10-K
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                                          to                                                         .
Commission file number 001-32426
__________________________________________________
 
WEX INC.
(Exact name of registrant as specified in its charter)
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)
(207) 773-8171
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
 
 
Name of each exchange on which registered
Common Stock, $0.01 par value
 
 
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
 __________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
    þ  Yes             ¨  No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
    ¨  Yes             þ  No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
    þ  Yes            ¨  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
    þ  Yes             ¨  No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.                                                                                                                                                                                                                                    þ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
                    Large accelerated filer  þ
 
            Accelerated filer  ¨
 
 
                    Non-accelerated filer  ¨
 
            Smaller reporting company  ¨
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
    ¨  Yes             þ  No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant (assuming for the purpose of this calculation, but without conceding, that all directors, officers and any 10 percent or greater stockholders are affiliates of the registrant) as of June 30, 2015, the last business day of the registrant’s most recently completed second fiscal quarter, was $4,347,908 (based on the closing price of the registrant’s common stock on that date as reported on the New York Stock Exchange).
There were 38,644,041 shares of the registrant’s common stock outstanding as of February 24, 2016.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s Proxy Statement for the 2016 Annual Meeting of Stockholders are incorporated by reference in Part III. With the exception of the sections of the 2016 Proxy Statement specifically incorporated herein by reference, the 2016 Proxy Statement is not deemed to be filed as part of the 10-K.


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Unless otherwise indicated or required by the context, the terms “we,” “us,” “our,” “WEX,” or the “Company,” in this Annual Report on Form 10-K mean WEX Inc. and all of its subsidiaries that are consolidated under Generally Accepted Accounting Principles.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for statements that are forward-looking and are not statements of historical facts. This Annual Report includes forward-looking statements including, but not limited to, statements about management’s plan and goals, and the “Strategy” section of this Annual Report in Item 1. Any statements in this Annual Report that are not statements of historical facts are forward-looking statements. When used in this Annual Report, the words “may,” “could,” “anticipate,” “plan,” “continue,” “project,” “intend,” “estimate,” “believe,” “expect” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. Forward-looking statements relate to our future plans, objectives, expectations and intentions and are not historical facts and accordingly involve known and unknown risks and uncertainties and other factors that may cause the actual results or performance to be materially different from future results or performance expressed or implied by these forward-looking statements. The following factors, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this Annual Report and in oral statements made by our authorized officers: the effects of general economic conditions on fueling patterns as well as payment and transaction processing activity; the impact of foreign currency exchange rates on the Company’s operations, revenue and income; changes in interest rates; the impact of fluctuations in fuel prices; the effects of the Company’s business expansion and acquisition efforts; the Company’s failure to successfully integrate the businesses it has acquired or plans to acquire; the Company's failure to successfully operate and expand ExxonMobil's European commercial fuel card program, or Esso Card; the failure of corporate investments to result in anticipated strategic value; the impact and size of credit losses; the impact of changes to the Company's credit standards; breaches of the Company’s technology systems and any resulting negative impact on our reputation, liabilities or relationships with customers or merchants; the Company’s failure to maintain or renew key agreements; failure to expand the Company’s technological capabilities and service offerings as rapidly as the Company’s competitors; the actions of regulatory bodies, including banking and securities regulators, or possible changes in banking or financial regulations impacting the Company’s industrial bank, the Company as the corporate parent or other subsidiaries or affiliates; the impact of the Company’s outstanding notes on its operations; the impact of increased leverage on the Company's operations, results or capacity generally, and as a result of potential acquisitions specifically; financial loss if the Company determines it necessary to unwind its derivative instrument position prior to the expiration of a contract; the incurrence of impairment charges if our assessment of the fair value of certain of our reporting units changes; the uncertainties of litigation; as well as other risks and uncertainties identified in Item 1A of this Annual Report and in connection with such forward-looking statements. Our forward-looking statements and these factors do not reflect the potential future impact of any alliance, merger, acquisition, disposition or stock repurchases. The forward-looking statements speak only as of the date of the initial filing of this Annual Report and undue reliance should not be placed on these statements. We disclaim any obligation to update any forward-looking statements as a result of new information, future events or otherwise.
PART I
ITEM 1. BUSINESS
Our Company
WEX Inc. is a leading provider of corporate payment solutions. WEX Inc. began operations in 1983 as a Maine corporation and was acquired in February 1996 by an entity that subsequently merged with HFS Incorporated to form Cendant Corporation in December 1997. In June 1999, our predecessor, Wright Express, was sold to Avis Group Holdings, Inc., which was acquired by Cendant Corporation in March 2001. In anticipation of our initial public offering, the Company’s operations were transferred to a Delaware LLC, which was converted into a Delaware corporation in 2005 in conjunction with our initial public offering. Over the past 30 years, we have expanded the scope of our business from a fleet payment provider into a multi-channel provider of corporate payment solutions.
WEX Inc. has been publicly traded since February 16, 2005 (NYSE:WEX) and beginning in the fourth quarter of 2015, operates in three business segments: Fleet Solutions, Travel and Corporate Solutions and Health and Employee Benefit Solutions. Previously, the Company had reported two business segments, Fleet Payment Solutions and Other Payment Solutions. Fleet Solutions remains on the same basis as the historical Fleet Payment Solutions business segment. Travel and Corporate Solutions includes the Travel business as well as other verticals. Health and Employee Benefit Solutions includes the Healthcare and Employee related businesses. This change will enhance the Company's transparency and align our reporting with how we now operate our business. Financial reporting under this new structure is included within this report on Form 10-K and historical financial segment information has been recast to conform to this new presentation.

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Our business model enables us to provide exceptional payment security and control across a wide spectrum of payment sectors. The Fleet Solutions segment provides customers with fleet vehicle payment processing services specifically designed for the needs of commercial and government fleets. During the year ended December 31, 2015, Fleet Solutions revenue represented approximately 63 percent of our total revenue. As of December 31, 2015, the Fleet Solutions segment services over 9.4 million vehicles. Management estimates that WEX fleet cards are accepted at over 90 percent of fuel locations in each of the United States and Australia. With the acquisition of ExxonMobil’s European commercial fleet card portfolio ("Esso portfolio in Europe") in December 2014, WEX fleet cards are now accepted at all ExxonMobil stations throughout Europe. The Travel and Corporate Solutions segment focuses on the complex payment environment of business-to-business payments, providing customers with payment processing solutions for their corporate payment and transaction monitoring needs. Travel and Corporate Solutions revenue, which represented approximately 23 percent of our total revenue during the year ended December 31, 2015, is generated primarily in the online travel market. The Travel and Corporate Solutions segment has operations in North America, Europe, South America and Asia-Pacific. The Health and Employee Benefit Solutions segment, which represented approximately 14 percent of our total revenue during the year ended December 31, 2015, is generated primarily from the healthcare payment products and our software as a service ("SaaS") consumer directed platform. The Health and Employee Benefit Solutions segment also provides payroll related benefits to customers in Brazil.
The Company’s U.S. operations include WEX Inc. and our wholly-owned subsidiaries WEX Bank, WEX FleetOne, Evolution1 and Benaissance. Our international operations include our wholly-owned subsidiaries, WEX Fuel Cards Australia, WEX Prepaid Cards Australia, WEX New Zealand, WEX Europe Limited, formerly CorporatePay Limited, UNIK S.A., a Brazil-based company, and a majority equity position in WEX Europe Services Limited and its subsidiaries.
Prior to our initial public offering in 2005, the Company’s growth had primarily been organic. Our growth in the past several years has been supplemented by acquisitions. Our acquisitions over the last few years include:
On November 18, 2015, our wholly-owned subsidiary Evolution1 acquired Benaissance, a leading provider of integrated SaaS technologies and services for healthcare premium billing, payment and workflow management, to complement our healthcare payments products and services.
On August 31, 2015, we acquired the remaining 49 percent ownership in UNIK S.A., a majority-owned subsidiary prior to this transaction.
On December 1, 2014, our majority owned subsidiary, WEX Europe Services Limited, acquired the assets of ExxonMobil's European commercial fuel card program, which includes operations, funding, pricing, sales and marketing in nine countries in Europe.
On July 16, 2014, we acquired Evolution1, a leading provider of payment solutions within the healthcare industry.
On October 15, 2013, our subsidiary UNIK S.A. acquired FastCred, a provider of fleet cards to the heavy truck or over-the-road segment of the fleet market in Brazil.
On October 4, 2012, we acquired FleetOne, a provider of fleet cards and fleet-related payment solutions to the over-the-road segment of the fleet market.
On August 30, 2012, we acquired a 51 percent controlling interest in UNIK S.A., a provider of payroll cards, private label and processing services in Brazil, specializing in the retail, government and transportation sectors.
On May 11, 2012, we acquired CorporatePay Limited, located in London, England, a provider of corporate prepaid solutions to the travel industry in the United Kingdom. CorporatePay offers direct, co-branded and private label solutions including virtual cards, currency cards and expense management solutions.

In addition to the transactions described above, on October 18, 2015, we entered into a purchase agreement to acquire Electronic Funds Source LLC ("EFS"), a provider of customized corporate payment solutions for fleet and corporate customers with a focus on the large and mid-sized flee segments. Pursuant to the purchase agreement, and subject to the terms and conditions contained therein, at the closing of this acquisition, the Company will acquire all of the outstanding membership interests of WP Mustang Topco LLC, the indirect parent of EFS, and Warburg Pincus Private Equity XI (Lexington), LLC, an affiliated entity, from investment funds affiliated with Warburg Pincus LLC (the "EFS Sellers") for an aggregate purchase price comprised of $1.1 billion in cash and 4,011,672 shares of the Company’s common stock, subject to certain working capital and other adjustments as described in the purchase agreement. The parties’ obligations to consummate the acquisition are subject to customary closing conditions, including the expiration or termination of the applicable antitrust waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended.
On July 29, 2014, we sold our Pacific Pride subsidiary for $49.7 million, which resulted in a pre-tax book gain of $27.5 million. The Company decided to sell the operations of Pacific Pride as it did not align with the long-term strategy of the core

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fleet business. The Company has entered into a multi-year agreement with the buyer that will continue to allow WEX branded card acceptance at Pacific Pride locations.
On January 7, 2015, we sold the operations of rapid! PayCard for $20.0 million, which resulted in a pre-tax book gain of $1.2 million. Our primary focus in the U.S. continues to be in the fleet, travel, and healthcare industries. As such, we divested the operations of rapid! PayCard, which were not material to our annual revenue, net income or earnings per share.

WEX Bank, a Utah industrial bank incorporated in 1998, is a Federal Deposit Insurance Corporation (“FDIC”) insured depository institution. The functions performed at WEX Bank contribute to the operations of the Fleet Solutions and Travel and Corporate Solutions segments by providing a funding mechanism, among other services. With our ownership of WEX Bank, we have access to low-cost sources of capital. WEX Bank raises capital primarily through the issuance of brokered deposit accounts and provides the financing and makes credit decisions that enable the Fleet Solutions and Travel and Corporate Solutions segments to extend credit to customers. WEX Bank approves customer applications, maintains appropriate credit lines for each customer, is the account issuer, and is the counterparty for the customer relationships for most of our programs. Operations such as sales, marketing, merchant relations, customer service, software development and IT are performed as a service within our organization but outside of WEX Bank. WEX Bank’s primary regulators are the Utah Department of Financial Institutions and the FDIC. WEX Bank is required to maintain elements of independence from the rest of our business to comply with its charter and applicable banking regulations, and is required to file separate financial statements with the FDIC. The activities performed by WEX Bank are integrated into the operations of our Fleet Solutions and Travel and Corporate Solutions segments.
Competitive Strengths
We believe the following strengths distinguish us from our competitors:
Our closed-loop fuel networks in the U.S. and Australia are among the largest in each country. We describe our fleet payment processing networks as “closed-loop” as we have a direct contractual relationship with both the merchant and the fleet, and only WEX transactions can be processed on these networks. We have built networks that management estimates to provide coverage to over 90 percent of fuel locations in the U.S. and Australia, as well as wide acceptance in Canada and Brazil. This provides our customers with the convenience of broad acceptance.
Our proprietary closed-loop fuel networks provide us with access to a higher level of fleet-specific information and control as compared to what is typically available on an open-loop network. This allows us to improve purchase controls at the point of sale and to refine the information reporting we provide to our fleet customers and customers of our strategic relationships.
Our proprietary closed-loop network is a competitive strength because it enables us to establish a direct relationship with each of the merchants that comprise our network.
We offer a differentiated set of products and services, including security and purchase controls, to allow our customers and the customers of our strategic relationships to better manage their vehicle fleets. We provide customized analysis and reporting on the efficiency of fleet vehicles and the purchasing behavior of fleet vehicle drivers. We make this data available to fleet customers through both traditional reporting services and sophisticated web-based data analysis tools.
Our proprietary software facilitates the collection of information and provides us with a high level of control and flexibility in allowing fleets to restrict purchases and receive automated alerts.

Our long-standing strategic relationships, multi-year contracts and high contract renewal rates have contributed to the stability and recurring nature of our revenue base. We believe that we offer a compelling value to our customers relative to our competitors given the breadth and quality of our products and services and our deep understanding of our customers’ operational needs. We have a large installed customer base, with more than 9.4 million vehicles serviced as of December 31, 2015 and co-branded strategic relationships with six of the largest U.S. fleet management providers and with numerous oil companies that use our private label solutions. Our wide site acceptance, together with our private-label portfolios and value-added product and service offerings, drive high customer satisfaction levels, with a U.S. fleet retention rate in excess of 97 percent (based on the 2015 rate of voluntary customer attrition).

Our capabilities in the over-the-road segment of the market enhance our ability to serve fleet customers who operate both heavy duty trucks and cars or light duty vehicles in the U.S. and Canada as well as to blend the small fleet and private label businesses for greater scale.


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Our purchase of ExxonMobil's commercial fuel card program which uses a closed-loop network in Europe, combined with the long term supply agreement to serve the current and future Esso portfolio in Europe, provides us with a strong foundation in the large European fleet market.

Our travel and corporate payment products offer corporate customers enhanced security and control for complex payment needs. Our strategic relationships include three of the largest U.S. based online travel agencies, and our operations in the United Kingdom provide corporate payment solutions to the travel and healthcare industries. We continue to expand our online travel payment solution capabilities and geographies, which currently include North America, Europe, South America and Asia-Pacific. As of December 31, 2015, we settle transactions in 21 different currencies.
The demand for our payment processing, account servicing and transaction processing services combined with significant operating scale has historically driven strong revenue growth and earnings potential. We have an extensive history of organic revenue growth driven by our various marketing channels, our extensive network of fuel and service providers, and our growth in transaction volume. Further, we have completed a number of strategic acquisitions to expand our product and service offerings, which have contributed to our revenue growth and diversification.
We have an enterprise-wide risk management program that helps us to effectively address inherent risks related to funding and liquidity, our extension of credit and interest rates. Our ownership of WEX Bank provides us with access to low cost sources of capital, which provide liquidity to fund our short-term card receivables. We have maintained a long record of low credit losses due to the short-term, non-revolving credit issued to our customer base. Our credit risk management program is enhanced by our proprietary scoring models, managing credit lines and early suspension policy. Interest rate risk is managed through diversified funding sources at WEX Bank with significant non-interest bearing liabilities and merchant contracts that include some ability to raise rates if interest rates rise.
We have become a leading provider of cloud-based healthcare payments technology through the acquisitions of Evolution1 in 2014 and Benaissance in 2015. Our large partner network expands our opportunities in a growing healthcare payments market.
We have an experienced and committed management team that has substantial industry knowledge and a proven track record of financial success. The team has been successful in driving strong growth with consistent operating performance. We believe that our management team positions us well to continue successfully implementing our growth strategy and capture operating efficiencies.
Strategy
Our Company’s path forward will be shaped by the following three strategic priorities: 

Accelerating growth in our core verticals. We have built a robust set of products and services within our Fleet, Travel, and Health verticals.  We will continue to grow our business organically in these core verticals through excellence in our marketing and sales force as well a focus on our revenue management practices.  Our acquisition strategy will complement our organic growth by both enhancing scale and adding differentiation to our current offerings.

Capturing efficiencies and new scaling opportunities across the organization. We will build new product functionality while rationalizing our technology platforms to enable us to deliver greater customer value and enhanced margins.  We are also focused on streamlining our delivery model to ensure we have the flexibility to meet a diversity of customer needs as well as efficiently integrate our acquisitions.

Develop and drive market leading offerings globally.  Within our Fleet, Travel, and Health verticals, we are focusing on rapidly growing our presence in attractive geographies and enhancing our product suite. Revenue originated from non-US markets increased to 19% of 2015 total revenue, driven largely by our successful entry into Europe and Brazil. We will continue to target new regions such as Asia, where we see the potential for long-term growth.  We are also focused on innovating with new products such as data analytics, which harness the power of our proprietary closed loop data network in our Fleet vertical.



 
 

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FLEET SOLUTIONS SEGMENT
Overview
The Fleet Solutions segment provides customers with fleet vehicle payment processing services specifically designed for the needs of commercial and government fleets. We are a leading provider of fleet vehicle payment processing services with over 9.4 million vehicles at year end using our fleet payment solutions to purchase fuel and maintenance services. Our competitive advantages in the fleet market include brand strength and product offerings, commitment to customer satisfaction and a unique financing model with attractive credit terms. Our fleet products are based upon proprietary technology with closed-loop networks in the U.S., Australia and Europe, and wide site acceptance domestically and abroad.

As part of our value proposition, we deliver security through individualized driver identification and real-time transaction updates, purchase controls and sophisticated reporting tools. We collect a broad array of information at the point of sale, including the amount of the expenditure, the identity of the driver and vehicle, the odometer reading, the identity of the fuel or vehicle maintenance provider and the items purchased. We use this information to provide customers with analytical tools to help them effectively manage their vehicle fleets and control costs. We deliver value to our customers by providing customized offerings for accepting merchants, processing payments and providing information management products and services to fleets.

Our proprietary closed-loop networks allow us to provide our customers with highly detailed, fleet-specific information and customized controls that are not typically available on open-loop networks, such as limiting purchases to fuel only and restricting the time of day and day of the week when fuel is purchased. Our network also enables us to avoid dependence on third-party processors. In addition, our relationships with both fleets and merchants enable us to provide security and controls and provide customizable reporting.
The following illustrates our proprietary closed-loop network:
Payment processing transactions represent a majority of the revenue stream in the Fleet Solutions segment. In a payment processing transaction, we extend short-term credit to the fleet customer and pay the purchase price for the fleet customer’s transaction, less the payment processing fees we retain, to the merchant. Revenue from our WEX Europe Services operations is primarily generated by transactions where our revenue is derived from the difference between the negotiated price of the fuel from the supplier and the price charged to the fleet customer. We collect the total purchase price from the fleet customer, normally within 30 days from the billing date.

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The following illustration depicts our business process for a typical domestic fuel payment processing transaction:



Products and Services
Payment processing fees are based on a percentage of the aggregate dollar amount of the customer’s purchase, a fixed amount per transaction or a combination of both. Additionally, payment processing revenue related to our WEX Europe Services operations is specifically derived from the difference between the negotiated price of the fuel from the supplier and the agreed upon price paid by the fleets. In 2015, we processed approximately 343 million payment processing transactions, compared to 311 million payment processing transactions in 2014. Additionally, we receive revenue from account servicing fees, factoring receivables and finance fees.
We offer the following services:
Customer service, account activation and account retention: We offer customer service, account activation and account retention services to fleets and fleet management companies and the fuel and vehicle maintenance providers on our network. Our services include promoting the adoption and use of our products and programs and account retention programs on behalf of our customers and partners.
Authorization and billing inquiries and account maintenance: We handle authorization and billing questions, account changes and other issues for fleets through our dedicated customer contact centers, which are available 24 hours a day, seven days a week. Fleet customers also have self-service options available to them through our websites.
Premium fleet services: We assign designated account managers to businesses and government agencies with large fleets. These representatives have in-depth knowledge of both our programs and the operations and objectives of the fleets they service.
Credit and collections services: We have developed proprietary account approval, credit management and fraud detection programs. Our underwriting model produces a proprietary score, which we use to predict the likelihood of an account becoming delinquent within 12 months of activation. We also use a credit maintenance model to manage ongoing accounts, which helps us to predict the likelihood of account delinquency over an ongoing 18-month time horizon. We have developed a collections scoring model that we use to rank and prioritize past due accounts for collection activities. We also employ fraud specialists who monitor accounts, alert customers and provide case management expertise to minimize losses and reduce program abuse.

