ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 01-0526993 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
97 Darling Avenue, South Portland, Maine | 04106 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ý | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Class | Outstanding at October 24, 2013 | |
Common Stock, $0.01 par value per share | 38,875,635 shares |
Page | ||
PART I-FINANCIAL INFORMATION | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II-OTHER INFORMATION | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 6. | ||
September 30, 2013 | December 31, 2012 | ||||||
(As Adjusted) | |||||||
Assets | |||||||
Cash and cash equivalents | $ | 391,171 | $ | 197,662 | |||
Accounts receivable (less reserve for credit losses of $8,954 in 2013 and $11,709 in 2012) | 1,913,614 | 1,556,275 | |||||
Available-for-sale securities | 16,208 | 16,350 | |||||
Fuel price derivatives, at fair value | 488 | — | |||||
Property, equipment and capitalized software (net of accumulated depreciation of $139,684 in 2013 and $125,659 in 2012) | 70,097 | 60,097 | |||||
Deferred income taxes, net | 92,693 | 121,007 | |||||
Goodwill | 824,307 | 847,986 | |||||
Other intangible assets, net | 209,074 | 241,950 | |||||
Other assets | 139,805 | 90,538 | |||||
Total assets | $ | 3,657,457 | $ | 3,131,865 | |||
Liabilities and Stockholders’ Equity | |||||||
Accounts payable | $ | 706,927 | $ | 527,838 | |||
Accrued expenses | 79,754 | 67,419 | |||||
Income taxes payable | 14,228 | 10,038 | |||||
Deposits | 1,158,196 | 890,345 | |||||
Borrowed federal funds | — | 48,400 | |||||
Revolving line-of-credit facilities and term loan | 288,750 | 621,000 | |||||
Deferred income taxes, net | 11,464 | 18,407 | |||||
Notes outstanding | 400,000 | — | |||||
Amounts due under tax receivable agreement | 79,705 | 86,550 | |||||
Fuel price derivatives, at fair value | 983 | 1,729 | |||||
Other liabilities | 15,822 | 20,546 | |||||
Total liabilities | 2,755,829 | 2,292,272 | |||||
Commitments and contingencies (Note 14) | |||||||
Redeemable noncontrolling interest (Note 11) | 19,762 | 21,662 | |||||
Stockholders’ Equity | |||||||
Common stock $0.01 par value; 175,000 shares authorized; 42,897 in 2013 and 42,586 in 2012 shares issued; 38,982 in 2013 and 38,908 in 2012 shares outstanding | 429 | 426 | |||||
Additional paid-in capital | 166,615 | 162,470 | |||||
Retained earnings | 845,051 | 730,311 | |||||
Accumulated other comprehensive income | 337 | 37,379 | |||||
Less treasury stock at cost; 4,007 shares in 2013 and 3,766 in 2012 | (130,566 | ) | (112,655 | ) | |||
Total stockholders’ equity | 881,866 | 817,931 | |||||
Total liabilities and stockholders’ equity | $ | 3,657,457 | $ | 3,131,865 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenues | |||||||||||||||
Fleet payment solutions | $ | 136,874 | $ | 117,877 | $ | 393,953 | $ | 341,709 | |||||||
Other payment solutions | 54,651 | 43,090 | 141,227 | 112,444 | |||||||||||
Total revenues | 191,525 | 160,967 | 535,180 | 454,153 | |||||||||||
Expenses | |||||||||||||||
Salary and other personnel | 41,469 | 28,823 | 122,193 | 87,501 | |||||||||||
Service fees | 29,352 | 28,968 | 79,765 | 74,046 | |||||||||||
Provision for credit losses | 5,015 | 5,647 | 13,686 | 14,874 | |||||||||||
Technology leasing and support | 6,799 | 4,577 | 18,712 | 13,718 | |||||||||||
Occupancy and equipment | 3,822 | 3,032 | 11,818 | 9,062 | |||||||||||
Depreciation, amortization and impairment | 14,160 | 27,877 | 43,268 | 50,591 | |||||||||||
Operating interest expense | 976 | 1,243 | 3,205 | 3,430 | |||||||||||
Cost of hardware and equipment sold | 1,055 | 759 | 3,266 | 2,270 | |||||||||||
Other | 10,984 | 8,764 | 33,763 | 26,541 | |||||||||||
Total operating expenses | 113,632 | 109,690 | 329,676 | 282,033 | |||||||||||
Operating income | 77,893 | 51,277 | 205,504 | 172,120 | |||||||||||
Financing interest expense | (7,369 | ) | (2,302 | ) | (22,077 | ) | (6,877 | ) | |||||||
Gain (loss) on foreign currency transactions | 2,968 | 180 | 1,708 | (312 | ) | ||||||||||
Net realized and unrealized loss on fuel price derivatives | (3,640 | ) | (14,026 | ) | (2,781 | ) | (12,046 | ) | |||||||
Decrease in tax refund due to former shareholders of RD Card Holdings Australia | — | — | — | 9,750 | |||||||||||
Decrease in amount due under tax receivable agreement | 150 | — | 150 | — | |||||||||||
Income before income taxes | 70,002 | 35,129 | 182,504 | 162,635 | |||||||||||
Income taxes | 26,224 | 20,845 | 68,097 | 94,780 | |||||||||||
Net income | 43,778 | 14,284 | 114,407 | 67,855 | |||||||||||
Less: Net loss from noncontrolling interest | (60 | ) | (14 | ) | (333 | ) | (14 | ) | |||||||
Net earnings attributable to WEX Inc. | $ | 43,838 | $ | 14,298 | $ | 114,740 | $ | 67,869 | |||||||
Net earnings attributable to WEX Inc. per share: | |||||||||||||||
Basic | $ | 1.12 | $ | 0.37 | $ | 2.95 | $ | 1.75 | |||||||
Diluted | $ | 1.12 | $ | 0.37 | $ | 2.93 | $ | 1.74 | |||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 38,978 | 38,793 | 38,934 | 38,832 | |||||||||||
Diluted | 39,081 | 38,995 | 39,102 | 39,084 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income | $ | 43,778 | $ | 14,284 | $ | 114,407 | $ | 67,855 | |||||||
Changes in available-for-sale securities, net of tax effect of $(43) and $(289) in 2013 and $27 and $68 in 2012 | (73 | ) | 44 | (492 | ) | 114 | |||||||||
Changes in interest rate swap, net of tax effect of $35 for the nine months ended 2012 | — | — | — | 60 | |||||||||||
Foreign currency translation | 7,856 | 9,229 | (38,117 | ) | 7,412 | ||||||||||
Comprehensive income | 51,561 | 23,557 | 75,798 | 75,441 | |||||||||||
Less: comprehensive income (loss) attributable to noncontrolling interest | 112 | 209 | (1,900 | ) | 209 | ||||||||||
Comprehensive income attributable to WEX Inc. | $ | 51,449 | $ | 23,348 | $ | 77,698 | $ | 75,232 |
Common Stock | ||||||||||||||||||||||||||
Shares | Amount at par | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Retained Earnings | Total Stockholders’ Equity | ||||||||||||||||||||
Balance at December 31, 2011 | 42,252 | $ | 423 | $ | 146,282 | $ | 30,588 | $ | (101,367 | ) | $ | 633,389 | $ | 709,315 | ||||||||||||
Stock issued to employees exercising stock options | 136 | 1 | 1,862 | — | — | — | 1,863 | |||||||||||||||||||
Tax benefit from employees’ stock option and restricted stock units | — | — | 3,049 | — | — | — | 3,049 | |||||||||||||||||||
Stock issued to employees for vesting of restricted stock units | 100 | 1 | — | — | — | — | 1 | |||||||||||||||||||
Stock-based compensation, net of share repurchases for tax withholdings | — | — | 5,865 | — | — | — | 5,865 | |||||||||||||||||||
Purchase of shares of treasury stock | — | — | — | — | (11,288 | ) | — | (11,288 | ) | |||||||||||||||||
Changes in available-for-sale securities, net of tax effect of $68 | — | — | — | 114 | — | — | 114 | |||||||||||||||||||
Changes in interest rate swaps, net of tax effect of $35 | — | — | — | 60 | — | — | 60 | |||||||||||||||||||
Foreign currency translation | — | — | — | 7,189 | — | — | 7,189 | |||||||||||||||||||
