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Wright Express Reports Fourth-Quarter Results
Total Fuel Transactions and Average Number of Vehicles Serviced Both Rise 10
$7 Million Payment on Financing Debt Brings Total Paid to $47.5 Million for Year
SOUTH PORTLAND, Maine, Feb. 8 /PRNewswire-FirstCall/ -- Wright Express Corporation (NYSE: WXS), a leading provider of payment processing and information management services to the U.S. commercial and government fleet industry, today reported financial results for the fourth quarter ended December 31, 2005.
Total revenues increased 28 percent to $64.4 million from $50.4 million for the fourth quarter of 2004. Net income to common shareholders on a GAAP basis for the fourth quarter of 2005 was $28.3 million, or $0.69 per diluted share, compared with net income of $14.3 million, or $0.35 per diluted share, for the same period last year. On a non-GAAP basis, the Company's adjusted net income for the fourth quarter of 2005 was $13.0 million, or $0.32 per diluted share.
Fourth-quarter and full-year results for 2005 are not directly comparable with 2004 on a GAAP basis due to the non-cash earnings fluctuations associated with the Company's fuel-price related derivative instruments. The GAAP financial results for the fourth quarter of 2005 include an unrealized $20.9 million pre-tax, non-cash, mark-to-market gain on these instruments. Exhibit 1 reconciles adjusted net income for the fourth quarter and year ended December 31, 2005, which has not been determined in accordance with GAAP, to net income as determined in accordance with GAAP.
In addition, GAAP net income and adjusted net income for the fourth quarter and year ended December 31, 2005 include the effect of certain costs related to the Company operating as an independent public company, which were not present in 2004. If the Company had been incurring these costs during the fourth quarter of 2004, non-GAAP net income would have been $10.9 million. The Company's adjusted net income for the fourth quarter of 2005 of $13.0 million would have represented a 19 percent increase over this amount. Exhibit 2 reconciles non-GAAP net income to net income determined in accordance with GAAP for the fourth quarter and year ended December 31, 2004.
For the year ended December 31, 2005, net income on a GAAP basis was $18.7 million, or $0.46 per diluted share, compared with $51.2 million, or $1.25 per diluted share, for full-year 2004. Adjusted net income for full-year 2005 was $48.9 million, which represents a 20 percent increase over the $40.8 million of non-GAAP net income for full-year 2004. The Company's full-year 2005 net cash used by operating activities was $40.9 million, compared with free cash flow of $48.2 million. Exhibit 3 reconciles free cash flow, which has not been determined in accordance with GAAP, to net cash used by operating activities as determined in accordance with GAAP.
Management uses the non-GAAP measures presented within this news release to evaluate the Company's performance on a comparable basis, to eliminate the volatility associated with its derivative instruments, and to measure the amount of cash that is available for making scheduled payments on the Company's financing debt and discretionary purposes. Management believes that investors may find these measures useful for the same purposes, but cautions that they should not be considered a substitute for disclosure in accordance with GAAP.
Fourth-Quarter 2005 Performance Metrics * Average number of vehicles serviced increased 10 percent from the fourth quarter of 2004 to approximately 4.2 million. * Total fuel transactions processed increased 10 percent from the fourth quarter of 2004 to 58.0 million. Payment processing transactions increased 16 percent to 43.2 million, and transaction processing transactions decreased 6 percent to 14.8 million. * Average expenditure per payment processing transaction grew to $50.64, an increase of 29 percent from the same period last year. * Average retail fuel price increased 28 percent to $2.53 per gallon, from $1.98 per gallon for the fourth quarter a year ago. * Total MasterCard purchase volume grew to $228.6 million, an increase of 30 percent from the comparable period a year ago. * Wright Express paid $7.0 million in principal on its financing debt. The total paid year-to-date is $47.5 million.
"The fourth quarter was a strong conclusion to a great year for Wright Express," said Michael Dubyak, president and chief executive officer. "Our results were driven by growth in average number of vehicles serviced and number of transactions processed, as well as productivity gains as our business model scales. Our price risk management strategy is successfully mitigating our exposure to the variability in fuel prices, and our solid cash flow enabled us to pay down another $7 million of financing debt during the fourth quarter, raising the total paid down for 2005 to $47.5 million."
"There are approximately 41 million fleet vehicles on U.S. roads today, and we are making good progress in unlocking the growth potential in the fleet market," said Dubyak. "In acquiring and retaining customers, and in creating products that add value by satisfying new and existing customer needs, the Company's performance continues to improve."
"We expect 2006 to be another year of solid demand for fleet card solutions," said Dubyak. "We are leveraging our proprietary network and outstanding customer service capabilities, as well as our position as a market leader, to capitalize on this demand. As a result, our fleet card pipeline remains strong as we begin the new year. In addition, our MasterCard business is continuing to perform very well. At the same time, we continue to explore further opportunities to accelerate the Company's growth, both organically and through potential alliances or acquisitions. We look forward to reporting another strong year for Wright Express in 2006."
