UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________
FORM 10-Q
__________________________________________________________
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2016
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: 001-35004
__________________________________________________________
FleetCor Technologies, Inc.
(Exact name of registrant as specified in its charter)
__________________________________________________________
Delaware | 72-1074903 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
5445 Triangle Parkway, Norcross, Georgia | 30092 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (770) 449-0479
__________________________________________________________
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 ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ý | Accelerated filer | ¨ |
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class | Outstanding at November 4, 2016 | |
Common Stock, $0.001 par value | 92,791,739 | |
FLEETCOR TECHNOLOGIES, INC. AND SUBSIDIARIES
FORM 10-Q
For the Three and Nine Month Periods Ended September 30, 2016
INDEX
Page | ||
PART I—FINANCIAL INFORMATION | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II—OTHER INFORMATION | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
FleetCor Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share and Par Value Amounts)
September 30, 2016 | December 31, 2015 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 405,435 | $ | 447,152 | ||||
Restricted cash | 199,319 | 167,492 | ||||||
Accounts receivable (less allowance for doubtful accounts of $30,072 and $21,903 at September 30, 2016 and December 31, 2015, respectively) | 1,334,686 | 638,954 | ||||||
Securitized accounts receivable—restricted for securitization investors | 656,000 | 614,000 | ||||||
Prepaid expenses and other current assets | 80,837 | 68,113 | ||||||
Deferred income taxes | 8,879 | 8,913 | ||||||
Total current assets | 2,685,156 | 1,944,624 | ||||||
Property and equipment | 251,394 | 163,569 | ||||||
Less accumulated depreciation and amortization | (106,908 | ) | (82,809 | ) | ||||
Net property and equipment | 144,486 | 80,760 | ||||||
Goodwill | 4,183,981 | 3,546,034 | ||||||
Other intangibles, net | 2,758,877 | 2,183,595 | ||||||
Equity method investment | 79,717 | 76,568 | ||||||
Other assets | 63,837 | 58,225 | ||||||
Total assets | $ | 9,916,054 | $ | 7,889,806 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,230,339 | $ | 669,528 | ||||
Accrued expenses | 206,386 | 150,677 | ||||||
Customer deposits | 595,405 | 507,233 | ||||||
Securitization facility | 656,000 | 614,000 | ||||||
Current portion of notes payable and other obligations | 727,763 | 261,100 | ||||||
Other current liabilities | 39,080 | 44,936 | ||||||
Total current liabilities | 3,454,973 | 2,247,474 | ||||||
Notes payable and other obligations, less current portion | 2,552,357 | 2,059,900 | ||||||
Deferred income taxes | 692,221 | 713,428 | ||||||
Other noncurrent liabilities | 37,982 | 38,957 | ||||||
Total noncurrent liabilities | 3,282,560 | 2,812,285 | ||||||
Commitments and contingencies (Note 12) | ||||||||
Stockholders’ equity: | ||||||||
Common stock, $0.001 par value; 475,000,000 shares authorized; 121,188,761 shares issued and 92,765,739 shares outstanding at September 30, 2016; and 120,539,041 shares issued and 92,376,335 shares outstanding at December 31, 2015 | 121 | 121 | ||||||
Additional paid-in capital | 2,057,562 | 1,988,917 | ||||||
Retained earnings | 2,123,297 | 1,766,336 | ||||||
Accumulated other comprehensive loss | (612,150 | ) | (570,811 | ) | ||||
Less treasury stock, 28,423,022 and 28,162,706 shares at September 30, 2016 and December 31, 2015, respectively | (390,309 | ) | (354,516 | ) | ||||
Total stockholders’ equity | 3,178,521 | 2,830,047 | ||||||
Total liabilities and stockholders’ equity | $ | 9,916,054 | $ | 7,889,806 | ||||
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FleetCor Technologies, Inc. and Subsidiaries
Unaudited Consolidated Statements of Income
(In Thousands, Except Per Share Amounts)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenues, net | $ | 484,426 | $ | 451,493 | $ | 1,316,593 | $ | 1,272,264 | ||||||||
Expenses: | ||||||||||||||||
Merchant commissions | 28,214 | 31,726 | 78,755 | 80,777 | ||||||||||||
Processing | 96,233 | 90,959 | 256,738 | 246,879 | ||||||||||||
Selling | 34,180 | 27,383 | 92,680 | 81,011 | ||||||||||||
General and administrative | 77,904 | 66,142 | 209,084 | 199,252 | ||||||||||||
Depreciation and amortization | 57,084 | 48,526 | 141,848 | 145,435 | ||||||||||||
Other operating, net | (244 | ) | (1,703 | ) | (690 | ) | (2,475 | ) | ||||||||
Operating income | 191,055 | 188,460 | 538,178 | 521,385 | ||||||||||||
Equity method investment loss (income) | 2,744 | 6,108 | (2,247 | ) | 13,926 | |||||||||||
Other expense (income), net | 293 | (168 | ) | 1,056 | 2,345 | |||||||||||
Interest expense, net | 17,814 | 17,163 | 49,905 | 54,818 | ||||||||||||
Total other expense | 20,851 | 23,103 | 48,714 | 71,089 | ||||||||||||
Income before income taxes | 170,204 | 165,357 | 489,464 | 450,296 | ||||||||||||
Provision for income taxes | 40,586 | 48,587 | 132,503 | 140,695 | ||||||||||||
Net income | $ | 129,618 | $ | 116,770 | $ | 356,961 | $ | 309,601 | ||||||||
Earnings per share: | ||||||||||||||||
Basic earnings per share | $ | 1.40 | $ | 1.27 | $ | 3.85 | $ | 3.37 | ||||||||
Diluted earnings per share | $ | 1.36 | $ | 1.24 | $ | 3.75 | $ | 3.29 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic weighted average shares outstanding | 92,631 | 92,110 | 92,604 | 91,923 | ||||||||||||
Diluted weighted average shares outstanding | 95,307 | 94,157 | 95,204 | 94,069 | ||||||||||||
See accompanying notes to unaudited consolidated financial statements.
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FleetCor Technologies, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(In Thousands)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income | $ | 129,618 | $ | 116,770 | $ | 356,961 | $ | 309,601 | ||||||||
Other comprehensive loss: | ||||||||||||||||
Foreign currency translation loss, net of tax | (52,409 | ) | (163,030 | ) | (41,339 | ) | (263,968 | ) | ||||||||
Total other comprehensive loss | (52,409 | ) | (163,030 | ) | (41,339 | ) | (263,968 | ) | ||||||||
Total comprehensive income (loss) | $ | 77,209 | $ | (46,260 | ) | $ | 315,622 | $ | 45,633 | |||||||
See accompanying notes to unaudited consolidated financial statements.
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FleetCor Technologies, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
(In Thousands)
Nine Months Ended September 30, | ||||||||
2016 | 2015 | |||||||
Operating activities | ||||||||
Net income | $ | 356,961 | $ | 309,601 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 25,706 | 22,941 | ||||||
Stock-based compensation | 50,025 | 44,387 | ||||||
Provision for losses on accounts receivable | 24,512 | 18,287 | ||||||
Amortization of deferred financing costs and discounts | 5,568 | 5,295 | ||||||
Amortization of intangible assets | 112,455 | 120,055 | ||||||
Amortization of premium on receivables | 3,687 | 2,439 | ||||||
Deferred income taxes | (23,566 | ) | (27,640 | ) | ||||
Equity method investment (income) loss | (2,247 | ) | 13,926 | |||||
Other non-cash operating income | (690 | ) | (2,476 | ) | ||||
Changes in operating assets and liabilities (net of acquisitions): | ||||||||
Restricted cash | (28,744 | ) | 5,697 | |||||
Accounts receivable | (527,255 | ) | (71,310 | ) | ||||
Prepaid expenses and other current assets | (1,291 | ) | 2,724 | |||||
Other assets | (9,115 | ) | (3,297 | ) | ||||
Excess tax benefits related to stock-based compensation | — | (24,455 | ) | |||||
Accounts payable, accrued expenses and customer deposits | 418,280 | 108,278 | ||||||
Net cash provided by operating activities | 404,286 | 524,452 | ||||||
Investing activities | ||||||||
Acquisitions, net of cash acquired | (1,331,079 | ) | (9,239 | ) | ||||
Purchases of property and equipment | (41,877 | ) | (29,526 | ) | ||||
Other | 1,411 | (7,782 | ) | |||||
Net cash used in investing activities | (1,371,545 | ) | (46,547 | ) | ||||
Financing activities | ||||||||
Excess tax benefits related to stock-based compensation | — | 24,455 | ||||||
Proceeds from issuance of common stock | 18,620 | 13,977 | ||||||
Repurchase of common stock | (35,492 | ) | — | |||||
Borrowings (payments) on securitization facility, net | 42,000 | (10,000 | ) | |||||
Deferred financing costs paid | (2,272 | ) | — | |||||
Borrowings from notes payable | 600,000 | — | ||||||
Principal payments on notes payable | (85,125 | ) | (77,625 | ) | ||||
Borrowings from revolver – A Facility | 1,105,107 | — | ||||||
Payments on revolver – A Facility | (670,940 | ) | (411,818 | ) | ||||
Borrowings (payments) on swing line of credit, net | 5,188 | (601 | ) | |||||
Payment of contingent consideration | — | (40,310 | ) | |||||
Other | (673 | ) | (342 | ) | ||||
Net cash provided by (used in) financing activities | 976,413 | (502,264 | ) | |||||
Effect of foreign currency exchange rates on cash | (50,871 | ) | (30,320 | ) | ||||
Net decrease in cash and cash equivalents | (41,717 | ) | (54,679 | ) | ||||
Cash and cash equivalents, beginning of period | 447,152 | 477,069 | ||||||
Cash and cash equivalents, end of period | $ | 405,435 | $ | 422,390 | ||||
Supplemental cash flow information | ||||||||
Cash paid for interest | $ | 48,525 | $ | 55,959 | ||||
Cash paid for income taxes | $ | 79,599 | $ | 47,339 | ||||
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See accompanying notes to unaudited consolidated financial statements.
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FleetCor Technologies, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
September 30, 2016
1. Summary of Significant Accounting Policies
Basis of Presentation
Throughout this report, the terms “our,” “we,” “us,” and the “Company” refers to FleetCor Technologies, Inc. and its subsidiaries. The Company prepared the accompanying interim consolidated financial statements in accordance with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”). The unaudited consolidated financial statements reflect all adjustments considered necessary for fair presentation. These adjustments consist primarily of normal recurring accruals and estimates that impact the carrying value of assets and liabilities. Actual results may differ from these estimates. Operating results for the three and nine month periods ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.
The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at the rates of exchange in effect at period-end. The related translation adjustments are made directly to accumulated other comprehensive income. Income and expenses are translated at the average monthly rates of exchange in effect during the period. Gains and losses from foreign currency transactions of these subsidiaries are included in net income. The Company recognized foreign exchange losses of $0.7 million for the three months ended September 30, 2016 and no foreign exchange losses or gains for the three months ended September 30, 2015. The Company recognized foreign exchange losses of $1.5 million and $2.6 million for the nine months ended September 30, 2016 and 2015, respectively, which are recorded within other expense, net in the Unaudited Consolidated Statements of Income.
Revision of Previously Issued Financial Statements
As discussed in footnote 2 to the Company's 2015 consolidated financial statements, the Company corrected a misstatement in other comprehensive income to properly reflect the translation of goodwill and certain acquired intangible assets. Other comprehensive income for the three and nine months ended September 30, 2015 has been revised from our previously reported loss of $89.5 million and $175.7 million, respectively, to be consistent with the presentation in the December 31, 2015 financial statements. The Company does not believe this revision is material to any prior period financial statements.
Certain amounts related to transactions with our equity method investment have been reclassified to conform to current period presentation in the Consolidated Statements of Cash Flows within investing activities.
Adoption of New Accounting Standards
Going Concern
In August 2013, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-15 “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern”, which requires entities to perform interim and annual assessments of the entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements. This ASU is effective for fiscal years ending after December 15, 2016 and interim periods thereafter, with early adoption permitted. The Company’s adoption of this ASU is not expected to have a material impact on the results of operations, financial condition, or cash flows, as it is disclosure based.
Revenue Recognition
In May 2014, the FASB issued Accounting Standards Codification ("ASC") 606, “Revenue from Contracts with Customers”, which amends the guidance in former ASC 605, Revenue Recognition. This amended guidance requires revenue to be recognized in an amount that reflects the consideration to which the company expects to be entitled for those goods and services when the performance obligation has been satisfied. This amended guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and related cash flows arising from contracts with customers. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date”, which defers the effective date of the new revenue recognition standard by one year. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus
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Net)”, which clarifies how an entity should identify the unit of accounting for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. In April 2016, the FASB issued ASU 2016-10, "Identifying Performance Obligations and Licensing", which clarifies the accounting for intellectual property licenses and identifying performance obligations. In May 2016, the FASB issued ASU 2016-11, "Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting", which rescinds certain SEC guidance in response to announcements made by the SEC staff at the EITF's March 3, 2016 meeting and ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients", which clarifies the guidance on collectibility, non-cash consideration, the presentation of sales and other similar taxes collected from customers and contract modifications and completed contracts at transition. Additionally, ASU 2016-12 clarifies that entities electing the full retrospective transition method would no longer be required to disclose the effect of the change in accounting principle on the period of adoption; however, entities would still be required to disclose the effects on preadoption periods that were retrospectively adjusted. These ASUs are effective for the Company for reporting periods beginning after December 15, 2017, but permit companies the option to adopt as of the original effective date. The Company is currently evaluating the impact of the provisions of ASC 606. The guidance permits the use of either a retrospective or cumulative effect transition method. The Company anticipates selecting the modified retrospective method during transition and is currently evaluating the impact of the provisions of ASC 606 on the results of operations, financial condition, and cash flows.
Simplification of Guidance on Debt Issuance Costs
In April 2015, the FASB issued ASU 2015-3, “Interest—Imputation of Interest”, which changes the presentation of debt issuance costs in financial statements as a direct deduction from the related debt liability rather than as an asset. This ASU is effective for us for fiscal years ending after December 15, 2015 and interim periods. Early adoption is permitted. In August 2015, the FASB issued ASU 2015-15, “Interest-Imputation of Interest: Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements”, which is effective immediately. The SEC staff clarified that entities may continue presenting unamortized debt issuance costs for line-of-credit arrangements as an asset. The Company adopted this new guidance on January 1, 2016. As a result of the adoption of this ASU, $0.6 million and $1.5 million of unamortized debt issuance costs were retrospectively adjusted from prepaid expenses and other current assets to the current portion of notes payable and lines of credit and other assets to notes payable and other obligations, less current portion, respectively, in the Company’s Consolidated Balance Sheet as of December 31, 2015.
Simplification of Balance Sheet Classification of Deferred Taxes
In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”, which requires entities to present deferred tax assets (DTAs) and deferred tax liabilities (DTLs) as noncurrent in a classified balance sheet. It thus simplifies the current guidance, which requires entities to separately present DTAs and DTLs as current or noncurrent in a classified balance sheet. Netting of DTAs and DTLs by tax jurisdiction is still required under the new guidance. This ASU is effective for the Company for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. The Company’s adoption of this ASU in 2017 is not expected to have a material impact on the results of operations, financial condition, or cash flows.
Accounting for Leases
In February 2016, the FASB issued ASU 2016-02, “Leases”, which requires lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases. This ASU also requires disclosures to provide additional information about the amounts recorded in the financial statements. This ASU is effective for the Company for annual periods beginning after December 15, 2018 and interim periods therein. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition and requires application of the new guidance for leases that exist or are entered into after the beginning of the earliest comparative period presented. The Company is currently evaluating the impact of this ASU on the results of operations, financial condition, or cash flows.
Accounting for Breakage
In March 2016, the FASB issued ASU 2016-04, “Liabilities-Extinguishments of Liabilities: Recognition of Breakage for Certain Prepaid Stored-Value Products”, which requires entities that sell prepaid stored value products redeemable for goods, services or cash at third-party merchants to derecognize liabilities related to those products for breakage. This ASU is effective for the Company for reporting periods beginning after December 15, 2017. Early adoption is permitted. The ASU must be adopted using either a modified retrospective approach with a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption or a full retrospective approach. The Company’s adoption of this ASU is not expected to have a material impact on the results of operations, financial condition, or cash flows.
Accounting for Employee Stock-Based Payment
In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting", which requires excess tax benefits recognized on stock-based compensation expense be reflected in the consolidated statements of operations as a component of the provision for income taxes on a prospective basis. ASU 2016-09 also requires excess tax benefits recognized on stock-based compensation expense be classified as an operating activity in the
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consolidated statements of cash flows rather than a financing activity. Companies can elect to apply this provision retrospectively or prospectively. ASU 2016-09 also requires entities to elect whether to account for forfeitures as they occur or estimate expected forfeitures over the course of a vesting period. This ASU is effective for the Company for annual periods beginning after December 15, 2016. Early adoption is permitted.
During the third quarter of 2016, the Company elected to early adopt ASU 2016-09. The adoption of this ASU resulted in excess tax benefits being recorded as a reduction of income tax expense prospectively for all periods during 2016, rather than additional paid in capital, and an increase in the number of dilutive shares outstanding at the end of each period, which resulted in an increase to diluted earnings per share during the respective period. As required by ASU 2016-09, excess tax benefits recognized on stock-based compensation expense are classified as an operating activity in our consolidated statements of cash flows on a prospective basis within changes in accounts payable, accrued expenses and customer deposits. In accordance with ASU 2016-09, prior periods related to the classification of excess tax benefits have not been adjusted. The Company also elected to account for forfeitures as they occur, rather than estimate expected forfeitures over the course of a vesting period. As a result of the adoption of ASU 2016-09, the net cumulative effect of this change was not material.
The following table shows the impact of retrospectively applying ASU 2016-09 to the previously issued consolidated statements of operations for the three month period ended March 31 and the three and six month periods ended June 30 (in thousands, except per share amounts):
Three Months Ended March 31, 2016 | Three Months Ended June 30, 2016 | |||||||||||||||||||||||
As Previously Reported | Adjustments | As Recast | As Previously Reported | Adjustments | As Recast | |||||||||||||||||||
Income before income taxes | $ | 156,912 | $ | — | $ | 156,912 | $ | 162,348 | $ | — | $ | 162,348 | ||||||||||||
Provision for income taxes | 46,940 | (1,118 | ) | 45,822 | 48,163 | (2,068 | ) | 46,095 | ||||||||||||||||
Net income | $ | 109,972 | $ | 1,118 | $ | 111,090 | $ | 114,185 | $ | 2,068 | $ | 116,253 | ||||||||||||
Earnings per share: | ||||||||||||||||||||||||
Basic earnings per share | $ | 1.19 | $ | 0.01 | $ | 1.20 | $ | 1.23 | $ | 0.02 | $ | 1.25 | ||||||||||||
Diluted earnings per share | $ | 1.17 | $ | — | $ | 1.17 | $ | 1.21 | $ | 0.01 | $ | 1.22 | ||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||||||||
Basic | 92,516 | — | 92,516 | 92,665 | — | 92,665 | ||||||||||||||||||
Diluted | 94,329 | 701 | 95,030 | 94,549 | 729 | 95,279 | ||||||||||||||||||
Six Months Ended June 30, 2016 | ||||||||||||
As Previously Reported | Adjustments | As Recast | ||||||||||
Income before income taxes | $ | 319,260 | $ | — | $ | 319,260 | ||||||
Provision for income taxes | 95,103 | (3,186 | ) | $ | 91,917 | |||||||
Net income | $ | 224,157 | $ | 3,186 | $ | 227,343 | ||||||
Earnings per share: | ||||||||||||
Basic earnings per share | $ | 2.42 | $ | 0.04 | $ | 2.46 | ||||||
Diluted earnings per share | $ | 2.37 | $ | 0.02 | $ | 2.39 | ||||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 92,591 | — | 92,591 | |||||||||
Diluted | 94,433 | 703 | 95,137 | |||||||||
The following table shows the impact of retrospectively applying this guidance to the Consolidated Statement of Cash flows for the three months ended March 31, 2016 and six months ended June 30, 2016 (in thousands):
.
