EX-99.1 2 b58469weexv99w1.htm EX-99.1 PRESS RELEASE DATED FEBRUARY 8, 2006 exv99w1
 

Exhibit 99.1
     
News media contact:
  Investor contact:
Jessica Roy
  Steve Elder
Wright Express
  Wright Express
207.523.6763 
  207.523.7769 
Jessica_Roy@wrightexpress.com
  Steve_Elder@wrightexpress.com
Wright Express Reports Fourth-Quarter Results
Total Fuel Transactions and Average Number of Vehicles Serviced Both Rise 10 Percent;
$7 Million Payment on Financing Debt Brings Total Paid to $47.5 Million for Year
SOUTH PORTLAND, MAINE — February 8, 2006 — Wright Express Corporation (NYSE: WXS), a leading provider of payment processing and information management services to the U.S. commercial and government fleet industry, today reported financial results for the fourth quarter ended December 31, 2005.
Total revenues increased 28 percent to $64.4 million from $50.4 million for the fourth quarter of 2004. Net income to common shareholders on a GAAP basis for the fourth quarter of 2005 was $28.3 million, or $0.69 per diluted share, compared with net income of $14.3 million, or $0.35 per diluted share, for the same period last year. On a non-GAAP basis, the Company’s adjusted net income for the fourth quarter of 2005 was $13.0 million, or $0.32 per diluted share.
Fourth-quarter and full-year results for 2005 are not directly comparable with 2004 on a GAAP basis due to the non-cash earnings fluctuations associated with the Company’s fuel-price related derivative instruments. The GAAP financial results for the fourth quarter of 2005 include an unrealized $20.9 million pre-tax, non-cash, mark-to-market gain on these instruments. Exhibit 1 reconciles adjusted net income for the fourth quarter and year ended December 31, 2005, which has not been determined in accordance with GAAP, to net income as determined in accordance with GAAP.
In addition, GAAP net income and adjusted net income for the fourth quarter and year ended December 31, 2005 include the effect of certain costs related to the Company operating as an independent public company, which were not present in 2004. If the Company had been incurring these costs during the fourth quarter of 2004, non-GAAP net income would have been $10.9 million. The Company’s adjusted net income for the fourth quarter of 2005 of $13.0 million would have represented a 19 percent increase over this amount. Exhibit 2 reconciles non-GAAP net income to net income determined in accordance with GAAP for the fourth quarter and year ended December 31, 2004.
For the year ended December 31, 2005, net income on a GAAP basis was $18.7 million, or $0.46 per diluted share, compared with $51.2 million, or $1.25 per diluted share, for full-year 2004. Adjusted net income for full-year 2005 was $48.9 million, which represents a 20% increase over the $40.8 million of non-GAAP net income for full-year 2004. The Company’s full-year 2005 net cash used by operating activities was $40.9 million compared with free cash flow of $48.2 million. Exhibit 3 reconciles free cash flow, which has not been determined in accordance with GAAP to net cash used by operating activities as determined in accordance with GAAP.

 


 

Management uses the non-GAAP measures presented within this news release to evaluate the Company’s performance on a comparable basis, to eliminate the volatility associated with its derivative instruments and to measure the amount of cash that is available for making scheduled payments on the Company’s financing debt and discretionary purposes. Management believes that investors may find these measures useful for the same purposes, but cautions that they should not be considered a substitute for disclosure in accordance with GAAP.
Fourth-Quarter 2005 Performance Metrics
    Average number of vehicles serviced increased 10 percent from the fourth quarter of 2004 to approximately 4.2 million.
 
    Total fuel transactions processed increased 10 percent from the fourth quarter of 2004 to 58.0 million. Payment processing transactions increased 16 percent to 43.2 million, and transaction processing transactions decreased 6 percent to 14.8 million.
 
    Average expenditure per payment processing transaction grew to $50.64, an increase of 29 percent from the same period last year.
 
    Average retail fuel price increased 28 percent to $2.53 per gallon, from $1.98 per gallon for the fourth quarter a year ago.
 
    Total MasterCard purchase volume grew to $228.6 million, an increase of 30 percent from the comparable period a year ago.
 
