FleetCor Reports Second Quarter 2011 Financial Results

Press Release
August 04, 2011 4:06 PM

Press Release August 04, 2011 4:06 PM

NORCROSS, Ga., Aug 04, 2011 (BUSINESS WIRE) --

FleetCor Technologies, Inc. (NYSE: FLT), a leading independent global provider of specialized payment products and services to businesses, commercial fleets, major oil companies, petroleum marketers and government fleets, today reported financial results for its second quarter ended June 30, 2011.

"We are very pleased with our second quarter results in which we reported adjusted revenue growth of 22.8% and adjusted net income growth of 37%," said Ron Clarke, chairman, president and chief executive officer, FleetCor Technologies, Inc. "Our strategy continues to be growing the business through organic measures, signing new partnership agreements and pursuing acquisitions, particularly in emerging markets."

Financial results for the second quarter of 2011:

GAAP Results

Total revenues, net, in the second quarter of 2011 increased 20.4% to $134.2 million compared to $111.4 million in the second quarter of 2010
Net income in the second quarter of 2011 increased 24% to $36.7 million, or $0.44 per diluted share, compared to $29.6 million, or $0.37 per diluted share in the second quarter of 2010

Non GAAP Results

Adjusted revenues (revenues, net less merchant commissions) in the second quarter of 2011 increased 22.8% to $119.3 million compared to $97.2 million in the second quarter of 2010
Adjusted net income in the second quarter of 2011 increased 37% to $47.8 million, or $0.57 per diluted share, compared to $34.9 million, or $0.42 per diluted share in the second quarter of 2010 on a pro forma basis (to reflect the impact of public company expenses, non-cash compensation expenses, loss on early extinguishment of debt, decrease in the effective tax rate during the second quarter of 2011, and fully diluted shares effective in the second quarter of 2011, as if these changes had occurred during the second quarter of 2010)

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

2011 Outlook

"Given our strong performance in the first half of 2011, positive environmental factors, and our progress on our organic growth initiatives, we are raising our guidance for the year," said Eric Dey, chief financial officer.

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

Revenues, net between $480 million and $490 million, up from our previous guidance range of $460 million to $480 million
Adjusted Net Income between $168 million and $173 million, up from our previous guidance range of $155 million to $165 million; and
Adjusted Net Income per diluted share between $2.00 and $2.05, up from our previous guidance range of $1.83 to $1.95

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

Approximately $2 million of incremental cash operating costs in 2011 for public Company costs that did not exist in 2010.
A 2.1% increase in our effective tax rate from 28.7% of pretax profit in 2010 to 30.8% of pretax profit in 2011.
An increase of 3.3 million diluted shares outstanding from 80.8 million shares in 2010 to 84.1 million shares in 2011.

If these incremental costs and shares had been incurred in 2010, the Company's full year 2010 adjusted net income would have been $138 million or $1.64 per diluted share.

The Company's full year 2011 guidance is presented on a constant currency basis and assumes similar macroeconomic and business conditions exist in 2011 as did in 2010. This guidance does not reflect the impact of any future acquisitions or material new partnership agreements.

Conference Call

The Company will host a conference call to discuss second quarter 2011 financial results today at 5:00pm ET. Hosting the call will be Ron Clarke, chief executive officer, and Eric Dey, chief financial officer. The conference call can be accessed live over the phone by dialing 877-941-2069, or for international callers 480-629-9713. A replay will be available one hour after the call and can be accessed by dialing 877-870-5176 or 858-384-5517 for international callers; the conference ID is 4459688. The replay will be available until Thursday, August 11, 2011. The call will be webcast live from the Company's investor relations website at investor.fleetcor.com.

Forward-Looking Statements

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

About Non GAAP Financial Measures

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

Management uses adjusted revenues and adjusted net income:

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

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

About FleetCor

FleetCor, The Global Fleet Card Company, is a leading independent global provider of specialized payment products and services to businesses, commercial fleets, major oil companies, petroleum marketers and government entities. FleetCor's payment programs enable businesses to better manage and control employee spending and provide card-accepting merchants with a high volume customer base that can increase their sales and customer loyalty. FleetCor serves commercial accounts in 18 countries in North America, Europe, Africa and Asia. For more information, please visit www.fleetcor.com.