Net earnings attributable to WEX Inc. | — | — | — | — | — | 67,869 | 67,869 | |||||||||||||||||||
Balance at September 30, 2012 | 42,488 | $ | 425 | $ | 157,058 | $ | 37,951 | $ | (112,655 | ) | $ | 701,258 | $ | 784,037 | ||||||||||||
Balance at December 31, 2012 | 42,586 | $ | 426 | $ | 162,470 | $ | 37,379 | $ | (112,655 | ) | $ | 730,311 | $ | 817,931 | ||||||||||||
Stock issued to employees exercising stock options | 70 | 1 | 1,671 | — | — | — | 1,672 | |||||||||||||||||||
Tax benefit from employees’ stock option and restricted stock units | — | — | 6,509 | — | — | — | 6,509 | |||||||||||||||||||
Stock issued to employees for vesting of restricted stock units | 241 | 2 | (2 | ) | — | — | — | — | ||||||||||||||||||
Stock-based compensation, net of share repurchases for tax withholdings | — | — | (4,033 | ) | — | — | — | (4,033 | ) | |||||||||||||||||
Purchase of shares of treasury stock | — | — | — | — | (17,911 | ) | — | (17,911 | ) | |||||||||||||||||
Changes in available-for-sale securities, net of tax effect of $(289) | — | — | — | (492 | ) | — | — | (492 | ) | |||||||||||||||||
Foreign currency translation | — | — | — | (36,550 | ) | — | — | (36,550 | ) | |||||||||||||||||
Net earnings attributable to WEX Inc. | — | — | — | — | — | 114,740 | 114,740 | |||||||||||||||||||
Balance at September 30, 2013 | 42,897 | $ | 429 | $ | 166,615 | $ | 337 | $ | (130,566 | ) | $ | 845,051 | $ | 881,866 |
Nine months ended September 30, | |||||||
2013 | 2012 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 114,407 | $ | 67,855 | |||
Adjustments to reconcile net income to net cash provided by (used for) operating activities: | |||||||
Fair value change of fuel price derivatives | (1,234 | ) | 1,841 | ||||
Stock-based compensation | 6,882 | 8,806 | |||||
Depreciation, amortization and impairment | 45,021 | 35,604 | |||||
Goodwill impairment | — | 16,171 | |||||
Deferred taxes | 23,207 | 35,392 | |||||
Provision for credit losses | 13,686 | 14,874 | |||||
Loss on disposal of property, equipment and capitalized software | 637 | — | |||||
Changes in operating assets and liabilities, net of effects of acquisition: | |||||||
Accounts receivable | (384,715 | ) | (306,350 | ) | |||
Other assets | (39,289 | ) | (55,572 | ) | |||
Accounts payable | 185,284 | 163,203 | |||||
Accrued expenses | 13,030 | (5,755 | ) | ||||
Income taxes | 5,463 | 16,904 | |||||
Other liabilities | (826 | ) | (12,034 | ) | |||
Amounts due under tax receivable agreement | (6,841 | ) | (6,245 | ) | |||
Net cash used for operating activities | (25,288 | ) | (25,306 | ) | |||
Cash flows from investing activities | |||||||
Purchases of property, equipment and capitalized software | (30,122 | ) | (21,796 | ) | |||
Purchases of available-for-sale securities | (1,704 | ) | (224 | ) | |||
Maturities of available-for-sale securities | 1,065 | 1,228 | |||||
Acquisitions, net of cash | — | (26,217 | ) | ||||
Net cash used for investing activities | (30,761 | ) | (47,009 | ) | |||
Cash flows from financing activities | |||||||
Excess tax benefits from equity instrument share-based payment arrangements | 6,509 | 3,049 | |||||
Repurchase of share-based awards to satisfy tax withholdings | (10,917 | ) | (2,941 | ) | |||
Proceeds from stock option exercises | 1,671 | 1,862 | |||||
Net change in deposits | 267,859 | 512,456 | |||||
Net change in borrowed federal funds | (48,400 | ) | (6,900 | ) | |||
Other financing debt | (3,003 | ) | (19,560 | ) | |||
Loan origination fee | (12,023 | ) | — | ||||
Borrowings on notes outstanding | 400,000 | — | |||||
Net activity on 2011 revolving line-of-credit | (438,500 | ) | 12,200 | ||||
Net activity on 2011 term loan | (182,500 | ) | (7,500 | ) | |||
Net activity on 2013 term loan | 288,750 | — | |||||
Purchase of shares of treasury stock | (17,911 | ) | (11,288 | ) | |||
Net cash provided by financing activities | 251,535 | 481,378 | |||||
Effect of exchange rate changes on cash and cash equivalents | (1,977 | ) | 449 | ||||
Net change in cash and cash equivalents | 193,509 | 409,512 | |||||
Cash and cash equivalents, beginning of period | 197,662 | 25,791 | |||||
Cash and cash equivalents, end of period | $ | 391,171 | $ | 435,303 | |||
Supplemental cash flow information | |||||||
Interest paid | $ | 20,291 | $ | 9,676 | |||
Income taxes paid | $ | 33,013 | $ | 39,455 | |||
Significant non-cash transactions | |||||||
Reduction of rapid! – estimated earn out | $ | — | $ | 839 | |||
Acquisition of UNIK - estimated earn out | $ | — | $ | 991 | |||
Increase in UNIK – estimated earn out | $ | 198 | $ | — |
1. | Basis of Presentation |
2. | New Accounting Standards |
3. | Business Acquisitions |
Consideration paid (net of cash) | $ | 27,783 | |
Less: | |||
Accounts receivable | 1,585 | ||
Accounts payable | (629 | ) | |
Other tangible liabilities, net | (4,040 | ) | |
Acquired software(a) | 8,233 | ||
Customer relationships(b) | 1,614 | ||
Trademarks and trade name(c) | 1,453 | ||
Recorded goodwill | $ | 19,567 |
(a) | Weighted average life – 6.2 years. |
(b) | Weighted average life – 6.3 years. |
(c) | Weighted average life – 5.3 years. |
Total UNIK value | $ | 44,701 | |
Less: Redeemable noncontrolling interest | 21,904 | ||
Total purchase price (includes estimated earn out of $991) | $ | 22,797 | |
Less: | |||
Cash | 1,566 | ||
Accounts receivable | 11,726 | ||
Accounts payable | (12,640 | ) | |
Other tangible liabilities, net | (36,866 | ) | |
Acquired software(a) | 14,193 | ||
Customer relationships(b) | 15,171 | ||
Trademarks and trade name(c) | 1,272 | ||
Recorded goodwill | $ | 28,375 |
(a) | Weighted average life – 6.2 years. |
(b) | Weighted average life – 5.9 years. |
(c) | Weighted average life – 5.5 years. |
Consideration paid (net of cash) | $ | 376,258 | |
Less: | |||
Accounts receivable | 152,527 | ||
Accounts payable | (151,647 | ) | |
Other tangible liabilities, net | (693 | ) | |
Acquired software(a) | 35,000 | ||
Customer relationships(b) | 74,000 | ||
Trademarks and trade name(c) | 4,000 | ||
Recorded goodwill | $ | 263,071 |
(a) | Weighted average life – 6.7 years. |
(b) | Weighted average life – 5.5 years. |
(c) | Weighted average life – 5.5 years. |
4. | Reserves for Credit Losses |
Age Analysis of Past Due Financing Receivables, Gross as of September 30, 2013, and September 30, 2012 | |||||||||||||||||||
Current and Less Than 30 Days Past Due | 30-59 Days Past Due | 60-89 Days Past Due | Greater Than 90 Days Past Due | Total | |||||||||||||||
2013 | |||||||||||||||||||
Accounts receivable, trade | $ | 1,852,563 | $ | 50,691 | $ | 10,718 | $ | 8,596 | $ | 1,922,568 | |||||||||
Percent of total | 96.4 | % | 2.6 | % | 0.6 | % | 0.4 | % | |||||||||||
2012 | |||||||||||||||||||
Accounts receivable, trade | $ | 1,595,483 | $ | 32,031 | $ | 6,123 | $ | 7,130 | $ | 1,640,767 | |||||||||
Percent of total | 97.2 | % | 2.0 | % | 0.4 | % | 0.4 | % |
Nine months ended September 30, | |||||||
2013 | 2012 | ||||||
Balance, beginning of period | $ | 11,709 | $ | 11,526 | |||
Provision for credit losses | 13,686 | 14,874 | |||||
Charge-offs | (21,150 | ) | (20,397 | ) | |||
Recoveries of amounts previously charged-off | 5,031 | 4,065 | |||||
Currency translation | (322 | ) | — | ||||
