EX-99.1 2 b64038weexv99w1.htm EX-99.1 PRESS RELEASE OF WRIGHT EXPRESS CORP. DATED FEBRUARY 7, 2007 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 Financial Results
Company Pays Down $42 Million of Financing Debt and Reaches Low End of Targeted
Leverage Range; Board Approves $75 Million Share Repurchase Program
SOUTH PORTLAND, MAINE – February 7, 2007 — 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 and year ended December 31, 2006.
Total revenue for the fourth quarter of 2006 increased 10% to $70.8 million from $64.4 million for the fourth quarter of 2005. Net income to common shareholders on a GAAP basis for the fourth quarter of 2006 was $19.0 million, or $0.46 per diluted share, compared with $28.3 million, or $0.69 per diluted share, for the comparable quarter last year. On a non-GAAP basis, the Company’s adjusted net income for the fourth quarter of 2006 was $13.4 million, or $0.33 per diluted share, compared with $13 million, or $0.32 per diluted share, for the year-earlier period.
Wright Express uses fuel-price derivative instruments to mitigate financial risks associated with the variability in fuel prices. For the fourth quarter of 2006, the Company’s GAAP financial results include an unrealized $10.0 million pre-tax, non-cash, mark-to-market gain on these instruments. For the fourth quarter of 2005, the Company reported an unrealized pre-tax, non-cash, mark-to-market gain of $20.9 million.
For the year ended December 31, 2006, net income on a GAAP basis was $74.6 million, or $1.81 per diluted share, compared with $18.7 million, or $0.46 per diluted share, for full-year 2005. On a non-GAAP basis, adjusted net income increased 14% to $55.8 million for full-year 2006 from $48.9 million a year earlier.
The Company’s cash flow statement for 2006 includes $87 million related to the purchase of the receivables associated with the ExxonMobil fleet portfolio, which was purchased by Wright Express and transitioned to a payment processing relationship.
Exhibit 1 reconciles adjusted net income for the three- and 12-month periods ended December 31, 2006 and December 31, 2005, which has not been determined in accordance with GAAP, to net income 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 2006 Performance Metrics
    Average number of vehicles serviced increased 3% from the fourth quarter of 2005 to approximately 4.4 million.
 
    Total fuel transactions processed increased 2% from the fourth quarter of 2005 to 59.2 million. Payment processing transactions increased 4% to 45.1 million, and transaction processing transactions decreased 5% to 14.1 million.
 
    Average expenditure per payment processing transaction decreased 4% to $48.69 from $50.64 for the same period last year.
 
    Average retail fuel price declined 6% to $2.37 per gallon, from $2.53 per gallon for the fourth quarter a year ago.
 
    Total MasterCard purchase volume grew 46% to $332.9 million, from $228.6 million for the comparable period in 2005.
 
    Wright Express paid $42 million in principal on its term loan and line of credit during the fourth quarter of 2006.
To provide investors with additional insight into its operational performance, Wright Express has introduced in this news release a table of selected non-financial metrics for the five quarters ended December 31, 2006. This table is presented as Exhibit 2.
Management Comments on the Fourth Quarter
“This was another solid quarter in several key areas of our business,” said Michael Dubyak, president and chief executive officer. “In terms of bringing in new business, servicing our accounts at a high level, maintaining strong margins and generating healthy cash flow, Wright Express continued to perform well. The 10-year contract extensions we signed with ExxonMobil and Imperial Oil of Canada (Esso Canada) demonstrate that our strategic relationships recognize our strengths in marketing and portfolio management. With the signings, we have now locked in our two largest private label partners for the next 10 years.”
“Our results for the quarter also reflected a larger-than-anticipated positive mismatch on our derivatives,” Dubyak said. “At the same time, however, we saw slower growth in transaction volume with a slight decline in the number of transactions per active vehicle. Although credit loss was higher this quarter, primarily due to a second reserve associated with one customer, credit quality across our overall portfolio has improved. We also

