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FLEETCOR TECHNOLOGIES INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations
[November 10, 2014]

FLEETCOR TECHNOLOGIES INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations


(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and related notes appearing elsewhere in this report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management's expectations. Factors that could cause such differences include, but are not limited to, those identified below and those described in Part I, Item 1A "Risk Factors" appearing in our Annual Report on Form 10-K. All foreign currency amounts that have been converted into U.S. dollars in this discussion are based on the exchange rate as reported by OANDA Corporation for the applicable periods.



This management's discussion and analysis should also be read in conjunction with the management's discussion and analysis and consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013.

General Business FleetCor is a leading independent global provider of fuel cards and workforce payment products and services to businesses, commercial fleets, major oil companies, petroleum marketers and government entities in countries throughout North America, Latin America, Europe, Australia and New Zealand. Our payment programs enable our customers 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. We also provide a suite of fleet related and workforce payment solution products, including telematics services, fleet maintenance management and employee benefit and transportation related payments. In 2013, we processed approximately 328 million transactions on our proprietary networks and third-party networks. We believe that our size and scale, geographic reach, advanced technology and our expansive suite of products, services, brands and proprietary networks contribute to our leading industry position.


We provide our payment products and services in a variety of combinations to create customized payment solutions for our customers and partners. We collectively refer to our suite of product offerings as workforce productivity enhancement products for commercial businesses. We sell a range of customized fleet and lodging payment programs directly and indirectly to our customers through partners, such as major oil companies, hotels, leasing companies and petroleum marketers. We refer to these major oil companies, leasing companies and petroleum markets as "partners". We provide our customers with various card products that typically function like a charge card or prepaid card to purchase fuel, lodging, food, toll, transportation and related products and services at participating locations.

In order to deliver our payment programs and services and process transactions, we own and operate proprietary "closed-loop" networks through which we electronically connect to merchants and capture, analyze and report customized information. We also use third-party networks to deliver our payment programs and services in order to broaden our card acceptance and use. To support our payment products, we also provide a range of services, such as issuing and processing, as well as specialized information services that provide our customers with value-added functionality and data. Our customers can use this data to track important business productivity metrics, combat fraud and employee misuse, streamline expense administration and lower overall workforce and fleet operating costs.

Executive Overview Segments We operate in two segments, which we refer to as our North America and International segments. Our revenue is reported net of the wholesale cost for underlying products and services. In this report, we refer to this net revenue as "revenue." See "Results of Operations" for additional segment information.

For the three and nine months ended September 30, 2014 and 2013, our North America and International segments generated the following revenue: Three months ended September 30, Nine months ended September 30, 2014 2013 2014 2013 % of % of % of % of total total total total (dollars in millions) Revenue revenue Revenue revenue Revenue revenue Revenue revenue North America $ 156.4 52.9 % $ 115.3 51.2 % $ 421.6 51.2 % $ 335.4 52.4 % International 138.9 47.1 % 109.9 48.8 % 401.1 48.8 % 304.3 47.6 % $ 295.3 100.0 % $ 225.2 100.0 % $ 822.7 100.0 % $ 639.7 100.0 % 19 -------------------------------------------------------------------------------- Table of Contents Sources of Revenue Transactions. In both of our segments, we derive revenue from transactions. As illustrated in the diagram below, a transaction is defined as a purchase by a customer. Our customers include holders of our card products and those of our partners, for whom we manage card programs, members of our proprietary networks who are provided access to our products and services and commercial businesses to whom we provide workforce payment productivity solutions. Revenue from transactions is derived from our merchant and network relationships, as well as our customers and partners. Through our merchant and network relationships we primarily offer fuel, vehicle maintenance, food, toll and transportation cards and vouchers or lodging services to our customers.

The following diagram illustrates a typical card transaction flow, but may also be applied to our vehicle maintenance, lodging and food, fuel, toll and transportation card and voucher products. This representative model may not include all of our businesses.

Illustrative Transaction Flow [[Image Removed: LOGO]] From our customers and partners, we derive revenue from a variety of program fees, including transaction fees, card fees, network fees and charges, which can be fixed fees, cost plus a mark-up or based on a percentage discount from retail prices. Our programs include other fees and charges associated with late payments and based on customer credit risk.

From our merchant and network relationships, we derive revenue mostly from the difference between the price charged to a customer for a transaction and the price paid to the merchant or network for the same transaction, as well as network fees and charges in certain businesses. As illustrated in the table below, the price paid to a merchant or network may be calculated as (i) the merchant's wholesale cost of the product plus a markup; (ii) the transaction purchase price less a percentage discount; or (iii) the transaction purchase price less a fixed fee per unit.

The following table presents an illustrative revenue model for transactions with the merchant, which is primarily applicable to fuel based product transactions, but may also be applied to our vehicle maintenance, lodging and food, fuel, toll and transportation card and voucher products, substituting transactions for gallons. This representative model may not include all of our businesses.

Illustrative Revenue Model for Fuel Purchases (unit of one gallon) Illustrative Revenue Model Merchant Payment Methods Retail Price $ 3.00 i) Cost Plus Mark-up: ii) Percentage Discount: iii) Fixed Fee: Wholesale Cost (2.86 ) Wholesale Cost $ 2.86 Retail Price $ 3.00 Retail Price $ 3.00 Mark-up 0.05 Discount (3%) (0.09 ) Fixed Fee (0.09 ) FleetCor Revenue $ 0.14 Merchant Commission $ (0.05 ) Price Paid to Merchant $ 2.91 Price Paid to Merchant $ 2.91 Price Paid to Merchant $ 2.91 Price Paid to Merchant $ 2.91 20 -------------------------------------------------------------------------------- Table of Contents Set forth below are our sources of revenue for the three and nine months ended September 30, 2014 and 2013, expressed as a percentage of consolidated revenues: Three months ended September 30, Nine months ended September 30, 2014 2013 2014 2013 Revenue from customers and partners 53.8 % 54.4 % 54.9 % 52.3 % Revenue from merchants and networks 46.2 % 45.6 % 45.1 % 47.7 % Revenue tied to fuel-price spreads1 16.7 % 14.8 % 15.1 % 16.5 % Revenue influenced by the absolute price of fuel1 17.8 % 20.0 % 18.2 % 20.1 % Revenue from program fees, late fees, interest and other 65.5 % 65.2 % 66.7 % 63.4 % 1 Although we cannot precisely calculate the impact of fuel price spreads and the absolute price of fuel on our consolidated revenues, we believe these percentages approximate their relative impacts.

Revenue per transaction. Set forth below is revenue per transaction information for the three and nine months ended September 30, 2014 and 2013: Three months ended September 30, Nine months ended September 30, 2014 2013 2014 2013 Transactions (in millions) North America 45.3 43.3 128.4 122.7 International 49.1 41.0 143.9 114.7 Total transactions 94.4 84.3 272.3 237.4 Revenue per transaction North America $ 3.45 $ 2.66 $ 3.28 $ 2.73 International 2.83 2.68 2.79 2.65 Consolidated revenue per transaction 3.13 2.67 3.02 2.69 Adjusted revenue per transaction1 Consolidated adjusted revenue per transaction1 $ 2.86 $ 2.47 $ 2.79 $ 2.48 1 Adjusted revenues is a non-GAAP financial measure defined as revenues, net less merchant commissions. We believe this measure is a more effective way to evaluate our revenue performance. We use adjusted revenues as a basis to evaluate our revenues, net of the commissions that are paid to merchants to participate in our card programs. Adjusted revenues is a supplemental non-GAAP financial measure of operating performance. See the heading entitled "Management's Use of Non-GAAP Financial Measures." Revenue per transaction is derived from the various revenue types as discussed above and can vary based on geography, the relevant merchant relationship, the payment product utilized and the types of products or services purchased, the mix of which would be influenced by our acquisitions, organic growth in our business, and the overall macroeconomic environment, including fluctuations in foreign currency exchange rates. Revenue per transaction per customer changes as the level of services we provide to a customer increases or decreases, as macroeconomic factors changes and as adjustments are made to merchant and customer rates. When we discuss the macroeconomic environment, we are referring to the impact of market spread margins, fuel prices, foreign exchanges rates and the economy in general can have on our business. See "Results of Operations" for further discussion of transaction volumes and revenue per transaction.

