability to pay dividends or other distributions or create liens on our property, transact business with affiliates and/or
merge or consolidate with any other person or sell or convey certain of its assets to another person. In addition, some of the
agreements that govern the debt financing may contain financial covenants that will require us to maintain certain financial
ratios. Our ability to comply with these provisions may be affected by events beyond our control. Failure to comply with
these covenants could result in an event of default, which, if not cured or waived, could accelerate our repayment
obligations.
In addition, our credit ratings affect the cost and availability of future borrowings and, accordingly, our cost of capital.
Our ratings reflect each rating organization’s opinion of our financial strength, operating performance and ability to meet
our debt obligations. In connection with the debt financing, it is anticipated that we will seek ratings of our indebtedness
from one or more nationally recognized statistical rating organizations. There can be no assurance that we will achieve a
particular rating or maintain a particular rating in the future.
Moreover, we may be required to raise substantial additional financing to fund working capital, capital expenditures,
acquisitions or other general corporate requirements. Our ability to arrange additional financing or refinancing will depend
on, among other factors, our financial position and performance, as well as prevailing market conditions and other factors
beyond our control. There can be no assurance that we will be able to obtain additional financing or refinancing on terms
acceptable to us or at all.
Volatility in the financial markets may negatively impact our ability to access credit and the terms at which we
would access such 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 under the 2014 Credit Agreement 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. We
are planning to enter into a new credit facility in connection with our pending acquisition of EFS. Volatility in the financial
markets may impact the rates that we receive under that new facility.
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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.
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 will have substantially increased indebtedness following completion of the acquisition of EFS, which will increase
our interest expense. We will also incur various costs and expenses associated with the financing. The amount of cash
required to pay interest on our increased indebtedness levels following completion of the acquisition and thus the demands
on our cash resources will be greater than the amount of cash flows required to service our indebtedness prior to the EFS
transaction.
We cannot assure you 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 2014 Credit Agreement or any subsequent 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.
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 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, or CFTC, with broad authority to adopt combined
position limits for futures contracts and over-the-counter derivatives, and on November 5, 2013 the CFTC proposed rules
addressing such limits. The rules, if enacted in their proposed form, may require us to change to any fuel price hedging
practices we may then use 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.
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 enforces those laws against and examines
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.
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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 $1,069.8 million of fixed and variable interest rate indebtedness outstanding at December 31, 2015,
consisting of $400.0 million of borrowings under our bond facility at a fixed rate of 4.750 percent and $669.8 million of
borrowings under our credit facility that bore interest at floating rates. An increase in interest rates would increase the cost
of borrowing under our credit facility.
Our industrial bank subsidiary, WEX Bank, uses collectively brokered deposits, including certificates of deposit,
interest-bearing money-market deposits and negotiable order of withdrawal (NOW) account deposits, to finance payments
to major oil companies. Certificates of deposit carry fixed interest rates from issuance to maturity, which vary, and are
relatively short term in duration. 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, 2015, WEX Bank had outstanding $97.9 million in certificates of
deposit maturing within one year, $54.4 million in certificates of deposit maturing within one to two years, and $369.2
million in interest-bearing money market deposits. Also at December 31, 2015, WEX Bank had $309.0 million of NOW
account deposits outstanding, which are currently non-interest bearing.
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. To the extent that our customers require less
fuel, that decline in purchase volume could reduce our revenues, limiting our profitability and preventing us from taking on
other initiatives.
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 16 percent of our total revenues in 2015. 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, 2015, we had $309.0 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. While we
regularly monitor these relationships, there can be no guarantee that we will be able to maintain them in the future.
If the technology we use in operating our business and interacting with our customers fails, is unavailable, or does
not operate to expectations, our business and results of operation could be adversely impacted.
We utilize a combination of proprietary and third-party technology to operate our business and interact with our
customers. This includes technology that we have developed, have contracted with others to develop or obtained through
third-parties by way of service agreements. We use this technology to conduct our business and interact with our customers,
partners and suppliers, among others. To the extent that our third-party providers’ technology does not work as agreed to, or
if we experience outages or unavailability resulting from their operations and the services they provide to us, our ability to
efficiently and effectively deliver services to and interact with our customers and partners could be adversely impacted and
our business and results of operations could be adversely affected. Also, any failure by our customers or partners to access
our technology conveniently could have an adverse effect on our business, results of operations and financial condition.
19
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. Our pending acquisition of EFS is subject to customary closing
conditions, including the expiration or termination of the applicable antitrust waiting period under the Hart-Scott Rodino
Antitrust Improvements Act of 1976, as amended. The failure to satisfy all of the required conditions could delay the
completion of the acquisition for a significant period of time or prevent it from occurring. Any delay in completing the
acquisition could cause us to not realize some or all of the benefits that we expect to achieve in the transaction. If we are
unable to complete the proposed acquisition, we may have incurred substantial expenses and diverted significant
management time and resources from our ongoing business. In addition, in the event the EFS purchase agreement is
terminated in certain circumstances involving a failure to obtain required antitrust clearances, we could be required to pay
the EFS Sellers a termination fee of $70 million. If, upon the satisfaction of the closing conditions and the expiration of a
marketing period in connection with our debt financing, we fail to consummate the EFS acquisition (and in certain other
limited circumstances), if the EFS Sellers so elect, we could be required to pay the EFS Sellers a termination fee of $45
million. There can be no assurance that the conditions to the closing of the acquisition will be satisfied or waived or that the
acquisition of EFS will be completed. Even if we are able to successfully complete the acquisition of EFS, the size and
complexity of the organization may result in delays in achieving anticipated or planned benefits, including those benefits
relating to commercial strategies and financial advantages. We have never integrated another company of a comparable
scale to EFS and doing so presents significant challenges and opportunities.
We have received a request for additional information (a “second request”) from the United States Federal Trade
Commission (“FTC”) in connection with the FTC’s review of our proposed acquisition of EFS. The effect of the second
request is to extend the waiting period imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
until 30 days after both WEX and EFS have substantially complied with the request, unless that period is extended
voluntarily by the parties or is terminated sooner by the FTC. There can be no assurance that a challenge to the proposed
acquisition on antitrust grounds will not be made, or, if such a challenge is made, what the result might be.
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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•
•
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•
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fluctuation in foreign currencies;
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; and
local labor conditions and regulations.
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.
20
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; health care mandates; 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, payment card issuers and health
insurance providers. There continue 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.
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.
The healthcare industry changes often and technology-enabled services used by consumers is relatively new and
unproven. If our platform is not successfully implemented, our growth may be limited.
The market for technology-enabled services for healthcare consumers changes rapidly and new products and
services are consistently being introduced. Opportunities to gain market share are challenging due to the significant
resources of our existing and potential competitors. It is uncertain whether or how fast this market will continue to grow. In
order to remain competitive, we are continually involved in a number of projects to develop new services or compete with
these new market entrants, including the development of mobile versions of our proprietary technology platform. These
projects carry risks, such as cost overruns, delays in delivery, performance problems and lack of acceptance by our
customers.
Based on our experience, consumers are still learning about HSAs and other similar tax-advantaged healthcare
savings arrangements. The willingness of consumers to increase their use of technology platforms to manage their
healthcare saving and spending tax advantaged benefits will impact our operating results.
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 2015, we have determined
21
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.
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 activities which may be impermissible for a Bank Holding Company. Failure to qualify for this
exemption could thus 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.
The regulatory status of WEX Bank enables it 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 condition. 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
22
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 limitations 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
“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. 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 our information systems, including 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 and mitigate the impact of cyber-attack, as well as 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
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.
Furthermore, as we have increased the number of platforms as well as the size of our networks and information
systems, our reliance on these technologies have become increasingly important to our operating activities. The potential
negative impact that a platform, network or information system shutdown may have on our operating activities has
increased. Shutdowns may be caused by unexpected catastrophic events such as natural disasters or other unforeseen events,
such as software or hardware defects or cyber-attacks by groups or individuals.
Under the GLBA and some state laws, 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.
The 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.
23
When we handle individually identifiable health information, regulations issued under HIPAA and the HITECH Act,
our contracts with our customers, and supplemental state laws require us to implement privacy and data security measures
and to comply with breach notification requirements. We may be subject to contractual damages and civil or criminal
penalties if we are found to violate these privacy, security and breach notification requirements. Our efforts to comply with
existing and future health data laws and regulations may be costly and time-consuming. Incidents involving our handling of
health-related information may consume significant financial and managerial resources and may damage our reputation,
which may discourage customers from using, renewing, or expanding their use of our services.
Any security breach, inadvertent transmission of information about our customers, failure to comply with applicable
breach notification and reporting requirements, or any violation of federal or state privacy laws could expose us to liability
in excess of any applicable insurance policies, litigation, regulatory scrutiny, and/or cause damage to our reputation.
Our failure to effectively implement new technology could jeopardize our position as a leader in our industry.
As a provider of information management and payment processing services, we must constantly adapt and respond
to the technological advances offered by our competitors and the informational requirements of our customers, including
those related to the Internet, in order to maintain and improve upon our competitive position. We may not be able to expand
our technological capabilities and service offerings as rapidly as our competitors, which could jeopardize our position as a
leader in our industry.
We are dependent on technology systems and electronic communications networks managed by third parties,
which could result in our inability to prevent service disruptions.
Our ability to process and authorize transactions electronically depends on our ability to electronically communicate
with our fuel and vehicle maintenance providers through point-of-sale devices and electronic networks that are owned and
operated by third parties. The electronic communications networks upon which we depend are often subject to disruptions of
various magnitudes and durations. Any severe disruption of one or all of these networks could impair our ability to authorize
transactions or collect information about such transactions, which, in turn, could harm our reputation for dependable service
and adversely affect our results of operations. In addition, our ability to collect enhanced data relating to our customers’
purchases may be limited by the use of older point-of-sale devices by fuel and vehicle maintenance providers. To the extent
that fuel and vehicle maintenance providers within our network are slow to adopt advanced point-of-sale devices, we may
not be able to offer the services and capabilities our customers demand.
Our industry continues to become increasingly competitive, which makes it more challenging for us to maintain
profit margins at historical levels.
We face and expect to continue to face competition in each category of the overall industry from several companies
that seek to offer competing capabilities and services. Historically, we have been able to provide 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
24
the imposition of fines or penalties and other serious legal and reputational consequences which may impact 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 UKBA, 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.
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 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.
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
25
transaction. Under the FDIC’s regulations, the acquisition of 10 percent 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
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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
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ITEM 2. PROPERTIES
All of our facilities are leased. The following table presents the details of our principal leased properties as
of December 31, 2015:
Property location
Square footage
Purpose of leased property
South Portland, Maine
Midvale, Utah
Louisville, Kentucky
Nashville, Tennessee
Melbourne, Australia
Perth, Australia
Auckland, New Zealand
São Paulo, Brazil
Sorocaba, Brazil
Salvador, Brazil
London, England
Crewe, England
Breda, Netherlands
Hamburg, Germany
Oslo, Norway
Aubervilliers, France
Rome, Italy
Fargo, North Dakota
Edina, Minnesota
St. Louis, Missouri
Simsbury, Connecticut
Omaha, Nebraska
Singapore
157,600 Corporate headquarters, operations center and warehouse
12,400 Bank operations and call center
5,400
Fleet fuel operations
82,700 WEX Fleet One operations
21,500 Australia Fuel operations
2,000 Australia Fuel operations
17,700
International Fuel operations
20,600
International Fuel and Paycard operations
6,000
International Fuel operations
2,400
International call center
8,800 European Fuel operations
14,700 European Fuel operations
1,000 European Fuel operations
7,500 European Fuel operations
3,600 European Fuel operations
10,400 European Fuel operations
4,300 European Fuel operations
26,000 Evolution1 operations
24,000 Evolution1 operations
3,600 Evolution1 operations
18,000 Evolution1 operations
31,100 Benaissance operation
500 Travel and Corporate operations
Additional financial information about our leased facilities appears in Item 8 – Note 18 of our consolidated financial
statements.
ITEM 3. LEGAL PROCEEDINGS
On December 23, 2015, the FDIC and WEX Bank, a wholly-owned subsidiary of WEX Inc. (the “Bank”), entered into
a Consent Order, Order for Restitution and Order to Pay Civil Money Penalty (the "FDIC Consent Agreement") stating that the
Bank violated Section 5 of the Federal Trade Commission Act. The FDIC Consent Agreement related to the marketing and fee
disclosure practices used in connection with negotiable order of withdrawal (“NOW”) account deposits associated with the
Bank’s deposit program partner, Higher One. Higher One provides electronic financial disbursements and payment services to
the higher education industry. Among these services, Higher One offers to facilitate opening a deposit account at participating
banks for students receiving financial aid, with the Bank being one of those participating institutions. Upon a student’s opening
of an account and receipt of funds in excess of their financial obligation to their education institution, the Bank holds the funds
for the student but does not receive any of the fees at issue. Higher One services the accounts, pays related processing costs and
receives all of the fees at issue. The FDIC Consent Agreement, among other things, requires: (i) the Bank to pay restitution for
certain fees collected by Higher One in connection with these NOW accounts (in the event Higher One does not provide for the
restitution), and (ii) the Bank to pay a civil money penalty.
The civil money penalty applicable to the Bank in the FDIC Consent Agreement is $1.75 million. In addition to a civil
money penalty, the FDIC Consent Agreement requires the Bank to pay restitution of approximately $31 million (if Higher One
fails to pay restitution), as a result of the alleged violations. As a result of the above described proceedings, Higher One paid the
entire restitution amount into a custodial account during the fourth quarter of 2015 for later distribution to students following
27
the approval of the restitution plan. The Bank has also paid its $1.75 million obligation under the FDIC Consent Agreement
during the fourth quarter of 2015 (following the execution of the FDIC Consent Agreement).
From time to time, we are subject to other legal proceedings (excluding the proceeding described above) and claims in
the ordinary course of business. We do not believe the outcome of any other of pending litigation will have a material adverse
effect on our financial statements.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
28
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:
2014
First quarter
Second quarter
Third quarter
Fourth quarter
2015
First quarter
Second quarter
Third quarter
Fourth quarter
High
Low
$
$
$
$
$
$
$
$
99.24
106.27
118.30
119.11
108.53
118.97
115.75
98.94
$
$
$
$
$
$
$
$
78.78
86.17
101.55
93.32
90.75
105.14
84.63
80.00
As of February 24, 2016, the closing price of our common stock was $63.52 per share, there were 38,664,041 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 the dividends it may pay under its revolving credit agreement, including pro
forma compliance with a ratio of consolidated funded indebtedness to consolidated EBITDA of 2.50:1.00 for the most recent
period of four fiscal quarters. In addition, the purchase agreement for the acquisition of EFS prohibits the Company from
paying dividends without the prior written consent of the EFS sellers prior to the closing of the transaction, except in limited
circumstances described in the purchase agreement. We also expect that the terms of the agreements that will govern the
indebtedness used to finance the acquisition of EFS will restrict us from paying dividends in certain circumstances.
Share Repurchases
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.
We used $22.0 million during 2015 to repurchase shares of our common stock. We did not purchase shares of our
common stock during the fourth quarter of 2015. The approximate dollar value of shares that were available to be purchased
under our share repurchase program was $108.2 million as of December 31, 2015. The purchase agreement for the acquisition
of EFS prohibits the Company from repurchasing shares of its common stock without the prior written consent of the EFS
sellers prior to the closing of the transaction, except in limited circumstances described in the purchase agreement.
29
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 gains (losses) on fuel price derivatives
Net earnings attributable to shareholders
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
Total liabilities
Redeemable non-controlling interest
Total stockholders’ equity
Total liabilities and stockholders’ equity
2015
2014
2013
2012
2011
December 31,
$
$
$
$
$
$
$
$
854,637
625,844
46,189
5,848
101,904
2.63
38,771
3,857,946
2,762,265
—
$
$
$
$
$
$
$
$
817,647
511,409
36,042
46,212
202,211
5.20
38,890
4,118,513
3,024,202
16,590
1,095,681
1,077,721
$
$
$
$
$
$
$
$
717,463
440,724
29,419
$
$
$
623,151
401,532
10,433
$
$
$
553,076
319,752
11,676
(9,851) $
(12,365) $
(11,869)
149,208
3.83
38,946
3,433,043
2,511,017
18,729
903,297
$
$
$
$
96,922
2.50
38,840
3,131,865
2,292,272
21,662
817,931
$
$
$
$
133,622
3.45
38,686
2,278,060
1,568,745
—
709,315
$
3,857,946
$
4,118,513
$
3,433,043
$
3,131,865
$
2,278,060
30
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The discussion below focuses on the factors affecting our consolidated results of operations for the years ended
December 31, 2015, 2014 and 2013 and financial condition at December 31, 2015 and 2014 and, where appropriate, factors that
may affect our future financial performance, unless stated otherwise. This discussion should be read in conjunction with the
consolidated financial statements, notes to the consolidated financial statements and selected consolidated financial data.
The acronyms and abbreviations identified below are used in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" as well as in Item 8. "Financial Statements and Supplementary Data." The following is
provided to aid the reader and provide a reference when reviewing the consolidated financial statements.
Average expenditure
per payment
processing transaction
2011 Credit
Agreement
2013 Credit
Agreement
2014 Amendment
Agreement
2014 Credit
Agreement
Adjusted Net Income
or ANI
ASU 2014-09
ASU 2015-03
ASU 2015-16
Company
EFS
Esso portfolio in
Europe
Evolution1
Evolution1 Plan
FASB
FDIC
GAAP
Higher One
Indenture
Average total dollars of spend in a funded fuel transaction
Credit agreement entered into on May 23, 2011 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
Amended and restated credit agreement entered into on January 18, 2013 by and among the
Company and certain of our subsidiaries, as borrowers, and WEX Card Holdings Australia Pty
Ltd, as specified designated borrower, with a lending syndicate
Amendment and restatement agreement entered into on August 22, 2014, among the Company,
the lenders party thereto, and Bank of America, N.A., as administrative agent
Second amended and restated credit agreement entered into on August 22, 2014, by and among
the Company and certain of our subsidiaries, as borrowers, and WEX Card Holding Australia
Pty Ltd., as designated borrower, and Bank of America, N.A., as administrative agent on behalf
of consenting lenders.
A non-GAAP metric that adjusts net earnings attributable to WEX Inc. to exclude fair value
changes of fuel-price related derivative instruments, the amortization of purchased intangibles, the
impact of net foreign currency remeasurement gains and losses, the expense associated with stock-
based compensation, acquisition related expenses and adjustments, 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, restructuring charges, gains on the extinguishment of a portion of the tax receivable
agreement, regulatory reserves, gains or losses on divestitures and adjustments attributable to non-
controlling interests, including adjustments to the redemption value of a non-controlling interest,
as well as the related tax impacts of the adjustments
Accounting Standards Update No. 2014-09 Revenue from Contracts with Customers (Topic
606)
Accounting Standards Update No. 2015-03 Interest—Imputation of Interest (Subtopic 835-30):
Simplifying the Presentation of Debt Issuance Costs
Accounting Standards Update No. 2015-16 Business Combinations (Topic 805): Simplifying the
Accounting for Measurement-Period Adjustments
WEX Inc. and all entities included in the consolidated financial statements
Electronic Funds Source LLC
European commercial fleet card portfolio acquired from ExxonMobil
EB Holdings Corp. and its subsidiaries which includes Evolution1, Inc., acquired by the
Company on July 16, 2014
Evolution1 401(k) Plan sponsored by Evolution1 Inc.
Financial Accounting Standards Board
Federal Deposit Insurance Corporation
Generally Accepted Accounting Principles in the United States
Higher One, Inc. a technology and payment services company focused on higher education
The Notes were issued pursuant to an indenture dated as of January 30, 2013 among the
Company, the guarantors listed therein, and The Bank of New York Mellon Trust Company,
N.A., as trustee
31
Funded payment transactions where the Company maintains the receivable for total purchase
Non-controlling interests
Net operating loss
$400 million notes with a 4.75% fixed rate, issued on January 30, 2013
Negotiable order of withdrawal deposits
Typically heavy trucks traveling long distances
Pacific Pride Services, LLC, previously a wholly-owned subsidiary, sold on July 29, 2014
Total amount paid by customers for transactions
NCI
NOL
Notes
NOW deposits
Over-the-road
Pacific Pride
Payment solutions
purchase volume
Payment processing
transactions
PPG
rapid! PayCard
SaaS
SEC
Securitization
Subsidiary
Total fleet transactions Total of transaction processing and payment processing transactions
Transaction
processing
transactions
UNIK
WEX
WEX Europe Services Consists primarily of our European commercial fleet card portfolio acquired by the Company
Price per gallon of fuel
rapid! PayCard, previously a line of business of the Company, sold on January 7, 2015
Software-as-a-service
Securities and Exchange Commission
Southern Cross WEX 2015-1 Trust, a bankruptcy-remote subsidiary consolidated by the Company
Unfunded payment transactions where the Company is the processor and only has receivables for
the processing fee
UNIK S.A., the Company's Brazilian subsidiary
WEX Inc.
from ExxonMobil on December 1, 2014
2015 Highlights and Year in Review
WEX stands as a premier global payments solution provider in the corporate payments market. Our opportunities for
growth extend well beyond the fleet fuel market, and in particular to the online travel and healthcare payments market. 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 have become a leader in global virtual payments and
continue to grow the business and create scale on a global basis. Through our acquisition of Benaissance, we have continued to
expand into the healthcare payments market.
The following events and accomplishments occurred during 2015:
•
•
•
On January 7, 2015, we sold the operations of rapid! PayCard for $20.0 million, which resulted in a pre-tax
book gain of $1.2 million. Our primary focus in the U.S. continues to be in the fleet, travel, and healthcare
industries. As such, we divested the operations of rapid! PayCard, which were not material to our annual
revenue, net income or earnings per share.
On August 31, 2015, we acquired the remaining 49 percent ownership in UNIK S.A., a majority-owned
subsidiary prior to this transaction, for approximately $46 million, expanding our presence in the
Brazilian market.
On October 18, 2015, we entered into a purchase agreement to acquire EFS, a provider of customized
payment solutions for fleet and corporate customers with a focus on the large and mid-sized fleet segments.
Pursuant to the purchase agreement, and subject to the terms and conditions contained therein, at the closing
of the acquisition, we will acquire all of the outstanding membership interests of WP Mustang Topco LLC,
32
the indirect parent of EFS, and Warburg Pincus Private Equity XI (Lexington), LLC, an affiliated entity from
investment funds affiliated with Warburg Pincus LLC for an aggregate purchase price comprised of $1.1
billion in cash and 4,011,672 shares of our common stock, subject to certain working capital and other
adjustments as described in the purchase agreement. The parties’ obligations to consummate the acquisition
are subject to customary closing conditions, including the expiration or termination of the applicable antitrust
waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended. In connection
with the planned acquisition of EFS, we obtained financing commitments from Bank of America, N.A.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, SunTrust Bank, SunTrust Robinson Humphrey, Inc.,
MUFG Union Bank, N.A. and Citizens Bank, National Association, for senior secured credit facilities in the
aggregate amount of $2.125 billion, consisting of a $1.775 billion, seven-year term loan facility and a $350
million five-year revolving credit facility.
On November 18, 2015, we acquired Benaissance, a leading provider of integrated SaaS technologies and
services for healthcare premium billing, payment and workflow management, for approximately $81 million.
This acquisition complemented our current healthcare payments products and services.
We purchased approximately 210,000 shares of our common stock for $22 million during the first half
of 2015.
•
•
Our Company's management believes the following metrics were important to our overall performance in 2015:
•
•
•
•
•
Total fleet transactions processed increased 5 percent from 2014 to 405.9 million in 2015. Payment
processing transactions increased 10 percent from 2014 to 343.0 million in 2015, and transaction processing
transactions decreased 15 percent from 2014 to 62.9 million in 2015.
