Printer Friendly Version View printer-friendly version
<< Back

Wright Express Reports Fourth-Quarter Financial Results

Company Pays Down $42 Million of Financing Debt and Reaches Low End of Targeted Leverage Range; Board Approves $75 Million Share Repurchase Program
SOUTH PORTLAND, Maine, Feb 07, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Wright Express Corporation (NYSE: WXS), a leading provider of payment processing and information management services to the U.S. commercial and government fleet industry, today reported financial results for the fourth quarter and year ended December 31, 2006.

Total revenue for the fourth quarter of 2006 increased 10% to $70.8 million from $64.4 million for the fourth quarter of 2005. Net income to common shareholders on a GAAP basis for the fourth quarter of 2006 was $19.0 million, or $0.46 per diluted share, compared with $28.3 million, or $0.69 per diluted share, for the comparable quarter last year. On a non-GAAP basis, the Company's adjusted net income for the fourth quarter of 2006 was $13.4 million, or $0.33 per diluted share, compared with $13 million, or $0.32 per diluted share, for the year-earlier period.

Wright Express uses fuel-price derivative instruments to mitigate financial risks associated with the variability in fuel prices. For the fourth quarter of 2006, the Company's GAAP financial results include an unrealized $10.0 million pre-tax, non-cash, mark-to-market gain on these instruments. For the fourth quarter of 2005, the Company reported an unrealized pre-tax, non-cash, mark-to-market gain of $20.9 million.

For the year ended December 31, 2006, net income on a GAAP basis was $74.6 million, or $1.81 per diluted share, compared with $18.7 million, or $0.46 per diluted share, for full-year 2005. On a non-GAAP basis, adjusted net income increased 14% to $55.8 million for full-year 2006 from $48.9 million a year earlier.

The Company's cash flow statement for 2006 includes $87 million related to the purchase of the receivables associated with the ExxonMobil fleet portfolio, which was purchased by Wright Express and transitioned to a payment processing relationship.

Exhibit 1 reconciles adjusted net income for the three- and 12-month periods ended December 31, 2006 and December 31, 2005, which has not been determined in accordance with GAAP, to net income as determined in accordance with GAAP.

Management uses the non-GAAP measures presented within this news release to evaluate the Company's performance on a comparable basis, to eliminate the volatility associated with its derivative instruments and to measure the amount of cash that is available for making scheduled payments on the Company's financing debt and discretionary purposes. Management believes that investors may find these measures useful for the same purposes, but cautions that they should not be considered a substitute for disclosure in accordance with GAAP.

    Fourth-Quarter 2006 Performance Metrics
     - Average number of vehicles serviced increased 3% from the
       fourth quarter of 2005 to approximately 4.4 million.
     - Total fuel transactions processed increased 2% from the fourth quarter
       of 2005 to 59.2 million.  Payment processing transactions increased 4%
       to 45.1 million, and transaction processing transactions decreased 5%
       to 14.1 million.
     - Average expenditure per payment processing transaction decreased 4% to
       $48.69 from $50.64 for the same period last year.
     - Average retail fuel price declined 6% to $2.37 per gallon, from
       $2.53 per gallon for the fourth quarter a year ago.
     - Total MasterCard purchase volume grew 46% to $332.9 million, from
       $228.6 million for the comparable period in 2005.
     - Wright Express paid $42 million in principal on its term loan and line
       of credit during the fourth quarter of 2006.

To provide investors with additional insight into its operational performance, Wright Express has introduced in this news release a table of selected non-financial metrics for the five quarters ended December 31, 2006. This table is presented as Exhibit 2.

Management Comments on the Fourth Quarter

"This was another solid quarter in several key areas of our business," said Michael Dubyak, president and chief executive officer. "In terms of bringing in new business, servicing our accounts at a high level, maintaining strong margins and generating healthy cash flow, Wright Express continued to perform well. The 10-year contract extensions we signed with ExxonMobil and Imperial Oil of Canada (Esso Canada) demonstrate that our strategic relationships recognize our strengths in marketing and portfolio management. With the signings, we have now locked in our two largest private label partners for the next 10 years."