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Merchant services: Our representatives work with fuel and vehicle maintenance providers to enroll these providers in our network, test all network and terminal software and hardware, and to provide training on our sale, transaction authorization and settlement processes.
Information Management
We provide standard and customized information to customers through monthly vehicle analysis reports, custom reports and our websites. We also alert customers of unusual transactions or transactions that fall outside of pre-established parameters. Customers, through our website, can access their account information, including account history and recent transactions, and download the related details. In addition, fleet managers can elect to be notified by email when limits are exceeded in specified purchase categories, including limits on transactions within a time range and gallons per day.
Marketing Channels
We market our fleet products and services directly to commercial and government vehicle fleet customers with small, medium and large fleets, and over-the-road, long haul fleets. Our product suite includes payment processing and transaction processing services, WEX branded fleet cards in North America and Motorpass/Motorcharge-branded fleet cards in Australia. Our direct line of business services approximately 3.8 million vehicles.
We also market our products and services indirectly through co-branded and private label relationships. With a co-branded relationship product, we market our products and services for, and in collaboration with, both fuel providers and fleet management companies using their brand names and our logo on a co-branded fleet card. These companies seek to offer our payment processing and information management services as a component of their total offering to their fleet customers. Our co-branded marketing channel services approximately 1.8 million vehicles.
Our private label programs market our product and services for, and in collaboration with, fuel retailers, using only their brand names. The fuel retailers with which we have formed strategic relationships offer our payment processing and information management products and services to their fleet customers in order to establish and enhance customer loyalty. These fleets use these products and services to purchase fuel at locations of the fuel retailer with whom we have the private label relationship. Our private label marketing channel services approximately 3.8 million vehicles.
Fuel Price Derivatives
Management estimates that approximately 25 percent of our company-wide revenue in 2015 resulted from fees paid to us by fuel providers based on a negotiated percentage of the purchase price of fuel purchased by our customers. Accordingly, this revenue is impacted by fuel prices. To address fluctuations in fuel prices, we have previously hedged a portion of our U.S. fuel-price related earnings exposure to improve the management of potential cash flow volatility created by changes in U.S. fuel prices and to enhance the visibility and predictability of our anticipated future cash flows.
During the fourth quarter of 2014 we suspended purchases under our fuel derivatives program due to unusually low prices in the commodities market. We continue to hold fuel price derivative instruments for the first quarter of 2016 that were executed in the third quarter of 2014 for approximately 20 percent of the anticipated quarterly exposure to domestic earnings based on assumptions at time of purchase. After the first quarter of 2016, we will no longer be hedged for changes in fuel prices. Management will continue to monitor the fuel price market and evaluate our alternatives as it relates to this hedging program.
Our fuel price derivative instruments are in the form of put and call option contracts with monthly settlement provisions that create a “costless collar” based upon both the U.S. Department of Energy’s weekly diesel fuel price index and the NYMEX unleaded gasoline contracts. When entering into these options, our intent was to effectively lock in a range of prices during any given quarter on a portion of our U.S. forecasted earnings that are subject to fuel price variations. Differences between the indices underlying the options and actual retail prices could create a disparity between the effects of price changes on the actual revenues we earn and the gains or losses realized on the options.
Our derivative instruments do not qualify for hedge accounting under accounting guidance. Accordingly, gains and losses on our fuel price-sensitive derivative instruments, whether they are realized or unrealized, affect our current period earnings.

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The options are intended to limit the impact fuel price fluctuations have on our cash flows. The options that we have entered into:
 
 
 
 
Create a floor price. When the current month put option contract settles, we receive cash payments from the counterparties if the average price for the current month (as defined by the option contract) is below the strike price of the put option.
 
 
 
 
Create a ceiling price. When the current month call option contract settles, we make cash payments to the counterparties if the average price for the current month (as defined by the option contract) is above the strike price of the call option.
When the current month put and call option contracts settle and the average price for the current month (as defined by the option contract) is between the strike price of the put option contract and the strike price of the call option contract, no cash is exchanged between the counterparties and us.
The following table presents information about the options as of December 31, 2015. The approximate percentage of hedged fuel price-sensitive earnings exposure is based on assumptions at time of purchase and includes the earnings from our U.S. operations only.
     
 
 
Q1
  
 
2016
Average low end of range of fuel prices per gallon
 
$3.28
Average top end of range of fuel prices per gallon
 
$3.34
Approximate % of exposure locked in
 
20%

TRAVEL AND CORPORATE SOLUTIONS SEGMENT
Overview
Our Travel and Corporate Solutions segment is comprised of our virtual and prepaid products with which we provide innovative corporate purchasing and payment capabilities that can be integrated with our customers’ internal systems to streamline their corporate payments, accounts payable and reconciliation processes.
Products and Services
The Travel and Corporate Solutions segment allows businesses to centralize purchasing, simplify complex supply chain processes and eliminate the paper check writing associated with traditional purchase order programs. Our product suite includes virtual and prepaid products.
Our virtual card is used for transactions where no card is presented, including, for example, transactions conducted over the telephone, by mail, by fax or on the Internet. Our virtual card also can be used for transactions that require pre-authorization, such as hotel reservations. Under our virtual card programs, each transaction is assigned a unique account number with a customized credit limit and expiration date. These controls are in place to limit fraud and unauthorized spending. The unique account number limits purchase amounts and tracks, settles and reconciles purchases more easily, creating efficiencies and cost savings for our customers. The virtual card products offer both credit and debit options.
Our prepaid and gift card products are offered through WEX Prepaid Card Australia and WEX Europe Services to companies throughout Australia and Europe. These products provide secure payment and financial management solutions with single card options, access to open or closed loop redemption, load limits and variable expirations.



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The following illustration depicts our business process for a typical travel virtual card product transaction:
 1  Guest books a hotel through a travel website owned by an online travel company
 2  Online travel company reserves room at hotel through reservation system. A WEX virtual card number is used to reserve the room.
 3  Upon checkout, hotel authorizes WEX virtual card number. The WEX virtual card restricts charge to predetermined cost of room, incidental expenses are paid for by guest.
 4  Online travel company pays WEX. WEX provides consolidated payment process to multiple hotel franchises. WEX earns fee by retaining percentage of the online travel company reimbursement payment.


Marketing Channels
We market our Travel and Corporate Solutions segment products and services directly to new and existing customers. Our products are marketed to commercial and government organizations and we use existing open-loop networks.
 


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HEALTH AND EMPLOYEE BENEFIT SOLUTIONS SEGMENT
Overview
Our Health and Employee Benefit Solutions segment is comprised of our healthcare payment products and SaaS platforms with which we provide simplified payment capabilities in a complex healthcare market as well as employee benefit products in Brazil.
Products and Services
The Health and Employee Benefit Solutions segment product suite includes our 1Pay and 1Plan payment solution products and our ExchangePoint, 1Cloud and 1Direct SaaS platforms.
With our healthcare payment products, we provide payments in the complex healthcare market. We partner with health plans, third-party administrators, financial institutions, payroll companies and software providers to provide a software as a service product to support employers' healthcare benefits programs and to administer flexible spending, health saving and reimbursement accounts, and other healthcare related employee and dependent benefits.
We currently have approximately 500 partners with relationships with 125,000 employers, reaching 12 million customers. Revenue is generated by SaaS based monthly fees to partners and interchange fees from spending on customer debit cards issued under flexible spending, health savings and reimbursement accounts. Cards are branded with either Visa or MasterCard and operate on a restricted open loop network.
Our paycard products are offered through our wholly-owned subsidiary, UNIK S.A., a provider of employee benefit cards, private label and processing services in Brazil, specializing in the retail, government and transportation sectors. Revenue is generated by card usage fees and interchange fees from spending on the paycard products.
Marketing Channels
We market our Health Solutions products and services to consumers through an extensive partner network, that includes employers and healthcare providers. Our employee benefit products are marketed to consumers through employers in Brazil.

OTHER ITEMS
Employees
As of December 31, 2015, WEX Inc. and its subsidiaries had 2,265 employees, of which 1,545 were located in the United States. None of our U.S.-based employees are subject to a collective bargaining agreement. In Europe, certain employees are members of trade unions or works councils. In Brazil, certain employees are members of unions. The Company believes that its relations with its employees are generally satisfactory.
Competition
We have a strong competitive position in our Fleet Solutions, Travel and Corporate Solutions and Health and Employee Benefit Solutions segments. Our product features and extensive account management services are key factors behind our position in the fleet industry. We face competition in all of our segments. Our competitors vie with us for prospective direct fleet customers as well as for companies with which to form strategic relationships. We compete with companies that perform payment and transaction processing or similar services. Financial institutions that issue Visa, MasterCard and American Express credit and charge cards currently compete against us primarily in the fleet category of our Fleet Solutions segment and in the corporate purchase card category of our Travel and Corporate Solutions segment. We also compete with other healthcare payment service providers.
The most significant competitive factors include the breadth of features offered, functionality, servicing capability and price. For more information regarding risks related to competition, see the information in Item 1A, under the heading “Our industry continues to become increasingly competitive, which makes it more challenging for us to maintain profit margins at historical levels.”
Seasonality
Our businesses are affected by seasonal variations. For example fuel prices are typically higher during the summer and online travel sales are typically higher during the third quarter. In addition, we experience seasonality in our healthcare vertical, as the spend is correlated to customers' insurance deductibles with typically higher spend in the early part of the year until employees meet their deductibles.

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Technology
We believe that investment in technology is a crucial step in maintaining and enhancing our competitive position in the marketplace. Our data center network and infrastructure is supported by secure data centers with redundant locations. We have data centers in various locations in the United States including South Portland, Maine and Aurora, Colorado. We also have data centers and infrastructure located in various locations throughout Europe, Australia, New Zealand and Brazil.
Our fleet fuel-based closed-loop proprietary platforms capture detailed information from the fuel and maintenance locations within our network. Operating a proprietary network not only enhances our value proposition, it enables us to limit dependence on third-party processors and to respond rapidly to changing customer needs with system upgrades, while maintaining a more secure environment than an open-loop network typically allows. Our virtual card open-loop network uses internally developed software and third-party processors. Our infrastructure has been designed around industry-standard architectures to reduce downtime in the event of outages or catastrophic occurrences. At our Evolution1 subsidiary, we maintain an integrated multi-account payment platform, including a mobile application. In Australia, New Zealand, Brazil and the United Kingdom, we use standalone platforms to support operations.
Our secure networks are designed to isolate our databases from unauthorized access. We use security protocols among all applications, and our employees access critical components on a need-only basis. As of December 31, 2015, we have not experienced any significant incidents in network, application or data security. We are continually improving our technology to enhance customer relationships and to increase efficiency and security. We also review technologies and services provided by others in order to maintain the high level of service expected by our customers and continue to invest in our infrastructure.
For information regarding technology related risks, see the information in Item 1A under the headings “We may not be able to adequately protect our information systems, including the data we collect about our customers, which could subject us to liability and damage our reputation”, “Our failure to effectively implement new technology could jeopardize our position as a leader in our industry” and “We are dependent on technology systems and electronic communications networks managed by third parties, which could result in our inability to prevent service disruptions.”
Intellectual Property
We rely on a combination of patent, copyright, trade secret and trademark laws, confidentiality procedures, contractual provisions and other similar measures to protect the proprietary information and technology used in our business. We generally enter into confidentiality, professional services and/or license agreements with our consultants and corporate partners and control access to and distribution of our technology, documentation and other proprietary information. Despite the efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain the use of our products or technology that we consider proprietary and third parties may attempt to develop similar technology independently. We pursue registration and protection of our trademarks in the U.S. and other countries in which we operate or plan to operate. We market our products and services using the WEX, FleetOne, Benny, 1Cloud, 1Direct, 1Pay, 1Mobile, 1Plan and 1View brand names in the U.S., the Motorpass and Motorcharge brand names in Australia and the UNIK S.A. and FastCred brand names in Brazil.
Regulation - United States
The Company and its affiliates are subject to certain state and federal laws and regulations which govern insured depository institutions and their affiliates as well as our operations in the healthcare market. WEX Bank is subject to supervision and examination by both the Utah Department of Financial Institutions and the FDIC. The Company and its affiliates are subject to certain limitations on transactions with affiliates set forth in the Federal Reserve Act (“FRA”). The Company is subject to anti-tying provisions in the Bank Holding Company Act. State and Federal laws and regulations limit the loans WEX Bank may make to one borrower and the types of investments WEX Bank may make.

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Below is a description of the material elements of the laws, regulations, policies and other regulatory matters affecting the operations of WEX in the United States.
Exemption from certain requirements of the Bank Holding Company Act
As an industrial bank organized under the laws of Utah that does not accept demand deposits that may be withdrawn by check or similar means, WEX Bank meets the criteria for exemption from the definition of “bank” under the Bank Holding Company Act. As a result, the Company is generally, except as stated above, not subject to the Bank Holding Company Act.
Restrictions on intercompany borrowings and transactions
Sections 23A and 23B of the FRA and the implementing regulations limit the extent to which the Company can borrow or otherwise obtain credit from or engage in other “covered transactions” with WEX Bank. “Covered transactions” include loans or extensions of credit, purchases of or investments in securities, purchases of assets, including assets subject to an agreement to repurchase, acceptance of securities as collateral for a loan or extension of credit, or the issuance of a guarantee, acceptance, or letter of credit. Although the applicable rules do not serve as an outright bar on engaging in “covered transactions,” they do limit the amount of covered transactions WEX Bank may have with any one affiliate and with all affiliates in the aggregate. The applicable rules also require that the Company engage in such transactions with WEX Bank only on terms and under circumstances that are substantially the same, or at least as favorable to WEX Bank, as those prevailing at the time for comparable transactions with nonaffiliated companies. Furthermore, with certain exceptions, each loan or extension of credit by WEX Bank to the Company or its other affiliates must be secured by collateral with a market value ranging from 100 percent to 130 percent of the amount of the loan or extension of credit, depending on the type of collateral.
The Consumer Financial Protection Bureau
The Dodd-Frank Act established the Consumer Financial Protection Bureau ("CFPB") to regulate the offering of consumer financial products or services under the federal consumer financial laws. In addition, the CFPB was granted general authority to prevent covered persons or service providers from committing or engaging in unfair, deceptive or abusive acts or practices under federal law in connection with any transaction with a consumer for a consumer financial product or service. The CFPB has broad rulemaking authority for a wide range of consumer protection laws. The legislation also gives the state attorneys general the ability to enforce applicable federal consumer protection laws.
Brokered Deposits
Under FDIC regulations, depending upon their capital classification, banks may be restricted in their ability to accept brokered deposits. “Well capitalized” banks are permitted to accept brokered deposits, but banks that are not “well capitalized” are not permitted to accept such deposits. The FDIC may, on a case-by-case basis, permit banks that are “adequately capitalized” to accept brokered deposits if the FDIC determines that acceptance of such deposits would not constitute an unsafe or unsound banking practice.
Other Financial Regulatory Requirements
WEX Bank must monitor and report unusual or suspicious account activity, as well as transactions involving amounts in excess of prescribed limits, as required by the Bank Secrecy Act and Internal Revenue Service regulations. The USA PATRIOT Act of 2001 substantially broadened the scope of U.S. anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, identifying new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. The United States Treasury Department has proposed and, in some cases, issued a number of implementing regulations which impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers. Certain of those regulations impose specific due diligence requirements on financial institutions that maintain correspondent or private banking relationships with non-U.S. financial institutions or persons. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing could have serious legal and reputational consequences for the institution.
The U.S. federal government has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others. These sanctions, which are administered by the United States Treasury’s Office of Foreign Assets Control (“OFAC”), take many different forms but generally include one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on “U.S. persons” engaging in financial transactions relating to making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons). Blocked assets (for example, property and bank

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deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal and reputational consequences.
Under the Financial Services Modernization Act of 1999, also referred to as the “Gramm-Leach-Bliley Act" (or “GLBA”), the Company and WEX Bank are required to maintain a comprehensive written information security program that includes administrative, technical and physical safeguards relating to customer information. However, this requirement does not generally apply to information about companies or about individuals who obtain financial products or services for business, commercial, or agricultural purposes. The GLBA also requires the Company and WEX Bank to provide initial and annual privacy notices to customers that describe in general terms their information sharing practices. If the Company and WEX Bank intend to share nonpublic personal information about customers with affiliates and/or nonaffiliated third parties, they must provide customers with a notice and a reasonable period of time for each consumer to “opt out” of any such disclosure. In addition to U.S. federal privacy laws, states also have adopted statutes, regulations and other measures governing the collection and distribution of nonpublic personal information about customers. In some cases these state measures are preempted by federal law, but if not, the Company and WEX Bank must monitor and comply with such laws in the conduct of its business.
Restrictions on dividends
WEX Bank is subject to various regulatory requirements relating to the payment of dividends, including requirements to maintain capital above regulatory minimums. A banking regulator may determine that the payment of dividends would be inappropriate and could prohibit payment. Further, WEX Bank may not pay a dividend if it is undercapitalized or would become undercapitalized as a result of paying the dividend. Utah law permits WEX Bank to pay dividends out of the net profits of the industrial bank after providing for all expenses, losses, interest, and taxes accrued or due, but if WEX Bank’s surplus account is less than 100 percent of its capital stock, WEX Bank must transfer up to 10 percent of its net profits to the surplus account prior to the payment of any dividends.
 
Company obligations to WEX Bank
Any non-deposit obligation of WEX Bank to the Company is subordinate, in right of payment, to deposits and other indebtedness of WEX Bank. In the event of the Company’s bankruptcy, any commitment by the Company to a federal bank regulatory agency to maintain the capital of WEX Bank will be assumed by the bankruptcy trustee and entitled to priority of payment.
Restrictions on ownership of WEX Inc. common stock
WEX Bank, and therefore the Company, is subject to bank regulations that impose requirements on entities that might control WEX Bank through control of the Company. These requirements are discussed in Item 1A under the heading “If any entity controls 10 percent or more of our common stock and such entity has caused a violation of applicable banking laws by its failure to obtain any required approvals prior to acquiring that common stock, we have the power to, and may be required to, restrict such entity’s ability to vote shares held by it.”
Healthcare Regulation
The federal and state governments in the U.S. continue to enact and consider many broad-based legislative and regulatory proposals that could materially impact various aspects of our health-related business.
The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (collectively referred to as "Health Care Reform") mandates broad changes affecting insured and self-insured health benefit plans that impact our current business model, including our relationship with current and future customers, producers and health care providers, products, services, processes and technology. Health Care Reform left many details to be established through regulations. While federal agencies have published proposed and final regulations with respect to most provisions, some issues remain uncertain.
In connection with the processing of data, we frequently undertake or are subject to specific compliance obligations under privacy and data security-related laws, including HIPAA, the Gramm-Leach-Bliley Act, and similar state and federal laws governing the collection, use, protection and disclosure of nonpublic personally identifiable information, including individually identifiable health information.
HIPAA and its implementing regulations, as amended by the Health Information Technology for Economic and Clinical Health Act, or the HITECH Act, impose requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HIPAA, as amended by the HITECH Act, and its implementing regulations, subjects us to regulations and contractual obligations that impose privacy and security standards and breach notification and reporting requirements.