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Three Months Ended March 31, 2016 | Six Months Ended June 30, 2016 | |||||||||||||||||||||||
As Previously Reported | Adjustments | As Recast | As Previously Reported | Adjustments | As Recast | |||||||||||||||||||
Net cash provided by operating activities | $ | 121,505 | $ | 1,118 | $ | 122,623 | $ | 208,856 | $ | 3,186 | $ | 212,042 | ||||||||||||
Net cash used in investing activities | (20,745 | ) | — | (20,745 | ) | (37,924 | ) | — | (37,924 | ) | ||||||||||||||
Net cash used in financing activities | (157,389 | ) | (1,118 | ) | (158,507 | ) | (118,303 | ) | (3,186 | ) | (121,489 | ) | ||||||||||||
Effect of foreign currency exchange rates on cash | 8,795 | — | 8,795 | (6,696 | ) | — | (6,696 | ) | ||||||||||||||||
Net (decrease) increase in cash | $ | (47,834 | ) | $ | — | $ | (47,834 | ) | $ | 45,933 | $ | — | $ | 45,933 | ||||||||||
Cash Flow Classification
In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments", which amends the guidance in ASC 230, Statement of Cash Flows. This amended guidance reduces the diversity in practice that has resulted from the lack of consistent principles related to the classification of certain cash receipts and payments in the statement of cash flows. This ASU is effective for the Company for reporting periods beginning after December 15, 2017. Early adoption is permitted. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively from the earliest date practicable if retrospective application would be impracticable. The Company’s adoption of this ASU is not expected to have a material impact on the results of operations, financial condition, or cash flows.
2. Accounts Receivable
The Company maintains a $950 million revolving trade accounts receivable Securitization Facility. Accounts receivable collateralized within our Securitization Facility relate to trade receivables resulting from charge card activity. Pursuant to the terms of the Securitization Facility, the Company transfers certain of its domestic receivables, on a revolving basis, to FleetCor Funding LLC (Funding) a wholly-owned bankruptcy remote subsidiary. In turn, Funding sells, without recourse, on a revolving basis, up to $950 million of undivided ownership interests in this pool of accounts receivable to a multi-seller, asset-backed commercial paper conduit (Conduit). Funding maintains a subordinated interest, in the form of over-collateralization, in a portion of the receivables sold to the Conduit. Purchases by the Conduit are financed with the sale of highly-rated commercial paper.
The Company utilizes proceeds from the sale of its accounts receivable as an alternative to other forms of financing to reduce its overall borrowing costs. The Company has agreed to continue servicing the sold receivables for the financial institution at market rates, which approximates the Company’s cost of servicing. The Company retains a residual interest in the accounts receivable sold as a form of credit enhancement. The residual interest’s fair value approximates carrying value due to its short-term nature. Funding determines the level of funding achieved by the sale of trade accounts receivable, subject to a maximum amount.
The Company’s consolidated balance sheets and statements of income reflect the activity related to securitized accounts receivable and the corresponding securitized debt, including interest income, fees generated from late payments, provision for losses on accounts receivable and interest expense. The cash flows from borrowings and repayments, associated with the securitized debt, are presented as cash flows from financing activities.
The Company’s accounts receivable and securitized accounts receivable include the following at September 30, 2016 and December 31, 2015 (in thousands):
September 30, 2016 | December 31, 2015 | |||||||
Gross domestic accounts receivable | $ | 627,138 | $ | 338,275 | ||||
Gross domestic securitized accounts receivable | 656,000 | 614,000 | ||||||
Gross foreign receivables | 737,620 | 322,582 | ||||||
Total gross receivables | 2,020,758 | 1,274,857 | ||||||
Less allowance for doubtful accounts | (30,072 | ) | (21,903 | ) | ||||
Net accounts and securitized accounts receivable | $ | 1,990,686 | $ | 1,252,954 | ||||
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A rollforward of the Company’s allowance for doubtful accounts related to accounts receivable for nine months ended September 30 is as follows (in thousands):
2016 | 2015 | |||||||
Allowance for doubtful accounts beginning of period | $ | 21,903 | $ | 23,842 | ||||
Provision for bad debts | 24,512 | 18,287 | ||||||
Write-offs | (16,343 | ) | (19,586 | ) | ||||
Allowance for doubtful accounts end of period | $ | 30,072 | $ | 22,543 | ||||
Foreign receivables are not included in the Company’s accounts receivable securitization program. At September 30, 2016 and December 31, 2015, there was $656 million and $614 million, respectively, of short-term debt outstanding under the Company’s accounts receivable Securitization Facility.
3. Fair Value Measurements
Fair value is a market-based measurement that reflects assumptions that market participants would use in pricing an asset or liability. GAAP discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). These valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions.
As the basis for evaluating such inputs, a three-tier value hierarchy prioritizes the inputs used in measuring fair value as follows:
• | Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets. |
• | Level 2: Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. |
• | Level 3: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. |
The following table presents the Company’s financial assets and liabilities which are measured at fair values on a recurring basis as of September 30, 2016 and December 31, 2015, (in thousands).
Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
September 30, 2016 | ||||||||||||||||
Assets: | ||||||||||||||||
Repurchase agreements | $ | 142,379 | $ | — | $ | 142,379 | $ | — | ||||||||
Money market | 55,159 | — | 55,159 | — | ||||||||||||
Certificates of deposit | 46 | — | 46 | — | ||||||||||||
Total cash equivalents | $ | 197,584 | $ | — | $ | 197,584 | $ | — | ||||||||
December 31, 2015 | ||||||||||||||||
Assets: | ||||||||||||||||
Repurchase agreements | $ | 144,082 | $ | — | $ | 144,082 | $ | — | ||||||||
Money market | 55,062 | — | 55,062 | — | ||||||||||||
Certificates of deposit | 9,373 | — | 9,373 | — | ||||||||||||
Total cash equivalents | $ | 208,517 | $ | — | $ | 208,517 | $ | — | ||||||||
The Company has highly liquid investments classified as cash equivalents, with original maturities of 90 days or less, included in our Consolidated Balance Sheets. The Company utilizes Level 2 fair value determinations derived from directly or indirectly observable (market based) information to determine the fair value of these highly liquid investments. The Company has certain cash and cash equivalents that are invested on an overnight basis in repurchase agreements, money markets and certificates of deposit. The value of overnight repurchase agreements is determined based upon the quoted market prices for the treasury securities associated with the repurchase agreements. The value of money market instruments is the financial institutions'
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month-end statement, as these instruments are not tradeable and must be settled directly by us with the respective financial institution. Certificates of deposit are valued at cost, plus interest accrued. Given the short term nature of these instruments, the carrying value approximates fair value.
The level within the fair value hierarchy and the measurement technique are reviewed quarterly. Transfers between levels are deemed to have occurred at the end of the quarter. There were no transfers between fair value levels during the periods presented for 2016 and 2015.
The Company’s nonfinancial assets that are measured at fair value on a nonrecurring basis include those in connection with periodic testing for impairment include property, plant and equipment, equity method investment, goodwill and other intangible assets. While completing the preliminary acquisition accounting in 2016, the Company generally uses projected cash flows, discounted as appropriate, to estimate the fair values of the assets acquired and liabilities assumed using key inputs such as management’s projections of cash flows on a held-and-used basis (if applicable), management’s projections of cash flows upon disposition and discount rates. Accordingly, these fair value measurements are in Level 3 of the fair value hierarchy.
The fair value of the Company’s cash, accounts receivable, securitized accounts receivable and related facility, prepaid expenses and other current assets, accounts payable, accrued expenses, customer deposits and short-term borrowings approximate their respective carrying values due to the short-term maturities of the instruments. The carrying value of the Company’s debt obligations approximates fair value as the interest rates on the debt are variable market based interest rates that reset on a quarterly basis. These are each Level 2 fair value measurements, except for cash, which is a Level 1 fair value measurement.
4. Stockholders' Equity
On February 4, 2016, the Company's Board of Directors approved a stock repurchase program (the "Program") under which the Company may begin purchasing up to an aggregate of $500 million of its common stock over the following 18 month period. Any stock repurchases may be made at times and in such amounts as deemed appropriate. The timing and amount of stock repurchases, if any, will depend on a variety of factors including the stock price, market conditions, corporate and regulatory requirements, and any additional constraints related to material inside information that the Company may possess. Any repurchases are expected to be funded by available cash flow from the business and working capital. There were 259,145 shares totaling $35.5 million repurchased under the Program during the nine months ended September 30, 2016.
5. Stock-Based Compensation
The Company has Stock Incentive Plans (the "Plans") pursuant to which the Company’s board of directors may grant stock options or restricted stock to employees. The table below summarizes the expense recognized related to stock-based payments recognized for the three and nine month periods ended September 30 (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Stock options | $ | 8,304 | $ | 4,348 | $ | 25,942 | $ | 13,190 | ||||||||
Restricted stock | 9,101 | 9,539 | 24,083 | 31,197 | ||||||||||||
Stock-based compensation | $ | 17,405 | $ | 13,887 | $ | 50,025 | $ | 44,387 | ||||||||
The tax benefits recorded on stock based compensation were $28.4 million and $13.9 million for the nine month periods ended September 30, 2016 and 2015, respectively.
The following table summarizes the Company’s total unrecognized compensation cost related to stock-based compensation as of September 30, 2016 (cost in thousands):
Unrecognized Compensation Cost | Weighted Average Period of Expense Recognition (in Years) | |||||
Stock options | $ | 50,191 | 1.39 | |||
Restricted stock | 10,090 | 0.44 | ||||
Total | $ | 60,281 | ||||
Stock Options
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Stock options are granted with an exercise price estimated to be equal to the fair market value of the Company's stock on the date of grant as authorized by the Company’s board of directors. Options granted have vesting provisions ranging from one to six years and vesting of the options is generally based on the passage of time or performance. Stock option grants are subject to forfeiture if employment terminates prior to vesting.
The following summarizes the changes in the number of shares of common stock under option for the nine month period ended September 30, 2016 (shares and aggregate intrinsic value in thousands):
Shares | Weighted Average Exercise Price | Options Exercisable at End of Period | Weighted Average Exercise Price of Exercisable Options | Weighted Average Fair Value of Options Granted During the Period | Aggregate Intrinsic Value | |||||||||||||||||
Outstanding at December 31, 2015 | 5,003 | $ | 72.72 | 2,545 | $ | 26.82 | $ | 351,277 | ||||||||||||||
Granted | 1,418 | 122.88 | $ | 26.27 | ||||||||||||||||||
Exercised | (431 | ) | 43.17 | 56,330 | ||||||||||||||||||
Forfeited | (137 | ) | 140.67 | |||||||||||||||||||
Outstanding at September 30, 2016 | 5,853 | $ | 85.43 | 3,240 | $ | 47.84 | $ | 516,756 | ||||||||||||||
Expected to vest as of September 30, 2016 | 5,853 | $ | 85.43 | |||||||||||||||||||
The aggregate intrinsic value of stock options exercisable at September 30, 2016 was $407.9 million. The weighted average remaining contractual term of options exercisable at September 30, 2016 was 5.1 years.
The fair value of stock option awards granted was estimated using the Black-Scholes option pricing model during the nine months ended September 30, 2016 and 2015, with the following weighted-average assumptions for grants or modifications during the period:
September 30 | ||||||
2016 | 2015 | |||||
Risk-free interest rate | 1.09 | % | 1.27 | % | ||
Dividend yield | — | — | ||||
Expected volatility | 27.37 | % | 27.71 | % | ||
Expected life (in years) | 3.4 | 3.8 | ||||
Restricted Stock
Awards of restricted stock and restricted stock units are independent of stock option grants and are subject to forfeiture if employment terminates prior to vesting. The vesting of shares granted is generally based on the passage of time or performance, or a combination of these. Shares vesting based on the passage of time have vesting provisions of one year.
The following table summarizes the changes in the number of shares of restricted stock and restricted stock units for the nine months ended September 30, 2016 (shares in thousands):
Shares | Weighted Average Grant Date Fair Value | ||||||
Outstanding at December 31, 2015 | 497 | $ | 149.40 | ||||
Granted | 131 | 126.31 | |||||
Vested | (227 | ) | 151.68 | ||||
Cancelled | (42 | ) | 145.56 | ||||
Outstanding at September 30, 2016 | 359 | $ | 142.48 | ||||
6. Acquisitions
2016 Acquisitions
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During the nine months ended September 30, 2016, the Company completed acquisitions with an aggregate purchase price of $1.33 billion, net of cash acquired of $51.4 million, which includes deferred payments made during the period related to prior acquisitions of $5.3 million.
During the nine months ended September 30, 2016, the Company made additional investments of $7.9 million related to its equity method investment at Masternaut Group Holdings Limited ("Masternaut"). Additionally, during the nine months ended September 30, 2016, the Company recorded an approximately $9.3 million non-recurring gain recorded within operating results related to its investment at Masternaut.
STP
On August 31, 2016, the Company acquired all of the outstanding stock of Serviços e Tecnologia de Pagamentos S.A. (“STP”), for approximately $1.25 billion, net of cash acquired of $40.3 million. STP is an electronic toll payments company in Brazil and provides cardless fuel payments at a number of Shell sites throughout Brazil. The purpose of this acquisition was to enter the toll market in Brazil.The Company financed the acquisition using a combination of existing cash and borrowings under its existing credit facility. Results from the acquired business have been reported in the Company's international segment since the date of acquisition. The following table summarizes the preliminary acquisition accounting for STP (in thousands):
Trade and other receivables | $ | 238,997 | |
Prepaid expenses and other | 5,163 | ||
Deferred tax assets | 2,353 | ||
Property and equipment | 46,024 | ||
Other long term assets | 1,029 | ||
Goodwill | 621,741 | ||
Customer relationships and other identifiable intangible assets | 642,012 | ||
Deferred tax liabilities | (4,905 | ) | |
Liabilities assumed | (303,369 | ) | |
Aggregate purchase price | $ | 1,249,045 | |
The estimated fair value of intangible assets acquired and the related estimated useful lives consisted of the following (in thousands):
Useful Lives (in Years) | Value | |||
Customer relationships and other identifiable intangible assets | 4-10 | $ | 642,012 | |
$ | 642,012 | |||
The purchase price allocation related to this acquisition is preliminary as the Company is still completing the valuation for intangible assets, income taxes, certain acquired contingencies and the working capital adjustment period remains open. Goodwill recognized is comprised primarily of expected synergies from combining the operations of the Company and STP and assembled workforce. The allocation of the goodwill to the reporting units has not been completed. The goodwill acquired with this business is expected to be deductible for tax purposes.
Other
During the nine months ended September 30, 2016, the Company acquired additional fuel card portfolios in the U.S. and the United Kingdom, additional Shell fuel card markets in Europe and Travelcard in the Netherlands totaling approximately $76.7 million, net of cash acquired of $11.1 million. The following table summarizes the preliminary acquisition accounting for these acquisitions (in thousands):
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Trade and other receivables | $ | 27,810 | |
Prepaid expenses and other | 5,097 | ||
Property and equipment | 992 | ||
Goodwill | 21,820 | ||
Other intangible assets | 63,410 | ||
Deferred tax asset | 146 | ||
Liabilities assumed | (42,541 | ) | |
Aggregate purchase prices | $ | 76,734 | |
The estimated fair value of intangible assets acquired and the related estimated useful lives consisted of the following (in thousands):
Useful Lives (in Years) | Value | |||
Customer relationships and other identifiable intangible assets | 10-20 | $ | 63,410 | |
$ | 63,410 | |||
The other 2016 acquisitions were not material individually or in the aggregate to the Company’s consolidated financial statements. The accounting for certain of these acquisitions is preliminary as the Company is still completing the valuation of intangible assets, income taxes and evaluation of acquired contingencies.
2015 Acquisitions
During 2015, the Company completed acquisitions of Shell portfolios related to its fuel card businesses in Europe, as well as a small acquisition internationally, with an aggregate purchase price of $46.3 million, made additional investments of $8.4 million related to Masternaut and deferred payments of $3.4 million related to acquisitions occurring in prior years.
The following table summarizes the acquisition accounting for the acquisitions completed during 2015 (in thousands):
Trade and other receivables | $ | 521 | |
Prepaid expenses and other | 996 | ||
Property and equipment | 197 | ||
Goodwill | 9,561 | ||
Other intangible assets | 39,791 | ||
Deferred tax liabilities | (2,331 | ) | |
Liabilities assumed | (2,437 | ) | |
Aggregate purchase prices | $ | 46,298 | |
The fair value of intangible assets acquired and the related estimated useful lives consisted of the following (in thousands):
Useful Lives (in Years) | Value | |||
Customer relationships | 14-20 | $ | 39,791 | |
$ | 39,791 | |||
The 2015 acquisitions were not material individually or in the aggregate to the Company’s consolidated financial statements.
7. Goodwill and Other Intangible Assets
A summary of changes in the Company’s goodwill by reportable business segment is as follows (in thousands):
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December 31, 2015 | Acquisitions/ Dispositions | Acquisition Accounting Adjustments | Foreign Currency | September 30, 2016 | |||||||||||||||
Segment | |||||||||||||||||||
North America | $ | 2,640,409 | $ | — | $ | — | $ | — | $ | 2,640,409 | |||||||||
International | 905,625 | 642,876 | 163 | (5,092 | ) | 1,543,572 | |||||||||||||
$ | 3,546,034 | $ | 642,876 | $ | 163 | $ | (5,092 | ) | $ | 4,183,981 | |||||||||
As of September 30, 2016 and December 31, 2015, other intangible assets consisted of the following (in thousands):
September 30, 2016 | December 31, 2015 | |||||||||||||||||||||||||
Weighted- Avg Useful Lives (Years) | Gross Carrying Amounts | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amounts | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||||
Customer and vendor agreements | 15.8 | $ | 2,760,942 | $ | (418,166 | ) | $ | 2,342,776 | $ | 2,071,928 | $ | (329,664 | ) | $ | 1,742,264 | |||||||||||
Trade names and trademarks—indefinite lived | N/A | 320,408 | — | 320,408 | 318,048 | — | 318,048 | |||||||||||||||||||
Trade names and trademarks—other | 14.4 | 2,825 | (1,986 | ) | 839 | 3,067 | (2,058 | ) | 1,009 | |||||||||||||||||
Software | 5.1 | 167,573 | (76,851 | ) | 90,722 | 170,085 | (54,250 | ) | 115,835 | |||||||||||||||||
Non-compete agreements | 4.8 | 14,326 | (10,194 | ) | 4,132 | 15,209 | (8,770 | ) | 6,439 | |||||||||||||||||
Total other intangibles | $ | 3,266,074 | $ | (507,197 | ) | $ | 2,758,877 | $ | 2,578,337 | $ | (394,742 | ) | $ | 2,183,595 | ||||||||||||
Changes in foreign exchange rates resulted in a $18.0 million decrease to the carrying values of other intangible assets in the nine months ended September 30, 2016. Amortization expense related to intangible assets for the nine months ended September 30, 2016 and 2015 was $112.5 million and $120.1 million, respectively.