"Our results for the quarter also reflected a larger-than-anticipated positive mismatch on our derivatives," Dubyak said. "At the same time, however, we saw slower growth in transaction volume with a slight decline in the number of transactions per active vehicle. Although credit loss was higher this quarter, primarily due to a second reserve associated with one customer, credit quality across our overall portfolio has improved. We also booked an additional non-cash charge of $1 million related to our stock-based compensation programs unrelated to stock options."

"The past year was successful for Wright Express, and we expect further progress in 2007," said Dubyak. "Our derivatives strategy remains in place, with the goal of continuing to enhance earnings stability and visibility. We will see positive results from this strategy as the year unfolds. We also anticipate excellent results at the front end of our business in 2007. Demand from new customers for fleet card products is strong, our sales pipeline looks good, and we are committed to investing in the new products and powerful sales organization necessary to capitalize on this potential."

Share Repurchase Program

Wright Express also is announcing that its board of directors has approved a share repurchase program authorizing the Company to purchase up to $75 million of its common stock over the next 24 months. The program will be funded primarily through the Company's future cash flows. Share repurchases will be made on the open market and may be commenced or suspended at any time. The Company's management, based on its evaluation of market and economic conditions and other factors, will determine the timing and number of shares repurchased.

"Our strong cash flow enabled Wright Express to pay down $42 million on our financing debt in the fourth quarter, raising total repayments for the year to more than $70 million," Dubyak said. "As a result, we concluded 2006 at the low end of our targeted leverage range. This share repurchase program reflects our confidence in the Company's ability to both generate healthy levels of cash from operations in the future, and support further reinvestment in the growth of our business, while also enabling us to enhance shareholder value by repurchasing our stock."

Financial Guidance

Wright Express Corporation is issuing financial guidance for the first quarter and full year 2007. The Company's guidance excludes the impact of non-cash, mark-to-market adjustments on the Company's fuel-price-related derivative instruments. The fuel prices referenced below are based on the applicable NYMEX futures price:

     - For the first quarter of 2007, revenue in the range of $65 million to
       $70 million.  This is based on an assumed average retail fuel price of
       $2.34 per gallon.
     - First-quarter 2007 net income excluding unrealized gain or loss on
       derivative instruments in the range of $13 million to $14.5 million, or
       $0.32 to $0.35 per diluted share, based on approximately 41 million
       shares outstanding.
     - For the full year 2007, revenue in the range of $290 million to
       $310 million.  This is based on an assumed average retail fuel price
       of $2.37 per gallon.
     - For the full year 2007, net income excluding unrealized gain or loss
       on derivative instruments in the range of $71 million to $75 million,
       or $1.71 to $1.81 per diluted share, based on approximately
       41 million shares outstanding.

    Conference Call Details

In conjunction with this announcement, Wright Express will host a conference call today, February 7, at 5:00 p.m. (ET). The conference call will be webcast live on the Internet, and can be accessed at the Investor Relations section of the Wright Express website, www.wrightexpress.com. The live conference call also can be accessed by dialing (800) 361-0912 or (913) 981-5559. A replay of the webcast will be available on the Company's website for approximately three months.

About Wright Express

Wright Express is a leading provider of payment processing and information management services to the U.S. commercial and government vehicle fleet industry. Wright Express provides these services for approximately 295,000 commercial and government fleets containing 4.3 million vehicles. Wright Express markets these services directly as well as through more than 125 strategic relationships, and offers a MasterCard-branded corporate card. The Company employs more than 675 people and maintains its headquarters in South Portland, Maine. For more information about Wright Express, please visit wrightexpress.com.

This press release contains forward-looking statements, including statements regarding: our belief that credit quality across our overall portfolio is improving; expectations for further progress in 2007; the ability of our derivatives strategy to enhance earnings stability and visibility; expectations for positive results from the derivative strategy in 2007; anticipation of excellent results at the front end of the business in 2007; expectations for our sales pipeline; sources of funding for the share repurchase program; adequacy of cash flows to support business reinvestment and the share repurchase program and expectations and guidance for first- quarter and full-year 2007 results. These forward-looking statements include a number of risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include: volatility in fuel prices; first-quarter and full-year 2007 fueling patterns; the effect of the Company's fuel-price-related derivative instruments; effects of competition; the potential loss of key strategic relationships; decreased demand for fuel and other vehicle products and services and the effects of general economic conditions on the commercial activity of fleets; the Company's ability to rapidly implement new technology and systems; potential corporate transactions including alliances, mergers, acquisitions and divestitures; changes in interest rates and the other risks and uncertainties included from time to time in the Company's filings with the Securities and Exchange Commission, including the annual report on Form 10-K/A filed on November 20, 2006, and the Company's other periodic and current reports. Wright Express Corporation undertakes no obligation to update these forward-looking statements at any future date or dates.