Total transactions increased from 84.3 million for the three months ended September 30, 2013 to 94.4 million for the three months ended September 30, 2014, an increase of 10.1 million or 12.0%. Total transactions increased from 237.4 million for the nine months ended September 30, 2013 to 272.3 million for the three months ended September 30, 2014, an increase of 34.8 million or 14.7%.

We experienced an increase in transactions in our North America and International segments primarily due to the impact of the acquisitions completed in 2013 and organic growth in certain payment programs.

In 2013, we acquired several businesses in our international segment; FleetCard in Australia, CardLink in New Zealand, VB Servicos (VB) and DB Trans S.A. (DB) in Brazil and Epyx in the U.K. Certain of these international acquisitions have higher revenue per transaction products in comparison to our other international businesses, which contributes to the increase in transaction volumes and revenue per transaction in our International segment in 2014 over 2013, in addition to organic growth.

We also acquired NexTraq in the U.S in 2013, which has a higher revenue per transaction in comparison to our other North American businesses. This added to higher transaction volumes and revenue per transaction in our North American segment in 2014 over 2013, in addition to organic growth.

21-------------------------------------------------------------------------------- Table of Contents Sources of Expenses We incur expenses in the following categories: • Merchant commissions-In certain of our card programs, we incur merchant commissions expense when we reimburse merchants with whom we have direct, contractual relationships for specific transactions where a customer purchases products or services from the merchant. In the card programs where it is paid, merchant commissions equal the difference between the price paid by us to the merchant and the merchant's wholesale cost of the underlying products or services.

• Processing-Our processing expense consists of expenses related to processing transactions, servicing our customers and merchants, bad debt expense and cost of goods sold related to our hardware sales in certain businesses.

• Selling-Our selling expenses consist primarily of wages, benefits, sales commissions (other than merchant commissions) and related expenses for our sales, marketing and account management personnel and activities.

• General and administrative-Our general and administrative expenses include compensation and related expenses (including stock-based compensation) for our executive, finance and accounting, information technology, human resources, legal and other administrative personnel. Also included are facilities expenses, third-party professional services fees, travel and entertainment expenses, and other corporate-level expenses.

• Depreciation and amortization-Our depreciation and amortization expenses include depreciation of property and equipment, consisting of computer hardware and software (including proprietary software development amortization expense), card-reading equipment, furniture, fixtures, vehicles and buildings and leasehold improvements related to office space.

Our amortization expenses include intangible assets related to customer and vendor relationships, trade names and trademarks and non-compete agreements. We are amortizing intangible assets related to business acquisitions and certain private label contracts associated with the purchase of accounts receivable.

• Other income, net-Other income, net includes foreign currency transaction gains or losses, proceeds/costs from the sale of assets and other miscellaneous operating costs and revenue.

• Interest expense, net-Interest expense, net includes interest income on our cash balances and interest expense on our outstanding debt and on our securitization facility. We have historically invested our cash primarily in short-term money market funds.

• Provision for income taxes-The provision for income taxes consists primarily of corporate income taxes related to profits resulting from the sale of our products and services in the United States and internationally. Our worldwide effective tax rate is lower than the U.S.

statutory rate of 35%, due primarily to lower rates in foreign jurisdictions and foreign-sourced non-taxable income.

Adjusted Revenues, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income Per Diluted Share. Set forth below are adjusted revenues, earnings before interest, taxes, depreciation and amortization and equity method investment (adjusted EBITDA), adjusted net income and adjusted net income per diluted share for the three and nine months ended September 30, 2014 and 2013.

Three Months Ended September 30, Nine months Ended September 30, 2014 2013 2014 2013 (in thousands, except per share amounts) Adjusted revenues $ 270,269 $ 208,206 $ 759,729 $ 589,310 Adjusted EBITDA $ 169,921 $ 129,315 $ 467,388 $ 363,161 Adjusted net income $ 117,625 $ 91,359 $ 322,617 $ 250,600 Adjusted net income per diluted share $ 1.37 $ 1.08 $ 3.77 $ 2.97 We use adjusted revenues as a basis to evaluate our revenues, net of the commissions that are paid to merchants that participate in certain of 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. Thus, we believe this is a more effective way to evaluate our revenue performance on a consistent basis. We use EBITDA, adjusted net income and adjusted net income per diluted share to eliminate the effect of items that we do not consider indicative of our core operating performance on a consistent basis. Adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per diluted share are supplemental non-GAAP financial measures of operating performance. See the heading entitled "Management's Use of Non-GAAP Financial Measures." 22 -------------------------------------------------------------------------------- Table of Contents Factors and Trends Impacting our Business We believe that the following factors and trends are important in understanding our financial performance: • Fuel prices-Our fleet customers use our products and services primarily in connection with the purchase of fuel. Accordingly, our revenue is affected by fuel prices, which are subject to significant volatility. A change in retail fuel prices could cause a decrease or increase in our revenue from several sources, including fees paid to us based on a percentage of each customer's total purchase. Changes in the absolute price of fuel may also impact unpaid account balances and the late fees and charges based on these amounts. See "Sources of Revenue" above for further information related to the absolute price of fuel.

• Fuel-price spread volatility-A portion of our revenue involves transactions where we derive revenue from fuel-price spreads, which is the difference between the price charged to a fleet customer for a transaction and the price paid to the merchant for the same transaction. In these transactions, the price paid to the merchant is based on the wholesale cost of fuel. The merchant's wholesale cost of fuel is dependent on several factors including, among others, the factors described above affecting fuel prices. The fuel price that we charge to our customer is dependent on several factors including, among others, the fuel price paid to the merchant, posted retail fuel prices and competitive fuel prices. We experience fuel-price spread contraction when the merchant's wholesale cost of fuel increases at a faster rate than the fuel price we charge to our customers, or the fuel price we charge to our customers decreases at a faster rate than the merchant's wholesale cost of fuel. See "Sources of Revenue" above for further information related to fuel-price spreads.

• Acquisitions-Since 2002, we have completed over 60 acquisitions of companies and commercial account portfolios. Acquisitions have been an important part of our growth strategy, and it is our intention to continue to seek opportunities to increase our customer base and diversify our service offering through further strategic acquisitions. The impact of acquisitions has, and may continue to have, a significant impact on our results of operations and may make it difficult to compare our results between periods.

• Interest rates-Our results of operations are affected by interest rates.

We are exposed to market risk changes in interest rates on our cash investments and debt.

• Global economic downturn-Our results of operations are materially affected by conditions in the economy generally, both in North America and internationally. Factors affected by the economy include our transaction volumes and the credit risk of our customers. These factors affected our businesses in both our North America and International segments.

• Foreign currency changes-As our mix of earnings shifts to businesses outside of the United States, our results of operations are increasingly impacted by changes in foreign currency rates; namely, by movements of the Australian dollar, Brazilian real, British pound, Canadian dollar, Czech koruna, Euro, Mexican peso, New Zealand dollar and Russian ruble, relative to the U.S. dollar. Approximately 53.2% and 51.1% of our revenue during the three months ended September 30, 2014 and 2013, respectively, and 51.5% and 52.4% of our revenue during the nine months ended September 30, 2014 and 2013, respectively, was derived in U.S. dollars and was not affected by foreign currency exchange rates. See "Results of Operations" for information related to foreign currency impact on our total revenue, net.

• Expenses-Over the long term, we expect that our general and administrative expense will decrease as a percentage of revenue as our revenue increases.

To support our expected revenue growth, we plan to continue to incur additional sales and marketing expense by investing in our direct marketing, third-party agents, internet marketing, telemarketing and field sales force.

23 -------------------------------------------------------------------------------- Table of Contents Results of Operations Three months ended September 30, 2014 compared to the three months ended September 30, 2013 The following table sets forth selected consolidated statement of income data for the three months ended September 30, 2014 and 2013 (in thousands).

