Printer Friendly Version View printer-friendly version
<< Back

Wright Express Reports Second-Quarter Results

Payment Processing Transactions Increased 12 Percent; Company Pays Down $15 Million in Financing Debt

SOUTH PORTLAND, Maine, Aug. 1 /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 second quarter ended June 30, 2006.

Total revenue for the second quarter of 2006 increased 33 percent to $76.2 million from $57.3 million for the second quarter of 2005. Net income to common shareholders on a GAAP basis for the second quarter of 2006 was $9.9 million, or $0.24 per diluted share, compared with $15.0 million, or $0.37 per diluted share, for the comparable quarter last year. On a non-GAAP basis, the Company's adjusted net income for the second quarter of 2006 increased to $14.1 million, or $0.34 per diluted share, from $11.2 million, or $0.27 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 second quarter of 2006, the Company's GAAP financial results include an unrealized $7.5 million pre-tax, non-cash, mark-to-market loss on these instruments. For the second quarter of 2005, the Company reported an unrealized pre-tax, non-cash, mark-to-market gain of $6.6 million. Exhibit 1 reconciles adjusted net income for the second quarters of 2006 and 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.

Second-Quarter 2006 Performance Metrics

  • Average number of vehicles serviced increased 6 percent from the second quarter of 2005 to approximately 4.3 million.
  • Total fuel transactions processed increased 8 percent from the second quarter of 2005 to 61.1 million. Payment processing transactions increased 12 percent to 46 million, and transaction processing transactions decreased 5 percent to 15.1 million.
  • Average expenditure per payment processing transaction grew to $57.45, an increase of 30 percent from the same period last year.
  • Average retail fuel price increased 30 percent to $2.86 per gallon, from $2.20 per gallon for the second quarter a year ago.
  • Total MasterCard purchase volume grew 47 percent to $332.7 million, from $225.7 million for the comparable period in 2005.
  • Wright Express paid $15 million in principal on its financing debt during the second quarter of 2006.

Management Comments

"This was another quarter of steady, predictable growth for Wright Express," said Michael Dubyak, president and chief executive officer. "Operating leverage continues to improve as the business grows. We met our guidance for revenue and adjusted net income, and growth in business volume was on target with our expectations for the quarter. The Company's derivatives strategy continued to provide us with good earnings visibility, and our strong operating cash flow enabled us to continue paying down our financing debt."

"We are seeing sustained momentum and growth in demand for fleet and corporate cards across the business," said Dubyak. "Capitalizing on this momentum, our front-end marketing and sales operation continued to grow our sales pipeline and convert the pipeline into active customers during the second quarter. The number of large and medium fleet vehicles we serviced grew 10 percent year-over-year, and we were up 17 percent in the heavy truck market. This was also an excellent quarter for our MasterCard business."

"Looking ahead to the second half of 2006, we remain focused on expanding our core business," Dubyak said. "During the past five years, we have generated significant organic revenue growth, excluding the impact of fuel prices. With creative thinking and steady execution, we expect to continue generating strong increases in business volume. At the same time, it remains our practice to look at the marketplace for opportunities that can accelerate our long-term growth and/or enhance our strategic position by leveraging our core competencies."

Financial Guidance

Wright Express Corporation is issuing financial guidance for the third quarter of 2006, as well as updating guidance for the full year. 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 third quarter of 2006, revenue in the range of $75 million to $80 million. This is based on an assumed average retail fuel price of $2.88 per gallon.
  • Third-quarter 2006 net income before unrealized gain or loss on derivative instruments in the range of $14 million to $15 million, or $0.34 to $0.37 per diluted share, based on approximately 41 million shares outstanding.
  • For the full year 2006, revenue in the range of $290 million to $300 million. This is based on an assumed average retail fuel price of $2.70 per gallon.
  • For the full year 2006, net income before unrealized gain or loss on derivative instruments in the range of $54 million to $56 million, or $1.32 to $1.38 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 tomorrow, August 2, at 8:30 a.m. (ET) to discuss the Company's second-quarter financial results and business outlook. To access this call by telephone, dial (800) 231-9012 or (719) 457-2617 (Conference code: 5086745). 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 4.3 million vehicles. Wright Express markets these services directly as well as through more than 100 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: expectation that its operating leverage will continue to improve as the business grows; expectation to see sustained momentum and growth for fleet and corporate cards; intention to remain focused on expanding its core business; expectation to continue to generate strong increases in business volume; intention to explore further opportunities to accelerate growth and/or enhance its strategic position through potential alliances or acquisitions; and expectations and guidance for third-quarter and full-year 2006 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; third-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 annual report on Form 10-K filed on March 15, 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.