Our Travel and Corporate Solutions purchase volume grew to $19.4 billion in 2015, a 14 percent increase
from 2014. This increase is primarily due to our single use account product used for online travel-
related purchases.
Domestic fuel prices averaged $2.55 per gallon during 2015, down from an average of $3.55 per gallon
during 2014. Additionally, Australian fuel prices decreased 29 percent in 2015 as compared to 2014, to U.S.
$3.66 per gallon. As of December 31, 2015, the average price of domestic fuel was $2.09 per gallon. If prices
remain low or continue to fall, our future revenue and earnings will be negatively impacted. We currently
estimate that a drop of 1 cent in the price of fuel would lower our annual revenues by approximately
$1.1 million.
Beginning in the second half of 2014 and through 2015, there were fluctuations in foreign currency exchange
rates that resulted in a significant devaluation of major currencies to which our business is exposed, including
the Australian dollar, the Euro and the British Pound. Our foreign currency exchange exposure is primarily
related to the re-measurement of our cash, receivable, payable and intercompany balances that are
denominated in these foreign currencies. Movements in the foreign currency exchange rates resulted in a pre-
tax loss of $6 million during 2015, as compared to a pre-tax loss of $13 million during 2014.
Our effective tax rate was 40.7 percent for 2015 as compared to 33.7 percent for 2014. Our 2015 tax rate
reflects the recording of a valuation allowance in the amount of $2.9 million against certain state net
operating losses and estimated non-deductible transaction expenses. The 2015 tax rate also reflects $2.4
million of additional expense related to non-deductible acquisition expense, penalties and net operating loss
true-ups.
During the third quarter of 2014, we completed a strategic tax review project which resulted in a change in
estimate to reflect the tax impacts of the domestic production activities deduction and research and
development credits in our income tax provision. We amended prior year tax returns as a result of this change
in estimate which reduced the 2014 tax expense by approximately $11.3 million. In addition, the 2014 tax
provision was reduced by $2.4 million as a result of the change in estimate.
Future tax rates may fluctuate due to changes in the mix of earnings among different tax jurisdictions. Our tax
rate has fluctuations due to the impacts that rate and mix changes have on our net deferred tax assets. We
anticipate that our future GAAP effective tax rate should be within the range of our historical rates, excluding
discrete items.
33
Segments
Previously, we reported our results of operations in two business segments, Fleet Payment Solutions and Other Payment
Solutions. During the fourth quarter of 2015, we revised our internal and external reporting and now report our results of
operations in three reportable segments: Fleet Solutions, Travel and Corporate Solutions, and Health and Employee Benefit
Solutions. The Fleet Solutions segment provides customers with payment and transaction processing services specifically
designed for the needs of commercial and government fleets. This segment also provides information management services to
these fleet customers. Fleet Solutions remains on the same basis as the historical Fleet Payment Solutions business segment.
The Travel and Corporate Solutions segment focuses on the complex payment environment of business-to-business payments,
providing customers with payment processing solutions for their corporate payment and transaction monitoring needs. Travel
and Corporate Solutions includes the Travel business as well as other virtual and prepaid verticals. The Health and Employee
Benefit Solutions segment provides healthcare payment products and SaaS consumer directed platforms, as well as payroll
related benefits to customers in Brazil.
Summarized quarterly revenues by segment for the years ended December 31, 2015 and 2014, are as follows:
2015
Fleet Solutions revenue
Payment processing
Other
Total Fleet Solutions revenue
Travel and Corporate Solutions revenue
Payment processing
Other
Total Travel and Corporate Solutions revenue
Health and Employee Benefit Solutions revenue
2014
Fleet Solutions revenue
Payment processing
Other
Total Fleet Solution revenue
Travel and Corporate Solutions revenue
Payment processing
Other
Total Travel and Corporate Solution revenue
Health and Employee Benefit Solutions revenue
Three months ended
March 31
June 30
September 30
December 31
$
$
$
$
$
$
$
$
$
$
$
$
$
$
72,943
55,547
128,490
32,635
10,437
43,072
30,722
85,702
49,733
135,435
29,683
9,974
39,657
6,976
$
$
$
$
$
$
$
$
$
$
$
$
$
$
80,127
55,393
135,520
37,564
10,650
48,214
29,919
94,550
51,278
145,828
37,460
9,991
47,451
8,302
$
$
$
$
$
$
$
$
$
$
$
$
$
$
80,230
60,442
140,672
44,386
12,096
56,482
28,903
93,462
51,035
144,497
39,819
10,833
50,652
26,985
$
$
$
$
$
$
$
$
$
$
$
$
$
$
72,995
61,281
134,276
36,726
10,925
47,651
30,716
83,336
53,073
136,409
34,407
10,754
45,161
30,294
34
Results of Operations
YEAR ENDED DECEMBER 31, 2015, AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2014
FLEET SOLUTIONS SEGMENT
The following table reflects comparative operating results and key operating statistics within our Fleet Solutions
segment:
(in thousands, except per transaction and per gallon data)
2015
2014
Increase
(decrease)
Revenues
Payment processing revenue
Other
Total revenues
Total operating expenses
Operating income
Financing interest expense
Gain (loss) on foreign currency transactions
Net realized and unrealized gains on domestic fuel price derivative instruments
Decrease (increase) in amount due under tax receivable agreement
Income before income taxes
Key operating statistics
(a)
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:
$
306,295
$
232,663
538,958
408,840
130,118
(31,179)
1,479
5,848
2,145
357,050
205,119
562,169
341,734
220,435
(31,213)
(2,647)
46,212
(1,331)
$
108,411
$
231,456
342,975
311,291
$
$
$
64.59
2.55
3.66
$
$
$
84.00
3.55
5.14
(14)%
13 %
(4)%
20 %
(41)%
— %
(156)%
(87)%
NM
(53)%
10 %
(23)%
(28)%
(29)%
62,917
74,092
(15)%
Average number of vehicles serviced during the year
9,583
8,045
19 %
NM - Not Meaningful
(a)
As of December 1, 2014, these key operating statistics include fuel related payment processing transactions and gallons of fuel from the Esso portfolio
in Europe.
Revenues
Payment processing revenue decreased $50.8 million for 2015, as compared to 2014. This decrease is primarily due to a
decline in the average domestic price per gallon of fuel in 2015 as compared to 2014. This decrease is partially offset by an
increase in payment processing volume primarily related to the acquisition of the Esso portfolio in Europe in December
of 2014.
Other revenues increased $27.5 million in 2015, as compared to 2014, primarily due to (i) an increase in account
servicing revenue as a result of the Esso portfolio in Europe acquisition in December of 2014; and (ii) an increase in finance
fees for 2015, as compared to 2014. The increase in finance fees is primarily due to an increase in late fees assessed as well as
additional factoring revenue. Payments for customer receivables, or trade 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, subject to a minimum charge. 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.
35
Expenses
The following table compares selected expense line items within our Fleet Solutions segment:
(in thousands)
Expense
Salary and other personnel
Restructuring
Service fees
Provision for credit losses
Technology leasing and support
Other
Gain on sale of subsidiary
NM - Not Meaningful
2015
2014
Increase
(decrease)
$
$
$
$
$
$
$
169,480
9,010
61,291
20,822
25,136
23,900
$
$
$
$
$
$
154,481
—
40,945
30,696
18,532
27,639
— $
(27,490)
10 %
NM
50 %
(32)%
36 %
(14)%
— %
•
•
•
•
•
•
•
Salary and other personnel expenses increased $15.0 million for 2015, as compared to 2014. The increase is
primarily due to an increase in headcount related to the acquisition of the Esso portfolio in Europe in
December of 2014, partially offset by lower stock compensation expense.
We recorded restructuring costs of approximately $9.0 million related to our global review of operations, of
which $1.4 million was paid in 2015. The costs related to this initiative are employee termination benefits and
third party service fees. These actions are expected to continue through 2017. We anticipate lower employee
and facility related expenses once the restructuring is complete.
Service fees increased $20.3 million during 2015, as compared to 2014. The increase is due to expenses
associated with the acquisition of the Esso portfolio in Europe in December of 2014. This increase is partially
offset by a decrease in service fees related to the divestiture of Pacific Pride that occurred in July of 2014.
Provision for credit losses decreased $9.9 million for 2015, as compared to 2014. 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 9.4 basis points as compared to 11.7 basis points for 2014. The expense we recognized in 2015 is
the amount necessary to bring the reserve to its required level after net charge offs.
Technology leasing and support expenses increased $6.6 million in 2015, as compared to 2014. The increase
is primarily the result of additional expenses related to the consolidation of data centers, increases in
cybersecurity infrastructure and additional fees associated with the general expansion of operations.
Other expenses decreased $3.7 million in 2015, as compared to 2014. This decrease is due lower hardware
expenses.
On July 29, 2014, we sold our Pacific Pride subsidiary for a pre-tax book gain of $27.5 million as it did not
align with the long-term strategy of the core fleet business. The operations of Pacific Pride were not material
to our annual revenue, net income or earnings per share.
Gain (loss) on foreign currency transactions
Beginning in the second half of 2014 and through 2015 there were fluctuations in exchange rates that resulted in a
significant devaluation of major currencies to which our business is exposed, including the Australian dollar, the Brazilian real,
the Euro and the British Pound sterling. Our foreign currency exchange exposure is primarily related to the re-measurement of
our cash, receivable, payable and intercompany balances that are denominated in these foreign currencies. These fluctuations in
exchange rates resulted in a gain of $1.5 million in 2015 as compared to a loss of $2.6 million in 2014.
36
Fuel price derivatives
We own fuel price sensitive derivative instruments that we previously purchased 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 2015 we recorded a gain of $5.8 million, consisting of a change in the unrealized balance in fuel derivatives of $36.0
million and a realized gain of $41.8 million. During 2014 we recorded a gain of $46.2 million, consisting of an unrealized gain
of $48.3 million and a realized loss of $2.1 million. These gains and losses were due to the overall change in the current and
future price of fuel relative to our hedged fuel prices. During the fourth quarter of 2014 we suspended purchases under our fuel
derivatives program due to unusually low prices in the commodities market. We continue to hold fuel price derivative
instruments for the first quarter of 2016 that were executed in the third quarter of 2014 for approximately 20 percent of the
anticipated quarterly exposure to domestic earnings based on assumptions at the time of purchase. After the first quarter of
2016, we are no longer hedged for changes in fuel prices.
TRAVEL AND CORPORATE SOLUTIONS SEGMENT
The following table reflects comparative operating results and key operating statistics within our Travel and Corporate
Solutions segment:
(in thousands)
Revenues
Payment processing revenue
Other
Total revenues
Total operating expenses
Operating income
Loss on foreign currency transactions
Income before income taxes
Key operating statistics
Payment processing revenue:
Payment solutions purchase volume
NM - Not Meaningful
Revenues
2015
2014
Increase
(decrease)
$
151,311
$
141,368
44,108
195,419
108,388
87,031
(6,242)
41,553
182,921
95,623
87,298
(10,222)
$
80,789
$
77,076
7 %
6 %
7 %
13 %
— %
NM
5 %
$ 19,440,663
$ 17,072,743
14 %
Payment processing revenue increased approximately $9.9 million for 2015, as compared to 2014. The primary driver
of the increase in payment processing revenue is due to higher virtual card purchase volume, which grew by approximately $2.4
billion in 2015 compared to 2014. These increases were partially offset by a decrease in the virtual card net interchange rate of
5 basis points in 2015 as compared to 2014, primarily due to increases in customer rebates.
Other revenue increased $2.6 million for 2015 as compared to 2014. These increases are primarily due to revenues
associated with currency conversion fees charged to our virtual customers.
Expenses
The following table compares selected expense line items within our Travel and Corporate Solutions segment:
(in thousands)
Expense
Salary and other personnel
Service fees
Provision for credit losses
Technology leasing and support
Depreciation and amortization
Other
2015
2014
Increase
(decrease)
$
$
$
$
$
$
21,544
61,809
1,324
12,469
2,999
3,929
$
$
$
$
$
$
19,704
58,694
1,061
10,800
1,911
710
9%
5%
25%
15%
57%
453%
37
•
•
•
•
•
•
Salary and other personnel expenses increased $1.8 million in 2015, as compared to 2014. The increase is
primarily due to an increase in headcount over the prior year.
Service fees increased by $3.1 million in 2015, as compared to 2014. This increase is primarily due to higher
processing fees associated with an increase in purchase card volume.
Provision for credit losses increased $0.3 million in 2015, as compared to 2014, primarily due to higher
purchase volumes. The expense we recognize each year is the amount necessary to bring the reserve to its
required level after net charge offs.
Technology leasing and support expense increased $1.7 million in 2015, as compared to 2014. This increase
is primarily due to additional expenses from hardware and related maintenance.
Depreciation and amortization expenses increased $1.1 million in 2015, as compared to 2014. This increase is
primarily related to additional assets placed in service during the year.
Other expense increased $3.2 million in 2015, as compared to 2014. The increase is primarily due to sales and
marketing incentives.
Loss on foreign currency transactions
Beginning in the second half of 2014 and through 2015 there were fluctuations in exchange rates that resulted in a
significant devaluation of major currencies to which our business is exposed, including the Australian dollar, the Brazilian real,
the Euro and the British Pound sterling. Our foreign currency exchange exposure is primarily related to the re-measurement of
our cash, receivable, payable and intercompany balances that are denominated in these foreign currencies. These fluctuations in
exchange rates resulted in a loss of $6.2 million in 2015 as compared to a loss of $10.2 million in 2014.
38
HEALTH AND EMPLOYEE BENEFIT SOLUTIONS SEGMENT
The following table reflects comparative operating results and key operating statistics within our Health and Employee
Benefit Solutions segment:
(in thousands)
Revenues
Total operating expenses
Operating income
Finance interest expense
Loss on foreign currency transactions
Income before income taxes
Revenues
2015
2014
Increase
(decrease)
$
120,260
$
108,616
11,644
(15,010)
(926)
$
(4,292) $
72,557
74,052
(1,495)
(4,829)
(569)
(6,893)
66 %
47 %
(879)%
211 %
63 %
(38)%
Revenue increased approximately $47.7 million for 2015, as compared to 2014. The increase in revenue is due to the
acquisition of Evolution1 in July of 2014, offset by lower revenue, as compared to 2014, associated with rapid! Paycard, which
was sold in January of 2015. Due to the timing of the Benaissance acquisition, which was completed on November 18, 2015,
the impact from Benaissance on the results of operations of the Health and Employee Benefit Solutions segment was not
material.
Expenses
The following table compares selected expense line items within our Health and Employee Benefit Solutions segment:
(in thousands)
Expense
Salary and other personnel
Service fees
Technology leasing and support
Depreciation and amortization
2015
2014
Increase
(decrease)
$
$
$
$
43,540
15,744
3,710
25,692
$
$
$
$
26,624
20,237
1,249
13,743
64 %
(22)%
197 %
87 %
•
•
•
•
Salary and other personnel expenses increased $16.9 million in 2015, as compared to 2014. The increase is
primarily due to salary expense at Evolution1, which was acquired in July of 2014, offset by lower expenses
associated with rapid! Paycard, which was sold in January of 2015.
Service fees decreased by $4.5 million in 2015, as compared to 2014. This decrease is primarily due to lower
expenses associated with rapid! Paycard, which was sold in January of 2015, slightly offset by higher
expenses associated with Evolution1.
Technology leasing and support expenses increased $2.5 million in 2015, as compared to 2014. This increase
is primarily due to additional expenses related to Evolution1.
Depreciation and amortization expenses increased $11.9 million in 2015, as compared to 2014. This increase
is primarily related to amortization expense associated with the intangible assets acquired with Evolution1.
Financing interest expense
Financing interest expense is related to our credit agreements. The $15.0 million in financing interest expense in 2015
and the $4.8 million expense in 2014 are associated with the debt incurred to purchase Evolution1.
Loss on foreign currency transactions
Beginning in the second half of 2014 and through 2015 there were fluctuations in exchange rates that resulted in a
significant devaluation of major currencies to which our business is exposed, including the Brazilian real. Our foreign currency
exchange exposure is primarily related to the re-measurement of our cash, receivable, payable and intercompany balances that
are denominated in these foreign currencies. These fluctuations in exchange rates resulted in a loss of $0.9 million in 2015 as
compared to a loss of $0.6 million in 2014.
39
YEAR ENDED DECEMBER 31, 2014, AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2013
FLEET SOLUTIONS SEGMENT
These results are presented to conform to the segment presentation that was implemented in the fourth quarter of 2015.
The following table reflects comparative operating results and key operating statistics within our Fleet Solutions
segment:
(in thousands, except per transaction and per gallon data)
2014
2013
Increase
(decrease)
Revenues
Payment processing revenue
Other
Total revenues
Total operating expenses
Operating income
Financing interest expense
(Loss) gain on foreign currency transactions
Net realized and unrealized gains (losses) on domestic fuel price derivative instruments
Increase in amount due under tax receivable agreement
Income before income taxes
Key operating statistics (a)
Payment processing revenue:
Payment processing transactions
Average expenditure per payment processing transaction
Average price per gallon of fuel - Domestic – ($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
NM - Not Meaningful
$
357,050
$
205,119
562,169
341,734
220,435
(31,213)
(2,647)
46,212
(1,331)
348,291
179,133
527,424
314,313
213,111
(29,419)
263
(9,851)
(33)
$
231,456
$
174,071
311,291
292,079
$
$
$
84.00
3.55
5.14
$
$
$
85.58
3.67
5.39
74,092
78,501
8,045
7,538
3 %
15 %
7 %
9 %
3 %
6 %
NM
NM
NM
33 %
7 %
(2)%
(3)%
(5)%
(6)%
7 %
(a)
As of December 1, 2014, these key operating statistics include fuel related payment processing transactions and gallons of fuel from the Esso portfolio
in Europe.
Revenues
Payment processing revenue increased $8.8 million for 2014, as compared to 2013. This increase was primarily due to
the organic growth of our domestic fleet business as our transaction volume increased 7 percent in 2014 from 2013, as well as
an increase due to the Esso portfolio acquisition in Europe. Reducing the overall increase was a 3 percent decrease in the
average domestic price per gallon of fuel in 2014, as compared to 2013.
Other revenue increased $26.0 million primarily due to an increase in finance fees resulting from: (i) an increase in the
minimum late fee charges, (ii) an increase in factoring revenue and (iii) higher accounts receivable balances, as a result of
higher transaction volumes. Minimum late fee charges were increased in the third quarter of 2013. Other revenues also
increased due to growth in our WEX Telematics business, equipment sales and the number of fleet customers, as compared to
the prior year.
40
Expenses
The following table compares selected expense line items within our Fleet Solutions segment:
(in thousands)
Expense
Salary and other personnel
Service fees
Provision for credit losses
Technology leasing and support
Depreciation and amortization
Other
Gain on sale of subsidiary
2014
2013
Increase
(decrease)
$
$
$
$
$
$
$
154,481
40,945
30,696
18,532
54,726
27,639
$
$
$
$
$
$
(27,490) $
137,669
31,563
19,726
15,384
51,437
20,481
—
12%
30%
56%
20%
6%
35%
—%
•
•
•
•
•
•
•
Salary and other personnel expenses increased $16.8 million for 2014, as compared to 2013. The increase is
primarily due to an increase in headcount to support our growing operations, primarily related to the
acquisition of the Esso portfolio in Europe, as well as an increase in stock-based incentive compensation
expense.
Service fees increased $9.4 million during 2014, as compared to 2013. Service fees increased compared to the
prior year primarily due to expenses associated with the acquisition and integration of the Esso portfolio in
Europe and the fees related to the increase in the number of WEX Telematics units being serviced.
Provision for credit losses increased $11.0 million for 2014, as compared to 2013. Our credit losses as a
percentage of customer spend increased to 11.7 basis points as compared to 7.9 basis points for 2013.
Beginning in the third quarter of 2013, we tested less restrictive credit standards for the approval of certain
new customer applications and experienced an increase in delinquency rates during the first quarter of 2014.
After monitoring the impact to our credit loss reserve, we returned to our prior stricter credit standards
beginning in the second quarter of 2014. We also experienced an increase in a number of our low risk
accounts that were in early stage delinquency. The expense we recognized in 2014 is the amount necessary to
bring the reserve to its required level after net charge offs.
Technology leasing and support expenses increased $3.1 million in 2014, as compared to 2013. The increase
is primarily the result of additional expenses related to the consolidation of data centers and additional fees
associated with the general expansion of operations.
Depreciation and amortization expenses increased $3.3 million in 2014, as compared to 2013. This increase is
primarily related to hardware that was placed in service in conjunction with our data center consolidation as
well as an increase in depreciation and amortization expense related to the acquisition of the Esso portfolio in
Europe.
Other expenses increased $7.2 million in 2014, as compared to 2013. This increase is due to an increase in
expenses related to the consolidation of data centers and additional fees associated with the general growth of
operations.
On July 29, 2014, we sold our wholly-owned subsidiary Pacific Pride for a pre-tax gain of $27.5 million as it
did not align with the long-term strategy of the core fleet business. The operations of Pacific Pride were not
material to our annual revenue, net income or earnings per share.
Financing interest expense
Financing interest expense is related to our credit agreements. Interest expense associated with the Fleet Solutions
segment for 2014 increased $1.8 million from 2013. On January 30, 2013, we issued $400 million of Notes with a 4.75 percent
fixed rate. The proceeds of these Notes were primarily used to pay down borrowings under our 2013 Credit Agreement.
Additionally, on August 22, 2014, we entered into the 2014 Credit Agreement. The 2014 Credit Agreement amends and restates
the 2013 Credit Agreement. The 2014 Credit Agreement increases the outstanding amount of the term loans from $277,500 to
$500,000, and accordingly, financing interest expense related to the term loan outstanding was higher for 2014 as compared to
2013. These increases in financing interest expense were offset by a $1.0 million write-off of deferred loan fees associated with
the extinguishment of debt in the first quarter of 2013.
41
Gain (loss) on foreign currency transactions
In the second half of 2014 there were fluctuations in exchange rates that resulted in a significant devaluation of major
currencies to which our business is exposed, including the Australian dollar, the Euro and the British Pound sterling. Our
foreign currency exchange exposure is primarily related to the re-measurement of our cash, receivable, payable and
intercompany balances that are denominated in these foreign currencies. Furthermore, the recent addition of the Esso portfolio
has increased this type of exposure. These fluctuations in exchange rates resulted in a loss of $2.6 million in 2014 as compared
to a gain of $0.3 million in 2013.
Fuel price derivatives
We own fuel price sensitive derivative instruments that we purchase on a periodic basis to manage the impact of
volatility in domestic fuel prices on our cash flows. Our derivative instruments do not qualify for hedge accounting.
Accordingly, realized and unrealized gains and losses on our fuel price sensitive derivative instruments affect our net income.
During 2014 we recorded a gain of $46.2 million, consisting of an unrealized gain of $48.3 million and a realized loss of $2.1
million. 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. These gains and losses were due to the overall change in the current and future price of fuel relative to our hedged
fuel prices. During the fourth quarter of 2014 we suspended purchases under our fuel derivatives program due to unusually low
prices in the commodities market.
Esso portfolio in Europe
On December 1, 2014, we acquired the assets of ExxonMobil's European commercial fuel card program through our
majority owned subsidiary, WEX Europe Services Limited. As a result of this transaction, we are making investments relating
to the integration of operations and systems.
