FleetCor Reports Third Quarter 2011 Financial Results

Source:
FLEETCOR Technologies, Inc.
Increases Revenue and Earnings Guidance for 2011

NORCROSS, Ga., Nov 09, 2011 (BUSINESS WIRE) --

FleetCor Technologies, Inc. (NYSE: FLT), a leading independent global provider of specialized payment products to businesses, today reported financial results for its third quarter ended September 30, 2011.

"We are pleased to report another quarter ahead of our internal plan," said Ron Clarke, chairman, president and chief executive officer, FleetCor Technologies, Inc. "We also made progress on our acquisition strategy and announced a Mexico prepaid fuel card acquisition during the third quarter. The acquisition is consistent with our strategy to build a position in 'emerging payment markets' and establishes a beachhead in Latin America from which we expect to expand."

Financial results for the third quarter of 2011:

GAAP Results

  • Total revenues, net, in the third quarter of 2011 increased 20.2% to $134.2 million compared to $111.7 million in the third quarter of 2010
  • Net income in the third quarter of 2011 increased 21.3% to $40.5 million, or $0.48 per diluted share, compared to $33.4 million, or $0.41 per diluted share in the third quarter of 2010

Non GAAP Results

  • Adjusted revenues1 (revenues, net less merchant commissions) in the third quarter of 2011 increased 23.4% to $120.9 million compared to $97.9 million in the third quarter of 2010
  • Adjusted net income1 in the third quarter of 2011 increased 37.5% to $47.3 million, or $0.56 per diluted share, compared to $34.4 million, or $0.41 per diluted share in the third quarter of 2010 on a pro forma basis (to reflect the impact of public company expenses, non-cash compensation expense, increase in the effective tax rate during the third quarter of 2011, and fully diluted shares effective in the third quarter of 2011, as if these changes had occurred during the third quarter of 2010)

"Given our strong results for the third quarter and year to date, our progress on our growth initiatives, and continued positive environmental factors, we are again raising our financial guidance for 2011," said Eric Dey, chief financial officer FleetCor Technologies, Inc.

2011 Outlook

FleetCor Technologies, Inc. is raising its financial guidance for 2011 as follows:

  • Revenues, net between $500 million and $510 million, up from our previous guidance range of $480 million to $490 million
  • Adjusted Net Income between $173 million and $178 million, up from our previous guidance range of $168 million to $173 million; and
  • Adjusted Net Income per diluted share between $2.08 and $2.12, up from our previous guidance range of $2.00 to $2.05

The Company's full-year 2011 guidance includes the following:

  • Approximately $2 million of incremental cash operating costs in 2011 for public company costs that did not exist in 2010.
  • A 2.3% increase in our effective tax rate from 28.7% of pretax profit in 2010 to 31.0% of pretax profit in 2011.
  • An increase of 2.9 million diluted shares outstanding from 80.8 million shares in 2010 to 83.7 million shares in 2011.

The full year guidance produces a 16.4% full year 2011 revenue growth rate and 28% cash earnings per share growth rate at the midpoint of our guidance range versus 2010 on a pro-forma basis.

This guidance includes the anticipated impact of our Mexican prepaid fuel card acquisition, but does not reflect the impact of any future acquisitions or material new partnership agreements. In addition, our full year guidance assumes that there are no material changes in macroeconomic and business conditions in the fourth quarter as existed at the end of the third quarter.