FleetCor Technologies, Inc. and subsidiaries
GAAP Consolidated Statements of Income
(In thousands, except share and per share amounts)
(Unaudited)

	Three Months Ended June 30,			Six Months Ended June 30,
	2011		2010			2011	2010
Revenues, net	$	134,213		$	111,437			$	245,218		$	215,639

Expenses:
Merchant commissions		14,881			14,249				23,158			25,838
Processing		19,775			17,323				37,707			34,844
Selling		9,003			7,668				16,790			14,517
General and administrative		22,074			13,381				39,989			26,470
		68,480			58,816				127,574			113,970
Depreciation and amortization		8,588			8,259				17,195			16,313
Operating income		59,892			50,557				110,379			97,657
Other (income) loss, net		(56	)		(115	)			(90	)		(71	)
Interest expense, net		3,451			5,531				6,814			10,795
Loss on extinguishment of debt		2,669			-				2,669			-
Total other expense		6,064			5,416				9,393			10,724
Income before income taxes		53,828			45,141				100,986			86,933
Provision for income taxes		17,113			15,501				31,937			29,949
Net income		36,715			29,640				69,049			56,984
Calculation of income attributable to common shareholders:
Convertible preferred stock accrued dividends		-			(4,416	)			-			(8,836	)
Income attributable to common shareholders for basic earnings per share	$	36,715		$	25,224			$	69,049		$	48,148

Basic earnings per share	$	0.46		$	0.74			$	0.86		$	1.42
Diluted earnings per share	$	0.44		$	0.37			$	0.83		$	0.71

Weighted average shares outstanding:
Basic shares		80,151			33,988				80,044			33,999
Diluted shares		83,548			80,701				83,464			80,595

FleetCor Technologies, Inc. and subsidiaries
Consolidated Balance Sheets
(In thousands, except share and par value amounts)

	June 30, 2011			December 31, 2010
	(Unaudited)
Assets

Current assets:
Cash and cash equivalents	$	101,200			$	114,804
Restricted cash		63,008				62,341
Accounts receivable (less allowance for doubtful accounts of $16,345 and $14,256, respectively)		387,800				260,163
Securitized accounts receivable - restricted for securitization investors		162,000				144,000
Prepaid expenses and other current assets		36,850				33,191
Deferred income taxes		4,414				4,484

Total current assets		755,272				618,983

Property and equipment		90,770				83,013
Less accumulated depreciation and amortization		(62,971	)			(56,195	)

Net property and equipment		27,799				26,818

Goodwill		602,802				601,666
Other intangibles, net		185,593				193,861
Other assets		47,443				42,790

Total assets	$	1,618,909			$	1,484,118

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable	$	234,873			$	177,644
Accrued expenses		51,641				49,176
Customer deposits		78,231				78,685
Securitization facility		162,000				144,000
Current portion of notes payable and other obligations		15,243				11,617

Total current liabilities		541,988				461,122

Notes payable and other obligations, less current portion		285,291				313,796
Deferred income taxes		78,600				83,255

Total noncurrent liabilities		363,891				397,051

Commitments and contingencies

Stockholders' equity:
Common stock, $0.001 par value; 475,000,000 shares authorized, 112,132,551 shares issued and 80,250,881 shares outstanding at June 30, 2011; and 475,000,000 shares authorized, 111,522,354 shares issued and 79,655,213 shares outstanding at December 31, 2010		112				112
Additional paid-in capital		436,130				421,991
Retained earnings		456,212				387,163
Accumulated other comprehensive loss		(3,761	)			(8,101	)
Less treasury stock, 31,881,670 shares at March 31, 2011 and 31,867,141 shares at December 31, 2010		(175,663	)			(175,220	)