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In addition to federal data privacy and security laws and regulations, we are subject to state laws governing confidentiality and security of personally identifiable information and additional state-imposed breach notification and reporting requirements.
Regulation - Foreign
The conduct of our businesses, and the use of our products and services, are subject to various foreign laws and regulations administered by government entities and agencies where we operate. It is our policy to abide by the applicable laws and regulations in the jurisdictions around the world in which we do business.
Australia
The Company’s Australian operations are subject to laws and regulations of the Commonwealth of Australia governing banking and payment systems, financial services, consumer credit and money laundering. Because neither WEX Fuel Cards Australia nor WEX Prepaid Cards Australia holds an Australian Financial Services License or credit license or is an authorized deposit-taking institution, they operate within a framework of regulatory relief and exemptions afforded them on the basis that they satisfy the requisite conditions.
Europe
The Company’s European operations are subject to laws and regulations of the European Union and the countries in which we operate including, among others, those governing payment services, data protection and information security, consumer credit and anti-money laundering.
Brazil
The Company’s Brazilian operations are subject to laws and regulations of the Brazilian government. Brazil’s labor systems are governed by the Consolidation of Brazilian Labor Laws. Brazil is a signatory of the World Trade Organization’s Trade-Related Aspects of Intellectual Property Rights agreement. This agreement establishes a minimum protection standard to property rights and requires signatory countries to review and adapt national laws that meet that standard.
Segments and Geographic Information
For an analysis of financial information about our segments as well as our geographic areas, see Item 8 - Note 23 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Available Information
The Company’s principal executive offices are located at 97 Darling Avenue, South Portland, ME 04106. Our telephone number is (207) 773-8171, and our Internet address is www.wexinc.com. The Company’s annual, quarterly and current reports, proxy statements and certain other information filed with the SEC, as well as amendments thereto, may be obtained free of charge from our website. These documents are posted to our website as soon as reasonably practicable after we have filed or furnished these documents with the SEC. These documents are also available at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The Company’s Audit Committee Charter, Compensation Committee Charter, Finance Committee Charter, Corporate Governance Committee Charter, Corporate Governance Guidelines and Code of Business Conduct and Ethics are available without charge through the “Corporate Governance” portion of the Investor Relations page of the Company’s website.
Copies will also be provided, free of charge, to any stockholder upon written request to Investor Relations at the address above or by telephone at (866) 230-1633.
The Company’s Internet site and the information contained on it are not incorporated into this Form 10-K and should not be considered part of this report.

ITEM 1A. RISK FACTORS
The risks and uncertainties described below are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of those risks actually occurs, our business, financial condition, results of operations and cash flows could suffer. The risks discussed below also include forward-looking statements and our actual results may differ materially from those discussed in these forward-looking statements.

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Risks Relating to Our Company
A significant portion of our revenues are related to the dollar amount of fuel purchased by our customers, and, as a result, volatility in fuel prices could have an adverse effect on our revenues.
As of December 31, 2015, management estimates approximately 25 percent of our total revenues result from fees paid to us by fuel providers based on a negotiated percentage of the purchase price of fuel purchased by our customers. Our customers primarily purchase fuel. Accordingly, a significant part of our revenue is dependent on fuel prices, which are prone to volatility. For example, we estimate that during 2015, each one cent decline in average domestic fuel prices below average actual prices would result in approximately a $1.1 million decline in 2015 revenue. Therefore, extended declines in the price of fuel would have a material adverse effect on our total revenues. In the fourth quarter of 2014 we suspended our fuel price hedging program. The suspension of our fuel price hedging program will increase the impact of fuel price declines and our net income in future quarters will be increasingly exposed to fuel price volatility until the program is reinstated. If fuel prices remain at a reduced level, the lack of a hedge will negatively impact our revenue and income.
Fuel prices are dependent on many factors, all of which are beyond our control. These factors include, among others:
 
supply and demand for oil and gas, and expectations regarding supply and demand;
speculative trading;
actions by major oil exporting nations;
political conditions in other oil-producing, gas-producing or supply-route countries, including revolution, insurgency, terrorism or war;
refinery capacity;
weather;
the prices of foreign exports and the availability of alternate fuel sources;
value of the U.S. dollar versus other major currencies;
general worldwide economic conditions; and
governmental regulations and tariffs.
A portion of our revenue in Europe is derived from the difference between the negotiated price of the fuel from the supplier and the price charged to the fleet customer. As a result, a contraction in these differences would reduce revenues and could adversely affect our operating results.

Revenue from our fuel portfolio in Europe is derived from transactions where our revenue is tied to the difference between the negotiated price of the fuel from the supplier and the price charged to the fleet customer. The merchant’s cost of fuel is dependent on several factors including, among others, the factors described above affecting fuel prices. We experience fuel-price related revenue contraction when the merchant’s cost of fuel increases at a faster rate than the fuel price we charge to our fleet customers, or the fuel-price we charge to our fleet customers decreases at a faster rate than the merchant’s cost of fuel. Accordingly, we generate less revenue, which could adversely affect our operating results.
If we fail to adequately assess and monitor credit risks posed by our customers, we could experience an increase in credit loss.
We are subject to credit risk posed by our customers, many of which are small-to mid-sized businesses. We use various formulas and models to screen potential customers and establish appropriate credit limits, but these formulas and models cannot eliminate all potential bad credit risks and may not prevent us from approving applications that are fraudulently completed. Moreover, businesses that are good credit risks at the time of application may become bad credit risks over time and we may fail to detect such change. In addition, changes to our policies on the types and profiles of businesses to which we extend credit could also have an adverse impact on our credit losses. In times of economic slowdown, the number of our customers who default on payments owed to us tends to increase. If we fail to adequately manage our credit risks, our provision for credit losses on the income statement could be significantly higher.

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Fluctuations in foreign currency exchange rates could affect our financial results.
We earn revenues, pay expenses, own assets and incur liabilities in countries using currencies other than the U.S. dollar. Such currencies include, but are not limited to, the Australian dollar, the Euro, British Pound sterling, New Zealand dollar and Brazilian Real. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Realized and unrealized gains and losses on foreign currency transactions as well as the re-measurement of our cash, receivable and payable balances that are denominated in foreign currencies, are recorded directly in the consolidated statements of income. In addition, gains and losses associated with the Company's foreign currency exchange derivatives are recorded on the consolidated statements of income.
Therefore, increases or decreases in the value of the U.S. dollar against other major currencies that we use to conduct our business will affect our revenues, operating income and the value of balance sheet items denominated in those currencies. We cannot ensure that fluctuations in foreign currency exchange rates, particularly fluctuations in the U.S. dollar against other currencies, will not materially affect our financial results.
Our exposure to counterparty risk could create an adverse effect on our financial condition.
We engage in a number of transactions where counterparty risk is a relevant factor, including transactions with customers, derivatives counterparties and those businesses we work with to provide services, among others. These risks are dependent upon market conditions and also the real and perceived viability of the counterparty. The failure or perceived weakness of any of our counterparties has the potential to expose us to risk of loss in certain situations. Certain contracts and arrangements that we enter into with counterparties may provide us with indemnification clauses to protect us from financial loss. If the counterparty fails to, or is unable to fulfill these indemnification clauses, we may incur losses as well as harm to our reputation.
We have substantial indebtedness, which may materially and adversely affect our financial flexibility and our ability to meet our debt service obligations under our 4.750 percent senior notes, due 2023, or the Notes.
Our 2014 Credit Agreement provides for a term loan facility in an amount equal to $500 million that matures on January 31, 2018, and a $700 million secured revolving credit facility, with a $150 million sublimit for letters of credit and a $20 million sublimit for swingline loans, that terminates on January 31, 2018. In addition to the 2014 Credit Agreement, our indebtedness consists of the Notes, deposits issued by WEX Bank and other liabilities outstanding. Our indebtedness could, among other things:
 
require us to dedicate a substantial portion of our cash flow to repaying our indebtedness, thus reducing the amount of funds available for other general corporate purposes;
limit our ability to borrow additional funds necessary for working capital, capital expenditures or other general corporate purposes;
increase our vulnerability to adverse general economic or industry conditions; and
limit our flexibility in planning for, or reacting to changes in, our business.
There can be no assurance that we will be able to meet our indebtedness obligations, including any of our obligations under the Notes. In addition, we may need to incur substantial additional indebtedness in the future to fund our operations or certain strategic objectives. However, we may not be able to obtain the additional financing necessary for these purposes.
In addition, under the 2014 Credit Agreement, we are required to remain in compliance with a consolidated EBIT to consolidated interest charges ratio of no less than 3.00 to 1.00, measured quarterly; and a consolidated funded indebtedness (excluding the amount of consolidated funded indebtedness due to permitted securitization transactions) to consolidated EBITDA ratio of no more than 3.25 to 1.00, measured quarterly. The Company may elect to increase the permissible ratio under the latter financial covenant to 3.75 to 1.00 (for four fiscal quarters) or to 4.25 to 1.00 (for two fiscal quarters) in connection with certain acquisitions. In connection with the acquisition of the Esso portfolio in Europe, the Company has elected to increase the permissible ratio under the latter financial covenant to 4.25 to 1.00.
Failure to comply with the financial covenants or any other non-financial or restrictive covenant in our 2014 Credit Agreement could create a default. Upon a default, our lenders could accelerate the indebtedness under the facilities, foreclose against their collateral or seek other remedies, which could trigger a default under the Notes and would jeopardize our ability to continue our current operations.

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Despite our substantial indebtedness, we may still be able to incur more debt, intensifying the risks described above.
Subject to restrictions in our 2014 Credit Agreement, we may incur additional indebtedness, which could increase the risks associated with our already substantial indebtedness. Subject to certain limitations, including compliance with the covenants in our 2014 Credit Agreement, we have the ability to borrow additional funds under our 2014 Credit Agreement.
In connection with the planned acquisition of EFS, we have obtained financing commitments from Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, SunTrust Bank, SunTrust Robinson Humphrey, Inc., MUFG Union Bank, N.A. and Citizens Bank, National Association, for senior secured credit facilities in the aggregate amount of $2.125 billion, consisting of a $1.775 billion seven-year term loan facility and a $350 million five-year revolving credit facility. The new senior secured credit facilities would replace our existing senior secured credit facilities under the 2014 Credit Agreement.
This indebtedness could have the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions and increasing interest expense. We will also incur various costs and expenses associated with our indebtedness. The amount of cash required to pay interest on our increased indebtedness levels following completion of the acquisition, and thus the demands on our cash resources, will be greater than the amount of cash flows required to service our indebtedness prior to the transaction. The increased levels of indebtedness following completion of the acquisition could also reduce funds available for working capital, capital expenditures, acquisitions and other general corporate purposes and may create competitive disadvantages relative to other companies with lower debt levels. If we do not achieve the expected benefits and cost savings from the acquisition, or if the financial performance of the combined company does not meet current expectations, then our ability to service our indebtedness may be adversely impacted.
Certain indebtedness to be incurred in connection with the acquisition may bear interest at variable interest rates. If interest rates increase, variable rate debt will create higher debt service requirements, which could adversely affect our cash flows.
The agreements that will govern the indebtedness to be incurred in connection with the acquisition may contain various affirmative and negative covenants that may, subject to certain customary exceptions, restrict our ability to, among other things, create liens over our property, incur additional indebtedness, enter into sale and lease-back transactions, make loans, advances or other investments, make non-ordinary course asset sales, declare or pay dividends or make other distributions with respect to equity interests, change the nature of our business, enter into certain agreements which restrict our ability to pay dividends or other distributions or create liens on our property, transact business with affiliates and/or merge or consolidate with any other person or sell or convey certain of its assets to another person. In addition, some of the agreements that govern the debt financing may contain financial covenants that will require us to maintain certain financial ratios. Our ability to comply with these provisions may be affected by events beyond our control. Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations.
In addition, our credit ratings affect the cost and availability of future borrowings and, accordingly, our cost of capital. Our ratings reflect each rating organization’s opinion of our financial strength, operating performance and ability to meet our debt obligations. In connection with the debt financing, it is anticipated that we will seek ratings of our indebtedness from one or more nationally recognized statistical rating organizations. There can be no assurance that we will achieve a particular rating or maintain a particular rating in the future.
Moreover, we may be required to raise substantial additional financing to fund working capital, capital expenditures, acquisitions or other general corporate requirements. Our ability to arrange additional financing or refinancing will depend on, among other factors, our financial position and performance, as well as prevailing market conditions and other factors beyond our control. There can be no assurance that we will be able to obtain additional financing or refinancing on terms acceptable to us or at all.
Volatility in the financial markets may negatively impact our ability to access credit and the terms at which we would access such credit.
Adverse conditions in the credit market may limit our ability to access credit at a time when we would like or need to do so. Our senior secured credit facility under the 2014 Credit Agreement expires in January 2018 when the outstanding balance will be due. Any limitation of availability of funds or credit facilities could have an impact on our ability to refinance the maturing debt or react to changing economic and business conditions which could adversely impact us. We are planning to enter into a new credit facility in connection with our pending acquisition of EFS. Volatility in the financial markets may impact the rates that we receive under that new facility.

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Volatility in the financial markets may negatively impact WEX Bank’s ability to attract and retain deposits.
Adverse conditions in the credit market may limit WEX Bank’s ability to attract deposits at a time when it would like or need to do so. A significant credit ratings downgrade, material capital market disruptions, significant withdrawals by depositors at WEX Bank, or adverse changes to its industrial bank charter could impact our ability to maintain adequate liquidity and impact our ability to provide competitive offerings to our customers. Any limitation of availability of deposits could have an impact on our ability to finance our U.S. accounts receivable which could adversely impact us.
To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.
Our ability to make payments on and to refinance our indebtedness, and to fund capital expenditures, acquisitions and research and development efforts will depend on our ability to generate cash. This, to a certain extent, is subject to economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
We will have substantially increased indebtedness following completion of the acquisition of EFS, which will increase our interest expense. We will also incur various costs and expenses associated with the financing. The amount of cash required to pay interest on our increased indebtedness levels following completion of the acquisition and thus the demands on our cash resources will be greater than the amount of cash flows required to service our indebtedness prior to the EFS transaction.
We cannot assure you that our business will generate sufficient cash flows from operations, that anticipated cost savings and operating improvements will be realized on schedule or at all, that future borrowings will be available to us under our 2014 Credit Agreement or any subsequent credit agreement, or that we can obtain alternative financing proceeds in an amount sufficient to enable us to pay our indebtedness, including the Notes, or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness, including the Notes, at or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.
The Dodd-Frank Act may have a significant impact on our business, results of operation and financial condition.
On July 21, 2010, the Dodd-Frank Act Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, was enacted into law. The Dodd-Frank Act, among other things, when fully implemented, will result in substantial changes in the regulation of derivatives and capital market activities. The impact of the Dodd-Frank Act is difficult to assess because many provisions are being phased in over time. In particular, the Dodd-Frank Act establishes federal oversight and regulation of the over-the-counter derivatives market and entities that participate in that market. For example, the Dodd-Frank Act provides the Commodity Futures Trading Commission, or CFTC, with broad authority to adopt combined position limits for futures contracts and over-the-counter derivatives, and on November 5, 2013 the CFTC proposed rules addressing such limits. The rules, if enacted in their proposed form, may require us to change to any fuel price hedging practices we may then use to comply with new regulatory requirements. Potential changes include clearing and execution methodology of our derivatives transactions. The Dodd-Frank Act also requires many counterparties to derivatives instruments to spin off some of their derivatives activities to a separate entity. These new entities may not be as creditworthy as the current counterparty. Presently, we cannot assess the capital or margin requirements which might apply to our over-the-counter transactions. Once implemented, these changes could result in increased transaction costs. In summary, the Dodd-Frank Act and any new regulations could increase the cost of derivative contracts or modify the way in which we conduct those transactions.
The Dodd-Frank Act also created the Consumer Financial Protection Bureau, or CFPB, to regulate the offering of consumer financial products or services under the federal consumer financial laws. The CFPB assumed rulemaking authority under the existing federal consumer financial protection laws, and enforces those laws against and examines certain non-depository institutions and insured depository institutions with total assets greater than $10 billion and their affiliates. In addition, the CFPB was granted general authority to prevent covered persons or service providers from committing or engaging in unfair, deceptive or abusive acts or practices under federal law in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. The CFPB also has broad rulemaking authority for a wide range of consumer protection laws. It is unclear what changes will be promulgated by the CFPB and what effect, if any, such changes would have on our business and operations.
As required under the Dodd-Frank Act, the Government Accountability Office issued its study on the implications of any elimination of the exemption to the definition of “bank” for industrial banks under the Bank Holding Company Act. The study did not make a recommendation regarding the elimination of this exemption. However, if this exemption were eliminated without any grandfathering or accommodations for existing institutions, we could be required to become a bank holding company which could require us to either cease certain activities or divest WEX Bank.

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The Dodd-Frank Act and any related legislation or regulations may have a material impact on our business, results of operations and financial condition. In addition, we may be required to invest significant management time and resources to address the various provisions of the Dodd-Frank Act and the numerous regulations that are required to be issued under it.
In an environment of increasing interest rates, interest expense on the variable rate portion of our borrowings would increase and we may not be able to replace our maturing debt with new debt that carries the same interest rates. We may be adversely affected by significant changes in the brokered deposit market.
We had $1,069.8 million of fixed and variable interest rate indebtedness outstanding at December 31, 2015, consisting of $400.0 million of borrowings under our bond facility at a fixed rate of 4.750 percent and $669.8 million of borrowings under our credit facility that bore interest at floating rates. An increase in interest rates would increase the cost of borrowing under our credit facility.
Our industrial bank subsidiary, WEX Bank, uses collectively brokered deposits, including certificates of deposit, interest-bearing money-market deposits and negotiable order of withdrawal (NOW) account deposits, to finance payments to major oil companies. Certificates of deposit carry fixed interest rates from issuance to maturity, which vary, and are relatively short term in duration. The interest-bearing money market deposits carry variable rates. Upon maturity, the deposits will likely be replaced by issuing new deposits to the extent that they are needed. In a rising interest rate environment, WEX Bank would not be able to replace maturing deposits with deposits that carry the same or lower interest rates. Therefore, rising interest rates would result in reduced net income to the extent that certificates of deposit and money market deposits mature and are replaced. At December 31, 2015, WEX Bank had outstanding $97.9 million in certificates of deposit maturing within one year, $54.4 million in certificates of deposit maturing within one to two years, and $369.2 million in interest-bearing money market deposits. Also at December 31, 2015, WEX Bank had $309.0 million of NOW account deposits outstanding, which are currently non-interest bearing.
Decreased demand for fuel and other vehicle products and services could harm our business and results of operations.
Demand for fuel and other vehicle products and services may be reduced by factors that are beyond our control, such as the implementation of fuel efficiency standards and the development by vehicle manufacturers and adoption by our fleet customers of vehicles with greater fuel efficiency or alternative fuel sources. To the extent that our customers require less fuel, that decline in purchase volume could reduce our revenues, limiting our profitability and preventing us from taking on other initiatives.
Our business is dependent on several key strategic relationships, the loss of which could adversely affect our results of operations.
Revenue we received from services we provided to our top five customers and strategic relationships accounted for approximately 16 percent of our total revenues in 2015. Accordingly, we are dependent on maintaining our strategic relationships and our results of operations would be lower in the event that any of relationships cease to exist. Likewise, we have agreements with the major oil companies and fuel retailers whose locations accept our payment processing services. The termination of any of these agreements would reduce the number of locations where our payment processing services are accepted; therefore, we could lose our competitive advantage and our operating results could be adversely affected. In addition, as of December 31, 2015, we had $309.0 million of NOW account deposits outstanding with a single program. If that relationship terminated, we would need to seek additional sources of funding or further utilize other existing sources of funding. There could be no assurance that we would be able to find new or use existing sources of funding on terms acceptable to us. If we were unable to secure such funding, our results of operations could be adversely affected. While we regularly monitor these relationships, there can be no guarantee that we will be able to maintain them in the future.

If the technology we use in operating our business and interacting with our customers fails, is unavailable, or does not operate to expectations, our business and results of operation could be adversely impacted.