Conference Call

The Company will host a conference call to discuss third quarter 2011 financial results today at 5:00pm ET. Hosting the call will be Ron Clarke, chief executive officer, and Eric Dey, chief financial officer. The conference call can be accessed live over the phone by dialing 877-941-1428, or for international callers 480-629-9665. A replay will be available one hour after the call and can be accessed by dialing 877-870-5176 or 858-384-5517 for international callers; the conference ID is 4482598. The replay will be available until Wednesday, November 16, 2011. The call will be webcast live from the Company's investor relations website at investor.fleetcor.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about FleetCor's beliefs, expectations and future performance, are forward-looking statements. Forward-looking statements can be identified by the use of words such as "anticipate," "intend," "believe," "estimate," "plan," "seek," "project" or "expect," "may," "will," "would," "could" or "should," the negative of these terms or other comparable terminology. Examples of forward-looking statements in this press release include statements relating to revenue and earnings guidance, economic outlook, assumptions underlying financial guidance, expected expansion in Latin America, and management's plans for 2011 and confidence in prospects for growth. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those contained in any forward-looking statement, such as delays or failures associated with implementation; fuel price and spread volatility; changes in credit risk of customers and associated losses; the actions of regulators relating to payment cards; failure to maintain or renew key business relationships; failure to maintain competitive offerings; failure to maintain or renew sources of financing; failure to complete, or delays in completing, anticipated new partnership arrangements or acquisitions and the failure to successfully integrate or otherwise achieve anticipated benefits from such partnerships or acquired businesses; failure to successfully expand business internationally; the impact of foreign exchange rates on operations, revenue and income; the effects of general economic conditions on fueling patterns and the commercial activity of fleets, as well as the other risks and uncertainties identified under the caption "Risk Factors" in FleetCor's Annual Report on Form 10-K for the year ended December 31, 2010, filed with the Securities and Exchange Commission on March 25, 2011. FleetCor believes these forward-looking statements are reasonable; however, forward-looking statements are not a guarantee of performance, and undue reliance should not be placed on such statements. The forward-looking statements included in this press release are made only as of the date hereof, and FleetCor does not undertake, and specifically disclaims, any obligation to update any such statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments.

About Non GAAP Financial Measures

Adjusted revenues are calculated as revenues less merchant commissions. Adjusted net income is calculated as net income, adjusted to eliminate (a) stock-based compensation expense related to share-based compensation awards, (b) amortization of deferred financing costs and intangible assets, (c) amortization of the premium recognized on the purchase of receivables and, (d) loss on the early extinguishment of debt. The company uses adjusted revenues as a basis to evaluate the company's revenues net of the commissions that are paid to merchants to participate in our card programs. The commissions paid to merchants can vary when market spreads fluctuate in much the same way as revenues are impacted when market spreads fluctuate. The company believes this is a more effective way to evaluate the company's revenue performance. We prepare adjusted net income to eliminate the effect of items that we do not consider indicative of our core operating performance. Adjusted revenues and adjusted net income are supplemental measures of operating performance that do not represent and should not be considered as an alternative to revenues, net, net income or cash flow from operations, as determined by U.S. generally accepted accounting principles, or U.S. GAAP, and our calculation thereof may not be comparable to that reported by other companies. We believe it is useful to exclude stock-based compensation expense from adjusted net income because non-cash equity grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time and stock-based compensation expense is not a key measure of our core operating performance. We also believe that amortization expenses can vary substantially from company to company and from period to period depending upon their financing and accounting methods, the fair value and average expected life of their acquired intangible assets, their capital structures and the method by which their assets were acquired; therefore, we have excluded amortization expense from our adjusted net income. We also exclude loss on the early extinguishment of debt from adjusted net income as this expense is non-cash and is one-time in nature and does not reflect the ongoing operations of the business.

Management uses adjusted revenues and adjusted net income:

  • as measurements of operating performance because they assist us in comparing our operating performance on a consistent basis;
  • for planning purposes, including the preparation of our internal annual operating budget;
  • to allocate resources to enhance the financial performance of our business; and
  • to evaluate the performance and effectiveness of our operational strategies.

We believe adjusted revenues and adjusted net income are used by investors as supplemental measures to evaluate the overall operating performance of companies in our industry. By providing these non GAAP financial measures, together with reconciliations, we believe we are enhancing investors' understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing strategic initiatives.

About FleetCor

FleetCor, The Global Fleet Card Company, is a leading independent global provider of specialized payment products to businesses. FleetCor's payment programs enable businesses to better manage and control employee spending and provide card-accepting merchants with a high volume customer base that can increase their sales and customer loyalty. FleetCor serves commercial accounts in North America, Europe, Africa and Asia. For more information, please visit www.fleetcor.com.