Total stockholders' equity		713,030				625,945

Total liabilities and stockholders' equity	$	1,618,909			$	1,484,118

FleetCor Technologies, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)

	Six Months Ended June 30,
	2011			2010
Operating activities
Net income	$	69,049			$	56,984
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation		5,531				5,324
Stock-based compensation		11,983				1,738
Provision for losses on accounts receivable		8,771				10,344
Amortization of deferred financing costs		843				944
Amortization of intangible assets		9,187				8,414
Amortization of premium on receivables		1,634				1,632
Deferred income taxes		(765	)			211
Loss on extinguishment of debt		2,669				-
Changes in operating assets and liabilities (net of acquisitions):
Restricted cash		(667	)			10,443
Accounts receivable		(154,408	)			(64,712	)
Prepaid expenses and other current assets		(4,608	)			(9,908	)
Other assets		(1,114	)			1,825
Excess tax benefits related to stock-based compensation		(1,821	)			-
Accounts payable, accrued expenses and customer deposits		56,170				29,239
Net cash provided by operating activities		2,454				52,478


Investing activities
Acquisitions, net of cash acquired		(785	)			(6,836	)
Purchases of property and equipment		(5,916	)			(4,977	)
Net cash used in investing activities		(6,701	)			(11,813	)


Financing activities
Net payments for initial public offering		(179	)			-
Excess tax benefits related to stock-based compensation		1,821				-
Borrowings (payments) on securitization facility, net		18,000				(26,000	)
Deferred financing costs paid		(7,736	)			(1,067	)
Proceeds from issuance of common stock		855				454
Principal payments on notes payable		(331,465	)			(16,835	)
Borrowings from notes payable		300,000				-
Principal payments on other obligations		-				(13	)
Net cash used in financing activities		(18,704	)			(43,461	)

Effect of foreign currency exchange rates on cash		9,347				(9,776	)

Net increase in cash and cash equivalents		(13,604	)			(12,572	)
Cash and cash equivalents, beginning of period		114,804				84,701

Cash and cash equivalents, end of period	$	101,200			$	72,129


Supplemental cash flow information
Cash paid for interest	$	4,335			$	11,236

Cash paid for income taxes	$	20,284			$	24,922

Adoption of new accounting guidance related to asset securitization facility		-			$	218,000

Exhibit 1
RECONCILIATION OF NON-GAAP MEASURES AND PRO FORMA INFORMATION
(In thousands, except shares and per share amounts)
(Unaudited)

The following table reconciles revenues, net to adjusted revenues:

	Three Months Ended June 30,		Six Months Ended June 30,
	2011		2010	2011		2010

Revenues, net	$	134,213		$	111,437			$	245,218			$	215,639
Merchant commissions		14,881			14,249				23,158				25,838
Total adjusted revenues	$	119,332		$	97,188			$	222,060			$	189,801


The following table reconciles net income to adjusted net income and adjusted net income per diluted share:

	Three Months Ended June 30,		Six Months Ended June 30,	Year Ended
	2011		2010	2011		2010		2010
Net income	$	36,715		$	29,640			$	69,049			$	56,984		$	107,896

Stock based compensation		7,842			885				12,092				1,738			27,546
Amortization of intangible assets		4,587			4,226				9,187				8,414			17,203
Amortization of premium on receivables		818			816				1,634				1,632			3,263
Amortization of deferred financing costs		377			517				843				944			2,016
Loss on extinguishment of debt		2,669			-				2,669				-			-

Total pre-tax adjustments		16,293			6,444				26,425				12,728			50,028

Income tax impact of pre-tax adjustments at the effective tax rate		(5,180	)		(2,212	)			(8,357	)			(4,385	)		(14,340	)

Adjusted net income	$	47,828		$	33,872			$	87,117			$	65,327		$	143,584
Adjusted net income per diluted share	$	0.57		$	0.42			$	1.04			$	0.81		$	1.78