8. Debt
The Company’s debt instruments consist primarily of term notes, revolving lines of credit and a Securitization Facility as follows (in thousands):
September 30, 2016 | December 31, 2015 | |||||||
Term notes payable—domestic(a), net of discounts | $ | 2,671,875 | $ | 2,157,376 | ||||
Revolving line of credit A Facility—domestic(a) | 430,000 | 160,000 | ||||||
Revolving line of credit A Facility—foreign(a) | 162,128 | — | ||||||
Revolving line of credit A Facility—swing line(a) | 5,188 | — | ||||||
Other debt(c) | 10,929 | 3,624 | ||||||
Total notes payable and other obligations | 3,280,120 | 2,321,000 | ||||||
Securitization Facility(b) | 656,000 | 614,000 | ||||||
Total notes payable, credit agreements and Securitization Facility | $ | 3,936,120 | $ | 2,935,000 | ||||
Current portion | $ | 1,383,763 | $ | 875,100 | ||||
Long-term portion | 2,552,357 | 2,059,900 | ||||||
Total notes payable, credit agreements and Securitization Facility | $ | 3,936,120 | $ | 2,935,000 | ||||
______________________
(a) | On October 24, 2014, the Company entered into a $3.36 billion Credit Agreement, which provides for senior secured credit facilities consisting of (a) a revolving A credit facility in the amount of $1.0 billion, with sublimits for letters of credit, swing line loans and multi-currency borrowings, (b) a revolving B facility in the amount of $35 million for loans in Australian Dollars or New Zealand Dollars, (c) a term loan A facility in the amount of $2.02 billion and (d) a term loan B facility in the amount of $300 million. On August 22, 2016, the Company entered into the first Amendment to |
15
the existing Credit Agreement, which established an incremental term A loan in the amount of $600 million under the Credit Agreement accordion feature. The proceeds from the additional $600 million in term A loans were used to partially finance the STP acquisition. The Amendment also established an accordion feature for borrowing an additional $500 million in term A, term B or revolver A debt. The stated maturity dates for the term A loans, revolving loans, and letters of credit under the Credit Agreement is November 14, 2019 and November 14, 2021 for the term loan B. The Company has unamortized debt discounts of $6.8 million related to the term A facility and $1.0 million related to the term B facility at September 30, 2016.
(b) | The Company is party to a $950 million receivables purchase agreement ("Securitization Facility") that was amended and restated on December 1, 2015. There is a program fee equal to one month LIBOR and the Commercial Paper Rate of 0.66% plus 0.90% and 0.43% plus 0.90% as of September 30, 2016 and December 31, 2015, respectively. The unused facility fee is payable at a rate of 0.40% per annum as of September 30, 2016 and December 31, 2015. |
(c) | Other debt includes the long-term portion of contingent consideration and deferred payments associated with certain of our businesses. |
The Company was in compliance with all financial and non-financial covenants at September 30, 2016.
9. Income Taxes
The provision for income taxes differs from amounts computed by applying the U.S. federal tax rate of 35% to income before income taxes for the three months ended September 30, 2016 and 2015 due to the following (in thousands):
2016 | 2015 | |||||||||||||
Computed “expected” tax expense | $ | 59,571 | 35.0 | % | $ | 57,875 | 35.0 | % | ||||||
Changes resulting from: | ||||||||||||||
Foreign income tax differential | (4,265 | ) | (2.5 | )% | (5,860 | ) | (3.5 | )% | ||||||
Excess tax benefits related to stock-based compensation | (8,247 | ) | (4.9 | )% | — | — | % | |||||||
State taxes net of federal benefits | 1,678 | 1.0 | % | 2,501 | 1.5 | % | ||||||||
Foreign-sourced nontaxable income | (6,691 | ) | (3.9 | )% | (2,344 | ) | (1.4 | )% | ||||||
Domestic production activities deduction | (4,282 | ) | (2.5 | )% | (7,950 | ) | (4.8 | )% | ||||||
Other | 2,822 | 1.7 | % | 4,365 | 2.6 | % | ||||||||
Provision for income taxes | $ | 40,586 | 23.9 | % | $ | 48,587 | 29.4 | % | ||||||
10. Earnings Per Share
The Company reports basic and diluted earnings per share. Basic earnings per share is computed by dividing net income attributable to shareholders of the Company by the weighted average number of common shares outstanding during the reported period. Diluted earnings per share reflect the potential dilution related to equity-based incentives using the treasury stock method. The calculation and reconciliation of basic and diluted earnings per share for the three and nine months ended September 30 (in thousands, except per share data) follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income | $ | 129,618 | $ | 116,770 | $ | 356,961 | $ | 309,601 | ||||||||
Denominator for basic earnings per share | 92,631 | 92,110 | 92,604 | 91,923 | ||||||||||||
Dilutive securities | 2,676 | 2,047 | 2,600 | 2,146 | ||||||||||||
Denominator for diluted earnings per share | 95,307 | 94,157 | 95,204 | 94,069 | ||||||||||||
Basic earnings per share | $ | 1.40 | $ | 1.27 | $ | 3.85 | $ | 3.37 | ||||||||
Diluted earnings per share | $ | 1.36 | $ | 1.24 | $ | 3.75 | $ | 3.29 | ||||||||
There were 0.1 million antidilutive shares during the three month period ended September 30, 2016. Diluted earnings per share for the three month period ended September 30, 2015 excludes the effect of 0.6 million shares of common stock that may be issued upon the exercise of employee stock options because such effect would be antidilutive. Diluted earnings per share also excludes the effect of 0.3 million and 0.4 million shares of performance based restricted stock for which the performance criteria have not yet been achieved for the three month period ended September 30, 2016 and 2015, respectively.
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11. Segments
The Company reports information about its operating segments in accordance with the authoritative guidance related to segments. The Company’s reportable segments represent components of the business for which separate financial information is evaluated regularly by the chief operating decision maker in determining how to allocate resources and in assessing performance. The Company operates in two reportable segments, North America and International. There were no inter-segment sales.
The Company’s segment results are as follows for the three and nine month periods ended September 30 (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenues, net: | ||||||||||||||||
North America | $ | 345,868 | $ | 334,944 | $ | 950,542 | $ | 918,333 | ||||||||
International | 138,558 | 116,549 | 366,051 | 353,931 | ||||||||||||
$ | 484,426 | $ | 451,493 | $ | 1,316,593 | $ | 1,272,264 | |||||||||
Operating income: | ||||||||||||||||
North America | $ | 135,760 | $ | 132,428 | $ | 367,221 | $ | 351,778 | ||||||||
International | 55,295 | 56,032 | 170,957 | 169,607 | ||||||||||||
$ | 191,055 | $ | 188,460 | $ | 538,178 | $ | 521,385 | |||||||||
Depreciation and amortization: | ||||||||||||||||
North America | $ | 32,739 | $ | 32,257 | $ | 96,351 | $ | 96,200 | ||||||||
International | 24,345 | 16,269 | 45,497 | 49,235 | ||||||||||||
$ | 57,084 | $ | 48,526 | $ | 141,848 | $ | 145,435 | |||||||||
Capital expenditures: | ||||||||||||||||
North America | $ | 11,980 | $ | 6,493 | $ | 28,501 | $ | 14,510 | ||||||||
International | 5,140 | 6,799 | 13,376 | 15,016 | ||||||||||||
$ | 17,120 | $ | 13,292 | $ | 41,877 | $ | 29,526 | |||||||||
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12. Commitments and Contingencies
In the ordinary course of business, the Company is involved in various pending or threatened legal actions. The Company has recorded reserves for certain legal proceedings. The amounts recorded are estimated and as additional information becomes available, the Company will reassess the potential liability related to legal actions and revise its estimate in the period that information becomes known. In the opinion of management, the amount of ultimate liability, if any, with respect to these actions will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and related notes appearing elsewhere in this report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. See “Special Cautionary Notice Regarding Forward-Looking Statements”. All foreign currency amounts that have been converted into U.S. dollars in this discussion are based on the exchange rate as reported by OANDA for the applicable periods.
This management’s discussion and analysis should also be read in conjunction with the management’s discussion and analysis and consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2015.
General Business
FleetCor is a leading independent global provider of fuel cards, commercial payment and data solutions, stored value solutions, and workforce payment products and services to businesses, retailers, commercial fleets, major oil companies, petroleum marketers and government entities in countries throughout North America, South America, Europe, Australia and New Zealand. Our payment programs enable our customers to better manage and control their commercial payments, card programs, and employee spending and provide card-accepting merchants with a high volume customer base that can increase their sales and customer loyalty. We also provide a suite of fleet related and workforce payment solution products, including a mobile telematics service, fleet maintenance management and employee benefit and transportation related payments. In 2015, we processed approximately 1.9 billion transactions on our proprietary networks and third-party networks (which includes approximately 1.3 billion transactions related to our Stored Value Solutions ("SVS") product, acquired with Comdata). We believe that our size and scale, geographic reach, advanced technology and our expansive suite of products, services, brands and proprietary networks contribute to our leading industry position.
We provide our payment products and services in a variety of combinations to create customized payment solutions for our customers and partners. We collectively refer to our suite of product offerings as workforce productivity enhancement products for commercial businesses. We sell a range of customized fleet and lodging payment programs directly and indirectly to our customers through partners, such as major oil companies, leasing companies and petroleum marketers. We refer to these major oil companies, leasing companies, petroleum marketers, value-added resellers (VARs) and other referral partners with whom we have strategic relationships as our “partners”. We provide our customers with various card products that typically function like a charge card to purchase fuel, lodging, food, toll, transportation and related products and services at participating locations.
We support our products with specialized issuing, processing and information services that enable us to manage card accounts, facilitate the routing, authorization, clearing and settlement of transactions, and provide value-added functionality and data, including customizable card-level controls and productivity analysis tools. In order to deliver our payment programs and services and process transactions, we own and operate proprietary “closed-loop” networks through which we electronically connect to merchants and capture, analyze and report customized information in North America and internationally. We also use third-party networks to deliver our payment programs and services in order to broaden our card acceptance and use. To support our payment products, we also provide a range of services, such as issuing and processing, as well as specialized information services that provide our customers with value-added functionality and data. Our customers can use this data to track important business productivity metrics, combat fraud and employee misuse, streamline expense administration and lower overall workforce and fleet operating costs. Depending on our customer’s and partner’s needs, we provide these services in a variety of outsourced solutions ranging from a comprehensive “end-to-end” solution (encompassing issuing, processing and network services) to limited back office processing services.
Executive Overview
Segments
We operate in two segments, which we refer to as our North America and International segments. Our revenue is reported net of the wholesale cost for underlying products and services. In this report, we refer to this net revenue as “revenue.” See “Results of Operations” for additional segment information.
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For the three and nine months ended September 30, 2016 and 2015, our North America and International segments generated the following revenue:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||||
(dollars in millions) | Revenues, net | % of total revenues, net | Revenues, net | % of total revenues, net | Revenues, net | % of total revenues, net | Revenues, net | % of total revenues, net | ||||||||||||||||||||
North America | $ | 345.9 | 71.4 | % | $ | 334.9 | 74.2 | % | $ | 950.5 | 72.2 | % | $ | 918.4 | 72.2 | % | ||||||||||||
International | 138.6 | 28.6 | % | 116.6 | 25.8 | % | 366.1 | 27.8 | % | 353.9 | 27.8 | % | ||||||||||||||||
$ | 484.4 | 100.0 | % | $ | 451.5 | 100.0 | % | $ | 1,316.6 | 100.0 | % | $ | 1,272.3 | 100.0 | % | |||||||||||||
Revenues, net, Net Income and Net Income Per Diluted Share. Set forth below are revenues, net, net income and net income per diluted share for the three and nine months ended September 30, 2016 and 2015.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in thousands, except per share amounts) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues, net | $ | 484,426 | $ | 451,493 | $ | 1,316,593 | $ | 1,272,264 | ||||||||
Net income | $ | 129,618 | $ | 116,770 | $ | 356,961 | $ | 309,601 | ||||||||
Net income per diluted share | $ | 1.36 | $ | 1.24 | $ | 3.75 | $ | 3.29 | ||||||||
Sources of Revenue
Transactions. In both of our segments, we derive revenue from transactions. As illustrated in the diagram below, a transaction is defined as a purchase by a customer. Our customers include holders of our card products and those of our partners, for whom we manage card programs, members of our proprietary networks who are provided access to our products and services and commercial businesses to whom we provide workforce payment productivity solutions. Revenue from transactions is derived from our merchant and network relationships, as well as our customers and partners. Through our merchant and network relationships we primarily offer fuel cards, corporate cards, virtual cards, purchasing cards, T&E cards, gift cards, stored value payroll cards, vehicle maintenance, food, fuel, toll and transportation cards and vouchers and lodging services to our customers.
The following diagram illustrates a typical card transaction flow, but may also be applied to our vehicle maintenance, lodging and food, fuel, toll and transportation card and voucher products, substituting transactions for gallons. This representative model may not include all of our businesses.
Illustrative Transaction Flow
From our customers and partners, we derive revenue from a variety of program fees, including transaction fees, card fees, network fees and charges, which can be fixed fees, cost plus a mark-up or based on a percentage discount from retail prices. Our programs include other fees and charges associated with late payments and based on customer credit risk.
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From our merchant and network relationships, we derive revenue mostly from the difference between the price charged to a customer for a transaction and the price paid to the merchant or network for the same transaction, as well as network fees and charges in certain businesses. As illustrated in the table below, the price paid to a merchant or network may be calculated as (i) the merchant’s wholesale cost of the product plus a markup; (ii) the transaction purchase price less a percentage discount; or (iii) the transaction purchase price less a fixed fee per unit.
The following table presents an illustrative revenue model for transactions with the merchant, which is primarily applicable to fuel based product transactions, but may also be applied to our vehicle maintenance, lodging and food, fuel, toll and transportation card and voucher products, substituting transactions for gallons. This representative model may not include all of our businesses.
Illustrative Revenue Model for Fuel Purchases
(unit of one gallon)
Illustrative Revenue Model | Merchant Payment Methods | |||||||||||||||||||||
Retail Price | $ | 3.00 | i) Cost Plus Mark-up: | ii) Percentage Discount: | iii) Fixed Fee: | |||||||||||||||||
Wholesale Cost | (2.86 | ) | Wholesale Cost | $ | 2.86 | Retail Price | $ | 3.00 | Retail Price | $ | 3.00 | |||||||||||
Mark-up | 0.05 | Discount (3%) | (0.09 | ) | Fixed Fee | (0.09 | ) | |||||||||||||||
FleetCor Revenue | $ | 0.14 | ||||||||||||||||||||
Merchant Commission | $ | (0.05 | ) | Price Paid to Merchant | $ | 2.91 | Price Paid to Merchant | $ | 2.91 | Price Paid to Merchant | $ | 2.91 | ||||||||||
Price Paid to Merchant | $ | 2.91 | ||||||||||||||||||||
Set forth below are our sources of revenue for the three and nine months ended September 30, 2016 and 2015, expressed as a percentage of consolidated revenues:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
Revenue from customers and partners | 57.0 | % | 53.3 | % | 55.3 | % | 52.5 | % | ||||
Revenue from merchants and networks | 43.0 | % | 46.7 | % | 44.7 | % | 47.5 | % | ||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||
Revenue directly tied to fuel-price spreads1 | 11.2 | % | 13.0 | % | 11.2 | % | 12.4 | % | ||||
Revenue directly influenced by the absolute price of fuel 1 | 14.0 | % | 15.3 | % | 14.3 | % | 15.5 | % | ||||
Revenue from program fees, late fees, interest and other | 74.8 | % | 71.7 | % | 74.5 | % | 72.1 | % | ||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||
1 | Although we cannot precisely calculate the absolute impact of fuel price spreads and the absolute price of fuel on our consolidated revenues, we believe these percentages approximate their relative impacts. |
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Revenue per transaction. Set forth below is revenue per transaction information for the three and nine months ended September 30, 2016 and 2015:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Transactions (in millions)2 | ||||||||||||||||
North America | 371.2 | 371.5 | 1,217.3 | 1,145.3 | ||||||||||||
International | 127.4 | 45.6 | 233.3 | 138.0 | ||||||||||||
Total transactions | 498.6 | 417.1 | 1,450.6 | 1,283.3 | ||||||||||||
Revenue per transaction | ||||||||||||||||
North America | $ | 0.93 | $ | 0.90 | $ | 0.78 | $ | 0.80 | ||||||||
International | 1.09 | 2.56 | 1.57 | 2.56 | ||||||||||||
Consolidated revenue per transaction | 0.97 | 1.08 | 0.91 | 0.99 | ||||||||||||
Consolidated adjusted revenue per transaction3 | 0.92 | 1.01 | 0.85 | 0.93 | ||||||||||||
2 | SVS, Stored Value Solutions, is our global provider of gift card and stored value solutions, which is part of the Comdata business acquired in November 2014, and has a low revenue per transaction product. Transactions in the three month periods ended September 30, 2016 and 2015 include approximately 270 million and 274 million transactions, respectively, and approximately 924 million and 872 million transactions in the nine months ended September 30, 2016 and 2015, respectively. |
3 | Adjusted revenues is a non-GAAP financial measure defined as revenues, net less merchant commissions. We believe this measure is a more effective way to evaluate our revenue performance. We use adjusted revenues as a basis to evaluate our revenues, net of the commissions that are paid to merchants to participate in our card programs. Adjusted revenues is a supplemental non-GAAP financial measure of operating performance. See the heading entitled “Management’s Use of Non-GAAP Financial Measures.” |
Revenue per transaction is derived from the various revenue types as discussed above and can vary based on geography, the relevant merchant relationship, the payment product utilized and the types of products or services purchased, the mix of which would be influenced by our acquisitions, organic growth in our business, and the overall macroeconomic environment, including fluctuations in foreign currency exchange rates. Revenue per transaction per customer changes as the level of services we provide to a customer increases or decreases, as macroeconomic factors change and as adjustments are made to merchant and customer rates. See “Results of Operations” for further discussion of transaction volumes and revenue per transaction.