We utilize a combination of proprietary and third-party technology to operate our business and interact with our customers. This includes technology that we have developed, have contracted with others to develop or obtained through third-parties by way of service agreements. We use this technology to conduct our business and interact with our customers, partners and suppliers, among others. To the extent that our third-party providers’ technology does not work as agreed to, or if we experience outages or unavailability resulting from their operations and the services they provide to us, our ability to efficiently and effectively deliver services to and interact with our customers and partners could be adversely impacted and our business and results of operations could be adversely affected. Also, any failure by our customers or partners to access our technology conveniently could have an adverse effect on our business, results of operations and financial condition.

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We may never realize the anticipated benefits of acquisitions we have completed or may undertake.
We have acquired and may attempt to acquire businesses, technologies, services, products or licenses in technologies that we believe are a strategic fit with our business. The process of integrating any acquired business, technology, service or product may result in unforeseen redundancies, operating difficulties, and expenditures and may divert significant management attention from our ongoing business operations. As a result, we may incur a variety of costs in connection with acquisitions and may never realize the anticipated benefits. Our pending acquisition of EFS is subject to customary closing conditions, including the expiration or termination of the applicable antitrust waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended. The failure to satisfy all of the required conditions could delay the completion of the acquisition for a significant period of time or prevent it from occurring. Any delay in completing the acquisition could cause us to not realize some or all of the benefits that we expect to achieve in the transaction. If we are unable to complete the proposed acquisition, we may have incurred substantial expenses and diverted significant management time and resources from our ongoing business. In addition, in the event the EFS purchase agreement is terminated in certain circumstances involving a failure to obtain required antitrust clearances, we could be required to pay the EFS Sellers a termination fee of $70 million. If, upon the satisfaction of the closing conditions and the expiration of a marketing period in connection with our debt financing, we fail to consummate the EFS acquisition (and in certain other limited circumstances), if the EFS Sellers so elect, we could be required to pay the EFS Sellers a termination fee of $45 million. There can be no assurance that the conditions to the closing of the acquisition will be satisfied or waived or that the acquisition of EFS will be completed. Even if we are able to successfully complete the acquisition of EFS, the size and complexity of the organization may result in delays in achieving anticipated or planned benefits, including those benefits relating to commercial strategies and financial advantages. We have never integrated another company of a comparable scale to EFS and doing so presents significant challenges and opportunities.
We have received a request for additional information (a “second request”) from the United States Federal Trade Commission (“FTC”) in connection with the FTC’s review of our proposed acquisition of EFS. The effect of the second request is to extend the waiting period imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, until 30 days after both WEX and EFS have substantially complied with the request, unless that period is extended voluntarily by the parties or is terminated sooner by the FTC. There can be no assurance that a challenge to the proposed acquisition on antitrust grounds will not be made, or, if such a challenge is made, what the result might be.
We are exposed to risks associated with operations outside of the United States, which could harm both our U.S. and international operations.
We conduct operations in North America, South America, Asia Pacific and Europe. As part of our business strategy and growth plan, we plan to further expand internationally. Expansion of our international operations could impose substantial burdens on our resources, divert management’s attention from U.S. operations and otherwise harm our business. In addition, there are many barriers to competing successfully in the international market, including:
 
fluctuation in foreign currencies;
changes in the relations between the United States and foreign countries;
actions of foreign or United States governmental authorities affecting trade and foreign investment;
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; and
local labor conditions and regulations.
We cannot assure you that our investments outside the United States will produce desired levels of revenue or costs, or that one or more of the factors listed above will not harm our business.

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New laws, regulations and enforcement activities could negatively impact our business and the markets we presently operate in or could limit our expansion opportunities.
Our industry is subject to substantial regulation both domestically and internationally. There are often new regulatory efforts which could result in significant constraints and may impact our operations. These existing and emerging regulations can make the expansion of our business very difficult and negatively impact our revenue. Among the regulations that impact us or could impact us are those governing: interchange rates; interest rate and fee restrictions; credit access and disclosure requirements; collection and pricing regulations; compliance obligations; data security and data breach requirements; identity theft avoidance programs; health care mandates; and, anti-money laundering compliance programs. We also often must obtain permission to conduct business in new locations from government regulators. Changes to these regulations, including expansion of consumer-oriented regulation to business-to-business transactions, could negatively impact our operations and financial condition and results of operations and further increase compliance costs and limit our ability to expand to new markets.
We also conduct business with other highly regulated businesses such as banks, payment card issuers and health insurance providers. There continue to be significant potential reforms that could negatively affect their businesses, ability to maintain or expand their products and services, and the costs associated with doing so. These developments could also negatively impact our business.
Laws or regulations developed in one jurisdiction or for one product could result in new laws or regulations in other jurisdictions or for other products.
Regulators often monitor other approaches to the governance of the payment industry. As a result, law or regulation in one jurisdiction could result in similar developments in another. In addition, law and regulation involving one product could influence the extension of regulations to other product offerings.
The expansion of certain regulations could negatively impact our business in other geographies or for other products. Rules and regulations concerning interchange and business operations regulations, for example, may differ from country to country which adds complexity and expense to our operations.
These varying and increasingly complex regulations could limit our ability to globalize our products and negatively impact our business. These factors could significantly and adversely affect our business, financial condition and results of operations.
The healthcare industry changes often and technology-enabled services used by consumers is relatively new and unproven. If our platform is not successfully implemented, our growth may be limited.
The market for technology-enabled services for healthcare consumers changes rapidly and new products and services are consistently being introduced. Opportunities to gain market share are challenging due to the significant resources of our existing and potential competitors. It is uncertain whether or how fast this market will continue to grow. In order to remain competitive, we are continually involved in a number of projects to develop new services or compete with these new market entrants, including the development of mobile versions of our proprietary technology platform. These projects carry risks, such as cost overruns, delays in delivery, performance problems and lack of acceptance by our customers.
Based on our experience, consumers are still learning about HSAs and other similar tax-advantaged healthcare savings arrangements. The willingness of consumers to increase their use of technology platforms to manage their healthcare saving and spending tax advantaged benefits will impact our operating results.
We may incur impairment charges on goodwill or other intangible assets.
We account for goodwill in accordance with Financial Accounting Standards Board, or FASB, Accounting Standard Codification, or ASC, Topic 350, Intangibles—Goodwill and Other. Our reporting units and related indefinite-lived intangible assets are tested annually during the fourth fiscal quarter of each year in order to determine whether their carrying value exceeds their fair value. In addition, they are tested on an interim basis if an event occurs or circumstances change between annual tests that would more likely than not reduce their fair value below carrying value. If we determine the fair value of the goodwill or other indefinite-lived intangible assets is less than their carrying value as a result of the tests, an impairment loss is recognized. Any such write-down would adversely affect our results of operations.
Our goodwill resides in multiple reporting units. The profitability of individual reporting units may suffer periodically from downturns in customer demand and other factors, the high level of competition existing within our industry, and the level of overall economic activity. Individual reporting units may be relatively more impacted by these factors than the Company as a whole. As a result, demand for the services of one or more of the reporting units could decline which could adversely affect our operations and cash flow, and could result in an impairment of goodwill or intangible assets. As a result of our annual impairment analyses during the fourth quarter of fiscal 2015, we have determined

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that the fair value of the goodwill and other indefinite-lived intangible assets are greater than their carrying values, thus no impairment charge was recorded. For all reporting units, we use a discounted cash flow model of the projected earnings of reporting units to determine the amount of goodwill impairment. While we currently believe that the fair value of all of our intangibles substantially exceeds carrying value and that those intangibles so classified will contribute indefinitely to the cash flows of the Company, materially different assumptions regarding future performance of our reporting units or the weighted-average cost of capital used in the valuations could result in impairment losses and/or additional amortization expense.
If our industrial bank subsidiary fails to meet certain criteria, we may become subject to regulation under the Bank Holding Company Act, which could force us to cease all of our non-banking activities and thus could have an adverse effect on our revenue and business.
WEX Bank meets the criteria for exemption of an industrial bank from the definition of “bank” under the Bank Holding Company Act. WEX Bank’s failure to qualify for this exemption would cause us to become subject to regulation under the Bank Holding Company Act. This would require us to divest WEX Bank or become a Bank Holding Company and to possibly cease certain activities which may be impermissible for a Bank Holding Company. Failure to qualify for this exemption could thus have an adverse effect on our revenue and business.
The loss or suspension of the charter for our Utah industrial bank or changes in regulatory requirements could be disruptive to operations and increase costs.
The regulatory status of WEX Bank enables it to issue certificates of deposit, accept money market deposits and NOW account deposits, and borrow on a federal funds rate basis from other banks. These funds are used to support our U.S. payment processing operations, which require the Company to make payments, as well as for our virtual card and paycard products. WEX Bank operates under a uniform set of state lending laws, and its operations are subject to extensive state and federal regulation. WEX Bank, a Utah industrial bank incorporated in 1998, is an FDIC-insured depository institution. The bank’s primary regulators are the Utah Department of Financial Institutions and the FDIC. Continued licensing and federal deposit insurance are subject to ongoing satisfaction of compliance and safety and soundness requirements. WEX Bank must be adequately capitalized as defined in the banking regulations and satisfy a range of additional capital requirements. If WEX Bank were to lose its bank charter, we would either outsource our credit support activities or perform these activities ourselves, which would subject us to the credit laws of each individual state in which we conduct business. Furthermore, we could not be a MasterCard issuer and would have to work with another financial institution to issue the product or sell the portfolio. Any such change would be disruptive to our operations and could result in significant incremental costs. In addition, changes in the bank regulatory environment, including the implementation of new or varying measures or interpretations by the State of Utah or the federal government, may significantly affect or restrict the manner in which we conduct business in the future.
We are subject to extensive supervision and regulation that could restrict our activities and impose financial requirements or limitations on the conduct of our business and limit our ability to generate income.
We are subject to extensive federal and state regulation and supervision, including that of the FDIC, the CFPB, and the Utah Department of Financial Institutions. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, not shareholders or noteholders. These regulations affect our payment operations, capital structure, investment practices, dividend policy and growth, among other things. Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, damages, civil money penalties or reputational damage, which could have a material adverse effect on our business, financial condition and results of operations. While we have policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur. The U.S. Congress and federal regulatory agencies frequently revise banking and securities laws, regulations and policies. We cannot predict whether or in what form any other proposed regulations or statutes will be adopted or the extent to which our business may be affected by any new regulation or statute. Such changes could subject our business to additional costs, limit the types of financial services and products we may offer and increase the ability of non-banks to offer competing financial services and products, among other things.
Our industrial bank subsidiary is subject to regulatory capital requirements that may require us to make capital contributions to it, and that may restrict the ability of the subsidiary to make cash available to us.
WEX Bank must maintain minimum amounts of regulatory capital. If WEX Bank does not meet these capital requirements, its regulators have broad discretion to institute a number of corrective actions that could have a direct material effect on our financial condition. WEX Bank, as an institution insured by the FDIC, must maintain certain capital ratios, paid-in capital minimums and adequate allowances for loan losses. Under the Dodd-Frank Act, we are also required to serve as a source of financial strength for WEX Bank. If WEX Bank were to fail to meet any of the capital requirements to which

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it is subject, or if required under Dodd-Frank’s source of strength requirements, we may be forced to provide WEX Bank with additional capital, which could impair our ability to service our indebtedness. To pay any dividend, WEX Bank must maintain adequate capital above regulatory guidelines. Accordingly, WEX Bank may be unable to make any of its cash or other assets available to us, including to service our indebtedness.
Our industrial bank subsidiary is subject to funding risks associated with its reliance on brokered deposits.
Under applicable regulations, if WEX Bank were no longer “well capitalized,” it would not be able to accept brokered deposits without the approval of the FDIC. WEX Bank’s inability to accept brokered deposits, or a loss of a significant amount of its brokered deposits, could adversely affect our liquidity. Additionally, such circumstances could require it to raise deposit rates in an attempt to attract new deposits, or to obtain funds through other sources at higher rates, which would adversely affect our results of operations.
We are subject to limitations on transactions with our industrial bank subsidiary, which may limit our ability to engage in transactions with and obtain credit from our industrial bank.
Sections 23A and 23B of the FRA and the implementing regulations limit the extent to which the Company can borrow or otherwise obtain credit from or engage in other “covered transactions” with WEX Bank. “Covered transactions” include loans or extensions of credit, purchases of or investments in securities, purchases of assets, including assets subject to an agreement to repurchase, acceptance of securities as collateral for a loan or extension of credit, or the issuance of a guarantee, acceptance, or letter of credit. Although the applicable rules do not serve as an outright bar on engaging in “covered transactions,” they do limit the amount of covered transactions WEX Bank may have with any one affiliate and with all affiliates in the aggregate. The applicable rules also requires that the Company engage in such transactions with WEX Bank only on terms and under circumstances that are substantially the same, or at least as favorable to WEX Bank, as those prevailing at the time for comparable transactions with nonaffiliated companies. Furthermore, with certain exceptions, each loan or extension of credit by WEX Bank to the Company or its other affiliates must be secured by collateral with a market value ranging from 100 percent to 130 percent of the amount of the loan or extension of credit, depending on the type of collateral. Accordingly, WEX Bank may be unable to provide credit or engage in transactions with us, including transactions intended to help us service our indebtedness.
We may not be able to adequately protect our information systems, including the data we collect about our customers, which could subject us to liability and damage our reputation.
We collect and store data about our customers and their fleets, including bank account information and spending data. Our customers expect us to keep this information in our confidence. In certain instances, the information we collect includes social security numbers. As a result of applicable laws, we are required to take commercially reasonable measures to prevent and mitigate the impact of cyber-attack, as well as the unauthorized access, acquisition, release and use of “personally identifiable information," such as social security numbers. While social security numbers constitute a very small part of the data we keep, in the event of a security breach we would be required to determine the types of information comprised and determine corrective actions and next steps under applicable laws, which would require us to expend capital and other resources to address the security breach and protect against future breaches.
Furthermore, as we have increased the number of platforms as well as the size of our networks and information systems, our reliance on these technologies have become increasingly important to our operating activities. The potential negative impact that a platform, network or information system shutdown may have on our operating activities has increased. Shutdowns may be caused by unexpected catastrophic events such as natural disasters or other unforeseen events, such as software or hardware defects or cyber-attacks by groups or individuals.
Under the GLBA and some state laws, we and WEX Bank are required to maintain a comprehensive written information security program that includes administrative, technical and physical safeguards relating to consumer information. This requirement generally does not extend to information about companies or about individuals who obtain financial products or services for business, commercial, or agricultural purposes.
The GLBA also requires us and WEX Bank to provide initial and annual privacy notices to customers that describe in general terms our information sharing practices. If we or WEX Bank intend to share nonpublic personal information about consumers with affiliates and/or nonaffiliated third parties, we and WEX Bank must provide customers with a notice and a reasonable period of time for each customer to “opt out” of any such disclosure. In addition to U.S. federal privacy laws with which we must comply, states also have adopted statutes, regulations and other measures governing the collection and distribution of nonpublic personal information about customers. In some cases these state measures are preempted by federal law, but if not, we and WEX Bank must monitor and seek to comply with individual state privacy laws in the conduct of our businesses.

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When we handle individually identifiable health information, regulations issued under HIPAA and the HITECH Act, our contracts with our customers, and supplemental state laws require us to implement privacy and data security measures and to comply with breach notification requirements. We may be subject to contractual damages and civil or criminal penalties if we are found to violate these privacy, security and breach notification requirements. Our efforts to comply with existing and future health data laws and regulations may be costly and time-consuming. Incidents involving our handling of health-related information may consume significant financial and managerial resources and may damage our reputation, which may discourage customers from using, renewing, or expanding their use of our services.
Any security breach, inadvertent transmission of information about our customers, failure to comply with applicable breach notification and reporting requirements, or any violation of federal or state privacy laws could expose us to liability in excess of any applicable insurance policies, litigation, regulatory scrutiny, and/or cause damage to our reputation.
Our failure to effectively implement new technology could jeopardize our position as a leader in our industry.
As a provider of information management and payment processing services, we must constantly adapt and respond to the technological advances offered by our competitors and the informational requirements of our customers, including those related to the Internet, in order to maintain and improve upon our competitive position. We may not be able to expand our technological capabilities and service offerings as rapidly as our competitors, which could jeopardize our position as a leader in our industry.
We are dependent on technology systems and electronic communications networks managed by third parties, which could result in our inability to prevent service disruptions.
Our ability to process and authorize transactions electronically depends on our ability to electronically communicate with our fuel and vehicle maintenance providers through point-of-sale devices and electronic networks that are owned and operated by third parties. The electronic communications networks upon which we depend are often subject to disruptions of various magnitudes and durations. Any severe disruption of one or all of these networks could impair our ability to authorize transactions or collect information about such transactions, which, in turn, could harm our reputation for dependable service and adversely affect our results of operations. In addition, our ability to collect enhanced data relating to our customers’ purchases may be limited by the use of older point-of-sale devices by fuel and vehicle maintenance providers. To the extent that fuel and vehicle maintenance providers within our network are slow to adopt advanced point-of-sale devices, we may not be able to offer the services and capabilities our customers demand.
Our industry continues to become increasingly competitive, which makes it more challenging for us to maintain profit margins at historical levels.
We face and expect to continue to face competition in each category of the overall industry from several companies that seek to offer competing capabilities and services. Historically, we have been able to provide customers with a wide spectrum of services and capabilities and, therefore, we have not considered price to be the exclusive or even the primary basis on which we compete. As our competitors have continued to develop their service offerings, it has become increasingly more challenging for us to compete solely on the basis of superior capabilities or service. In some areas of our business we have been forced to respond to competitive pressures by reducing our fees. We have seen erosion of our historical profit margins as we encourage existing strategic relationships to sign long-term contracts. If these trends continue and if competition intensifies, our profitability may be adversely impacted.
While we have traditionally offered our services to all categories of the fleet industry, some of our competitors have successfully garnered significant share in particular categories of the overall industry. To the extent that our competitors are regarded as leaders in specific categories, they may have an advantage over us as we attempt to further penetrate these categories.
We also face increased competition in our efforts to enter into new strategic relationships and renew existing strategic relationships on the same terms.
Compliance with anti-money laundering laws and regulations creates additional compliance costs and reputational risk.
We must monitor and report unusual or suspicious account activity, as well as transactions involving amounts in excess of prescribed limits, as required by the Bank Secrecy Act and Internal Revenue Service regulations and other regulations. The USA PATRIOT Act of 2001 (the “USA Patriot Act”) imposes significant anti-money laundering compliance and due diligence obligations on financial institutions, including WEX Bank. Financial regulators have issued various implementing regulations and have made enforcement a top priority. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could result in

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the imposition of fines or penalties and other serious legal and reputational consequences which may impact our financial results.
Our increased presence in foreign jurisdictions increases the possibility of foreign law violations or violation of the U.S. Foreign Corrupt Practices Act (“FCPA”) and United Kingdom Bribery Act of 2010 (“UKBA”).
We are subject to both the FCPA and the UKBA, as we own subsidiaries organized under UK law, which serve as a holding company for other subsidiaries. While the FCPA generally prohibits U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business, the UKBA is broader in its reach and prohibits bribery in purely commercial contexts. Any violation of the FCPA, the UKBA or similar laws and regulations could result in significant expenses, divert management attention, and otherwise have a negative impact on us. Any determination that we have violated the FCPA, UKBA or laws of any other jurisdiction could subject us to, among other things, penalties and legal expenses that could harm our reputation and have a material adverse effect on our financial condition and results of operation. The possibility of violations of the FCPA, UKBA or similar laws or regulations may increase as we expand globally and into countries with recognized corruption problems.
We may incur substantial losses due to fraudulent use of our card products.
Under certain circumstances, when we fund customer transactions, we bear the risk of substantial losses due to fraudulent use of our card products. We do not maintain any insurance to protect us against any such losses.
If we fail to maintain effective systems of internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results or prevent fraud, which could cause current and potential shareholders to lose confidence in our financial reporting, adversely affect the trading price of our securities or harm our operating results.
Effective internal control over financial reporting and disclosure controls and procedures are necessary for us to provide reliable financial reports and effectively prevent fraud and operate successfully as a public company. Our financial reporting and disclosure controls and procedures are reliant, in part, on information we receive from third parties that supply information to us regarding transactions that we process. Any failure to develop or maintain effective internal control over financial reporting and disclosure controls and procedures could harm our reputation or operating results, or cause us to fail to meet our reporting obligations. As we complete acquisitions and expand our business operations both within the United States and internationally, we will need to maintain effective internal control over financial reporting and disclosure controls and procedures. If we are unable to adequately maintain our internal control over financial reporting, our external auditors will not be able to issue an unqualified opinion on the effectiveness of our internal control over financial reporting.
Ineffective internal control over financial reporting and disclosure controls and procedures could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our securities or affect our ability to access the capital markets and could result in regulatory proceedings against us by, among others, the SEC. In addition, a material weakness in internal control over financial reporting, which may lead to deficiencies in the preparation of financial statements, could lead to litigation claims against us. The defense of any such claims may cause the diversion of management’s attention and resources, and we may be required to pay damages if any such claims or proceedings are not resolved in our favor. Any litigation, even if resolved in our favor, could cause us to incur significant legal and other expenses. Such events could harm our business, affect our ability to raise capital and adversely affect the trading price of our securities.
Our ability to attract and retain qualified employees is critical to the success and the failure to do so may materially adversely affect our performance.