Three months ended % of total Three months ended % of total Increase September 30, 2014 revenue September 30, 2013 revenue (decrease) % Change Revenues, net: North America $ 156,343 52.9 % $ 115,266 51.2 % $ 41,077 35.6 % International 138,940 47.1 % 109,884 48.8 % 29,056 26.4 % Total revenues, net 295,283 100.0 % 225,150 100.0 % 70,133 31.1 % Consolidated operating expenses: Merchant commissions 25,014 8.5 % 16,944 7.5 % 8,070 47.6 % Processing 41,451 14.0 % 33,473 14.9 % 7,978 23.8 % Selling 17,950 6.1 % 13,859 6.2 % 4,091 29.5 % General and administrative 40,947 13.9 % 31,559 14.0 % 9,388 29.7 % Depreciation and amortization 25,714 8.7 % 18,060 8.0 % 7,654 42.4 % Operating income 144,207 48.8 % 111,255 49.4 % 32,952 29.6 % Other income, net 594 0.2 % (156 ) (0.1 )% 750 NM Interest expense, net 4,859 1.6 % 3,756 1.7 % 1,103 29.4 % Equity method investment loss 2,200 0.7 % - - 2,200 NM Provision for income taxes 41,045 13.9 % 29,035 12.9 % 12,010 41.4 % Net income $ 95,509 32.3 % $ 78,620 34.9 % $ 16,889 21.5 % Operating income for segments: North America $ 78,797 $ 59,093 $ 19,704 33.3 % International 65,410 52,162 13,248 25.4 % Operating income $ 144,207 $ 111,255 $ 32,952 29.6 % Operating margin for segments: North America 50.4 % 51.3 % (0.9 )% International 47.1 % 47.5 % (0.4 )% Total 48.8 % 49.4 % (0.6 )% NM = Not Meaningful Three months ended September 30, 2014 2013 Transactions (in millions) North America 45.3 43.3 International 49.1 41.0 Total transactions 94.4 84.3 Revenue per transaction North America $ 3.45 $ 2.66 International 2.83 2.68 Consolidated revenue per transaction 3.13 2.67 Revenues and revenue per transaction Our consolidated revenues increased from $225.2 million in the three months ended September 30, 2013 to $295.3 million in the three months ended September 30, 2014, an increase of $70.1 million, or 31.1%. The increase in our consolidated revenue was primarily due to: • The impact of acquisitions completed in 2013, which contributed approximately $29 million in additional revenue in the three months ended September 30, 2014 over the comparable period in 2013.

24 -------------------------------------------------------------------------------- Table of Contents • Organic growth in certain of our payment programs driven primarily by increases in both volume and revenue per transaction.

• Included within organic growth, is the impact of the macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a positive impact on our consolidated revenue for the three months ended September 30, 2014 over the comparable period in 2013. The macroeconomic environment was primarily impacted by higher fuel spread margins and the slightly favorable impact of changes in foreign exchange rates. Changes in foreign exchange rates had a favorable impact on revenues of approximately $2.2 million, due primarily to favorable fluctuations in the British Pound, which was mostly offset by unfavorable fluctuations in the Russian Ruble, Czech Koruna and Brazilian Real, in the three months ended September 30, 2014 over 2013. We believe that changes in fuel price had a minimal impact on revenues.

Consolidated revenue per transaction increased from $2.67 in the three months ended September 30, 2013 to $3.13 in the three months ended September 30, 2014, an increase of $0.46 or 17.1%. This increase is primarily due to the impact higher fuel spread margins during the quarter and the impact of acquisitions completed in 2013, which have higher revenue per transaction products in comparison to our other businesses, as well as the reasons discussed above.

North America segment revenues and revenue per transaction North America revenues increased from $115.3 million in the three months ended September 30, 2013 to $156.3 million in the three months ended September 30, 2014, an increase of $41.1 million, or 35.6%. The increase in our North America segment revenue was primarily due to: • The impact of acquisitions completed in 2013, which contributed approximately $11 million in additional revenue in the three months ended September 30, 2014 over the comparable period in 2013.

• Organic growth in certain of our payment programs driven primarily by increases in both volume and revenue per transaction.

• Included within organic growth, is the impact of the macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a positive impact on our North America segment revenue for the three months ended September 30, 2014 over the comparable period in 2013, primarily due to the impact of higher fuel spread margins.

North America segment revenue per transaction increased from $2.66 in the three months ended September 30, 2013 to $3.45 in the three months ended September 30, 2014, an increase of $0.79 or 29.8%. We experienced an increase in transactions in our North America segment primarily due to the impact of higher fuel spread margins and the impact of acquisitions completed in 2013, in addition to the reasons discussed above.

International segment revenues and revenue per transaction International segment revenues increased from $109.8 million in the three months ended September 30, 2013 to $138.9 million in the three months ended September 30, 2014, an increase of $29.1 million, or 26.4%. The increase in our International segment revenue was primarily due to: • The impact of acquisitions completed in 2013, which contributed approximately $18 million in additional revenue in the three months ended September 30, 2014 over the comparable period in 2013.

• Organic growth in certain of our payment programs driven primarily by increases in both volume and revenue per transaction.

• Included within organic growth, is the impact of the macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a slightly positive impact on our International segment revenue for the three months ended September 30, 2014 over the comparable period in 2013, primarily due to the slightly favorable impact of changes in foreign exchange rates. Changes in foreign exchange rates had a favorable impact on revenues of approximately $2.2 million, due primarily to favorable fluctuations in the British Pound, which was mostly offset by unfavorable fluctuations in the Russian Ruble, Czech Koruna and Brazilian Real, in the three months ended September 30, 2014 over 2013. We believe that changes in fuel price and fuel spreads had a minimal impact on revenues.

International segment revenue per transaction increased from $2.68 in the three months ended September 30, 2013 to $2.83 in the three months ended September 30, 2014, an increase of $0.15 per transaction or 5.5%. This increase is primarily due to the impact of acquisitions completed in 2013, some of which have higher revenue per transaction products in comparison to our other businesses, in addition to the reasons discussed above.

25-------------------------------------------------------------------------------- Table of Contents Consolidated operating expenses Merchant commissions Merchant commissions increased from $16.9 million in the three months ended September 30, 2013 to $25.0 million in the three months ended September 30, 2014, an increase of $8.1 million, or 47.6%. This increase was due primarily to additional commissions paid due to higher fuel spread margins, as well as the impact of higher volume in revenue streams where merchant commissions are paid.

Processing Processing expenses increased from $33.5 million in the three months ended September 30, 2013 to $41.5 million in the three months ended September 30, 2014, an increase of $8.0 million, or 23.8%. Our processing expenses increased primarily due to acquisitions completed in 2013, organic growth in transaction volume, as well as incremental bad debt expense of approximately $0.9 million in our Russia business due to the slowdown in their economy.

Selling Selling expenses increased from $13.9 million in the three months ended September 30, 2013 to $18.0 million in the three months ended September 30, 2014, an increase of $4.1 million, or 29.5%. The increase was primarily due to acquisitions completed in 2013, as well as additional sales and marketing spending in certain markets.

General and administrative General and administrative expenses increased from $31.6 million in the three months ended September 30, 2013 to $40.9 million in the three months ended September 30, 2014, an increase of $9.4 million, or 29.7%. The increase was primarily due to the impact of acquisitions completed in 2013, incremental stock based compensation of $3.6 million and incremental onetime costs related to the startup of our Shell Germany business, deal-related expenses, severance and other miscellaneous items of $0.4 million.

Depreciation and amortization Depreciation and amortization increased from $18.1 million in the three months ended September 30, 2013 to $25.7 million in the three months ended September 30, 2014, an increase of $7.7 million, or 42.4%.

The increase was primarily due to acquisitions completed during 2013, which resulted in an increase of $6.5 million related to the amortization of acquired intangible assets for customer and vendor relationships, trade names and trademarks, non-compete agreements and software and increased depreciation expense.

Operating income and operating margin Consolidated operating income Operating income increased from $111.3 million in the three months ended September 30, 2013 to $144.2 million in the three months ended September 30, 2014, an increase of $33.0 million, or 29.6%. Our operating margin was 49.4% and 48.8% for the three months ended September 30, 2013 and 2014, respectively. The increase in operating income was due primarily to the impact of acquisitions completed in 2013 and organic growth in the business driven by increases in volume and revenue per transaction, as well as due to the positive impact of the macroeconomic environment, primarily due to higher fuel spread margins. These positive drivers of results were partially offset by incremental stock based compensation expense, increased amortization expense related to acquired intangible assets, increased bad debt expense in our Russian business and incremental onetime costs related to the startup of our Shell Germany business, deal-related expenses, severance and other miscellaneous items.