TRAVEL AND CORPORATE SOLUTIONS SEGMENT
The following table reflects comparative operating results and key operating statistics within our Travel and Corporate
Solutions segment:
(in thousands)
Revenues
Payment processing revenue
Other
Total revenues
Total operating expenses
Operating income
(Loss) gain on foreign currency transactions
Income before income taxes
Key operating statistics
Payment processing revenue:
Payment solutions purchase card volume
NM - Not Meaningful
2014
2013
Increase
(decrease)
$
141,368
$
125,591
41,553
182,921
95,623
87,298
(10,222)
$
77,076
$
37,413
163,004
95,162
67,842
1,066
68,908
13%
11%
12%
—%
29%
NM
12%
$ 17,072,743
$ 13,057,666
31%
42
Revenues
Payment processing revenue increased approximately $15.8 million for 2014, as compared to 2013. The primary driver
of the increase in payment processing revenue is due to higher corporate charge card purchase volume from our virtual WEX
travel product, which grew by approximately $4.0 billion in 2014 compared to 2013. This increase was partially offset by a
decrease in the virtual card net interchange rate of 13 basis points in 2014 as compared to 2013, primarily due to decreases in
customer specific incentives from our network provider. Lastly, on November 9, 2012, the U.S. District Court granted
preliminary approval to the MasterCard/Visa merchant interchange settlement. Under the terms of this settlement, the domestic
interchange rate for our branded credit card transactions was reduced by 10 basis points for a period of eight months, that began
on July 29, 2013. This resulted in a revenue reduction of approximately $3.6 million in the second half of 2013 and a revenue
reduction of approximately $1.9 million in the first quarter of 2014.
Other revenue increased $4.1 million for 2014 as compared to 2013. This increase is primarily due to revenues
associated with foreign exchange fees.
Expenses
The following table compares selected expense line items within our Travel and Corporate Solutions segment:
(in thousands)
Expense
Salary and other personnel
Service fees
Provision for credit losses
Technology leasing and support
2014
2013
Increase
(decrease)
$
$
$
$
19,704
58,694
1,061
10,800
$
$
$
$
18,220
60,404
196
8,664
8 %
(3)%
441 %
25 %
•
•
•
•
Salary and other personnel expenses increased $1.5 million in 2014, as compared to 2013. The increase is
primarily due to additional headcount.
Service fees decreased by $1.7 million in 2014, as compared to 2013. This decrease is primarily due to a
decrease in cross-border fees, as compared to the same period in the prior year.
Provision for credit losses increased $0.9 million in 2014, as compared to 2013, primarily due to higher
purchase volumes. The expense we recognized each year is the amount necessary to bring the reserve to its
required level after net charge offs.
Technology leasing and support expense increased $2.1 million in 2014, as compared to 2013. This increase
is primarily due to additional expenses from hardware and related maintenance.
Gain (loss) on foreign currency transactions
In the second half of 2014 there were fluctuations in exchange rates that resulted in a significant devaluation of major
currencies to which our business is exposed, including the Australian dollar, the Euro and the British Pound sterling. Our
foreign currency exchange exposure is primarily related to the re-measurement of our cash, receivable, payable and
intercompany balances that are denominated in these foreign currencies. These fluctuations in exchange rates resulted in a loss
of $10.2 million in 2014 as compared to a gain of $1.1 million in 2013.
43
HEALTH AND EMPLOYEE BENEFIT SOLUTIONS SEGMENT
The following table reflects comparative operating results and key operating statistics within our Health and Employee
Benefit Solutions segment:
(in thousands)
Revenues
Total operating expenses
Operating income
Finance interest expense
Loss on foreign currency transactions
Income before income taxes
NM - Not Meaningful
Revenues
2014
2013
Increase
(decrease)
$
72,557
$
74,052
(1,495)
(4,829)
(569)
27,035
31,249
(4,214)
—
(365)
$
(6,893) $
(4,579)
168 %
137 %
(65)%
NM
56 %
51 %
Revenue increased approximately $45.5 million for 2014, as compared to 2013. The primary driver of the increase in
payment processing revenue is due to the acquisition of Evolution1, which was acquired in July of 2014.
Expenses
The following table compares selected expense line items within our Health and Employee Benefit Solutions segment:
(in thousands)
Expense
Salary and other personnel
Service fees
Technology leasing and support
Depreciation and amortization
2014
2013
Increase
(decrease)
$
$
$
$
26,624
20,237
1,249
13,743
$
$
$
$
8,632
11,461
169
4,037
208%
77%
639%
240%
•
•
•
•
Salary and other personnel expenses increased $18.0 million in 2014, as compared to 2013. The increase is
primarily due to the acquisition of Evolution1, which was acquired in July of 2014.
Service fees increased by $8.8 million in 2014, as compared to 2013. The increase is primarily due to the
acquisition of Evolution1.
Technology leasing and support expenses increased $1.1 million in 2014, as compared to 2013. The increase
is primarily due to the acquisition of Evolution1.
Depreciation and amortization expense increased $9.7 million in 2014, as compared to 2013. The increase is
primarily due to the intangibles acquired with the acquisition of Evolution1.
Financing interest expense
Financing interest expense is related to our credit agreements. The $4.8 million in financing interest expense in 2014
was associated with the debt incurred to purchase Evolution1. There was no financing interest expense for the Health and
Employee Benefit Solutions segment in 2013.
Gain (loss) on foreign currency transactions
In the second half of 2014 there were fluctuations in exchange rates that resulted in a significant devaluation of major
currencies to which our business is exposed. Our foreign currency exchange exposure is primarily related to the re-
measurement of our cash, receivable, payable and intercompany balances that are denominated in these foreign currencies.
These fluctuations in exchange rates resulted in a loss of $0.6 million in 2014 as compared to a loss of $0.4 million in 2013.
44
Non-GAAP financial measures
In addition to providing financial measurements based on GAAP, we publicly discuss additional financial measures, such as
adjusted net income, that are not prepared in accordance with GAAP, or non-GAAP financial measures. Although adjusted net
income 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 other specified items that the Company's management excludes in evaluating the Company's
performance. Specifically, in addition to evaluating the Company's performance on a GAAP basis, management evaluates the
Company's performance on a basis that excludes the above items because:
•
•
•
•
•
•
•
•
•
Exclusion of the non-cash, mark-to-market adjustments on fuel-price related derivative instruments helps management
identify and assess trends in the Company's underlying business that might otherwise be obscured due to quarterly
non-cash earnings fluctuations associated with fuel-price-related derivative contracts.
The non-cash, mark-to-market adjustments on derivative instruments are difficult to forecast accurately, making
comparisons across historical and future quarters difficult to evaluate.
Net foreign currency gains and losses primarily result from the remeasurement to functional currency of foreign
currency cash, receivable and payable balances, certain intercompany notes and any gain or loss on foreign currency
hedges relating to these items. The exclusion of these items helps management compare changes in operating results
between periods that might otherwise be obscured due to currency fluctuations.
The amortization of acquired intangibles, deferred loan costs associated with the extinguishment of debt, acquisition
related expenses, non-cash adjustments related to the Company's tax receivable agreement, and adjustments
attributable to non-controlling interests, including adjustments to the redemption value of a non-controlling interest,
have no significant impact on the ongoing operations of the business.
Stock-based compensation is different from other forms of compensation, as it is a non-cash expense. For example, a
cash salary generally has a fixed and unvarying cash cost. In contrast, the expense associated with an equity-based
award is generally unrelated to the amount of cash ultimately received by the employee, and the cost to us is based on
a stock-based compensation valuation methodology and underlying assumptions that may vary over time.
Restructuring charges are related to employee termination benefits from certain identified initiatives to further
streamline the business, improve the Company's efficiency, and to globalize the Company's operations, all with an
objective to improve scale and increase profitability going forward. We exclude these items when evaluating our
continuing business performance as such items are not consistently occurring and do not reflect expected future
operating expense, nor provide meaningful insight into the fundamentals of current or past operations of our business.
The gain or loss from a divestiture is not indicative of the performance of the ongoing operations of the business.
The regulatory reserve reflects charges related to the impact of a regulatory action which resulted in a penalty being
paid by WEX Bank. We have excluded this item when evaluating our continuing business performance as it is not
recurring.
The Company considers certain acquisition-related costs, investment banking fees, financing fees and warranty and
indemnity insurance, to be unpredictable, dependent on factors that may be outside of our control and unrelated to the
continuing operations of the acquired business or the Company. In addition, the size and complexity of an acquisition,
which often drives the magnitude of acquisition-related costs, may not be indicative of such future costs. The
Company believes that excluding acquisition-related costs facilitates the comparison of our financial results to the
Company's historical operating results and to other companies in our industry.
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 flows 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.
45
The following table reconciles Adjusted Net Income to net earnings attributable to WEX Inc.:
Adjusted net income attributable to WEX Inc.
Changes in unrealized fuel price derivatives
Net foreign currency remeasurement (loss) gain
Amortization of acquired intangible assets
Stock-based compensation
Restructuring
Gain on divestitures
Deferred loan costs associated with the extinguishment of debt
Expenses and adjustments related to acquisitions
Non-cash adjustments related to tax receivable agreement
Regulatory reserve
ANI adjustments attributable to non-controlling interests
Tax impact
Net earnings attributable to shareholders
Year ended December 31,
2015
189,120
(35,962)
(5,689)
(47,792)
(12,420)
(9,010)
1,215
—
(4,137)
2,145
(1,750)
(4,996)
31,180
101,904
$
$
2014
204,571
48,327
(13,438)
(40,622)
(13,790)
—
27,490
—
(7,694)
(1,331)
—
2,150
(3,452)
202,211
$
$
2013
179,033
(5,628)
964
(33,147)
(9,429)
—
—
(1,004)
658
(33)
—
1,622
16,172
149,208
$
$
The tax impact of the foregoing adjustments is the difference between the Company’s U.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 U.S. GAAP tax
provision.
46
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, borrowed
federal funds and the financing commitments obtained in connection with proposed acquisition of EFS), 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, 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 (used for) provided by financing activities
2015 Highlights
Year ended December 31,
2015
2014
2013
$
$
$
445,100
$
(126,658) $
(319,538) $
296,413
$
39,551
(904,034) $
526,707
$
(51,342)
179,242
•
•
•
•
•
•
•
During 2015, cash provided by operating activities was primarily provided by a decrease in accounts
receivable, net of the accounts receivable balances acquired with our acquisitions, net income, and
depreciation and amortization expense. Accounts receivable decreased in 2015 over 2014 as a result of
decreases in fuel prices.
On November 18, 2015, we acquired Benaissance for approximately $80.7 million. The transaction was
financed through the Company’s cash on hand and existing credit facility.
On October 18, 2015, in connection with the planned acquisition of EFS, we obtained financing commitments
(which were amended and restated on December 13, 2015) from Bank of America, N.A., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, SunTrust Bank, SunTrust Robinson Humphrey, Inc., MUFG Union
Bank, N.A. and Citizens Bank, National Association, for senior secured credit facilities in the aggregate
amount of $2.125 billion, consisting of a $1.775 billion seven-year term loan facility and a $350 million five-
year revolving credit facility.
On August 31, 2015, we acquired the remaining 49 percent ownership in UNIK, that we did not
previously own for approximately $46 million. The transaction was financed through the Company’s cash on
hand and existing credit facility.
On January 7, 2015, we sold our operations of rapid! PayCard for $20.0 million, which resulted in a pre-tax
gain of $1.2 million.
During 2015, we incurred restructuring charges of $9.0 million, of which approximately $1.4 million was
paid during the year. These expenses consist of employee termination benefits and third party service fees and
are expected to be paid out through 2016 and into 2017.
During 2015, we had approximately $63 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 the development of our global fleet platform. Our capital spending
is financed primarily through internally generated funds.
2014 Highlights
•
•
•
During 2014, our increase in accounts receivable, net of the account receivable balances acquired with our
acquisitions, was primarily funded by operating activities. Accounts receivable increased in 2014 over 2013
as a result of increased customer spend levels.
On July 16, 2014, we acquired Evolution1 for approximately $532.2 million in cash. The transaction was
financed through our cash on hand and existing credit facility.
On July 29, 2014, we sold our Pacific Pride subsidiary, for $49.7 million, which resulted in a pre-tax gain of
$27.5 million.
47
•
•
•
On August 22, 2014, we entered into agreements, including the 2014 Credit Agreement, to modify certain
terms of our existing bank borrowing agreements in order to permit the additional financing and investments
necessary to facilitate the consummation of the Esso portfolio in Europe transaction.
On December 1, 2014, WEX Europe Services Limited, acquired certain assets of ExxonMobil's European
commercial fuel card program for approximately $379.5 million, which includes operations, funding, pricing,
sales and marketing in nine countries in Europe.
During 2014, we had $58.1 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 for the development of our global fleet platform. Our capital spending is
financed primarily through internally generated funds.
2013 Highlights
•
•
•
•
During 2013, our increase in accounts receivable, net of the account receivable balances acquired with our
acquisitions, was 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 acquired FastCred for $12.3 million.
On September 23, 2013, our Board of Directors authorized a 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. During 2013, we also capitalized approximately
$13 million related to the consolidation of our data centers.
Liquidity
General
In general, our trade receivables provide for payment terms of 30 days or less. 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, 2015, approximately 86 percent of the outstanding balance of $1.6 billion of total trade accounts receivable was
current and approximately 97 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. One customer was 11 percent of the
outstanding receivables balance at December 31, 2015. The same customer was 8 percent of the outstanding receivables
balance at December 31, 2014.
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.
2014 Credit Agreement
On August 22, 2014, we entered into the agreements described below to modify certain terms of our existing bank
borrowing agreements in order to permit the additional financings and investments to facilitate the consummation of the Esso
Card transaction.
On August 22, 2014, we entered into the 2014 Amendment Agreement. Pursuant to the 2014 Amendment Agreement,
certain lenders party to the 2013 Credit Agreement, consented to the amendment and restatement of the 2013 Credit Agreement
in the form of the 2014 Credit Agreement.
The 2014 Amendment Agreement (i) provides for a new tranche of term loans under the 2014 Credit Agreement in an
aggregate principal amount equal to $222,500 on the terms and conditions set forth in the 2014 Credit Agreement, (ii) modifies
certain of the negative covenants as described below in the description of the 2014 Credit Agreement and (iii) provides for the
addition of Wright Express International Holdings Limited as a designated borrower, subject to specified conditions precedent.
48
On August 22, 2014, we entered into the 2014 Credit Agreement. The 2014 Credit Agreement provides for a term loan
facility in an amount equal to $500,000 that matures on January 31, 2018, and a $700,000 secured revolving credit facility, with
a $150,000 sublimit for letters of credit and a $20,000 sublimit for swingline loans, that terminates on January 31, 2018.
The 2014 Credit Agreement amends and restates the 2013 Credit Agreement. The 2014 Credit Agreement increases the
outstanding amount of the term loans from $277,500 to $500,000, and does not change the amount of the $700,000 revolving
loan. A portion of the indebtedness owing under the 2014 Credit Agreement is the same indebtedness as formerly evidenced by
the 2013 Credit Agreement.
As of December 31, 2015, we also had approximately $8.6 million in letters of credit outstanding. At December 31, 2015,
we had $669.8 million of borrowed funds, and $480.4 million available, under the 2014 Credit Agreement, subject to the
covenants as described below.
Proceeds from the 2014 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.
We were in compliance with all material covenants and restrictions at December 31, 2015.
2013 Credit Agreement
On January 18, 2013, we entered into an Amended and Restated Credit Agreement (the “2013 Credit Agreement”),
among the Company, as borrower, WEX Card Holdings Australia Pty Ltd, one of our wholly-owned subsidiaries, 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 was secured by pledges of the stock of our foreign subsidiaries.
The 2013 Credit Agreement provided 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,
we had the option to increase the facility by up to an additional $100 million. Proceeds from the 2013 Credit Agreement were
available for working capital purposes, acquisitions, payment of dividends and other restricted payments, refinancing of
indebtedness, and other general corporate purposes.
As discussed above, the 2013 Credit Agreement was amended and restated in 2014.
$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.
Australian Securitization Facility
On April 28, 2015, we entered into a one year securitized debt agreement with the Bank of Tokyo-Mitsubishi UFJ, Ltd.
Under the terms of the agreement, each month, on a revolving basis, we sell certain of our Australian receivables to a
bankruptcy-remote subsidiary consolidated by us ("Securitization Subsidiary"). The Securitization Subsidiary, in turn, uses the
receivables as collateral to issue asset-backed commercial paper ("securitized debt") for approximately 85 percent of the
securitized receivables. The amount collected on the securitized receivables is restricted to pay the securitized debt and is not
available for general corporate purposes.
We pay a variable interest rate on the outstanding balance of the securitization facility based on the Australian Bank Bill
Rate plus an applicable margin, which as of December 31, 2015, was 2.91 percent. As of December 31, 2015, we had $82
million of securitized debt.
Deposits and borrowed federal funds
WEX Bank issues certificates of deposit in various maturities ranging between 9 months and two years, with interest
rates ranging from 0.55 percent to 1.35 percent as of December 31, 2015, as compared to interest rates ranging from 0.35
percent to 1.05 percent as of December 31, 2014, and 0.30 percent to 0.80 percent as of December 31, 2013. WEX Bank also
issues interest-bearing money market deposits with variable interest rates ranging from 0.00 percent to 0.60 percent as of
December 31, 2015, as compared to variable interest rates ranging from 0.16 percent to 0.36 percent as of December 31, 2014,
and 0.15 percent to 0.35 percent as of December 31, 2013. As of December 31, 2015, we had approximately $369.2 million of
brokered money market deposits outstanding at a weighted average interest rate of 0.45 percent, compared to $330.7 million of
49
brokered money market deposits at a weighted average interest rate of 0.25 percent as of December 31, 2014, and
approximately $222.5 million of brokered money market deposits outstanding at a weighted average interest rate of 0.25
percent as of December 31, 2013.
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, 2015, 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, 2015, we had $309.0 million and as of December 31, 2014, we had $314.6 million of non-interest bearing NOW
account deposits. During certain periods, these deposits may have been in excess of our operating cash requirements to fund
account receivables, which may result 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 $40.0 million of these deposits on hand at December 31, 2015, $38.3 million at December 31, 2014, and $18.6 million
at December 31, 2013.
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 $257.5 million as of December 31, 2015, $125.0 million as of December 31,
2014 and $125.0 million as of December 31, 2013, with no outstanding balance as of December 31, 2015.
Other Liquidity Matters
During the third quarter of 2015, the Company entered into a purchase agreement to acquire EFS, a provider of
customized payment solutions for fleet and corporate customers with a focus on the large and mid-sized fleet segment. In
connection with the planned acquisition of EFS, we have obtained financing commitments from Bank of America, N.A., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, SunTrust Bank, SunTrust Robinson Humphrey Inc., MUFG Union Bank, N.A.
and Citizens Bank, National Association, for senior secured credit facilities in the aggregate amount of $2.125 billion,
consisting of a $1.775 billion seven-year term loan facility and a $350 million five-year revolving credit facility. The new
senior secured credit facilities would replace our existing senior secured credit facilities under the 2014 Credit Agreement.
We discuss our hedging strategies relative to commodity and interest rate risk in Item 7A below. Our fuel price
derivatives were 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, established at the time the fuel price
derivatives are purchased. As a result, at December 31, 2015, we had an asset related to these derivatives of approximately $5.0
million. During the course of the year we received $41.8 million from our counterparties as a result of the net settlement of
expiring derivative contracts.
During the fourth quarter of 2014 we suspended purchases under our fuel derivatives program due to unusually low
prices in the commodities market. We continue to hold fuel price derivative instruments for the first quarter of 2016 that were
executed in the third quarter of 2014 for approximately 20 percent of the anticipated quarterly exposure to domestic earnings
based on assumptions at the time of purchase. After the first quarter of 2016, we will no longer be hedged for changes in fuel
prices. Management will continue to monitor the fuel price market and evaluate our alternatives as it relates to this hedging
program.
Our long-term cash requirements consist primarily of amounts owed on our 2014 Credit Agreement, amounts due to
Wyndham Worldwide Corporation (see Note 14 - Tax Receivable Agreement, in Part II, Item 8) as part of our tax receivable
agreement, and various facilities lease agreements.
Undistributed earnings of certain foreign subsidiaries of the Company amounted to $13.2 million at December 31, 2015,
and $7.7 million at December 31, 2014. 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,
Australia and the United Kingdom.
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,
50
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, 2015, we have approximately $63.4 million in cash located outside of the United States.
In April 2014 we initiated a partial foreign currency exchange hedging program. During the third quarter of 2015, the
Company decided to suspend the foreign currency exchange hedging program for all but a few short-term intercompany
transactions. Because this was a partial foreign currency exchange hedging program, the Company had additional foreign
currency exchange exposure which was not hedged.
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, 2015 and 2014 was $39.7 million and $31.1
million, respectively.
We currently have authorization from our Board to purchase up to $150 million of our common stock until September
30, 2017. We used $22 million during 2015 to repurchase shares of our common stock. The approximate dollar value of shares
that were available to be purchased under our share repurchase program was $108.2 million as of December 31, 2015. The
program is funded either through our future cash flows or through borrowings on our 2014 Credit Agreement. Share
repurchases are 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, determines the timing and number of shares
repurchased. The purchase agreement for the acquisition of EFS prohibits the Company from repurchasing shares of its
common stock without the prior written consent of the EFS sellers prior to the closing of the transaction, except in limited
circumstances described in the purchase agreement.
At December 31, 2015, 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 whether to execute
additional interest rate swaps.
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, 2015:
•
•
•
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. See Item 8 - Note 18,
Commitment and Contingencies.
Extension of credit to customers. We have entered into commitments to extend credit in the ordinary course of
business. We had approximately $6.2 billion of commitments to extend credit at December 31, 2015, as part of
established customer agreements. These amounts may increase or decrease during 2016 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 most of 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, 2015, we have posted an $8.6 million
letter of credit as collateral.
51
Contractual Obligations
The table below summarizes the estimated dollar amounts of payments under contractual obligations as of
December 31, 2015, for the periods specified:
(in thousands)
Operating leases:
Facilities
Equipment, including vehicles
Term Loan
Interest payments on term loan (a)
Revolving credit facility (b)
$400 million notes offering
Interest on $400 million notes offering
Securitization facility
Tax receivable agreement
Certificates of deposit
Total
(a)
(b)
2016
2017
2018
2019
2020 and
Thereafter
Total
$
10,580
$
9,006
$
8,512
$
5,711
$
20,125
$
53,934
1,800
27,500
11,426
211,005
—
19,000
82,018
12,073
97,859
710
27,500
10,720
—
—
19,000
—
12,167
54,448
69
403,750
834
—
—
19,000
—
13,001
—
26
—
—
—
—
19,000
—
15,077
—
—
—
—
—
400,000
58,583
—
5,219
—
2,605
458,750
22,980
211,005
400,000
134,583
82,018
57,537
152,307
$
473,261
$
133,551
$
445,166
$
39,814
$
483,927
$ 1,575,719
Interest based on LIBOR plus a margin. See Item 8 - Note 12, Financing Debt
Amount in table excludes interest payments. See Item 8 - Note 12, Financing Debt
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, 2015, we had $8.6 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.
Pending EFS acquisition - During the third quarter of 2015, the Company entered into a purchase agreement to acquire EFS,
a provider of customized payment solutions for fleet and corporate customers with a focus on the large and mid-sized fleet
segment. In connection with the planned acquisition of EFS, we have obtained financing commitments from Bank of America,
N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, SunTrust Bank, SunTrust Robinson Humphrey Inc., MUFG Union
Bank, N.A. and Citizens Bank, National Association, for senior secured credit facilities in the aggregate amount of $2.125
billion, consisting of a $1.775 billion seven-year term loan facility and a $350 million five-year revolving credit facility. The
new senior secured credit facilities would replace our existing senior secured credit facilities under the 2014 Credit Agreement.