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booked an additional non-cash charge of $1 million related to our stock-based compensation programs unrelated to stock options.”
“The past year was successful for Wright Express, and we expect further progress in 2007,” said Dubyak. “Our derivatives strategy remains in place, with the goal of continuing to enhance earnings stability and visibility. We will see positive results from this strategy as the year unfolds. We also anticipate excellent results at the front end of our business in 2007. Demand from new customers for fleet card products is strong, our sales pipeline looks good, and we are committed to investing in the new products and our powerful sales organization necessary to capitalize on this potential.”
Share Repurchase Program
Wright Express also is announcing that its board of directors has approved a share repurchase program authorizing the Company to purchase up to $75 million of its common stock over the next 24 months. The program will be funded primarily through the Company’s future cash flows. Share repurchases will be made on the open market and may be commenced or suspended at any time. The Company’s management, based on its evaluation of market and economic conditions and other factors, will determine the timing and number of shares repurchased.
“Our strong cash flow enabled Wright Express to pay down $42 million on our financing debt in the fourth quarter, raising total repayments for the year to more than $70 million,” Dubyak said. “As a result, we concluded 2006 at the low end of our targeted leverage range. This share repurchase program reflects our confidence in the Company’s ability to both generate healthy levels of cash from operations in the future, and support further reinvestment in the growth of our business, while also enabling us to enhance shareholder value by repurchasing our stock.”
Financial Guidance
Wright Express Corporation is issuing financial guidance for the first quarter and full year 2007. The Company’s 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 2007, revenue in the range of $65 million to $70 million. This is based on an assumed average retail fuel price of $2.34 per gallon.
 
    First-quarter 2007 net income excluding unrealized gain or loss on derivative instruments in the range of $13 million to $14.5 million, or $0.32 to $0.35 per diluted share, based on approximately 41 million shares outstanding.
 
    For the full year 2007, revenue in the range of $290 million to $310 million. This is based on an assumed average retail fuel price of $2.37 per gallon.

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    For the full year 2007, net income excluding unrealized gain or loss on derivative instruments in the range of $71 million to $75 million, or $1.71 to $1.81 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, February 7, at 5:00 p.m. (ET). The conference call will be webcast live on the Internet, and can be accessed at the Investor Relations section of the Wright Express website, www.wrightexpress.com. The live conference call also can be accessed by dialing (800) 361-0912 or (913) 981-5559. A replay of the webcast will be available on the Company’s 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 4.3 million vehicles. Wright Express markets these services directly as well as through more than 125 strategic relationships, and offers a MasterCard-branded corporate card. The Company employs more than 675 people and maintains its headquarters in South Portland, Maine. For more information about Wright Express, please visit wrightexpress.com.
This press release contains forward-looking statements, including statements regarding: our belief that credit quality across our overall portfolio is improving; expectations for further progress in 2007; the ability of our derivatives strategy to enhance earnings stability and visibility; expectations for positive results from the derivative strategy in 2007; anticipation of excellent results at the front end of the business in 2007; expectations for our sales pipeline; sources of funding for the share repurchase program; adequacy of cash flows to support business reinvestment and the share repurchase program and expectations and guidance for first-quarter and full-year 2007 results. 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 2007 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 annual report on Form 10-K/A filed on November 20, 2006, and the Company’s other periodic and

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current reports. Wright Express Corporation undertakes no obligation to update these forward-looking statements at any future date or dates.

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WRIGHT EXPRESS CORPORATION
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
                                 
    Three months ended     Year ended  
    December 31,     December 31,  
    2006     2005     2006     2005  
 
Revenues
                               
Payment processing revenue
  $ 50,736     $ 46,527     $ 214,641     $ 173,416  
Transaction processing revenue
    4,274       4,215       17,528       17,136  
Account servicing revenue
    6,060       5,656       23,999       22,935  
Finance fees
    5,713       5,379       22,351       15,769  
Other
    3,973       2,648       12,728       12,077  
 
                       
Total revenues
    70,756       64,425       291,247       241,333  
 
                               
Expenses
                               
Salary and other personnel
    15,230       14,356       60,016       59,986  
Service fees
    4,795       2,332       14,525       11,924  
Provision for credit losses
    5,477       1,610       16,695       8,813  
Technology leasing and support
    1,950       2,144       7,823       8,590  
Occupancy and equipment
    1,315       1,431       6,157       5,874  
Depreciation and amortization
    3,048       2,736       10,988       9,918  
Operating interest expense
    5,855       4,927       23,415       14,519  
Other
    4,535       3,704       16,525       15,092  
 