For the three months ended September 30, 2016, transaction volumes increased 19.5% to 498.6 million transactions from 417.1 million transactions in the comparable period of 2015. For the nine months ended September 30, 2016, transaction volumes increased 13.0% to 1,450.6 million transactions from 1,283.3 million transactions in the comparable period of 2015. Excluding the impact of the SVS business, North American segment transactions increased approximately 5% in the three months ended September 30, 2016 as compared to 2015 and grew by approximately 7% in the nine months ended September 30, 2016 over the comparable period in 2015, primarily due to growth in our MasterCard and corporate payments businesses. Transaction volumes in our international segment increased by 179.4% and 69.0% in the three and nine months ended September 30, 2016, respectively, over the comparable periods in 2015, primarily due to the acquisition of STP and Travelcard during the third quarter of 2016, the addition of new Shell fuel card markets in 2015 and 2016 and additional transactions from a small acquisition in Brazil in the first quarter of 2016.
Sources of Expenses
We incur expenses in the following categories:
• | Merchant commissions—In certain of our card programs, we incur merchant commissions expense when we reimburse merchants with whom we have direct, contractual relationships for specific transactions where a customer purchases products or services from the merchant. In the card programs where it is paid, merchant commissions equal the difference between the price paid by us to the merchant and the merchant’s wholesale cost of the underlying products or services. |
• | Processing—Our processing expense consists of expenses related to processing transactions, servicing our customers and merchants, bad debt expense and cost of goods sold related to our hardware sales in certain businesses. |
• | Selling—Our selling expenses consist primarily of wages, benefits, sales commissions (other than merchant commissions) and related expenses for our sales, marketing and account management personnel and activities. |
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• | General and administrative—Our general and administrative expenses include compensation and related expenses (including stock-based compensation) for our executives, finance and accounting, information technology, human resources, legal and other administrative personnel. Also included are facilities expenses, third-party professional services fees, travel and entertainment expenses, and other corporate-level expenses. |
• | Depreciation and amortization—Our depreciation expenses include depreciation of property and equipment, consisting of computer hardware and software (including proprietary software development amortization expense), card-reading equipment, furniture, fixtures, vehicles and buildings and leasehold improvements related to office space. Our amortization expenses include amortization of intangible assets related to customer and vendor relationships, trade names and trademarks, software and non-compete agreements. We are amortizing intangible assets related to business acquisitions and certain private label contracts associated with the purchase of accounts receivable. |
• | Other operating, net—Our other operating, net includes other operating expenses and income items unusual to the period and presented separately. |
• | Equity method investment loss (income)—Our equity method investment results relate to our minority interest in Masternaut, a provider of telematics solutions to commercial fleets in Europe, which we account for using the equity method. |
• | Other expense (income), net—Our other expense (income), net includes foreign currency transaction gains or losses, proceeds/costs from the sale of assets and other miscellaneous operating costs and revenue. |
• | Interest expense, net—Our interest expense, net includes interest income on our cash balances and interest expense on our outstanding debt and on our Securitization Facility. We have historically invested our cash primarily in short-term money market funds. |
• | Provision for income taxes—Our provision for income taxes consists primarily of corporate income taxes related to profits resulting from the sale of our products and services in the United States and internationally. Our worldwide effective tax rate is lower than the U.S. statutory rate of 35%, due primarily to lower rates in foreign jurisdictions and foreign-sourced non-taxable income. |
Adjusted Revenues, Adjusted Net Income and Adjusted Net Income Per Diluted Share. Set forth below are adjusted revenues, adjusted net income and adjusted net income per diluted share for the three and nine months ended September 30, 2016 and 2015.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in thousands, except per share amounts) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Adjusted revenues | $ | 456,212 | $ | 419,767 | $ | 1,237,838 | $ | 1,191,487 | ||||||||
Adjusted net income | $ | 183,310 | $ | 157,570 | $ | 478,679 | $ | 432,424 | ||||||||
Adjusted net income per diluted share | $ | 1.92 | $ | 1.67 | $ | 5.03 | $ | 4.60 | ||||||||
Adjusted revenues, adjusted net income and adjusted net income per diluted share are supplemental non-GAAP financial measures of operating performance. We use adjusted revenues as a basis to evaluate our revenues, net of the commissions that are paid to merchants that participate in certain of our card programs. The commissions paid to merchants can vary when market spreads fluctuate in much the same way as revenues are impacted when market spreads fluctuate. Thus, we believe this is a more effective way to evaluate our revenue performance on a consistent basis. We use adjusted net income and adjusted net income per diluted share to eliminate the effect of items that we do not consider indicative of our core operating performance on a consistent basis. See the heading entitled “Management’s Use of Non-GAAP Financial Measures.”
Factors and Trends Impacting our Business
We believe that the following factors and trends are important in understanding our financial performance:
• | Fuel prices—Our fleet customers use our products and services primarily in connection with the purchase of fuel. Accordingly, our revenue is affected by fuel prices, which are subject to significant volatility. A change in retail fuel prices could cause a decrease or increase in our revenue from several sources, including fees paid to us based on a percentage of each customer’s total purchase. Changes in the absolute price of fuel may also impact unpaid account balances and the late fees and charges based on these amounts. See “Sources of Revenue” above for further information related to the absolute price of fuel. |
• | Fuel-price spread volatility—A portion of our revenue involves transactions where we derive revenue from fuel-price spreads, which is the difference between the price charged to a fleet customer for a transaction and the price paid to the merchant for the same transaction. In these transactions, the price paid to the merchant is based on the wholesale cost of fuel. The merchant’s wholesale cost of fuel is dependent on several factors including, among others, the factors described above affecting fuel prices. The fuel price that we charge to our customer is dependent on several factors |
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including, among others, the fuel price paid to the merchant, posted retail fuel prices and competitive fuel prices. We experience fuel-price spread contraction when the merchant’s wholesale cost of fuel increases at a faster rate than the fuel price we charge to our customers, or the fuel price we charge to our customers decreases at a faster rate than the merchant’s wholesale cost of fuel. See “Sources of Revenue” above for further information related to fuel-price spreads.
• | Acquisitions—Since 2002, we have completed over 70 acquisitions of companies and commercial account portfolios. Acquisitions have been an important part of our growth strategy, and it is our intention to continue to seek opportunities to increase our customer base and diversify our service offering through further strategic acquisitions. The impact of acquisitions has, and may continue to have, a significant impact on our results of operations and may make it difficult to compare our results between periods. |
• | Interest rates—Our results of operations are affected by interest rates. We are exposed to market risk to changes in interest rates on our cash investments and debt. |
• | Global economic environment—Our results of operations are materially affected by conditions in the economy generally, both in North America and internationally. Factors affected by the economy include our transaction volumes and the credit risk of our customers. These factors affected our businesses in both our North America and International segments. |
• | Foreign currency changes—Our results of operations are significantly impacted by changes in foreign currency rates; namely, by movements of the Australian dollar, Brazilian real, British pound, Canadian dollar, Czech koruna, Euro, Mexican peso, New Zealand dollar and Russian ruble, relative to the U.S. dollar. Approximately 72% of our revenue in both the nine months ended September 30, 2016 and 2015, respectively, was derived in U.S. dollars and was not affected by foreign currency exchange rates. See “Results of Operations” for information related to foreign currency impact on our total revenue, net. |
• | Expenses— Over the long term, we expect that our general and administrative expense will decrease as a percentage of revenue as our revenue increases. To support our expected revenue growth, we plan to continue to incur additional sales and marketing expense by investing in our direct marketing, third-party agents, internet marketing, telemarketing and field sales force. |
Acquisitions and Investments
2016 Acquisitions
During the nine months ended September 30, 2016, we completed acquisitions with an aggregate purchase price of $1.33 billion, net of cash acquired of $51.4 million, which includes deferred payments made during the period related to prior acquisitions of $5.3 million.
STP
On August 31, 2016, we acquired all of the outstanding stock of STP for approximately $1.25 billion, net of cash acquired of $40.3 million. STP is an electronic toll payments company in Brazil and provides cardless fuel payments at a number of Shell sites throughout Brazil. The purpose of this acquisition was to enter the toll market in the Brazil. We financed the acquisition using a combination of existing cash and borrowings under our existing credit facility.
Other
During the nine months ended September 30, 2016, we also acquired a fuel card portfolio in the U.S., a fuel card portfolio in the United Kingdom, additional Shell markets related to our fuel card products in Europe, a travel card portfolio in the Netherlands and a small business in Brazil totally approximately $76.7 million, net of cash acquired of $11.1 million.
The results of operations from the fuel card portfolio acquired in the U.S. are included within our North America segment, from the date of acquisition. The results of operations of STP, the fuel card portfolio in the United Kingdom, the additional Shell markets, the travel card portfolio in the Netherlands and the small business in Brazil are included within our International segment, from the date of acquisition.
Equity Method Investment
During the nine months ended September 30, 2016, we made additional investments of $7.9 million related to our equity method investment at Masternaut Group Holdings Limited ("Masternaut"). Additionally, during the nine months ended
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September 30, 2016, we recorded an approximately $9.3 million non-recurring gain recorded within operating results related to its investment at Masternaut.
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Results of Operations
Three months ended September 30, 2016 compared to the three months ended September 30, 2015
The following table sets forth selected consolidated statement of income data for the three months ended September 30, 2016 and 2015 (in thousands).
Three Months Ended September 30, 2016 | % of total revenue | Three Months Ended September 30, 2015 | % of total revenue | Increase (decrease) | % Change | ||||||||||||||||
Revenues, net: | |||||||||||||||||||||
North America | $ | 345,868 | 71.4 | % | $ | 334,944 | 74.2 | % | $ | 10,924 | 3.3 | % | |||||||||
International | 138,558 | 28.6 | % | 116,549 | 25.8 | % | 22,009 | 18.9 | % | ||||||||||||
Total revenues, net | 484,426 | 100.0 | % | 451,493 | 100.0 | % | 32,933 | 7.3 | % | ||||||||||||
Consolidated operating expenses: | |||||||||||||||||||||
Merchant commissions | 28,214 | 5.8 | % | 31,726 | 7.0 | % | (3,512 | ) | (11.1 | )% | |||||||||||
Processing | 96,233 | 19.9 | % | 90,959 | 20.1 | % | 5,274 | 5.8 | % | ||||||||||||
Selling | 34,180 | 7.1 | % | 27,383 | 6.1 | % | 6,797 | 24.8 | % | ||||||||||||
General and administrative | 77,904 | 16.1 | % | 66,142 | 14.6 | % | 11,762 | 17.8 | % | ||||||||||||
Depreciation and amortization | 57,084 | 11.8 | % | 48,526 | 10.7 | % | 8,558 | 17.6 | % | ||||||||||||
Other operating, net | (244 | ) | (0.1 | )% | (1,703 | ) | (0.4 | )% | 1,459 | 85.7 | % | ||||||||||
Operating income | 191,055 | 39.4 | % | 188,460 | 41.7 | % | 2,595 | 1.4 | % | ||||||||||||
Equity method investment loss (income) | 2,744 | 0.6 | % | 6,108 | 1.4 | % | (3,364 | ) | (55.1 | )% | |||||||||||
Other expense, net | 293 | 0.1 | % | (168 | ) | — | % | 461 | (274.4 | )% | |||||||||||
Interest expense, net | 17,814 | 3.7 | % | 17,163 | 3.8 | % | 651 | 3.8 | % | ||||||||||||
Provision for income taxes | 40,586 | 8.4 | % | 48,587 | 10.8 | % | (8,001 | ) | (16.5 | )% | |||||||||||
Net income | $ | 129,618 | 26.8 | % | $ | 116,770 | 25.9 | % | $ | 12,848 | 11.0 | % | |||||||||
Operating income for segments: | |||||||||||||||||||||
North America | $ | 135,760 | $ | 132,428 | $ | 3,332 | 2.5 | % | |||||||||||||
International | 55,295 | 56,032 | (737 | ) | (1.3 | )% | |||||||||||||||
Operating income | $ | 191,055 | $ | 188,460 | $ | 2,595 | 1.4 | % | |||||||||||||
Operating margin for segments: | |||||||||||||||||||||
North America | 39.3 | % | 39.5 | % | (0.2 | )% | |||||||||||||||
International | 39.9 | % | 48.1 | % | (8.2 | )% | |||||||||||||||
Total | 39.4 | % | 41.7 | % | (2.3 | )% | |||||||||||||||
The sum of the columns and rows may not calculate due to rounding.
Revenues and revenue per transaction
Our consolidated revenues increased from $451.5 million in the three months ended September 30, 2015 to $484.4 million in the three months ended September 30, 2016, an increase of $32.9 million, or 7.3%. The increase in our consolidated revenue was primarily due to:
• | The impact of acquisitions during the three months ended September 30, 2016 which contributed approximately $25 million in additional revenue. |
• | Organic growth in certain of our payment programs driven by increases in both volume and revenue. |
• | Partially offsetting this growth was the negative impact of the macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a negative impact on our consolidated segment revenue for the three months ended September 30, 2016 over the comparable period in 2015 by |
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approximately $28 million. We believe the impact of lower fuel prices, primarily in the U.S., and lower fuel spread margins, had an unfavorable impact on consolidated revenues of approximately $18 million. Additionally, changes in foreign exchange rates had an unfavorable impact on consolidated revenues of approximately $10 million due to unfavorable fluctuations in rates in most geographies in the three months ended September 30, 2016 compared to 2015.
Consolidated revenue per transaction decreased from $1.08 in the three months ended September 30, 2015 to $0.97 in the three months ended September 30, 2016, a decrease of $0.11, or 10.2%. This decrease was due primarily to the unfavorable impact of the macroeconomic environment, the mix impact of acquisitions (STP, Travelcard and a small acquisition in Brazil), which have transactions at much lower revenue per transaction than the historical average, and the impact of SVS, partially offset by organic growth. Excluding these items, revenue per transaction increased approximately 3% to $2.88 in the third quarter of 2016 compared to $2.78 in 2015.
Revenue per transaction can vary based on the geography, the relevant merchant and customer relationship, the payment product utilized, and the types of products or services purchased. The revenue mix was influenced by our acquisitions, organic growth in the business, and fluctuations in the macroeconomic environment, including fuel prices, fuel spread margins and foreign exchange rates.
North America segment revenues and revenue per transaction
North America revenues increased from $334.9 million in the three months ended September 30, 2015 to $345.9 million in the three months ended September 30, 2016, an increase of $10.9 million, or 3.3%. The increase in our North America segment revenue was primarily due to:
• | Organic growth in certain of our payment programs driven by increases in both volume and revenue. |
• | Partially offsetting the organic growth was the negative impact of macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a negative impact on our North America segment revenue in three months ended September 30, 2016 over the comparable period in 2015 of approximately $18 million, primarily due to the impact of lower fuel prices and lower fuel spread margins. |
North America segment revenue per transaction increased from $0.90 in the September 30, 2015 to $0.93 in the three months ended September 30, 2016, an increase of $0.03, or 3.4%. When discussing revenue per transaction in the North America segment, we typically exclude the impact of the SVS business, which had approximately 270 million and 274 million transactions in the third quarter of 2016 and 2015, respectively. Revenue per transaction in our North America segment for the third quarter of 2016, excluding SVS, decreased 2% to $2.83 from $2.89 in the third quarter of 2015, due primarily to the impact of lower fuel prices during the quarter and lower fuel spread margins over the comparable period in 2015. Excluding the negative impact of the macroeconomic environment of approximately $18 million and SVS, revenue per transaction increased approximately 4% to $3.00 in the third quarter of 2016 compared to $2.89 in 2015.
International segment revenues and revenue per transaction
International segment revenues increased from $116.5 million in the three months ended September 30, 2015 to $138.6 million in the three months ended September 30, 2016, an increase of $22.0 million, or 18.9%. The increase in our International segment revenue was primarily due to:
• | The impact of acquisitions during the three months ended September 30, 2016 which contributed approximately $25 million in additional revenue. |
• | Organic growth in certain of our payment programs driven by increases in both volume and revenue. |
• | Partially offsetting this growth was the negative impact of the macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a negative impact on our International segment revenue for the three months ended September 30, 2016 over the comparable period in 2015 of approximately $10 million, primarily due to unfavorable fluctuations in foreign exchange rates in most geographies where we do business and slightly lower fuel prices. |
International segment revenue per transaction decreased from $2.56 in the three months ended September 30, 2015 to $1.09 in the three months ended September 30, 2016, a decrease of $1.47 per transaction, or 57.5%. This decrease was due primarily to the unfavorable impact of foreign exchange rates across most geographies and the mix impact of acquisitions (STP, Travelcard and a small acquisition in Brazil), which have transactions at much lower revenue per transaction than the historical average, partially offset by organic growth. Excluding these items, our International revenue per transaction increased approximately 2% to $2.61 in the third quarter of 2016 compared to $2.56 in 2015.
Consolidated operating expenses
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Merchant commissions. Merchant commissions decreased from $31.7 million in the three months ended September 30, 2015 to $28.2 million in the three months ended September 30, 2016, a decrease of $3.5 million, or 11.1%. This decrease was due primarily to the fluctuation of the margin between the wholesale cost and retail price of fuel, which impacted merchant commissions in certain card programs, as well as the impact of fluctuations in foreign exchange rates.
Processing. Processing expenses increased from $91.0 million in the three months ended September 30, 2015 to $96.2 million in the three months ended September 30, 2016, an increase of $5.3 million, or 5.8%. Increases in processing expenses were primarily due to ongoing expenses related to acquisitions completed in 2016, partially offset by the impact of fluctuations in foreign exchange rates.
Selling. Selling expenses increased from $27.4 million in the three months ended September 30, 2015 to $34.2 million in the three months ended September 30, 2016, an increase of $6.8 million, or 24.8%. Increases in spending were primarily due to ongoing expenses related to acquisitions completed in 2016 and Comdata, partially offset by the impact of fluctuations in foreign exchange rates.
General and administrative. General and administrative expenses increased from $66.1 million in the three months ended September 30, 2015 to $77.9 million in the three months ended September 30, 2016, an increase of 11.8 million, or 17.8%. The increase was primarily due to ongoing expenses related to acquisitions completed in 2016, incremental acquisition related expenses of approximately $3 million and an increase in stock based compensation expense of approximately $3 million, partially offset by the impact of fluctuations in foreign exchange rates.
Depreciation and amortization. Depreciation and amortization increased from $48.5 million in the three months ended September 30, 2015 to $57.1 million in the three months ended September 30, 2016, an increase of $8.6 million, or 17.6%. The increase was primarily due to ongoing expenses related to acquisitions completed in 2016, which resulted in an increase of approximately $7.6 million related to the amortization of acquired intangible assets, as well as depreciation of acquired fixed assets, partially offset by decreases due to the impact of fluctuations in foreign exchange rates.
Equity method investment loss (income). Equity method investment loss decreased to $2.7 million in the three months ended September 30, 2016, compared to $6.1 million in the three months ended September 30, 2015. Included in 2015, were higher costs incurred to restructure the operations of the business.
Interest expense, net. Interest expense increased from $17.2 million in the three months ended September 30, 2015 to $17.8 million in the three months ended September 30, 2016, an increase of $0.7 million, or 3.8%. The increase in interest expense is primarily due to the impact of additional borrowings for the acquisitions of STP and Travelcard during the third quarter of 2016. The following table sets forth the average interest rates paid on borrowings under our Credit Facility, excluding the relevant unused credit facility fees.