For the purpose of segment operating results, we calculate segment operating income by subtracting segment operating expenses from segment revenue.

Similarly, segment operating margin is calculated by dividing segment operating income by segment revenue.

North America segment operating income North America operating income increased from $59.1 million in the three months ended September 30, 2013 to $78.8 million in the three months ended September 30, 2014, an increase of $19.7 million, or 33.3%. North America operating margin was 51.3% and 50.4% for the three months ended September 30, 2013 and 2014, respectively. The increase in operating income was due primarily to the positive impact of the macroeconomic environment; primarily due to higher fuel spread margins, as well as organic growth in the business driven by increases in volume and revenue per transaction and the impact of acquisitions completed in 2013. The decrease in operating margin was due primarily to the impact of increased stock based compensation expense, the majority of which is recorded in our North American segment.

International segment operating income International operating income increased from $52.2 million in the three months ended September 30, 2013 to $65.4 million in the three months ended September 30, 2014, an increase of $13.3 million, or 25.4%. International operating margin was 47.5% and 47.1% for the three months ended September 30, 2013 and 2014, respectively. The increase in operating income was due primarily to the 26 -------------------------------------------------------------------------------- Table of Contents impact of acquisitions completed in 2013 and organic growth in the business driven by increases in volume. These positive drivers of results were partially offset by increased amortization expense related to acquired intangible assets, increased bad debt expense in our Russian business and incremental onetime costs related to the startup of our Shell Germany business.

Interest expense, net Interest expense increased from $3.8 million in the three months ended September 30, 2013 to $4.9 million in the three months ended September 30, 2014, an increase of $1.1 million, or 29.4%. The increase is due to an increase in borrowings in 2014 over 2013, primarily due to funding the purchase price for acquisitions. The following table sets forth the average interest rates paid on borrowings under our Credit Facility, to include our term loan, domestic Revolver A, foreign Revolver B and foreign swing line of credit, including the relevant unused credit facility fees. There were no borrowings under our foreign Revolver A in the three months ended September 30, 2013.

Three months ended September 30, 2014 2013 Term loan 2.20 % 1.94 % Domestic Revolver A 2.20 % 2.01 % Foreign Revolver A 2.25 % N/A Foreign Revolver B N/A 4.50 % Foreign swing line 2.19 % N/A Equity method investment loss On April 28, 2014, we acquired a minority interest in Masternaut, a provider of telematics solutions to commercial fleets in Europe, which we account for as an equity method investment. The loss at Masternaut was driven primarily by amortization of intangible assets at this investment of approximately $3.0 million in the three months ended September 30, 2014.

Provision for income taxes The provision for income taxes increased from $29.0 million in the three months ended September 30, 2013 to $41.0 million in the three months ended September 30, 2014, an increase of $12.0 million, or 41.4%. We provide for income taxes during interim periods based on an estimate of our effective tax rate for the year. Discrete items and changes in the estimate of the annual tax rate are recorded in the period they occur. Our effective tax rate increased from 27.0% for three months ended September 30, 2013 to 30.1% for the three months ended September 30, 2014. Included in income tax expense in the three months ended September 30, 2013 is the impact of income tax benefits resulting from the enactment of a U.K. statutory tax rate reduction during 2013. This lower statutory rate was applied to deferred tax items, which are primarily payable in future periods, reducing income tax expense in the three months ended September 30, 2013 by approximately $3.8 million, compared to the 2014 period.

The increase in our effective tax rate was also due to losses generated from investments accounted for under the equity method of accounting, which provided no tax benefit to the Company.

We pay taxes in many different taxing jurisdictions, including the U.S., most U.S. states and many non-U.S. jurisdictions. The tax rates in certain non-U.S.

taxing jurisdictions are lower than the U.S. tax rate. Consequently, as our earnings fluctuate between taxing jurisdictions, our effective tax rate fluctuates.

Net income For the reasons discussed above, our net income increased from $78.6 million in the three months ended September 30, 2013 to $95.5 million in the three months ended September 30, 2014, an increase of $16.9 million, or 21.5%.

27-------------------------------------------------------------------------------- Table of Contents Nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 The following table sets forth selected consolidated statement of income data for the nine months ended September 30, 2014 and 2013 (in thousands).

Nine months ended % of total Nine months ended % of total Increase September 30, 2014 revenue September 30, 2013 revenue (decrease) % Change Revenues, net: North America $ 421,579 51.2 % $ 335,346 52.4 % $ 86,233 25.7 % International 401,114 48.8 % 304,324 47.6 % 96,790 31.8 % Total revenues, net 822,693 100.0 % 639,670 100.0 % 183,023 28.6 % Consolidated operating expenses: Merchant commissions 62,964 7.7 % 50,360 7.9 % 12,604 25.0 % Processing 117,152 14.2 % 95,426 14.9 % 21,726 22.8 % Selling 52,885 6.4 % 38,949 6.1 % 13,936 35.8 % General and administrative 122,304 14.9 % 91,774 14.3 % 30,530 33.3 % Depreciation and amortization 74,561 9.1 % 48,579 7.6 % 25,982 53.5 % Operating income 392,827 47.7 % 314,582 49.2 % 78,245 24.9 % Other expense, net 870 0.1 % 130 0.0 % 740 NM Interest expense, net 15,628 1.9 % 10,960 1.7 % 4,668 42.6 % Equity method investment loss 3,689 0.4 % - - 3,689 NM Provision for income taxes 113,473 13.8 % 87,111 13.6 % 26,362 30.3 % Net income $ 259,167 31.5 % $ 216,381 33.8 % $ 42,786 19.8 % Operating income for segments: North America $ 203,311 $ 168,622 $ 34,689 20.6 % International 189,516 145,960 43,556 29.8 % Operating income $ 392,827 $ 314,582 $ 78,245 24.9 % Operating margin for segments: North America 48.2 % 50.3 % (2.1 )% International 47.2 % 48.0 % (0.8 )% Total 47.7 % 49.2 % (1.5 )% NM = Not Meaningful Nine months ended September 30, 2014 2013 Transactions (in millions) North America 128.4 122.7 International 143.9 114.7 Total transactions 272.3 237.4 Revenue per transaction North America $ 3.28 $ 2.73 International 2.79 2.65 Consolidated revenue per transaction 3.02 2.69 Revenues and revenue per transaction Our consolidated revenues increased from $639.7 million in the nine months ended September 30, 2013 to $822.7 million in the nine months ended September 30, 2014, an increase of $183.0 million, or 28.6%. The increase in our consolidated revenue was primarily due to: • The impact of acquisitions completed in 2013, which contributed approximately $111 million in additional revenue in the nine months ended September 30, 2014 over the comparable period in 2013.

• Organic growth in certain of our payment programs driven primarily by increases in both volume and revenue per transaction.

28 -------------------------------------------------------------------------------- Table of Contents • Included within organic growth, is the impact of the macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a slightly positive impact on our consolidated revenue for the nine months ended September 30, 2014 over the comparable period in 2013. The macroeconomic environment was primarily impacted by higher fuel spread margins and the slightly favorable impact of changes in foreign exchange rates. Changes in foreign exchange rates had a slightly favorable impact on revenues of approximately $1.7 million, due primarily to favorable fluctuations in the British Pound, which was mostly offset by unfavorable fluctuations in the Russian Ruble, Czech Koruna and Brazilian Real, in the nine months ended September 30, 2014 over 2013. We believe that the impact of changes in fuel prices was slightly unfavorable to revenues in the nine months ended September 30, 2014 over 2013.

Consolidated revenue per transaction increased from $2.69 in the nine months ended September 30, 2013 to $3.02 in the nine months ended September 30, 2014, an increase of $0.33 or 12.2%. This increase is primarily due to the impact of acquisitions completed in 2013, which have higher revenue per transaction products in comparison to our other businesses, as well as the reasons discussed above.