Wright Express Corporation is issuing financial guidance for the first quarter of 2006, as well as the full year. This guidance excludes the impact of non-cash, mark-to-market adjustments on the Company's fuel-price-related derivative instruments. The fuel prices referenced below are based on the applicable NYMEX futures price:
* For the first quarter of 2006, revenue in the range of $62 million to $67 million. This is based on an assumed average retail fuel price of $2.52 per gallon. * First-quarter 2006 net income before unrealized gain or loss on derivative contracts in the range of $11 million to $12 million, or $0.27 to $0.30 per diluted share, based on approximately 41 million shares outstanding. * For the full year 2006, revenue in the range of $275 million to $285 million. This is based on an assumed average retail fuel price of $2.57 per gallon. * For the full year 2006, net income before unrealized gain or loss on derivative contracts in the range of $52 million to $55 million, or $1.27 to $1.33 per diluted share, based on approximately 41 million shares outstanding.
Conference Call Details
In conjunction with this announcement, Wright Express will host a conference call today at 5:00 p.m. (ET) to discuss the Company's financial results, fourth-quarter highlights, business strategy and business outlook. To access this call by telephone, dial (866) 323-7218 or (706) 643-0228 (Conference ID: 4585657). A live webcast of this conference call will be available at the "Investor Relations" section of the Company's website (http://www.wrightexpress.com). A replay of the webcast will be available on the website for approximately three months.
About Wright Express
Wright Express is a leading provider of payment processing and information management services to the U.S. commercial and government vehicle fleet industry. Wright Express provides these services for approximately 295,000 commercial and government fleets containing 4.2 million vehicles. Wright Express markets these services directly as well as through more than 95 strategic relationships, and offers a MasterCard-branded corporate card. The Company employs more than 650 people and maintains its headquarters in South Portland, Maine. For more information about Wright Express, please visit http://www.wrightexpress.com.
This press release contains forward-looking statements, including statements regarding Wright Express Corporation's: assessment of its progress in unlocking growth potential and improved performance; expectations for demand for fleet card solutions in 2006; its plan to explore opportunities to accelerate growth organically and through potential alliances or acquisitions; and financial guidance for the first quarter and full year 2006.
These forward-looking statements include a number of risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include: volatility in fuel prices; first quarter and full-year 2006 fueling patterns; the effect of the Company's fuel-price related derivative instruments; effects of competition; the potential loss of key strategic relationships; decreased demand for fuel and other vehicle products and services and the effects of general economic conditions on the commercial activity of fleets; the Company's ability to rapidly implement new technology and systems; potential corporate transactions including alliances, mergers, acquisitions and divestitures; changes in interest rates and the other risks and uncertainties included from time to time in the Company's filings with the Securities and Exchange Commission, including the final prospectus filed on February 16, 2005, and the Company's periodic and current reports. Wright Express Corporation undertakes no obligation to update these forward-looking statements at any future date or dates.
Condensed Financial Statements and Supplemental Exhibits Follow ... WRIGHT EXPRESS CORPORATION CONDENSED CONSOLIDATED RESULTS OF OPERATIONS (in thousands, except per share data) (unaudited) Three months ended Year ended December 31, December 31, 2005 2004 2005 2004 Revenues Payment processing revenue $46,527 $35,112 $173,416 $129,987 Transaction processing revenue 4,215 4,242 17,136 18,113 Account servicing revenue 5,656 5,426 22,935 21,167 Finance fees 5,379 2,708 15,769 9,603 Other 2,648 2,888 12,077 10,230 Total revenues 64,425 50,376 241,333 189,100 Expenses Salary and other personnel 14,356 12,646 59,986 49,420 Service fees 2,332 2,732 11,924 9,534 Provision for credit losses 1,610 1,898 8,813 8,131 Technology leasing and support 2,144 2,222 8,590 8,169 Occupancy and equipment 1,431 1,157 5,874 5,441 Depreciation and amortization 2,736 1,526 9,918 7,376 Operating interest expense 4,927 1,801 14,519 5,625 Operating interest income - (1,076) - (3,197) Other 3,704 3,795 15,092 14,441 Total operating expenses 33,240 26,701 134,716 104,940 Operating income 31,185 23,675 106,617 84,160 Financing interest expense (3,707) - (12,966) - Realized and unrealized gains (losses)on derivative instruments 14,216 - (65,778) - Income before income taxes 41,694 23,675 27,873 84,160 Provision for income taxes 13,367 9,413 9,220 32,941 Net income $28,327 $14,262 $18,653 $51,219 Earnings per share (on a pro forma basis for 2004): Basic $0.70 $0.35 $0.46 $1.27 Diluted $0.69 $0.35 $0.46 $1.25 Weighted average common shares outstanding (on a pro forma basis for 2004): Basic 40,206 40,185 40,194 40,185 Diluted 41,337 41,104 40,735 41,104 WRIGHT EXPRESS CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) (unaudited) December 31, 2005 2004 Assets Cash and cash equivalents $44,994 $31,806 Accounts receivable (less reserve for credit losses of $4,627 in 2005 and $4,212 in 2004) 652,132 447,169 Income tax refunds receivable, net 3,300 - Due from related parties - 134,182 Available-for-sale securities 20,878 17,792 Property, equipment