Either party may terminate the purchase agreement if (i) the closing has not occurred on or prior to April 18, 2016 (subject
to extension to July 18, 2016 if antitrust clearance has not then been obtained), (ii) an order or law permanently prohibiting the
acquisition has become final and non-appealable or (iii) the other party has breached its representations, warranties or
covenants, subject to customary materiality qualifications and abilities to cure. In addition, the EFS sellers may also terminate
the purchase agreement if, upon the satisfaction of the closing conditions and the expiration of a marketing period in connection
with the Company’s debt financing, the Company fails to consummate the acquisition. Upon such a termination (and in certain
other limited circumstances), if the EFS sellers so elect, the Company is required to pay the EFS sellers a cash termination fee
of $45 million. In the event the purchase agreement is terminated in certain circumstances involving a failure to obtain required
antitrust clearances, if the EFS sellers so elect, the Company is required to pay the sellers a cash termination fee of $70 million.
52
Application of Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated
financial statements, which have been prepared in accordance with Generally Accepted Accounting Principles. Preparation of
these financial statements requires us to make estimates and judgments that affect reported amounts of assets and liabilities,
revenue and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. We
continually evaluate our judgments and estimates in determination of our financial condition and operating results. We base our
estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Estimates are based on information available as of the date of the financial statements and,
accordingly, actual results could differ from these estimates, sometimes materially. Critical accounting policies and estimates
are defined as those that are both most important to the portrayal of our financial condition and operating results and require
management’s most subjective judgments. Our consolidated financial statements are based on the selection and application of
critical accounting policies and estimates, the most significant of which are included in the tables below.
Effect if Actual Results Differ from
Assumptions
In preparing the financial statements,
management must make estimates related to
the contractual terms, customer performance
and sales volume to determine the total
amounts recorded as deductions, such as
rebates and incentives, from revenue.
Management also considers historical results
in making such estimates. The actual amounts
ultimately paid to the customer may be
different from our estimates. Such differences
are recorded once they have been determined
and have historically not been significant.
Revenue Recognition
Description
Assumptions/Approach Used
The Company generally records revenue net of
costs based on the following criteria: (i) the
Company is not the primary obligor in the
arrangement; (ii) the Company has no
inventory risk; (iii) the Company does not have
reasonable latitude with respect to establishing
the price for the product; (iv) the Company
does not make any changes to the product or
have any involvement in the product
specifications; and (v) the amount the
Company earns for its services is fixed, within
a limited range.
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.
Service related revenues are recognized in the
period that the work is performed.
The Company recognizes service fees in the
healthcare market for the per-participant per-
month fee which is recognized on a monthly
basis subsequent to billing being completed.
Interchange fees are recorded as received and
ancillary service revenue is recognized when
the related services have been provided.
The majority of the Company’s revenues are
comprised of transaction-based fees, which are
generally calculated based on measures such as:
(i) percentage of dollar value of volume
processed; (ii) number of transactions processed;
or (iii) some combination thereof.
In Europe, our payment processing revenue is
specifically derived from the difference between
the negotiated price of the fuel from the supplier
and the agreed upon price paid by the fleets.
Interchange income is earned from the
Company’s suite of card products. 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 it is earned.
The Company assesses fees for providing
ancillary services, such as information products
and services, professional services and marketing
services. Other revenues also include cross-
border fees, fees for overnight shipping, certain
customized electronic reporting and customer
contact services provided on behalf of certain of
the Company’s customers.
The Company 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.
53
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, 2015, we
have estimated a reserve for credit losses
which is 0.91 percent of the total gross
accounts receivable balance.
An increase or decrease to this reserve by
0.5 percent would increase or decrease the
provision for credit losses for the year by
$7.6 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.
54
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
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, 2015, the Company had
an aggregate of approximately $1,584 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, 2015. Since the acquisitions of the Esso
portfolio in Europe and Evolution1 were
recent, their market values approximate their
carrying values. The goodwill associated with
these reporting units are as follows: WEX
Europe, $40.6 million and Evolution1, $296.5
million. The remaining reporting units have
fair market values in excess of their carrying
values. Although an impairment charge is not
required at this time, if actual results
deteriorate versus our assumptions in the
valuation, the potential exist for an
impairment in our reporting units.
Benaissance was not included in our annual
impairment study as it was acquired after
October 1, 2015.
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 three 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 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.
55
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, 2015, the Company had
established that the net fair value of the
derivatives was an asset of $5.0 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.
New Accounting Standards
See Item 8, Note 1, "New Accounting Standards" for updated accounting standards
56
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, 2015. Actual results may differ materially.
Interest Rate Risk
At December 31, 2015, we had borrowings of $669.8 million under our 2014 Credit Agreement that bore interest at
variable rates. We periodically review our projected borrowing under our 2014 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, 2015, WEX Bank had deposits (includes certificates of deposits, interest bearing money market
deposits and borrowed federal funds) outstanding of $830.5 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, Prime and Eurocurrency rates on interest expense on our
revolving credit facility, term loan and participation agreement for 2015 on the principal outstanding as of December 31, 2015,
as well as the impact of changes in interest rates on certificates of deposits, interest bearing money market deposits and
borrowed federal funds on the amounts outstanding as of December 31, 2015:
(in thousands)
Projected annual financing interest expense on credit agreement borrowings (assumes one-month LIBOR plus 200 basis points equal to
2.43%)
Increase of:
1.00%
2.00%
Projected annual financing interest expense on credit agreement borrowings (assumes Prime rate plus 1.00% equal to 4.5% )
Increase of:
1.00%
2.00%
Projected annual financing interest expense on credit agreement borrowings (assumes Eurocurrency rate plus 2.00% equal to 2.28%)
Increase of:
1.00%
2.00%
Projected annual operating interest expense on participation agreement (assumes 3-month LIBOR plus 225 basis points equal to 2.86%)
Increase of:
1.00%
2.00%
Projected annual operating interest expense on WEX Bank deposits (certificates of deposits at 0.90% and interest bearing money market
deposits at 0.45%)
Increase of:
1.00%
2.00%
(a)
Changes to interest expense presented in this table are based on interest payments, outstanding balance and rate as of December 31, 2015.
At December 31, 2015, WEX Bank had NOW account deposits outstanding of $309 million.
(in thousands)
Projected annual interest expense (based on the federal fund rate) on NOW account deposits using federal funds rate of 0.36%
Increase of:
1.00%
2.00%
(b)
Changes to interest expense presented in this table are based on the outstanding balance and rate as of December 31, 2015.
57
(a)
Impact
12,849
5,288
10,575
2,174
483
966
2,114
927
1,854
1,287
450
900
3,032
5,215
10,430
(b)
Impact
—
—
556
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Foreign Currency Risk
Growth in our international operations incrementally increases 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 currency exchange rate fluctuations may
adversely impact our consolidated results of operations as exchange rate fluctuations on transactions and balances denominated
in currencies other than our functional currencies result in gains and losses that are reflected in our consolidated statements of
operations.
Commodity Price Risk
As discussed in the “Fuel Price Derivatives” section of Item 1, we previously used derivative instruments to manage the
impact of volatility in North American fuel prices on our earnings. 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 first quarter of 2016. 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. During the fourth quarter of 2014 we suspended purchases under our
fuel derivatives program due to unusually low prices in the commodities market. After the first quarter of 2016, we are no
longer hedged for changes in fuel prices.
The following table presents information about the Options:
Fuel price derivative instruments – unleaded fuel
Options settling July 2015 – March 2016
Fuel price derivative instruments – diesel
Options settling July 2015 – March 2016
Total fuel price derivative instruments
December 31,
2015
Put Strike
Price of
Underlying
Option
(per gallon) (a)
Call Strike
Price of
Underlying
Option
(per gallon) (a)
Aggregate
Notional
Amount
(gallons) (b)
Fair
Value
$
$
2.483
3.724
$
$
2.543
2,655
3,082
3.784
1,314
1,925
3,969
$
5,007
(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.
58
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, 2015 and 2014
Consolidated Statements of Income for the Years Ended December 31, 2015, 2014 and 2013
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015, 2014 and 2013
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2015, 2014 and 2013
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014 and 2013
Notes to Consolidated Financial Statements
Page
60
61
62
63
64
65
66
59
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, 2015 and 2014, 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, 2015. 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, 2015 and 2014, and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2015, 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, 2015, based on the criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated February 26, 2016 expressed an unqualified opinion on the Company's internal control over financial
reporting.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 26, 2016
60
WEX INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
Assets
Cash and cash equivalents
Accounts receivable (less reserve for credit losses of $13,832 in 2015 and $13,919 in 2014)
Securitized accounts receivable, restricted
Income taxes receivable
Available-for-sale securities
Fuel price derivatives, at fair value
Property, equipment and capitalized software, net
Deferred income taxes, net
Goodwill
Other intangible assets, net
Other assets
Total assets
Liabilities and Stockholders’ Equity
Accounts payable
Accrued expenses
Income taxes payable
Deposits
Securitized debt
Revolving line-of-credit facilities and term loan
Deferred income taxes, net
Notes outstanding
Other debt
Amounts due under tax receivable agreement
Other liabilities
Total liabilities
Commitments and contingencies (Note 18)
Redeemable non-controlling interest
Stockholders’ Equity
Common stock $0.01 par value; 175,000 shares authorized; 43,079 shares issued in 2015 and 43,021 in 2014;
38,746 shares outstanding in 2015 and 38,897 in 2014
Additional paid-in capital
Non-controlling interest
Retained earnings
Accumulated other comprehensive loss
Treasury stock at cost; 4,428 shares in 2015 and 4,218 shares in 2014
Total stockholders’ equity
Total liabilities and stockholders’ equity
See notes to consolidated financial statements.
61
December 31,
2015
2014
$
279,989
$
284,763
1,508,605
1,865,538
87,724
—
18,562
5,007
138,585
10,303
—
6,859
18,940
40,969
105,596
5,764
1,112,878
1,117,281
$
$
$
$
470,712
225,581
3,857,946
378,811
156,180
2,732
870,518
82,018
669,755
83,912
400,000
50,046
57,537
10,756
497,297
175,506
4,118,513
425,956
137,227
—
979,553
—
901,564
44,004
400,000
52,975
69,637
13,286
2,762,265
3,024,202
—
16,590
431
174,972
12,437
430
179,077
17,396
1,183,634
1,081,730
(103,451)
(172,342)
(50,581)
(150,331)
1,095,681
1,077,721
$
3,857,946
$
4,118,513
WEX INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Year ended December 31,
2015
2014
2013
$
854,637
$
817,647
$
717,463
234,564
9,010
138,844
22,825
41,315
20,618
12,891
4,515
6,457
10,424
83,077
5,628
36,891
(1,215)
625,844
228,793
(46,189)
(5,689)
5,848
2,145
184,908
75,296
109,612
(1,705)
111,317
(9,413)
101,904
2.63
2.62
38,771
38,843
$
$
$
200,809
164,521
—
—
119,876
103,428
32,144
30,581
18,278
11,814
3,934
5,369
9,213
70,380
6,437
30,064
(27,490)
511,409
306,238
(36,042)
(13,438)
46,212
(1,331)
301,639
101,621
200,018
(2,193)
202,211
—
202,211
5.20
5.18
38,890
39,000
$
$
$
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
—
149,208
3.83
3.82
38,946
39,103
$
$
$
Total revenues
Expenses
Salary and other personnel
Restructuring
Service fees
Provision for credit losses
Technology leasing and support
Occupancy and equipment
Advertising
Marketing
Postage and shipping
Communications
Depreciation and amortization
Operating interest expense
Other
Gain on sale of subsidiary
Total operating expenses
Operating income
Financing interest expense
Net foreign currency (loss) gain
Net realized and unrealized gains (losses) on fuel price derivatives
Decrease (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.
Accretion of non-controlling interest
Net earnings attributable to shareholders
Net earnings attributable to WEX Inc. per share:
Basic
Diluted
Weighted average common shares outstanding:
Basic
Diluted
See notes to consolidated financial statements.
62
WEX INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Changes in available-for-sale securities, net of tax effect of $(49) in 2015, $175 in 2014 and $(367) in
2013
Foreign currency translation
Comprehensive income
Less: Comprehensive (loss) attributable to non-controlling interest
Comprehensive income attributable to WEX Inc.
See notes to consolidated financial statements.
Year ended December 31,
2015
2014
2013
$
109,612
$
200,018
$
148,298
(83)
(49,952)
59,577
(7,979)
304
(39,726)
160,596
(6,529)
(630)
(54,776)
92,892
(910)
$
67,556
$
167,125
$
93,802
63
WEX INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
Balance at December 31, 2012
38,908
$
426
$ 162,470
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
37,379
$
Treasury
Stock
Retained
Earnings
Non-
controlling
interest in
subsidiaries
Total
Equity
$(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
share repurchases for tax withholdings
Purchase of shares of treasury stock
Changes in available-for-sale
securities, net of tax effect of $(367)
Noncontrolling interest investment
Foreign currency translation
Net income
70
—
250
—
(241)
—
—
—
—
1
—
2
—
—
—
—
—
—
1,679
6,539
(2)
(1,795)
—
—
—
—
—
—
—
—
—
—
(630)
—
(52,244)
—
—
—
—
—
(17,911)
—
—
—
—
Balance at December 31, 2013
38,987
429
168,891
(15,495)
(130,566)
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
share repurchases for tax withholdings
Purchase of shares of treasury stock
Changes in available-for-sale
securities, net of tax effect of $175
Non-controlling interest investment
Foreign currency translation
Net income
18
—
103
—
(211)
—
—
—
—
—
—
1
—
—
—
—
—
—
239
1,867
(1)
8,081
—
—
—
—
—
—
—
—
—
—
304
—
(35,390)
—
—
—
—
—
(19,765)
—
—
—
—
—
—
—
—
—
—
—
—
149,208
879,519
—
—
—
—
—
—
—
—
202,211
—
—
—
—
—
—
1,032
—
(513)
519
—
—
—
—
—
—
21,267
(1,999)
(2,391)
1,680
6,539
—
(1,795)
(17,911)
(630)
1,032
(52,244)
148,695
903,297
239
1,867
—
8,081
(19,765)
304
21,267
(37,389)
199,820
Balance at December 31, 2014
38,897
430
179,077
(50,581)
(150,331)
1,081,730
17,396
1,077,721
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
share repurchases for tax
withholdings
Purchase of shares of treasury stock
Changes in available-for-sale
securities, net of tax effect of $(49)
Foreign currency translation
Adjustment of redeemable non-
controlling interest
Net income
3
—
56
—
(210)
—
—
—
—
—
—
1
—
—
—
—
—
—
33
650
(1)
9,140
—
—
—
(13,927)
—
—
—
—
—
—
(83)
(43,679)
(9,108)
—
—
—
—
—
(22,011)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
33
650
—
9,140
(22,011)
(83)
(2,063)
(45,742)
(9,413)
111,317
—
(32,448)
(2,896)
108,421
Balance at December 31, 2015
38,746
$
431
$ 174,972
$
(103,451) $(172,342) $1,183,634
$
12,437
$ 1,095,681
See notes to consolidated financial statements.
64
WEX INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year ended December 31,
2014
2013
2015
$
109,612
$
200,018
$
148,298
15,852
12,420
86,174
(1,215)
37,359
7,561
22,825
349
199,717
(17,653)
(33,201)
9,033
10,687
(2,322)
(12,098)
445,100
(63,491)
(349)
594
(80,677)
17,265
(126,658)
650
(2,392)
33
(107,345)
—
2,203,027
(2,402,118)
—
—
—
—
—
(27,500)
84,571
—
(435)
(46,018)
(22,011)
(319,538)
(3,678)
(4,774)
284,763
279,989
(48,327)
13,790
73,022
(27,490)
46,111
—
32,144
1,182
55,883
(16,921)
(29,154)
29,263
(21,770)
(3,190)
(8,148)
296,413
(58,133)
(2,837)
337
(891,725)
48,324
(904,034)
1,867
(5,709)
239
(109,138)
—
2,519,742
(2,105,321)
(3,309)
—
—
(7,500)
222,500
(13,750)
—
—
46,851
—
(19,765)
526,707
4,191
(76,723)
361,486
284,763
$
$
$
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)
419,200
(857,700)
(12,023)
(182,500)
300,000
(15,000)
—
—
—
400,000
(2,016)
—
(17,911)
179,242
(3,627)
163,824
197,662
361,486
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Net unrealized loss (gain)
Stock-based compensation
Depreciation and amortization
Gain on divestiture
Deferred taxes
Restructuring charge
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
Proceeds from sale of subsidiary
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
Borrowings on revolving line-of-credit facility
Repayments on revolving line-of-credit facility
Loan origination fees
Repayments of 2011 term loan
Borrowings on 2013 term loan
Repayments on 2013 term loan
Borrowings on 2014 term loan
Repayments on 2014 term loan
Net change in securitized debt
Borrowings on notes outstanding
Other debt
Purchase of redeemable non-controlling interest
Purchase of shares of treasury stock
Net cash (used for) provided by financing activities
Effect of exchange rates on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
See notes to consolidated financial statements.
65
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 Solutions, Travel and Corporate Solutions, and Health and Employee Benefit 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, 2015, 2014 and
2013, 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, 2014, to account for the
measurement period adjustments related to the Esso portfolio in Europe and Evolution1 purchase price allocations discussed in
Note 3, Business Acquisitions and Other Intangible Asset Acquisitions below.
66
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The acronyms and abbreviations identified below are used in the accompanying consolidated financial statements and the
notes thereto. The following is provided to aid the reader and provide a reference point when reviewing the consolidated
financial statements.
Average expenditure
per payment
processing transaction
2011 Credit
Agreement
2013 Credit
Agreement
2014 Amendment
Agreement
2014 Credit
Agreement
Adjusted Net Income
or ANI
ASU 2014-09
ASU 2015-03
ASU 2015-16
Company
EFS
Esso portfolio in
Europe
Evolution1
Evolution1 Plan
FASB
FDIC
GAAP
Higher One
Indenture
NCI
NOL
Notes
NOW deposits
Over-the-road
Pacific Pride
Average total dollars of spend in a funded fuel transaction
Credit agreement entered into on May 23, 2011 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
Amended and restated credit agreement entered into on January 18, 2013 by and among the
Company and certain of our subsidiaries, as borrowers, and WEX Card Holdings Australia Pty
Ltd, as specified designated borrower, with a lending syndicate
Amendment and restatement agreement entered into on August 22, 2014, among the Company, the
lenders party thereto, and Bank of America, N.A., as administrative agent
Second amended and restated credit agreement entered into on August 22, 2014, by and among
the Company and certain of our subsidiaries, as borrowers, and WEX Card Holding Australia Pty
Ltd., as designated borrower, and Bank of America, N.A., as administrative agent on behalf of
consenting lenders.
A non-GAAP metric that adjusts net earnings attributable to WEX Inc. to exclude fair value
changes of fuel-price related derivative instruments, the amortization of purchased intangibles, the
impact of net foreign currency remeasurement gains and losses, the expense associated with stock-
based compensation, acquisition related expenses and adjustments, 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, restructuring charges, gains on the extinguishment of a portion of the tax receivable
agreement, regulatory reserves, gains or losses on divestitures and adjustments attributable to non-
controlling interests, including adjustments to the redemption value of a non-controlling interest,
as well as the related tax impacts of the adjustments
Accounting Standards Update No. 2014-09 Revenue from Contracts with Customers (Topic 606)
Accounting Standards Update No. 2015-03 Interest—Imputation of Interest (Subtopic 835-30):
Simplifying the Presentation of Debt Issuance Costs
Accounting Standards Update No. 2015-16 Business Combinations (Topic 805): Simplifying the
Accounting for Measurement-Period Adjustments
WEX Inc. and all entities included in the consolidated financial statements
Electronic Funds Source LLC
European commercial fleet card portfolio acquired from ExxonMobil
EB Holdings Corp. and its subsidiaries which includes Evolution1, Inc., acquired by the Company
on July 16, 2014
Evolution1 401(k) Plan sponsored by Evolution1 Inc.
Financial Accounting Standards Board
Federal Deposit Insurance Corporation
Generally Accepted Accounting Principles in the United States
Higher One, Inc. a technology and payment services company focused on higher education
The Notes were issued pursuant to an indenture dated as of January 30, 2013 among the Company,
the guarantors listed therein, and The Bank of New York Mellon Trust Company, N.A., as trustee
Non-controlling interests
Net operating loss
$400 million notes with a 4.75% fixed rate, issued on January 30, 2013
Negotiable order of withdrawal deposits
Typically heavy trucks traveling long distances
Pacific Pride Services, LLC, previously a wholly-owned subsidiary, sold on July 29, 2014
67
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Total amount paid by customers for transactions
Funded payment transactions where the Company maintains the receivable for total purchase
Price per gallon of fuel
rapid! PayCard, previously a line of business of the Company, sold on January 7, 2015
Software-as-a-service
Securities and Exchange Commission
Southern Cross WEX 2015-1 Trust, a bankruptcy-remote subsidiary consolidated by the Company
Payment solutions
purchase volume
Payment processing
transactions
PPG
rapid! PayCard
SaaS
SEC
Securitization
Subsidiary
Total fleet transactions Total of transaction processing and payment processing transactions
Transaction
processing
transactions
UNIK
WEX
WEX Europe Services Consists primarily of our European commercial fleet card portfolio acquired by the Company
Unfunded payment transactions where the Company is the processor and only has receivables for
the processing fee
UNIK S.A., the Company's Brazilian subsidiary
WEX Inc.
from ExxonMobil on December 1, 2014
68
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Use of Estimates and Assumptions
The Company prepares its consolidated financial statements in conformity with GAAP. 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 fair value. Cash
equivalents include federal funds sold, which are unsecured short-term investments entered into with financial institutions.
Accounts Receivable and Reserve for Credit Losses
Accounts receivable balances are stated at net realizable value. The balance includes a reserve for credit losses which
reflects management’s estimate of uncollectable balances resulting from credit and fraud losses. Management has consistently
considered its portfolio of charge card receivables as a large group of smaller balance accounts that it has collectively evaluated
for impairment. The reserve for credit losses is established based on the determination of the amount of expected credit losses
inherent in the accounts receivable as of the reporting date. Management reviews delinquency reports, historical collection
rates, economic trends, geography and other information in order to make judgments as to probable credit losses. Management
also uses historical charge off experience to determine the amount of losses inherent in accounts receivable at the reporting
date. Assumptions regarding probable credit losses are reviewed periodically and may be impacted by actual performance of
accounts receivable and changes in any of the factors discussed above.
Available-for-sale Securities
The Company records certain 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 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 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 has used 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 and unrealized gains or losses are included in operating cash flows, as they are intended to hedge
operating cash flows.
In April 2014, the Company initiated a partial foreign currency exchange hedging program. In 2014 the Company
managed foreign currency exchange exposure on an intra-quarter basis. The majority of the hedges are intended to renew on a
monthly basis. Because this was a partial foreign currency exchange hedging program, the Company had additional foreign
currency exchange exposure which was not hedged. During the third quarter of 2015, the Company decided to suspend the
foreign currency exchange hedging program for all but a few short-term intercompany transactions.
69
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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 are the estimated useful lives for assets placed in service during 2015 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 to provide 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 during the application development stage. Costs incurred during the
preliminary project stage are expensed as incurred. Capitalization occurs when the preliminary project stage is complete, as
well as when management authorizes and commits to the funding of the project. 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.
Below are the amounts of internal-use software capitalized and amortized:
Amounts capitalized for internal-use computer software (including work-in-process)
Amounts expensed for amortization of internal-use computer software
Goodwill and Other Intangible Assets
Year ended December 31,
2015
2014
2013
$
$
52,218
20,316
$
$
34,053
18,661
$
$
18,360
18,830
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 and amortization expense on the consolidated statements of
income. The Company's annual goodwill and intangible asset impairment tests performed as of October 1, 2015, October 1,
2014 and October 1, 2013 did not identify any impairment.
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
70
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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 is required. The Company did not
recognize any significant impairment expense on the Company’s long-lived assets during the years ended December 31, 2015
and 2014. Disposals over the ordinary course of business are recorded in occupancy and equipment in the consolidated
statements of income.
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 are generally 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.