North America segment revenues and revenue per transaction North America revenues increased from $335.3 million in the nine months ended September 30, 2013 to $421.6 million in the nine months ended September 30, 2014, an increase of $86.2 million, or 25.7%. The increase in our North America segment revenue was primarily due to: • The impact of acquisitions completed in 2013, which contributed approximately $32 million in additional revenue in the nine months ended September 30, 2014 over the comparable period in 2013.

• Organic growth in certain of our payment programs driven primarily by increases in both volume and revenue per transaction.

• Included within organic growth, is the impact of the macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a slightly positive impact on our North America segment revenue for the nine months ended September 30, 2014 over the comparable period in 2013, primarily due to the impact of higher fuel spread margins. We believe that changes in fuel prices had a minimal impact on revenues.

North America segment revenue per transaction increased from $2.73 in the nine months ended September 30, 2013 to $3.28 in the nine months ended September 30, 2014, an increase of $0.55 or 20.1%. We experienced an increase in transactions in our North America segment primarily due to the impact of the acquisitions completed in 2013, in addition to the reasons discussed above.

International segment revenues and revenue per transaction International segment revenues increased from $304.3 million in the nine months ended September 30, 2013 to $401.1 million in the nine months ended September 30, 2014, an increase of $96.8 million, or 31.8%. The increase in our International segment revenue was primarily due to: • The impact of acquisitions completed in 2013, which contributed approximately $79 million in additional revenue in the nine months ended September 30, 2014 over the comparable period in 2013.

• Organic growth in certain of our payment programs driven primarily by increases in both volume and revenue per transaction.

• Included within organic growth, is the impact of the macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a minimal impact on our International segment revenue for the nine months ended September 30, 2014 over the comparable period in 2013. Higher fuel spread margins and slightly favorable changes in foreign exchange rates were offset by the impact of lower fuel prices internationally. Changes in foreign exchange rates had a slightly favorable impact on revenues of approximately $1.7 million, due primarily to favorable fluctuations in the British Pound, which was mostly offset by unfavorable fluctuations in the Russian Ruble, Czech Koruna and Brazilian Real, in the nine months ended September 30, 2014 over 2013.

International segment revenue per transaction increased from $2.65 in the nine months ended September 30, 2013 to $2.79 in the nine months ended September 30, 2014, an increase of $0.14 per transaction or 5.1%. This increase is primarily due to the impact of acquisitions completed in 2013, some of which have higher revenue per transaction products in comparison to our other businesses.

29-------------------------------------------------------------------------------- Table of Contents Consolidated operating expenses Merchant commissions Merchant commissions increased from $50.4 million in the nine months ended September 30, 2013 to $63.0 million in the nine months ended September 30, 2014, an increase of $12.6 million, or 25.0%. This increase was due primarily to additional commissions paid due to higher fuel spread margins, as well as the impact of higher volume in revenue streams where merchant commissions are paid.

Processing Processing expenses increased from $95.4 million in the nine months ended September 30, 2013 to $117.2 million in the nine months ended September 30, 2014, an increase of $21.7 million, or 22.8%. Our processing expenses increased primarily due to acquisitions completed in 2013 and organic growth in transaction volume, as well as incremental bad debt expense of approximately $3.0 million in our Russia business due to the slowdown in their economy.

Selling Selling expenses increased from $38.9 million in the nine months ended September 30, 2013 to $52.9 million in the nine months ended September 30, 2014, an increase of $13.9 million, or 35.8%. The increase was primarily due to acquisitions completed in 2013, as well as additional sales and marketing spending in certain markets.

General and administrative General and administrative expenses increased from $91.8 million in the nine months ended September 30, 2013 to $122.3 million in the nine months ended September 30, 2014, an increase of $30.5 million, or 33.3%. The increase was primarily due to the impact of acquisitions completed in 2013, incremental stock based compensation of $13.9 million and onetime costs related to the startup of our Shell Germany business of $0.8 million.

Depreciation and amortization Depreciation and amortization increased from $48.6 million in the nine months ended September 30, 2013 to $74.6 million in the nine months ended September 30, 2014, an increase of $26.0 million, or 53.5%. The increase was primarily due to acquisitions completed during 2013, which resulted in an increase of $23.2 million related to the amortization of acquired intangible assets for customer and vendor relationships, trade names and trademarks, non-compete agreements and software and increased depreciation expense.

Operating income and operating margin Consolidated operating income Operating income increased from $314.6 million in the nine months ended September 30, 2013 to $392.8 million in the nine months ended September 30, 2014, an increase of $78.2 million, or 24.9%. Our operating margin was 49.2% and 47.7% for the nine months ended September 30, 2013 and 2014, respectively. The increase in operating income was due primarily to the impact of acquisitions completed in 2013 and organic growth in the business driven by increases in volume and revenue per transaction. We believe the impact of the macroeconomic environment was slightly positive to consolidated operating results in the nine months ended September 30, 2014 over the comparable period in 2013, primarily due to higher fuel spread margins. These positive drivers of consolidated results were partially offset by incremental stock based compensation expense, increased amortization expense related to acquired intangible assets, increased bad debt expense in our Russian business and incremental onetime costs related to the startup of our Shell Germany business.

For the purpose of segment operating results, we calculate segment operating income by subtracting segment operating expenses from segment revenue.

Similarly, segment operating margin is calculated by dividing segment operating income by segment revenue.

North America segment operating income North America operating income increased from $168.6 million in the nine months ended September 30, 2013 to $203.3 million in the nine months ended September 30, 2014, an increase of $34.7 million, or 20.6%. North America operating margin was 50.3% and 48.2% for the nine months ended September 30, 2013 and 2014, respectively. The increase in operating income was due primarily to the impact of acquisitions completed in 2013 and organic growth in the business driven by increases in volume and revenue per transaction. We believe the impact of the macroeconomic environment was slightly positive to North American operating results in the nine months ended September 30, 2014 over the comparable period in 2013, primarily due to higher fuel spread margins. The decrease in operating margin was due primarily to the impact of increased stock based compensation expense, the majority of which is recorded in our North American segment.

International segment operating income International operating income increased from $146.0 million in the nine months ended September 30, 2013 to $189.5 million in the nine months ended September 30, 2014, an increase of $43.6 million, or 29.8%. International operating margin was 48.0% and 47.2% for the nine months ended September 30, 2013 and 2014, respectively. The increase in operating income was due primarily to the impact of acquisitions completed in 2013 and organic growth in the business driven by increases in volume. The decrease in operating 30-------------------------------------------------------------------------------- Table of Contents margin was due primarily to increased amortization expense related to acquired intangible assets, increased bad debt expense in our Russian business and incremental onetime costs related to the startup of our Shell Germany business.

We believe the impact of the macroeconomic environment was minimal to International operating results in the nine months ended September 30, 2014 over the comparable period in 2013.

Interest expense, net Interest expense increased from $11.0 million in the nine months ended September 30, 2013 to $15.6 million in the nine months ended September 30, 2014, an increase of $4.7 million, or 42.6%. The increase in interest expense is due to an increase in borrowings in 2014 over 2013, primarily due to funding the purchase price for acquisitions as well as increased interest rates as a result of the uptick in our leverage ratio due to the additional borrowings to fund acquisitions. The following table sets forth the average interest rates paid on borrowings under our Credit Facility, to include our term loan, domestic Revolver A, foreign Revolver B and foreign swing line of credit, including the relevant unused credit facility fees. There were no borrowings under our foreign Revolver A in the nine months ended September 30, 2013.

Nine months ended September 30, 2014 2013 Term loan 2.21 % 2.00 % Domestic Revolver A 2.21 % 2.02 % Foreign Revolver A 2.24 % N/A Foreign Revolver B 4.73 % 4.66 % Foreign swing line 2.20 % N/A Equity method investment loss On April 28, 2014, we acquired a minority interest in Masternaut, a provider of telematics solutions to commercial fleets in Europe, which we account for as an equity method investment. The loss at Masternaut was driven primarily by amortization of intangible assets at this investment of approximately $5.2 million in the nine months ended September 30, 2014.