Balance, end of period | $ | 8,954 | $ | 10,068 |
5. | Goodwill and Other Intangible Assets |
Fleet Payment Solutions Segment | Other Payment Solutions Segment | Total | |||||||||
Gross goodwill, January 1, 2013, as adjusted | $ | 779,654 | $ | 85,840 | $ | 865,494 | |||||
Impact of foreign currency translation | (21,123 | ) | (2,556 | ) | (23,679 | ) | |||||
Gross goodwill, September 30, 2013 | 758,531 | 83,284 | 841,815 | ||||||||
Accumulated impairment, September 30, 2013 | (1,337 | ) | (16,171 | ) | (17,508 | ) | |||||
Net goodwill, September 30, 2013 | $ | 757,194 | $ | 67,113 | $ | 824,307 |
Net Carrying Amount, January 1, 2013 | Transfer from indefinite-lived intangible assets to definite-lived intangible assets | Amortization | Impact of foreign currency translation | Net Carrying Amount, September 30, 2013 | |||||||||||||||
(As adjusted) | |||||||||||||||||||
Definite-lived intangible assets | |||||||||||||||||||
Acquired software | $ | 71,343 | $ | — | $ | (6,350 | ) | $ | (1,584 | ) | $ | 63,409 | |||||||
Customer relationships | 150,290 | — | (17,264 | ) | (5,819 | ) | 127,207 | ||||||||||||
Patent | 2,365 | — | (341 | ) | (176 | ) | 1,848 | ||||||||||||
Trade names | 7,407 | 2,421 | (609 | ) | (116 | ) | 9,103 | ||||||||||||
Indefinite-lived intangible assets | — | ||||||||||||||||||
Trademarks and trade names | 10,545 | (2,421 | ) | — | (617 | ) | 7,507 | ||||||||||||
Total | $ | 241,950 | $ | — | $ | (24,564 | ) | $ | (8,312 | ) | $ | 209,074 |
Estimated Amortization Expense | |||
Remaining 2013 | $ | 8,188 | |
2014 | $ | 31,541 | |
2015 | $ | 28,918 | |
2016 | $ | 25,360 | |
2017 | $ | 21,625 | |
2018 | $ | 18,606 |
September 30, 2013 | December 31, 2012 | ||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||
Definite-lived intangible assets | |||||||||||||||||||||||
Acquired software | $ | 84,023 | $ | (20,614 | ) | $ | 63,409 | $ | 86,527 | $ | (15,184 | ) | $ | 71,343 | |||||||||
Non-compete agreement | 100 | (100 | ) | — | 100 | (100 | ) | — | |||||||||||||||
Customer relationships | 192,846 | (65,639 | ) | 127,207 | 202,061 | (51,771 | ) | 150,290 | |||||||||||||||
Patent | 3,083 | (1,235 | ) | 1,848 | 3,430 | (1,065 | ) | 2,365 | |||||||||||||||
Trademarks and trade names | 10,137 | (1,034 | ) | 9,103 | 7,827 | (420 | ) | 7,407 | |||||||||||||||
$ | 290,189 | $ | (88,622 | ) | 201,567 | $ | 299,945 | $ | (68,540 | ) | 231,405 | ||||||||||||
Indefinite-lived intangible assets | |||||||||||||||||||||||
Trademarks and trade names | 7,507 | 10,545 | |||||||||||||||||||||
Total | $ | 209,074 | $ | 241,950 |
6. | Earnings per Share |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net earnings attributable to WEX Inc. available for common stockholders – Basic and Diluted | $ | 43,838 | $ | 14,298 | $ | 114,740 | $ | 67,869 | |||||||
Weighted average common shares outstanding – Basic | 38,978 | 38,793 | 38,934 | 38,832 | |||||||||||
Unvested restricted stock units | 74 | 96 | 125 | 130 | |||||||||||
Stock options | 29 | 106 | 43 | 122 | |||||||||||
Weighted average common shares outstanding – Diluted | 39,081 | 38,995 | 39,102 | 39,084 |
7. | Derivative Instruments |
Aggregate Notional Amount (gallons) (a) | ||
Fuel price derivative instruments – unleaded fuel | ||
Option contracts settling October 2013 – March 2015 | 36,953 | |
Fuel price derivative instruments – diesel | ||
Option contracts settling October 2013 – March 2015 | 17,402 | |
Total fuel price derivative instruments | 54,355 |
(a) | The settlement of the put and call option contracts is based upon the New York Mercantile Exchange’s New York Harbor Reformulated Gasoline Blendstock for Oxygen Blending and the U.S. Department of Energy’s weekly retail on-highway diesel fuel price for the month. |
Derivatives Classified as Assets | Derivatives Classified as Liabilities | |||||||||||||||||||||
September 30, 2013 | December 31, 2012 | September 30, 2013 | December 31, 2012 | |||||||||||||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||||||||||||
Derivatives Not Designated as Hedging Instruments | ||||||||||||||||||||||
Commodity contracts | Fuel price derivatives, at fair value | $ | 488 | Fuel price derivatives, at fair value | — | Fuel price derivatives, at fair value | $ | 983 | Fuel price derivatives, at fair value | $ | 1,729 |
Amount of Gain or (Loss) Recognized in Income on Derivative | |||||||||
Derivatives Not Designated as Hedging Instruments | Location of Gain or (Loss) Recognized in | Three months ended September 30, | |||||||
Income on Derivative | 2013 | 2012 | |||||||
Commodity contracts | Net realized and unrealized loss on fuel price derivatives | $ | (3,640 | ) | $ | (14,026 | ) |
Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) (a) | Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) (b) | Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) | ||||||||||||||||||||||||
Derivatives in Cash Flow Hedging Relationships | Nine months ended September 30, | Nine months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||
Interest rate contracts | $ | — | $ | 60 | Financing interest expense | $ | — | $ | (109 | ) | Financing interest expense | $ | — | $ | — |
Location of Gain or (Loss) Recognized in Income on Derivative | Amount of Gain or (Loss) Recognized in Income on Derivative | ||||||||
Nine months ended September 30, | |||||||||
Derivatives Not Designated as Hedging Instruments | 2013 | 2012 | |||||||
Commodity contracts | Net realized and unrealized loss on fuel price derivatives | $ | (2,781 | ) | $ | (12,046 | ) |
(a) | The amount of gain or (loss) recognized in other comprehensive income ("OCI") on the Company’s interest rate swap arrangements has been recorded net of tax impact of $35 in 2012. |
(b) | No ineffectiveness was reclassified into earnings nor was any amount excluded from effectiveness testing. |
8. | Financing Debt |
Years beginning on February 1 | Percentage of Principal Amount of Notes | |
2018 | 102.375 | |
2019 | 101.583 | |
2020 | 100.792 | |
2021 and thereafter | 100.000 |
9. | Fair Value |
• | Level 1 – Quoted prices for identical instruments inactive markets. |
• | Level 2 – Quoted prices for similar instruments inactive markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. |
• | Level 3 – Instruments whose significant value drivers are unobservable. |
Fair Value Measurements at Reporting Date Using | |||||||||||||||
September 30, 2013 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets: | |||||||||||||||
Mortgage-backed securities | $ | 867 | $ | — | $ | 867 | $ | — | |||||||
Asset-backed securities | 1,490 | — | 1,490 | — | |||||||||||
Municipal bonds | 535 | — | 535 | — | |||||||||||
Equity securities | 13,316 | 13,316 | — | — | |||||||||||
Total available-for-sale securities | $ | 16,208 | $ | 13,316 | $ | 2,892 | $ | — | |||||||
Executive deferred compensation plan trust (a) | $ | 4,048 | $ | 4,048 | $ | — | $ | — | |||||||
Fuel price derivatives – unleaded fuel (b) | $ | 22 | $ | — | $ | 22 | $ | — | |||||||
Liabilities: | |||||||||||||||
Fuel price derivatives – diesel (b) | 517 | — | — | 517 |
(a) | The fair value of these instruments is recorded in other assets. |