    Condensed Financial Statements and Supplemental Exhibit Follow  ...



               CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
                             COMPREHENSIVE INCOME
                    (in thousands, except per share data)
                                 (unaudited)

                                   Three months ended       Six months ended
                                         June 30,               June 30,
                                    2006         2005       2006        2005

    Revenues
     Payment processing revenue   $57,693      $41,809    $104,649    $76,618
     Transaction processing
      revenue                       4,343        4,288       8,553      8,395
     Account servicing revenue      5,926        5,792      11,841     11,411
     Finance fees                   5,243        3,052      10,481      6,247
     Other                          2,959        2,370       5,278      6,842

       Total revenues              76,164       57,311     140,802    109,513

    Expenses
     Salary and other personnel    15,196       13,450      29,550     32,167
     Service fees                   3,377        3,005       6,417      6,547
     Provision for credit losses    2,302        1,940       6,220      4,877
     Technology leasing and support 1,934        2,099       3,797      4,176
     Occupancy and equipment        1,703        1,432       3,295      2,874
     Depreciation and amortization  2,692        2,684       5,206      4,656
     Operating interest expense     6,042        3,192      10,649      5,453
     Other                          4,406        3,482       8,249      7,401

       Total operating expenses    37,652       31,284      73,383     68,151

    Operating income               38,512       26,027      67,419     41,362

    Financing interest expense     (3,666)      (4,133)     (7,394)    (5,519)
    Net realized and unrealized
     (losses) gains on derivative
     instruments                  (20,509)       2,658     (27,987)   (41,544)

    Income (loss) before income
     taxes                         14,337       24,552      32,038     (5,701)
    Provision (benefit) for income
     taxes                          4,481        9,568      10,832     (2,212)

    Net income (loss)               9,856       14,984      21,206     (3,489)



    Change in net unrealized loss on
     available-for-sale securities,
     net of tax effect of $(21) and
     $(62) in 2006 and $27 and $(3)
     in 2005                          (55)          49        (118)        (6)
    Change in net unrealized gain on
     interest rate swaps, net of tax
     effect of $(49) and $37 in 2006
     and $8 and $8 in 2005            (20)          13          48         13

    Comprehensive income (loss)    $9,781      $15,046     $21,136    $(3,482)

    Earnings (loss) per share:
      Basic                         $0.24        $0.37       $0.53     $(0.09)
      Diluted                       $0.24        $0.37       $0.52     $(0.09)

    Weighted average common
     shares outstanding:
      Basic                        40,331       40,186      40,288     40,186
      Diluted                      41,086       41,072      41,035     40,186



                    CONDENSED CONSOLIDATED BALANCE SHEETS
                    (in thousands, except per share data)

                                                  June 30, 2006   December 31,
                                                    (unaudited)       2005

    Assets
     Cash and cash equivalents                        $16,600        $44,994
     Accounts receivable (less reserve for
      credit losses of $5,188 in 2006 and
      $4,627 in 2005)                                 890,857        652,132
     Available-for-sale securities                      5,987         20,878
     Property, equipment and capitalized
      software, net                                    39,548         38,543
     Deferred income taxes, net                       506,678        513,018
     Intangible assets, net                             2,421          2,421
     Goodwill                                         135,047        135,047
     Other assets                                      11,559         13,388

    Total assets                                   $1,608,697     $1,420,421

    Liabilities and Stockholders' Equity
     Accounts payable                                $396,127       $254,381
     Accrued expenses                                  19,721         22,197
     Deposits                                         414,316        338,251
     Borrowed federal funds                             9,350         39,027
     Revolving line-of-credit facility                 48,000         53,000
     Term loan, net                                   151,398        167,508
     Derivative instruments, at fair value             45,598         36,710
     Other liabilities                                  1,163            331
     Amounts due to Cendant Corporation under tax
      receivable agreement                            414,798        424,277
     Preferred stock; 10,000 shares authorized:
      Series A non-voting convertible preferred stock;
      0.1 shares authorized, issued and outstanding    10,000         10,000

    Total liabilities                               1,510,471      1,345,682

    Commitments and contingencies

    Stockholders' Equity
     Common stock $0.01 par value; 175,000 shares
      authorized; 40,353 shares issued and outstanding
      as of June 30, 2006, 40,210 shares issued and
      outstanding as of December 31, 2005                404            402
    Additional paid-in capital                        57,369         55,020
    Retained earnings                                 39,859         18,653
    Other comprehensive income (loss), net of tax:
     Net unrealized gain on interest rate swaps          796            748
     Net unrealized loss on available-for-sale
      securities                                        (202)           (84)