and capitalized software, net 38,543 37,474 Deferred income taxes, net 513,018 502 Intangible assets, net 2,421 2,421 Goodwill 135,047 135,047 Other assets 10,088 6,296 Total assets $1,420,421 $812,689 Liabilities and Stockholders' or Member's Equity Accounts payable $254,381 $197,647 Accrued expenses 22,197 17,410 Deposits 338,251 194,360 Borrowed federal funds 39,027 27,097 Revolving line-of-credit facility 53,000 - Term loan, net 167,508 - Derivative instruments, at fair value 36,710 - Other liabilities 331 459 Due to related parties - 91,466 Amounts due to Cendant under tax receivable agreement 424,277 - Preferred stock; 10,000 shares authorized: Series A non-voting convertible, redeemable preferred stock; 0.1 shares authorized, issued and outstanding 10,000 - Total liabilities 1,345,682 528,439 Stockholders' or Member's Equity Member's contribution - 182,379 Common stock $0.01 par value; 175,000 shares authorized 40,210 shares Issued and outstanding 402 - Additional paid-in capital 55,020 - Retained earnings 18,653 101,869 Other comprehensive income, net of tax: Net unrealized gain on interest rate swaps 748 - Net unrealized gain (loss) on available for sale securities (84) 2 Accumulated other comprehensive income 664 2 Total stockholders' or member's equity 74,739 284,250 Total liabilities and stockholders' or member's equity $1,420,421 $812,689 WRIGHT EXPRESS CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) (unaudited) Year ended December 31, 2005 2004 Cash flows from operating activities Net income $18,653 $51,219 Adjustments to reconcile net income to net cash provided by operating activities: Net unrealized loss on derivative instruments 36,710 - Stock-based compensation 6,994 - Depreciation and amortization 11,100 7,376 Deferred taxes 4,228 (809) Provision for credit losses 8,813 8,131 Loss (gain) on disposal of property and equipment (72) 1,016 Change in operating assets and liabilities: Accounts receivable (213,776) (152,983) Income tax refunds receivable, net (3,300) - Other assets (1,268) (1,279) Accounts payable 56,734 71,981 Accrued expenses 4,787 7,622 Other liabilities (128) (784) Amounts due to Cendant under tax receivable agreement (15,468) - Due to/from related parties 45,051 (32,105) Net cash used by operating activities (40,942) (40,615) Cash flows from investing activities Purchases of property and equipment (11,017) (11,039) Sales of property and equipment 125 1,346 Purchases of available-for-sale securities (3,637) (985) Maturities of available-for-sale securities 425 758 Purchases of Federal Home Loan Bank stock - (43) Purchases of option contracts - (144) Net cash used for investing activities (14,104) (10,107) Cash flows from financing activities Dividends paid (305,887) (25,279) Excess tax benefits of equity instrument share-based payment arrangements 60 - Proceeds from exercise of stock options 328 - Net repayments on related party line of credit - (20,000) Net increase in deposits ** 143,891 102,542 Net increase in borrowed federal funds ** 11,930 3,131 Net borrowings on revolving line of credit 53,000 - Loan origination fees paid for revolving line of credit (1,704) - Borrowings on term loan, net of loan origination fees of $2,884 217,116 - Repayments on term loan (50,500) - Net provided by financing activities 68,234 60,394 Net change in cash and cash equivalents 13,188 9,672 Cash and cash equivalents, beginning of period 31,806 22,134 Cash and cash equivalents, end of period $44,994 $31,806 ** Although classified as financing activities for purposes of the financial statements, the Company uses these amounts specifically as a source of cash for funding the timing difference between collecting accounts receivable and payments of accounts payable. Exhibit 1 Wright Express Corporation Reconciliation of Adjusted Net Income to GAAP Net Income Fourth Quarter and Full Year 2005 (in thousands) (unaudited) Three months ended Year ended December 31, December 31, 2005 2005 Adjusted net income $12,999 $48,909 Non-cash, mark-to-market adjustments on derivative instruments 20,856 (36,710) Termination of derivative instruments - (8,450) Conversion of restricted stock units and stock options - (5,723) Tax impact (5,528) 20,627 GAAP net income $28,327 $18,653
Although adjusted net income is not calculated in accordance with generally accepted accounting principles (GAAP), this measure is integral to the Company's reporting and planning processes. The Company considers this measure integral because it eliminates the non-cash volatility associated with the derivative instruments. Specifically, in addition to evaluating the Company's performance on a GAAP basis, management evaluates the Company's performance on a basis that excludes the above items because:
* Exclusion of the non-cash, mark-to-market adjustments on derivative instruments helps management identify and assess trends in the Company's underlying business that might otherwise be obscured due to quarterly and annual non-cash earnings fluctuations associated with fuel-price derivative contracts; * The non-cash, mark-to-market adjustments on derivative instruments are difficult to forecast accurately, making comparisons across historical and future quarters and years difficult to evaluate; * The termination of derivative instruments during the first quarter of 2005 was a non-recurring event effected by the Company's former parent company as part of the process of preparing the Company for its initial public offering; and * The conversion of restricted stock units and stock options was a non- recurring event resulting from the need to convert the equity incentives held by the Company's employees so that they were exercisable following the initial public offering for Company common stock instead of for common stock of the Company's former parent.