Three Months Ended September 30, | ||||||
2016 | 2015 | |||||
Term loan A | 1.99 | % | 1.94 | % | ||
Term loan B | 3.75 | % | 3.75 | % | ||
Domestic Revolver A | 2.08 | % | 1.94 | % | ||
Foreign Revolver A | 1.77 | % | — | % | ||
Foreign swing line | 1.73 | % | 2.23 | % | ||
The average unused credit facility fee for Domestic Revolver A was 0.30% and 0.35% in the three month period ending September 30, 2016 and 2015, respectively.
Provision for income taxes. The provision for income taxes decreased from $48.6 million in the three months ended September 30, 2015 to $40.6 million in the three months ended September 30, 2016, a decrease of $8.0 million, or 16.5%. We provide for income taxes during interim periods based on an estimate of our effective tax rate for the year. Discrete items and changes in the estimate of the annual tax rate are recorded in the period they occur. Our effective tax rate decreased from 29.4% for three months ended September 30, 2015 to 23.9% for the three months ended September 30, 2016. The decrease in the provision for income taxes and in the effective tax rate was due primarily to the early adoption of new guidance on accounting for stock-based payments to employees. In addition, the U.K. corporate income tax rate was reduced from 18% to 17% beginning on April 1, 2020. The rate reduction was enacted on September 15, 2016. The total effect of tax rate changes on deferred tax balances is recorded as a component of the income tax provision related to continuing operations for the period in which the law is enacted.
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We pay taxes in many different taxing jurisdictions, including the U.S., most U.S. states and many non-U.S. jurisdictions. The tax rates in certain non-U.S. taxing jurisdictions are lower than the U.S. tax rate. Consequently, as our earnings fluctuate between taxing jurisdictions, our effective tax rate fluctuates.
Net income. For the reasons discussed above, our net income increased from $116.8 million in the three months ended September 30, 2015 to $129.6 million in the three months ended September 30, 2016, an increase of $12.8 million, or 11.0%.
Operating income and operating margin
Consolidated operating income. Operating income increased from $188.5 million in the three months ended September 30, 2015 to $191.1 million in the three months ended September 30, 2016, an increase of $2.6 million, or 1.4%. Our operating margin was 41.7% and 39.4% for the three months ended September 30, 2015 and 2016, respectively. The increase in operating income was primarily due to acquisitions completed in 2016 and organic growth in the business, partially offset by the negative impact of the macroeconomic environment of approximately $23 million, driven by lower fuel prices and spreads, as well as unfavorable fluctuations in foreign exchange rates.
For the purpose of segment operating results, we calculate segment operating income by subtracting segment operating expenses from segment revenue. Segment operating margin is calculated by dividing segment operating income by segment revenue.
North America segment operating income. North America operating income increased from $132.4 million in the three months ended September 30, 2015 to $135.8 million in the three months ended September 30, 2016, an increase of $3.3 million, or 2.5%. North America operating margin was 39.5% and 39.3% for the three months ended September 30, 2015 and 2016, respectively. The increase in operating income was due primarily to organic growth in the business, partially offset by the negative impact of the macroeconomic environment of approximately $15 million, driven by lower fuel prices and spreads.
International segment operating income. International operating income decreased from $56.0 million in the three months ended September 30, 2015 to $55.3 million in the three months ended September 30, 2016, a decrease of $0.7 million, or 1.3%. International operating margin was 48.1% and 39.9% for the three months ended September 30, 2015 and 2016, respectively. The decrease in operating income was due primarily to the negative impact of the macroeconomic environment of approximately $8 million, driven by unfavorable fluctuations in foreign exchange rates, which was partially offset by the impact of acquisitions completed in 2016 and organic growth in the business.
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Nine months ended September 30, 2016 compared to the nine months ended September 30, 2015
The following table sets forth selected consolidated statement of income data for the nine months ended September 30, 2016 and 2015 (in thousands).
Nine Months Ended September 30, 2016 | % of total revenue | Nine Months Ended September 30, 2015 | % of total revenue | Increase (decrease) | % Change | ||||||||||||||||
Revenues, net: | |||||||||||||||||||||
North America | $ | 950,542 | 72.2 | % | $ | 918,333 | 72.2 | % | $ | 32,209 | 3.5 | % | |||||||||
International | 366,051 | 27.8 | % | 353,931 | 27.8 | % | 12,120 | 3.4 | % | ||||||||||||
Total revenues, net | 1,316,593 | 100.0 | % | 1,272,264 | 100.0 | % | 44,329 | 3.5 | % | ||||||||||||
Consolidated operating expenses: | |||||||||||||||||||||
Merchant commissions | 78,755 | 6.0 | % | 80,777 | 6.3 | % | (2,022 | ) | (2.5 | )% | |||||||||||
Processing | 256,738 | 19.5 | % | 246,879 | 19.4 | % | 9,859 | 4.0 | % | ||||||||||||
Selling | 92,680 | 7.0 | % | 81,011 | 6.4 | % | 11,669 | 14.4 | % | ||||||||||||
General and administrative | 209,084 | 15.9 | % | 199,252 | 15.7 | % | 9,832 | 4.9 | % | ||||||||||||
Depreciation and amortization | 141,848 | 10.8 | % | 145,435 | 11.4 | % | (3,587 | ) | (2.5 | )% | |||||||||||
Other operating, net | (690 | ) | (0.1 | )% | (2,475 | ) | (0.2 | )% | 1,785 | 72.1 | % | ||||||||||
Operating income | 538,178 | 40.9 | % | 521,385 | 41.0 | % | 16,793 | 3.2 | % | ||||||||||||
Equity method investment (income) loss | (2,247 | ) | (0.2 | )% | 13,926 | 1.1 | % | (16,173 | ) | (116.1 | )% | ||||||||||
Other expense, net | 1,056 | 0.1 | % | 2,345 | 0.2 | % | (1,289 | ) | (55.0 | )% | |||||||||||
Interest expense, net | 49,905 | 3.8 | % | 54,818 | 4.3 | % | (4,913 | ) | (9.0 | )% | |||||||||||
Provision for income taxes | 132,503 | 10.1 | % | 140,695 | 11.1 | % | (8,192 | ) | (5.8 | )% | |||||||||||
Net income | $ | 356,961 | 27.1 | % | $ | 309,601 | 24.3 | % | $ | 47,360 | 15.3 | % | |||||||||
Operating income for segments: | |||||||||||||||||||||
North America | $ | 367,221 | $ | 351,778 | $ | 15,443 | 4.4 | % | |||||||||||||
International | 170,957 | 169,607 | 1,350 | 0.8 | % | ||||||||||||||||
Operating income | $ | 538,178 | $ | 521,385 | $ | 16,793 | 3.2 | % | |||||||||||||
Operating margin for segments: | |||||||||||||||||||||
North America | 38.6 | % | 38.3 | % | 0.3 | % | |||||||||||||||
International | 46.7 | % | 47.9 | % | (1.2 | )% | |||||||||||||||
Total | 40.9 | % | 41.0 | % | (0.1 | )% | |||||||||||||||
The sum of the columns and rows may not calculate due to rounding.
Revenues and revenue per transaction
Our consolidated revenues increased from $1,272.3 million in the nine months ended September 30, 2015 to $1,316.6 million in the nine months ended September 30, 2016, an increase of $44.3 million, or 3.5%. The increase in our consolidated revenue was primarily due to:
• | The impact of acquisitions during the nine months ended September 30, 2016, which contributed approximately $25 million in additional revenue. |
• | Organic growth in certain of our payment programs driven by increases in both volume and revenue. |
• | Partially offsetting this growth was the negative impact of the macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a negative impact on our |
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consolidated segment revenue for the nine months ended September 30, 2016 over the comparable period in 2015 of approximately $90 million. We believe the impact of lower fuel prices and lower fuel spread margins, primarily in the U.S., had an unfavorable impact on consolidated revenues of approximately $58 million. Additionally, changes in foreign exchange rates had an unfavorable impact on consolidated revenues of approximately $32 million due to unfavorable fluctuations in rates in most geographies in the nine months ended September 30, 2016 compared to 2015.
Consolidated revenue per transaction decreased from $0.99 in the nine months ended September 30, 2015 to $0.91 in the nine months ended September 30, 2016, a decrease of $0.08, or 8.5%. This decrease was due primarily to the unfavorable impact of the macroeconomic environment, the mix impact of acquisitions (STP, Travelcard and a small acquisition in Brazil), which have transactions at much lower revenue per transaction than the historical average, and the impact of SVS, partially offset by organic growth. Excluding these items, revenue per transaction increased approximately 4% to $2.88 in the nine months ended September 30, 2016 compared to $2.78 in 2015.
Revenue per transaction can vary based on the geography, the relevant merchant and customer relationship, the payment product utilized, and the types of products and services purchased. The revenue mix was influenced by our acquisitions, organic growth in the business, and fluctuations in the macroeconomic environment, including fuel prices, fuel spread margins and foreign exchange rates.
North America segment revenues and revenue per transaction
North America revenues increased from $918.3 million in the nine months ended September 30, 2015 to $950.5 million in the nine months ended September 30, 2016, an increase of $32.2 million, or 3.5%. The increase in our North America segment revenue was primarily due to:
• | Organic growth in certain of our payment programs driven by increases in both volume and revenue. |
• | Partially offsetting the organic growth was the negative impact of the macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a negative impact on our North America segment revenue for the nine months ended September 30, 2016 over the comparable period in 2015 by approximately $57 million, primarily due to the impact of lower fuel prices and lower fuel spread margins. |
North America segment revenue per transaction decreased from $0.80 in the nine months ended September 30, 2015 to $0.78 in the nine months ended September 30, 2016, a decrease of $0.02, or 2.6%. When discussing revenue per transaction in the North America segment, we typically exclude the impact of the SVS business, which had approximately 924 million and 872 million transactions in the nine months ended September 30, 2016 and 2015, respectively, at a very low revenue per transaction. Revenue per transaction in our North America segment for the nine months ended September 30, 2016, excluding SVS, decreased 4% to $2.77 from $2.89 compared to 2015, due primarily to the impact of lower fuel prices during the period and lower fuel spread margins over the comparable period in 2015. Excluding the negative impact of the macroeconomic environment of approximately $57 million and SVS, revenue per transaction increased approximately 3% to $2.97 in the nine months ended September 30, 2016 compared to $2.89 in 2015.
International segment revenues and revenue per transaction
International segment revenues increased from $353.9 million in the nine months ended September 30, 2015 to $366.1 million in the nine months ended September 30, 2016, an increase of $12.1 million, or 3.4%. The increase in our International segment revenue was primarily due to:
• | The impact of acquisitions during the nine months ended September 30, 2016, which contributed approximately $25 million in additional revenue. |
• | Organic growth in certain of our payment programs driven by increases in both volume and revenue. |
• | Partially offsetting this growth was the negative impact of the macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a negative impact on our International segment revenue for the nine months ended September 30, 2016 over the comparable period in 2015, of approximately $33 million, primarily due to unfavorable fluctuations in foreign exchange rates in most geographies where we do business and slightly lower fuel prices. |
International segment revenue per transaction decreased from $2.56 in the nine months ended September 30, 2015 to $1.57 in the nine months ended September 30, 2016, a decrease of $1.00 per transaction, or 38.8%. This decrease was due primarily to the unfavorable impact of foreign exchange rates across most geographies and the mix impact of acquisitions (STP, Travelcard and a small acquisition in Brazil), which have transactions at much lower revenue per transaction than the historical average, partially offset by organic growth. Excluding these items, our International revenue per transaction increased approximately 5% to $2.69 in the nine months ended September 30, 2016 compared to $2.56 in 2015.
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Consolidated operating expenses
Merchant commissions. Merchant commissions decreased from $80.8 million in the nine months ended September 30, 2015 to $78.8 million in the nine months ended September 30, 2016, a decrease of $2.0 million, or 2.5%. This decrease was primarily to the fluctuation of the margin between the wholesale cost and retail price of fuel, which impacted merchant commissions in certain card programs, as well as the impact of fluctuations in foreign exchange rates.
Processing. Processing expenses increased from $246.9 million in the nine months ended September 30, 2015 to $256.7 million in the nine months ended September 30, 2016, an increase of $9.9 million, or 4.0%. Increases in processing expenses were primarily due to ongoing expenses related to acquisitions completed in 2016, partially offset by the impact of fluctuations in foreign exchange rates.
Selling. Selling expenses increased from $81.0 million in the nine months ended September 30, 2015 to $92.7 million in the nine months ended September 30, 2016, an increase of $11.7 million, or 14.4%. Increases in spending primarily due to ongoing expenses related to acquisitions completed in 2016 and Comdata, were partially offset by the impact of fluctuations in foreign exchange rates.
General and administrative. General and administrative expenses increased from $199.3 million in the nine months ended September 30, 2015 to $209.1 million in the nine months ended September 30, 2016, an increase of $9.8 million, or 4.9%, The increase was primarily due to increased stock based compensation of approximately $5 million over the comparable period in 2015, ongoing expenses related to acquisitions completed in 2016 and incremental acquisition related expenses of approximately $3 million, partially offset by the impact of fluctuations in foreign exchange rates.
Depreciation and amortization. Depreciation and amortization decreased from $145.4 million in the nine months ended September 30, 2015 to $141.8 million in the nine months ended September 30, 2016, a decrease of $3.6 million, or 2.5%. The decrease was primarily due to movements in and adjustments from changes in foreign exchange rates of approximately $2.9 million, partially offset by ongoing expenses related to acquisitions completed in 2016.
Equity method investment (income) loss. Equity method investment income was $2.2 million in the nine months ended September 30, 2016 as compared to a loss of $13.9 million in the nine months ended September 30, 2015. Included in 2016, was a non-recurring net recovery of purchase price of approximately $11 million and included in 2015, were higher costs incurred to restructure the operations of the business.
Interest expense, net. Interest expense decreased from $54.8 million in the nine months ended September 30, 2015 to $49.9 million in the nine months ended September 30, 2016, a decrease of $4.9 million, or 9.0%. The decrease in interest expense is primarily due to the impact of delevering from the first quarter of 2015 through the third quarter of 2016 and overall lower interest rates, partially offset by the impact of additional borrowings for acquisitions in 2016. The following table sets forth the average interest rates paid on borrowings under our Credit Facility, excluding the relevant unused credit facility fees.
Nine Months Ended September 30, | ||||||
2016 | 2015 | |||||
Term loan A | 1.96 | % | 1.99 | % | ||
Term loan B | 3.75 | % | 3.75 | % | ||
Domestic Revolver A | 2.00 | % | 1.99 | % | ||
Foreign Revolver A | 1.77 | % | 2.36 | % | ||
Foreign swing line | 1.73 | % | 2.29 | % | ||
The average unused credit facility fee for Domestic Revolver A was 0.30% and 0.36% in the nine month period ending September 30, 2016 and 2015, respectively.
Provision for income taxes. The provision for income taxes decreased from $140.7 million in the nine months ended September 30, 2015 to $132.5 million in the nine months ended September 30, 2016, a decrease of $8.2 million, or 5.8%. We provide for income taxes during interim periods based on an estimate of our effective tax rate for the year. Discrete items and changes in the estimate of the annual tax rate are recorded in the period they occur. Our effective tax rate decreased from 31.2% for nine months ended September 30, 2015 to 27.1% for the nine months ended September 30, 2016. The decrease in the provision for income taxes and the effective tax rate was due to a one-time net gain recorded by our equity method investment, which favorably impacted pre-tax earnings but was not subject to U.S. income taxes, and the impact of the early adoption of the new guidance on accounting for stock-based payments to employees.
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We pay taxes in many different taxing jurisdictions, including the U.S., most U.S. states and many non-U.S. jurisdictions. The tax rates in certain non-U.S. taxing jurisdictions are lower than the U.S. tax rate. Consequently, as our earnings fluctuate between taxing jurisdictions, our effective tax rate fluctuates.
Net income. For the reasons discussed above, our net income increased from $309.6 million in the nine months ended September 30, 2015 to $357.0 million in the nine months ended September 30, 2016, an increase of $47.4 million, or 15.3%.
Operating income and operating margin
Consolidated operating income. Operating income increased from $521.4 million in the nine months ended September 30, 2015 to $538.2 million in the nine months ended September 30, 2016, an increase of $16.8 million, or 3.2%. Our operating margin was 41.0% and 40.9% for the nine months ended September 30, 2015 and 2016, respectively. The increase in operating income was primarily due to organic growth in the business and the impact of acquisitions completed in 2016, partially offset by the negative impact of the macroeconomic environment of approximately $68 million, driven by lower fuel prices and spreads, as well as unfavorable fluctuations in foreign exchange rates.
For the purpose of segment operating results, we calculate segment operating income by subtracting segment operating expenses from segment revenue. Segment operating margin is calculated by dividing segment operating income by segment revenue.
North America segment operating income. North America operating income increased from $351.8 million in the nine months ended September 30, 2015 to $367.2 million in the nine months ended September 30, 2016, an increase of $15.4 million, or 4.4%. North America operating margin was 38.3% and 38.6% for the nine months ended September 30, 2015 and 2016, respectively. The increase in operating income was due primarily to organic growth in the business, partially offset by the negative impact of the macroeconomic environment of approximately $51 million, driven by lower fuel prices and spreads.
International segment operating income. International operating income increased from $169.6 million in the nine months ended September 30, 2015 to $171.0 million in the nine months ended September 30, 2016, an increase of $1.4 million, or 0.8%. International operating margin was 47.9% and 46.7% for the nine months ended September 30, 2015 and 2016, respectively. The increase in operating income was due to the impact of acquisitions completed in 2016 and organic growth in the business, partially offset by the negative impact of the macroeconomic environment of approximately $18 million, driven by unfavorable fluctuations in foreign exchange rates.
Liquidity and capital resources
Our principal liquidity requirements are to service and repay our indebtedness, make acquisitions of businesses and commercial account portfolios, repurchase shares of our common stock and meet working capital needs, tax and capital expenditure needs.
Sources of liquidity
At September 30, 2016, our cash balances totaled $604.8 million, with approximately $199.3 million restricted. Restricted cash represents customer deposits in the Czech Republic and in our Comdata business in the U.S., which we are restricted from using other than to repay customer deposits.
At September 30, 2016, cash and cash equivalents held in foreign subsidiaries where we have determined we are permanently reinvested is $250.2 million. All of the cash and cash equivalents held by our foreign subsidiaries, excluding restricted cash, are available for general corporate purposes. Our current intent is to permanently reinvest these funds outside of the U.S. Our current expectation for funds held in our foreign subsidiaries is to use the funds to finance foreign organic growth, to pay for potential future foreign acquisitions and to repay any foreign borrowings that may arise from time to time. We currently believe that funds generated from our U.S. operations, along with available borrowing capacity in the U.S. will be sufficient to fund our U.S. operations for the foreseeable future, and therefore do not foresee a need to repatriate cash held by our foreign subsidiaries in a taxable transaction to fund our U.S. operations. However, if at a future date or time these funds are needed for our operations in the U.S. or we otherwise believe it is in our best interests to repatriate all or a portion of such funds, we may be required to accrue and pay U.S. taxes to repatriate these funds. No assurances can be provided as to the amount or timing thereof, the tax consequences related thereto or the ultimate impact any such action may have on our results of operations or financial condition.