1 Reconciliations of GAAP results to non GAAP results and pro forma adjustments are provided in Exhibit 1 attached. Additional supplemental data is provided in Exhibit 2 and segment information is provided in Exhibit 3.

FleetCor Technologies, Inc. and subsidiaries
GAAP Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2011 2010 2011 2010
Revenues, net $ 134,213 $ 111,655 $ 379,431 $ 327,294
Expenses:
Merchant commissions 13,347 13,711 36,505 39,549
Processing 20,878 17,764 58,585 52,608
Selling 9,484 8,638 26,274 23,155
General and administrative 19,729 13,555 59,718 40,025
70,775 57,987 198,349 171,957
Depreciation and amortization 9,052 8,925 26,247 25,238
Operating income 61,723 49,062 172,102 146,719
Other income, net (518 ) (696 ) (608 ) (767 )
Interest expense, net 3,130 5,557 9,944 16,352
Loss on extinguishment of debt - - 2,669 -
Total other expense 2,612 4,861 12,005 15,585
Income before income taxes 59,111 44,201 160,097 131,134
Provision for income taxes 18,597 10,803 50,534 40,752
Net income 40,514 33,398 109,563 90,382
Calculation of income attributable to common shareholders:
Convertible preferred stock accrued dividends - (4,529 ) - (13,365 )
Income attributable to common shareholders for basic earnings per share $ 40,514 $ 28,869 $ 109,563 $ 77,017
Basic earnings per share $ 0.50 $ 0.85 $ 1.36 $ 2.26
Diluted earnings per share $ 0.48 $ 0.41 $ 1.31 $ 1.12
Weighted average shares outstanding:
Basic shares 80,819 34,076 80,305 34,025
Diluted shares 83,649 80,880 83,526 80,691
FleetCor Technologies, Inc. and subsidiaries
Consolidated Balance Sheets
(In thousands, except share and par value amounts)
September 30, December 31,
2011 2010
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 137,284 $ 114,804
Restricted cash 57,399 62,341
Accounts receivable (less allowance for doubtful accounts of $14,966 and $14,256, respectively) 419,530 260,163
Securitized accounts receivable - restricted for securitization investors 150,000 144,000
Prepaid expenses and other current assets 18,126 33,191
Deferred income taxes 4,594 4,484
Total current assets 786,933 618,983
Property and equipment 90,435 83,013
Less accumulated depreciation and amortization (60,069 ) (56,195 )
Net property and equipment 30,366 26,818
Goodwill 642,799 601,666
Other intangibles, net 234,135 193,861
Other assets 45,310 42,790
Total assets $ 1,739,543 $ 1,484,118
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 241,423 $ 177,644
Accrued expenses 29,192 49,176
Customer deposits 168,259 78,685
Securitization facility 150,000 144,000
Current portion of notes payable and other obligations 15,243 11,617
Total current liabilities 604,117 461,122
Notes payable and other obligations, less current portion 281,481 313,796
Deferred income taxes 92,121 83,255
Total noncurrent liabilities 373,602 397,051
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value; 475,000,000 shares authorized, 113,122,381 shares issued and 81,240,711 shares outstanding at September 30, 2011; and 475,000,000 shares authorized, 111,522,354 shares issued and 79,655,213 shares outstanding at December 31, 2010 113 112
Additional paid-in capital 449,294 421,991
Retained earnings 496,726 387,163
Accumulated other comprehensive loss (8,646 ) (8,101 )
Less treasury stock, 31,881,670 shares at September 30, 2011 and 31,867,141 shares at December 31, 2010 (175,663 ) (175,220 )
Total stockholders' equity 761,824 625,945
Total liabilities and stockholders' equity $ 1,739,543 $ 1,484,118
FleetCor Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Nine Months Ended September 30,
2011 2010
Operating activities
Net income $ 109,563 $ 90,382
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation 8,477 8,562
Stock-based compensation 15,622 2,453
Provision for losses on accounts receivable 13,600 15,097
Amortization of deferred financing costs 1,351 1,480
Amortization of intangible assets 13,969 12,749
Amortization of premium on receivables 2,450 2,447
Deferred income taxes (863 ) (3,107 )
Loss on extinguishment of debt 2,669 -
Changes in operating assets and liabilities (net of acquisitions):
Restricted cash 4,942 2,052
Accounts receivable (140,491 ) (60,301 )
Prepaid expenses and other current assets 14,732 (10,969 )
Other assets (81 ) (408 )
Excess tax benefits related to stock-based compensation (8,170 ) -