     News media contact:
     Jessica Roy
     207.523.6763
     Jessica_Roy@wrightexpress.com

     Investor contact:
     Steve Elder
     Wright Express
     207.523.7769
     Steve_Elder@wrightexpress.com



                            WRIGHT EXPRESS CORPORATION
                   CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
                      (in thousands, except per share data)
                                   (unaudited)

                                    Three months ended    Year ended
                                       December 31,       December 31,
                                      2006     2005      2006      2005

    Revenues
      Payment processing revenue     $50,736  $46,527  $214,641  $173,416
      Transaction processing revenue   4,274    4,215    17,528    17,136
      Account servicing revenue        6,060    5,656    23,999    22,935
      Finance fees                     5,713    5,379    22,351    15,769
      Other                            3,973    2,648    12,728    12,077
        Total revenues                70,756   64,425   291,247   241,333

    Expenses
      Salary and other personnel      15,230   14,356    60,016    59,986
      Service fees                     4,795    2,332    14,525    11,924
      Provision for credit losses      5,477    1,610    16,695     8,813
      Technology leasing and support   1,950    2,144     7,823     8,590
      Occupancy and equipment          1,315    1,431     6,157     5,874
      Depreciation and amortization    3,048    2,736    10,988     9,918
      Operating interest expense       5,855    4,927    23,415    14,519
      Other                            4,535    3,704    16,525    15,092
        Total operating expenses      42,205   33,240   156,144   134,716

    Operating income                  28,551   31,185   135,103   106,617

    Financing interest expense        (3,461)  (3,707)  (14,447)  (12,966)
    Realized and unrealized gains
     (losses)on derivative
     instruments                       5,669   14,216    (4,180)  (65,778)
    Income before income taxes        30,759   41,694   116,476    27,873
    Provision for income taxes        11,800   13,367    41,867     9,220

    Net income                       $18,959  $28,327   $74,609   $18,653

    Earnings per share:
      Basic                            $0.47    $0.70     $1.85     $0.46
      Diluted                          $0.46    $0.69     $1.81     $0.46

    Weighted average common shares
     outstanding:
      Basic                           40,441   40,206    40,373    40,194
      Diluted                         41,604   41,337    41,553    40,735



                            WRIGHT EXPRESS CORPORATION
                            CONSOLIDATED BALANCE SHEETS
                       (in thousands, except per share data)

                                                          December 31,
                                                       2006           2005

    Assets
      Cash and cash equivalents                      $35,060        $44,994
      Accounts receivable (less reserve for credit
       losses of $9,749 in 2006 and $4,627 in 2005)  802,165        652,132
      Income tax refunds receivable, net                   -          3,300
      Available-for-sale securities                    8,023         20,878
      Property, equipment and capitalized
       software, net                                  39,970         38,543
      Deferred income taxes, net                     377,276        403,078
      Intangible assets, net                           2,421          2,421
      Goodwill                                       272,861        272,861
      Other assets                                    13,239         10,088

    Total assets                                  $1,551,015     $1,448,295

    Liabilities and Stockholders' Equity
      Accounts payable                              $297,102       $254,381
      Accrued expenses                                26,065         22,197
      Income taxes payable                               813              -
      Deposits                                       394,699        338,251
      Borrowed federal funds                          65,396         39,027
      Revolving line-of-credit facility               20,000         53,000
      Term loan, net                                 129,760        167,508
      Derivative instruments, at fair value            4,524         36,710
      Other liabilities                                1,170            331
      Amounts due to Avis (formerly Cendant)
       under tax receivable agreement                418,359        424,277
      Preferred stock; 10,000 shares authorized:
       Series A non-voting convertible, redeemable
       preferred stock; 0.1 shares authorized,
       issued and outstanding                         10,000         10,000