We utilize an accounts receivable Securitization Facility to finance a majority of our domestic fuel card receivables, to lower our cost of borrowing and more efficiently use capital. We generate and record accounts receivable when a customer makes a purchase from a merchant using one of our charge card products and generally pay merchants within seven days of receiving the merchant billing. As a result, we utilize the Securitization Facility as a source of liquidity to provide the cash flow required to fund merchant payments while we collect customer balances. These balances are primarily composed of charge balances,
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which are typically billed to the customer on a weekly, semimonthly or monthly basis, and are generally required to be paid within 14 days of billing. We also consider the undrawn amounts under our Securitization Facility and Credit Facility as funds available for working capital purposes and acquisitions. At September 30, 2016, we had the ability to generate approximately $75 million of additional liquidity under our Securitization Facility. At September 30, 2016, we had approximately $438 million available under our Credit Facility.
Based on our current forecasts and anticipated market conditions, we believe that our current cash balances, our available borrowing capacity and our ability to generate cash from operations, will be sufficient to fund our liquidity needs for at least the next twelve months. However, we regularly evaluate our cash requirements for current operations, commitments, capital requirements and acquisitions, and we may elect to raise additional funds for these purposes in the future, either through the issuance of debt or equity securities. We may not be able to obtain additional financing on terms favorable to us, if at all.
Cash flows
The following table summarizes our cash flows for the nine months ended September 30, 2016 and 2015.
Nine Months Ended September 30, | ||||||||
(in millions) | 2016 | 2015 | ||||||
Net cash provided by operating activities | $ | 404.3 | $ | 524.5 | ||||
Net cash used in investing activities | (1,371.5 | ) | (46.5 | ) | ||||
Net cash provided by (used in) financing activities | 976.4 | (502.3 | ) | |||||
Operating activities. Net cash provided by operating activities decreased from $524.5 million in the nine months ended September 30, 2015 to $404.3 million in the nine months ended September 30, 2016. The decrease is primarily due to changes in working capital. Fluctuations in receivables and payables, which affect working capital the most significantly, are largely due to timing of month end transactions and volume. The decrease was partially offset by additional net income of $47.4 million during the nine months ended September 30, 2016 over the comparable period in 2015 and a one-time nonrecurring net gain of approximately $11 million recorded by our equity method investment.
Investing activities. Net cash used in investing activities increased from $46.5 million in the nine months ended September 30, 2015 to $1,371.5 million in the nine months ended September 30, 2016. This increase is primarily due to the increase in cash paid for acquisitions completed in 2016.
Financing activities. Net cash used in financing activities was $502.3 million in the nine months ended September 30, 2015 compared to net cash provided by financing activities of $976.4 million in the nine months ended September 30, 2016. The increase in cash provided by financing activities is primarily due to an increase in net borrowings on our revolving A credit facility and our term loans of $852 million and $593 million, respectively, to fund acquisitions during the nine months ended September 30, 2016.
Capital spending summary
Our capital expenditures increased from $29.5 million in the nine months ended September 30, 2015 to $41.9 million in the nine months ended September 30, 2016, an increase of $12.4 million, or 41.8%. This increase is primarily due to increased spending on strategic projects, including continued investment in our GFN application.
Credit Facility
We are party to a $3.96 billion Credit Agreement (the “Credit Facility”) with a syndicate of banks, which we originally entered into on October 24, 2014. The Credit Facility provides for (a) a revolving A credit facility in the amount of $1.0 billion, with sublimits for letters of credit, swing line loans and multicurrency borrowings, (b) a revolving B facility in the amount of $35 million for loans in Australian Dollars or New Zealand Dollars, (c) a term loan A facility in the amount of $2.02 billion and (d) a term loan B facility in the amount $300 million. On August 22, 2016, we entered into the first Amendment to the existing Credit Agreement. The Amendment established an incremental term A loan in the amount of $600 million under the Credit Agreement accordion feature. The proceeds from the additional $600 million in term A loans were used to partially finance the STP acquisition. The Amendment also established an accordion feature for borrowing an additional $500 million in term A, term B or revolver A debt. The Credit Facility contains representations, warranties and events of default, as well as certain affirmative and negative covenants, customary for financings of this nature. These covenants include limitations on our ability to pay dividends and make other restricted payments under certain circumstances and compliance with certain financial ratios. As of September 30, 2016, we were in compliance with each of the covenants under the Credit Facility.
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The stated maturity dates for our term A loans, revolving loans, and letters of credit under the New Credit Agreement is November 14, 2019 and November 14, 2021 for our term loan B. The term loans are payable in quarterly installments and are due on the last business day of each March, June, September, and December with the final principal payment due on the respective maturity date. Borrowings on the revolving line of credit are repayable at our option of one, two, three or nine months after borrowing, depending on the term of the borrowing on the facility. Borrowings on the foreign swing line of credit are due no later than ten business days after such loan is made.
At September 30, 2016, we had $2,435.8 million in borrowings outstanding on term loan A, $245.6 million in borrowings outstanding on term loan B, $430.0 million in borrowings outstanding on the domestic revolving A facility, $162.1 million in borrowings outstanding on the foreign revolving A facility and $5.2 million in borrowings outstanding on the swing line revolving A facility. Unamortized debt discounts are $7.8 million at September 30, 2016. During the nine months ended September 30, 2016, we made principal payments of $83.3 million on the term loan A, $1.9 million on the term loan B, $645.0 million on the domestic revolving A facility and $188.1 million on the foreign revolving A facility.
Securitization Facility
We are a party to a receivables purchase agreement among FleetCor Funding LLC, as seller, PNC Bank, National Association as administrator, and various purchaser agents, conduit purchasers and related committed purchasers parties thereto, which was amended and restated as of December 1, 2015. We refer to this arrangement as the Securitization Facility. The current purchase limit under the Securitization Facility is $950 million. There is a program fee equal to one month LIBOR and the Commercial Paper Rate of 0.66% plus 0.90% and 0.43% plus 0.90% as of September 30, 2016 and December 31, 2015, respectively. The unused facility fee is payable at a rate of 0.40% per annum as of September 30, 2016 and December 31, 2015, respectively.
The Securitization Facility provides for certain termination events, which includes nonpayment, upon the occurrence of which the administrator may declare the facility termination date to have occurred, may exercise certain enforcement rights with respect to the receivables, and may appoint a successor servicer, among other things.
We were in compliance with the financial covenant requirements related to our Securitization Facility as of September 30, 2016.
Other Liabilities
In connection with our acquisition of certain businesses, we owe final payments of $3.9 million, which are payable in the next twelve months.
Stock Repurchase Program
On February 4, 2016, our Board of Directors approved a stock repurchase program under which we may begin purchasing up to an aggregate of $500 million of the Company's common stock over the next 18 months. Any stock repurchases may be made at times and in such amounts as we deem appropriate. The timing and amount of stock repurchases, if any, will depend on a variety of factors including the stock price, market conditions, corporate and regulatory requirements, and any additional constraints related to material inside information we may possess. Any repurchases are expected to be funded by available cash flow from the business and working capital. There were 259,145 shares totaling $35.5 million repurchased under the Program during the nine months ended September 30, 2016.
Critical accounting policies and estimates
In applying the accounting policies that we use to prepare our consolidated financial statements, we necessarily make accounting estimates that affect our reported amounts of assets, liabilities, revenue and expenses. Some of these estimates require us to make assumptions about matters that are highly uncertain at the time we make the accounting estimates. We base these assumptions and the resulting estimates on historical information and other factors that we believe to be reasonable under the circumstances, and we evaluate these assumptions and estimates on an ongoing basis. In many instances, however, we reasonably could have used different accounting estimates and, in other instances, changes in our accounting estimates could occur from period to period, with the result in each case being a material change in the financial statement presentation of our financial condition or results of operations. We refer to estimates of this type as critical accounting estimates.
Accounting estimates necessarily require subjective determinations about future events and conditions. During the three months ended September 30, 2016, we have not adopted any new critical accounting policies that had a significant impact upon our consolidated financial statements, have not changed any critical accounting policies and have not changed the application of any critical accounting policies from the year ended December 31, 2015. For critical accounting policies, refer to the Critical Accounting Estimates in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
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included in our Annual Report on Form 10-K for the year ended December 31, 2015 and our summary of significant accounting policies in Note 1 of our notes to the unaudited consolidated financial statements in this Form 10-Q.
Management’s Use of Non-GAAP Financial Measures
We have included in the discussion above certain financial measures that were not prepared in accordance with GAAP. Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. Below, we define the non-GAAP financial measures, provide a reconciliation of the non-GAAP financial measure to the most directly comparable financial measure calculated in accordance with GAAP, and discuss the reasons that we believe this information is useful to management and may be useful to investors.
Adjusted revenues
We have defined the non-GAAP measure adjusted revenues as revenues, net less merchant commissions as reflected in our income statement.
We use adjusted revenues as a basis to evaluate our revenues, net of the commissions that are paid to merchants to participate in our card programs. The commissions paid to merchants can vary when market spreads fluctuate in much the same way as revenues are impacted when market spreads fluctuate. We believe that adjusted revenue is an appropriate supplemental measure of financial performance and may be useful to investors to understanding our revenue performance on a consistent basis. Adjusted revenues are not intended to be a substitute for GAAP financial measures and should not be used as such.
Set forth below is a reconciliation of adjusted revenues to the most directly comparable GAAP measure, revenues, net (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenues, net | $ | 484,426 | $ | 451,493 | $ | 1,316,593 | $ | 1,272,264 | ||||||||
Merchant commissions | (28,214 | ) | (31,726 | ) | (78,755 | ) | (80,777 | ) | ||||||||
Total adjusted revenues | $ | 456,212 | $ | 419,767 | $ | 1,237,838 | $ | 1,191,487 | ||||||||
Adjusted net income and adjusted net income per diluted share
We have defined the non-GAAP measure adjusted net income as net income as reflected in our statement of income, adjusted to eliminate (a) non-cash stock-based compensation expense related to stock-based compensation awards, (b) amortization of deferred financing costs, discounts and intangible assets, (c) amortization of the premium recognized on the purchase of receivables, (d) our proportionate share of amortization of intangible assets at our equity method investment, and (e) a non-recurring net gain at our equity method investment.
We have defined the non-GAAP measure adjusted net income per diluted share as the calculation previously noted divided by the weighted average diluted shares outstanding as reflected in our statement of income.
We use adjusted net income to eliminate the effect of items that we do not consider indicative of our core operating performance. We believe it is useful to exclude non-cash stock based compensation expense from adjusted net income because non-cash equity grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time and stock based compensation expense is not a key measure of our core operating performance. We also believe that amortization expense can vary substantially from company to company and from period to period depending upon their financing and accounting methods, the fair value and average expected life of their acquired intangible assets, their capital structures and the method by which their assets were acquired. Therefore, we have excluded amortization expense from adjusted net income. We believe that adjusted net income and adjusted net income per diluted share are appropriate supplemental measures of financial performance and may be useful to investors to understanding our operating performance on a consistent basis. Adjusted net income and adjusted net income per diluted share are not intended t o be a substitute for GAAP financial measures and should not be used as such.
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Set forth below is a reconciliation of adjusted net income and adjusted net income per diluted share to the most directly comparable GAAP measure, net income and net income per diluted share (in thousands, except per share amounts):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||
2016² | 2015 | 2016² | 2015 | ||||||||||||||||
Net income | $ | 129,618 | $ | 116,770 | $ | 356,961 | $ | 309,601 | |||||||||||
Net income per diluted share | 1.36 | 1.24 | 3.75 | 3.29 | |||||||||||||||
Stock based compensation | 17,405 | 13,887 | 50,025 | 44,387 | |||||||||||||||
Amortization of intangible assets | 46,341 | 39,869 | 112,455 | 120,055 | |||||||||||||||
Amortization of premium on receivables | 1,348 | 812 | 3,687 | 2,439 | |||||||||||||||
Amortization of deferred financing costs and discounts | 1,917 | 1,778 | 5,568 | 5,295 | |||||||||||||||
Amortization of intangibles at equity method investment | 2,406 | 3,032 | 7,533 | 8,404 | |||||||||||||||
Non-recurring net gain at equity method investment | — | — | (10,845 | ) | — | ||||||||||||||
Total pre-tax adjustments | 69,417 | 59,378 | 168,423 | 180,580 | |||||||||||||||
Income tax impact of pre-tax adjustments at the effective tax rate* | (15,726 | ) | (18,579 | ) | 1 | (46,705 | ) | (57,758 | ) | 1 | |||||||||
Adjusted net income | $ | 183,310 | $ | 157,570 | $ | 478,679 | $ | 432,424 | |||||||||||
Adjusted net income per diluted share | $ | 1.92 | $ | 1.67 | $ | 5.03 | $ | 4.60 | |||||||||||
Diluted shares | 95,307 | 94,157 | 95,204 | 94,069 | |||||||||||||||
1Effective tax rate utilized excludes the impact of a one time tax benefit recognized during the three months ended September 30, 2015 of approximately $7.9 million.
2Reflects the impact of the Company's adoption of Accounting Standards Update 2016-09, "Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting", to simplify several aspects of the accounting for the stock-based compensation, including the income tax consequences.
*Excludes the results of our equity method investment on our effective tax rate, as results from our equity method investment are reported within the Consolidated Income Statements on a post-tax basis and no tax-over-book outside basis differences related to our equity method investment reversed during 2016.
Special Cautionary Notice Regarding Forward-Looking Statements
This report contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about our beliefs, expectations and future performance, are forward-looking statements. Forward-looking statements can be identified by the use of words such as “anticipate,” “intend,” “believe,” “estimate,” “plan,” “seek,” “project” or “expect,” “may,” “will,” “would,” “could” or “should,” the negative of these terms or other comparable terminology.
These forward-looking statements are not a guarantee of performance, and you should not place undue reliance on such statements. We have based these forward-looking statements largely on our current expectations and projections about future events. Forward-looking statements are subject to many uncertainties and other variable circumstances, such as delays or failures associated with implementation; fuel price and spread volatility; changes in credit risk of customers and associated losses; the actions of regulators relating to payment cards or investigations; failure to maintain or renew key business relationships; failure to maintain competitive offerings; failure to maintain or renew sources of financing; failure to complete, or delays in completing, anticipated new partnership arrangements or acquisitions and the failure to successfully integrate or otherwise achieve anticipated benefits from such partnerships or acquired businesses; failure to successfully expand business internationally; other risks related to our international operations, including the potential impact to our business as a result of the United Kingdom's recent referendum to leave the European Union; the impact of foreign exchange rates on operations, revenue and income; the effects of general economic conditions on fueling patterns and the commercial activity of fleets, as well as the other risks and uncertainties identified under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015. These factors could cause our actual results and experience to differ materially from any forward-looking statement. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements included in this report are made only as of the date hereof. We do not
37
undertake, and specifically disclaim, any obligation to update any such statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
As of September 30, 2016, there have been no material changes to our market risk from that disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015.
Item 4. | Controls and Procedures |
As of September 30, 2016, management carried out, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2016, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and are designed to ensure that information required to be disclosed in those reports is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. | Legal Proceedings |
As of the date of this filing, we are not currently party to any legal proceedings or governmental inquiries or investigations that we consider to be material and we were not involved in any material legal proceedings that terminated during the third quarter. We are and may become, however, subject to lawsuits from time to time in the ordinary course of our business.
Item 1A. | Risk Factors |
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, which could materially affect our business, financial condition or future results.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
On February 4, 2016, our Board of Directors approved a stock repurchase program (the "Program") under which we may begin purchasing up to an aggregate of $500 million of the Company's common stock over the next 18 months. The following table presents information with respect to purchases of common stock of the Company made during the three months ended September 30, 2016 by the Company as defined in Rule 10b-18(a)(3) under the Exchange Act:
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of the Publicly Announced Plan | Maximum Value that May Yet be Purchased Under the Publicly Announced Plan (in thousands) | ||||||||||
July 1, 2016 through July 31, 2016 | 67,854 | $ | 139.31 | 259,145 | $ | 464,514 | ||||||||
Item 3. | Defaults Upon Senior Securities |
Not applicable.
Item 4. | Mine Safety Disclosures |
Not applicable.
Item 5. | Other Information |
Not applicable.
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Item 6. Exhibits
Exhibit No. | ||
2.1 | Acquisition agreement to acquire Serviços e Tecnologia de Pagamentos S.A. (incorporated by reference to Exhibit 2.1 to the Registrant's Form 8-K, File No. 001-35004, filed with the Securities and Exchange Commission ("SEC") on March 18, 2016) | |
3.1 | Amended and Restated Certificate of Incorporation of FleetCor Technologies, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K, File No. 001-35004, filed with the SEC on March 25, 2011) | |
3.2 | Amended and Restated Bylaws of FleetCor Technologies, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K, File No. 001-35004, filed with the SEC on March 25, 2011) | |
4.1 | Form of Stock Certificate for Common Stock (incorporated by reference to Exhibit 4.1 to Amendment No. 3 to the Registrant’s Registration Statement on Form S-1, File No. 333-166092, filed with the SEC on June 29, 2010) | |
10.1 | First Amendment to Credit Agreement and Lender Joinder Agreement, dated as of August 22, 2016, by and among FleetCor Funding LLC, FleetCor Technologies Operating Company, LLC and PNC Bank, National Association, as administrator for a group of purchasers and purchaser agents, and certain other parties | |
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act, as amended | |
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act, as amended | |
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2001 | |
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2001 | |
101 | The following financial information for the Registrant formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Unaudited Consolidated Statements of Income, (iii) the Unaudited Consolidated Statements of Comprehensive Income; (iv) the Unaudited Consolidated Statements of Cash Flows and (v) the Notes to Unaudited Consolidated Financial Statements | |
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SIGNATURES
Pursuant to the requirements 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, in their capacities indicated on November 9, 2016.
FleetCor Technologies, Inc. | ||||
(Registrant) | ||||
Signature | Title | |||
/s/ Ronald F. Clarke | President, Chief Executive Officer and Chairman of the Board of Directors (Duly Authorized Officer and Principal Executive Officer) | |||
Ronald F. Clarke | ||||
/s/ Eric R. Dey | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |||
Eric R. Dey | ||||
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Exhibit 10.1
FIRST AMENDMENT TO CREDIT AGREEMENT AND LENDER JOINDER AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT AND LENDER JOINDER AGREEMENT (this “Amendment”) dated as of August 22, 2016 (the “First Amendment Effective Date”) is entered into among FleetCor Technologies Operating Company, LLC, a Georgia limited liability company (the “Company”), FLEETCOR TECHNOLOGIES, INC., a Delaware corporation (the “Parent”), the Designated Borrowers party hereto (including FleetCor Luxembourg Holding2, a société à responsabilité limitée, incorporated under the laws of the Grand-Duchy of Luxembourg, with a share capital of EUR 143,775,650, having its registered office at 5, rue Guillaume Kroll, L-1882 Luxembourg and registered with the Registre de Commerce et des Sociétés, Luxembourg under number B 121.980), the other Guarantors party hereto, the Lenders party hereto and Bank of America, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”), L/C Issuer and Swing Line Lender. Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement (as defined below) as amended hereby.