Accounts payable, accrued expenses and customer deposits 32,747 46,415
Net cash provided by operating activities 70,517 106,852
Investing activities
Acquisitions, net of cash acquired (21,933 ) (6,216 )
Purchases of property and equipment (8,408 ) (7,074 )
Net cash used in investing activities (30,341 ) (13,290 )
Financing activities
Excess tax benefits related to stock-based compensation 8,170 -
Borrowings (payments) on securitization facility, net 6,000 (51,000 )
Deferred financing costs paid (7,839 ) (1,067 )
Proceeds from issuance of common stock 5,066 480
Principal payments on notes payable (335,215 ) (17,585 )
Proceeds from notes payable 300,000 -
Principal payments on other obligations - (15 )
Other (179 ) -
Net cash used in financing activities (23,997 ) (69,187 )
Effect of foreign currency exchange rates on cash 6,301 1,697
Net increase in cash and cash equivalents 22,480 26,072
Cash and cash equivalents, beginning of period 114,804 84,701
Cash and cash equivalents, end of period $ 137,284 $ 110,773
Supplemental cash flow information
Cash paid for interest $ 11,213 $ 16,851
Cash paid for income taxes $ 35,171 $ 40,604
Adoption of new accounting guidance related to asset securitization facility - $ 218,000
Exhibit 1
RECONCILIATION OF NON-GAAP MEASURES AND PRO FORMA INFORMATION
(In thousands, except shares and per share amounts)
(Unaudited)
The following table reconciles revenues, net to adjusted revenues:
Three Months Ended Nine Months Ended
September 30, September 30,
2011 2010 2011 2010
Revenues, net $ 134,213 $ 111,655 $ 379,431 $ 327,294
Merchant commissions 13,347 13,711 36,505 39,549
Total adjusted revenues $ 120,866 $ 97,944 $ 342,926 $ 287,745
The following table reconciles net income to adjusted net income and adjusted net income per diluted share:
Three Months Ended Nine Months Ended
September 30, September 30, Year Ended
2011 2010 2011 2010 2010
Net income $ 40,514 $ 33,398 $ 109,563 $ 90,382 $ 107,896
Stock based compensation 3,739 716 15,832 2,453 26,755
Amortization of intangible assets 4,782 4,335 13,969 12,749 17,203
Amortization of premium on receivables 816 815 2,450 2,447 3,263
Amortization of deferred financing costs 508 536 1,351 1,480 2,016
Loss on extinguishment of debt - - 2,669 - -
Total pre-tax adjustments 9,845 6,402 36,271 19,129 49,237
Income tax impact of pre-tax adjustments at the effective tax rate (3,097 ) (1,565 ) (11,449 ) (5,945 ) (14,120 )
Adjusted net income $ 47,262 $ 38,235 $ 134,385 $ 103,566 $ 143,013
Adjusted net income per diluted share $ 0.56 $ 0.47 $ 1.61 $ 1.28 $ 1.77
Diluted shares 83,649 80,880 83,526 80,691 80,751
For the periods presented below, the following table reconciles 2010 actual results to 2010 pro forma results, which reflects the impact of stock-based compensation expense related to share-based compensation awards, public company expenses and a decrease in the effective tax rate, effective during 2011, as if these changes had occurred in 2010:
Three Months Ended QTD Q3 2011 Pro forma QTD Nine Months Ended YTD Q3 2011 Pro forma YTD Year Ended 2011 Pro forma
September 30, 2010 Changes1 September 30, 2010 September 30, 2010 Changes1 September 30, 2010 2010 Changes2 2010
Income before income taxes $ 44,201 $ (3,485 ) $ 40,716 $ 131,134 $ (17,276 ) $ 113,858 $ 151,280 $ 3,035 $ 154,315
Provision for income taxes 10,803 2,007 12,810 40,752 (4,813 ) 35,939 43,384 4,454 47,838
Net income 33,398 (5,492 ) 27,906 90,382 (12,463 ) 77,919 107,896 (1,419 ) 106,477
Stock based compensation 716 3,023 3,739 2,453 13,379 15,832 26,755 (6,788 ) 19,967
Amortization of intangible assets 4,335 - 4,335 12,749 - 12,749 17,203 - 17,203
Amortization of premium on receivables 815 - 815 2,447 - 2,447 3,263 - 3,263
Amortization of deferred financing costs 536 - 536 1,480 - 1,480 2,016 - 2,016
Loss on extinguishment of debt - - - - 2,669 2,669 - 2,669 2,669
Total pre-tax adjustments 6,402 3,023 9,425 19,129 16,048 35,177 49,237 (4,119 ) 45,118
Income tax impact of pre-tax adjustments at the effective tax rate (1,565 ) (1,400 ) (2,965 ) (5,945 ) (5,159 ) (11,104 ) (14,120 ) 134 (13,987 )
Adjusted net income $ 38,235 $ (3,869 ) $ 34,366 $ 103,566 $ (1,574 ) $ 101,992 $ 143,013 $ (5,404 ) $ 137,608
Adjusted net income per diluted share $ 0.47 $ 0.41 $ 1.28 $ 1.22 $ 1.77 $ 1.64
Diluted shares 80,880 83,649 80,691 83,526 80,751 83,700