(b) | The balance sheet presentation combines unleaded fuel and diesel fuel positions. |
Fair Value Measurements at Reporting Date Using | |||||||||||||||
December 31, 2012 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets: | |||||||||||||||
Mortgage-backed securities | $ | 1,839 | $ | — | $ | 1,839 | $ | — | |||||||
Asset-backed securities | 1,654 | — | 1,654 | — | |||||||||||
Municipal bonds | 641 | — | 641 | — | |||||||||||
Equity securities | 12,216 | 12,216 | — | — | |||||||||||
Total available-for-sale securities | $ | 16,350 | $ | 12,216 | $ | 4,134 | $ | — | |||||||
Executive deferred compensation plan trust (a) | $ | 2,921 | $ | 2,921 | $ | — | $ | — | |||||||
Liabilities: | |||||||||||||||
Fuel price derivatives – unleaded fuel (b) | $ | 1,622 | $ | — | $ | 1,622 | $ | — | |||||||
Fuel price derivatives – diesel (b) | 107 | — | — | 107 | |||||||||||
Total fuel price derivatives | $ | 1,729 | $ | — | $ | 1,622 | $ | 107 | |||||||
Contingent consideration (c) | $ | 313 | — | — | $ | 313 |
(a) | The fair value of these instruments is recorded in other assets. |
(b) | The balance sheet presentation combines unleaded fuel and diesel fuel positions. |
(c) | The fair value of the contingent consideration is recorded in accrued expenses. |
September 30, 2013 | September 30, 2012 | |||||||||||
Fuel Price Derivatives – Diesel | Contingent Consideration | Fuel Price Derivatives – Diesel | ||||||||||
Beginning balance | $ | 498 | $ | — | $ | 3,398 | ||||||
Total (losses) and gains – realized/unrealized | ||||||||||||
Included in earnings (a) | (1,015 | ) | — | (3,812 | ) | |||||||
Included in other comprehensive income | — | — | — | |||||||||
Purchases, issuances and settlements | — | (991 | ) | — | ||||||||
Transfers (in)/out of Level 3 | — | — | — | |||||||||
Ending balance | $ | (517 | ) | $ | (991 | ) | $ | (414 | ) |
(a) | Gains and losses (realized and unrealized), associated with fuel price derivatives, included in earnings for the three months ended September 30, 2013 and 2012, are reported in net realized and unrealized losses on fuel price derivatives on the unaudited condensed consolidated statements of income. Gains associated with contingent consideration, included in earnings for the three months ended September 30, 2012, are reported in other expenses and loss of foreign currency transactions on the unaudited condensed consolidated statements of income. |
September 30, 2013 | September 30, 2012 | ||||||||||||||
Contingent Consideration | Fuel Price Derivatives – Diesel | Contingent Consideration | Fuel Price Derivatives – Diesel | ||||||||||||
Beginning balance | $ | (313 | ) | $ | (107 | ) | $ | (9,325 | ) | $ | (25 | ) | |||
Total (losses) and gains – realized/unrealized | |||||||||||||||
Included in earnings (a) | (198 | ) | (410 | ) | 839 | (389 | ) | ||||||||
Included in other comprehensive income | — | — | — | — | |||||||||||
Purchases, issuances and settlements | — | — | (991 | ) | — | ||||||||||
Transfers (in)/out of Level 3 | 511 | — | 8,486 | — | |||||||||||
Ending balance | $ | — | $ | (517 | ) | $ | (991 | ) | $ | (414 | ) |
(a) | Gains and losses (realized and unrealized), associated with fuel price derivatives, included in earnings for the nine months ended September 30, 2013 and 2012, are reported in net realized and unrealized losses on fuel price derivatives on the unaudited condensed consolidated statements of income. Gains associated with contingent consideration, included in earnings for the nine months ended September 30, 2013 and 2012, are reported in other expenses and loss of foreign currency transactions on the unaudited condensed consolidated statements of income. |
Fair Value at September 30, 2013 | Valuation Technique | Unobservable Input | Range $ per gallon | ||||||
Fuel price derivatives – diesel | $ | (517 | ) | Option model | Future retail price of diesel fuel after September 30, 2013 | $3.71 – 3.94 |
10. | Comprehensive Income |
2013 | 2012 | ||||||||||||||
Unrealized Gains and Losses on Available- for-Sale Securities | Foreign Currency Items | Unrealized Gains and Losses on Available- for-Sale Securities | Foreign Currency Items | ||||||||||||
Beginning balance | $ | (222 | ) | $ | (7,052 | ) | $ | 270 | $ | 28,631 | |||||
Other comprehensive (loss) income | (73 | ) | 7,684 | 44 | 9,006 | ||||||||||
Ending balance | $ | (295 | ) | $ | 632 | $ | 314 | $ | 37,637 |
2013 | 2012 | ||||||||||||||
Unrealized Gains and Losses on Available- for-Sale Securities | Foreign Currency Items | Unrealized Gains and Losses on Available- for-Sale Securities | Foreign Currency Items | ||||||||||||
Beginning balance | $ | 197 | $ | 37,182 | $ | 200 | $ | 30,448 | |||||||
Other comprehensive (loss) income | (492 | ) | (36,550 | ) | 114 | 7,189 | |||||||||
Ending balance | $ | (295 | ) | $ | 632 | $ | 314 | $ | 37,637 |
11. | Redeemable noncontrolling interest |
Three months ended September 30, | Nine months ended September 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Balance, beginning of period | $ | 19,650 | — | 21,662 | — | |||||||
Acquisition of subsidiary at fair value | — | 21,904 | — | 21,904 | ||||||||
Net loss attributable to noncontrolling interest | (60 | ) | (14 | ) | (333 | ) | (14 | ) | ||||
Currency translation adjustment | 172 | 223 | (1,567 | ) | 223 | |||||||
Ending balance | $ | 19,762 | 22,113 | 19,762 | 22,113 |
12. | Stock-Based Compensation |
13. | Income Taxes |
14. | Commitments and Contingencies |
15. | Segment Information |
Total Revenues | Operating Interest Expense | Depreciation and Amortization | Provision for Income Taxes | Adjusted Net Income | |||||||||||||||
Three months ended September 30, 2013 | |||||||||||||||||||
Fleet payment solutions | $ | 136,874 | $ | 427 | $ | 5,767 | $ | 21,726 | 35,119 | ||||||||||
Other payment solutions | 54,651 | 549 | 342 | 7,577 | 15,303 | ||||||||||||||
Total | $ | 191,525 | $ | 976 | $ | 6,109 | $ | 29,303 | 50,422 | ||||||||||
Three months ended September 30, 2012 | |||||||||||||||||||
Fleet payment solutions | $ | 117,877 | $ | 838 | $ | 5,856 | $ | 21,874 | $ | 33,641 | |||||||||
Other payment solutions | 43,090 | 404 | 441 | 5,589 | 8,394 | ||||||||||||||
Total | $ | 160,967 | $ | 1,242 | $ | 6,297 | $ | 27,463 | $ | 42,035 |
Total Revenues | Operating Interest Expense | Depreciation and Amortization | Provision for Income Taxes | Adjusted Net Income | |||||||||||||||
Nine months ended September 30, 2013 | |||||||||||||||||||
Fleet payment solutions | $ | 393,953 | $ | 1,392 | $ | 17,358 | $ | 58,474 | 99,950 | ||||||||||
Other payment solutions | 141,227 | 1,813 | 1,346 | 17,128 | 29,840 | ||||||||||||||
Total | $ | 535,180 | $ | 3,205 | $ | 18,704 | $ | 75,602 | 129,790 | ||||||||||
Nine months ended September 30, 2012 | |||||||||||||||||||
Fleet payment solutions | $ | 341,709 | $ | 2,685 | $ | 17,699 | $ | 56,027 | $ | 94,169 | |||||||||
Other payment solutions | 112,444 | 744 | 1,241 | 13,607 | 22,512 | ||||||||||||||
Total | $ | 454,153 | $ | 3,429 | $ | 18,940 | $ | 69,634 | $ | 116,681 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Adjusted net income WEX Inc. | $ | 50,422 | $ | 42,035 | $ | 129,790 | $ | 116,681 | |||||||