    Wright Express paid $7.0 million in principal on its financing debt. The total paid year-to-date is $47.5 million.
Management Comments
“The fourth quarter was a strong conclusion to a great year for Wright Express,” said Michael Dubyak, president and chief executive officer. “Our results were driven by growth in average number of vehicles serviced and number of transactions processed, as well as productivity gains as our business model scales. Our price risk management strategy is successfully mitigating our exposure to the variability in fuel prices, and our solid cash flow enabled us to pay down another $7 million of financing debt during the fourth quarter, raising the total paid down for 2005 to $47.5 million.”
“There are approximately 41 million fleet vehicles on U.S. roads today, and we are making good progress in unlocking the growth potential in the fleet market,” said Dubyak. “In acquiring and retaining customers, and in creating products that add value by satisfying new and existing customer needs, the Company’s performance continues to improve.”
“We expect 2006 to be another year of solid demand for fleet card solutions,” said Dubyak. “We are leveraging our proprietary network and outstanding customer service capabilities, as well as our position as a market leader, to capitalize on this demand. As a result, our fleet card pipeline remains strong as we begin the new year. In addition, our MasterCard business is continuing to perform very well. At the same time, we continue to explore further opportunities to accelerate the Company’s growth, both organically and

 


 

through potential alliances or acquisitions. We look forward to reporting another strong year for Wright Express in 2006.”
Financial Guidance
Wright Express Corporation is issuing financial guidance for the first quarter of 2006, as well as the full year. This guidance excludes the impact of non-cash, mark-to-market adjustments on the Company’s fuel-price-related derivative instruments. The fuel prices referenced below are based on the applicable NYMEX futures price:
    For the first quarter of 2006, revenue in the range of $62 million to $67 million. This is based on an assumed average retail fuel price of $2.52 per gallon.
 
    First-quarter 2006 net income before unrealized gain or loss on derivative contracts in the range of $11 million to $12 million, or $0.27 to $0.30 per diluted share, based on approximately 41 million shares outstanding.
 
    For the full year 2006, revenue in the range of $275 million to $285 million. This is based on an assumed average retail fuel price of $2.57 per gallon.
 
    For the full year 2006, net income before unrealized gain or loss on derivative contracts in the range of $52 million to $55 million, or $1.27 to $1.33 per diluted share, based on approximately 41 million shares outstanding.
Conference Call Details
In conjunction with this announcement, Wright Express will host a conference call today at 5:00 p.m. (ET) to discuss the Company’s financial results, fourth-quarter highlights, business strategy and business outlook. To access this call by telephone, dial (866) 323-7218 or (706) 643-0228 (Conference ID: 4585657). A live webcast of this conference call will be available at the “Investor Relations” section of the Company’s website (www.wrightexpress.com). A replay of the webcast will be available on the website for approximately three months.
About Wright Express
Wright Express is a leading provider of payment processing and information management services to the U.S. commercial and government vehicle fleet industry. Wright Express provides these services for approximately 295,000 commercial and government fleets containing 4.2 million vehicles. Wright Express markets these services directly as well as through more than 95 strategic relationships, and offers a MasterCard-branded corporate card. The Company employs more than 650 people and maintains its headquarters in South Portland, Maine. For more information about Wright Express, please visit www.wrightexpress.com.
This press release contains forward-looking statements, including statements regarding Wright Express Corporation’s: assessment of its progress in unlocking growth potential and improved performance; expectations for demand for fleet card solutions in 2006; its

 


 

plan to explore opportunities to accelerate growth organically and through potential alliances or acquisitions; and financial guidance for the first quarter and full year 2006.
These forward-looking statements include a number of risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include: volatility in fuel prices; first quarter and full-year 2006 fueling patterns; the effect of the Company’s fuel-price related derivative instruments; effects of competition; the potential loss of key strategic relationships; decreased demand for fuel and other vehicle products and services and the effects of general economic conditions on the commercial activity of fleets; the Company’s ability to rapidly implement new technology and systems; potential corporate transactions including alliances, mergers, acquisitions and divestitures; changes in interest rates and the other risks and uncertainties included from time to time in the Company’s filings with the Securities and Exchange Commission, including the final prospectus filed on February 16, 2005, and the Company’s periodic and current reports. Wright Express Corporation undertakes no obligation to update these forward-looking statements at any future date or dates.
Condensed Financial Statements and Supplemental Exhibits Follow ...