RECITALS
WHEREAS pursuant to that certain Credit Agreement dated as of October 24, 2014 (as amended, modified, supplemented, increased or extended from time to time, the “Credit Agreement”) among the Company, the Parent, the Designated Borrowers from time to time party thereto, the Lenders from time to time party thereto and the Administrative Agent, the Lenders have agreed to provide the Borrowers with the credit facilities provided for therein; and
WHEREAS, pursuant to Section 2.02(f) of the Credit Agreement, the Company has requested that each of the Lenders identified on Schedule 1 attached hereto (the “Incremental Term Loan Lenders”) provide a portion of an Incremental Term A Loan in the aggregate principal amount of $600,000,000 to the Company; and
WHEREAS, each Incremental Term Loan Lender has agreed to provide a portion of such Incremental Term A Loan on the terms and conditions set forth herein and to become an “Incremental Term Loan Lender” under the Credit Agreement in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Establishment of Incremental Term Loan. Subject to the terms and conditions set forth herein, a new term loan in the original principal amount of $600,000,000 (herein the “Incremental Term Loan”) is hereby established as an Incremental Term A Loan pursuant to Section 2.02(f)(ii) of the Credit Agreement. In furtherance thereof:
(a) Subject to the terms and conditions set forth herein and in the Credit Agreement, each Incremental Term Loan Lender severally agrees to make its portion of the Incremental Term Loan in a single advance to the Company in Dollars on the date hereof in the amount of its respective Incremental Term Loan Commitment set forth on Schedule 1 attached hereto; provided that, after giving effect to such advances, the Outstanding Amount of the Incremental Term Loan shall not exceed the aggregate amount of the Incremental Term Loan Commitments of the Incremental Term Loan Lenders. The Incremental Term Loan Commitment and Applicable Percentage for each of the Incremental Term Loan Lenders with respect to the Incremental Term Loan as of the date hereof shall be as set forth on Schedule 1 attached hereto. The existing Schedule 2.01 to the Credit Agreement shall be deemed to be amended to include the information set forth on Schedule 1 attached hereto.
(b) The Applicable Rate with respect to the Incremental Term Loan shall be the following percentages per annum, based upon the Consolidated Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 7.02(a) of the Credit Agreement:
Pricing Tier | Consolidated Leverage Ratio | Eurocurrency Rate Loans | Base Rate Loans | |
1 | > 3.25:1.0 | 2.00% | 1.00% | |
2 | > 2.50:1.0 but <3.25:1.0 | 1.75% | 0.75% | |
3 | > 1.50:1.0 but < 2.50:1.0 | 1.50% | 0.50% | |
4 | > 0.75:1.0 but < 1.50:1.0 | 1.25% | 0.25% | |
5 | < 0.75:1.0 | 1.00% | 0.00% | |
Any increase or decrease in the Applicable Rate resulting from a change in the Consolidated Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 7.02(a) of the Credit Agreement; provided, however, that if a Compliance Certificate is not delivered when due in accordance with such Section, then, upon the request of the Required Lenders, Pricing Tier 1 shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and shall continue to apply until the first Business Day immediately following the date a Compliance Certificate is delivered in accordance with Section 7.02(a) of the Credit Agreement, whereupon the Applicable Rate shall be adjusted based upon the calculation of the Consolidated Leverage Ratio contained in such Compliance Certificate. Notwithstanding anything to the contrary contained in this subsection, the determination of the Applicable Rate for any period shall be subject to the provisions of Section 2.10(b) of the Credit Agreement.
(c) The Incremental Term Loan Maturity Date for the Incremental Term Loan shall be November 14, 2019.
(d) The Company shall repay to the Incremental Term Loan Lenders the outstanding principal amount of the Incremental Term Loan in consecutive installments on the last Business Day of each March, June, September and December, beginning on September 30, 2016, in the respective amount set forth below opposite such installment (as such installments may hereafter be adjusted as a result of prepayments made pursuant to Section 2.05 of the Credit Agreement), unless accelerated sooner pursuant to Section 9.02 of the Credit Agreement:
Installment Number | Principal Amortization Payment |
$7,500,000 | |
2 | $7,500,000 |
3 | $7,500,000 |
4 | $7,500,000 |
5 | $7,500,000 |
6 | $7,500,000 |
7 | $15,000,000 |
8 | $15,000,000 |
9 | $15,000,000 |
10 | $15,000,000 |
11 | $22,500,000 |
12 | $22,500,000 |
13 | $22,500,000 |
Incremental Term Loan Maturity Date | Outstanding Principal Balance of Incremental Term Loan |
The entire outstanding principal balance of the Incremental Term Loan shall be due and payable in full on the Incremental Term Loan Maturity Date.
(e) The Company shall use the proceeds of the Incremental Term Loan to partially finance the acquisition by the Parent, directly or indirectly, of Serviços e Tecnologia de Pagamentos S.A., a corporation organized under the laws of Brazil (the “STP Acquisition”), and fees and expenses related to the STP Acquisition and the closing of the Incremental Term Loan.
2. Amendments. The Credit Agreement is hereby amended as follows:
(a) The following definitions are added to Section 1.01 in the appropriate alphabetical order and shall read as follows:
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
“First Amendment Effective Date” means August 22, 2016.
“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.
(b) The definitions of “Arrangers,” “Attributable Indebtedness,” “Consolidated Leverage Ratio,” “Consolidated Scheduled Funded Debt Payments,” “Consolidated Tangible Assets,” “Disposition,” “Excluded Property” and “Receivables Facility” in Section 1.01 are amended and restated in their entireties and shall read as follows:
“Arrangers” means (a) Bank of America (or any of its designated Affiliates, including any other registered broker-dealer wholly-owned by Bank of America Corporation to which all or substantially all of Bank of America Corporation’s or any of its subsidiaries’ investment banking, commercial lending services or related businesses may be transferred following the date of this Agreement) in its capacity as a joint lead arranger and joint bookrunner, (b) Barclays Bank PLC in its capacity as a joint lead arranger and joint bookrunner, (c) Wells Fargo Securities, LLC in its capacity as a joint lead arranger and joint bookrunner, (d) PNC Capital Markets, LLC in its capacity as joint lead arranger and (e) The Bank of Tokyo-Mitsubishi UFJ, Ltd., in its capacity as joint lead arranger.
“Attributable Indebtedness” means, on any date, (a) in respect of any Capital Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, (b) in respect of any Synthetic Lease of any Person, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a Capital Lease and (c) in respect of any Receivables Facility of any Person, the amount of obligations outstanding on any date of determination that would be characterized as principal if such Receivables Facility had been structured as a secured loan rather than a sale.
“Consolidated Leverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated Funded Indebtedness (excluding Attributable Indebtedness and other Indebtedness (if any), in each case with respect to all Receivables Facilities in an aggregate amount not to exceed $1,000,000,000) as of such date to (b) Consolidated EBITDA for the period of the four fiscal quarters most recently ended.
“Consolidated Scheduled Funded Debt Payments” means for any period for the Parent and its Subsidiaries on a consolidated basis, the sum of all scheduled payments of principal on Consolidated Funded Indebtedness, as determined in accordance with GAAP. For purposes of this definition, “scheduled payments of principal” (a) shall be determined without giving effect to any reduction of such scheduled payments resulting from the application of any voluntary or mandatory prepayments made during the applicable period, (b) shall be deemed to include the Attributable Indebtedness in respect of Capital Leases, Synthetic Leases and Receivables Facilities and (c) shall not include any voluntary prepayments or mandatory prepayments required pursuant to Section 2.05.
“Consolidated Tangible Assets” means, as of any date of determination, the book value of total assets of the Parent and its Subsidiaries on a consolidated basis, as determined in accordance
with GAAP, excluding (a) assets that are considered to be intangible assets under GAAP (including customer lists, goodwill, computer software, copyrights, trade names, trademarks, patents, franchises and licenses) and (b) receivables and related assets that are sold in connection with, and pursuant to the terms of, a Receivables Facility.
“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any Sale and Leaseback Transaction) of any property by any Loan Party or any Subsidiary (including the Equity Interests of any Subsidiary), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith, but excluding (a) the sale, lease, license, transfer or other disposition of inventory in the ordinary course of business; (b) the sale, lease, license, transfer or other disposition in the ordinary course of business of surplus, obsolete or worn out property no longer used or useful in the conduct of business of any Loan Party and its Subsidiaries; (c) any sale, lease, license, transfer or other disposition of property to any Loan Party or any Subsidiary; provided, that if the transferor of such property is a Loan Party (i) the transferee thereof must be a Loan Party or (ii) to the extent such transaction constitutes an Investment, such transaction is permitted under Section 8.02, (d) any Involuntary Disposition, and (e) any sales, transfers or other dispositions of accounts, payments, payment intangibles, receivables, rights to future lease payments or residuals or similar rights to payment and related assets in connection with, and pursuant to the terms of, a Receivables Facility permitted under Section 8.03(f).
“Excluded Property” means, with respect to any Loan Party, including any Person that becomes a Loan Party after the Initial Borrowing Date as contemplated by Section 7.12, (a) any owned or leased real property, (b) any owned or leased personal property which is located outside of the United States, (c) any personal property (including, without limitation, motor vehicles) in respect of which perfection of a Lien is not either (i) governed by the Uniform Commercial Code or (ii) effected by appropriate evidence of the Lien being filed in either the United States Copyright Office or the United States Patent and Trademark Office, unless requested by the Administrative Agent or the Required Lenders, (d) the Equity Interests of any direct Foreign Subsidiary of a Loan Party to the extent not required to be pledged to secure the Obligations pursuant to Section 7.13(a), (e) any property which, subject to the terms of Section 8.09, is subject to a Lien of the type described in Section 8.01(i) pursuant to documents which prohibit such Loan Party from granting any other Liens in such property, (f) any accounts, payments, payment intangibles, receivables, rights to future lease payments or residuals or similar rights to payment and related assets sold, contributed or otherwise conveyed to FleetCor Funding LLC, to any other Subsidiary of the Parent formed as a special purpose entity, or to any other Person, or encumbered, in each case pursuant to a Receivables Facility permitted under Section 8.03(f), and (g) any deposit accounts, securities accounts, securities, cash, Cash Equivalents and other similar investments permitted under money transmitter laws of a Loan Party that holds a “money transmitter” (or similar) license under state Law, in the aggregate amount required by applicable Law to be owned by a holder of such license free of Liens and other similar restrictions.
“Receivables Facility” means, collectively, with respect to any Person, (a) any financing transaction or series of financing transactions pursuant to which such Person or any Subsidiary of such Person may sell, convey or otherwise transfer, or grant a security interest in, accounts, payments, payment intangibles, receivables, rights to future lease payments or residuals or similar rights to payment and related assets (i) to a special purpose subsidiary or affiliate of such Person; (ii) as security for a credit agreement or other borrowing arrangement of one or more Foreign Subsidiaries, if such assets so sold, conveyed, transferred or encumbered are assets of one or more Foreign Subsidiaries; or (iii) that is a factoring arrangement, and (b) each trade receivables commercial paper, co-purchase conduit facility or other receivables facility pursuant to which the Parent or any of its Subsidiaries sells or contributes accounts, payments, payment intangibles, receivables, rights to future lease payments or residuals or similar rights to payment and related assets to FleetCor Funding LLC or to any other Subsidiary of the Parent formed as a special purpose entity in connection with any such transaction.
(c) The portion of clause (d) of the definition of “Defaulting Lender” in Section 1.01 appearing before the proviso in such clause is amended and restated in its entirety and shall read as follows:
(d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity, or (iii) become the subject of a Bail-In Action;
(d) Clause (e) of the definition of “Funded Indebtedness” in Section 1.01 is amended and restated in its entirety and shall read as follows:
(e) the Attributable Indebtedness of Capital Leases, Receivables Facilities and Synthetic Leases;
(e) The definitions of “Foreign A/R Facility” and “Securitization Transaction” are deleted in their entireties from Section 1.01.
(f) The lead-in to Section 2.02(f)(i) is amended and restated in its entirety and shall read as follows:
The Company may, at any time and from time to time prior to the Maturity Date with respect to the Aggregate Revolving A Commitments, upon prior written notice to the Administrative Agent, increase the Aggregate Revolving A Commitments by a maximum aggregate amount of up to the sum of (x) FIVE HUNDRED MILLION DOLLARS ($500,000,000) less (y) the amount, if any, of any Incremental Term Loans instituted after the First Amendment Effective Date pursuant to clause (ii) below (other than any Incremental Term B Loans instituted pursuant to clause (ii)(z) below in this subsection (f)), with additional Revolving A Commitments from any existing Lender with a Revolving Commitment or new Revolving A Commitments from any other Person (other than any Borrower or any Affiliate or Subsidiary of any Borrower) selected by the Borrowers and reasonably acceptable to the Administrative Agent, the L/C Issuer and the Swing Line Lender; provided that:
(g) Upon the effectiveness of this Amendment but immediately prior to the establishment and advance of the Incremental Term Loan pursuant to Section 1 of this Amendment, the sum “FIVE HUNDRED MILLION DOLLARS ($500,000,000)” appearing in Section 2.02(f)(ii) is deleted and the sum “SIX HUNDRED MILLION DOLLARS ($600,000,000)” is inserted in lieu thereof (it being acknowledged and agreed that, immediately after the establishment and advance of the Incremental Term Loan pursuant to Section 1 of this Amendment, Section 2.02(f)(ii) of the Credit Agreement shall be amended as provided in Section 2(h) below in this Amendment).
(h) Immediately after the establishment and advance of the Incremental Term Loan pursuant to Section 1 of this Amendment, the lead-in to Section 2.02(f)(ii) is amended and restated in its entirety and shall read as follows:
Upon prior written notice to the Administrative Agent, the Company may institute one or more incremental term loan tranches (each an “Incremental Term Loan”) that are Incremental Term A Loans, at any time prior to the Maturity Date with respect to the Term A Loan, or that are Incremental Term B Loans, at any time prior to the Maturity Date with respect to the Term B Loan, in a maximum aggregate amount (for all Incremental Term Loans instituted after the First Amendment Effective Date) of up to the sum of (x) FIVE HUNDRED MILLION DOLLARS ($500,000,000) less (y) the amount, if any, of any increase in the Aggregate Revolving A Commitments pursuant to clause (i) above, plus (z) an unlimited amount of Incremental Term B Loans that are instituted at any time that the Consolidated Leverage Ratio (in each case, giving effect to the incurrence of such Incremental
Term B Loan on a Pro Forma Basis and calculated as of the most recent fiscal quarter for which the Company was required to deliver financial statements pursuant to Section 7.01(a) or (b)) is less than 3.00 to 1.00, provided that:
(i) The last sentence of Section 2.15(a)(iv) is amended and restated in its entirety and shall read as follows:
Subject to Section 11.20, no reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.
(j) A new Section 6.24 is added to Article VI immediately after Section 6.23 and shall read as follows:
6.24 EEA Financial Institution.
No Loan Party is an EEA Financial Institution.
(k) Section 8.01(q) is amended and restated in its entirety and shall read as follows:
(q) Liens on accounts, payments, payment intangibles, receivables, rights to future lease payments or residuals or similar rights to payment and related assets sold, contributed or otherwise conveyed or encumbered pursuant to a Receivables Facility permitted under Section 8.03(f);
(l) Section 8.03(f) is amended and restated in its entirety and shall read as follows:
(f) Attributable Indebtedness and other Indebtedness (if any) in connection with Receivables Facilities (including Guarantees of such Attributable Indebtedness and other Indebtedness (if any) that is otherwise permitted under this Section 8.03(f)), not to exceed $1,200,000,000 in the aggregate at any one time outstanding, and all yield, interest, fees, indemnities and other amounts related thereto;
(m) Section 8.09(b) is amended and restated in its entirety and shall read as follows:
(b) Enter into, or permit to exist, any Contractual Obligation that prohibits or otherwise restricts the existence of any Lien upon any of its property in favor of the Administrative Agent (for the benefit of the holders of the Obligations) for the purpose of securing the Obligations, whether now owned or hereafter acquired, or requiring the grant of any security for any obligation if such property is given as security for the Obligations, except (i) any document or instrument governing Indebtedness incurred pursuant to Section 8.03(e), provided that any such restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith, (ii) in connection with any Permitted Lien or any document or instrument governing any Permitted Lien, provided that any such restriction contained therein relates only to the asset or assets subject to such Permitted Lien, (iii) pursuant to customary restrictions and conditions contained in any agreement relating to the sale of any property permitted under Section 8.05, pending the consummation of such sale, (iv) any document or instrument governing any Receivables Facility permitted under Section 8.03(f), provided that any such restriction relates only to the applicable accounts receivable and related assets actually sold, conveyed, pledged, encumbered or otherwise contributed pursuant to such Receivables Facility, and (v) applicable Laws that require a holder of a “money transmitter” (or similar) license under state Law to own a specified amount of deposit accounts, securities accounts, securities, cash, Cash Equivalents and/or other similar investments permitted under money transmitter laws free of Liens and other similar restrictions.
(n) A new subsection (g) is added to Section 11.06 immediately after subsection (f) thereof and shall read as follows:
(g) Arranger Assignment. The parties hereby agree that Bank of America (and any of its Affiliates) may, without notice to any Person, assign its rights and obligations under this Agreement as an Arranger to any other registered broker-dealer wholly-owned by Bank of America Corporation to which all or substantially all of Bank of America Corporation’s or any of its subsidiaries’ investment banking, commercial lending services or related businesses may be transferred after the First Amendment Effective Date.
(o) A new Section 11.20 is added to Article XI immediately after Section 11.19 and shall read as follows:
11.20 Acknowledgement and Consent to Bail-In of EEA Financial Institutions.
Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Lender that is an EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by: (a) the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any Lender that is an EEA Financial Institution; and (b) the effects of any Bail-in Action on any such liability, including, if applicable, (i) a reduction in full or in part or cancellation of any such liability; (ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or (iii) the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.
3. Conditions Precedent. This Amendment shall be effective upon satisfaction of the following conditions precedent:
(a) Receipt by the Administrative Agent of counterparts of this Amendment duly executed by (i) a Responsible Officer of the Company, the Designated Borrowers and the Guarantors and (ii) each of the Incremental Term Loan Lenders and (if any) the other Required Lenders.
(b) Receipt by the Administrative Agent of Incremental Term Notes dated the First Amendment Effective Date executed by a Responsible Officer of the Company in favor of each Incremental Term Loan Lender requesting an Incremental Term Note from the Company.
(c) Receipt by the Administrative Agent of a Pro Forma Compliance Certificate, duly executed by a Responsible Officer of the Parent, demonstrating that, upon giving effect to the institution of the Incremental Term Loan and the consummation of the STP Acquisition, in each case on a Pro Forma Basis, the Loan Parties are in compliance with the financial covenants set forth in Section 8.11 of the Credit Agreement as of the most recent fiscal quarter for which the Company was required to deliver financial statements pursuant to Section 7.01(a) or (b) of the Credit Agreement.