Unrealized (loss) gains on fuel price derivatives | (2,733 | ) | (12,849 | ) | 1,234 | (1,841 | ) | ||||||||
Amortization of acquired intangible assets | (8,051 | ) | (5,411 | ) | (24,564 | ) | (15,481 | ) | |||||||
Goodwill impairment | — | (16,171 | ) | — | (16,171 | ) | |||||||||
Deferred loan costs associated with the extinguishment of debt | — | — | (1,004 | ) | — | ||||||||||
Non-cash adjustments related to tax receivable agreement | 150 | — | 150 | — | |||||||||||
Change in tax refund due to former shareholders of RD Card Holding Australia | — | — | — | 9,750 | |||||||||||
Other adjustments related to Fleet One acquisition | 658 | — | 658 | — | |||||||||||
ANI adjustments attributable to noncontrolling interest | 313 | 77 | 971 | 77 | |||||||||||
Tax impact | 3,079 | 6,617 | 7,505 | (25,146 | ) | ||||||||||
Net earnings attributable to WEX Inc. | $ | 43,838 | $ | 14,298 | $ | 114,740 | $ | 67,869 |
• | Corporate charge card purchase volume grew by approximately $771.5 million to $4.0 billion for the third quarter of 2013, an increase of 24% over the same period in the prior year. |
• | Average number of vehicles serviced increased 9.5 percent from the third quarter of 2012 to approximately 7.6 million for the third quarter of 2013, primarily due to the acquisition of Fleet One during the fourth quarter of 2012. |
• | Total fuel transactions processed increased 12.7 percent from the third quarter of 2012 to 96.7 million for the third quarter of 2013. Total payment processing transactions increased 15.8 percent to 76.6 million for the third quarter of 2013 as compared to the same quarter in 2012. Approximately half the growth was due to the acquisition of FleetOne and the remainder was due to organic growth. Transaction processing transactions increased 2.5 percent to 20.1 million for the third quarter of 2013, over the same period in the prior year. |
• | Average expenditure per payment processing transaction increased 16 percent to $85.43 for the third quarter of 2013, from $73.59 for the same period in the prior year. This increase was driven by our Fleet One acquisition. Fleet One services large trucking customers who spend more dollars per transaction. The average U.S. fuel price per gallon during the third quarter of 2013, was $3.70 for North America, a 1 percent decrease over the same period in the prior year. The average Australian fuel price per gallon during the third quarter of 2013, was US$5.30, a 2 percent decrease as compared to the same period in the prior year. |
• | Credit loss expense in the Fleet Payment Solutions segment was $5.0 million during the third quarter of 2013, as compared to $5.4 million during the third quarter of 2012. While volume increased 34 percent in the third quarter of 2013, as compared to the same quarter last year, our credit losses were 7.6 basis points of fuel expenditures for the third quarter of 2013, as compared to 11.1 basis points of fuel expenditures for the same period last year. |
• | Realized losses on our fuel price derivatives during the third quarter of 2013 were $0.9 million as compared to realized losses of $1.2 million for the same period in the prior year. |
• | During the third quarter, we announced that our Board of Directors has authorized a new share repurchase program under which up to $150 million worth of our common stock may be repurchased from time to time until September 30, 2017. |
(in thousands, except per transaction and per gallon data) | Three months ended September 30, | Increase (decrease) | Nine months ended September 30, | Increase (decrease) | |||||||||||||||||||||||||
2013 | 2012 | Amount | Percent | 2013 | 2012 | Amount | Percent | ||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||||||
Payment processing revenue | $ | 91,273 | $ | 78,803 | $ | 12,470 | 16 | % | $ | 262,889 | $ | 231,109 | $ | 31,780 | 14 | % | |||||||||||||
Transaction processing revenue | 5,044 | 4,097 | 947 | 23 | % | 14,551 | 12,235 | 2,316 | 19 | % | |||||||||||||||||||
Account servicing revenue | 19,069 | 17,657 | 1,412 | 8 | % | 56,247 | 48,592 | 7,655 | 16 | % | |||||||||||||||||||
Finance fees | 15,688 | 12,604 | 3,084 | 24 | % | 42,669 | 35,422 | 7,247 | 20 | % | |||||||||||||||||||
Other | 5,800 | 4,716 | 1,084 | 23 | % | 17,597 | 14,351 | 3,246 | 23 | % | |||||||||||||||||||
Total revenues | 136,874 | 117,877 | 18,997 | 16 | % | 393,953 | 341,709 | 52,244 | 15 | % | |||||||||||||||||||
Total operating expenses | 78,483 | 62,964 | 15,519 | 25 | % | 230,956 | 186,329 | 44,627 | 24 | % | |||||||||||||||||||
Operating income | 58,391 | 54,913 | 3,478 | 6 | % | 162,997 | 155,380 | 7,617 | 5 | % | |||||||||||||||||||
Gain (loss) on foreign currency transactions | 558 | (33 | ) | 591 | NM | 442 | (410 | ) | 852 | NM | |||||||||||||||||||
Financing interest expense (a) | (7,369 | ) | (2,302 | ) | (5,067 | ) | 220 | % | (22,076 | ) | (6,877 | ) | (15,199 | ) | 221 | % | |||||||||||||
Increase (decrease) in tax refund due to former shareholders of RD Card Holdings Australia | — | — | — | — | — | 6,968 | (6,968 | ) | (100 | )% | |||||||||||||||||||
Net realized and unrealized (losses) gains on derivative instruments (a) | (3,640 | ) | (14,026 | ) | 10,386 | (74 | )% | (2,781 | ) | (12,046 | ) | 9,265 | (77 | )% | |||||||||||||||
Decrease in amount due under tax receivable agreement | 150 | — | 150 | NM | 150 | — | 150 | NM | |||||||||||||||||||||
Income before income taxes | 48,090 | 38,552 | 9,538 | 25 | % | 138,732 | 143,015 | (4,283 | ) | (3 | )% | ||||||||||||||||||
Income taxes | 18,367 | 15,652 | 2,715 | 17 | % | 52,002 | 77,387 | (25,385 | ) | (33 | )% | ||||||||||||||||||
Net income | $ | 29,723 | $ | 22,900 | $ | 6,823 | 30 | % | $ | 86,730 | $ | 65,628 | $ | 21,102 | 32 | % | |||||||||||||
(in thousands, except per transaction and per gallon data) | |||||||||||||||||||||||||||||
Key operating statistics | |||||||||||||||||||||||||||||
Payment processing revenue: | |||||||||||||||||||||||||||||
Payment processing transactions | 76,578 | 66,155 | 10,423 | 16 | % | 219,117 | 190,624 | 28,493 | 15 | % | |||||||||||||||||||
Average expenditure per payment processing transaction | $ | 85.43 | $ | 73.59 | $ | 11.84 | 16 | % | $ | 86.18 | $ | 74.47 | $ | 11.71 | 16 | % | |||||||||||||
Average price per gallon of fuel | |||||||||||||||||||||||||||||
- Domestic – ($/gal) | $ | 3.70 | $ | 3.74 | $ | (0.04 | ) | (1 | )% | $ | 3.72 | $ | 3.75 | $ | (0.03 | ) | (1 | )% | |||||||||||
- Australia – ($USD/gal) | $ | 5.30 | $ | 5.42 | $ | (0.12 | ) | (2 | )% | $ | 5.42 | $ | 5.60 | $ | (0.18 | ) | (3 | )% | |||||||||||
Transaction processing revenue: | |||||||||||||||||||||||||||||
Transaction processing transactions | 20,081 | 19,591 | 490 | 3 | % | 58,554 | 57,687 | 867 | 2 | % | |||||||||||||||||||
Account servicing revenue: | |||||||||||||||||||||||||||||
Average number of vehicles serviced | 7,560 | 6,902 | 658 | 10 | % | 7,490 | 6,775 | 715 | 11 | % |
Increase (decrease) | ||||||||||||||
(in thousands) | 2013 | 2012 | Amount | Percent | ||||||||||
Expense | ||||||||||||||
Salary and other personnel | $ | 35,134 | $ | 24,458 | $ | 10,676 | 44 | % | ||||||