      Total liabilities                            1,367,888      1,345,682

      Commitments and contingencies

      Stockholders' Equity
        Common stock $0.01 par value; 175,000 shares
         authorized 40,430 in 2006 and 40,210 in 2005
         shares issued and outstanding                   404            402
        Additional paid-in capital                    89,325         82,894
        Retained earnings                             93,262         18,653
        Other comprehensive income, net of tax:
          Net unrealized gain on interest rate swaps     234            748
          Net unrealized loss on
           available-for-sale securities                 (98)           (84)

        Accumulated other comprehensive income           136            664

      Total stockholders' equity                     183,127        102,613

    Total liabilities and stockholders' equity    $1,551,015     $1,448,295



                         WRIGHT EXPRESS CORPORATION
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (in thousands)

                                                    Year ended December 31,
                                                       2006           2005

     Cash flows from operating activities
      Net income                                     $74,609        $18,653
      Adjustments to reconcile net income to net
       cash provided by (used for) operating
       activities:

      Change in net unrealized loss on
       derivative instruments                        (32,186)        36,710
      Stock-based compensation                         4,273          6,994
      Depreciation and amortization                   12,081         11,100
      Gain on sale of investment                      (2,188)             -
      Deferred taxes                                  34,409          4,228
      Provision for credit losses                     16,695          8,813
      Loss (gain) on disposal of property
       and equipment                                      59            (72)
      Change in operating assets and liabilities:
        Accounts receivable                          (79,944)      (213,776)
        Income taxes                                   4,113         (3,300)
        Other assets                                  (4,214)        (1,268)
        Accounts payable                              42,721         56,734
        Accrued expenses                               3,868          4,787
        Other liabilities                                839           (128)
        Amounts due to Avis(formerly Cendant)
         under tax receivable agreement              (14,685)       (15,468)
        Due to/from related parties                        -         45,051

      Net cash provided by (used for)
       operating activities                           60,450       (40,942)

    Cash flows from investing activities
      Purchases of property and equipment            (12,474)       (11,017)
      Proceeds from sale of investment                 2,188              -
      Sales of property and equipment                      -            125
      Purchases of available-for-sale securities      (2,154)        (3,637)
      Maturities of available-for-sale securities     14,982            425
      Purchases of fleet card receivables            (86,784)             -

      Net cash used for investing activities         (84,242)       (14,104)

    Cash flows from financing activities
      Dividends paid                                       -       (305,887)
      Excess tax benefits of equity instrument
       share-based payment arrangements                1,047             60
      Payments in lieu of issuing shares of
       common stock                                     (734)             -
      Proceeds from stock option exercises             2,228            328
      Net increase in deposits                        56,448        143,891
      Net increase in borrowed federal funds          26,369         11,930
      Net (repayments) borrowings on revolving
       line of credit                                (33,000)        53,000
      Loan origination fees paid for
       revolving line of credit                            -         (1,704)
      Borrowings on term loan, net of loan
       origination fees of $2,884 in 2005                  -        217,116
      Repayments on term loan                        (38,500)       (50,500)

      Net cash provided by financing activities       13,858         68,234

    Net change in cash and cash equivalents           (9,934)        13,188
    Cash and cash equivalents, beginning of period    44,994         31,806

    Cash and cash equivalents, end of period         $35,060        $44,994



                                  Exhibit 1
                        Wright Express Corporation
        Reconciliation of Adjusted Net Income to GAAP Net Income
               Fourth Quarter and Full Year 2006 and 2005
                               (in thousands)
                                 (unaudited)

                         Three months  Three months
                            ended         ended      Year ended   Year ended
                          December 31, December 31,  December 31, December 31,
                             2006         2005           2006         2005

    Adjusted net income(1)  $13,441      $12,999        $55,788       $48,909
    Non-cash, mark-to-market
     adjustments on
     derivative instruments  10,010       20,856         32,186       (36,710)
    Termination of
     derivative instruments       -            -              -        (8,450)
    Conversion of restricted
     stock units and
     stock options                -            -              -        (5,723)
    Tax impact               (4,492)      (5,528)       (13,365)       20,627
    GAAP net income         $18,959      $28,327        $74,609       $18,653