We believe our employees, including our executive management team, are our most important resource and, in our industry and geographic area, competition for qualified personnel is intense. If we were unable to retain and attract qualified employees, our performance could be materially adversely affected.
Risks Relating to Our Common Stock
If any entity controls 10 percent or more of our common stock and such entity has caused a violation of applicable banking laws by its failure to obtain any required approvals prior to acquiring that common stock, we have the power to, and may be required to, restrict such entity’s ability to vote shares held by it.
As owners of a Utah industrial bank, we are subject to Utah banking regulations that require any entity that controls 10 percent or more of our common stock to obtain the prior approval of Utah banking authorities. Federal law also prohibits a person or group of persons from acquiring “control” of us unless the FDIC has been notified and has not objected to the

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transaction. Under the FDIC’s regulations, the acquisition of 10 percent or more of a class of our voting stock would generally create a rebuttable presumption of control.
Our certificate of incorporation requires that if any stockholder fails to provide us with satisfactory evidence that any required approvals have been obtained, we may, or will if required by state or federal regulators, restrict such stockholder’s ability to vote such shares with respect to any matter subject to a vote of our stockholders.
Provisions in our charter documents, Delaware law and applicable banking law may delay or prevent our acquisition by a third party.
Our certificate of incorporation and by-laws contain several provisions that may make it more difficult for a third party to acquire control of us without the approval of our board of directors. These provisions include, among other things, a classified board of directors, the elimination of stockholder action by written consent, advance notice for raising business or making nominations at meetings of stockholders and “blank check” preferred stock. Blank check preferred stock enables our board of directors, without stockholder approval, to designate and issue additional series of preferred stock with such special dividend, liquidation, conversion, voting or other rights, including the right to issue convertible securities with no limitations on conversion, and rights to dividends and proceeds in a liquidation that are senior to the common stock, as our board of directors may determine. These provisions may make it more difficult or expensive for a third party to acquire a majority of our outstanding voting common stock. We also are subject to certain provisions of Delaware law, which could delay, deter or prevent us from entering into an acquisition, including Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in a business combination with an interested stockholder unless specific conditions are met. These provisions also may delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our stockholders receiving a premium over the market price for their common stock.
In addition, because we own a Utah industrial bank, any purchaser of our common stock who would own 10 percent or more of our common stock after such purchase would be required to obtain the consent of Utah banking authorities and the federal banking authorities prior to consummating any such acquisition. These regulatory requirements may preclude or delay the purchase of a relatively large ownership stake by potential investors.

ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2.  PROPERTIES
All of our facilities are leased. The following table presents the details of our principal leased properties as of December 31, 2015:
Property location
 
Square footage
 
Purpose of leased property
South Portland, Maine
 
157,600

 
Corporate headquarters, operations center and warehouse
Midvale, Utah
 
12,400

 
Bank operations and call center
Louisville, Kentucky
 
5,400

 
Fleet fuel operations
Nashville, Tennessee
 
82,700

 
WEX Fleet One operations
Melbourne, Australia
 
21,500

 
Australia Fuel operations
Perth, Australia
 
2,000

 
Australia Fuel operations
Auckland, New Zealand
 
17,700

 
International Fuel operations
São Paulo, Brazil
 
20,600

 
International Fuel and Paycard operations
Sorocaba, Brazil
 
6,000

 
International Fuel operations
Salvador, Brazil
 
2,400

 
International call center
London, England
 
8,800

 
European Fuel operations
Crewe, England
 
14,700

 
European Fuel operations
Breda, Netherlands
 
1,000

 
European Fuel operations
Hamburg, Germany
 
7,500

 
European Fuel operations
Oslo, Norway
 
3,600

 
European Fuel operations
Aubervilliers, France
 
10,400

 
European Fuel operations
Rome, Italy
 
4,300

 
European Fuel operations
Fargo, North Dakota
 
26,000

 
Evolution1 operations
Edina, Minnesota
 
24,000

 
Evolution1 operations
St. Louis, Missouri
 
3,600

 
Evolution1 operations
Simsbury, Connecticut
 
18,000

 
Evolution1 operations
Omaha, Nebraska
 
31,100

 
Benaissance operation
Singapore
 
500

 
Travel and Corporate operations
Additional financial information about our leased facilities appears in Item 8 – Note 18 of our consolidated financial statements.

ITEM 3. LEGAL PROCEEDINGS
On December 23, 2015, the FDIC and WEX Bank, a wholly-owned subsidiary of WEX Inc. (the “Bank”), entered into a Consent Order, Order for Restitution and Order to Pay Civil Money Penalty (the "FDIC Consent Agreement") stating that the Bank violated Section 5 of the Federal Trade Commission Act. The FDIC Consent Agreement related to the marketing and fee disclosure practices used in connection with negotiable order of withdrawal (“NOW”) account deposits associated with the Bank’s deposit program partner, Higher One. Higher One provides electronic financial disbursements and payment services to the higher education industry. Among these services, Higher One offers to facilitate opening a deposit account at participating banks for students receiving financial aid, with the Bank being one of those participating institutions. Upon a student’s opening of an account and receipt of funds in excess of their financial obligation to their education institution, the Bank holds the funds for the student but does not receive any of the fees at issue. Higher One services the accounts, pays related processing costs and receives all of the fees at issue. The FDIC Consent Agreement, among other things, requires: (i) the Bank to pay restitution for certain fees collected by Higher One in connection with these NOW accounts (in the event Higher One does not provide for the restitution), and (ii) the Bank to pay a civil money penalty.
The civil money penalty applicable to the Bank in the FDIC Consent Agreement is $1.75 million. In addition to a civil money penalty, the FDIC Consent Agreement requires the Bank to pay restitution of approximately $31 million (if Higher One fails to pay restitution), as a result of the alleged violations. As a result of the above described proceedings, Higher One paid the entire restitution amount into a custodial account during the fourth quarter of 2015 for later distribution to students following

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the approval of the restitution plan. The Bank has also paid its $1.75 million obligation under the FDIC Consent Agreement during the fourth quarter of 2015 (following the execution of the FDIC Consent Agreement).
From time to time, we are subject to other legal proceedings (excluding the proceeding described above) and claims in the ordinary course of business. We do not believe the outcome of any other of pending litigation will have a material adverse effect on our financial statements.

ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.


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PART II
 
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The principal market for the Company’s common stock is the New York Stock Exchange (“NYSE”) and our ticker symbol is WEX. The following table sets forth, for the indicated calendar periods, the reported intraday high and low sales prices of the common stock on the NYSE Composite Tape:
 
 
High
 
Low
2014
 
 
 
First quarter
$
99.24

 
$
78.78

Second quarter
$
106.27

 
$
86.17

Third quarter
$
118.30

 
$
101.55

Fourth quarter
$
119.11

 
$
93.32

2015
 
 
 
First quarter
$
108.53

 
$
90.75

Second quarter
$
118.97

 
$
105.14

Third quarter
$
115.75

 
$
84.63

Fourth quarter
$
98.94

 
$
80.00

 
As of February 24, 2016, the closing price of our common stock was $63.52 per share, there were 38,664,041 shares of our common stock outstanding and there were five holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers or nominees.
Dividends
The Company has not declared any dividends on its common stock since it commenced trading on the NYSE on February 16, 2005. The timing and amount of future dividends, if any, will be (i) dependent upon the Company’s results of operations, financial condition, cash requirements and other relevant factors, (ii) subject to the discretion of the Board of Directors of the Company and (iii) payable only out of the Company’s surplus or current net profits in accordance with the General Corporation Law of the State of Delaware.
The Company has certain restrictions on the dividends it may pay under its revolving credit agreement, including pro forma compliance with a ratio of consolidated funded indebtedness to consolidated EBITDA of 2.50:1.00 for the most recent period of four fiscal quarters. In addition, the purchase agreement for the acquisition of EFS prohibits the Company from paying dividends without the prior written consent of the EFS sellers prior to the closing of the transaction, except in limited circumstances described in the purchase agreement. We also expect that the terms of the agreements that will govern the indebtedness used to finance the acquisition of EFS will restrict us from paying dividends in certain circumstances.
Share Repurchases

On September 23, 2013, we announced a new share repurchase program authorizing the purchase of up to $150 million worth of our common stock from time to time until September 30, 2017. Share repurchases are to be made on the open market and can be commenced or suspended at any time.
We used $22.0 million during 2015 to repurchase shares of our common stock. We did not purchase shares of our common stock during the fourth quarter of 2015. The approximate dollar value of shares that were available to be purchased under our share repurchase program was $108.2 million as of December 31, 2015. The purchase agreement for the acquisition of EFS prohibits the Company from repurchasing shares of its common stock without the prior written consent of the EFS sellers prior to the closing of the transaction, except in limited circumstances described in the purchase agreement.






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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth our summary historical financial information for the periods ended and as of the dates indicated. You should read the following historical financial information along with Item 7 and the consolidated financial statements and related notes thereto contained in this Form 10-K. The financial information included in the table below is derived from audited financial statements:
 
 
December 31,
(in thousands, except per share data)
2015
 
2014
 
2013
 
2012
 
2011
Income statement information, for the year ended
 
 
 
 
 
 
 
 
 
Total revenues
$
854,637

 
$
817,647

 
$
717,463

 
$
623,151

 
$
553,076

Total operating expenses
$
625,844

 
$
511,409

 
$
440,724

 
$
401,532

 
$
319,752

Financing interest expense
$
46,189

 
$
36,042

 
$
29,419

 
$
10,433

 
$
11,676

Net realized and unrealized gains (losses) on fuel price derivatives
$
5,848

 
$
46,212

 
$
(9,851
)
 
$
(12,365
)
 
$
(11,869
)
Net earnings attributable to shareholders
$
101,904

 
$
202,211

 
$
149,208

 
$
96,922

 
$
133,622

Basic earnings per share
$
2.63

 
$
5.20

 
$
3.83

 
$
2.50

 
$
3.45

Weighted average basic shares of common stock outstanding
38,771

 
38,890

 
38,946

 
38,840

 
38,686

Balance sheet information, at end of period
 
 
 
 
 
 
 
 
 
Total assets
$
3,857,946

 
$
4,118,513

 
$
3,433,043

 
$
3,131,865

 
$
2,278,060

Liabilities and stockholders’ equity
 
 
 
 
 
 
 
 
 
Total liabilities
$
2,762,265

 
$
3,024,202

 
$
2,511,017

 
$
2,292,272

 
$
1,568,745

Redeemable non-controlling interest

 
16,590

 
18,729

 
21,662

 

Total stockholders’ equity
1,095,681

 
1,077,721

 
903,297

 
817,931

 
709,315

Total liabilities and stockholders’ equity
$
3,857,946

 
$
4,118,513

 
$
3,433,043

 
$
3,131,865

 
$
2,278,060


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ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion below focuses on the factors affecting our consolidated results of operations for the years ended December 31, 2015, 2014 and 2013 and financial condition at December 31, 2015 and 2014 and, where appropriate, factors that may affect our future financial performance, unless stated otherwise. This discussion should be read in conjunction with the consolidated financial statements, notes to the consolidated financial statements and selected consolidated financial data.

The acronyms and abbreviations identified below are used in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as in Item 8. "Financial Statements and Supplementary Data." The following is provided to aid the reader and provide a reference when reviewing the consolidated financial statements.
Average expenditure per payment processing transaction

Average total dollars of spend in a funded fuel transaction
2011 Credit Agreement

Credit agreement entered into on May 23, 2011 among the Company, as borrower, WEX Card Holdings Australia Pty Ltd, a wholly-owned subsidiary of the Company, as specified designated borrower, Bank of America, N.A., as administrative agent and letter of credit issuer, and the other lenders party thereto
2013 Credit Agreement

Amended and restated credit agreement entered into on January 18, 2013 by and among the Company and certain of our subsidiaries, as borrowers, and WEX Card Holdings Australia Pty Ltd, as specified designated borrower, with a lending syndicate
2014 Amendment Agreement

Amendment and restatement agreement entered into on August 22, 2014, among the Company, the lenders party thereto, and Bank of America, N.A., as administrative agent
2014 Credit Agreement

Second amended and restated credit agreement entered into on August 22, 2014, by and among the Company and certain of our subsidiaries, as borrowers, and WEX Card Holding Australia Pty Ltd., as designated borrower, and Bank of America, N.A., as administrative agent on behalf of consenting lenders.
Adjusted Net Income or ANI

A non-GAAP metric that adjusts net earnings attributable to WEX Inc. to exclude fair value changes of fuel-price related derivative instruments, the amortization of purchased intangibles, the impact of net foreign currency remeasurement gains and losses, the expense associated with stock-based compensation, acquisition related expenses and adjustments, the net impact of tax rate changes on the Company’s deferred tax asset and related changes in the tax-receivable agreement, deferred loan costs associated with the extinguishment of debt, certain non-cash asset impairment charges, restructuring charges, gains on the extinguishment of a portion of the tax receivable agreement, regulatory reserves, gains or losses on divestitures and adjustments attributable to non-controlling interests, including adjustments to the redemption value of a non-controlling interest, as well as the related tax impacts of the adjustments
ASU 2014-09

Accounting Standards Update No. 2014-09 Revenue from Contracts with Customers (Topic 606)
ASU 2015-03

Accounting Standards Update No. 2015-03 Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs
ASU 2015-16

Accounting Standards Update No. 2015-16 Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments
Company

WEX Inc. and all entities included in the consolidated financial statements
EFS

Electronic Funds Source LLC
Esso portfolio in Europe

European commercial fleet card portfolio acquired from ExxonMobil
Evolution1

EB Holdings Corp. and its subsidiaries which includes Evolution1, Inc., acquired by the Company on July 16, 2014
Evolution1 Plan

Evolution1 401(k) Plan sponsored by Evolution1 Inc.
FASB

Financial Accounting Standards Board
FDIC

Federal Deposit Insurance Corporation
GAAP

Generally Accepted Accounting Principles in the United States
Higher One

Higher One, Inc. a technology and payment services company focused on higher education
Indenture

The Notes were issued pursuant to an indenture dated as of January 30, 2013 among the Company, the guarantors listed therein, and The Bank of New York Mellon Trust Company, N.A., as trustee

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NCI

Non-controlling interests
NOL

Net operating loss
Notes

$400 million notes with a 4.75% fixed rate, issued on January 30, 2013
NOW deposits

Negotiable order of withdrawal deposits
Over-the-road

Typically heavy trucks traveling long distances
Pacific Pride

Pacific Pride Services, LLC, previously a wholly-owned subsidiary, sold on July 29, 2014
Payment solutions purchase volume

Total amount paid by customers for transactions
Payment processing transactions

Funded payment transactions where the Company maintains the receivable for total purchase
PPG

Price per gallon of fuel
rapid! PayCard

rapid! PayCard, previously a line of business of the Company, sold on January 7, 2015
SaaS

Software-as-a-service
SEC

Securities and Exchange Commission
Securitization Subsidiary

Southern Cross WEX 2015-1 Trust, a bankruptcy-remote subsidiary consolidated by the Company
Total fleet transactions

Total of transaction processing and payment processing transactions
Transaction processing transactions

Unfunded payment transactions where the Company is the processor and only has receivables for the processing fee
UNIK

UNIK S.A., the Company's Brazilian subsidiary
WEX

WEX Inc.
WEX Europe Services

Consists primarily of our European commercial fleet card portfolio acquired by the Company from ExxonMobil on December 1, 2014
2015 Highlights and Year in Review

WEX stands as a premier global payments solution provider in the corporate payments market. Our opportunities for growth extend well beyond the fleet fuel market, and in particular to the online travel and healthcare payments market. Building on a leading market position in our core fleet business, we continue to expand our company.

Our strategic approach to entering new markets is focused on three steps:

Identify complicated markets facing complex challenges and inefficiencies,
Develop products and services that address these unmet market needs, and,
Operate with systemic efficiency through scale and cost management.
We have a proven model in the fleet space where we have developed a leading market position and a strong margin profile. We have done the same in the online travel industry where we have become a leader in global virtual payments and continue to grow the business and create scale on a global basis. Through our acquisition of Benaissance, we have continued to expand into the healthcare payments market.
The following events and accomplishments occurred during 2015:
 
On January 7, 2015, we sold the operations of rapid! PayCard for $20.0 million, which resulted in a pre-tax book gain of $1.2 million. Our primary focus in the U.S. continues to be in the fleet, travel, and healthcare industries. As such, we divested the operations of rapid! PayCard, which were not material to our annual revenue, net income or earnings per share.
On August 31, 2015, we acquired the remaining 49 percent ownership in UNIK S.A., a majority-owned subsidiary prior to this transaction, for approximately $46 million, expanding our presence in the Brazilian market.
On October 18, 2015, we entered into a purchase agreement to acquire EFS, a provider of customized payment solutions for fleet and corporate customers with a focus on the large and mid-sized fleet segments. Pursuant to the purchase agreement, and subject to the terms and conditions contained therein, at the closing of the acquisition, we will acquire all of the outstanding membership interests of WP Mustang Topco LLC,

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the indirect parent of EFS, and Warburg Pincus Private Equity XI (Lexington), LLC, an affiliated entity from investment funds affiliated with Warburg Pincus LLC for an aggregate purchase price comprised of $1.1 billion in cash and 4,011,672 shares of our common stock, subject to certain working capital and other adjustments as described in the purchase agreement. The parties’ obligations to consummate the acquisition are subject to customary closing conditions, including the expiration or termination of the applicable antitrust waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended. In connection with the planned acquisition of EFS, we obtained financing commitments from Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, SunTrust Bank, SunTrust Robinson Humphrey, Inc., MUFG Union Bank, N.A. and Citizens Bank, National Association, for senior secured credit facilities in the aggregate amount of $2.125 billion, consisting of a $1.775 billion, seven-year term loan facility and a $350 million five-year revolving credit facility.
On November 18, 2015, we acquired Benaissance, a leading provider of integrated SaaS technologies and services for healthcare premium billing, payment and workflow management, for approximately $81 million. This acquisition complemented our current healthcare payments products and services.
We purchased approximately 210,000 shares of our common stock for $22 million during the first half of 2015.
Our Company's management believes the following metrics were important to our overall performance in 2015:

Total fleet transactions processed increased 5 percent from 2014 to 405.9 million in 2015. Payment processing transactions increased 10 percent from 2014 to 343.0 million in 2015, and transaction processing transactions decreased 15 percent from 2014 to 62.9 million in 2015.
Our Travel and Corporate Solutions purchase volume grew to $19.4 billion in 2015, a 14 percent increase from 2014. This increase is primarily due to our single use account product used for online travel-related purchases.
Domestic fuel prices averaged $2.55 per gallon during 2015, down from an average of $3.55 per gallon during 2014. Additionally, Australian fuel prices decreased 29 percent in 2015 as compared to 2014, to U.S. $3.66 per gallon. As of December 31, 2015, the average price of domestic fuel was $2.09 per gallon. If prices remain low or continue to fall, our future revenue and earnings will be negatively impacted. We currently estimate that a drop of 1 cent in the price of fuel would lower our annual revenues by approximately $1.1 million.
Beginning in the second half of 2014 and through 2015, there were fluctuations in foreign currency exchange rates that resulted in a significant devaluation of major currencies to which our business is exposed, including the Australian dollar, the Euro and the British Pound. Our foreign currency exchange exposure is primarily related to the re-measurement of our cash, receivable, payable and intercompany balances that are denominated in these foreign currencies. Movements in the foreign currency exchange rates resulted in a pre-tax loss of $6 million during 2015, as compared to a pre-tax loss of $13 million during 2014.
Our effective tax rate was 40.7 percent for 2015 as compared to 33.7 percent for 2014. Our 2015 tax rate reflects the recording of a valuation allowance in the amount of $2.9 million against certain state net operating losses and estimated non-deductible transaction expenses. The 2015 tax rate also reflects $2.4 million of additional expense related to non-deductible acquisition expense, penalties and net operating loss true-ups.
During the third quarter of 2014, we completed a strategic tax review project which resulted in a change in estimate to reflect the tax impacts of the domestic production activities deduction and research and development credits in our income tax provision. We amended prior year tax returns as a result of this change in estimate which reduced the 2014 tax expense by approximately $11.3 million. In addition, the 2014 tax provision was reduced by $2.4 million as a result of the change in estimate.
Future tax rates may fluctuate due to changes in the mix of earnings among different tax jurisdictions. Our tax rate has fluctuations due to the impacts that rate and mix changes have on our net deferred tax assets. We anticipate that our future GAAP effective tax rate should be within the range of our historical rates, excluding discrete items.