The Company generally records revenue net of costs based on the following criteria: (i) the Company is not the primary
obligor in the arrangement; (ii) the Company has no inventory risk; (iii) the Company does not have reasonable latitude with
respect to establishing the price for the product; (iv) the Company does not make any changes to the product or have any
involvement in the product specifications and (v) the amount the Company earns for its services is fixed, within a limited range.
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.
A description of the major components of revenue are as follows:
Payment Processing Revenue. Revenue consists of transaction fees as well as interchange income;
•
•
•
Fleet transaction fees are assessed to major oil companies, fuel retailers and vehicle maintenance providers. 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.
In Europe, our payment processing revenue is specifically derived from the difference between the negotiated price of
the fuel from the supplier and the agreed upon price paid by the fleets.
Interchange income is earned from the Company’s suite of card products. 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.
71
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
With regard to fleet payment processing revenue, the Company is generally responsible for the collection of the total
transaction amount from the customer 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 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.
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
$6,013 in 2015, $6,002 in 2014 and $4,557 in 2013. The Company 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.
Healthcare revenue. The Company recognizes service fees in the healthcare market for the per-participant per-month
fee which is recognized on a monthly basis subsequent to billing being completed. Interchange fees are recorded as received
and ancillary service revenue is recognized when the related services have been provided.
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, prior to the divestiture of
Pacific Pride, the Company sold 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.
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, net of
estimated forfeitures, and records expense for each award over the employee requisite service period. The Company uses the
straight-line methodology for amortizing Restricted Stock Units ("RSUs") and a graded-vesting methodology for performance
based awards. The Company estimates the fair value of stock option awards and with an earnings cap using a Black-Scholes-
Merton valuation model. The fair value of 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 in which 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
72
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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.
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
$
101,904
$
202,211
$
149,208
Weighted average common shares outstanding used to calculate earnings per share are as follows:
Year ended December 31,
2015
2014
2013
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,
2015
2014
2013
38,771
38,890
38,946
55
17
89
21
117
40
38,843
39,000
39,103
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 resulting from
this translation are recorded as a component of accumulated other comprehensive loss.
Realized and unrealized gains and losses on foreign currency transactions as well as the re-measurement of the
Company's cash, receivable and payable balances that are denominated in foreign currencies, are recorded directly in the
consolidated statements of income. However, gains or losses resulting from intercompany transactions where repayment is not
anticipated for the foreseeable future are not recognized in the consolidated statements of income. In these situations, the gains
or losses are deferred and included as a component of accumulated other comprehensive loss. In addition, gains and losses
associated with the Company's foreign currency exchange derivatives are recorded in gains and losses on foreign currency on
the consolidated statements of income.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive loss includes unrealized gains and losses on available-for-sale securities 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.
73
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
New Accounting Standards
In May 2014, the FASB issued ASU 2014-09 related to revenue recognition, which will supersede most existing
revenue recognition guidance under U.S. GAAP. The new revenue recognition standard requires entities to recognize revenue
for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The standard permits the use of either the retrospective or
cumulative effect transition method. On July 9, 2015, the Board voted to defer the effective date by one year to interim and
annual reporting periods beginning after December 15, 2017, and permitted early adoption of the standard, but not for periods
beginning on or before the original effective date of December 15, 2016. The Company is evaluating the impact of this standard
on its consolidated financial statements and related disclosures and has not yet selected a transition method.
In April 2015, the FASB issued ASU 2015-03 related to the simplification of the presentation of debt issuance costs.
The standard requires entities to present such costs in the balance sheet as a direct deduction from the related debt liability
rather than as an asset. Amortization of the costs is reported as interest expense. The new standard is effective for interim and
annual reporting periods beginning after December 15, 2015. Early adoption is permitted. Entities would apply the new
guidance retrospectively to all prior periods and provide the applicable disclosures for a change in accounting principal: (i) the
nature of and reason for the change in accounting principle; (ii) the transition method; (iii) a description of the prior-period
information that has been retrospectively adjusted; and, (iv) the effect of the change on the financial statement line item. The
adoption of this standard affects presentation only and, as such, is not expected to have a material impact on the Company's
consolidated financial statements.
In September 2015, the FASB issued ASU 2015-16 related to simplifying the accounting for measurement
period adjustments. This standard replaces the requirement that an acquirer in a business combination account for measurement
period adjustments retrospectively with a requirement that an acquirer recognize adjustments to the provisional amounts that
are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The
acquirer is required to record, in the same period’s financial statements, the effect on earnings of changes in depreciation,
amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting
had been completed at the acquisition date. The pronouncement is effective for annual reporting periods beginning after
December 15, 2015, including interim periods within that reporting period. The guidance is to be applied prospectively to
adjustments to provisional amounts that occur after the effective date of the guidance. The Company is currently evaluating the
impact the pronouncement will have on the consolidated financial statements and related disclosures.
2. Supplemental Cash Flow Information
Interest paid
Income taxes paid
Year ended December 31,
2015
2014
2013
$
$
49,032
27,186
$
$
40,287
75,258
$
$
23,646
48,869
3. Business Acquisitions and Other Intangible Asset Acquisitions
The Company incurred and expensed costs directly related to completed acquisitions of $342 in 2015, $7,694 in 2014,
and $203 in 2013, which are included primarily within service fees expenses in the consolidated statements of income.
Benaissance
On November 18, 2015, the Company, through its wholly-owned subsidiary Evolution1, purchased the stock of
Benaissance for approximately $80,677, subject to working capital adjustments. The transaction was financed through the
Company’s cash on hand and existing credit facility. Benaissance provides financial management for health benefits
administration by offering SaaS solutions for individual single point and consolidated group premium billing. Evolution1
acquired Benaissance to enhance the Company's positioning in the growing healthcare market.
During the fourth quarter of 2015, the Company obtained preliminary information to assist in determining the fair
values of certain tangible and intangible assets acquired and liabilities assumed in the Benaissance acquisition. Based on such
information, the Company recorded intangible assets and goodwill as described below. The Company is still reviewing the
valuation of the tax assets and liabilities and has not finalized the purchase accounting.
74
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The operations of Benaissance contributed net revenues of approximately $2,085 and net income of approximately
$399 from November 18, 2015, through December 31, 2015. Goodwill is expected to be deductible for tax purposes. The
results of operations for Benaissance are presented in the Company's Health and Employee Benefit Solutions segment.
The following is a summary of the preliminary allocation of the purchase price to the assets and liabilities acquired:
Consideration paid (net of cash acquired)
Less:
Accounts receivable
Other tangible assets and liabilities, net
Acquired software and developed technology (a)
Customer relationships(b)
Trade name(c)
Recorded goodwill
(a)
(b)
(c)
Weighted average life – 5.0 years.
Weighted average life – 7.6 years.
Weighted average life – 8.1 years
$
80,677
1,594
816
10,300
27,700
1,500
38,767
$
No pro forma information has been included in these financial statements as the operations of Benaissance 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 remaining 49% of UNIK
On August 31, 2015, the Company acquired the remaining 49 percent ownership in UNIK for $46,018. See Note 17
Non-controlling interests for further information.
Esso portfolio in Europe
On December 1, 2014, the Company acquired certain assets of the Esso portfolio in Europe through a majority owned
subsidiary, WEX Europe Services Limited. The Company formed this entity during 2013 and has 75 percent ownership. The
Company paid $379,458 in cash, which includes an $80,000 advance payment made in the third quarter of 2014. The
transaction was financed through the Company’s cash on hand and existing credit facility. Under the terms of the transaction,
WEX purchased ExxonMobil’s commercial fleet fuel card program which includes operations, funding, pricing, sales and
marketing in nine countries in Europe. As part of the transaction, both parties have agreed to enter into a long term supply
agreement to serve the current and future Esso Card customers and to grow the business. The Company entered into this
transaction in order to expand its presence in the European market and to broaden its international footprint, while laying the
foundation for further expansion.
During the fourth quarter of 2014, the Company obtained preliminary information to assist in determining the fair
values of certain tangible and intangible assets acquired and liabilities assumed in the Esso portfolio in Europe transaction.
During 2015, the Company obtained final information to assist in determining the fair values of certain tangible and intangible
assets acquired and liabilities assumed as of the acquisition date. Based on such information, the Company retrospectively
adjusted the fiscal year 2014 comparative information resulting in an increase in goodwill of $537, a decrease in accounts
receivable of $2, a decrease in the customer relationship intangible asset of $374, a decrease in the licensing agreements
intangible asset of $374, and an increase in other tangible assets and liabilities, net, including consideration receivable of $213.
The Company recorded intangible assets and goodwill as described below. The Company finalized the purchase accounting
during the fourth quarter of 2015. Goodwill related to this transaction is expected to be deductible for income tax purposes. The
results of operations for the Esso portfolio in Europe are presented in the Company's Fleet Solutions segment.
The operations of the Esso portfolio in Europe contributed net revenues of approximately $3,428 and net losses
attributable to WEX Inc. of approximately $7,172 from December 1, 2014, through December 31, 2014, which includes finance
costs. Goodwill related to this transaction is expected to be deducted for income tax purposes. The results of operations for the
Esso portfolio in Europe are presented in the Company's Fleet Solutions segment.
75
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 acquired)
Less:
Accounts receivable
Other tangible assets and liabilities, net
Licensing agreements(a)
Customer relationships(b)
Recorded goodwill
(a)
(b)
Weighted average life – 4.6 years.
Weighted average life – 7.2 years.
$
379,458
303,376
(8,497)
36,605
7,346
40,628
$
Supplemental pro forma financial information related to the Esso portfolio in Europe acquisition has not been provided
as it would be impracticable to do so. Historical financial information regarding the acquired assets is not accessible and, thus,
the amounts would require estimates to be significant and render the disclosure irrelevant.
Acquisition of Evolution1
On July 16, 2014, the Company acquired all of the outstanding stock of Evolution1, a leading provider of payment
solutions within the healthcare industry, for approximately $532,174 in cash. The transaction was financed through the
Company’s cash on hand and existing credit facility. Evolution1 developed and operates an all-in-one, multi-tenant technology
platform, card products, and mobile offering that supports a full range of healthcare account types. This includes consumer-
directed payments for health savings accounts, health reimbursement arrangements, flexible spending accounts, voluntary
employee beneficiary associations, and defined contribution and wellness programs. The Company acquired Evolution1 to
enhance the Company's capabilities and positioning in the growing healthcare market.
During the third quarter of 2014, the Company obtained preliminary information to assist in determining the fair
values of certain tangible and intangible assets acquired and liabilities assumed in the Evolution1 acquisition. During 2015, the
Company obtained final information to assist in determining the fair values of certain tangible and intangible assets acquired
and liabilities assumed as of the acquisition date. Based on such information, the Company retrospectively adjusted the fiscal
year 2014 comparative information resulting in an increase in goodwill of $379, a decrease in other tangible assets and
liabilities of $127, and an increase in deferred income tax liabilities of $252. There were no changes to the previously reported
consolidated statements of operations or statements of cash flows. The valuation of all assets and liabilities have been finalized.
The results of operations for Evolution1 are presented in the Company's Health and Employee Benefit Solutions segment.
The operations of Evolution1 contributed net revenues of approximately $35,976 and net losses of approximately $512
from July 16, 2014, through December 31, 2014, which includes finance costs. Evolution1 had previously recorded goodwill on
its financial statements from prior acquisitions, some of which is expected to be deductible for tax purposes.
76
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 acquired)
Less:
Accounts receivable
Accounts payable
Deferred tax liabilities, net
Other tangible assets and liabilities, net
Acquired software and developed technology (a)
Customer relationships(b)
Trade name(c)
Trade name(d)
Recorded goodwill
(a)
(b)
(c)
(d)
Weighted average life – 6.4 years.
Weighted average life – 9.7 years.
Weighted average life – 9.9 years.
Indefinite-lived
$
532,174
8,418
(175)
(68,768)
(3,712)
70,000
211,000
7,900
11,000
296,511
$
The following represents unaudited pro forma operational results as if Evolution1 had been included in the Company’s
consolidated statements of income as of January 1, 2013:
Revenue
Net income attributable to WEX Inc.
Pro forma net income attributable to WEX Inc. per common share:
Net income per share – basic
Net income per share – diluted
December 31,
2014
865,056
191,415
4.92
4.91
$
$
$
$
$
$
$
$
2013
786,854
97,016
2.49
2.48
The pro forma financial information assumes that the companies were combined as of January 1, 2013, and includes the
business combination accounting impact from the acquisition, including acquisition related expenses, 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
integration costs that have been or will be incurred by the Company. 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 year 2013.
Acquisition of FastCred
On October 15, 2013, 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 $12,309, net of cash acquired. The Company purchased FastCred to expand its Fleet
Solutions segment. During the fourth quarter of 2013, the Company preliminarily allocated $4,282 of the cost of the acquisition
to goodwill and $12,594 to other intangible assets, primarily customer relationships. During the first quarter of 2014, the
Company obtained additional information to assist in determining the fair values of certain tangible and intangible assets
acquired and liabilities assumed as of the FastCred acquisition date. Based on such information, the Company retrospectively
adjusted the fiscal year 2013 comparative information resulting in an increase in goodwill of $1,490, a decrease in intangible
assets of $2,253, a decrease in property, equipment and capitalized software of $2, and a decrease in deferred income tax
liabilities of $765. There were no changes to the previously reported consolidated statements of operations or statements of cash
flows. The valuation of all assets and liabilities have been finalized. The total weighted average useful life of the intangible
assets acquired from FastCred is four years for customer relationships and three years for acquired software. 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.
77
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
4. Sale of Subsidiary
rapid! PayCard
On January 7, 2015, the Company sold the assets of its rapid! PayCard operations for $20,000, which resulted in a pre-
tax book gain of approximately $1,215. The Company's primary focus in the U.S. continues to be in the fleet, travel, and
healthcare industries. As such, the Company divested the operations of rapid! PayCard, which were not material to the
Company's annual revenue, net income or earnings per share. The Company does not view this divestiture as a strategic shift in
its Health and Employee Benefit Solutions segment.
Pacific Pride
On July 29, 2014, the Company sold its wholly-owned subsidiary Pacific Pride for $49,664, which resulted in a pre-tax
book gain of $27,490. The transfer of the operations of Pacific Pride occurred on July 31, 2014. The Company decided to sell
the operations of Pacific Pride as it did not align with the long-term strategy of the core fleet business. The operations of Pacific
Pride were not material to the Company's annual revenue, net income or earnings per share. Simultaneously with the sale, the
Company entered into a multi-year agreement with the buyer that will continue to allow WEX branded card acceptance at
Pacific Pride locations. The Company does not view this divestiture as a strategic shift in its Fleet Solutions segment.
The following is a summary of the allocation of the assets and liabilities sold:
Consideration received
Less:
Expenses associated with the sale
Accounts receivable
Accounts payable
Other tangible assets and liabilities, net
Customer relationships
Trademarks and trade name
Goodwill
Gain on sale
$
49,664
1,340
48,699
(53,001)
828
3,727
1,444
19,137
27,490
$
5. Accounts Receivable and Reserves for Credit Losses
In general, the terms of the Company’s trade receivables (securitized and non-securitized) provide for payment terms of
30 days or less. The portfolio of receivables is considered to be a large group of smaller balance homogeneous amounts that are
collectively evaluated for impairment.
Receivables are generally written off when they are 150 days past due or upon declaration of bankruptcy by the
customer. The reserve for credit losses is calculated by an analytic model that also takes into account 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.
At December 31, 2015, approximately 86 percent of the outstanding balance of $1.6 billion of total trade accounts
receivable was current and approximately 97 percent of the outstanding balance of total trade accounts receivable was less than
60 days past due. At December 31, 2014, approximately 94 percent of the outstanding balance of $1.9 billion of total trade
accounts receivable was current and approximately 98 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. One customer
was 11 percent of the outstanding receivables balance at December 31, 2015. The same customer was 8 percent of the
outstanding receivables balance at December 31, 2014.
78
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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
6. Investments
Available-for-sale Securities
Year ended December 31,
2015
2014
2013
$
$
13,919
$
10,396
$
22,825
(27,862)
5,202
(252)
32,144
(35,302)
6,832
(151)
13,832
$
13,919
$
11,709
20,200
(27,781)
6,663
(395)
10,396
The Company’s available-for-sale securities as of December 31, 2015 and 2014, are presented below:
2015
Mortgage-backed securities
Asset-backed securities
Municipal bonds
Equity securities (a)
Total available-for-sale securities
2014
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
$
$
$
$
$
$
$
665
850
424
16,961
18,900
820
1,168
545
16,612
19,145
$
16
—
—
—
16
22
—
9
—
31
$
$
$
$
31
2
26
295
354
32
3
—
201
236
$
$
$
$
650
848
398
16,666
18,562
810
1,165
554
16,411
18,940
(a) These securities exclude $5,655 in equity securities designated as trading as of December 31, 2015, and $5,927 as of December 31, 2014, 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, 2015 and 2014 are temporary in nature. The Company reviews its investments to identify and evaluate
investments that have indications of possible impairment. The Company’s techniques used to measure the fair value of its
investments are in Note 16, Fair Value. Factors considered in determining whether a loss is temporary include the length of time
and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee,
and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery
in market value. Substantially all of the Company’s fixed income securities are rated investment grade or better.
The Company had maturities of available-for-sale securities of $594 for the year ended December 31, 2015, $337 for
the year ended December 31, 2014, and $1,192 for the year ended December 31, 2013.
79
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,
2015
2014
Cost
Fair Value
Cost
Fair Value
$
— $
— $
315
—
959
665
313
—
933
650
16,961
16,666
$
213
342
—
1,158
820
16,612
$
18,900
$
18,562
$
19,145
$
211
341
—
1,167
810
16,411
18,940
7. 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
Capital leases
Total
Less accumulated depreciation and amortization
Total property, equipment and capitalized software, net
December 31,
2015
2014
$
63,278
$
212,504
39,694
14,492
757
56,177
184,868
21,937
11,239
757
330,725
274,978
(192,140)
(169,382)
$
138,585
$
105,596
The Company did not incur significant impairment charges during 2015, 2014, and 2013. Depreciation expense,
including expense associated with capital leases, was $35,285, $29,758 and $25,061 in 2015, 2014 and 2013, respectively.
80
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
8. Goodwill and Other Intangible Assets
The changes in goodwill during the period January 1 to December 31, 2015 were as follows:
Gross goodwill, beginning of period (a)
Impact of foreign currency translation
Acquisition of Benaissance
Sale of subsidiaries
Gross goodwill, end of period
Accumulated impairment, end of period
Net goodwill, end of period
Fleet
Solutions
Segment (a)
Travel and
Corporate
Solutions
Segment
Health and
Employee
Benefit
Solutions
Segment (a)
Total (a)
$
759,985
$
44,710
$
330,094
$
1,134,789
(23,598)
—
(147)
736,240
(1,337)
(885)
—
—
43,825
(16,171)
(6,154)
38,767
(12,386)
350,321
—
(30,637)
38,767
(12,533)
1,130,386
(17,508)
$
734,903
$
27,654
$
350,321
$
1,112,878
(a)
The prior year amounts have been adjusted to reflect changes as a result of finalizing the purchase accounting. See Note 3, "Business Acquisitions and
Other Intangible Asset Acquisitions."
The changes in goodwill during the period January 1 to December 31, 2014 were as follows:
Gross goodwill, beginning of period (a)
Impact of foreign currency translation
Acquisition of Evolution1
Sale of subsidiary
Acquisition of Esso portfolio in Europe
Gross goodwill, end of period
Accumulated impairment, end of period
Net goodwill, end of period
Fleet
Solutions
Segment (a)
Travel and
Corporate
Solutions
Segment
Health and
Employee
Benefit
Solutions
Segment
Total (a)
$
754,886
$
45,872
$
36,642
$
837,400
(16,392)
(1,162)
—
(19,137)
40,628
759,985
(1,337)
—
—
—
(3,059)
296,511
—
—
(20,613)
296,511
(19,137)
40,628
44,710
(16,171)
330,094
1,134,789
—
(17,508)
$
758,648
$
28,539
$
330,094
$
1,117,281
(a)
The prior year amounts have been adjusted to reflect changes as a result of finalizing the purchase accounting. See Note 3, "Business Acquisitions and
Other Intangible Asset Acquisitions."
The changes in intangible assets during the period January 1 to December 31, 2015, were as follows:
Net Carrying
Amount,
Beginning of
Period (a)
Acquisitions
Amortization
Disposals
Impacts of
Foreign
Currency
Translation
Net Carrying
Amount,
End of
Period
$
119,509
$
10,300
$
(9,844) $
— $
(5,953) $
309,450
35,341
1,245
15,373
27,700
—
—
1,500
(32,468)
(4,165)
(243)
(1,072)
(2,329)
(164)
—
(723)
(4,449)
(3,614)
(124)
(1,934)
114,012
297,904
27,398
878
13,144
Definite-lived intangible assets
Acquired software and developed
technology (a)
Customer relationships (a)
Licensing agreements
Patent
Trade name (a)
Indefinite-lived intangible assets
Trademarks, trade names and brand names
16,379
—
—
—
997
17,376
Total
(a)
The prior year amounts have been adjusted to reflect changes as a result of finalizing the purchase accounting. See Note 3, "Business Acquisitions and
Other Intangible Asset Acquisitions."
$
497,297
$
39,500
$
(47,792) $
(3,216) $
(15,077) $
470,712
81
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, 2014, were as follows:
Net Carrying
Amount,
Beginning of
Period (a)
Acquisitions
Amortization
Disposals
Impacts of
Foreign
Currency
Translation
Net Carrying
Amount, End
of Period
$
61,590
$
70,000
$
(10,091) $
— $
(1,990) $
127,403
—
1,672
8,835
218,346
36,605
—
7,900
(28,575)
(390)
(380)
(1,186)
(3,727)
(3,997)
—
—
—
(874)
(47)
(176)
119,509
309,450
35,341
1,245
15,373
Definite-lived intangible assets
Acquired software and developed
technology (a)
Customer relationships (a)
Licensing agreements
Patent
Trade name (a)
Indefinite-lived intangible assets
Trademarks, trade names and brand names
7,244
11,000
—
(1,444)
(421)
16,379
Total
(a)
$
206,744
$
343,851
$
(40,622) $
(5,171) $
(7,505) $
497,297
The prior year 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
2016
2017
2018
2019
2020
Other intangible assets consist of the following:
$
$
$
$
$
51,733
51,770
47,783
44,230
40,647
December 31, 2015
December 31, 2014
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Definite-lived intangible assets
Acquired software and developed technology
$
155,182
$
(41,170) $
114,012
$
150,458
$
(30,949) $
Customer relationships
Licensing agreements
Patent
Trade name
Indefinite-lived intangible assets
Trademarks, trade names and brand names
Total
403,382
(105,478)
31,903
2,413
16,410
(4,505)
(1,535)
(3,266)
297,904
27,398
878
13,144
393,942
(84,492)
35,726
2,697
17,786
(385)
(1,452)
(2,413)
$
609,290
$
(155,954)
453,336
$
600,609
$
(119,691)
480,918
17,376
$
470,712
16,379
$
497,297
119,509
309,450
35,341
1,245
15,373
(a)
The prior year amounts have been adjusted to reflect changes as a result of finalizing the purchase accounting.
82
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
9. Accounts Payable
Accounts payable consists of:
Merchant payables
Other payables
Total accounts payable
10. Deposits, Borrowed Federal Funds and Other Debt
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,
2015
2014
313,244
65,567
378,811
$
$
376,753
49,203
425,956
December 31,
2015
97,859
54,448
369,191
308,998
40,022
2014
$
261,502
34,493
330,696
314,576
38,286
$
870,518
$
979,553
0.90%
0.45%
—
0.61%
0.25%
—
WEX Bank has issued certificates of deposit in various maturities ranging between 9 months and 2 years and with
interest rates ranging from 0.55 percent to 1.35 percent as of December 31, 2015. 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, 2015, certificates of deposit were in
denominations of $250 or less.