Provision for income taxes The provision for income taxes increased from $87.1 million in the nine months ended September 30, 2013 to $113.5 million in the nine months ended September 30, 2014, an increase of $26.4 million, or 30.3%. We provide for income taxes during interim periods based on an estimate of our effective tax rate for the year. Discrete items and changes in the estimate of the annual tax rate are recorded in the period they occur. Our effective tax rate increased from 28.7% for nine months ended September 30, 2013 to 30.5% for the nine months ended September 30, 2014. The increase in our effective tax rate from 2013 to 2014 is primarily a result of two discrete items recorded in 2013 which were not repeated in comparable period in 2014. Included in income tax expense in the nine months ended September 30, 2013 is the impact of income tax benefits resulting from the enactment of a U.K. statutory tax rate reduction during the third quarter of 2013. This lower statutory rate was applied to deferred tax items, which are primarily payable in future periods, reducing income tax expense in the nine months ended September 30, 2013 by approximately $3.8 million. Also included in income tax expense in the nine months ended September 30, 2013 is the impact of the reversal of $1.9 million of tax in January 2013, related to the controlled foreign corporation look-through exclusion expiring for us on December 1, 2012. The exclusion was retroactively extended in January 2013 and the additional taxes recorded prior to extension were reversed at that time, resulting in a favorable tax impact in the nine months ended September 30, 2013 over the comparable period in 2014.

The increase in our effective tax rate was also due to losses generated from investments accounted for under the equity method of accounting, which provided no tax benefit to us.

We pay taxes in many different taxing jurisdictions, including the U.S., most U.S. states and many non-U.S. jurisdictions. The tax rates in certain non-U.S.

taxing jurisdictions are lower than the U.S. tax rate. Consequently, as our earnings fluctuate between taxing jurisdictions, our effective tax rate fluctuates.

Net income For the reasons discussed above, our net income increased from $216.4 million in the nine months ended September 30, 2013 to $259.2 million in the nine months ended September 30, 2014, an increase of $42.8 million, or 19.8%.

31-------------------------------------------------------------------------------- Table of Contents Liquidity and capital resources Our principal liquidity requirements are to service and repay our indebtedness, make acquisitions of businesses and commercial account portfolios and meet working capital, tax and capital expenditure needs.

Sources of liquidity At September 30, 2014, our unrestricted cash and cash equivalent balance totaled $304.1 million. Our restricted cash balance at September 30, 2014 totaled $42.3 million. Restricted cash primarily represents customer deposits in the Czech Republic, which we are restricted from using other than to repay customer deposits.

At September 30, 2014, cash and cash equivalents held in foreign subsidiaries where we have determined we are permanently reinvested is $338.0 million. All of the cash and cash equivalents held by our foreign subsidiaries, excluding restricted cash, are available for general corporate purposes. Our current intent is to permanently reinvest these funds outside of the U.S. Our current expectation for funds held in our foreign subsidiaries is to use the funds to finance foreign organic growth, to pay for potential future foreign acquisitions and to repay any foreign borrowings that may arise from time to time. We currently believe that funds generated from our U.S. operations, along with potential borrowing capabilities in the U.S. will be sufficient to fund our U.S.

operations for the foreseeable future, and therefore do not foresee a need to repatriate cash held by our foreign subsidiaries in a taxable transaction to fund our U.S. operations. However, if at a future date or time these funds are needed for our operations in the U.S. or we otherwise believe it is in our best interests to repatriate all or a portion of such funds, we may be required to accrue and pay U.S. taxes to repatriate these funds. No assurances can be provided as to the amount or timing thereof, the tax consequences related thereto or the ultimate impact any such action may have on our results of operations or financial condition.

We utilize an accounts receivable Securitization Facility to finance a majority of our domestic fuel card receivables, to lower our cost of borrowing and more efficiently use capital. We generate and record accounts receivable when a customer makes a purchase from a merchant using one of our card products and generally pay merchants within seven days of receiving the merchant billing. As a result, we utilize the Securitization Facility as a source of liquidity to provide the cash flow required to fund merchant payments while we collect customer balances. These balances are primarily composed of charge balances, which are typically billed to the customer on a weekly, semimonthly or monthly basis, and are generally required to be paid within 14 days of billing. We also consider the undrawn amounts under our Securitization Facility and Credit Facility as funds available for working capital purposes and acquisitions. At September 30, 2014, we had the ability to generate approximately $29.8 million of additional liquidity under our Securitization Facility. At September 30, 2014, we had approximately $372 million available under our Credit Facility.

Based on our current forecasts and anticipated market conditions, we believe that our current cash balances, our available borrowing capacity and our ability to generate cash from operations, will be sufficient to fund our liquidity needs for at least the next twelve month, except for the pending acquisition of Comdata for which we have secured needed financing through a New Credit Agreement further discussed below. However, we regularly evaluate our cash requirements for current operations, commitments, capital requirements and acquisitions, and we may elect to raise additional funds for these purposes in the future, either through the issuance of debt or equity securities. We may not be able to obtain additional financing on terms favorable to us, if at all.

Cash flows The following table summarizes our cash flows for the nine months ended September 30, 2014 and 2013.

Nine months ended September 30, (in millions) 2014 2013 Net cash provided by operating activities $ 317.5 $ 208.0 Net cash used in investing activities (280.2 ) (392.3 ) Net cash (used in) provided by financing activities (56.2 ) 253.6 Operating activities Net cash provided by operating activities increased from $208.0 million in the nine months ended September 30, 2013 to $317.5 million in the nine months ended September 30, 2014. The increase is primarily due to changes in working capital, driven by increases in amortization resulting from acquisitions completed in 2013, increases in stock based compensation expense, as well as additional net income of $42.8 million during the nine months ended September 30, 2014 over the comparable period in 2013.

Investing activities Net cash used in investing activities decreased from $392.3 million in the nine months ended September 30, 2013 to $280.2 million in the nine months ended September 30, 2014. This decrease is primarily due to less acquisition activity in the nine months ended September 30, 2014 over the comparable period in 2013.

32 -------------------------------------------------------------------------------- Table of Contents Financing activities Financing activities provided net cash of $253.6 million in the nine months ended September 30, 2013. Financing activities used net cash of $56.2 million in the nine months ended September 30, 2014. The change is primarily due to additional aggregate net pay downs of outstanding balances under our Credit Facility and Securitization Facility of $339.1, in the nine months ended September 30, 2014 over the comparable period in 2013. These financing cash uses were partially offset by additional cash provided by excess tax benefits provided by stock based compensation due to the exercise of stock options of $28.9 million.

Capital spending summary Our capital expenditures increased from $15.3 million in the nine months ended September 30, 2013 to $18.3 million in the nine months ended September 30, 2014, an increase of $2.9 million, or 19.1%. The increase was primarily related to additional investments to continue to acquisitions completed in 2013 and additional spending to enhance our existing processing systems. We anticipate our capital expenditures will approximate $23 million for 2014 as we continue to enhance our existing processing systems and integrate recently acquired businesses.

Credit Facility We are party to a five-year, $1.4 billion Credit Agreement (the "Credit Agreement") with a syndicate of banks, which we originally entered into on June 22, 2011 and have amended three times since. The Credit Agreement provides for a $550 million term loan facility and an $850 million revolving credit facility, with sublimits for letters of credit, swing line loans and multicurrency borrowings. Subject to certain conditions, including obtaining commitments of lenders, we have the option to increase the facility up to an additional $250 million via an accordion feature. The Credit Agreement contains representations, warranties and events of default, as well as certain affirmative and negative covenants, customary for financings of this nature.

These covenants include limitations on our ability to pay dividends and make other restricted payments under certain circumstances and compliance with certain financial ratios. Proceeds from this new Credit Facility may also be used for working capital purposes, acquisitions, and other general corporate purposes.

On March 13, 2012, we entered into the first amendment to the Credit Agreement.

This Amendment added two United Kingdom entities as designated borrowers and added a $110 million foreign currency swing line of credit sub facility under the existing revolver, which allows for alternate currency borrowing on the swing line. On November 6, 2012, we entered into a second amendment to the Credit Agreement to add an additional term loan of $250 million and increase the borrowing limit on the revolving line of credit from $600 million to $850 million. In addition, we increased the accordion feature from $150 million to $250 million. On March 20, 2013, we entered into a third amendment to the Credit Agreement to extend the term of the facility for an additional five years from the amendment date, with a new maturity date of March 20, 2018, separated the revolver into two tranches (a $815 million Revolving A facility and a $35 million Revolving B facility), added additional designated borrowers, with the ability to borrow in local currency and US Dollars under the Revolving B facility and removed a cap to allow for additional investments in certain business relationships. The revolving line of credit contains a $20 million sublimit for letters of credit, a $20 million sublimit for swing line loans and sublimits for multicurrency borrowings in Euros, Sterling, Japanese Yen, Australian Dollars and New Zealand Dollars. On April 28, 2014, we entered into a fourth amendment to the Credit Agreement to add additional designated borrowers.