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Segments
Previously, we reported our results of operations in two business segments, Fleet Payment Solutions and Other Payment Solutions. During the fourth quarter of 2015, we revised our internal and external reporting and now report our results of operations in three reportable segments: Fleet Solutions, Travel and Corporate Solutions, and Health and Employee Benefit Solutions. The Fleet Solutions segment provides customers with payment and transaction processing services specifically designed for the needs of commercial and government fleets. This segment also provides information management services to these fleet customers. Fleet Solutions remains on the same basis as the historical Fleet Payment Solutions business segment. The Travel and Corporate Solutions segment focuses on the complex payment environment of business-to-business payments, providing customers with payment processing solutions for their corporate payment and transaction monitoring needs. Travel and Corporate Solutions includes the Travel business as well as other virtual and prepaid verticals. The Health and Employee Benefit Solutions segment provides healthcare payment products and SaaS consumer directed platforms, as well as payroll related benefits to customers in Brazil.
Summarized quarterly revenues by segment for the years ended December 31, 2015 and 2014, are as follows:
  
 
Three months ended
  
 
March 31
 
June 30
 
September 30
 
December 31
2015
 
 
 
 
 
 
 
 
Fleet Solutions revenue
 
 
 
 
 
 
 
 
Payment processing
$
72,943

 
$
80,127

 
$
80,230

 
$
72,995

 
Other
$
55,547

 
$
55,393

 
$
60,442

 
$
61,281

 
Total Fleet Solutions revenue
$
128,490

 
$
135,520

 
$
140,672

 
$
134,276

Travel and Corporate Solutions revenue
 
 
 
 
 
 
 
 
Payment processing
$
32,635

 
$
37,564

 
$
44,386

 
$
36,726

 
Other
$
10,437

 
$
10,650

 
$
12,096

 
$
10,925

 
Total Travel and Corporate Solutions revenue
$
43,072

 
$
48,214

 
$
56,482

 
$
47,651

Health and Employee Benefit Solutions revenue
$
30,722

 
$
29,919

 
$
28,903

 
$
30,716

2014
 
 
 
 
 
 
 
 
Fleet Solutions revenue
 
 
 
 
 
 
 
 
Payment processing
$
85,702

 
$
94,550

 
$
93,462

 
$
83,336

 
Other
$
49,733

 
$
51,278

 
$
51,035

 
$
53,073

 
Total Fleet Solution revenue
$
135,435

 
$
145,828

 
$
144,497

 
$
136,409

Travel and Corporate Solutions revenue
 
 
 
 
 
 
 
 
Payment processing
$
29,683

 
$
37,460

 
$
39,819

 
$
34,407

 
Other
$
9,974

 
$
9,991

 
$
10,833

 
$
10,754

 
Total Travel and Corporate Solution revenue
$
39,657

 
$
47,451

 
$
50,652

 
$
45,161

Health and Employee Benefit Solutions revenue
$
6,976

 
$
8,302

 
$
26,985

 
$
30,294


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Results of Operations
YEAR ENDED DECEMBER 31, 2015, AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2014
FLEET SOLUTIONS SEGMENT
The following table reflects comparative operating results and key operating statistics within our Fleet Solutions segment: 
(in thousands, except per transaction and per gallon data)
2015
 
2014
 
Increase
(decrease)
Revenues
 
 
 
 
 
Payment processing revenue
$
306,295

 
$
357,050

 
(14
)%
Other
232,663

 
205,119

 
13
 %
Total revenues
538,958

 
562,169

 
(4
)%
Total operating expenses
408,840

 
341,734

 
20
 %
Operating income
130,118

 
220,435

 
(41
)%
Financing interest expense
(31,179
)
 
(31,213
)
 
 %
Gain (loss) on foreign currency transactions
1,479

 
(2,647
)
 
(156
)%
Net realized and unrealized gains on domestic fuel price derivative instruments
5,848

 
46,212

 
(87
)%
Decrease (increase) in amount due under tax receivable agreement
2,145

 
(1,331
)
 
NM

Income before income taxes
$
108,411

 
$
231,456

 
(53
)%
 
 
 
 
 
 
Key operating statistics (a)
 
 
 
 
 
Payment processing revenue:
 
 
 
 
 
Payment processing transactions
342,975

 
311,291

 
10
 %
Average expenditure per payment processing transaction
$
64.59

 
$
84.00

 
(23
)%
Average price per gallon of fuel - Domestic – ($USD/gal)
$
2.55

 
$
3.55

 
(28
)%
Average price per gallon of fuel - Australia – ($USD/gal)
$
3.66

 
$
5.14

 
(29
)%
Transaction processing revenue:
 
 
 
 
 
Transaction processing transactions
62,917

 
74,092

 
(15
)%
Account servicing revenue:
 
 
 
 
 
Average number of vehicles serviced during the year
9,583

 
8,045

 
19
 %
NM - Not Meaningful 
(a) As of December 1, 2014, these key operating statistics include fuel related payment processing transactions and gallons of fuel from the Esso portfolio in Europe.
  
Revenues
Payment processing revenue decreased $50.8 million for 2015, as compared to 2014. This decrease is primarily due to a decline in the average domestic price per gallon of fuel in 2015 as compared to 2014. This decrease is partially offset by an increase in payment processing volume primarily related to the acquisition of the Esso portfolio in Europe in December of 2014.
Other revenues increased $27.5 million in 2015, as compared to 2014, primarily due to (i) an increase in account servicing revenue as a result of the Esso portfolio in Europe acquisition in December of 2014; and (ii) an increase in finance fees for 2015, as compared to 2014. The increase in finance fees is primarily due to an increase in late fees assessed as well as additional factoring revenue. Payments for customer receivables, or trade receivables, are due within thirty days or less. Late fee revenue, which is included in finance fees, is earned when a customer’s receivable balance becomes delinquent. The late fee is calculated using a stated late fee rate based on the outstanding balance, subject to a minimum charge. The absolute amount of such outstanding balances can be attributed to (i) changes in fuel prices; (ii) customer specific transaction volume; and (iii) customer specific delinquencies. Late fee revenue can also be impacted by changes in (i) late fee rates and (ii) increases or decreases in the number of customers with overdue balances.

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Expenses
The following table compares selected expense line items within our Fleet Solutions segment:
  
(in thousands)
2015
 
2014
 
Increase
(decrease)
Expense
 
 
 
 
 
Salary and other personnel
$
169,480

 
$
154,481

 
10
 %
Restructuring
$
9,010

 
$

 
NM

Service fees
$
61,291

 
$
40,945

 
50
 %
   Provision for credit losses
$
20,822

 
$
30,696

 
(32
)%
Technology leasing and support
$
25,136

 
$
18,532

 
36
 %
Other
$
23,900

 
$
27,639

 
(14
)%
Gain on sale of subsidiary
$

 
$
(27,490
)
 
 %
NM - Not Meaningful 
Salary and other personnel expenses increased $15.0 million for 2015, as compared to 2014. The increase is primarily due to an increase in headcount related to the acquisition of the Esso portfolio in Europe in December of 2014, partially offset by lower stock compensation expense.
We recorded restructuring costs of approximately $9.0 million related to our global review of operations, of which $1.4 million was paid in 2015. The costs related to this initiative are employee termination benefits and third party service fees. These actions are expected to continue through 2017. We anticipate lower employee and facility related expenses once the restructuring is complete.
Service fees increased $20.3 million during 2015, as compared to 2014. The increase is due to expenses associated with the acquisition of the Esso portfolio in Europe in December of 2014. This increase is partially offset by a decrease in service fees related to the divestiture of Pacific Pride that occurred in July of 2014.
Provision for credit losses decreased $9.9 million for 2015, as compared to 2014. We use a roll rate methodology to calculate the amount necessary for our ending receivable reserve balance. This methodology takes into account total receivable balances, recent charge off experience, recoveries on previously charged off accounts, and the dollars that are delinquent to calculate the total reserve. In addition, management undertakes a detailed evaluation of the receivable balances to help ensure further overall reserve adequacy. We generally measure our credit loss performance by calculating credit losses as a percentage of total fuel expenditures on payment processing transactions. Our credit losses as a percentage of customers spend decreased to 9.4 basis points as compared to 11.7 basis points for 2014. The expense we recognized in 2015 is the amount necessary to bring the reserve to its required level after net charge offs.
Technology leasing and support expenses increased $6.6 million in 2015, as compared to 2014. The increase is primarily the result of additional expenses related to the consolidation of data centers, increases in cybersecurity infrastructure and additional fees associated with the general expansion of operations.
Other expenses decreased $3.7 million in 2015, as compared to 2014. This decrease is due lower hardware expenses.
On July 29, 2014, we sold our Pacific Pride subsidiary for a pre-tax book gain of $27.5 million as it did not align with the long-term strategy of the core fleet business. The operations of Pacific Pride were not material to our annual revenue, net income or earnings per share.
Gain (loss) on foreign currency transactions
Beginning in the second half of 2014 and through 2015 there were fluctuations in exchange rates that resulted in a significant devaluation of major currencies to which our business is exposed, including the Australian dollar, the Brazilian real, the Euro and the British Pound sterling. Our foreign currency exchange exposure is primarily related to the re-measurement of our cash, receivable, payable and intercompany balances that are denominated in these foreign currencies. These fluctuations in exchange rates resulted in a gain of $1.5 million in 2015 as compared to a loss of $2.6 million in 2014.

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Table of Contents

Fuel price derivatives
We own fuel price sensitive derivative instruments that we previously purchased on a periodic basis to manage the impact of volatility in domestic fuel prices on our cash flows. Our derivative instruments do not qualify for hedge accounting. Accordingly, realized and unrealized gains and losses on our fuel price sensitive derivative instruments affect our net income. During 2015 we recorded a gain of $5.8 million, consisting of a change in the unrealized balance in fuel derivatives of $36.0 million and a realized gain of $41.8 million. During 2014 we recorded a gain of $46.2 million, consisting of an unrealized gain of $48.3 million and a realized loss of $2.1 million. These gains and losses were due to the overall change in the current and future price of fuel relative to our hedged fuel prices. During the fourth quarter of 2014 we suspended purchases under our fuel derivatives program due to unusually low prices in the commodities market. We continue to hold fuel price derivative instruments for the first quarter of 2016 that were executed in the third quarter of 2014 for approximately 20 percent of the anticipated quarterly exposure to domestic earnings based on assumptions at the time of purchase. After the first quarter of 2016, we are no longer hedged for changes in fuel prices.
TRAVEL AND CORPORATE SOLUTIONS SEGMENT
The following table reflects comparative operating results and key operating statistics within our Travel and Corporate Solutions segment:
 
(in thousands)
2015
 
2014
 
Increase
(decrease)
Revenues
 
 
 
 
 
Payment processing revenue
$
151,311

 
$
141,368

 
7
 %
Other
44,108

 
41,553

 
6
 %
Total revenues
195,419

 
182,921

 
7
 %
Total operating expenses
108,388

 
95,623

 
13
 %
Operating income
87,031


87,298

 
 %
Loss on foreign currency transactions
(6,242
)
 
(10,222
)
 
NM

Income before income taxes
$
80,789


$
77,076

 
5
 %
 
 
 
 
 
 
Key operating statistics
 
 
 
 
 
Payment processing revenue:
 
 
 
 
 
Payment solutions purchase volume
$
19,440,663

 
$
17,072,743

 
14
 %
 NM - Not Meaningful 
Revenues
Payment processing revenue increased approximately $9.9 million for 2015, as compared to 2014. The primary driver of the increase in payment processing revenue is due to higher virtual card purchase volume, which grew by approximately $2.4 billion in 2015 compared to 2014. These increases were partially offset by a decrease in the virtual card net interchange rate of 5 basis points in 2015 as compared to 2014, primarily due to increases in customer rebates.
Other revenue increased $2.6 million for 2015 as compared to 2014. These increases are primarily due to revenues associated with currency conversion fees charged to our virtual customers.
Expenses
The following table compares selected expense line items within our Travel and Corporate Solutions segment:
 
(in thousands)
2015
 
2014
 
Increase
(decrease)
Expense
 
 
 
 
 
Salary and other personnel
$
21,544

 
$
19,704

 
9
%
Service fees
$
61,809

 
$
58,694

 
5
%
Provision for credit losses
$
1,324

 
$
1,061

 
25
%
Technology leasing and support
$
12,469

 
$
10,800

 
15
%
Depreciation and amortization
$
2,999

 
$
1,911

 
57
%
Other
$
3,929

 
$
710

 
453
%
 

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Table of Contents

Salary and other personnel expenses increased $1.8 million in 2015, as compared to 2014. The increase is primarily due to an increase in headcount over the prior year.
Service fees increased by $3.1 million in 2015, as compared to 2014. This increase is primarily due to higher processing fees associated with an increase in purchase card volume.
Provision for credit losses increased $0.3 million in 2015, as compared to 2014, primarily due to higher purchase volumes. The expense we recognize each year is the amount necessary to bring the reserve to its required level after net charge offs.
Technology leasing and support expense increased $1.7 million in 2015, as compared to 2014. This increase is primarily due to additional expenses from hardware and related maintenance.
Depreciation and amortization expenses increased $1.1 million in 2015, as compared to 2014. This increase is primarily related to additional assets placed in service during the year.
Other expense increased $3.2 million in 2015, as compared to 2014. The increase is primarily due to sales and marketing incentives.
Loss on foreign currency transactions
Beginning in the second half of 2014 and through 2015 there were fluctuations in exchange rates that resulted in a significant devaluation of major currencies to which our business is exposed, including the Australian dollar, the Brazilian real, the Euro and the British Pound sterling. Our foreign currency exchange exposure is primarily related to the re-measurement of our cash, receivable, payable and intercompany balances that are denominated in these foreign currencies. These fluctuations in exchange rates resulted in a loss of $6.2 million in 2015 as compared to a loss of $10.2 million in 2014.


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Table of Contents

HEALTH AND EMPLOYEE BENEFIT SOLUTIONS SEGMENT
The following table reflects comparative operating results and key operating statistics within our Health and Employee Benefit Solutions segment:
 
(in thousands)
2015
 
2014
 
Increase
(decrease)
Revenues
$
120,260

 
$
72,557

 
66
 %
Total operating expenses
108,616

 
74,052

 
47
 %
Operating income
11,644

 
(1,495
)
 
(879
)%
Finance interest expense
(15,010
)
 
(4,829
)
 
211
 %
Loss on foreign currency transactions
(926
)
 
(569
)
 
63
 %
Income before income taxes
$
(4,292
)
 
$
(6,893
)
 
(38
)%
 
Revenues
Revenue increased approximately $47.7 million for 2015, as compared to 2014. The increase in revenue is due to the acquisition of Evolution1 in July of 2014, offset by lower revenue, as compared to 2014, associated with rapid! Paycard, which was sold in January of 2015. Due to the timing of the Benaissance acquisition, which was completed on November 18, 2015, the impact from Benaissance on the results of operations of the Health and Employee Benefit Solutions segment was not material.
Expenses
The following table compares selected expense line items within our Health and Employee Benefit Solutions segment:
 
(in thousands)
2015
 
2014
 
Increase
(decrease)
Expense
 
 
 
 
 
Salary and other personnel
$
43,540

 
$
26,624

 
64
 %
Service fees
$
15,744

 
$
20,237

 
(22
)%
Technology leasing and support
$
3,710

 
$
1,249

 
197
 %
Depreciation and amortization
$
25,692

 
$
13,743

 
87
 %
 
Salary and other personnel expenses increased $16.9 million in 2015, as compared to 2014. The increase is primarily due to salary expense at Evolution1, which was acquired in July of 2014, offset by lower expenses associated with rapid! Paycard, which was sold in January of 2015.
Service fees decreased by $4.5 million in 2015, as compared to 2014. This decrease is primarily due to lower expenses associated with rapid! Paycard, which was sold in January of 2015, slightly offset by higher expenses associated with Evolution1.
Technology leasing and support expenses increased $2.5 million in 2015, as compared to 2014. This increase is primarily due to additional expenses related to Evolution1.
Depreciation and amortization expenses increased $11.9 million in 2015, as compared to 2014. This increase is primarily related to amortization expense associated with the intangible assets acquired with Evolution1.
Financing interest expense
Financing interest expense is related to our credit agreements. The $15.0 million in financing interest expense in 2015 and the $4.8 million expense in 2014 are associated with the debt incurred to purchase Evolution1.
Loss on foreign currency transactions
Beginning in the second half of 2014 and through 2015 there were fluctuations in exchange rates that resulted in a significant devaluation of major currencies to which our business is exposed, including the Brazilian real. Our foreign currency exchange exposure is primarily related to the re-measurement of our cash, receivable, payable and intercompany balances that are denominated in these foreign currencies. These fluctuations in exchange rates resulted in a loss of $0.9 million in 2015 as compared to a loss of $0.6 million in 2014.