For the same reasons, Wright Express believes that adjusted net income may also be useful to investors as one means of evaluating the Company's performance. However, because adjusted net income is a non-GAAP measure, it should not be considered as a substitute for, or superior to, net income, operating income or cash flows from operating activities as determined in accordance with GAAP. In addition, adjusted net income as used by Wright Express may not be comparable to similarly titled measures employed by other companies.
Exhibit 2 Wright Express Corporation Reconciliation of Non-GAAP Net Income to GAAP Net Income Fourth Quarter and Full Year 2004 (in thousands) (unaudited) Three months Full year ended ended December 31, December 31, 2004 2004 Non-GAAP net income $10,891 $40,818 Loss of interest income on cash balances 1,075 3,196 Incremental public company expenses, net of Cendant allocations 1,804 4,485 Founders grant vesting expense recognized in 2005 400 1,335 Savings from vesting Cendant restricted stock units (321) (914) Additional interest on operating debt balances used to pay a dividend to Cendant 158 455 Interest expense on financing debt balances 2,676 8,579 Tax impact (2,421) (6,735) GAAP net income $14,262 $51,219
Although non-GAAP net income is not calculated in accordance with generally accepted accounting principles (GAAP), this measure is integral to the Company's internal reporting. Management considers this an important measure because it includes the effect of new costs related to the Company's operating for the first time as an independent public company, as well as financing costs related to the indebtedness incurred to pay a $306 million dividend to Cendant prior to the initial public offering. However, because non-GAAP net income has not been determined in accordance with generally accepted accounting principles, it should not be considered as a substitute for net income, operating income or cash flows from operating activities as determined in accordance with GAAP. In addition, non-GAAP net income as used by Wright Express may not be comparable to similarly titled measures employed by other companies. The non-GAAP adjustments are based upon available information the Company believes to be reasonable as of today. The non-GAAP results are not necessarily indicative of the future results of operations.
Exhibit 3 Wright Express Corporation Reconciliation of Free Cash Flow to Net Cash used by Operating Activities (in thousands) (unaudited) Year ended December 31, 2005 Free cash flow $48,222 Net (increase)/decrease in accounts receivable (213,776) Charge-offs of accounts receivable 11,810 Net (increase)/decrease in accounts payable 56,734 Related party activity 45,051 Capital expenditures 11,017 Net cash used by operating activities $(40,942)
Although free cash flow is not calculated in accordance with generally accepted accounting principles (GAAP), this measure is integral to the Company's internal reporting. Free cash flow is determined as cash provided or used by operating activities adjusted for the impact of accounts receivable (net of charge offs), accounts payable, non-recurring related party activity in connection with the Company's initial public offering and capital expenditures. Management considers this an important measure because it provides management with a measure of cash that is available for scheduled financing debt payments and discretionary purposes. This measure aligns the sources of cash with their related uses based upon the underlying activity. However, because free cash flow has not been determined in accordance with generally accepted accounting principles, it should not be considered as a substitute for net cash used by operating activities as determined in accordance with GAAP. In addition, free cash flow as used by Wright Express may not be comparable to similarly titled measures employed by other companies. The non-GAAP adjustments are based upon available information the Company believes to be reasonable as of today. The non-GAAP results are not necessarily indicative of the future results of operations.
News media contact: Investor contact: Jessica Roy Steve Elder Wright Express Wright Express 207.523.6763 207.523.7769 Jessica_Roy@wrightexpress.com Steve_Elder@wrightexpress.com
SOURCE Wright Express Corporation