                       
Total operating expenses
    42,205       33,240       156,144       134,716  
 
                       
Operating income
    28,551       31,185       135,103       106,617  
 
                               
Financing interest expense
    (3,461 )     (3,707 )     (14,447 )     (12,966 )
Realized and unrealized gains (losses) on derivative instruments
    5,669       14,216       (4,180 )     (65,778 )
 
                       
Income before income taxes
    30,759       41,694       116,476       27,873  
Provision for income taxes
    11,800       13,367       41,867       9,220  
 
                       
 
                               
Net income
  $ 18,959     $ 28,327     $ 74,609     $ 18,653  
 
                       
Earnings per share :
                               
Basic
  $ 0.47     $ 0.70     $ 1.85     $ 0.46  
Diluted
  $ 0.46     $ 0.69     $ 1.81     $ 0.46  
 
                               
Weighted average common shares outstanding:
                               
Basic
    40,441       40,206       40,373       40,194  
Diluted
    41,604       41,337       41,553       40,735  
 

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WRIGHT EXPRESS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
                 
    December 31,  
    2006     2005  
 
Assets
               
Cash and cash equivalents
  $ 35,060     $ 44,994  
Accounts receivable (less reserve for credit losses of $9,749 in 2006 and $4,627 in 2005)
    802,165       652,132  
Income tax refunds receivable, net
          3,300  
Available-for-sale securities
    8,023       20,878  
Property, equipment and capitalized software, net
    39,970       38,543  
Deferred income taxes, net
    377,276       403,078  
Intangible assets, net
    2,421       2,421  
Goodwill
    272,861       272,861  
Other assets
    13,239       10,088  
 
 
               
Total assets
  $ 1,551,015     $ 1,448,295  
     
Liabilities and Stockholders’ Equity
               
Accounts payable
  $ 297,102     $ 254,381  
Accrued expenses
    26,065       22,197  
Income taxes payable
    813        
Deposits
    394,699       338,251  
Borrowed federal funds
    65,396       39,027  
Revolving line-of-credit facility
    20,000       53,000  
Term loan, net
    129,760       167,508  
Derivative instruments, at fair value
    4,524       36,710  
Other liabilities
    1,170       331  
Amounts due to Avis (formerly Cendant) under tax receivable agreement
    418,359       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       10,000  
 
Total liabilities
    1,367,888       1,345,682  
 
               
Commitments and contingencies
               
 
               
Stockholders’ Equity
               
Common stock $0.01 par value; 175,000 shares authorized 40,430 in 2006 and 40,210 in 2005 shares issued and outstanding
    404       402  
Additional paid-in capital
    89,325       82,894  
Retained earnings
    93,262       18,653  
Other comprehensive income, net of tax:
               
Net unrealized gain on interest rate swaps
    234       748  
Net unrealized loss on available-for-sale securities
    (98 )     (84 )
 
 
               
Accumulated other comprehensive income
    136       664  
 
 
               
Total stockholders’ equity
    183,127       102,613  
 
Total liabilities and stockholders’ equity
  $ 1,551,015     $ 1,448,295  
 

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WRIGHT EXPRESS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                 
    Year ended December 31,  
    2006     2005  
 
Cash flows from operating activities
               
Net income
  $ 74,609     $ 18,653  
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
               
 
               
Change in net unrealized loss on derivative instruments
    (32,186 )     36,710  
Stock-based compensation
    4,273       6,994  
Depreciation and amortization
    12,081       11,100  
Gain on sale of investment
    (2,188 )      
Deferred taxes
    34,409       4,228  
Provision for credit losses
    16,695       8,813  
Loss (gain) on disposal of property and equipment
    59       (72 )
Change in operating assets and liabilities:
               
Accounts receivable
    (79,944 )     (213,776 )
Income taxes
    4,113       (3,300 )
Other assets
    (4,214 )     (1,268 )
Accounts payable
    42,721       56,734  
Accrued expenses
    3,868       4,787  
Other liabilities
    839       (128 )
Amounts due to Avis(formerly Cendant) under tax receivable agreement
    (14,685 )     (15,468 )
Due to/from related parties
          45,051  
 
 
               
Net cash provided by (used for) operating activities
    60,450       (40,942 )
 