 


 

WRIGHT EXPRESS CORPORATION
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
                                 
    Three months ended     Year ended  
    December 31,     December 31,  
    2005     2004     2005     2004  
 
 
                               
Revenues
                               
Payment processing revenue
  $ 46,527     $ 35,112     $ 173,416     $ 129,987  
Transaction processing revenue
    4,215       4,242       17,136       18,113  
Account servicing revenue
    5,656       5,426       22,935       21,167  
Finance fees
    5,379       2,708       15,769       9,603  
Other
    2,648       2,888       12,077       10,230  
 
                       
Total revenues
    64,425       50,376       241,333       189,100  
 
                               
Expenses
                               
Salary and other personnel
    14,356       12,646       59,986       49,420  
Service fees
    2,332       2,732       11,924       9,534  
Provision for credit losses
    1,610       1,898       8,813       8,131  
Technology leasing and support
    2,144       2,222       8,590       8,169  
Occupancy and equipment
    1,431       1,157       5,874       5,441  
Depreciation and amortization
    2,736       1,526       9,918       7,376  
Operating interest expense
    4,927       1,801       14,519       5,625  
Operating interest income
          (1,076 )           (3,197 )
Other
    3,704       3,795       15,092       14,441  
 
                       
Total operating expenses
    33,240       26,701       134,716       104,940  
 
                       
 
                               
Operating income
    31,185       23,675       106,617       84,160  
 
                               
Financing interest expense
    (3,707 )           (12,966 )      
Realized and unrealized gains (losses) on derivative instruments
    14,216             (65,778 )      
 
                       
Income before income taxes
    41,694       23,675       27,873       84,160  
Provision for income taxes
    13,367       9,413       9,220       32,941  
 
                       
 
                               
Net income
  $ 28,327     $ 14,262     $ 18,653     $ 51,219  
 
                       
 
                               
Earnings per share (on a pro forma basis for 2004):
                               
Basic
  $ 0.70     $ 0.35     $ 0.46     $ 1.27  
Diluted
  $ 0.69     $ 0.35     $ 0.46     $ 1.25  
 
                               
Weighted average common shares outstanding (on a pro forma basis for 2004):
                               
Basic
    40,206       40,185       40,194       40,185  
Diluted
    41,337       41,104       40,735       41,104  
 
                               
 

 


 

WRIGHT EXPRESS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands except per share data)
(unaudited)
 
                 
    December 31,
    2005   2004
 
 
               
Assets
               
Cash and cash equivalents
  $ 44,994     $ 31,806  
Accounts receivable (less reserve for credit losses of $4,627 in 2005 and $4,212 in 2004)
    652,132       447,169  
Income tax refunds receivable, net
    3,300        
Due from related parties
          134,182  
Available-for-sale securities
    20,878       17,792  
Property, equipment and capitalized software, net
    38,543       37,474  
Deferred income taxes, net
    513,018       502  
Intangible assets, net
    2,421       2,421  
Goodwill
    135,047       135,047  
Other assets
    10,088       6,296  
 
 
               
Total assets
  $ 1,420,421     $ 812,689  
 
 
               
Liabilities and Stockholders’ or Member’s Equity
               
Accounts payable
  $ 254,381     $ 197,647  
Accrued expenses
    22,197       17,410  
Deposits
    338,251       194,360  
Borrowed federal funds
    39,027       27,097  
Revolving line-of-credit facility
    53,000        
Term loan, net
    167,508        
Derivative instruments, at fair value
    36,710        
Other liabilities
    331       459  
Due to related parties
          91,466  
Amounts due to Cendant under tax receivable agreement
    424,277        
Preferred stock; 10,000 shares authorized:
               
Series A non-voting convertible, redeemable preferred stock; 0.1 shares authorized, issued and outstanding
    10,000        
 
 
               
Total liabilities
    1,345,682       528,439  
 
               
Stockholders’ or Member’s Equity
               
Member’s contribution
          182,379  
Common stock $0.01 par value; 175,000 shares authorized 40,210 shares
Issued and outstanding
    402        
Additional paid-in capital
    55,020        
Retained earnings
    18,653       101,869  
Other comprehensive income, net of tax:
               