At September 30, 2014, we had $476.3 million in outstanding term loans, $355.0 million in borrowings outstanding on the domestic revolving A facility, $73.5 million in borrowings outstanding on the foreign revolving A facility and $49.7 million in borrowings outstanding on the foreign swing line of credit. As of September 30, 2014, we were in compliance with each of the covenants under the Credit Facility.

Interest on amounts outstanding under the Credit Agreement accrues based on the British Bankers Association LIBOR Rate (the Eurocurrency Rate), plus a margin based on a leverage ratio, or our option, the Base Rate (defined as the rate equal to the highest of (a) the Federal Funds Rate plus 0.5%, (b) the prime rate announced by Bank of America, N.A., or (c) the Eurocurrency Rate plus 1.0%) plus a margin based on a leverage ratio. Interest is payable quarterly in arrears. In addition, we have agreed to pay a quarterly commitment fee at a rate per annum ranging from 0.2% to 0.4% of the daily unused portion of the credit facility. At September 30, 2014, the interest rate on the term loan and domestic revolving A facility was 1.91%, the interest rate on the foreign revolving A facility and foreign swing line of credit was 2.25% and 2.23%, respectively. The unused credit facility was 0.3% at September 30, 2014.

The stated maturity date for our term loan and revolving loans and letters of credit under the Credit Agreement is March 20, 2018. The term loan is payable in quarterly installments and are due on the last business day of each March, June, September, and December with the final principal payment due in March 2018.

Borrowings on the revolving line of credit are repayable at our option of one, two, three or nine months after borrowing, depending on the term of the borrowing on the facility. Borrowings on the foreign swing line of credit are due no later than ten business days after such loan is made.

33-------------------------------------------------------------------------------- Table of Contents During the nine months ended September 30, 2014, we made principal payments of $20.6 million on the term loan, $381.4 million on the revolving A facility and $7.3 million on the revolving B facility. As of September 30, 2014, we were in compliance with each of the covenants under the Credit Facility.

New Zealand Facility On April 29, 2013, we entered into a $12 million New Zealand dollar ($10.7 million) facility with Westpac Bank in New Zealand ("New Zealand Facility"), which we renewed on June 13, 2014. This facility matures on April 30, 2015. This facility is for purposes of funding the working capital needs of our business in New Zealand, CardLink. A line of credit charge accrues at a rate of 0.025% times the facility limit each month. Interest accrues on outstanding borrowings at the Bank Bill Mid-Market (BKBM) settlement rate plus a margin of 1.0%. The New Zealand Facility contains representations, warranties and events of default, as well as certain affirmative and negative covenants, customary for financings of this nature. These covenants include compliance with certain financial ratios.

We did not have an outstanding unpaid balance on this facility at September 30, 2014. As of September 30, 2014, we were in compliance with each of the covenants under the New Zealand Facility.

Securitization Facility We are a party to a receivables purchase agreement among FleetCor Funding LLC, as seller, PNC Bank, National Association as administrator, and the various purchaser agents, conduit purchasers and related committed purchasers parties thereto, with a purchase limit of $500 million. We refer to this arrangement as the Securitization Facility. The Securitization Facility was amended for the tenth time on February 3, 2014 to extend the facility termination date to February 2, 2015. There is a program fee equal to one month LIBOR and the Commercial Paper Rate of 0.17% plus 0.65% as of September 30, 2014. The unused facility fee is payable at a rate of 0.25% per annum as of September 30, 2014.

Under a related purchase and sale agreement, dated as of December 20, 2004, and most recently amended on July 7, 2008, between FleetCor Funding LLC, as purchaser, and certain of our subsidiaries, as originators, the receivables generated by the originators are deemed to be sold to FleetCor Funding LLC immediately and without further action upon creation of such receivables. At the request of FleetCor Funding LLC, as seller, undivided percentage ownership interests in the receivables are ratably purchased by the purchasers in amounts not to exceed their respective commitments under the facility. Collections on receivables are required to be made pursuant to a written credit and collection policy and may be reinvested in other receivables, may be held in trust for the purchasers, or may be distributed. Fees are paid to each purchaser agent for the benefit of the purchasers and liquidity providers in the related purchaser group in accordance with the Securitization Facility and certain fee letter agreements.

The Securitization Facility provides for certain termination events, which includes nonpayment, upon the occurrence of which the administrator may declare the facility termination date to have occurred, may exercise certain enforcement rights with respect to the receivables, and may appoint a successor servicer, among other things. There are no financial covenant requirements related to our Securitization Facility.

Other Liabilities In connection with our acquisition of certain businesses, we owe final payments of $0.4 million. Also in connection with our acquisition of certain businesses, we have remaining contingent earn out payments to the respective sellers with estimated fair values totaling $89.4 million.

New Credit Agreement On October 24, 2014, we entered into a new $3.355 billion Credit Agreement (the "New Credit Agreement"), by and among the Company, as guarantor, FleetCor Technologies Operating Company, LLC, as a borrower and guarantor (the "Domestic Borrower"), certain of the our foreign subsidiaries as borrowers (together with the Domestic Borrower, the "Borrowers"), Bank of America, N.A., as administrative agent, swing line lender and L/C issuer and a syndicate of financial institutions (the "Lenders"). The New Credit Agreement provides for senior secured credit facilities (the "Senior Credit Facilities") consisting of (a) a revolving A credit facility in the amount of up to $1.0 billion, with sublimits for letters of credit, swing line loans and multicurrency borrowings, (b) a revolving B facility in the amount of up to $35 million for loans in Australian Dollars or New Zealand Dollars, (c) a term loan A facility in the amount of up to $2.02 billion and (d) a term loan B facility in the amount of up to $300 million. The New Credit Agreement provides for additional commitments in an aggregate amount of up to $430 million that may be borrowed as increases in the term loan A facility or the term loan B facility on the date of the initial borrowing under the New Credit Agreement.

The term notes are payable in quarterly installments which are due on the last business day of each March, June, September, and 34-------------------------------------------------------------------------------- Table of Contents December with the final principal payment of the term loan A due five years after the initial borrowing date of the Senior Credit Facilities and the final principal payment of the term loan B due seven years after the initial borrowing date of the Senior Credit Facilities. Borrowings on the revolving line of credit are repayable on the fifth anniversary of the initial borrowing date. Borrowings on the foreign swing line of credit are due no later than ten business days after each such loan is made. Loans are subject to certain mandatory prepayment requirements for dispositions, debt issuances and excess cash flow.

The New Credit Agreement contains representations, warranties and events of default, as well as certain affirmative and negative covenants, customary for financings of this nature, which will become effective upon the initial borrowing date. These covenants include limitations on our ability to pay dividends and make other restricted payments under certain circumstances and compliance with certain financial ratios. Upon the occurrence and during the continuance of an event of default under the New Credit Agreement, the Lenders may declare the loans and all other obligations under the New Credit Agreement immediately due and payable. The obligations of the Borrowers under the New Credit Agreement will be guaranteed by the Company, the Domestic Borrower and our domestic subsidiaries pursuant to a separate guaranty agreement that will be signed on the initial borrowing date.

The obligations of the Borrowers under the New Credit Agreement will be secured by all or substantially all of the assets of the Company and its domestic subsidiaries, pursuant to a separate security agreement that will be signed on the initial borrowing date, and will include a pledge of shares of its domestic subsidiaries and a pledge of 66% of the voting shares of its first-tier foreign subsidiaries, but excluding real property, personal property located outside of the United States, accounts receivables and related assets subject to a securitization, and certain investments required under the money transmitter laws to be held free and clear of liens.

We anticipate the initial borrowing will be made under the New Credit Agreement when we close the anticipated acquisition of Comdata Inc. In the meantime, our current facility will remain in place. The commitments under the New Credit Agreement will terminate if the initial borrowing does not occur on or prior to May 11, 2015 or if the agreement for the acquisition of Comdata Inc. is terminated.