Although adjusted net income is not calculated in accordance with generally accepted accounting principles (GAAP), this measure is integral to the Company's reporting and planning processes. The Company considers this measure integral because it eliminates the non-cash volatility associated with the derivative instruments. Specifically, in addition to evaluating the Company's performance on a GAAP basis, management evaluates the Company's performance on a basis that excludes the above items because:

     - Exclusion of the non-cash, mark-to-market adjustments on derivative
       instruments helps management identify and assess trends in the
       Company's underlying business that might otherwise be obscured due to
       quarterly and annual non-cash earnings fluctuations associated with
       fuel-price derivative contracts;
     - The non-cash, mark-to-market adjustments on derivative instruments are
       difficult to forecast accurately, making comparisons across historical
       and future quarters and years difficult to evaluate;
     - The termination of derivative instruments during the first quarter of
       2005 was a non-recurring event effected by the Company's former parent
       company as part of the process of preparing the Company for its initial
       public offering; and
     - The conversion of restricted stock units and stock options was a
       non-recurring event resulting from the need to convert the equity
       incentives held by the Company's employees so that they were
       exercisable following the initial public offering for Company common
       stock instead of for common stock of the Company's former parent.

For the same reasons, Wright Express believes that adjusted net income may also be useful to investors as one means of evaluating the Company's performance. However, because adjusted net income is a non-GAAP measure, it should not be considered as a substitute for, or superior to, net income, operating income or cash flows from operating activities as determined in accordance with GAAP. In addition, adjusted net income as used by Wright Express may not be comparable to similarly titled measures employed by other companies.


    (1) The number of diluted shares for adjusted net income is approximately
41.1 million



                                    Exhibit 2
                         Wright Express Corporation
                       Selected Non Financial Metrics

                               Q4 2006  Q3 2006   Q2 2006   Q1 2006   Q4 2005

    Fleet Payment Processing
     Revenue:
    Payment processing
     transactions (000's)      45,075    46,800    45,998    43,459    43,176
    Gallons per payment
     processing transaction      20.6      20.2      20.1      20.2      20.0
    Payment processing gallons
     of fuel (000's)          926,605   944,458   924,343   876,917   865,015
    Average fuel price         $ 2.37      2.87      2.86      2.41      2.53
    Payment processing
     $ of fuel (000's)     $2,194,543 2,712,120 2,642,456 2,113,614 2,186,301
    Net payment
     processing rate             2.13%     2.02%     2.03%     2.06%     2.02%
    Fleet payment processing
     revenue (000's)          $46,647    54,841    53,590    43,597    44,144

    MasterCard Payment
     Processing Revenue:
    MasterCard purchase
     volume (000's)          $332,934   365,739   332,706   269,361   228,648
    Net interchange rate         1.23%     1.21%     1.23%     1.25%     1.04%
    MasterCard payment
     processing revenue
     (000's)                   $4,089     4,416     4,105     3,357     2,371

     Definitions:
     Payment processing transactions represents the total number of fuel
     purchases made by fleets that have a payment processing relationship with
     Wright Express.

     Payment processing gallons of fuel represents the total number of gallons
     of fuel purchased by fleets that have a payment processing relationship
     with Wright Express.

     Payment processing $ of fuel represents the total dollar value of the
     fuel purchased by fleets that have a payment processing relationship with
     Wright Express.

     Net payment processing rate represents the percentage of the dollar value
     of each payment processing transaction that Wright Express records as
     revenue from merchants less any discounts given to fleets or strategic
     relationships.


     MasterCard purchase volume represents the total dollar value of all
     transactions that use a Wright Express MasterCard branded product.


     Net interchange rate represents the percentage of the dollar value of
     each MasterCard transaction that Wright Express records as revenue less
     any discounts given to customers.

SOURCE Wright Express Corporation

Jessica Roy, +1-207-523-6763, or Jessica_Roy@wrightexpress.com, or Investors, Steve Elder, +1-207-523-7769, or Steve_Elder@wrightexpress.com, both of Wright Express

http://www.wrightexpress.com/