Provision for credit losses | $ | 4,973 | $ | 5,420 | $ | (447 | ) | (8 | )% | |||||
Technology leasing and support | $ | 4,536 | $ | 2,728 | $ | 1,808 | 66 | % | ||||||
Depreciation, amortization and impairment | $ | 12,599 | $ | 9,966 | $ | 2,633 | 26 | % |
Increase (decrease) | ||||||||||||||
(in thousands) | 2013 | 2012 | Amount | Percent | ||||||||||
Expense | ||||||||||||||
Salary and other personnel | $ | 102,254 | $ | 76,057 | $ | 26,197 | 34 | % | ||||||
Service fees | $ | 22,063 | $ | 20,920 | $ | 1,143 | 5 | % | ||||||
Provision for credit losses | $ | 13,679 | $ | 13,234 | $ | 445 | 3 | % | ||||||
Technology leasing and support | $ | 12,116 | $ | 8,568 | $ | 3,548 | 41 | % | ||||||
Occupancy and equipment | $ | 9,916 | $ | 8,390 | $ | 1,526 | 18 | % | ||||||
Depreciation, amortization and impairment | $ | 38,090 | $ | 30,004 | $ | 8,086 | 27 | % |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
(in thousands, except per gallon data) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Fuel price derivatives, at fair value, beginning of period | $ | 2,238 | $ | 11,003 | $ | (1,729 | ) | $ | (5 | ) | |||||
Net change in fair value | (3,640 | ) | (14,026 | ) | (2,781 | ) | (12,046 | ) | |||||||
Cash payments on settlement | 907 | 1,177 | 4,015 | 10,205 | |||||||||||
Fuel price derivatives, at fair value, end of period | $ | (495 | ) | $ | (1,846 | ) | $ | (495 | ) | $ | (1,846 | ) | |||
Collar range: | |||||||||||||||
Floor | $ | 3.47 | $ | 3.45 | $ | 3.44 | $ | 3.29 | |||||||
Ceiling | $ | 3.53 | $ | 3.51 | $ | 3.50 | $ | 3.35 | |||||||
Domestic average fuel price, beginning of period | $ | 3.61 | $ | 3.47 | $ | 3.49 | $ | 3.45 | |||||||
Domestic average fuel price, end of period | $ | 3.66 | $ | 3.89 | $ | 3.66 | $ | 3.89 |
Three months ended September 30, | Increase (decrease) | Nine months ended September 30, | Increase (decrease) | ||||||||||||||||||||||||||
(in thousands, except corporate charge card purchase volume in millions) | 2013 | 2012 | Amount | Percent | 2013 | 2012 | Amount | Percent | |||||||||||||||||||||
Revenues | |||||||||||||||||||||||||||||
Payment processing revenue | $ | 39,314 | $ | 29,653 | $ | 9,661 | 33 | % | $ | 99,941 | $ | 75,731 | $ | 24,210 | 32 | % | |||||||||||||
Transaction processing revenue | 1,000 | 1,531 | (531 | ) | (35 | )% | 3,763 | 5,128 | (1,365 | ) | (27 | )% | |||||||||||||||||
Account servicing revenue | 3,092 | 1,627 | 1,465 | 90 | % | 8,383 | 3,891 | 4,492 | 115 | % | |||||||||||||||||||
Finance fees | 1,618 | 521 | 1,097 | 211 | % | 4,777 | 840 | 3,937 | 469 | % | |||||||||||||||||||
Other | 9,627 | 9,758 | (131 | ) | (1 | )% | 24,363 | 26,854 | (2,491 | ) | (9 | )% | |||||||||||||||||
Total revenues | 54,651 | 43,090 | 11,561 | 27 | % | 141,227 | 112,444 | 28,783 | 26 | % | |||||||||||||||||||
Total operating expenses | 35,149 | 46,726 | (11,577 | ) | (25 | )% | 98,720 | 95,704 | 3,016 | 3 | % | ||||||||||||||||||
Operating income | 19,502 | (3,636 | ) | 23,138 | (636 | )% | 42,507 | 16,740 | 25,767 | 154 | % | ||||||||||||||||||
Gain on foreign currency transactions | 2,410 | 213 | 2,197 | NM | 1,266 | 98 | 1,168 | NM | |||||||||||||||||||||
Financing interest expense | — | — | — | — | (1 | ) | — | (1 | ) | — | % | ||||||||||||||||||
Decrease in tax refund due to former shareholders of RD Card Holdings Australia | — | — | — | — | — | 2,782 | (2,782 | ) | (100 | )% | |||||||||||||||||||
Income before income taxes | 21,912 | (3,423 | ) | 25,335 | (740 | )% | 43,772 | 19,620 | 24,152 | 123 | % | ||||||||||||||||||
Income taxes | 7,857 | 5,193 | 2,664 | 51 | % | 16,095 | 17,393 | (1,298 | ) | (7 | )% | ||||||||||||||||||
Net income | 14,055 | $ | (8,616 | ) | $ | 22,671 | (263 | )% | $ | 27,677 | $ | 2,227 | $ | 25,450 | 1,143 | % | |||||||||||||
Less: Net loss from noncontrolling interest | (60 | ) | (14 | ) | (46 | ) | NM | (333 | ) | (14 | ) | (319 | ) | NM | |||||||||||||||
Net earnings attributable to WEX Inc. | $ | 14,115 | $ | (8,602 | ) | $ | 22,717 | (264 | )% | $ | 28,010 | $ | 2,241 | $ | 25,769 | 1,150 | % | ||||||||||||
(in thousands) | |||||||||||||||||||||||||||||
Key operating statistics | |||||||||||||||||||||||||||||
Payment processing revenue: | |||||||||||||||||||||||||||||
Worldwide corporate charge card purchase volume | $ | 3,954 | $ | 3,182 | $ | 772 | 24 | % | $ | 9,771 | $ | 8,194 | $ | 1,577 | 19 | % |
Increase (decrease) | ||||||||||||||
(in thousands) | 2013 | 2012 | Amount | Percent | ||||||||||
Expense | ||||||||||||||
Salary and other personnel | $ | 6,335 | $ | 4,365 | $ | 1,970 | 45 | % | ||||||
Service fees | $ | 21,434 | $ | 20,634 | $ | 800 | 4 | % | ||||||
Technology leasing, support and occupancy and equipment | $ | 2,763 | $ | 2,139 | $ | 624 | 29 | % | ||||||
Depreciation, amortization and impairment | $ | 1,561 | $ | 17,912 | $ | (16,351 | ) | (91 | )% |
Increase (decrease) | ||||||||||||||
(in thousands) | 2013 | 2012 | Amount | Percent | ||||||||||
Expense | ||||||||||||||
Salary and other personnel | $ | 19,939 | $ | 11,444 | $ | 8,495 | 74 | % | ||||||
Service fees | $ | 57,702 | $ | 53,126 | $ | 4,576 | 9 | % | ||||||
Provision for credit losses | $ | 7 | $ | 1,640 | $ | (1,633 | ) | (100 | )% | |||||
Technology leasing, support and occupancy and equipment | $ | 8,498 | $ | 5,822 | $ | 2,676 | 46 | % | ||||||
Depreciation, amortization and impairment | $ | 5,178 | $ | 20,587 | $ | (15,409 | ) | (75 | )% | |||||
Other | $ | 5,539 | $ | 2,240 | $ | 3,299 | 147 | % |
Nine months ended September 30, | |||||||
2013 | 2012 | ||||||
Net cash used for operating activities | $ | (25,288 | ) | $ | (25,306 | ) | |
Net change in deposits | 267,859 | 512,456 | |||||
Net change in borrowed federal funds | (48,400 | ) | (6,900 | ) | |||
Change in management operating cash | $ | 194,171 | $ | 480,250 |
(in thousands) | Remaining 2013 | 2014 | 2015 | 2016 | 2017 and Thereafter | Total | |||||||||||||||||
Revolving line-of-credit | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
Term Loan | 3,750 | 15,000 | 15,000 | 15,000 | 240,000 | 288,750 | |||||||||||||||||
Interest payments on term loan | 1,442 | 5,498 | 5,201 | 4,918 | 4,828 | 21,887 | |||||||||||||||||
Loan origination fees on credit facility | 420 | 1,648 | 1,633 | 1,630 | 1,710 | 7,041 | |||||||||||||||||
$400 million notes offering | — | — | — | — | 400,000 | 400,000 | |||||||||||||||||
Interest on $400 million notes offering | 4,750 | 19,000 | 19,000 | 19,000 | 115,582 | 177,332 | |||||||||||||||||
Loan origination fees on notes offering | 182 | 734 | 734 | 734 | 4,408 | 6,792 | |||||||||||||||||
$ | 10,544 | $ | 41,880 | $ | 41,568 | $ | 41,282 | $ | 766,528 | $ | 901,802 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||||||||||||
(in thousands) | Shares | Cost | Shares | Cost | Shares | Cost | Shares | Cost | |||||||||||||||||||
Treasury stock purchased | — | $ | — | — | $ | — | 240.3 | $ | 17,911 | 200.8 | $ | 11,288 |
• | changes in the relations between the United States and foreign countries; |
• | actions of foreign or United States governmental authorities affecting trade and foreign investment; |