The Company requires non-interest bearing deposits for certain customers as collateral for credit that has been
extended.
The Company also had federal funds lines of credit totaling $257,500 at December 31, 2015 and $125,000 at
December 31, 2014. There were no borrowings against these lines of credit at December 31, 2015 and December 31, 2014.
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, 2015, the weighted average
interest rate on interest-bearing money market deposits was 0.45 percent.
On January 11, 2012, the Company entered into an agreement with Higher One to offer NOW accounts to a portion of
Higher One’s customers. Higher One provides processing and other administrative services while the Company, through its
bank subsidiary WEX Bank, establishes and maintains the NOW accounts. During 2015 and 2014, the Company received non-
interest bearing NOW account deposits. As of December 31, 2015, the Company has $308,998 of non-interest bearing NOW
account deposits outstanding.
Other debt
UNIK debt
UNIK had approximately $5,046 of debt as of December 31, 2015, and $7,975 of debt as of December 31, 2014. UNIK's
debt is comprised of various credit facilities held in Brazil, with various maturity dates. The weighted average annual interest
rate was 13.5 percent as of December 31, 2015, and 13.9 percent as of December 31, 2014. This debt is classified in Other debt
on the Company’s consolidated balance sheets for the periods presented.
83
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Participation debt
During the second quarter of 2014, WEX Bank entered into an agreement with a third party bank to fund customers
balances that exceed the WEX Bank lending limit. This borrowing carries a variable interest rate of 3-month LIBOR plus a
margin of 2.25 percent. The balance of the debt as of December 31, 2015, was $45,000, which is secured by an interest in the
underlying customers receivable. The participation debt balance will fluctuate on a daily basis based on customers funding
needs, and will range from $0 to $45,000. The participation debt agreement will mature on April 1, 2016. This debt is classified
in Other debt on the Company’s consolidated balance sheets for the periods presented.
The following table presents the average interest rates for deposits, borrowed federal funds and other debt:
Average interest rate:
Deposits
Borrowed federal funds
Negotiable order of withdrawal deposits
Interest-bearing money market deposits
UNIK debt
Participation agreement
Average deposits and borrowed federal funds balance
Average other debt (UNIK and participation agreement)
11. Derivative Instruments
Year ended December 31,
2015
2014
2013
0.65%
0.39%
—
0.25%
15.21%
2.57%
0.53%
0.38%
—
0.23%
17.15%
2.46%
0.51%
0.41%
—
0.31%
17.04%
—%
$ 1,026,963
$ 1,220,979
$ 1,012,806
$
51,209
$
37,876
$
8,767
The Company is exposed to certain market risks relating to its ongoing business operations. Derivative instruments
were utilized in prior years to manage the Company's commodity price risk. The Company entered into put and call option
contracts related to the Company’s commodity price risk, which were based on the wholesale price of gasoline and the retail
price of diesel fuel and settled on a monthly basis. These put and call option contracts, or fuel price derivative instruments, were
designed to reduce the volatility of the Company’s cash flows associated with its fuel price-related earnings exposure in North
America.
During the fourth quarter of 2014, the Company suspended purchases under its fuel derivatives program due to
unusually low prices in the commodities market. Management will continue to monitor the fuel price market and evaluate its
alternatives as it relates to this hedging program. For the first quarter of 2016, the Company holds fuel price sensitive derivative
instruments to hedge approximately 20 percent of its anticipated U.S. fuel-price related earnings exposure based on
assumptions at time of purchase. After the first quarter of 2016, we are no longer hedged for changes in fuel prices.
In April 2014, the Company initiated a partial foreign currency exchange hedging program. In 2014 the Company
managed foreign currency exchange exposure on an intra-quarter basis. During the third quarter of 2015, the Company decided
to suspend the foreign currency exchange hedging program for all but a few short-term intercompany transactions. Because this
was a partial foreign currency exchange hedging program, the Company had foreign currency exchange exposure which was
not hedged while the program was in effect.
The realized and unrealized gains or losses on the currency forward contracts and swaps are reported in earnings
within the same consolidated statement of income line as the impact of the foreign currency translation, net foreign currency
gain (loss).
Accounting guidance requires companies to recognize all derivative instruments as either assets or liabilities at fair
value in the consolidated balance sheet. The Company’s fuel price derivative instruments and foreign currency instruments do
not qualify for hedge accounting treatment, and therefore, no such hedging designation has been made.
Derivatives Not Designated as Hedging Instruments
For derivative instruments that are not designated as hedging instruments, the gain or loss on the derivative is
recognized in current earnings.
84
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
As of December 31, 2015, the Company had the following put and call option contracts that settle on a monthly basis
and which do not have formal hedging designations:
Fuel price derivative instruments – unleaded fuel
Put and call option contracts settling January 2016 – March 2016
Fuel price derivative instruments – diesel
Put and call option contracts settling January 2016 – March 2016
Total fuel price derivative instruments
Aggregate
Notional
Amount
(gallons)
(a)
2,655
1,314
3,969
(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.
As of December 31, 2014, 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 2015 – March 2016
Fuel price derivative instruments – diesel
Put and call option contracts settling January 2015 – March 2016
Total fuel price derivative instruments
Aggregate
Notional
Amount
(gallons)
(a)
31,754
15,588
47,342
(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.
As of December 31, 2015, the Company had the following contracts related to its foreign currency swaps, which are
not designated as hedging contracts and settle in U.S. dollars at various dates within 5 days:
Australian dollar
Euro
Pound sterling
Aggregate
Notional
Amount
A$
€
£
10,000
10,000
5,000
85
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The following table presents information on the location and amounts of derivative fair values in the consolidated
balance sheets:
Derivatives not designated
as hedging instruments
Commodity contracts
Foreign currency contracts
Asset Derivatives
Liability Derivatives
December 31, 2015
December 31, 2014
December 31, 2015
December 31, 2014
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
$ 5,007
Fuel price
derivatives,
at fair value
Fuel price
derivatives,
at fair value
$ 40,969
Accounts
receivable
$
—
Accounts
receivable
$
—
Accounts
payable
Fuel price
derivatives,
at fair value
Accounts
payable
$
$
—
90
$
$
—
—
The following table presents information on the location and amounts of derivative gains and losses in the consolidated
statements of income:
Derivatives Not
Designated as
Hedging Instruments
Commodity contracts
Foreign currency contracts
Location of
Gain or (Loss)
Recognized in
Income on
Derivative
Amount of Gain or
(Loss) Recognized in
Income on Derivative
For the period ended
December 31,
2015
2014
Net realized and
unrealized gains on fuel
price derivatives
Net foreign currency
(loss) gain
$
$
5,848
27,236
$
$
46,212
15,398
For the Company’s North America operations, the Company traditionally has used derivative instruments to manage the
impact of volatility in fuel prices on the Company's earnings. The Company entered into put and call option contracts
(“Options”) based on the wholesale price of unleaded gasoline and retail price of diesel fuel. The Company discontinued
entering into new instruments during the fourth quarter of 2014, and the remaining Options settle on a monthly basis through
the first quarter of 2016. 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 fair value of these instruments is recorded in fuel price
derivative instruments, at fair value on the consolidated balance sheets.
86
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The following table presents information about the Options:
December 31,
2015
2014
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 July 2015 – March 2016
Options settling April 2015 – December 2015
Options settling January 2015 – September 2015
Options settling October 2014 – June 2015
Options settling July 2014 – March 2015
Total fuel price derivative instruments – unleaded fuel
Fuel price derivative instruments – diesel
Options settling July 2015 – March 2016
Options settling April 2015 – December 2015
Options settling January 2015 – September 2015
Options settling October 2014 – June 2015
Options settling July 2014 – March 2015
Total fuel price derivative instruments – diesel
Total fuel price derivative instruments
$
$
$
$
$
$
$
$
$
$
2.483
2.620
2.625
2.568
2.510
3.724
3.785
3.795
3.785
3.788
$
$
$
$
$
$
$
$
$
$
2.543
2.680
2.685
2.628
2.570
3.784
3.845
3.855
3.845
3.848
2,655
3,082
—
—
—
—
—
—
—
—
7,873
7,562
8,689
5,151
2,479
6,459
7,109
8,369
4,772
2,411
2,655
$
3,082
31,754
$ 29,120
1,314
1,925
—
—
—
—
—
—
—
—
3,951
3,708
4,300
2,451
1,178
2,842
2,720
3,464
1,906
917
1,314
3,969
$
$
1,925
5,007
15,588
11,849
47,342
$ 40,969
(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 gains (losses)
Change in unrealized fuel price derivatives
Net realized and unrealized gains (losses) on derivative instruments
Year ended December 31,
2015
2014
2013
$
$
41,810
(35,962)
5,848
$
$
(2,115) $
48,327
46,212
$
(4,223)
(5,628)
(9,851)
87
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
12. Financing Debt
2014 Credit Agreement
On August 22, 2014, the Company entered into the agreements described below to modify certain terms of the 2013
Credit Agreement in order to permit the additional financings and investments to facilitate the consummation of the Esso Card
transaction.
On August 22, 2014, the Company entered into the 2014 Amendment Agreement. Pursuant to the 2014 Amendment
Agreement, certain lenders party to the 2013 Credit Agreement consented to the amendment and restatement of the 2013 Credit
Agreement in the form of the 2014 Credit Agreement.
The 2014 Amendment Agreement (i) provides for a new tranche of term loans under the 2014 Credit Agreement in an
aggregate principal amount equal to $222,500 on the terms and conditions set forth in the 2014 Credit Agreement, (ii) modifies
certain of the negative covenants as described below in the description of the 2014 Credit Agreement and (iii) provides for the
addition of Wright Express International Holdings Limited as a designated borrower, subject to specified conditions precedent.
Concurrently, on August 22, 2014, the Company entered into the 2014 Credit Agreement. The 2014 Credit Agreement
provides for a term loan facility in an amount equal to $500,000 that matures on January 31, 2018, and a $700,000 secured
revolving credit facility, secured by pledges of stock of certain subsidiaries of the Company, with a $150,000 sublimit for letters
of credit and a $20,000 sublimit for swingline loans, that terminates on January 31, 2018.
The 2014 Credit Agreement amends and restates the 2013 Credit Agreement. The 2014 Credit Agreement increases the
outstanding amount of the term loans from $277,500 to $500,000, and does not change the amount of the $700,000 revolving
loan. A portion of the indebtedness owing under the 2014 Credit Agreement is the same indebtedness as formerly evidenced by
the 2013 Credit Agreement.
Proceeds from the 2014 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 2014 Credit Agreement bear interest at a rate equal to, at the Company’s option, (a) the
Eurocurrency Rate, as defined in the 2014 Credit Agreement, plus a margin of 1.25 percent to 2.75 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 Bank of America N.A., and (iii) the Eurocurrency Rate
plus 1.00 percent, in each case plus a margin of 0.25 percent to 1.75 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 0.45 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 2014
Credit Agreement.
The 2014 Credit Agreement contains customary representations and warranties, as well as affirmative and negative
covenants. The 2014 Credit Agreement also requires that the Company maintain at the end of each fiscal quarter the following
financial ratios:
•
•
a consolidated EBIT to consolidated interest charges ratio of no less than 3.00 to 1.00, measured quarterly; and
a consolidated funded indebtedness (excluding the amount of consolidated funded indebtedness due to permitted
securitization transactions) to consolidated EBITDA ratio of no more than 3.25 to 1.00, measured quarterly.
The Company may elect to increase the permissible ratio under the latter financial covenant to 3.75 to 1.00 (for four fiscal
quarters) or to 4.25 to 1.00 (for two fiscal quarters) in connection with certain acquisitions.
$400 Million Notes Outstanding
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 the Indenture among the Company, the guarantors listed therein, and The Bank of New York
Mellon Trust Company, N.A., as 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.
88
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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 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.
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. The
Company 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.
2013 Credit Agreement
On January 18, 2013, the Company entered into 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 provided 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 required 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 had the option to increase the facility by up to an
additional $100,000.
The 2013 Credit Agreement amended, restated and substituted for the 2011 Credit Agreement. The 2013 Credit
Agreement increased the outstanding amount of the term loan from $185,000 to $300,000 and increased the amount of the
revolving loan from $700,000 to $800,000. A portion of the indebtedness owing under the 2013 Credit Agreement was the same
indebtedness as formerly evidenced by the 2011 Credit Agreement.
2013 Credit Agreement would have matured in January 2018, unless extended pursuant to the terms of the 2013 Credit
Agreement.
89
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
2011 Credit Agreement
On May 23, 2011, the Company entered into the 2011 Credit Agreement. 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. 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.
The 2011 Credit Agreement was replaced in January 2013 by the 2013 Credit Agreement.
The following table presents information about the outstanding borrowings under the 2013 and 2014 Credit Agreement:
Outstanding balance on revolving line-of-credit and term loan with interest based on LIBOR
Outstanding balance on revolving line-of-credit and term loan with interest based on Prime
Outstanding balance on revolving line-of-credit and term loan with interest based on Eurocurrency
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 of revolving line-of-credit facility and term loan based on LIBOR
Weighted average rate of revolving line-of-credit facility and term loan based on Prime
Weighted average rate of revolving line-of-credit facility and term loan based on Eurocurrency
December 31,
2015
2014
$
528,750
$
696,250
48,300
92,705
400,000
67,700
137,614
400,000
$
1,069,755
$
1,301,564
2.41%
4.50%
2.43%
2.92%
5.00%
2.88%
As of December 31, 2015, the weighted average interest rate for all the financing borrowings under the 2014 Credit
Agreement was 2.60 percent.
As of December 31, 2015, the Company has posted approximately $8,550 in letters of credit as collateral for lease
agreements and virtual card and fuel payment processing activity at our foreign subsidiaries. Accordingly, at December 31,
2015, the Company had $480,445 of availability under the 2014 Credit Agreement, subject to the covenants as described below.
90
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:
Year ended December 31,
2015
2014
2013
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
Interest expense based on Prime
Fees
Amortization of loan origination fees
$300 Million Term Loan:
Interest expense based on LIBOR
Amortization of loan origination fees
2014 Credit Agreement
$700 Million Revolver:
Interest expense based on LIBOR
Interest expense based on Prime
Interest expense based on Eurocurrency
Fees
Amortization of loan origination fees
$500 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
Securitization interest expense
Deferred loan costs associated with the extinguishment of debt
Other
Total financing interest expense
91
$
— $
— $
—
—
—
—
—
—
—
—
—
—
— $
— $
— $
—
—
—
—
—
$
573
419
1,361
757
3,667
301
— $
7,078
$
4,137
$
1,723
$
636
3,874
1,624
1,378
12,050
984
24,683
19,000
734
19,734
1,640
—
132
$
$
$
$
972
484
733
574
4,468
276
9,230
19,000
734
19,734
$
$
$
— $
—
—
350
54
36
43
170
11
664
400
—
2,098
1,122
5,496
491
9,607
—
—
—
—
—
—
—
—
17,469
674
18,143
—
1,004
1
46,189
$
36,042
$
29,419
$
$
$
$
$
$
$
$
$
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The following table presents average interest rates and debt balances:
Average interest rate:
Based on LIBOR
Based on prime
Based on Australian bank rate
Based on Eurocurrency
Average debt balance at LIBOR
Average debt balance at prime
Average debt balance at Australian bank rate
Average debt balance at Eurocurrency
Debt Covenants
Year ended December 31,
2015
2014
2013
2.55%
4.53%
2.94%
2.52%
2.30 %
3.89 %
— %
2.81 %
1.93 %
3.75 %
— %
— %
$
$
$
$
635,029
14,031
84,639
153,895
$
$
$
$
452,911
35,765
$
$
300,056
19,162
— $
17,216
$
—
—
The 2014 Credit Agreement and the 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
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.
Australian Securitization Facility
On April 28, 2015, the Company entered into a one year securitized debt agreement with the Bank of Tokyo-Mitsubishi
UFJ, Ltd. Under the terms of the agreement, each month, on a revolving basis, the Company sells certain of its Australian
receivables to a bankruptcy-remote subsidiary consolidated by the Company ("Securitization Subsidiary"). The Securitization
Subsidiary, in turn, uses the receivables as collateral to issue asset-backed commercial paper ("securitized debt") for
approximately 85 percent of the securitized receivables. The amount collected on the securitized receivables is restricted to pay
the securitized debt and is not available for general corporate purposes.
The Company pays a variable interest rate on the outstanding balance of the securitized debt, based on the Australian
Bank Bill Rate plus an applicable margin. The interest rate as of December 31, 2015, was 2.91 percent. As of December 31,
2015, the Company had $82,018 of securitized debt.
92
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Other
As of December 31, 2015, WEX Bank pledged approximately $350,583 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 $265,882
as of December 31, 2015. As of December 31, 2015, WEX Bank had no borrowings on this line of credit through the Federal
Reserve Bank Discount Window.
13. Income Taxes
Income (losses) before income taxes consisted of the following:
United States
Foreign
Total
Year ended December 31,
2015
2014
2013
$
$
203,692
(18,784)
184,908
$
$
329,633
(27,994)
301,639
$
$
249,311
(10,911)
238,400
Income tax expense (benefit) from continuing operations consisted of the following for the years ended December 31:
2015
Current
Deferred
2014
Current
Deferred
2013
Current
Deferred
United States
State
and Local
Foreign
Total
$
$
$
$
$
$
22,570
37,553
43,565
51,581
52,118
31,020
$
$
$
$
$
$
4,288
5,631
3,326
3,979
5,176
1,562
$
$
$
$
$
$
9,173
$
(3,919) $
8,009
$
(8,839) $
5,255
$
(5,029) $
36,031
39,265
54,900
46,721
62,549
27,553
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
Research and development credit
Domestic production exclusions
Change in valuation allowance
Nondeductible penalties
Other
Effective tax rate
Year ended December 31,
2015
2014
2013
35.0%
35.0%
35.0%
2.5
1.4
0.7
0.2
(1.8)
1.6
0.3
0.8
1.6
1.1
(0.1)
(0.6)
(4.0)
0.1
—
0.6
1.9
0.8
—
—
—
—
—
0.1
40.7%
33.7%
37.8%
93
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 carryforwards
Other assets
Unrealized losses, primarily related to fuel price derivatives
Total
Deferred tax liabilities related to:
Unrealized gains, primarily related to fuel price derivatives
Other liabilities
Property, equipment and capitalized software
Intangibles, net
Pension
Total
Valuation allowance primarily on net operating loss carryforwards
Deferred income taxes, net
Net deferred tax (liabilities) assets by jurisdiction are as follows:
United States
Australia
New Zealand
The Netherlands
United Kingdom
Brazil
Total
December 31,
2015
2014
$
5,310
$
4,686
9,150
22,797
5,992
2,647
50,582
1,876
1,226
20,861
94,814
600
119,377
4,814
5,484
4,399
11,455
36,768
5,399
—
63,505
15,554
1,540
11,159
71,030
—
99,283
2,210
$
(73,609) $
(37,988)
December 31,
2015
2014
$
(76,308) $
(34,963)
(6,153)
(7,078)
252
230
9,623
(1,253)
185
238
5,607
(1,977)
$
(73,609) $
(37,988)
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, Australia and the United Kingdom. The Company had
approximately $102,483 of post apportionment state, $10,072 of federal and $69,762 of foreign net operating loss carry
forwards at December 31, 2015 and approximately $78,500 of post apportionment state, $53,099 of federal and $53,609 of
foreign net operating loss carry forwards at December 31, 2014. The U.S. losses expire at various times through 2035. The
Company expects to utilized $42,618 of U.S. federal operating losses during 2015 and $20,753 of U.S. federal operating losses
during 2014. Foreign losses in Brazil and the UK have indefinite carry forward periods.
The Company has established valuation allowances for the following items: (i) acquired net operating losses in the UK
(ii) Evolution1’s equity investment in its minority-owned subsidiaries, (iii) state tax credits, and (iv) certain net operating losses
and estimated non-deductible expenses. During 2015, the Company recorded tax expense of $2,888 for net increases to the
valuation allowance. The Company also recorded a decrease in the valuation allowance associated with an acquisition
adjustment for $205, and a foreign currency translation adjustment of $79 during 2015. In each case the Company has
determined it is more likely than not that the benefits will not be utilized. No other valuation allowances have been established
for any 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 $13,230 at December 31, 2015, and
$7,733 at December 31, 2014. These earnings are considered to be indefinitely reinvested, and accordingly, no U.S. federal and
94
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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
provides guidance on derecognition, classification, interest and penalties, accounting in the interim periods, disclosure,
and transition.
The Company or one of its subsidiaries files income tax returns in the United States federal jurisdiction and various
state and foreign jurisdictions, where required. In the normal course of business, the Company is no longer subject to income
tax examination for the years prior to 2011. The Internal Revenue Service is currently in the process of examining the
Company's US income federal income tax returns for 2011, 2012 and 2014. The Company is also subject to an ongoing
examination in New Zealand by Inland Revenue for calendar tax years 2012 and 2013. As of December 31, 2015, no
adjustments have been proposed in connection with the ongoing audits
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,
2015
2014
2013
$
$
4,856
$
5,283
$
431
(511)
—
(427)
4,776
$
4,856
$
6,176
—
(893)
5,283
At December 31, 2015, the Company had $7,027 of net unrecognized tax benefits. If recognized, the $7,027 in net
unrecognized tax benefits would reduce the Company’s effective tax rate. The Company anticipates settling a portion of the
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 $2,251 as of December 31, 2015, $1,988 as of December 31, 2014 and $1,625 as of December 31, 2013,
for penalties and interest related to uncertain tax positions.
14. 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.
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.
95
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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 has been reassessment of the blended tax rates that are projected into the future. For the
year ended December 31, 2015, the net future benefits decreased, which decreased the associated liability to Wyndham,
resulting in a $2,145 offset to non-operating expense. In prior years, the net future benefits increased, which increased the
associated liability to Wyndham, resulting in a $1,331 charge to non-operating expense in 2014 and a $33 charge to non-
operating expense in 2013.
15. Employee Benefit Plans
The Company sponsors a 401(k) retirement and savings plan. Employees are eligible to participate in the plan
immediately. The Company’s employees who are at least 18 years of age, have worked at least 1000 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 $4,571, $3,502 and $2,991 in matching funds to the plan for the years ended
December 31, 2015, 2014 and 2013, respectively.
During 2014, the Company acquired Evolution1 which, as of the date of the acquisition, had its own employee savings
plan, the Evolution1 Plan. As of December 31, 2014, the Evolution1 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 Evolution1
Plan. Subsequent to year end, net assets available for benefits totaling $21,739 were received by the plan on January 2, 2015, in
a transfer from the Evolution1 Plan. On January 1, 2015, Evolution1 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 $5,655 at December 31, 2015, and $5,927 at December 31, 2014. 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 $5,655 at December 31, 2015, and $5,927 at December 31, 2014. Such amounts are included in other assets on the
consolidated balance sheet.
The Company has defined benefit pension plans in Germany and Norway related to the Esso portfolio in Europe
transaction in December of 2014. The total net unfunded status for the Company’s foreign defined benefit pension plans,
recognized as accrued expenses in the consolidated balance sheet, was $4,406 as of December 31, 2015 and $4,900 as of
December 31, 2014. The Company will measure these plan obligations on an annual basis. The change in fair value to the
defined benefit pension plans is recorded through the consolidated statements of income. The expense under each of these
defined benefit pension plans for 2015 and 2014 was not material to the consolidated financial statements.
16. Fair Value
The Company holds mortgage-backed and other asset-backed securities, fixed income and equity securities, derivatives
and certain other financial instruments which are carried at fair value. The Company determines fair value based upon quoted
prices when available or through the use of alternative approaches, such as model pricing, when market quotes are not readily
accessible or available. The Company carries certain of its liabilities at fair value, including its derivative liabilities. In
determining the fair value of the Company’s obligations, various factors are considered including: closing exchange or over-
the-counter market price quotations; time value and volatility factors underlying options and derivatives; price activity for
equivalent instruments; the Company’s own-credit standing; and counterparty credit risk.