    Accumulated other comprehensive income               594            664

    Total stockholders' equity                        98,226         74,739

    Total liabilities and stockholders' equity    $1,608,697     $1,420,421



               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)
                                 (unaudited)

                                                        Six months ended
                                                             June 30,
                                                       2006           2005
    Cash flows from operating activities
     Net income (loss)                               $21,206        $(3,489)
     Adjustments to reconcile net income (loss) to
      net cash used in operating activities:
     Net unrealized loss on derivative instruments     8,888         27,821
     Stock-based compensation                          1,553          6,031
     Depreciation and amortization                     5,766          5,333
     Deferred taxes                                    6,365           (161)
     Provision for credit losses                       6,220          4,877
     Loss (gain) on disposal of property and equipment     5           (118)
     Changes in operating assets and liabilities:
      Accounts receivable                           (244,945)      (164,571)
      Other assets                                     1,744         (1,706)
      Accounts payable                               141,746         84,901
      Accrued expenses                                (2,476)            31
      Other liabilities                                  832            (55)
      Amounts due to Cendant under tax receivable
       agreement                                      (9,479)        (6,379)
      Due to/from related parties                         --         45,051

    Net cash used in operating activities            (62,575)        (2,434)

    Cash flows from investing activities
     Purchases of property and equipment              (6,216)        (5,145)
     Sales of property and equipment                      --            125
     Purchases of available-for-sale securities          (66)        (1,096)
     Maturities of available-for-sale securities      14,777            121

     Net cash provided by (used in) investing
      activities                                       8,495         (5,995)

    Cash flows from financing activities
     Dividends paid                                       --       (305,887)
     Excess tax benefits of equity instrument
      share-based payment arrangements                   251             --
     Payments in lieu of issuing shares of common
      stock                                             (682)            --
     Proceeds from stock option exercises              1,229             --
     Net increase in deposits                         76,065        100,160

     Net decrease in borrowed federal funds          (29,677)       (20,514)
     Net (repayments) borrowings on revolving line
      of credit                                       (5,000)        50,000
     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                         (16,500)       (35,000)

     Net cash provided by financing activities        25,686          4,171

    Net change in cash and cash equivalents          (28,394)        (4,258)
    Cash and cash equivalents, beginning of period    44,994         31,806

    Cash and cash equivalents, end of period         $16,600        $27,548



         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                                (in thousands)
                                 (unaudited)

                                                         Six months ended
                                                              June 30,
                                                        2006           2005
    Supplemental cash flow information:
     Interest paid                                    $17,362         $7,975
     Income taxes paid                                   $925         $3,870

There were no significant non-cash transactions during the six months ended June 30, 2006.

During the six months ended June 30, 2005 the following significant non-cash transactions occurred:

  • The tax basis of our assets increased as a result of our initial public offering creating a deferred tax asset of $488,719 based upon our estimated tax rate at June 30, 2005. We entered into a tax receivable agreement with Cendant Corporation, our former parent company, which provided that we will make total payments estimated at $415,411 as of June 30, 2005. The difference between the initial asset recorded and the initial liability payable to our former parent company was recorded as $73,308 of stockholders' equity.
  • We issued 40,000 shares of common stock upon the completion of our initial public offering and as part of the conversion from a Delaware limited liability company to a Delaware corporation. We did not receive any proceeds from this offering as our former parent company received all common stock proceeds from the offering concurrent with its sale of 100 percent of its interest in us.
  • We issued 0.1 shares of preferred stock as part of the conversion from a Delaware limited liability company to a Delaware corporation. We did not receive any proceeds from this offering as our former parent company received all preferred stock proceeds from this conversion.


                                  Exhibit 1

                          Wright Express Corporation
           Reconciliation of Adjusted Net Income to GAAP Net Income
                         Second Quarter 2006 and 2005
                                (in thousands)
                                 (unaudited)

                                       Three months ended   Three months ended
                                          June 30, 2006        June 30, 2005

    Adjusted net income                      $14,121              $11,160
    Non-cash, mark-to-market
     adjustments on derivative
     instruments                              (7,462)               6,553
    Tax impact                                 3,197               (2,729)
    GAAP net income                           $9,856              $14,984

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 non-cash earnings fluctuations associated with fuel-price derivative contracts; and
  • The non-cash, mark-to-market adjustments on derivative instruments are difficult to forecast accurately, making comparisons across historical and future quarters difficult to evaluate.

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.

    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