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Table of Contents

YEAR ENDED DECEMBER 31, 2014, AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2013
FLEET SOLUTIONS SEGMENT
These results are presented to conform to the segment presentation that was implemented in the fourth quarter of 2015.
The following table reflects comparative operating results and key operating statistics within our Fleet Solutions segment: 
(in thousands, except per transaction and per gallon data)
2014
 
2013
 
Increase
(decrease)
Revenues
 
 
 
 
 
Payment processing revenue
$
357,050

 
$
348,291

 
3
 %
Other
205,119

 
179,133

 
15
 %
Total revenues
562,169

 
527,424

 
7
 %
Total operating expenses
341,734

 
314,313

 
9
 %
Operating income
220,435

 
213,111

 
3
 %
Financing interest expense
(31,213
)
 
(29,419
)
 
6
 %
(Loss) gain on foreign currency transactions
(2,647
)
 
263

 
NM

Net realized and unrealized gains (losses) on domestic fuel price derivative instruments
46,212

 
(9,851
)
 
NM

Increase in amount due under tax receivable agreement
(1,331
)
 
(33
)
 
NM

Income before income taxes
$
231,456

 
$
174,071

 
33
 %
 
 
 
 
 
 
Key operating statistics (a)
 
 
 
 
 
Payment processing revenue:
 
 
 
 
 
Payment processing transactions
311,291

 
292,079

 
7
 %
Average expenditure per payment processing transaction
$
84.00

 
$
85.58

 
(2
)%
Average price per gallon of fuel - Domestic – ($USD/gal)
$
3.55

 
$
3.67

 
(3
)%
Average price per gallon of fuel - Australia – ($USD/gal)
$
5.14

 
$
5.39

 
(5
)%
Transaction processing revenue:
 
 
 
 


Transaction processing transactions
74,092

 
78,501

 
(6
)%
Account servicing revenue:
 
 
 
 


Average number of vehicles serviced during the year
8,045

 
7,538

 
7
 %
  NM - Not Meaningful 
(a) As of December 1, 2014, these key operating statistics include fuel related payment processing transactions and gallons of fuel from the Esso portfolio in Europe.
Revenues
Payment processing revenue increased $8.8 million for 2014, as compared to 2013. This increase was primarily due to the organic growth of our domestic fleet business as our transaction volume increased 7 percent in 2014 from 2013, as well as an increase due to the Esso portfolio acquisition in Europe. Reducing the overall increase was a 3 percent decrease in the average domestic price per gallon of fuel in 2014, as compared to 2013.
Other revenue increased $26.0 million primarily due to an increase in finance fees resulting from: (i) an increase in the minimum late fee charges, (ii) an increase in factoring revenue and (iii) higher accounts receivable balances, as a result of higher transaction volumes. Minimum late fee charges were increased in the third quarter of 2013. Other revenues also increased due to growth in our WEX Telematics business, equipment sales and the number of fleet customers, as compared to the prior year.

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Table of Contents

Expenses
The following table compares selected expense line items within our Fleet Solutions segment:
  
(in thousands)
2014
 
2013
 
Increase
(decrease)
Expense
 
 
 
 
 
Salary and other personnel
$
154,481

 
$
137,669

 
12
%
Service fees
$
40,945

 
$
31,563

 
30
%
   Provision for credit losses
$
30,696

 
$
19,726

 
56
%
Technology leasing and support
$
18,532

 
$
15,384

 
20
%
Depreciation and amortization
$
54,726

 
$
51,437

 
6
%
Other
$
27,639

 
$
20,481

 
35
%
Gain on sale of subsidiary
$
(27,490
)
 
$

 
%
Salary and other personnel expenses increased $16.8 million for 2014, as compared to 2013. The increase is primarily due to an increase in headcount to support our growing operations, primarily related to the acquisition of the Esso portfolio in Europe, as well as an increase in stock-based incentive compensation expense.
Service fees increased $9.4 million during 2014, as compared to 2013. Service fees increased compared to the prior year primarily due to expenses associated with the acquisition and integration of the Esso portfolio in Europe and the fees related to the increase in the number of WEX Telematics units being serviced.
Provision for credit losses increased $11.0 million for 2014, as compared to 2013. Our credit losses as a percentage of customer spend increased to 11.7 basis points as compared to 7.9 basis points for 2013. Beginning in the third quarter of 2013, we tested less restrictive credit standards for the approval of certain new customer applications and experienced an increase in delinquency rates during the first quarter of 2014. After monitoring the impact to our credit loss reserve, we returned to our prior stricter credit standards beginning in the second quarter of 2014. We also experienced an increase in a number of our low risk accounts that were in early stage delinquency. The expense we recognized in 2014 is the amount necessary to bring the reserve to its required level after net charge offs.
Technology leasing and support expenses increased $3.1 million in 2014, as compared to 2013. The increase is primarily the result of additional expenses related to the consolidation of data centers and additional fees associated with the general expansion of operations.
Depreciation and amortization expenses increased $3.3 million in 2014, as compared to 2013. This increase is primarily related to hardware that was placed in service in conjunction with our data center consolidation as well as an increase in depreciation and amortization expense related to the acquisition of the Esso portfolio in Europe.
Other expenses increased $7.2 million in 2014, as compared to 2013. This increase is due to an increase in expenses related to the consolidation of data centers and additional fees associated with the general growth of operations.
On July 29, 2014, we sold our wholly-owned subsidiary Pacific Pride for a pre-tax gain of $27.5 million as it did not align with the long-term strategy of the core fleet business. The operations of Pacific Pride were not material to our annual revenue, net income or earnings per share.
Financing interest expense
Financing interest expense is related to our credit agreements. Interest expense associated with the Fleet Solutions segment for 2014 increased $1.8 million from 2013. On January 30, 2013, we issued $400 million of Notes with a 4.75 percent fixed rate. The proceeds of these Notes were primarily used to pay down borrowings under our 2013 Credit Agreement. Additionally, on August 22, 2014, we entered into the 2014 Credit Agreement. The 2014 Credit Agreement amends and restates the 2013 Credit Agreement. The 2014 Credit Agreement increases the outstanding amount of the term loans from $277,500 to $500,000, and accordingly, financing interest expense related to the term loan outstanding was higher for 2014 as compared to 2013. These increases in financing interest expense were offset by a $1.0 million write-off of deferred loan fees associated with the extinguishment of debt in the first quarter of 2013.

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Table of Contents

Gain (loss) on foreign currency transactions
In the second half of 2014 there were fluctuations in exchange rates that resulted in a significant devaluation of major currencies to which our business is exposed, including the Australian dollar, the Euro and the British Pound sterling. Our foreign currency exchange exposure is primarily related to the re-measurement of our cash, receivable, payable and intercompany balances that are denominated in these foreign currencies. Furthermore, the recent addition of the Esso portfolio has increased this type of exposure. These fluctuations in exchange rates resulted in a loss of $2.6 million in 2014 as compared to a gain of $0.3 million in 2013.
Fuel price derivatives
We own fuel price sensitive derivative instruments that we purchase on a periodic basis to manage the impact of volatility in domestic fuel prices on our cash flows. Our derivative instruments do not qualify for hedge accounting. Accordingly, realized and unrealized gains and losses on our fuel price sensitive derivative instruments affect our net income. During 2014 we recorded a gain of $46.2 million, consisting of an unrealized gain of $48.3 million and a realized loss of $2.1 million. During 2013 we recorded a loss of $9.9 million, consisting of a realized loss of $4.2 million and an unrealized loss of $5.6 million. These gains and losses were due to the overall change in the current and future price of fuel relative to our hedged fuel prices. During the fourth quarter of 2014 we suspended purchases under our fuel derivatives program due to unusually low prices in the commodities market.
Esso portfolio in Europe
On December 1, 2014, we acquired the assets of ExxonMobil's European commercial fuel card program through our majority owned subsidiary, WEX Europe Services Limited. As a result of this transaction, we are making investments relating to the integration of operations and systems.

TRAVEL AND CORPORATE SOLUTIONS SEGMENT
The following table reflects comparative operating results and key operating statistics within our Travel and Corporate Solutions segment:
 
(in thousands)
2014
 
2013
 
Increase
(decrease)
Revenues
 
 
 
 
 
Payment processing revenue
$
141,368

 
$
125,591

 
13
%
Other
41,553

 
37,413

 
11
%
Total revenues
182,921

 
163,004

 
12
%
Total operating expenses
95,623

 
95,162

 
%
Operating income
87,298

 
67,842

 
29
%
(Loss) gain on foreign currency transactions
(10,222
)
 
1,066

 
NM

Income before income taxes
$
77,076

 
$
68,908

 
12
%
 
 
 
 
 
 
Key operating statistics
 
 
 
 
 
Payment processing revenue:
 
 
 
 
 
Payment solutions purchase card volume
$
17,072,743

 
$
13,057,666

 
31
%
 NM - Not Meaningful  
    

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Table of Contents

Revenues
Payment processing revenue increased approximately $15.8 million for 2014, as compared to 2013. The primary driver of the increase in payment processing revenue is due to higher corporate charge card purchase volume from our virtual WEX travel product, which grew by approximately $4.0 billion in 2014 compared to 2013. This increase was partially offset by a decrease in the virtual card net interchange rate of 13 basis points in 2014 as compared to 2013, primarily due to decreases in customer specific incentives from our network provider. Lastly, on November 9, 2012, the U.S. District Court granted preliminary approval to the MasterCard/Visa merchant interchange settlement. Under the terms of this settlement, the domestic interchange rate for our branded credit card transactions was reduced by 10 basis points for a period of eight months, that began on July 29, 2013. This resulted in a revenue reduction of approximately $3.6 million in the second half of 2013 and a revenue reduction of approximately $1.9 million in the first quarter of 2014.
Other revenue increased $4.1 million for 2014 as compared to 2013. This increase is primarily due to revenues associated with foreign exchange fees.
Expenses
The following table compares selected expense line items within our Travel and Corporate Solutions segment:
 
(in thousands)
2014
 
2013
 
Increase
(decrease)
Expense
 
 
 
 
 
Salary and other personnel
$
19,704

 
$
18,220

 
8
 %
Service fees
$
58,694

 
$
60,404

 
(3
)%
Provision for credit losses
$
1,061

 
$
196

 
441
 %
Technology leasing and support
$
10,800

 
$
8,664

 
25
 %
 
Salary and other personnel expenses increased $1.5 million in 2014, as compared to 2013. The increase is primarily due to additional headcount.
Service fees decreased by $1.7 million in 2014, as compared to 2013. This decrease is primarily due to a decrease in cross-border fees, as compared to the same period in the prior year.
Provision for credit losses increased $0.9 million in 2014, as compared to 2013, primarily due to higher purchase volumes. The expense we recognized each year is the amount necessary to bring the reserve to its required level after net charge offs.
Technology leasing and support expense increased $2.1 million in 2014, as compared to 2013. This increase is primarily due to additional expenses from hardware and related maintenance.
Gain (loss) on foreign currency transactions
In the second half of 2014 there were fluctuations in exchange rates that resulted in a significant devaluation of major currencies to which our business is exposed, including the Australian dollar, the Euro and the British Pound sterling. Our foreign currency exchange exposure is primarily related to the re-measurement of our cash, receivable, payable and intercompany balances that are denominated in these foreign currencies. These fluctuations in exchange rates resulted in a loss of $10.2 million in 2014 as compared to a gain of $1.1 million in 2013.


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Table of Contents

HEALTH AND EMPLOYEE BENEFIT SOLUTIONS SEGMENT
The following table reflects comparative operating results and key operating statistics within our Health and Employee Benefit Solutions segment:
 
(in thousands)
2014
 
2013
 
Increase
(decrease)
Revenues
$
72,557

 
$
27,035

 
168
 %
Total operating expenses
74,052

 
31,249

 
137
 %
Operating income
(1,495
)
 
(4,214
)
 
(65
)%
Finance interest expense
(4,829
)
 

 
NM

Loss on foreign currency transactions
(569
)
 
(365
)
 
56
 %
Income before income taxes
$
(6,893
)
 
$
(4,579
)
 
51
 %
 NM - Not Meaningful  
Revenues
Revenue increased approximately $45.5 million for 2014, as compared to 2013. The primary driver of the increase in payment processing revenue is due to the acquisition of Evolution1, which was acquired in July of 2014.     
Expenses
The following table compares selected expense line items within our Health and Employee Benefit Solutions segment: 
(in thousands)
2014
 
2013
 
Increase
(decrease)
Expense
 
 
 
 
 
Salary and other personnel
$
26,624

 
$
8,632

 
208
%
Service fees
$
20,237

 
$
11,461

 
77
%
Technology leasing and support
$
1,249

 
$
169

 
639
%
Depreciation and amortization
$
13,743

 
$
4,037

 
240
%
 
Salary and other personnel expenses increased $18.0 million in 2014, as compared to 2013. The increase is primarily due to the acquisition of Evolution1, which was acquired in July of 2014.
Service fees increased by $8.8 million in 2014, as compared to 2013. The increase is primarily due to the acquisition of Evolution1.
Technology leasing and support expenses increased $1.1 million in 2014, as compared to 2013. The increase is primarily due to the acquisition of Evolution1.
Depreciation and amortization expense increased $9.7 million in 2014, as compared to 2013. The increase is primarily due to the intangibles acquired with the acquisition of Evolution1.
Financing interest expense
Financing interest expense is related to our credit agreements. The $4.8 million in financing interest expense in 2014 was associated with the debt incurred to purchase Evolution1. There was no financing interest expense for the Health and Employee Benefit Solutions segment in 2013.
Gain (loss) on foreign currency transactions
In the second half of 2014 there were fluctuations in exchange rates that resulted in a significant devaluation of major currencies to which our business is exposed. Our foreign currency exchange exposure is primarily related to the re-measurement of our cash, receivable, payable and intercompany balances that are denominated in these foreign currencies. These fluctuations in exchange rates resulted in a loss of $0.6 million in 2014 as compared to a loss of $0.4 million in 2013.


44

Table of Contents

Non-GAAP financial measures
In addition to providing financial measurements based on GAAP, we publicly discuss additional financial measures, such as adjusted net income, that are not prepared in accordance with GAAP, or non-GAAP financial measures. Although adjusted net income is not calculated in accordance with GAAP, this measure is integral to the Company's reporting and planning processes. The Company considers this measure integral because it eliminates the non-cash volatility associated with the fuel price related derivative instruments, and excludes other specified items that the Company's management excludes in evaluating the Company's performance. Specifically, in addition to evaluating the Company's performance on a GAAP basis, management evaluates the Company's performance on a basis that excludes the above items because:
Exclusion of the non-cash, mark-to-market adjustments on fuel-price related derivative instruments helps management identify and assess trends in the Company's underlying business that might otherwise be obscured due to quarterly non-cash earnings fluctuations associated with fuel-price-related derivative contracts.
The non-cash, mark-to-market adjustments on derivative instruments are difficult to forecast accurately, making comparisons across historical and future quarters difficult to evaluate.
Net foreign currency gains and losses primarily result from the remeasurement to functional currency of foreign currency cash, receivable and payable balances, certain intercompany notes and any gain or loss on foreign currency hedges relating to these items. The exclusion of these items helps management compare changes in operating results between periods that might otherwise be obscured due to currency fluctuations.
The amortization of acquired intangibles, deferred loan costs associated with the extinguishment of debt, acquisition related expenses, non-cash adjustments related to the Company's tax receivable agreement, and adjustments attributable to non-controlling interests, including adjustments to the redemption value of a non-controlling interest, have no significant impact on the ongoing operations of the business.
Stock-based compensation is different from other forms of compensation, as it is a non-cash expense. For example, a cash salary generally has a fixed and unvarying cash cost. In contrast, the expense associated with an equity-based award is generally unrelated to the amount of cash ultimately received by the employee, and the cost to us is based on a stock-based compensation valuation methodology and underlying assumptions that may vary over time.
Restructuring charges are related to employee termination benefits from certain identified initiatives to further streamline the business, improve the Company's efficiency, and to globalize the Company's operations, all with an objective to improve scale and increase profitability going forward. We exclude these items when evaluating our continuing business performance as such items are not consistently occurring and do not reflect expected future operating expense, nor provide meaningful insight into the fundamentals of current or past operations of our business.
The gain or loss from a divestiture is not indicative of the performance of the ongoing operations of the business.
The regulatory reserve reflects charges related to the impact of a regulatory action which resulted in a penalty being paid by WEX Bank. We have excluded this item when evaluating our continuing business performance as it is not recurring.
The Company considers certain acquisition-related costs, investment banking fees, financing fees and warranty and indemnity insurance, to be unpredictable, dependent on factors that may be outside of our control and unrelated to the continuing operations of the acquired business or the Company. In addition, the size and complexity of an acquisition, which often drives the magnitude of acquisition-related costs, may not be indicative of such future costs. The Company believes that excluding acquisition-related costs facilitates the comparison of our financial results to the Company's historical operating results and to other companies in our industry.
For the same reasons, WEX believes that adjusted net income may also be useful to investors as one means of evaluating the Company's performance. However, because adjusted net income is a non-GAAP measure, it should not be considered as a substitute for, or superior to, net income, operating income or cash flows from operating activities as determined in accordance with GAAP. In addition, adjusted net income as used by WEX may not be comparable to similarly titled measures employed by other companies.

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Table of Contents


The following table reconciles Adjusted Net Income to net earnings attributable to WEX Inc.:
 
Year ended December 31,
 
2015
 
2014
 
2013
Adjusted net income attributable to WEX Inc.
$
189,120

 
$
204,571

 
$
179,033

Changes in unrealized fuel price derivatives
(35,962
)
 
48,327

 
(5,628
)
Net foreign currency remeasurement (loss) gain
(5,689
)
 
(13,438
)
 
964

Amortization of acquired intangible assets
(47,792
)
 
(40,622
)
 
(33,147
)
Stock-based compensation
(12,420
)
 
(13,790
)
 
(9,429
)
Restructuring
(9,010
)
 

 

Gain on divestitures
1,215

 
27,490

 

Deferred loan costs associated with the extinguishment of debt

 

 
(1,004
)
Expenses and adjustments related to acquisitions
(4,137
)
 
(7,694
)
 
658

Non-cash adjustments related to tax receivable agreement
2,145

 
(1,331
)
 
(33
)
Regulatory reserve
(1,750
)
 

 

ANI adjustments attributable to non-controlling interests
(4,996
)
 
2,150

 
1,622

Tax impact
31,180

 
(3,452
)
 
16,172

Net earnings attributable to shareholders
$
101,904


$
202,211


$
149,208

The tax impact of the foregoing adjustments is the difference between the Company’s U.S. GAAP tax provision and a pro forma tax provision based upon the Company’s adjusted net income before taxes. The methodology utilized for calculating the Company’s adjusted net income tax provision is the same methodology utilized in calculating the Company’s U.S. GAAP tax provision.


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LIQUIDITY, CAPITAL RESOURCES AND CASH FLOWS
We believe that our cash generating capability and financial condition, together with our revolving credit agreement, term loan and $400 million notes outstanding, as well as other available methods of financing (including deposit, borrowed federal funds and the financing commitments obtained in connection with proposed acquisition of EFS), are adequate to meet our operating, investing and financing needs. As part of our overall financial structure, our industrial bank subsidiary, WEX Bank, utilizes brokered deposits, NOW deposits and borrowed federal funds to finance our domestic accounts receivable.
The table below summarizes our cash activities: 
 
 
Year ended December 31,
(in thousands)
2015
 
2014
 
2013
Net cash provided by operating activities
$
445,100

 
$
296,413

 
$
39,551

Net cash used for investing activities
$
(126,658
)
 
$
(904,034
)
 
$
(51,342
)
Net cash (used for) provided by financing activities
$
(319,538
)
 
$
526,707

 
$
179,242

 
2015 Highlights
During 2015, cash provided by operating activities was primarily provided by a decrease in accounts receivable, net of the accounts receivable balances acquired with our acquisitions, net income, and depreciation and amortization expense. Accounts receivable decreased in 2015 over 2014 as a result of decreases in fuel prices.
On November 18, 2015, we acquired Benaissance for approximately $80.7 million. The transaction was financed through the Company’s cash on hand and existing credit facility.
On October 18, 2015, in connection with the planned acquisition of EFS, we obtained financing commitments (which were amended and restated on December 13, 2015) from Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, SunTrust Bank, SunTrust Robinson Humphrey, Inc., MUFG Union Bank, N.A. and Citizens Bank, National Association, for senior secured credit facilities in the aggregate amount of $2.125 billion, consisting of a $1.775 billion seven-year term loan facility and a $350 million five-year revolving credit facility.
On August 31, 2015, we acquired the remaining 49 percent ownership in UNIK, that we did not previously own for approximately $46 million. The transaction was financed through the Company’s cash on hand and existing credit facility.
On January 7, 2015, we sold our operations of rapid! PayCard for $20.0 million, which resulted in a pre-tax gain of $1.2 million.
During 2015, we incurred restructuring charges of $9.0 million, of which approximately $1.4 million was paid during the year. These expenses consist of employee termination benefits and third party service fees and are expected to be paid out through 2016 and into 2017.
During 2015, we had approximately $63 million of capital expenditures. A significant portion of our capital expenditures are for the development of internal-use computer software primarily to enhance product features and functionality in the United States and the development of our global fleet platform. Our capital spending is financed primarily through internally generated funds.
2014 Highlights
During 2014, our increase in accounts receivable, net of the account receivable balances acquired with our acquisitions, was primarily funded by operating activities. Accounts receivable increased in 2014 over 2013 as a result of increased customer spend levels.
On July 16, 2014, we acquired Evolution1 for approximately $532.2 million in cash. The transaction was financed through our cash on hand and existing credit facility.
On July 29, 2014, we sold our Pacific Pride subsidiary, for $49.7 million, which resulted in a pre-tax gain of $27.5 million.