1 Q3 QTD September 30, 2011 changes include approximately $0.5 million in incremental cash operating costs for public company expenses, $3.0 million of non-cash compensation expenses associated with our stock plan, and a 7.1% increase in our effective tax rate from 24.4% for the QTD ended September 30, 2010 to 31.5% for the QTD ended September 30, 2011. Additionally, QTD September 30, 2011 reflects an increase of 2.7 million diluted shares outstanding, from 80.9 million for the QTD September 30, 2010 to 83.6 million for the QTD September 30, 2011.

Q3 YTD September 30, 2011 changes include approximately $1.2 million in incremental cash operating costs for public company expenses, $2.7 million in losses on the extinguishment of debt, $13.4 million of non-cash compensation expenses associated with our stock plan, and a 0.5% increase in our effective tax rate from 31.1% for the YTD ended September 30, 2010 to 31.6% for the YTD ended September 30, 2011. Additionally, YTD September 30, 2011 reflects an increase of 2.8 million diluted shares outstanding, from 80.7 million for the YTD September 30, 2010 to 83.5 million for the YTD September 30, 2011.

2 2011 changes include approximately $1.8 million in incremental cash operating costs for public company expenses, $2.7 million in losses on the extinguishment of debt, $16.2 million of non-cash compensation expenses associated with our stock plan, $23.0 million of non-cash compensation expense associated with our IPO, and a 2.3% increase in our effective tax rate from 28.7% in 2010 to 31.0% in 2011. Additionally, 2011 reflects an increase of 2.9 million diluted shares outstanding, from 80.8 million at in 2010 to 83.7 million in 2011.

Exhibit 2
Transaction Volume, Revenues and Adjusted Revenue, Per Transaction and by Segment
(In thousands except revenues, net per transaction and adjusted revenues per transaction)
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2011 2010 Change % Change 2011 2010 Change % Change

NORTH AMERICA

- Transactions 39,884 38,976 908 2.3 % 114,667 111,930 2,737 2.4 %
- Revenues, net per transaction $ 2.33 $ 1.92 $ 0.41 21.4 % $ 2.25 $ 1.96 $ 0.29 14.8 %
- Revenues, net $ 92,995 $ 74,784 $ 18,211 24.4 % $ 257,444 $ 219,447 $ 37,997 17.3 %