               
Cash flows from investing activities
               
Purchases of property and equipment
    (12,474 )     (11,017 )
Proceeds from sale of investment
    2,188        
Sales of property and equipment
          125  
Purchases of available-for-sale securities
    (2,154 )     (3,637 )
Maturities of available-for-sale securities
    14,982       425  
Purchases of fleet card receivables
    (86,784 )      
 
 
               
Net cash used for investing activities
    (84,242 )     (14,104 )
 
               
Cash flows from financing activities
               
Dividends paid
          (305,887 )
Excess tax benefits of equity instrument share-based payment arrangements
    1,047       60  
Payments in lieu of issuing shares of common stock
    (734 )      
Proceeds from stock option exercises
    2,228       328  
Net increase in deposits
    56,448       143,891  
Net increase in borrowed federal funds
    26,369       11,930  
Net (repayments) borrowings on revolving line of credit
    (33,000 )     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 in 2005
          217,116  
Repayments on term loan
    (38,500 )     (50,500 )
 
 
               
Net cash provided by financing activities
    13,858       68,234  
 
Net change in cash and cash equivalents
    (9,934 )     13,188  
Cash and cash equivalents, beginning of period
    44,994       31,806  
 
 
               
Cash and cash equivalents, end of period
  $ 35,060     $ 44,994  
 

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Exhibit 1
Wright Express Corporation
Reconciliation of Adjusted Net Income to GAAP Net Income
Fourth Quarter and Full Year 2006 and 2005
(in thousands)
(unaudited)
                                 
    Three months     Three months     Year ended     Year ended  
    ended     ended December     December 31,     December 31,  
    December 31,     31, 2005     2006     2005  
    2006                          
Adjusted net income1
  $ 13,441     $ 12,999     $ 55,788     $ 48,909  
 
                               
Non-cash, mark-to-market adjustments on derivative instruments
    10,010       20,856       32,186       (36,710 )
Termination of derivative instruments
                        (8,450 )
Conversion of restricted stock units and stock options
                        (5,723 )
Tax impact
    (4,492 )     (5,528 )     (13,365 )     20,627  
     
GAAP net income
  $ 18,959     $ 28,327       74,609     $ 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.
 
1   The number of diluted shares for adjusted net income is approximately 41.1 million

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Exhibit 2
Wright Express Corporation
Selected Non Financial Metrics
                                         
    Q4 2006   Q3 2006   Q2 2006   Q1 2006   Q4 2005
     
Fleet Payment Processing Revenue:
                                       
Payment processing transactions (000’s)
    45,075       46,800       45,998       43,459       43,176  
Gallons per payment processing transaction
    20.6       20.2       20.1       20.2       20.0  
Payment processing gallons of fuel (000’s)
    926,605       944,458       924,343       876,917       865,015  
Average fuel price
  $ 2.37       2.87       2.86       2.41       2.53  
Payment processing $ of fuel (000’s)
  $ 2,194,543       2,712,120       2,642,456       2,113,614       2,186,301  
Net payment processing rate
    2.13 %     2.02 %     2.03 %     2.06 %     2.02 %
Fleet payment processing revenue (000’s)
  $ 46,647       54,841       53,590       43,597       44,144  
 
                                       
MasterCard Payment Processing Revenue:
                                       
MasterCard purchase volume (000’s)
  $ 332,934       365,739       332,706       269,361       228,648  
Net interchange rate
    1.23 %     1.21 %     1.23 %     1.25 %     1.04 %
MasterCard payment processing revenue (000’s)
  $ 4,089       4,416       4,105       3,357       2,371  
Definitions:
Payment processing transactions represents the total number of fuel purchases made by fleets that have a payment processing relationship with Wright Express.
Payment processing gallons of fuel represents the total number of gallons of fuel purchased by fleets that have a payment processing relationship with Wright Express.
Payment processing $ of fuel represents the total dollar value of the fuel purchased by fleets that have a payment processing relationship with Wright Express.
Net payment processing rate represents the percentage of the dollar value of each payment processing transaction that Wright Express records as revenue from merchants less any discounts given to fleets or strategic relationships.
MasterCard purchase volume represents the total dollar value of all transactions that use a Wright Express MasterCard branded product.
Net interchange rate represents the percentage of the dollar value of each MasterCard transaction that Wright Express records as revenue less any discounts given to customers.

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