These valuation techniques may be based upon observable and unobservable inputs. Observable inputs reflect market
data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types
of inputs create the following fair value hierarchy:
96
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 2015:
•
•
•
•
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,
2015
$
$
$
$
$
$
650
848
398
16,666
18,562
5,655
3,083
1,924
5,007
$
$
$
$
$
— $
—
—
16,666
16,666
5,655
$
$
— $
—
— $
$
650
848
398
—
1,896
$
— $
3,083
—
3,083
$
$
—
—
—
—
—
—
—
1,924
1,924
90
$
— $
90
$
—
Assets:
Mortgage-backed securities
Asset-backed securities
Municipal bonds
Equity securities
Total available-for-sale securities
Executive deferred compensation plan trust
(a)
Fuel price derivatives – unleaded fuel
(b)
Fuel price derivatives – diesel
(b)
Total fuel price derivatives
Liabilities:
Foreign currency swaps (c)
(a)
(b)
(c)
2014:
The fair value of these instruments is recorded in other assets.
The consolidated balance sheet presentation combines unleaded fuel and diesel fuel positions.
The fair value of these instruments is recorded in Accounts payable.
The following table presents the Company’s assets that are measured at fair value and the related hierarchy levels for
Assets:
Mortgage-backed securities
Asset-backed securities
Municipal bonds
Equity securities
Total available-for-sale securities
Executive deferred compensation plan trust
Fuel price derivatives – unleaded fuel (b)
Fuel price derivatives – diesel (b)
(a)
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,
2014
$
$
$
$
$
810
$
— $
810
$
1,165
554
16,411
18,940
5,927
29,121
11,848
40,969
$
$
$
$
—
—
16,411
16,411
5,927
$
$
— $
—
— $
1,165
554
—
2,529
$
— $
29,121
—
29,121
$
$
—
—
—
—
—
—
—
11,848
11,848
(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.
97
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, 2015:
Beginning balance
Total gains or (losses) – realized/unrealized
Included in earnings
(a)
Included in other comprehensive income
Purchases, issuances and settlements
Transfers (in)/out of Level 3
Ending balance
Fuel Price
Derivatives –
Diesel
$
11,848
(9,924)
—
—
—
$
1,924
(a)
Gains and losses (realized and unrealized) included in earnings for the year ended December 31, 2015, are reported in net realized and unrealized gains
and (losses) on fuel price derivatives on the consolidated statements of income.
The following table presents a reconciliation of the beginning and ending balances for assets and liabilities measured at
fair value on a recurring basis using significant unobservable inputs (Level 3) during the year ended December 31, 2014:
Beginning balance
Total gains or (losses) – realized/unrealized
Included in earnings (a)
Included in other comprehensive income
Purchases, issuances and settlements
Transfers in/(out) of Level 3
Ending balance
Fuel Price
Derivatives –
Diesel
$
(2,142)
13,990
—
—
—
$
11,848
(a)
Gains and losses (realized and unrealized) included in earnings for the year ended December 31, 2014, are reported in net realized and unrealized gains
and (losses) on fuel price derivatives on the consolidated statements of income.
Available-for-sale securities and executive deferred compensation plan trust
When available, the Company uses quoted market prices to determine the fair value of available-for-sale securities;
such items are classified in Level 1 of the fair-value hierarchy. These securities primarily consist of exchange-traded equity
securities.
For mortgage-backed and asset-backed debt securities and bonds, the Company generally uses quoted prices for recent
trading activity of assets with similar characteristics to the debt security or bond being valued. The securities and bonds priced
using such methods are generally classified as Level 2. The obligations related to the deferred compensation plan trust are
classified as Level 1 in the fair value hierarchy because the fair value is determined using quoted prices for identical
instruments in active markets.
$400 Million Notes outstanding
The Notes outstanding as of December 31, 2015, have a carrying value of $400,000 and fair value of $366,000. The fair
value is based on market rates for the issuance of our debt. The Company determined the fair value of its Notes outstanding are
classified as Level 2 in the fair value hierarchy.
Foreign currency contracts
Derivatives include foreign currency forward and swap contracts. Our foreign currency forward and swap contracts are
valued using an income approach (Level 2) based on the spot rate less the contract rate multiplied by the notional amount. We
consider counterparty credit risk in the valuation of our derivatives. However, counterparty credit risk did not impact the
valuation of our derivatives during 2015 and 2014.
98
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Fuel price derivatives
The majority of derivatives entered into by the Company were 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
$
1,924
Option model
Fair Value at
December 31, 2015
Valuation
Technique
Fuel price derivatives – diesel
$
11,849
Option model
Fair Value at
December 31, 2014
Valuation
Technique
Unobservable Input
Future retail price of diesel
fuel after December 31,
2015
Unobservable Input
Future retail price of diesel
fuel after December 31,
2014
Range $
per gallon
3.72 – 3.78
Range $
per gallon
3.72 – 3.86
Sensitivity To Changes In Significant Unobservable Inputs. As presented in the table above, the significant unobservable
inputs used in the fair value measurement of the Company’s diesel fuel price derivative instruments are the future retail price of
diesel fuel from the first quarter of 2016. Significant changes in these unobservable inputs in isolation would result in a
significant change in the fair value measurement.
17. Non-controlling interest
On August 30, 2012, the Company acquired a 51 percent ownership interest in UNIK. The redeemable non-controlling
interest was measured at fair value at the date of acquisition and was reported on the Company’s consolidated balance sheets as
“Redeemable non-controlling interest." On August 31, 2015, the Company acquired the remaining 49 percent ownership in
UNIK for $46,018. Due to put rights held by the non-controlling shareholders after the Company's original investment, the non-
controlling interest was previously reported as a liability rather than permanent equity. The Company agreed to cancel this put
option in conjunction with the acquisition of the remaining 49 percent ownership. The value of the redeemable non-controlling
interest was adjusted to the redemption value at date of purchase and the Company recorded the adjustment to retained
earnings. This adjustment to retained earnings reduces the Earnings Per Share to shareholders. The Company recorded the
amount paid in excess of the redemption value in additional paid-in capital and the impact related to foreign currency in
accumulated other comprehensive income. The Company's overall purchase price was less than the fair value of UNIK.
The redeemable non-controlling interest was reported on the Company’s consolidated balance sheets as “Redeemable
non-controlling interest.”
99
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
A reconciliation of redeemable non-controlling interest for the years ended December 31, 2015 and 2014, is as follows:
Balance, beginning of period
Net income attributable to redeemable non-controlling interest
Currency translation adjustment
Accretion to redemption value
Excess purchase amount over redemption value
Purchase of non-controlling interest
Ending balance
2015
2014
16,590
$
1,190
(4,210)
9,413
23,035
(46,018)
—
18,729
198
(2,337)
—
—
—
16,590
$
$
On December 1, 2014, WEX acquired the assets of ExxonMobil's Esso portfolio in Europe through its majority
owned subsidiary, WEX Europe Services Limited. The Company formed this entity during 2013 and has 75 percent ownership.
A reconciliation of non-controlling interest for the years ended December 31, 2015 and 2014 is as follows:
Balance, beginning of period
Non-controlling interest investment
Net loss attributable to non-controlling interest
Currency translation adjustment
Ending balance
18. Commitments and Contingencies
Litigation
2015
2014
$
$
17,396
$
—
(2,896)
(2,063)
12,437
$
519
21,267
(2,391)
(1,999)
17,396
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.
Legal Matters
On December 23, 2015, the FDIC and WEX Bank, a wholly-owned subsidiary (the “Bank”), entered into a Consent
Order, Order for Restitution and Order to Pay Civil Money Penalty (the "FDIC Consent Agreement") stating that the Bank
violated Section 5 of the Federal Trade Commission Act. The FDIC Consent Agreement related to the marketing and fee
disclosure practices used in connection with NOW account deposits associated with the Bank’s deposit program partner, Higher
One. Higher One provides electronic financial disbursements and payment services to the higher education industry. Among
these services, Higher One offers to facilitate opening a deposit account at participating banks for students receiving financial
aid, with the Bank being one of those participating institutions. Upon a student’s opening of an account and receipt of funds in
excess of their financial obligation to their education institution, the Bank holds the funds for the student but does not receive
any of the fees at issue. Higher One services the accounts, pays related processing costs and receives all of the fees at issue. The
FDIC Consent Agreement, among other things, requires: (i) the Bank to pay restitution for certain fees collected by Higher One
in connection with these NOW accounts (in the event Higher One does not provide for the restitution), and (ii) the Bank to pay
a civil money penalty.
The civil money penalty applicable to the Bank in the FDIC Consent Agreement is $1,750. In addition to a civil money
penalty, the FDIC Consent Agreement requires the Bank to pay restitution of approximately $31,000 (if Higher One fails to pay
restitution), as a result of the alleged violations. As a result of the above described proceedings, Higher One paid the entire
restitution amount into a custodial account during the fourth quarter of 2015 for later distribution to students following the
approval of the restitution plan. The Bank has also paid its $1,750 obligation under the FDIC Consent Agreement during the
fourth quarter of 2015 (following the execution of the FDIC Consent Agreement).
Pending EFS Acquisition
On October 18, 2015, the Company entered into a purchase agreement to acquire EFS, a provider of customized payment
solutions for fleet and corporate customers with a focus on the large and mid-sized fleet segment. Pursuant to the purchase
agreement, and subject to the terms and conditions contained therein, at the closing of the acquisition, the Company will
100
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
acquire all of the outstanding membership interests of WP Mustang Topco LLC, the indirect parent of EFS, and Warburg Pincus
Private Equity XI (Lexington), LLC, an affiliated entity, from investment funds affiliated with Warburg Pincus LLC for an
aggregate purchase price comprised of $1,100,000 in cash and 4,012 shares of the Company’s common stock, subject to certain
working capital and other adjustments. The parties’ obligations to consummate the acquisition are subject to customary closing
conditions, including the expiration or termination of the applicable antitrust waiting period under the Hart-Scott Rodino
Antitrust Improvements Act of 1976, as amended.
Either party may terminate the purchase agreement if (i) the closing has not occurred on or prior to April 18, 2016
(subject to extension to July 18, 2016 if antitrust clearance has not then been obtained), (ii) an order or law permanently
prohibiting the acquisition has become final and non-appealable or (iii) the other party has breached its representations,
warranties or covenants, subject to customary materiality qualifications and abilities to cure. In addition, the EFS sellers may
also terminate the purchase agreement if, upon the satisfaction of the closing conditions and the expiration of a marketing
period in connection with the Company’s debt financing, the Company fails to consummate the acquisition. Upon such a
termination (and in certain other limited circumstances), if the EFS Sellers so elect, the Company is required to pay the EFS
sellers a cash termination fee of $45,000. In the event the purchase agreement is terminated in certain circumstances involving a
failure to obtain required antitrust clearances, the Company is required to pay the EFS sellers a cash termination fee of $70,000.
In connection with the planned acquisition of EFS, the Company has obtained financing commitments from Bank of
America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, SunTrust Bank, SunTrust Robinson Humphrey Inc. and
MUFG Union Bank, N.A. and Citizens Bank, National Association, for senior secured credit facilities in the aggregate amount
of $2,125,000, consisting of a $1,775,000 seven-year term loan facility and a $350,000 five-year revolving credit facility. The
new senior secured credit facilities would replace our existing senior secured credit facilities. See Note 24, Pending EFS
Acquisition.
Extension of Credit to Customers
The Company had aggregate commitments of approximately $6,229,000 at December 31, 2015, and $5,927,000 at
December 31, 2014, 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, subject to limited notice requirements in some instances. These amounts are not recorded on the
consolidated balance sheet.
Operating and Capital Leases
The Company leases office space, equipment, and vehicles under non-cancelable operating and capital lease agreements
that expire at various dates through 2023. 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 $11,310 for the year
ended December 31, 2015, $8,838 for the year ended December 31, 2014 and $7,257 for the year ended December 31, 2013.
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
and rental expense related to information technology hardware and software leases totaled $11,288 for the year ended
December 31, 2015, $9,852 for the year ended December 31, 2014, and $8,249 for the year ended December 31, 2013. These
amounts were included in technology leasing and support on the consolidated statements of income.
101
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Future minimum lease payments under non-cancelable operating and capital leases are as follows:
2016
2017
2018
2019
2020
2021 and thereafter
Total minimum lease payments
Less: Amount representing interest
Total obligations under capital lease
$
$
Operating
Capital
11,533
$
9,716
8,581
5,737
4,574
15,551
55,692
$
$
$
847
—
—
—
—
—
847
40
807
19. Accumulated Other Comprehensive Loss
A reconciliation of accumulated other comprehensive loss for the twelve month periods ended December 31, 2015 and
2014, is as follows:
Beginning balance
Other comprehensive (loss) income
Purchase of redeemable non-controlling interest
Ending balance
2015
2014
Unrealized
Gains and
Losses on
Available-
for-Sale
Securities
Foreign
Currency
Items
Unrealized
Gains and
Losses on
Available-
for-Sale
Securities
Foreign
Currency
Items
$
$
$
(129) $
(50,452) $
(433) $
(15,062)
(83)
(43,679)
304
(35,390)
— $
(9,108) $
— $
—
(212) $ (103,239) $
(129) $
(50,452)
No significant amounts were reclassified from accumulated other comprehensive loss in the periods presented.
The change in foreign currency items is primarily due to the foreign currency translation of assets such as goodwill and
other intangible assets related to the Company's foreign subsidiaries.
The total tax effect on accumulated unrealized loss as of December 31, 2015 was $2,647 and the total tax effect on
accumulated unrealized loss was $1,453 as of December 31, 2014.
20. 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, 2015 and 2014 was $39,748 and $31,127,
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. In addition, the purchase agreement for the acquisition of EFS
prohibits the Company from paying dividends without the prior written consent of the EFS sellers prior to the closing of the
transaction, except in limited circumstances described in the purchase agreement. 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
102
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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, 2015, 2014,
and 2013.
21. Stock-Based Compensation
In 2010, the Company adopted the WEX Inc. 2010 Equity Incentive Plan (the “Plan”). This Plan replaced the
Company’s 2005 Equity and Incentive Plan. In May of 2015 the Company adopted the 2015 Section 162(m) Performance
Incentive Plan (collectively the "Plans"). These Plans, which are stockholder-approved, permit 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 the sum of (i) 3,800 shares of common stock and (ii) such additional
number of shares of common stock (up to 1,596) as is equal to (x) the number of shares of common stock reserved for issuance
under the Company’s Amended and Restated 2005 Equity and Incentive Plan (the “Prior Plan”) that remained available for
grant under the Prior Plan immediately prior to the Board of Directors’ approval of the 2010 Plan and (y) the number of shares
of common stock subject to awards under the Prior Plan which awards expire, terminate or are otherwise surrendered, canceled,
forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right.
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, 2015, 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 $12,420 for 2015, $13,790 for
2014, and $9,429 for 2013.
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, 2015, and changes during the year then ended is
presented below:
Restricted Stock Units
Balance at January 1, 2015
Granted
Vested – shares issued
Vested – shares deferred (a)
Forfeited
Withheld for taxes (b)
Balance at December 31, 2015
Weighted-
Average per share
Grant-
Date Fair
Value
Units
105
82
$
$
(54) $
(2) $
(9) $
(23) $
99
$
82.45
98.32
86.98
118.03
88.08
81.67
94.51
(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.
103
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
As of December 31, 2015, there was $3,971 of total unrecognized compensation cost related to nonvested share-based
compensation arrangements granted as RSUs. That cost is expected to be recognized over a weighted-average period of 1.1
years. The total grant-date fair value of shares granted was $7,846 during 2015, $7,376 during 2014, and $9,757 during 2013.
The total fair value of shares vested was $4,521 during 2015, $8,545 during 2014, and $5,259 during 2013.
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, 2015, and changes during the year is presented
below:
Deferred Stock Units
Balance at January 1, 2015
Awards
Converted from RSUs
Balance at December 31, 2015
Weighted-
Average per share
Grant-Date
Fair Value
Units
95
1
2
98
$
$
$
$
27.79
100.70
118.03
30.59
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 $363 during 2015, $189 during 2014, and $137 during 2013.
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.
A summary of the status of certain of the Company’s PBRSUs at threshold and target performance as of December 31,
2015, and changes during the year then ended is presented below:
Performance Based Restricted Stock Units
Balance at January 1, 2015
Granted
Forfeited
Canceled / Converted to RSUs
Balance at December 31, 2015
Units at
Threshold
Units at
Target
Units at
Maximum
Weighted-
Average per
share
Grant-Date
Fair Value
58
30
(5)
(12)
71
186
66
(18)
(46)
188
355
133
$
$
(33) $
(92) $
363
$
92.39
103.32
94.56
92.07
96.16
The range of unrecognized compensation cost related to the PBRSU awards is from $2,595 at threshold (below target
performance), $7,254 at target and up to $14,318 at maximum (above target performance), as of December 31, 2015, depending
on whether certain performance conditions are met. That cost is expected to be recognized over a weighted-average period of
1.3 years. The total grant-date fair value of shares granted at target was $6,860 during 2015, $19,239 during 2014, and $5,356
during 2013. The total grant-date fair value of shares converted to RSUs and subsequently vested was $2,035 during 2015,
$2,474 during 2014, and $9,075 during 2013.
104
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
Stock Options
The fair value of each option award is estimated on the grant date using the following assumptions and a Black-Scholes-
Merton option-pricing model. The expected term assumption as it relates to the valuation of the options represents the period of
time that options granted are expected to be outstanding. The Company also estimates expected volatilities that are based on
implied volatilities from traded options on the Company's stock, historical volatility of the Company’s stock, and other factors.
The option-pricing model includes a risk-free interest rate for the period matching the expected term of the option and is based
on the U.S. Treasury yield curve in effect at the time of the grant. The dividend yield used in the option-pricing model is the
calculated yield on the Company’s stock at the time of the grant.
On March 15, 2015, and on August 31, 2015, the Company approved the grant of stock options to certain officers and
employees under the Plan. Stock options granted generally become exercisable over three years (with approximately 33
percent of the total grant vesting each year on the anniversary of the grant date) and expire 10 years from the date of grant.
The table below summarizes the assumptions used to calculate the fair value:
Weighted average expected life (in years)
Weighted average exercise price
Weighted average volatility
Weighted average risk-free rate
Weighted average dividend yield
Weighted average fair value
March 15,
2015
August 31,
2015
6.0
5.77
$
103.75
$
94.53
30.53%
1.73%
—%
28.73%
1.66%
—%
$
34.13
$
28.90
105
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The stock options granted under the plan related to the Company’s employees consisted of:
Stock Options
Outstanding at January 1, 2015
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2015
Exercisable on December 31, 2015
Vested and expected to vest at December 31, 2015
Weighted-
Average per
share
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (in
years)
Aggregate
Intrinsic
Value
Shares
$
31
55
(3) $
(2)
81
81
81
$
$
$
13.59
103.40
13.59
103.75
71.50
71.50
71.50
6.36
6.36
6.36
$
$
$
1,363
1,363
1,363
The total intrinsic value of options exercised during the years ended December 31, 2015, 2014 and 2013 was $216,
$1,543 and $3,632, respectively.
22. Restructuring
During the first quarter of 2015, the Company recorded initial restructuring costs of approximately $8,559 related to the
Company's global review of operations. This global review identified certain initiatives to further streamline the business,
improve the Company's efficiency, and to globalize the Company's operations, all with an objective to improve scale and
increase profitability going forward. The costs related to this initiative are employee termination benefits. During the fourth
quarter of 2015, the Company recorded $479 in restructuring costs associated with a restructuring of its global information
technology resources in conjunction with this initiative. The remaining balance at December 31, 2015, is expected to be paid
through 2016 and into 2017. The Company has determined that the amount of expense related to this program is probable and
estimable and has recorded the impact on the consolidated statements of income and in Accrued expenses on the condensed
consolidated balance sheet.
The following table presents the Company’s restructuring liability:
Beginning balance at January 1, 2015
Restructuring charges
Reserve release
Cash paid
Impact of foreign currency translation
Ending balance at December 31, 2015
23. Segment Information
$
$
—
9,038
(28)
(1,433)
(328)
7,249
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
aggregated into the three reportable segments as described below.
The Company’s chief operating decision maker evaluates the operating results of the Company’s operating and
reportable segments based upon revenues and adjusted pre-tax income before NCI which adjusts income before income taxes to
exclude fair value changes of fuel price derivative instruments, net foreign currency remeasurement gains and losses, the
amortization of acquired intangible assets, the expense associated with stock-based compensation, acquisition related expenses
and adjustments, 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
106
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
charges, gains on the extinguishment of a portion of the tax receivable agreement, restructuring charges, gain or losses on
divestitures, regulatory reserves and adjustments attributable to non-controlling interests including adjustments to the
redemption value of a non-controlling interest.
Prior to the fourth quarter of 2015, we reported our results of operations in two business segments, Fleet Payment
Solutions and Other Payment Solutions. During the fourth quarter of 2015, the Company revised its internal and external
reporting and report our results of operations in three reportable segments. The Fleet Solutions segment provides customers
with payment and transaction processing services specifically designed for the needs of commercial and government fleets.
This segment also provides information management services to these fleet customers. The Travel and Corporate Solutions
segment focuses on the complex payment environment of business-to-business payments, providing customers with payment
processing solutions for their corporate payment and transaction monitoring needs. The Health and Employee Benefit Solutions
segment provides healthcare payment products and SaaS consumer directed platforms, as well as payroll related benefits to
customers in Brazil. The Company has recasted the prior years segment information to conform to the current year presentation.
No one customer makes up more than 10 percent of the total consolidated revenue at December 31, 2015. Total assets are not
allocated to the segments.
The accounting policies of the reportable segments are generally the same as those described in the summary of
significant accounting policies.
The following table presents the Company’s reportable segment results for the years ended December 31, 2015, 2014
and 2013:
Year ended December 31, 2015
Fleet solutions
Travel and corporate solutions
Health and employee benefit solutions
Total
Year ended December 31, 2014
Fleet solutions
Travel and corporate solutions
Health and employee benefit solutions
Total
Year ended December 31, 2013
Fleet solutions
Travel and corporate solutions
Health and employee benefit solutions
Total
Total
Revenues
Operating
Interest
Expense
Depreciation
and
Amortization
Adjusted Pre-
Tax
Income
before NCI
$
$
$
$
$
$
538,958
$
195,419
120,260
854,637
562,169
182,921
72,557
817,647
527,424
163,004
27,035
$
$
$
$
717,463
$
1,869
1,218
2,541
5,628
2,778
542
3,117
6,437
1,802
573
1,912
4,287
$
$
$
$
$
$
27,663
$
193,394
1,415
6,207
35,285
26,046
1,332
2,380
29,758
23,351
1,488
222
$
$
$
$
88,094
16,820
298,308
204,171
92,313
6,213
302,697
216,705
69,493
(179)
25,061
$
286,019
107
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
The following table reconciles adjusted pre-tax income before NCI to net income before income taxes:
Adjusted pre-tax income before NCI
Changes in unrealized fuel price derivatives
Net foreign currency remeasurement (loss) gain
Amortization of acquired intangible assets
Stock-based compensation
Restructuring
Gain on divestiture
Deferred loan costs associated with the extinguishment of debt
Expenses and adjustments related to acquisitions
Non-cash adjustments related to tax receivable agreement
Regulatory reserve
Income before income taxes
Year ended December 31,
2015
2014
2013
$
298,308
$
302,697
$
286,019
(35,962)
(5,689)
(47,792)
(12,420)
(9,010)
1,215
—
(4,137)
2,145
(1,750)
48,327
(13,438)
(40,622)
(13,790)
—
27,490
—
(7,694)
(1,331)
—
(5,628)
964
(33,147)
(9,429)
—
—
(1,004)
658
(33)
—
$
184,908
$
301,639
$
238,400
Management believes this information is useful to investors to facilitate comparison of operating results and better
identify trends in our businesses.