INTERNATIONAL1

- Transactions3 14,276 10,614 3,662 34.5 % 36,196 30,829 5,367 17.4 %
- Revenues, net per transaction3 $ 2.89 $ 3.45 $ (0.56 ) -16.2 % $ 3.37 $ 3.47 $ (0.10 ) -2.9 %
- Revenues, net $ 41,218 $ 36,623 $ 4,595 12.5 % $ 121,987 $ 107,018 $ 14,969 14.0 %

FLEETCOR CONSOLIDATED REVENUES1

- Transactions3 54,160 49,590 4,570 9.2 % 150,863 142,759 8,104 5.7 %
- Revenues, net per transaction3 $ 2.48 $ 2.25 $ 0.23 10.2 % $ 2.52 $ 2.29 $ 0.23 10.0 %
- Revenues, net $ 134,213 $ 111,407 $ 22,806 20.5 % $ 379,431 $ 326,465 $ 52,966 16.2 %

FLEETCOR CONSOLIDATED ADJUSTED REVENUES1,2

- Transactions3 54,160 49,590 4,570 9.2 % 150,863 142,759 8,104 5.7 %
- Adjusted Revenues per transaction3 $ 2.23 $ 1.97 $ 0.26 13.2 % $ 2.27 $ 2.01 $ 0.26 12.9 %
- Adjusted Revenues $ 120,866 $ 97,696 $ 23,170 23.7 % $ 342,926 $ 286,916 $ 56,010 19.5 %

1Calculation of revenue per transaction for our International segment and on a consolidated basis for the three and nine months ended September 30, 2010 excludes the impact of a non-renewed partner contract in Europe, inherited from an acquisition, which we chose not to renew. This non-renewed contract contributed approximately 0.3 million transactions and $0.2 million in revenues, net to our International segment in the three months ended September 30, 2010; and approximately 3.6 million transactions and $0.8 million in revenues, net to our International segment in the nine months ended September 30, 2010. This contract had a high number of transactions and very little revenue and had a $0.09 and $0.36 negative impact on our International segment revenue per transaction in the three and nine months ended September 30, 2010, respectively. We believe that excluding the impact of this contract is a more effective measure for evaluating the Company's revenue performance of its continuing business. Revenues, net, excluding the impact of a non-renewed partner contract in Europe for our International segment and on a consolidated basis are supplemental non-GAAP financial measures of performance. The results from our Mexican prepaid fuel card and food voucher business acquired during the third quarter of 2011 are reported in our International segment.

2Adjusted revenues is a non-gaap financial measure defined as revenues, net less merchant commissions. The Company believes this measure is a more effective way to evaluate the Company's revenue performance. Refer to Exhibit 1 for a reconciliation of revenues, net to adjusted revenues.

3The presentation of prior quarters presented herein has been conformed to the current period presentation that eliminates certain intercompany transactions.

Exhibit 3
GAAP Segment Results
(In thousands)
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2011 2010 2011 2010
Revenues, net:
North America $ 92,995 $ 74,784 $ 257,444 $ 219,447
International1 41,218 36,871 121,987 107,847
$ 134,213 $ 111,655 $ 379,431 $ 327,294
Operating income:
North America $ 43,335 $ 31,541 $ 115,325 $ 95,643
International1 18,388 17,521 56,777 51,076
$ 61,723 $ 49,062 $ 172,102 $ 146,719
Depreciation and amortization:
North America $ 4,990 $ 5,521 $ 14,821 $ 15,251
International1 4,062 3,404 11,426 9,987
$ 9,052 $ 8,925 $ 26,247 $ 25,238
Capital expenditures:
North America $ 1,142 $ 1,210 $ 3,975 $ 4,860
International1 1,350 887 4,433 2,214
$ 2,492 $ 2,097 $ 8,408 $ 7,074

1The results from our Mexican prepaid fuel card and food voucher business acquired during the third quarter of 2011 are reported in our International segment.

SOURCE: FleetCor Technologies, Inc.

FleetCor Technologies, Inc.
Investor Relations
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investor@fleetcor.com

FLEETCOR Technologies, Inc.

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