Net unrealized gain on interest rate swaps
    748        
Net unrealized gain (loss) on available for sale securities
    (84 )     2  
 
 
               
Accumulated other comprehensive income
    664       2  
 
 
               
Total stockholders’ or member’s equity
    74,739       284,250  
 
 
               
Total liabilities and stockholders’ or member’s equity
  $ 1,420,421     $ 812,689  
 
 

 


 

WRIGHT EXPRESS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
 
                 
    Year ended December 31,
    2005   2004
 
 
               
Cash flows from operating activities
               
Net income
  $ 18,653     $ 51,219  
Adjustments to reconcile net income to net cash provided by operating activities:
               
 
               
Net unrealized loss on derivative instruments
    36,710        
Stock-based compensation
    6,994        
Depreciation and amortization
    11,100       7,376  
Deferred taxes
    4,228       (809 )
Provision for credit losses
    8,813       8,131  
Loss (gain) on disposal of property and equipment
    (72 )     1,016  
Change in operating assets and liabilities:
               
Accounts receivable
    (213,776 )     (152,983 )
Income tax refunds receivable, net
    (3,300 )      
Other assets
    (1,268 )     (1,279 )
Accounts payable
    56,734       71,981  
Accrued expenses
    4,787       7,622  
Other liabilities
    (128 )     (784 )
Amounts due to Cendant under tax receivable agreement
    (15,468 )      
Due to/from related parties
    45,051       (32,105 )
 
 
               
Net cash used by operating activities
    (40,942 )     (40,615 )
 
               
Cash flows from investing activities
               
Purchases of property and equipment
    (11,017 )     (11,039 )
Sales of property and equipment
    125       1,346  
Purchases of available-for-sale securities
    (3,637 )     (985 )
Maturities of available-for-sale securities
    425       758  
Purchases of Federal Home Loan Bank stock
          (43 )
Purchases of option contracts
          (144 )
 
 
               
Net cash used for investing activities
    (14,104 )     (10,107 )
 
               
Cash flows from financing activities
               
Dividends paid
    (305,887 )     (25,279 )
Excess tax benefits of equity instrument share-based payment arrangements
    60        
Proceeds from Exercise of Stock Options
    328        
Net repayments on related party line of credit
          (20,000 )
Net increase in deposits **
    143,891       102,542  
Net increase in borrowed federal funds **
    11,930       3,131  
Net borrowings on revolving line of credit
    53,000        
Loan origination fees paid for revolving line of credit
    (1,704 )      
Borrowings on term loan, net of loan origination fees of $2,884
    217,116        
Repayments on term loan
    (50,500 )      
 
 
               
Net provided by financing activities
    68,234       60,394  
 
 
               
Net change in cash and cash equivalents
    13,188       9,672  
Cash and cash equivalents, beginning of period
    31,806       22,134  
 
 
               
Cash and cash equivalents, end of period
  $ 44,994     $ 31,806  
 
 
**   Although classified as financing activities for purposes of the financial statements, the Company uses these amounts specifically as a source of cash for funding the timing difference between collecting accounts receivable and payments of accounts payable.

 


 

Exhibit 1
Wright Express Corporation
Reconciliation of Adjusted Net Income to GAAP Net Income
Fourth Quarter and Full Year 2005
(in thousands)
(unaudited)
                 
    Three months ended   Year ended
    December 31, 2005   December 31, 2005
 
               
Adjusted net income
  $ 12,999     $ 48,909  
Non-cash, mark-to-market adjustments on derivative instruments
    20,856       (36,710 )
Termination of derivative instruments
          (8,450 )
Conversion of restricted stock units and stock options
          (5,723 )
Tax impact
    (5,528 )     20,627  
     
GAAP net income
  $ 28,327     $ 18,653  
     
Although adjusted net income is not calculated in accordance with generally accepted accounting principles (GAAP), this measure is integral to the Company’s reporting and planning processes. The Company considers this measure integral because it eliminates the non-cash volatility associated with the derivative instruments. 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 derivative instruments helps management identify and assess trends in the Company’s underlying business that might otherwise be obscured due to quarterly and annual non-cash earnings fluctuations associated with fuel-price derivative contracts;
 