• | regulations on repatriation of funds; |
• | increased infrastructure costs including complex legal, tax, accounting and information technology laws and treaties; |
• | interpretation and application of local laws and regulations including, among others, those impacting anti-money laundering, bribery, financial transaction reporting and positive balance or prepaid cards; |
• | enforceability of intellectual property and contract rights; |
• | potentially adverse tax consequences due to, but not limited to, the repatriation of cash and negative consequences from changes in or interpretations of tax laws; |
• | local labor conditions and regulations; and |
• | fluctuation in foreign currencies. |
Exhibit No. | Description | ||
3.1 | Certificate of Incorporation (incorporated by reference to Exhibit No. 3.1 to our Current Report on Form 8-K filed with the SEC on March 1, 2005, File No. 001-32426) | ||
3.2 | Certificate of Ownership and Merger merging WEX Transitory Corporation with and into Wright Express Corporation (incorporated by reference to Exhibit No. 3.1 to our Current Report on Form 8-K filed with the SEC on October 30, 2012, File No. 001-32426) | ||
3.3 | Amended and Restated By-Laws of WEX Inc. (incorporated by reference to Exhibit No. 3.1 to our Current Report on Form 8-K filed with the SEC on October 30, 2012, File No. 001-32426) | ||
4.1 | Rights Agreement dated as of February 16, 2005, by and between Wright Express Corporation and Wachovia Bank, National Association (incorporated by reference to Exhibit No. 4.1 to our Current Report on Form 8-K filed with the SEC on March 1, 2005, File No. 001-32426) | ||
4.2 | Indenture, dated as of January 30, 2013, among WEX Inc., the Guarantors named therein, and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit No. 4.1 to our Current Report on Form 8-K filed with the SEC on February 1, 2013, File No. 001-32426) | ||
* | 31.1 | Certification of Chief Executive Officer of WEX INC. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended | |
* | 31.2 | Certification of Chief Financial Officer of WEX INC. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended | |
* | 32.1 | Certification of Chief Executive Officer of WEX INC. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code | |
* | 32.2 | Certification of Chief Financial Officer of WEX INC. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code | |
101.INS | XBRL Instance Document | ||
101.SCH | XBRL Taxonomy Extension Schema Document | ||
101.CAL | XBRL Taxonomy Calculation Linkbase Document | ||
101.LAB | XBRL Taxonomy Label Linkbase Document | ||
101.PRE | XBRL Taxonomy Presentation Linkbase Document | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
* | These exhibits have been filed with this Quarterly Report on Form 10-Q. |
WEX INC. | |||
October 31, 2013 | By: | /s/ Steven A. Elder | |
Steven A. Elder | |||
Senior Vice President and CFO | |||
(principal financial officer and principal accounting officer) |
Exhibit No. | Description | ||
3.1 | Certificate of Incorporation (incorporated by reference to Exhibit No. 3.1 to our Current Report on Form 8-K filed with the SEC on March 1, 2005, File No. 001-32426) | ||
3.2 | Certificate of Ownership and Merger merging WEX Transitory Corporation with and into Wright Express Corporation (incorporated by reference to Exhibit No. 3.1 to our Current Report on Form 8-K filed with the SEC on October 30, 2012, File No. 001-32426) | ||
3.3 | Amended and Restated By-Laws of WEX Inc. (incorporated by reference to Exhibit No. 3.1 to our Current Report on Form 8-K filed with the SEC on October 30, 2012, File No. 001-32426) | ||
4.1 | Rights Agreement dated as of February 16, 2005, by and between Wright Express Corporation and Wachovia Bank, National Association (incorporated by reference to Exhibit No. 4.1 to our Current Report on Form 8-K filed with the SEC on March 1, 2005, File No. 001-32426) | ||
4.2 | Indenture, dated as of January 30, 2013, among WEX Inc., the Guarantors named therein, and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit No. 4.1 to our Current Report on Form 8-K filed with the SEC on February 1, 2013, File No. 001-32426) | ||
* | 31.1 | Certification of Chief Executive Officer of WEX INC. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended | |
* | 31.2 | Certification of Chief Financial Officer of WEX INC. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended | |
* | 32.1 | Certification of Chief Executive Officer of WEX INC. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code | |
* | 32.2 | Certification of Chief Financial Officer of WEX INC. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code | |
101.INS | XBRL Instance Document | ||
101.SCH | XBRL Taxonomy Extension Schema Document | ||
101.CAL | XBRL Taxonomy Calculation Linkbase Document | ||
101.LAB | XBRL Taxonomy Label Linkbase Document | ||
101.PRE | XBRL Taxonomy Presentation Linkbase Document | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
* | These exhibits have been filed with this Quarterly Report on Form 10-Q. |
1. | I have reviewed this quarterly report on Form 10-Q of WEX 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/ Michael E. Dubyak |
Michael E. Dubyak |
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of WEX 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/ Steven A. Elder |
Steven A. Elder |
Senior Vice President and Chief Financial Officer |
(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/ Michael E. Dubyak |
Michael E. Dubyak |
Chief Executive Officer |
October 31, 2013 |
(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/ Steven A. Elder |
Steven A. Elder |
Senior Vice President and Chief Financial Officer |
(Principal accounting and principal financial officer) |
October 31, 2013 |
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Financing Debt
|
9 Months Ended | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2013
|
||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||
Financing Debt |
2013 Credit Agreement On January 18, 2013, the Company entered into an amended and restated credit agreement (the “2013 Credit Agreement”), among the Company and a syndicate of lenders. The 2013 Credit Agreement provides for a five-year amortizing $300,000 term loan facility, and a five-year $800,000 secured revolving credit facility with a $150,000 sub-limit for letters of credit. The indebtedness covenant under the 2013 Credit Agreement requires that the Company reduce the revolving commitments under the 2013 Credit Agreement on a dollar-for-dollar basis to the extent that the Company issued more than $300,000 in principal amount of senior or senior subordinated notes of the Company. Subject to certain conditions, including obtaining relevant commitments, the Company has the option to increase the facility by up to an additional $100,000. The 2013 Credit Agreement replaced the 2011 Credit Agreement, dated as of May 23, 2011. The 2013 Credit Agreement increased the outstanding amount of the term loan from $185,000 to $300,000 and increased the amount of the revolving loan from $700,000 to $800,000. On January 30, 2013, the