Diluted shares		83,548			80,701				83,464				80,595			80,751


For the periods presented below, the following table reconciles 2010 actual results to 2010 pro forma results , which reflects the impact of stock-based compensation expense related to share-based compensation awards, public company expenses and a decrease in the effective tax rate, effective during 2011, as if these changes had occurred in 2010:

	Three Months Ended		QTD Q2 2011	Pro forma QTD		Six Months Ended		YTD Q2 2011		Pro forma YTD		Year Ended		2011	Pro forma
	June 30, 2010		Changes ¹	June 30, 2010		June 30, 2010		Changes ¹		June 30, 2010		2010		Changes ²	2010

Income before income taxes	$	45,141		$	(10,031	)		$	35,110			$	86,933		$	(13,776	)	$	73,157		$	151,280			$	(22,604	)	$	128,676
Provision for income taxes		15,501			(4,340	)			11,161				29,949			(6,813	)		23,136			43,384				(3,752	)		39,632
Net income		29,640			(5,691	)			23,949				56,984			(6,963	)		50,021			107,896				(18,852	)		89,044

Stock based compensation		885			6,957				7,842				1,738			10,354			12,092			27,546				17,935			45,481
Amortization of intangible assets		4,226			-				4,226				8,414			-			8,414			17,203				-			17,203
Amortization of premium on receivables		816			-				816				1,632			-			1,632			3,263				-			3,263
Amortization of deferred financing costs		517			-				517				944			-			944			2,016				-			2,016
Loss on extinguishment of debt		-			2,669				2,669				-			2,669			2,669			-				2,669			2,669

Total pre-tax adjustments		6,444			9,626				16,070				12,728			13,023			25,751			50,028				20,604			70,632

Income tax impact of pre-tax adjustments at the effective tax rate		(2,212	)		(2,896	)			(5,109	)			(4,385	)		(3,759	)		(8,144	)		(14,340	)			(7,415	)		(21,755	)

Adjusted net income	$	33,872		$	1,038			$	34,910			$	65,327		$	2,301		$	67,628		$	143,584			$	(5,663	)	$	137,921
Adjusted net income per diluted share	$	0.42				$	0.42			$	0.81				$	0.81		$	1.78				$	1.64

Diluted shares		80,701					83,548				80,595					83,464			80,751					84,100

¹ Q2 QTD June 30, 2011 changes include approximately $0.4 million in incremental cash operating costs for public company expenses, $2.7 million in losses on the extinguishment of debt, $7.0 million of non-cash compensation expenses associated with our stock plan, and a 2.6% decrease in our effective tax rate from 34.3% for the QTD ended June 30, 2010 to 31.8% for the QTD ended June 30, 2011. Additionally, QTD June 30, 2011 reflects an increase of 2.9 million diluted shares outstanding, from 80.7 million for the QTD June 30, 2010 to 83.5 million for the QTD June 30, 2011.

Q2 YTD June 30, 2011 changes include approximately $0.8 million in incremental cash operating costs for public company expenses, $2.7 million in losses on the extinguishment of debt, $10.3 million of non-cash compensation expenses associated with our stock plan, and a 2.9% decrease in our effective tax rate from 34.5% for the YTD ended June 30, 2010 to 31.6% for the YTD ended June 30, 2011. Additionally, YTD June 30, 2011 reflects an increase of 2.9 million diluted shares outstanding, from 80.6 million for the YTD June 30, 2010 to 83.5 million for the YTD June 30, 2011.

² 2011 changes include approximately $2.0 million in incremental cash operating costs for public company expenses, $2.7 million in losses on the extinguishment of debt, $17.9 million of non-cash compensation expenses associated with our stock plan, and a 2.1% increase in our effective tax rate from 28.7% in 2010 to 30.8% in 2011. Additionally, 2011 reflects an increase of 3.3 million diluted shares outstanding, from 80.8 million at in 2010 to 84.1 million in 2011.