(d) Receipt by the Administrative Agent of a certificate of each Loan Party, duly executed by a Responsible Officer of each such Loan Party, dated the date hereof, (i) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to the Incremental Term Loan, (ii) certifying and attaching copies of the Organization Documents of such Loan Party, certified to be true and complete as of a recent date
by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation or organization, where applicable (or, as to any such Organization Documents that have not been amended, modified or terminated since the Initial Borrowing Date, certifying that such Organization Documents have not been amended, modified or terminated since the Initial Borrowing Date and remain in full force and effect, and true and complete, in the form delivered to the Administrative Agent on the Initial Borrowing Date), (iii) certifying as to the incumbency, identity, authority and capacity of each Responsible Officer of such Loan Party authorized to act as a Responsible Officer in connection with the Incremental Term Loan, this Amendment and the other Loan Documents to which such Loan Party is a party, and (iv) in the case of the Company, certifying that, before and after giving effect to the Incremental Term Loan, (A) the representations and warranties contained in Article VI of the Credit Agreement and the other Loan Documents are true and correct in all material respects (and in all respects if any such representation or warranty is already qualified by materiality) on and as of the First Amendment Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects (and in all respects if any such representation or warranty is already qualified by materiality) as of such earlier date (and, for purposes hereof, the representations and warranties contained in subsections (a) and (b) of Section 6.05 of the Credit Agreement shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 7.01 of the Credit Agreement), and (B) no Default or Event of Default exists.
(e) Receipt by the Administrative Agent of such documents and certifications as the Administrative Agent may require to evidence that each Loan Party is duly organized or formed, and is validly existing, in good standing and qualified to engage in business in its state of organization or formation.
(f) Receipt by the Administrative Agent of favorable domestic opinions of legal counsel to the Loan Parties, addressed to the Administrative Agent and each Lender (including each Incremental Term Loan Lender), and dated as of the First Amendment Effective Date, in form and substance satisfactory to the Administrative Agent.
(g) Receipt by the Administrative Agent of evidence satisfactory to the Administrative Agent that the STP Acquisition has been consummated or will be consummated substantially concurrently with (and, in any case, within three (3) Business Days after) the funding of the Incremental Term Loan (including, if requested by the Administrative Agent, a certificate duly executed by a Responsible Officer of the Parent to such effect).
(h) Receipt by MLPFS (or any of its designated Affiliates) and the Incremental Term Loan Lenders of any fees required to be paid on or before the First Amendment Effective Date.
(i) The Administrative Agent shall have received a Loan Notice with respect to the Incremental Term Loan in accordance with the requirements of the Credit Agreement.
(j) Unless waived by the Administrative Agent, the Company shall have paid all fees, charges and disbursements of counsel to the Administrative Agent (directly to such counsel, if so requested by the Administrative Agent) to the extent invoiced prior to or on the First Amendment Effective Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Company and the Administrative Agent).
4. Miscellaneous.
(a) The Credit Agreement and the obligations of the Loan Parties thereunder and under the other Loan Documents are hereby ratified and confirmed and shall remain in full force and effect according to their terms, as amended hereby.
(b) Each Guarantor (i) acknowledges and consents to all of the terms and conditions of the Incremental Term Loan and this Amendment, and the transactions contemplated hereby, (ii) affirms all of its
obligations under the Loan Documents to which it is a party and (iii) agrees that this Amendment and all documents executed in connection herewith do not operate to reduce or discharge its obligations under the Loan Documents to which it is a party.
(c) Each Loan Party hereby represents and warrants to the Administrative Agent and the Lenders as follows:
(i) The execution, delivery and performance by each Loan Party of this Amendment have been duly authorized by all necessary corporate or other organizational action, and do not (A) contravene the terms of any of such Person’s Organization Documents; (B) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (I) any material Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (II) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (C) violate any Law.
(ii) This Amendment has been duly executed and delivered by the Loan Parties and constitutes each of the Loan Parties’ legal, valid and binding obligations, enforceable in accordance with its terms, subject to laws generally affecting creditors’ rights, to statutes of limitations and to principles of equity.
(iii) No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Amendment or the Credit Agreement as amended hereby.
(iv) The representations and warranties of the Loan Parties set forth in Article VI of the Credit Agreement and in each other Loan Document are true and correct in all material respects (and in all respects if any such representation or warranty is already qualified by materiality) on and as of the date hereof with the same effect as if made on and as of the date hereof, except to the extent such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects (and in all respects if any such representation or warranty is already qualified by materiality) as of such earlier date, and except that for purposes of this Section 4(c)(iv), the representations and warranties contained in subsections (a) and (b) of Section 6.05 of the Credit Agreement shall be deemed to refer to the most recent financial statements furnished pursuant to subsections (a) and (b), respectively, of Section 7.01 of the Credit Agreement.
(v) No Default has occurred and is continuing or would result from the transactions contemplated by this Amendment.
(vi) The Persons signing this Amendment as Guarantors include all of the Subsidiaries existing as of the date of this Amendment that are required to become Guarantors pursuant to the Credit Agreement.
(d) Each Incremental Term Loan Lender (i) represents and warrants that (A) it has full power and authority, and has taken all action necessary, to execute and deliver this Amendment and to consummate the transactions contemplated hereby and to become an Incremental Term Loan Lender under the Credit Agreement, (B) it meets all requirements of an Eligible Assignee under the Credit Agreement (subject to receipt of such consents as may be required under the Credit Agreement), (C) from and after the date hereof, it shall be bound by the provisions of the Credit Agreement as an Incremental Term Loan Lender thereunder and shall have the obligations of an Incremental Term Loan Lender thereunder, (D) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 7.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Amendment on the basis of which it has made such analysis
and decision independently and without reliance on the Administrative Agent or any other Incremental Term Loan Lender, and (E) if it is a Foreign Lender, it has delivered any documentation required to be delivered by it pursuant to the terms of the Credit Agreement; and (ii) agrees that (A) it will, independently and without reliance on the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (B) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as an Incremental Term Loan Lender.
(e) Each of the Administrative Agent, the Company, the Designated Borrowers and the Guarantors agrees that, as of the date hereof, each Incremental Term Loan Lender shall (i) be a party to the Credit Agreement and the other Loan Documents, (ii) be an “Incremental Term Loan Lender” for all purposes of the Credit Agreement and the other Loan Documents and (iii) have the rights and obligations of an Incremental Term Loan Lender under the Credit Agreement and the other Loan Documents.
(f) The address of each Incremental Term Loan Lender for purposes of all notices and other communications is as set forth on the Administrative Questionnaire delivered by such Incremental Term Loan Lender to the Administrative Agent.
(g) This Amendment may be executed in any number of counterparts and by the various parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. Delivery of an executed counterpart of this Amendment by telecopy or in any other electronic format (such as .pdf format) shall be effective as delivery of a manually executed original counterpart of this Amendment.
(h) This Amendment is a Loan Document, a Lender Joinder Agreement and an Incremental Facility Amendment for all purposes. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under any of the Loan Documents, nor, except as expressly provided herein, constitute a waiver or amendment of any provision of any of the Loan Documents.
(i) If for any reason the STP Acquisition is not consummated using the proceeds of the Incremental Term Loan for the purposes described in Section 1(e) above on or before September 6, 2016, the Company shall repay the entire outstanding principal balance of the Incremental Term Loan, together with all accrued but unpaid interest thereon, in full on such date. The company’s failure to timely comply with the covenant in the preceding sentence shall constitute an Event of Default under the Credit Agreement for all purposes.
(j) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. This Amendment shall be further subject to the terms and conditions of Sections 11.14 and 11.15 of the credit agreement, the terms of which are incorporated herein by reference as if fully set forth herein.
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered by a duly authorized officer as of the date first above written.
COMPANY: FLEETCOR TECHNOLOGIES OPERATING COMPANY, LLC,
a Georgia limited liability company
By: /s/ Steve Pisciotta
Name: Steve Pisciotta
Title: Treasurer
PARENT: FLEETCOR TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ Steve Pisciotta
Name: Steve Pisciotta
Title: Treasurer
DESIGNATED
BORROWERS: FLEETCOR UK ACQUISITION LIMITED,
a private limited company registered in England and Wales
By: /s/ Steve Pisciotta
Name: Steve Pisciotta
Title: Director
ALLSTAR BUSINESS SOLUTIONS LIMITED,
a private limited company registered in England and Wales
By: /s/ Steve Pisciotta
Name: Steve Pisciotta
Title: Director
BUSINESS FUEL CARDS PTY LTD (formerly FleetCor Technologies Australia Pty Ltd),
a proprietary limited company registered in Australia, in accordance with section 127 of the Corporations Act 2001 (Cth)
By:/s/Eric Dey
Name: Eric Dey
Title: Director
By: /s/ Steve Pisciotta
Name: Steve Pisciotta
Title: Director
FLEETCOR TECHNOLOGIES NEW ZEALAND LIMITED,
a company registered in New Zealand
By: /s/ Steven Joseph Pisciotta
Name: Steven Joseph Pisciotta
Title: Director
FLEETCOR LUXEMBOURG HOLDING2,
a société à responsabilité limitée incorporated under the laws of Luxembourg
By:/s/ Steve Pisciotta
Name: Steve Pisciotta
Title: Type A Manager
GUARANTORS: CFN HOLDING CO.,
a Delaware corporation
By:/s/ Steve Pisciotta
Name: Steve Pisciotta
Title: Treasurer
CLC GROUP, INC.,
a Delaware corporation
By:/s/ Steve Pisciotta
Name: Steve Pisciotta
Title: Treasurer
CORPORATE LODGING CONSULTANTS, INC.,
a Kansas corporation
By:/s/ Steve Pisciotta
Name: Steve Pisciotta
Title: Treasurer
CREW TRANSPORTATION SPECIALISTS, INC.,
a Kansas corporation
By:/s/ Steve Pisciotta
Name: Steve Pisciotta
Title: Treasurer
MANNATEC, INC.,
a Georgia corporation
By:/s/ Steve Pisciotta
Name: Steve Pisciotta
Title: Treasurer
FLEETCOR FUEL CARDS LLC,
a Delaware limited liability company
By:/s/ Steve Pisciotta
Name: Steve Pisciotta
Title: Treasurer
Fleet Management Holding Corporation,
a Delaware corporation
By:/s/ Steve Pisciotta
Name: Steve Pisciotta
Title: Treasurer
DISCRETE WIRELESS, INC.,
a Georgia corporation
By:/s/ Steve Pisciotta
Name: Steve Pisciotta
Title: Treasurer
PACIFIC PRIDE SERVICES, LLC,
a Delaware limited liability company
By:/s/ Steve Pisciotta
Name: Steve Pisciotta
Title: Treasurer
FCHC Holding Company, LLC,
a Delaware limited liability company
By:/s/ John Coughlin
Name: John Coughlin
Title: President
COMDATA INC.,
a Delaware corporation
By: /s/ Robert E. Kribbs
Name: Robert E. Kribbs
Title: Vice President
COMDATA TN, INC.,
a Tennessee corporation
By: /s/ Robert E. Kribbs
Name: Robert E. Kribbs
Title: Vice President
COMDATA NETWORK, INC. OF CALIFORNIA,
a California corporation
By: /s/ Robert E. Kribbs
Name: Robert E. Kribbs
Title: Vice President
ADMINISTRATIVE
AGENT: BANK OF AMERICA, N.A.,
as Administrative Agent
By: /s/ Christine Trotter
Name: Christine Trotter
Title: Assistant Vice President
LENDERS: BANK OF AMERICA, N.A.,
as a Lender, Swing Line Lender and L/C Issuer
By: /s/ Ryan Maples
Name: Ryan Maples
Title: Senior Vice President
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as a Lender
By:/s/ Lex Mayers
Name: Lex Mayers
Title: Senior Vice President
PNC BANK, NATIONAL ASSOCIATION,
As a Lender
By: /s/ Susan J. Dimmick
Name: Susan J. Dimmick
Title: Managing Director
HSBC BANK USA, NATIONAL ASSOCIATION,
As a Lender
By: /s/ Rafael De Paoli
Name: Rafael De Paoli
Title: Senior Vice President
TD BANK, N. A.,
As a Lender
By: /s/ Craig Welch
Name: Craig Welch
Title: Senior Vice President
COMPASS BANK
As a Lender
By: /s/ April Chan
Name: April Chan
Title: Executive Vice President
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
As a Lender
By: /s/ Maria Iarriccio
Name: Maria Iarriccio
Title: Director
SUMITOMO MITSUI BANKING CORPORATION,
As a Lender
By: /s/ David W. Kee
Name: David W. Kee
Title: Managing Director
JPMORGAN CHASE BANK, N.A.,
As a Lender
By: /s/ Peter B. Thayer
Name: Peter B. Thayer
Title: Managing Director
REGIONS BANK,
As a Lender
By: /s/ Jason Douglas
Name: Jason Douglas
Title: Director
CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK,
As a Lender
By: /s/ Kaye Ea
Name: Kaye Ea
Title: Managing Director
By: /s/ Gordon Yip
Name: Gordon Yip
Title: Director
BARCLAYS BANK PLC,
As a Lender
By: /s/ Christopher Aitkin
Name: Christopher Aitkin
Title: Assistant Vice President
CITIZENS BANK, N.A.,
As a Lender
By: /s/ Michael McWalters
Name: Michael McWalters
Title: Vice President
THE BANK OF NOVA SCOTIA,
As a Lender
By: /s/ Michael Grad
Name: Michael Grad
Title: Director
CAPITAL ONE BANK, N.A.,
As a Lender
By: /s/ Jacob Villere
Name: Jacob Villere
Title: Senior Vice President
FIFTH THIRD BANK, an Ohio banking corporation,
As a Lender
By: /s/ Andy Tessema
Name: Andy Tessema
Title: Vice President
MIZUHO BANK LTD.,
As a Lender
By: /s/ James R. Fayen
Name: James R. Fayen
Title: Managing Director
ROYAL BANK OF CANADA,
As a Lender
By: /s/ Michael G. Wang
Name: Michael G. Wang
Title: Authorized Signatory
KEYBANK NATIONAL ASSOCIATION,
As a Lender
By: /s/ Geoff Smith
Name: Geoff Smith
Title: Senior Vice President
SYNOVUS BANK,
As a Lender
By: /s/ Matthew McKee
Name: Matthew McKee
Title: Corporate Banker
BANK OF THE WEST,
As a Lender
By: /s/ Chandra Pierson
Name: Chandra Pierson
Title: Vice President
BNP PARIBAS,
As a Lender
By: /s/ Matthew Harvey
Name: Matthew Harvey
Title: Managing Director
By: /s/ Liz Cheng
Name: Liz Cheng
Title: Vice President
CAPITAL BANK CORPORATION,
As a Lender
By: /s/ Rebecca L. Hetzer
Name: Rebecca L. Hetzer
Title: Senior Vice President
AZB Funding 7
As a Lender
By: /s/ Kei Kajimura
Name: Kei Kajimura
Title: Authorized Signatory
[STATE BANK OF INDIA, NEW YORK BRANCH],
As a Lender
By: /s/ Manoranyan Panda
Name: Manoranyan Panda
Title: VP & Head (CMC)
STIFEL BANK & TRUST,
As a Lender
By: /s/ John H. Phillips
Name: John H. Phillips
Title: Executive Vice President
FIRST HAWAIIAN BANK,
As a Lender
By: /s/ Jeffrey Inouye
Name: Jeffrey Inouye
Title: Vice President
MANUFACTURERS BANK,
As a Lender
By: /s/ Dirk Price
Name: Dirk Price
Title: Vice President, Senior Portfolio Manager
Wintrust Bank,
As a Lender
By: /s/ Amanda Scott
Name: Amanda Scott
Title: Officer
California First National Bank,
As a Lender
By: /s/ D.N. Lee
Name: D.N. Lee
Title: S.V.P./
MACQUARIE BANK LIMITED,
As a Lender
By: /s/ Robert Trevena
Name: Robert Trevena
Title: Division Director
By: /s/ Fiona Smith
Name: Fiona Smith
Title: Division Director
Signed in Sydney, POA Ref:
#2090 dated 26 Nov 2015
SCHEDULE 1
Schedule 1
INCREMENTAL TERM LOAN COMMITMENTS AND APPLICABLE PERCENTAGES
LENDER | INCREMENTAL TERM LOAN COMMITMENT | APPLICABLE PERCENTAGE OF INCREMENTAL TERM LOAN COMMITMENTS |
Bank of America, N.A. | $102,800,000.00 | 17.133333334% |
Wells Fargo Bank, National Association | $56,000,000.00 | 9.333333333% |
The Bank of Tokyo-Mitsubishi UFJ, Ltd. | $100,000,000.00 | 16.666666667% |
PNC Bank, National Association | $50,000,000.00 | 8.333333333% |
TD Bank, N.A. | $50,000,000.00 | 8.333333333% |
Regions Bank | $50,000,000.00 | 8.333333333% |
State Bank of India, New York Branch | $30,000,000.00 | 5.000000000% |
Sumitomo Mitsui Banking Corporation | $30,000,000.00 | 5.000000000% |
Credit Agricole Corporate and Investment Bank | $25,500,000.00 | 4.250000000% |
HSBC Bank USA, National Association | $25,000,000.00 | 4.166666667% |
Capital One Bank, N.A. | $28,700,000.00 | 4.783333333% |
Mizuho Bank Ltd. | $25,000,000.00 | 4.166666667% |
Royal Bank of Canada | $15,000,000.00 | 2.500000000% |
The Bank of Nova Scotia | $12,000,000.00 | 2.000000000% |
TOTAL: | $600,000,000.00 | 100.000000000% |
Exhibit 31.1
CERTIFICATIONS
I, Ronald F. Clarke, certify that:
1. I have reviewed this quarterly report on Form 10-Q of FleetCor Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ Ronald F. Clarke |
Ronald F. Clarke |
Chief Executive Officer |
November 9, 2016
Exhibit 31.2
CERTIFICATIONS
I, Eric R. Dey, certify that:
1. I have reviewed this quarterly report on Form 10-Q of FleetCor Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ Eric R. Dey |
Eric R. Dey |
Chief Financial Officer |
November 9, 2016
Exhibit 32.1
CERTIFICATIONS PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Quarterly Report of FleetCor Technologies, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the period ended September 30, 2016, as filed with the Securities and Exchange Commission (the “Report”), Ronald F. Clarke, Chief Executive Officer of the Company, does hereby certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Ronald F. Clarke |
Ronald F. Clarke |
Chief Executive Officer |
November 9, 2016
[A signed original of this written statement required by Section 906 has been provided to FleetCor Technologies, Inc. and will be retained by FleetCor Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.]
Exhibit 32.2
CERTIFICATIONS PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Quarterly Report of FleetCor Technologies, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the period ended September 30, 2016, as filed with the Securities and Exchange Commission (the “Report”), Eric R. Dey, Chief Financial Officer of the Company, does hereby certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Eric R. Dey |
Eric R. Dey |
Chief Financial Officer |
November 9, 2016
[A signed original of this written statement required by Section 906 has been provided to FleetCor Technologies, Inc. and will be retained by FleetCor Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.]