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On August 22, 2014, we entered into agreements, including the 2014 Credit Agreement, to modify certain terms of our existing bank borrowing agreements in order to permit the additional financing and investments necessary to facilitate the consummation of the Esso portfolio in Europe transaction.
On December 1, 2014, WEX Europe Services Limited, acquired certain assets of ExxonMobil's European commercial fuel card program for approximately $379.5 million, which includes operations, funding, pricing, sales and marketing in nine countries in Europe.
During 2014, we had $58.1 million of capital expenditures. A significant portion of our capital expenditures are for the development of internal-use computer software primarily to enhance product features and functionality in the United States and for the development of our global fleet platform. Our capital spending is financed primarily through internally generated funds.
2013 Highlights
During 2013, our increase in accounts receivable, net of the account receivable balances acquired with our acquisitions, was funded by operating activities as well as a $150 million overall increase in borrowed federal funds and deposits. Accounts receivable increased in 2013 over 2012 as a result of increased customer spend levels.
On October 15, 2013, the Company's Brazilian subsidiary UNIK acquired FastCred for $12.3 million.
On September 23, 2013, our Board of Directors authorized a 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, through open market purchases. We used $17.9 million during 2013 to repurchase our own common stock.
During 2013, we had $39.5 million of capital expenditures. During 2013, we also capitalized approximately $13 million related to the consolidation of our data centers.
Liquidity
General
In general, our trade receivables provide for payment terms of 30 days or less. Receivables not paid within the terms of the customer agreement are generally subject to finance fees based upon the outstanding customer receivable balance. At December 31, 2015, approximately 86 percent of the outstanding balance of $1.6 billion of total trade accounts receivable was current and approximately 97 percent of the outstanding balance of total trade accounts receivable was less than 60 days past due. The outstanding balance is made up of receivables from a wide range of industries. One customer was 11 percent of the outstanding receivables balance at December 31, 2015. The same customer was 8 percent of the outstanding receivables balance at December 31, 2014.
Our short-term cash requirements consist primarily of payments to major oil companies for purchases made by our fleet customers, payments to merchants for other payment solutions, payments on maturing and withdrawals of brokered deposits and borrowed federal funds, interest payments on our credit facility, cash payments for derivative instruments and other operating expenses. WEX Bank is responsible for the majority of domestic payments to major oil companies, merchants, and payments on maturing and withdrawals of brokered deposits and borrowed federal funds. WEX Bank can fund our short-term domestic cash requirements through the issuance of brokered deposits and borrowed federal funds. Any remaining cash needs are primarily funded through operations.
2014 Credit Agreement
On August 22, 2014, we entered into the agreements described below to modify certain terms of our existing bank borrowing agreements in order to permit the additional financings and investments to facilitate the consummation of the Esso Card transaction.
On August 22, 2014, we entered into the 2014 Amendment Agreement. Pursuant to the 2014 Amendment Agreement, certain lenders party to the 2013 Credit Agreement, consented to the amendment and restatement of the 2013 Credit Agreement in the form of the 2014 Credit Agreement.
The 2014 Amendment Agreement (i) provides for a new tranche of term loans under the 2014 Credit Agreement in an aggregate principal amount equal to $222,500 on the terms and conditions set forth in the 2014 Credit Agreement, (ii) modifies certain of the negative covenants as described below in the description of the 2014 Credit Agreement and (iii) provides for the addition of Wright Express International Holdings Limited as a designated borrower, subject to specified conditions precedent.

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On August 22, 2014, we entered into the 2014 Credit Agreement. The 2014 Credit Agreement provides for a term loan facility in an amount equal to $500,000 that matures on January 31, 2018, and a $700,000 secured revolving credit facility, with a $150,000 sublimit for letters of credit and a $20,000 sublimit for swingline loans, that terminates on January 31, 2018.
The 2014 Credit Agreement amends and restates the 2013 Credit Agreement. The 2014 Credit Agreement increases the outstanding amount of the term loans from $277,500 to $500,000, and does not change the amount of the $700,000 revolving loan. A portion of the indebtedness owing under the 2014 Credit Agreement is the same indebtedness as formerly evidenced by the 2013 Credit Agreement.
As of December 31, 2015, we also had approximately $8.6 million in letters of credit outstanding. At December 31, 2015, we had $669.8 million of borrowed funds, and $480.4 million available, under the 2014 Credit Agreement, subject to the covenants as described below.
Proceeds from the 2014 Credit Agreement may be used for working capital purposes, acquisitions, payment of dividends and other restricted payments, refinancing of indebtedness, and other general corporate purposes.
We were in compliance with all material covenants and restrictions at December 31, 2015.
2013 Credit Agreement
On January 18, 2013, we entered into an Amended and Restated Credit Agreement (the “2013 Credit Agreement”), among the Company, as borrower, WEX Card Holdings Australia Pty Ltd, one of our wholly-owned subsidiaries, as specified designated borrower, Bank of America, N.A., as administrative agent and letter of credit issuer, and the other lenders party thereto. The 2013 Credit Agreement was secured by pledges of the stock of our foreign subsidiaries.
The 2013 Credit Agreement provided for a five-year $300 million amortizing term loan facility, and a five-year $700 million secured revolving credit facility with a $150 million sub-limit for letters of credit. The 2013 Credit Agreement replaced the 2011 Credit Agreement, dated as of May 23, 2011. Subject to certain conditions, including obtaining relevant commitments, we had the option to increase the facility by up to an additional $100 million. Proceeds from the 2013 Credit Agreement were available for working capital purposes, acquisitions, payment of dividends and other restricted payments, refinancing of indebtedness, and other general corporate purposes.
As discussed above, the 2013 Credit Agreement was amended and restated in 2014.
$400 million notes outstanding
On January 30, 2013, the Company completed a $400 million offering in aggregate principal amount of its 4.750 percent senior notes due 2023 (the “Notes”) at an issue price of 100.0 percent of the principal amount, plus accrued interest, from January 30, 2013. Proceeds from the Notes were used to pay down the entire outstanding balance of the revolver portion of our 2013 Credit Agreement. The remaining proceeds are available for working capital purposes, acquisitions, payment of dividends and other restricted payments, refinancing of indebtedness, and other general corporate purposes.
Australian Securitization Facility
On April 28, 2015, we entered into a one year securitized debt agreement with the Bank of Tokyo-Mitsubishi UFJ, Ltd. Under the terms of the agreement, each month, on a revolving basis, we sell certain of our Australian receivables to a bankruptcy-remote subsidiary consolidated by us ("Securitization Subsidiary"). The Securitization Subsidiary, in turn, uses the receivables as collateral to issue asset-backed commercial paper ("securitized debt") for approximately 85 percent of the securitized receivables. The amount collected on the securitized receivables is restricted to pay the securitized debt and is not available for general corporate purposes.
We pay a variable interest rate on the outstanding balance of the securitization facility based on the Australian Bank Bill Rate plus an applicable margin, which as of December 31, 2015, was 2.91 percent. As of December 31, 2015, we had $82 million of securitized debt.
Deposits and borrowed federal funds
WEX Bank issues certificates of deposit in various maturities ranging between 9 months and two years, with interest rates ranging from 0.55 percent to 1.35 percent as of December 31, 2015, as compared to interest rates ranging from 0.35 percent to 1.05 percent as of December 31, 2014, and 0.30 percent to 0.80 percent as of December 31, 2013. WEX Bank also issues interest-bearing money market deposits with variable interest rates ranging from 0.00 percent to 0.60 percent as of December 31, 2015, as compared to variable interest rates ranging from 0.16 percent to 0.36 percent as of December 31, 2014, and 0.15 percent to 0.35 percent as of December 31, 2013. As of December 31, 2015, we had approximately $369.2 million of brokered money market deposits outstanding at a weighted average interest rate of 0.45 percent, compared to $330.7 million of

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brokered money market deposits at a weighted average interest rate of 0.25 percent as of December 31, 2014, and approximately $222.5 million of brokered money market deposits outstanding at a weighted average interest rate of 0.25 percent as of December 31, 2013.
WEX Bank may issue brokered deposits without limitation on the balance outstanding. However, WEX Bank must maintain minimum financial ratios, which include risk-based asset and capital requirements, as prescribed by the FDIC. As of December 31, 2015, all brokered deposits were in denominations of $250,000 or less, corresponding to FDIC deposit insurance limits. Interest-bearing money market funds may be withdrawn at any time. We believe that our brokered deposits are paying competitive yields and that there continues to be consumer demand for these instruments.
Beginning during the second quarter of 2012, we received non-interest bearing NOW account deposits. As of December 31, 2015, we had $309.0 million and as of December 31, 2014, we had $314.6 million of non-interest bearing NOW account deposits. During certain periods, these deposits may have been in excess of our operating cash requirements to fund account receivables, which may result in a larger than typical cash balance on our consolidated balance sheet for the current period. We anticipate this balance to decline based on historical patterns of the non-interest bearing NOW account deposits and scheduled maturities of our deposits. Deposits are subject to regulatory capital requirements.
We also carry non-interest bearing deposits that are required for certain customers as collateral for their credit accounts. We had $40.0 million of these deposits on hand at December 31, 2015, $38.3 million at December 31, 2014, and $18.6 million at December 31, 2013.
WEX Bank also borrows from lines of credit on a federal funds rate basis to supplement the financing of our accounts receivable. Our federal funds lines of credit were $257.5 million as of December 31, 2015, $125.0 million as of December 31, 2014 and $125.0 million as of December 31, 2013, with no outstanding balance as of December 31, 2015.
Other Liquidity Matters
During the third quarter of 2015, the Company entered into a purchase agreement to acquire EFS, a provider of customized payment solutions for fleet and corporate customers with a focus on the large and mid-sized fleet segment. In connection with the planned acquisition of EFS, we have obtained financing commitments from Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, SunTrust Bank, SunTrust Robinson Humphrey Inc., MUFG Union Bank, N.A. and Citizens Bank, National Association, for senior secured credit facilities in the aggregate amount of $2.125 billion, consisting of a $1.775 billion seven-year term loan facility and a $350 million five-year revolving credit facility. The new senior secured credit facilities would replace our existing senior secured credit facilities under the 2014 Credit Agreement.
We discuss our hedging strategies relative to commodity and interest rate risk in Item 7A below. Our fuel price derivatives were entered into to mitigate the volatility that domestic fuel prices introduce to our revenue streams. The effect of these derivatives is to restrict a portion of our fuel price exposure to a collar range, established at the time the fuel price derivatives are purchased. As a result, at December 31, 2015, we had an asset related to these derivatives of approximately $5.0 million. During the course of the year we received $41.8 million from our counterparties as a result of the net settlement of expiring derivative contracts.
During the fourth quarter of 2014 we suspended purchases under our fuel derivatives program due to unusually low prices in the commodities market. We continue to hold fuel price derivative instruments for the first quarter of 2016 that were executed in the third quarter of 2014 for approximately 20 percent of the anticipated quarterly exposure to domestic earnings based on assumptions at the time of purchase. After the first quarter of 2016, we will no longer be hedged for changes in fuel prices. Management will continue to monitor the fuel price market and evaluate our alternatives as it relates to this hedging program.
Our long-term cash requirements consist primarily of amounts owed on our 2014 Credit Agreement, amounts due to Wyndham Worldwide Corporation (see Note 14 - Tax Receivable Agreement, in Part II, Item 8) as part of our tax receivable agreement, and various facilities lease agreements.
Undistributed earnings of certain foreign subsidiaries of the Company amounted to $13.2 million at December 31, 2015, and $7.7 million at December 31, 2014. These earnings are considered to be indefinitely reinvested, and accordingly, no U.S. federal and state income taxes have been provided thereon. If we were to distribute such earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. The Company’s primary tax jurisdictions are the United States, Australia and the United Kingdom.
Earnings outside of the United States are accompanied by certain financial risks, such as changes in foreign currency exchange rates. Changes in foreign currency exchange rates may reduce the reported value of our foreign currency revenues,

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net of expenses, and cash flows. We cannot predict changes in currency exchange rates, the impact of exchange rate changes, or the degree to which we will be able to manage the impact of currency exchange rate changes.
As of December 31, 2015, we have approximately $63.4 million in cash located outside of the United States.
In April 2014 we initiated a partial foreign currency exchange hedging program. During the third quarter of 2015, the Company decided to suspend the foreign currency exchange hedging program for all but a few short-term intercompany transactions. Because this was a partial foreign currency exchange hedging program, the Company had additional foreign currency exchange exposure which was not hedged.
WEX Bank is required to maintain reserves against certain customer deposits by keeping cash on hand or balances with the Federal Reserve Bank. The required amount of those reserves at December 31, 2015 and 2014 was $39.7 million and $31.1 million, respectively.
We currently have authorization from our Board to purchase up to $150 million of our common stock until September 30, 2017. We used $22 million during 2015 to repurchase shares of our common stock. The approximate dollar value of shares that were available to be purchased under our share repurchase program was $108.2 million as of December 31, 2015. The program is funded either through our future cash flows or through borrowings on our 2014 Credit Agreement. Share repurchases are made on the open market and may be commenced or suspended at any time. The Company’s management, based on its evaluation of market and economic conditions and other factors, determines the timing and number of shares repurchased. The purchase agreement for the acquisition of EFS prohibits the Company from repurchasing shares of its common stock without the prior written consent of the EFS sellers prior to the closing of the transaction, except in limited circumstances described in the purchase agreement.
At December 31, 2015, we did not have any interest rate swap arrangements in place, however we regularly review our projected borrowings under our credit facility and the current interest rate environment to determine whether to execute additional interest rate swaps.
Management believes that we can adequately fund our cash needs for at least the next 12 months.
Off-balance Sheet Arrangements
We have the following off-balance sheet arrangements as of December 31, 2015:
Operating leases. We lease office space, office equipment and computer equipment under long-term operating leases, which are recorded in occupancy and equipment or technology leasing and support. See Item 8 - Note 18, Commitment and Contingencies.
Extension of credit to customers. We have entered into commitments to extend credit in the ordinary course of business. We had approximately $6.2 billion of commitments to extend credit at December 31, 2015, as part of established customer agreements. These amounts may increase or decrease during 2016 as we increase or decrease credit to customers, subject to appropriate credit reviews, as part of our lending product agreements. Many of these commitments are not expected to be utilized; therefore, we do not believe total unused credit available to customers and customers of strategic relationships represents future cash requirements. We can adjust most of our customers’ credit lines at our discretion at any time. We believe that we can adequately fund actual cash requirements related to these credit commitments through the issuance of certificates of deposit, borrowed federal funds and other debt facilities.
Letters of credit. We are required to post collateral primarily related to facility lease agreements and virtual card and fuel payment processing activity at our foreign subsidiaries. As of December 31, 2015, we have posted an $8.6 million letter of credit as collateral.

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Contractual Obligations
The table below summarizes the estimated dollar amounts of payments under contractual obligations as of December 31, 2015, for the periods specified:
 
(in thousands)
2016
 
2017
 
2018
 
2019
 
2020 and
Thereafter
 
Total
Operating leases:
 
 
 
 
 
 
 
 
 
 
 
Facilities
$
10,580

 
$
9,006

 
$
8,512

 
$
5,711

 
$
20,125

 
$
53,934

Equipment, including vehicles
1,800

 
710

 
69

 
26

 

 
2,605

Term Loan
27,500

 
27,500

 
403,750

 

 

 
458,750

Interest payments on term loan (a)
11,426

 
10,720

 
834

 

 

 
22,980

Revolving credit facility (b)
211,005

 

 

 

 

 
211,005

$400 million notes offering

 

 

 

 
400,000

 
400,000

    Interest on $400 million notes offering
19,000

 
19,000

 
19,000

 
19,000

 
58,583

 
134,583

Securitization facility
82,018

 

 

 

 

 
82,018

Tax receivable agreement
12,073

 
12,167

 
13,001

 
15,077

 
5,219

 
57,537

Certificates of deposit
97,859

 
54,448

 

 

 

 
152,307

Total
$
473,261

 
$
133,551

 
$
445,166

 
$
39,814

 
$
483,927

 
$
1,575,719

(a) Interest based on LIBOR plus a margin. See Item 8 - Note 12, Financing Debt
(b) Amount in table excludes interest payments. See Item 8 - Note 12, Financing Debt
Uncertain tax liabilities - At this time, the Company is unable to make a reasonably reliable estimate of the timing of payments in individual years in connection with uncertain tax liabilities; therefore, such amounts are not included in the above contractual obligation table.
Letters of credit - As of December 31, 2015, we had $8.6 million outstanding in undrawn irrevocable letters of credit issued by us in favor of third-party beneficiaries, primarily related to facility lease agreements and virtual card and fuel payment processing activity at our foreign subsidiaries. These irrevocable letters of credit are unsecured and are renewed on an annual basis unless the Company chooses not to renew them.
Pending EFS acquisition - During the third quarter of 2015, the Company entered into a purchase agreement to acquire EFS, a provider of customized payment solutions for fleet and corporate customers with a focus on the large and mid-sized fleet segment. In connection with the planned acquisition of EFS, we have obtained financing commitments from Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, SunTrust Bank, SunTrust Robinson Humphrey Inc., MUFG Union Bank, N.A. and Citizens Bank, National Association, for senior secured credit facilities in the aggregate amount of $2.125 billion, consisting of a $1.775 billion seven-year term loan facility and a $350 million five-year revolving credit facility. The new senior secured credit facilities would replace our existing senior secured credit facilities under the 2014 Credit Agreement.
Either party may terminate the purchase agreement if (i) the closing has not occurred on or prior to April 18, 2016 (subject to extension to July 18, 2016 if antitrust clearance has not then been obtained), (ii) an order or law permanently prohibiting the acquisition has become final and non-appealable or (iii) the other party has breached its representations, warranties or covenants, subject to customary materiality qualifications and abilities to cure. In addition, the EFS sellers may also terminate the purchase agreement if, upon the satisfaction of the closing conditions and the expiration of a marketing period in connection with the Company’s debt financing, the Company fails to consummate the acquisition. Upon such a termination (and in certain other limited circumstances), if the EFS sellers so elect, the Company is required to pay the EFS sellers a cash termination fee of $45 million. In the event the purchase agreement is terminated in certain circumstances involving a failure to obtain required antitrust clearances, if the EFS sellers so elect, the Company is required to pay the sellers a cash termination fee of $70 million.




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Application of Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with Generally Accepted Accounting Principles. Preparation of these financial statements requires us to make estimates and judgments that affect reported amounts of assets and liabilities, revenue and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. We continually evaluate our judgments and estimates in determination of our financial condition and operating results. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates are based on information available as of the date of the financial statements and, accordingly, actual results could differ from these estimates, sometimes materially. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of our financial condition and operating results and require management’s most subjective judgments. Our consolidated financial statements are based on the selection and application of critical accounting policies and estimates, the most significant of which are included in the tables below.

Revenue Recognition
Description                                                     
  
Assumptions/Approach Used
  
Effect if Actual Results Differ from
Assumptions
The majority of the Company’s revenues are comprised of transaction-based fees, which are generally calculated based on measures such as: (i) percentage of dollar value of volume processed; (ii) number of transactions processed; or (iii) some combination thereof.