    The non-cash, mark-to-market adjustments on derivative instruments are difficult to forecast accurately, making comparisons across historical and future quarters and years difficult to evaluate;
 
    The termination of derivative instruments during the first quarter of 2005 was a non-recurring event effected by the Company’s former parent company as part of the process of preparing the Company for its initial public offering; and
 
    The conversion of restricted stock units and stock options was a non-recurring event resulting from the need to convert the equity incentives held by the Company’s employees so that they were exercisable following the initial public offering for Company common stock instead of for common stock of the Company’s former parent.
For the same reasons, Wright Express believes that adjusted net income may also be useful to investors as one means of evaluating the Company’s performance. However, because adjusted net income is a non-GAAP measure, it should not be considered as a substitute for, or superior to, net income, operating income or cash flows from operating activities as determined in accordance with GAAP. In addition, adjusted net income as used by Wright Express may not be comparable to similarly titled measures employed by other companies.

 


 

Exhibit 2
Wright Express Corporation
Reconciliation of Non-GAAP Net Income to GAAP Net Income
Fourth Quarter and Full Year 2004
(in thousands)
(unaudited)
                 
    Three months   Full year ended
    ended December 31,   December 31,
    2004   2004
 
               
Non-GAAP net income
  $ 10,891     $ 40,818  
Loss of interest income on cash balances
    1,075       3,196  
Incremental public company expenses, net of Cendant allocations
    1,804       4,485  
Founders grant vesting expense recognized in 2005
    400       1,335  
Savings from vesting Cendant restricted stock units
    (321 )     (914 )
Additional interest on operating debt balances used to pay a dividend to Cendant
    158       455  
Interest expense on financing debt balances
    2,676       8,579  
Tax impact
    (2,421 )     (6,735 )
     
GAAP net income
  $ 14,262     $ 51,219  
     
Although non-GAAP net income is not calculated in accordance with generally accepted accounting principles (GAAP), this measure is integral to the Company’s internal reporting. Management considers this an important measure because it includes the effect of new costs related to the Company’s operating for the first time as an independent public company, as well as financing costs related to the indebtedness incurred to pay a $306 million dividend to Cendant prior to the initial public offering. However, because non-GAAP net income has not been determined in accordance with generally accepted accounting principles, it should not be considered as a substitute for net income, operating income or cash flows from operating activities as determined in accordance with GAAP. In addition, non-GAAP net income as used by Wright Express may not be comparable to similarly titled measures employed by other companies. The non-GAAP adjustments are based upon available information the Company believes to be reasonable as of today. The non-GAAP results are not necessarily indicative of the future results of operations.
# # #

 


 

Exhibit 3
Wright Express Corporation
Reconciliation of Free Cash Flow to Net Cash used by Operating Activities
(in thousands)
(unaudited)
         
    Year ended  
    December 31,  
    2005  
 
       
Free cash flow
  $ 48,222  
Net (increase)/decrease in accounts receivable
    (213,776 )
Charge-offs of accounts receivable
    11,810  
Net (increase)/decrease in accounts payable
    56,734  
Related party activity
    45,051  
Capital expenditures
    11,017  
 
     
Net cash used by operating activities
  $ (40,942 )
 
     
Although free cash flow is not calculated in accordance with generally accepted accounting principles (GAAP), this measure is integral to the Company’s internal reporting. Free cash flow is determined as cash provided or used by operating activities adjusted for the impact of accounts receivable (net of charge offs), accounts payable, non recurring related party activity in connection with The Company’s initial public offering and capital expenditures. The timing difference between collecting accounts receivable and payment of accounts payable is being funded by certificates of deposit and borrowed federal funds, and therefore these amounts are excluded from free cash flow. Management considers this an important measure because it provides management with a measure of cash that is available for scheduled financing debt payments and discretionary purposes. This measure aligns the sources of cash with their related uses based upon the underlying activity. However, because free cash flow has not been determined in accordance with generally accepted accounting principles, it should not be considered as a substitute for net cash used by operating activities as determined in accordance with GAAP. In addition, free cash flow as used by Wright Express may not be comparable to similarly titled measures employed by other companies. The non-GAAP adjustments are based upon available information the Company believes to be reasonable as of today. The non-GAAP results are not necessarily indicative of the future results of operations.
# # #