Exhibit 2
Transaction Volume, Revenues and Adjusted Revenue, Per Transaction and by Segment
(In thousands except revenues, net per transaction and adjusted revenues per transaction)
(Unaudited)

	Three Months Ended June 30,		Six Months Ended June 30,
	2011		2010		Change	% Change		2011		2010	Change		% Change

NORTH AMERICA
- Transactions		38,625			38,027		598		1.6	%		74,782			72,953		1,829	2.5	%
- Revenues, net per transaction	$	2.40		$	2.00	$	0.40		20.0	%	$	2.20		$	1.98	$	0.22	11.1	%
- Revenues, net	$	92,865		$	76,072	$	16,793		22.1	%	$	164,449		$	144,663	$	19,786	13.7	%

INTERNATIONAL¹
- Transactions		11,703			10,944		759		6.9	%		23,001			21,677		1,324	6.1	%
- Revenues, net per transaction	$	3.53		$	3.21	$	0.32		10.0	%	$	3.51		$	3.25	$	0.26	8.0	%
- Revenues, net	$	41,348		$	35,098	$	6,250		17.8	%	$	80,769		$	70,395	$	10,374	14.7	%


FLEETCOR CONSOLIDATED REVENUES¹
- Transactions		50,328			48,971		1,357		2.8	%		97,783			94,630		3,153	3.3	%
- Revenues, net per transaction	$	2.67		$	2.27	$	0.40		17.6	%	$	2.51		$	2.27	$	0.24	10.6	%
- Revenues, net	$	134,213		$	111,170	$	23,043		20.7	%	$	245,218		$	215,058	$	30,160	14.0	%



FLEETCOR CONSOLIDATED ADJUSTED REVENUES^1,2
- Transactions		50,328			48,971		1,357		2.8	%		97,783			94,630		3,153	3.3	%
- Adjusted Revenues per transaction	$	2.37		$	1.98	$	0.39		19.7	%	$	2.27		$	2.00	$	0.27	13.5	%
- Adjusted Revenues	$	119,332		$	96,921	$	22,411		23.1	%	$	222,060		$	189,220	$	32,840	17.4	%



¹ Calculation of revenue per transaction for our International segment and on a consolidated basis for the three and six months ended June 30, 2010 excludes the impact of a non-renewed partner contract in Europe, inherited from an acquisition, which we chose not to renew. This non-renewed contract contributed approximately 1.6 million transactions and $0.3 million in revenues, net to our International segment in the three months ended June 30, 2010; and approximately 3.3 million transactions and $0.6 million in revenues, net to our International segment in the six months ended June 30, 2010. This contract had a high number of transactions and very little revenue and had a $0.40 and $0.41 negative impact on our International segment revenue per transaction in the three and six months ended June 30, 2010, respectively. We believe that excluding the impact of this contract is a more effective measure for evaluating the Company's revenue performance of its continuing business. Revenues, net, excluding the impact of a non-renewed partner contract in Europe for our International segment and on a consolidated basis are supplemental non-GAAP financial measures of performance.

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

Exhibit 3
GAAP Segment Results
(In thousands)
(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010			2011	2010
Revenues, net:
North America	$	92,865		$	76,072		$	164,449	$	144,663
International		41,348			35,365			80,769		70,976
	$	134,213		$	111,437		$	245,218	$	215,639

Operating income:
North America	$	40,471		$	32,960		$	71,990	$	64,103
International		19,421			17,597			38,389		33,554
	$	59,892		$	50,557		$	110,379	$	97,657

Depreciation and amortization:
North America	$	4,889		$	4,980		$	9,831	$	9,730
International		3,699			3,279			7,364		6,583
	$	8,588		$	8,259		$	17,195	$	16,313

Capital expenditures:
North America	$	1,347		$	2,156		$	2,834	$	3,650
International		1,975			677			3,082		1,327
	$	3,322		$	2,833		$	5,916	$	4,977

SOURCE: FleetCor Technologies, Inc.

FleetCor Technologies, Inc.
Investor Relations, 770-729-2017

investor@fleetcor.com

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FleetCor Reports Second Quarter 2011 Financial Results

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