108
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
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,
2015
2014
2013
691,088
$
708,827
$
627,282
50,387
113,162
854,637
893,067
148,258
71,553
1,112,878
392,221
23,064
55,427
470,712
79,265
5,445
53,875
$
$
$
$
$
$
57,897
50,923
817,647
866,692
165,688
84,901
1,117,281
388,717
32,123
76,457
497,297
72,334
6,280
26,982
$
$
$
$
$
$
61,645
28,536
717,463
589,319
180,274
50,299
819,892
118,808
43,385
44,551
206,744
59,817
5,988
6,470
138,585
$
105,596
$
72,275
$
$
$
$
$
$
$
$
No single country, other than the United States and Australia, made up more than 10 percent of total revenues for any of
the years presented.
24. Pending EFS Acquisition
On October 18, 2015, the Company entered into a purchase agreement to acquire EFS, a provider of customized payment
solutions for fleet and corporate customers with a focus on the large and mid-sized fleet segment.
Pursuant to the purchase agreement, and subject to the terms and conditions contained therein, at the closing of this
acquisition, the Company will acquire all of the outstanding membership interests of WP Mustang Topco LLC, the indirect
parent of EFS, and Warburg Pincus Private Equity XI (Lexington), LLC, an affiliated entity from investment funds affiliated
with Warburg Pincus LLC for an aggregate purchase price comprised of $1,100,000 in cash and 4,012 shares of the Company’s
common stock (representing approximately 9.4 percent of the Company’s outstanding common stock after giving effect to the
issuance of the new shares) and subject to certain working capital and other adjustments, as described in the purchase
agreement.
The parties’ obligations to consummate the acquisition are subject to customary closing conditions, including the
expiration or termination of the applicable antitrust waiting period under the Hart-Scott Rodino Antitrust Improvements Act of
1976, as amended.
Either party may terminate the purchase agreement if (i) the closing has not occurred on or prior to April 18, 2016 (subject
to extension to July 18, 2016, if antitrust clearance has not then been obtained), (ii) an order or law permanently prohibiting the
acquisition has become final and non-appealable or (iii) the other party has breached its representations, warranties or
covenants, subject to customary materiality qualifications and abilities to cure. In addition, the EFS sellers may also terminate
the purchase agreement if, upon the satisfaction of the closing conditions and the expiration of a marketing period in connection
with the Company’s debt financing, the Company fails to consummate the acquisition. Upon such a termination (and in certain
other limited circumstances), if the EFS Sellers so elect, the Company is required to pay the EFS sellers a cash termination fee
of $45,000. In the event the purchase agreement is terminated in certain circumstances involving a failure to obtain required
antitrust clearances the Company is required to pay the EFS sellers a cash termination fee of $70,000.
109
WEX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in thousands, except per share data)
In connection with the planned acquisition of EFS, the Company has obtained financing commitments from Bank of
America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, SunTrust Bank, SunTrust Robinson Humphrey, Inc. and
MUFG Union Bank, N.A. and Citizens Bank, National Association, for senior secured credit facilities in the aggregate amount
of $2,125,000, consisting of a $1,775,000 seven-year term loan facility and a $350,000 five-year revolving credit facility. The
new senior secured credit facilities would replace our existing senior secured credit facilities under the 2014 Credit Agreement.
The Company has received a request for additional information (a “second request”) from the FTC in connection with
the FTC's review of our proposed acquisition of EFS. The effect of the second request is to extend the waiting period imposed
by the Hart-Scott-Rodino Antitrust Improvements Act until 30 days after both WEX and EFS have substantially complied with
the request, unless that period is extended voluntarily by the parties or terminated sooner by the FTC. There can be no
assurance that a challenge to the acquisition on antitrust grounds will not be made, or, if such a challenge is made, what the
result might be.
25. Quarterly Financial Results (Unaudited)
Summarized quarterly results for the years ended December 31, 2015 and 2014, are as follows:
2015
Total revenues
Operating income
Net earnings attributable to shareholders
Earnings per share:
Basic
Diluted
2014
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
$
$
$
$
$
$
$
$
$
$
202,285
48,240
22,345
0.58
0.57
182,068
61,537
36,542
0.94
0.93
$
$
$
$
$
$
$
$
$
$
213,653
62,918
26,492
0.68
0.68
201,581
80,329
43,333
1.12
1.11
$
$
$
$
$
$
$
$
$
$
226,057
67,745
32,166
0.83
0.83
222,134
102,530
74,443
1.92
1.91
$
$
$
$
$
$
$
$
$
$
212,642
49,890
20,901
0.54
0.54
211,864
61,842
47,893
1.23
1.22
110
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, 2015.
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 (2013) issued by The Committee of Sponsoring Organizations of the Treadway Commission. Based on our
evaluation under the framework in Internal Control – Integrated Framework (2013), management concluded that WEX Inc.’s
internal control over financial reporting was effective as of December 31, 2015.
The effectiveness of our internal control over financial reporting as of December 31, 2015, 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, 2015, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
111
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, 2015, based on criteria established in Internal Control - Integrated Framework (2013) 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, 2015, based on the criteria established in Internal Control - Integrated Framework (2013) 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, 2015 of the Company and our report dated
February 26, 2016 expressed an unqualified opinion on those financial statements.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 26, 2016
112
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 2016 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 2016 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 2016 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 2016 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 2016 Annual Meeting of Stockholders captioned “Auditor
Selection and Fees,” which information is incorporated herein by reference.
113
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this report:
PART IV
1. Financial Statements (see Index to Financial Statements on page 55).
2. The exhibit index attached to this Annual Report on Form 10-K is hereby incorporated by reference.
114
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 26, 2016
By:
/s/ Steven A. Elder
Steven A. Elder
Senior Vice President and Chief Financial Officer
(principal financial and accounting officer)
115
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 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
/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/ Eric Duprat
Eric Duprat
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
116
Exhibit No.
Description
EXHIBIT INDEX
2.1
2.2
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
Corporation (incorporated by reference to Exhibit No. 2.1 to our Current Report on Form 8-K filed with the SEC on September 20,
2010, File No. 001-32426)
Unit Purchase Agreement, dated October 18, 2015, by and among WEX Inc., Mustang HoldCo 1 LLC, Warburg Pincus Private
(E&P) XI, L.P., WP Mustang Topco LLC and Warburg Pincus Private Equity XI (Lexington), LLC (incorporated by reference to
Exhibit 2.1 to our Current Report on Form 8-K filed with the SEC on October 19, 2015, 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 March 18, 2014, 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 2, 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 2, 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)
117
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
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 (incorporated by reference to Exhibit No. 10.15 to our
Annual Report on Form 10-K filed with the SEC on February 28, 2013, File No. 001-32426)
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 (incorporated
by reference to Exhibit No. 10.16 to our Annual Report on Form 10-K filed with the SEC on February 28, 2013, File No.
001-32426)
Second amended and Restated Agreement, dated as of August 22, 2014, 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 (incorporated
by reference to Exhibit No. 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on October 30, 2014, File No.
001-32426)
Amendment and Restatement Agreement, dated as of August 22, 2014, by and among WEX Inc. as the Company, the Lenders party
hereto and Bank of America, N.A. as administrative agent and Merrill Lynch, Pierce Fenner & Smith Incorporated, SunTrust
Robinson Humphrey, Inc. and Wells Fargo Securities, LLC, as joint lead arrangers and joint book managers (incorporated by
reference to Exhibit No. 10.2 to our Quarterly Report on Form 10-Q filed with the SEC on October 30, 2014, File No. 001-32426)
Amended and Restated Guaranty, dated as of August 22, 2014, between WEX Inc., and Bank of America, N.A., as administrative
agent (incorporated by reference to Exhibit No. 10.3 to our Quarterly Report on Form 10-Q filed with the SEC on October 30, 2014,
File No. 001-32426)
First Amendment to Second Amended and Restated Credit Agreement dated as of November 20, 2014, by and among, WEX Inc. as
the Company, the Lenders party hereto and Bank of America, N.A. as administrative agent.
† 10.21
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)
118
† 10.22
† 10.23
Wright Express Corporation Employee Stock Purchase Plan (incorporated by reference to Exhibit No. 10.7 to our Registration
Statement on Form S-1 filed with the SEC on February 10, 2005, File No. 333-120679)
Wright Express Corporation Amended and Restated Non-Employee Directors Deferred Compensation Plan (incorporated by
reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426)
† 10.24
2013 Amended and Restated WEX Inc. Short-Term Incentive Program (incorporated by reference to Exhibit No. 10.20 to our
Annual Report on Form 10-K filed with the SEC on February 27, 2014, File No. 001-32426)
† 10.25
2013 Corporate Annual Grant Long-Term Incentive Program (incorporated by reference to Exhibit No. 10.22 to our Annual Report
on Form 10-K filed with the SEC on February 27, 2014, File No. 001-32426)
† 10.26
2013 International Annual Grant Long-Term Incentive Program (incorporated by reference to Exhibit No. 10.23 to our Annual
Report on Form 10-K filed with the SEC on February 27, 2014, File No. 001-32426)
† 10.27
2013 FleetOne Integration Long-Term Incentive Program (incorporated by reference to Exhibit No. 10.27 to our Annual Report on
Form 10-K filed with the SEC on February 26, 2015, File No. 001-32426)
† 10.28
2014 Amended and Restated WEX Inc. Short-Term Incentive Program (incorporated by reference to Exhibit No. 10.28 to our
Annual Report on Form 10-K filed with the SEC on February 26, 2015, File No. 001-32426)
† 10.29
† 10.30
† 10.31
2014 Form of Annual Performance-Based Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.2 to our
Quarterly Report on Form 10-Q filed with the SEC on April 30, 2014, File No. 001-32426)
2014 Form of Annual Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form
10-Q filed with the SEC on April 30, 2014, File No. 001-32426)
Form of 2014 Growth Grant - Performance-Based Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.4 to
our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2014, File No. 001-32426)
† 10.32
George Hogan WEX Inc. Special Incentive Plan (incorporated by reference to Exhibit No. 10.32 to our Annual Report on Form 10-
K filed with the SEC on February 26, 2015, File No. 001-32426)
† 10.33
† 10.34
2015 Section 162(m) Performance Incentive Plan (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K
filed with the SEC on May 21, 2015, File No. 001-32426)
WEX Inc. Severance Plan for Officers (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the
SEC on October 1, 2015, File No. 001-32426)
† 10.35
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)
† 10.36
† 10.37
Form of Employment Agreement for Robert Cornett, Hilary Rapkin and Jamie Morin (incorporated by reference to Exhibit No. 10.7
to our Current Report on Form 8-K filed with the SEC on January 7, 2009, File No. 001-32426)
Form of Employment Agreement for George Hogan and Richard Stecklair (incorporated by reference to Exhibit No. 10.20 to our
Annual Report on Form 10-K filed with the SEC on February 26, 2010, File No. 001-32426)
† 10.38
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)
† 10.39
† 10.40
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. 99.1 to our Current Report on Form 8-K filed with the SEC on April 6,
2006, File No. 001-32426)
Form of Non-Employee Director Long Term Incentive Program Award Agreement under the Amended and Restated Wright Express
Corporation 2005 Equity and Incentive Plan (for grants received prior to December 31, 2006) (incorporated by reference to Exhibit
10.3 to our Quarterly Report on Form 10-Q filed with the SEC on August 5, 2008, File No. 001-32426)
119
† 10.41
† 10.42
Form of Wright Express Corporation Long Term Incentive Program 2010 Growth Grant Stock Non-Statutory Stock Option Award
Agreement under the Amended and Restated Wright Express Corporation 2005 Equity and Incentive Plan (incorporated by reference
to Exhibit No. 10.5 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426)
Form of Wright Express Corporation Option Agreement under the Wright Express Corporation 2010 Equity and Incentive Plan
(incorporated by reference to Exhibit No. 10.29 to our Annual Report on Form 10-K filed with the SEC on February 28, 2011, File
No. 001-32426)
† 10.43
2015 Form of WEX Inc. Long Term Incentive Program Non-Statutory Stock Option Award Agreement (incorporated by reference to
Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 1, 2015, File No. 001-32426)
† 10.44
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)
10.45
10.46
10.47
10.48
10.49
10.50
10.51
10.52
10.53
10.54
10.55
10.56
10.57
ISDA Master Agreement and Schedule between CITIBANK, National Association and Wright Express Corporation, dated as of
April 20, 2005 (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on April 27,
2005, File No. 001-32426)
Confirmation of transaction between CITIBANK, National Association and Wright Express Corporation, dated April 21, 2005
(incorporated by reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on April 27, 2005, File No.
001-32426)
ISDA Master Agreement between Fleet National Bank and Wright Express Corporation, dated as of April 20, 2005 (incorporated by
reference to Exhibit No. 10.3 to our Current Report on Form 8-K filed with the SEC on April 27, 2005, File No. 001-32426)
ISDA Schedule to the Master Agreement between Fleet National Bank and Wright Express Corporation, dated as of April 20, 2005
(incorporated by reference to Exhibit No. 10.4 to our Current Report on Form 8-K filed with the SEC on April 27, 2005, File No.
001-32426)
Confirmation of transaction between Fleet National Bank and Wright Express Corporation, dated April 21, 2005 (incorporated by
reference to Exhibit No. 10.5 to our Current Report on Form 8-K filed with the SEC on April 27, 2005, File No. 001-32426)
Form of confirmation evidencing purchases of Nymex Unleaded Regular Gasoline put options and call options by Wright Express
Corporation from J. Aron & Company (incorporated by reference to Exhibit 10.18 to our Quarterly Report on Form 10-Q filed with
the SEC on October 28, 2005, File No. 001-32426)
Form of confirmation evidencing purchases of Nymex Diesel put options and call options by Wright Express Corporation from J.
Aron & Company (incorporated by reference to Exhibit 10.19 to our Quarterly Report on Form 10-Q filed with the SEC on
October 28, 2005, File No. 001-32426)
ISDA Credit Support Annex to the Schedule Master Agreement between Bank of America, N.A. (successor to Fleet National Bank)
and Wright Express Corporation, dated as of August 28, 2006 (incorporated by reference to Exhibit 10.1 to our Quarterly Report on
Form 10-Q filed with the SEC on November 20, 2006, File No. 001-32426)
Amendment to the ISDA Master Agreement between Bank of America, N.A. (successor to Fleet National Bank) and Wright Express
Corporation, dated as of August 28, 2006 (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed
with the SEC on November 20, 2006, File No. 001-32426)
Form of confirmation evidencing purchases and sales of Diesel put options and call options by Wright Express Corporation from
Bank of America, N.A. (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed with the SEC on
August 7, 2007, File No. 001-32426)
Form of confirmation evidencing purchases and sales of Nymex Unleaded Regular Gasoline put options and call options by Wright
Express Corporation from Bank of America, N.A. (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q
filed with the SEC on August 7, 2007, File No. 001-32426)
Novation Agreement and New ISDA Agreement, dated as of October 23, 2009, among Wright Express Corporation, Bank of
America, N.A., and Merrill Lynch Commodities, Inc. (incorporated by reference to Exhibit No. 10.35 to our Annual Report on Form
10-K filed with the SEC on February 26, 2010, File No. 001-32426)
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)
120
10.58
10.59
10.60
10.61
10.62
10.63
10.64
10.65
10.66
10.67
10.68
10.69
10.70
10.71
10.72
10.73
10.74
Confirmation of transaction between Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch and Wright Express Corporation, dated
as of July 18, 2007 (incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q filed with the SEC on
November 7, 2007, File No. 001-32426)
ISDA Master Agreement and Schedule between SunTrust Bank and Wright Express Corporation, dated as of April 5, 2005
(incorporated by reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007, File No.
001-32426)
Amendment to ISDA Master Agreement, dated as of May 20, 2011, between SunTrust Bank and Wright Express Corporation
(incorporated by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q filed with the SEC on August 8, 2011, File No.
001-32426)
Confirmation of transaction between SunTrust Bank and Wright Express Corporation, dated as of July 18, 2007 (incorporated by
reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007, File No. 001-32426)
Confirmation of transaction between SunTrust Bank and Wright Express Corporation, dated as of July 22, 2009 (incorporated by
reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on July 24, 2009, File No. 001-32426)
Confirmation of transaction between SunTrust Bank and Wright Express Corporation, dated as of September 20, 2010 evidencing
purchase of interest rate swap (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC
on September 22, 2010, File No. 001-32426)
ISDA Master Agreement and Schedule between KeyBank National Association and Wright Express Corporation, dated as of
June 15, 2007 (incorporated by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q filed with the SEC on November 7,
2007, File No. 001-32426)
Confirmation of transaction between KeyBank National Association and Wright Express Corporation, dated as of August 22, 2007
(incorporated by reference to Exhibit 10.8 to our Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007, File No.
001-32426)
ISDA Master Agreement and Schedule between Wachovia Bank, National Association and Wright Express Corporation, dated as of
July 18, 2007 (incorporated by reference to Exhibit No. 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 8,
2008, File No. 001-32426)
Form of confirmation evidencing purchases of Nymex Unleaded Regular Gasoline put options and call options by Wright Express
Corporation from Wachovia Bank, National Association (incorporated by reference to Exhibit No. 10.2 to our Quarterly Report on
Form 10-Q filed with the SEC on May 8, 2008, File No. 001-32426)
ISDA Master Agreement between Barclays Bank PLC and Wright Express Corporation, dated as of March 10, 2010 (incorporated
by reference to Exhibit No. 10.6 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No. 001-32426)
ISDA Schedule to the Master Agreement between Barclays Bank PLC and Wright Express Corporation, dated as of March 10, 2010
(incorporated by reference to Exhibit No. 10.7 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No.
001-32426)
Credit Support Annex to the Schedule to the ISDA Master Agreement between Barclays Bank PLC and Wright Express Corporation,
dated as of March 10, 2010 (incorporated by reference to Exhibit No. 10.8 to our Quarterly Report on Form 10-Q filed with the SEC
on April 30, 2010, File No. 001-32426)
The First Amendment, dated as of March 23, 2010, to the Schedule to the ISDA Master Agreement dated as of July 18, 2007
between Wells Fargo Bank, N.A. (formerly known as Wachovia Bank, National Association) and Wright Express Corporation
(incorporated by reference to Exhibit No. 10.9 to our Quarterly Report on Form 10-Q filed with the SEC on April 30, 2010, File No.
001-32426)
ISDA Master and Consolidation Agreement, dated as of March 23, 2010, to the Schedule to the Master Agreement dated as of
July 18, 2007 between Wells Fargo Bank, N.A. (formerly known as Wachovia Bank, National Association) and Wright Express
Corporation (incorporated by reference to Exhibit No. 10.10 to our Quarterly Report on Form 10-Q filed with the SEC on April 30,
2010, File No. 001-32426)
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)
121
10.75
10.76
10.77
10.78
10.79
10.80
10.81
10.82
10.83
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. 10.71 to our Annual Report on Form 10-K filed with the SEC on February 28, 2012, File
No. 001-32426)
Southern Cross WEX 2015-1 Trust - Receivables Acquisition and Servicing Agreement (incorporated by reference to Exhibit 10.1 to
our Quarterly Report on Form 10-Q filed with the SEC on July 31, 2015, File No. 001-32426)
Southern Cross WEX 2015-1 Trust - Guarantee and Indemnity (incorporated by reference to Exhibit 10.2 to our Quarterly Report on
Form 10-Q filed with the SEC on July 31, 2015, File No. 001-32426)
Southern Cross WEX 2015-1 Trust General Security Agreement (incorporated by reference to Exhibit 10.3 to our Quarterly Report
on Form 10-Q filed with the SEC on July 31, 2015, File No. 001-32426)
Southern Cross WEX 2015-1 Trust Class A Facility Deed (incorporated by reference to Exhibit 10.4 to our Quarterly Report on
Form 10-Q filed with the SEC on July 31, 2015, File No. 001-32426)
Southern Cross WEX 2015-1 Trust Class B Facility Deed (incorporated by reference to Exhibit 10.5 to our Quarterly Report on
Form 10-Q filed with the SEC on July 31, 2015, File No. 001-32426)
Commitment Letter, dated as of October 18, 2015, by and among WEX Inc., Bank of America, N.A., Merrill Lynch, Pierce, Fenner
& Smith Incorporated, SunTrust Bank, SunTrust Robinson Humphrey and MUFG Union Bank, N.A (incorporated by reference to
Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on October 19, 2015, File No. 001-32426)
† 10.84
Offer Letter dated November 3, 2015 between WEX Inc. and Mr. Simon (incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed with the SEC on November 5, 2015, File No. 001-32426)
* 21.1
Subsidiaries of the registrant
* 23.1
Consent of Independent Registered Accounting Firm – Deloitte & Touche LLP
* 31.1
* 31.2
* 32.1
* 32.2
Certification of Chief Executive Officer of WEX INC. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of
1934, as amended
Certification of Chief Financial Officer of WEX INC. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of
1934, as amended
Certification of Chief Executive Officer of WEX INC. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act
of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code
Certification of Chief Financial Officer of WEX INC. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of
1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Calculation Linkbase Document
101.LAB
XBRL Taxonomy Label Linkbase Document
101.PRE
XBRL Taxonomy Presentation Linkbase Document
122
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
Filed with this report.
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.
*
†
123
DIRECTORS
MICHAEL E. DUBYAK
Chairman of WEX Inc.
ROWLAND T. MORIARTY
Lead Director and
Vice Chairman of WEX Inc.
Chairman, CRA International, Inc.
ERIC DUPRAT
Chief Executive Officer
of FairCare, Inc.
SHIKHAR GHOSH
Professor, Harvard Business School
RONALD T. MAHEU
Financial and Business Consultant
GEORGE L. MCTAVISH
Advisory Board of Clayton Associates
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
Operating Partner of
Highland Consumer Fund
EXECUTIVE OFFICERS
MELISSA D. SMITH
President and
Chief Executive Officer
STEPHEN R. CROWLEY
Senior Vice President,
Shared Services and
Chief Information Officer
GEORGE HOGAN
Senior Vice President,
International
KENNETH W. JANOSICK
Senior Vice President and
General Manager,
Global Fleet Direct
NICOLA S. MORRIS
Senior Vice President,
Corporate Development
JAMES PRATT
Senior Vice President and
General Manager,
Virtual Products
HILARY A. RAPKIN
Senior Vice President,
General Counsel and
Corporate Secretary
ROBERTO SIMON
Chief Financial Officer
JEFF YOUNG
Senior Vice President and
General Manager,
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CORPORATE HEADQUARTERS
ATTORNEYS
INVESTOR RELATIONS
WEX Inc.
97 Darling Avenue
South Portland, ME 04106
(207) 773-8171
Email: newsroom@wexinc.com
www.wexinc.com
TRANSFER AGENT
American Stock Transfer
& Trust Company
6201 15th Avenue
Brooklyn, NY 11219
(866) 668-6550
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116-5022
(617) 437-2000
Wilmer Cutler Pickering Hale
and Dorr LLP
60 State Street
Boston, MA 02109
(617) 526-6000
STOCKHOLDERS’ MEETING
Date: May 13, 2016
Time: 8:00 a.m.
Location:
WEX Inc. Long Creek Campus
225 Gorham Road
South Portland, Maine
(207) 773-8171
TICKER SYMBOL
NYSE: WEX
Steve Elder
Senior Vice President, Global Investor Relations
(207) 523-7769
Steve.Elder@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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MAK ING EVERY
TRANSACT ION CO UNT.
2015 WEX INC.
Annual Report
97 Darling Avenue
South Portland, Maine 04106
(207) 773-8171
newsroom@wexinc.com
www.wexinc.com
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