Proceeds from the new credit facility are intended to be used to refinance our existing indebtedness under our existing Credit Facility with Bank of America, N.A. and the other lenders party thereto, and to pay off existing indebtedness of Comdata Inc. in connection with our anticipated acquisition of Comdata Inc.

during the fourth quarter of this year.

Interest on amounts outstanding under the New Credit Agreement (other than the term loan B facility) will accrue based on the LIBOR Rate (the Eurocurrency Rate) published on the applicable Bloomberg screen page or other source designated by Bank of America, N.A., as administrative agent, plus a margin based on a leverage ratio and ranging from 1.00 to 2.00% per annum, or at the option of the Company, the Base Rate (defined as the rate equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the prime rate announced by Bank of America, N.A., or (c) the Eurocurrency Rate plus 1.00%) plus a margin based on a leverage ratio and ranging from 0.00% to 1.00% per annum. Interest on Eurocurrency Rate Loans denominated in New Zealand Dollars will be based on the Bank Bill Reference Bid Rate, and interest on Eurocurrency Rate Loans denominated in Australian Dollars will be based on the Bank Bill Swap Reference Bid Rate. Interest on the term loan B facility will accrue based on the Eurocurrency Rate or the Base Rate, as described above, except that the applicable margin is fixed at 3% for Eurocurrency Rate Loans and at 2% for Base Rate Loans. We will pay interest on the last day of each interest period. In addition, we have agreed to pay a quarterly commitment fee at a rate per annum ranging from 0.20% to 0.40% of the daily unused portion of the credit facility.

Critical accounting policies and estimates In applying the accounting policies that we use to prepare our consolidated financial statements, we necessarily make accounting estimates that affect our reported amounts of assets, liabilities, revenue and expenses. Some of these estimates require us to make assumptions about matters that are highly uncertain at the time we make the accounting estimates. We base these assumptions and the resulting estimates on historical information and other factors that we believe to be reasonable under the circumstances, and we evaluate these assumptions and estimates on an ongoing basis. In many instances, however, we reasonably could have used different accounting estimates and, in other instances, changes in our accounting estimates could occur from period to period, with the result in each case being a material change in the financial statement presentation of our financial condition or results of operations. We refer to estimates of this type as critical accounting estimates.

Accounting estimates necessarily require subjective determinations about future events and conditions. During the three months ended September 30, 2014, we have not adopted any new critical accounting policies that had a significant impact upon our consolidated financial statements, have not changed any critical accounting policies and have not changed the application of any critical accounting policies from the year ended December 31, 2013. For critical accounting policies, refer to the Critical Accounting Estimates in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2013 and our summary of significant accounting policies in Note 1 of our notes to the unaudited consolidated financial statements in this Form 10-Q.

35 -------------------------------------------------------------------------------- Table of Contents Management's Use of Non-GAAP Financial Measures We have included in the discussion under the caption "Adjusted Revenues, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income Per Diluted Share" above certain financial measures that were not prepared in accordance with GAAP.

Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. Below, we define the non-GAAP financial measures, provide a reconciliation of the non-GAAP financial measure to the most directly comparable financial measure calculated in accordance with GAAP, and discuss the reasons that we believe this information is useful to management and may be useful to investors.

Adjusted revenues We have defined the non-GAAP measure adjusted revenues as revenues, net less merchant commissions as reflected in our income statement.

We use adjusted revenues as a basis to evaluate our 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. We believe that adjusted revenue is an appropriate supplemental measure of financial performance and may be useful to investors to understanding our revenue performance on a consistent basis. Adjusted revenues are not intended to be a substitute for GAAP financial measures and should not be used as such.

Set forth below is a reconciliation of adjusted revenues to the most directly comparable GAAP measure, revenues, net (in thousands): Three Months Ended September 30, Nine months Ended September 30, 2014 2013 2014 2013 Revenues, net $ 295,283 $ 225,150 $ 822,693 $ 639,670 Merchant commissions 25,014 16,944 62,964 50,360 Total adjusted revenues $ 270,269 $ 208,206 $ 759,729 $ 589,310 Adjusted EBITDA We have defined the non-GAAP measure adjusted EBITDA, as net income as reflected in our statement of income, adjusted to eliminate (a) interest expense, (b) tax expense, (c) depreciation of long-lived assets, (d) amortization of intangible assets, (e) other expense (income), net and (f) gains and losses from our equity method investment.

We use adjusted EBITDA as a basis to evaluate our operating performance net of the impact of certain non-core items during the period. We believe that adjusted EBITDA may be useful to investors to understanding our operating performance on a consistent basis. Adjusted EBITDA is not intended to be a substitute for GAAP financial measures and should not be used as such.

Set forth below is a reconciliation of adjusted EBITDA to the most directly comparable GAAP measure, net income (in thousands): Three Months Ended September 30, Nine months Ended September 30, 2014 2013 2014 2013 Net income $ 95,509 $ 78,620 $ 259,167 $ 216,381 Provision for income taxes 41,045 29,035 113,473 87,111 Interest expense, net 4,859 3,756 15,628 10,960 Depreciation and amortization 25,714 18,060 74,561 48,579 Other (income) expense, net 594 (156 ) 870 130 Equity method investment loss 2,200 - 3,689 - Adjusted EBITDA $ 169,921 $ 129,315 $ 467,388 $ 363,161 Adjusted net income We have defined the non-GAAP measure adjusted net income as net income as reflected in our statement of income, adjusted to eliminate (a) non-cash stock based compensation expense related share-based compensation awards, (b) amortization of deferred financing costs and intangible assets, (c) amortization of the premium recognized on the purchase of receivables, (d) loss on the early extinguishment of debt and (e) our proportionate share of amortization of intangible assets from our equity method investment.

36-------------------------------------------------------------------------------- Table of Contents We have defined the non-GAAP measure adjusted net income per diluted share as the calculation previously noted divided by the weighted average diluted shares outstanding as reflected in our statement of income.

We use adjusted net income to eliminate the effect of items that we do not consider indicative of our core operating performance. We believe it is useful to exclude non-cash 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 expense 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 adjusted net income. We believe that adjusted net income and adjusted net income per diluted share are appropriate supplemental measures of financial performance and may be useful to investors to understanding our operating performance on a consistent basis. Adjusted net income and adjusted net income per diluted share are not intended to be a substitute for GAAP financial measures and should not be used as such.

Set forth below is a reconciliation of adjusted net income and adjusted net income per diluted share to the most directly comparable GAAP measure, net income and net income per diluted share (in thousands, except per share amounts): Three Months Ended September 30, Nine months Ended September 30, 2014 2013 2014 2013 Net income $ 95,509 $ 78,620 $ 259,167 $ 216,381 Net income per diluted share $ 1.11 $ 0.93 $ 3.02 $ 2.56 Stock based compensation 7,993 4,382 26,292 12,441 Amortization of intangible assets 19,255 12,296 55,737 31,535 Amortization of premium on receivables 815 816 2,445 2,448 Amortization of deferred financing costs 537 841 1,599 2,434 Amortization of intangibles at equity method investment 3,021 - 5,158 - Total pre-tax adjustments 31,621 18,335 91,231 48,858 Income tax impact of pre-tax adjustments at the effective tax rate (9,505 ) (5,596 ) (27,781 ) (14,639 ) Adjusted net income $ 117,625 $ 91,359 $ 322,617 $ 250,600 Adjusted net income per diluted share $ 1.37 $ 1.08 $ 3.77 $ 2.97 Diluted shares 86,134 84905 85,688 84,446 Special Cautionary Notice Regarding Forward-Looking Statements This report contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about our 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.

These forward-looking statements are not a guarantee of performance, and you should not place undue reliance on such statements. We have based these forward-looking statements largely on our current expectations and projections about future events. Forward-looking statements are subject to many uncertainties and other variable circumstances, 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 or investigations; 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 our Annual Report on Form 10-K for the year ended December 31, 2013. These factors could cause our actual results and experience to differ materially from any forward-looking statement. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements included in this report are made only as of the date hereof. We do not undertake, and specifically decline, 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.

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