revolving loan commitment under the 2013 Credit Agreement was reduced to $700,000. The reduction was required due to the completion of the $400,000, 4.75 percent senior notes due in 2023, described below. $400 Million Note Offering On January 18, 2013, the Company completed a $400,000 offering in aggregate principal amount of 4.75 percent senior notes due in 2023 (the “Notes”) at an issue price of 100.0 percent of the principal amount, plus accrued interest, from January 18, 2013, in a private placement for resale to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and in offshore transactions pursuant to Regulation S under the Securities Act. The Notes were issued pursuant to an indenture dated as of January 18, 2013 (the “Indenture”) among the Company, the guarantors listed therein, and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). The Notes mature on February 1, 2023, and interest accrues at the rate of 4.75 percent per annum. Interest is payable semiannually in arrears on February 1 and August 1 of each year, commencing on August 1, 2013. The Notes are guaranteed on a senior unsecured basis by each of the Company’s restricted subsidiaries and each of the Company’s regulated subsidiaries that guarantees the Company’s 2013 Credit Agreement, which, as of the issue date, consisted of four of the Company’s restricted subsidiaries. WEX Bank, which represents a substantial amount of the Company’s operations, is not a guarantor and is not subject to many of the restrictive covenants in the indenture governing the Notes. The Notes and guarantees described above are general senior unsecured obligations ranking equally with the Company’s existing and future senior debt, senior in right of payment to all of the Company’s subordinated debt, and effectively junior in right of payment to all of the Company’s existing and future secured debt, including the Company’s 2013 Credit Agreement, to the extent of the value of the collateral securing such debt. In addition, the Notes and the guarantees are structurally subordinated to all liabilities of the Company’s subsidiaries that are not guarantors, including WEX Bank. Prior to February 1, 2016, the Company may, subject to certain conditions, redeem up to 35 percent of the Notes from the proceeds of certain equity offerings at a redemption price of 104.75 percent of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption. Prior to February 1, 2018, the Company may redeem the Notes, in whole or in part, at a redemption price equal to 100.0 percent of the principal amount of such Notes redeemed plus a “make-whole” premium (as described in the Indenture), together with any accrued and unpaid interest up to the date of redemption. At any time on or after February 1, 2018, the Company may redeem the Notes, in whole or in part, at the following redemption prices (expressed as a percentage of principal amount of the Notes), plus accrued and unpaid interest, if any, to, but excluding, the date of redemption if redeemed during the twelve month period beginning on February 1 of the following years:
Upon the occurrence of a change in control of the Company (as described in the Indenture), the Company must offer to repurchase the Notes at 101 percent of the principal amount of the Notes, plus accrued and unpaid interest up to the date of repurchase. The Indenture contains covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries and, in certain limited circumstances, WEX Bank and the Company’s other regulated subsidiaries, to (i) incur additional debt, (ii) pay dividends or make other distributions on, redeem or repurchase capital stock, or make investments or other restricted payments, (iii) enter into transactions with affiliates, (iv) dispose of assets or issue stock of restricted subsidiaries or regulated subsidiaries, (v) create liens on assets, or (vi) effect a consolidation or merger or sell all, or substantially all, of the Company’s assets. These covenants are subject to important exceptions and qualifications. At any time that the Notes are rated investment grade, which is not currently the case, and subject to certain conditions, certain covenants will be suspended with respect to the Notes. WEX Bank and the Company’s other regulated subsidiaries will not be subject to some of the restrictive covenants in the Indenture that place limitations on the Company and its restricted subsidiaries’ actions, and where WEX Bank and the Company’s regulated subsidiaries are subject to covenants, there are significant exceptions and limitations on the application of those covenants to WEX Bank and the Company’s regulated subsidiaries. The Company used the net proceeds of this offering to repay the outstanding amount under the revolving portion of its 2013 Credit Agreement and to pay related fees and expenses and for general corporate purposes. |
Financing Debt - Additional Information (Detail) (USD $)
|
9 Months Ended | 1 Months Ended | 9 Months Ended | 1 Months Ended | 1 Months Ended | 9 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2013
|
Jan. 30, 2013
Senior Notes
|
Sep. 30, 2013
Senior Notes
|
Sep. 30, 2013
Semi Annual Payment, First Payment
Senior Notes
|
Sep. 30, 2013
Semi Annual Payment, Second Payment
Senior Notes
|
Jan. 18, 2013
2013 Credit Agreement
|
Jan. 18, 2013
2013 Credit Agreement
Term Loans Facility
|
May 23, 2011
2013 Credit Agreement
Term Loans Facility
|
Jan. 18, 2013
2013 Credit Agreement
Revolving Credit Facility
|
Jan. 30, 2013
2013 Credit Agreement
Revolving Credit Facility
|
May 23, 2011
2013 Credit Agreement
Revolving Credit Facility
|
Jan. 18, 2013
2013 Credit Agreement
Revolving Credit Facility
Minimum
|
Jan. 18, 2013
2013 Credit Agreement
Revolving Credit Facility
Letter of Credit
|
Sep. 30, 2013
Senior Notes Redeemed Prior to February One Twenty Sixteen
|
Sep. 30, 2013
Senior Notes Redeemed Prior to February One Twenty Eighteen
|
|
Debt Instrument [Line Items] | |||||||||||||||
Credit agreement loan, term | 5 years | 5 years | |||||||||||||
Credit agreement loan, maximum | $ 300,000,000 | $ 800,000,000 | $ 700,000,000 | $ 150,000,000 | |||||||||||
Principal remaining outstanding amount | 300,000,000 | ||||||||||||||
Credit agreement loan, option to increase | 100,000,000 | ||||||||||||||
Credit agreement outstanding amount | 185,000,000 | 700,000,000 | |||||||||||||
Debt instrument, aggregate principal amount | $ 400,000,000 | ||||||||||||||
Debt instrument, interest rate | 4.75% | ||||||||||||||
Debt instrument, issuance price as a percentage of principal amount | 100.00% | ||||||||||||||
Debt instrument, maturity date | Feb. 01, 2023 | ||||||||||||||
Debt instrument, interest payable month and day | --02-01 | --08-01 | |||||||||||||
Debt instrument, interest payment commencement date | Aug. 01, 2013 | ||||||||||||||
Debt instrument, redemption percentage | 35.00% | ||||||||||||||
Debt instrument, redemption price as a percentage of principal amount | 104.75% | 100.00% | |||||||||||||
Debt instrument, redemption date | Feb. 01, 2018 | Feb. 01, 2016 | |||||||||||||
Debt repurchase price | 101.00% |
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