Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


	Page
Reports of Independent Registered Public Accounting Firm		71
Consolidated Balance Sheets at December 31, 2013 and 2012		74
Consolidated Statements of Income for the Years Ended December 31, 2013, 2012 and 2011		75
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2013, 2012 and 2011		76
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2013, 2012 and 2011		77
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012 and 2011		78
Notes to Consolidated Financial Statements		79

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of FleetCor Technologies, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of FleetCor Technologies, Inc. and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of FleetCor Technologies, Inc. and subsidiaries at December 31, 2013 and 2012, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), FleetCor Technologies, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated March 3, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Atlanta, Georgia

March 3, 2014

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of FleetCor Technologies, Inc. and Subsidiaries

We have audited FleetCor Technologies, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). FleetCor Technologies, Inc. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the following entities which are included in the 2013 consolidated financial statements of FleetCor Technologies, Inc. and subsidiaries: FleetCor Technologies Australia Pty Ltd., Cardlink Systems, Ltd., Discrete Wireless, Inc., VB-Serviocios, Comercio E Administracao, DBTRANS, S.A., Epyx Limited and other insignificant acquisitions. These entities constituted 32% of total assets and 23% of net assets as of December 31, 2013, and 8% of revenues and 4% of net income for the year then ended. Our audit of internal control over financial reporting of FleetCor Technologies, Inc. and subsidiaries also did not include an evaluation of the internal control over financial reporting of the entities mentioned herein.

In our opinion, FleetCor Technologies, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of FleetCor Technologies, Inc. and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2013 of FleetCor Technologies, Inc. and subsidiaries and our report dated March 3, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Atlanta, Georgia

March 3, 2014

FleetCor Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands, Except Share and Par Value Amounts)


	December 31
	2013			2012
Assets
Current assets:
Cash and cash equivalents	$	338,105		$	283,649
Restricted cash		48,244			53,674
Accounts receivable (less allowance for doubtful accounts of $22,416 and $19,463, respectively)		573,351			525,441
Securitized accounts receivable—restricted for securitization investors		349,000			298,000
Prepaid expenses and other current assets		40,062			28,126
Deferred income taxes		4,750			6,464

Total current assets		1,353,512			1,195,354

Property and equipment		111,100			93,902
Less accumulated depreciation and amortization		(57,144	)		(48,706	)

Net property and equipment		53,956			45,196
Goodwill		1,552,725			926,609
Other intangibles, net		871,263			463,864
Other assets		100,779			90,847

Total assets	$	3,932,235		$	2,721,870

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	467,202		$	418,609
Accrued expenses		114,870			75,812
Customer deposits		182,541			187,627
Securitization facility		349,000			298,000
Current portion of notes payable and lines of credit		662,439			141,875
Other current liabilities		132,846			20,299

Total current liabilities		1,908,898			1,142,222

Notes payable and other obligations, less current portion		474,939			485,217
Deferred income taxes		249,504			180,609
Other noncurrent liabilities		55,001			—

Total noncurrent liabilities		779,444			665,826

Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 25,000,000 shares authorized and no shares issued and outstanding at December 31, 2013 and 2012		—			—
Common stock, $0.001 par value; 475,000,000 shares authorized, 118,206,262 shares issued and 82,471,770 shares outstanding at December 31, 2013; and 116,772,324 shares issued and 81,037,832 shares outstanding at December 31, 2012		117			116
Additional paid-in capital		631,667			542,018
Retained earnings		1,035,198			750,697
Accumulated other comprehensive loss		(47,426	)		(3,346	)
Less treasury stock (35,734,492 shares at December 31, 2013 and 2012)		(375,663	)		(375,663	)

Total stockholders’ equity		1,243,893			913,822

Total liabilities and stockholders’ equity	$	3,932,235		$	2,721,870

See accompanying notes.

FleetCor Technologies, Inc. and Subsidiaries

Consolidated Statements of Income

(In Thousands, Except Share Amounts)


	Year Ended December 31
	2013		2012		2011
Revenues, net	$	895,171	$	707,534	$	519,591
Expenses:
Merchant commissions		68,143		58,573		51,199
Processing		134,030		115,446		84,516
Selling		57,346		46,429		36,606
General and administrative		142,283		110,122		84,765
Depreciation and amortization		72,737		52,036		36,171

Operating income		420,632		324,928		226,334

Other expense (income), net		602		1,121		(589	)
Interest expense, net		16,461		13,017		13,377
Loss on early extinguishment of debt		—		—		2,669

Total other expense		17,063		14,138		15,457

Income before income taxes		403,569		310,790		210,877
Provision for income taxes		119,068		94,591		63,542

Net income	$	284,501	$	216,199	$	147,335

Earnings per share:
Basic earnings per share	$	3.48	$	2.59	$	1.83

Diluted earnings per share	$	3.36	$	2.52	$	1.76

Weighted average shares outstanding:
Basic weighted average shares outstanding		81,793		83,328		80,610

Diluted weighted average shares outstanding		84,655		85,736		83,654

See accompanying notes.

FleetCor Technologies, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In Thousands)


	Year Ended December 31
	2013			2012		2011
Net income	$	284,501		$	216,199	$	147,335
Other comprehensive (loss) income:
Foreign currency translation adjustment (loss) gain, net of tax		(44,080	)		10,370		(5,615	)

Total other comprehensive (loss) income		(44,080	)		10,370		(5,615	)

Total comprehensive income	$	240,421		$	226,569	$	141,720

See accompanying notes.

FleetCor Technologies, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

(In Thousands)


	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2010	$	112	$	421,991	$	387,163	$	(175,220	)	$	(8,101	)	$	625,945
Net income		—		—		147,335		—			—			147,335
Other comprehensive loss from currency exchange, net of tax of $0		—		—		—		—			(5,615	)		(5,615	)

Total comprehensive income														141,720
Repurchase of common stock		—		—		—		(443	)		—			(443	)
Issuance of common stock		2		44,212		—		—			—			44,214

Balance at December 31, 2011		114		466,203		534,498		(175,663	)		(13,716	)		811,436
Net income		—		—		216,199		—			—			216,199
Other comprehensive income from currency exchange, net of tax of $0		—		—		—		—			10,370			10,370

Total comprehensive income														226,569
Repurchase of common stock		—		—		—		(200,000	)		—			(200,000	)
Issuance of common stock		2		75,815		—		—			—			75,817

Balance at December 31, 2012		116		542,018		750,697		(375,663	)		(3,346	)		913,822
Net income		—		—		284,501		—			—			284,501
Other comprehensive loss from currency exchange, net of tax of $186		—		—		—		—			(44,080	)		(44,080	)

Total comprehensive income														240,421
Issuance of common stock		1		89,649		—		—			—			89,650

Balance at December 31, 2013	$	117	$	631,667	$	1,035,198	$	(375,663	)	$	(47,426	)	$	1,243,893

See accompanying notes.

FleetCor Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In Thousands)


	Year Ended December 31
	2013			2012			2011
Operating activities
Net income	$	284,501		$	216,199		$	147,335
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		16,885			14,116			11,451
Stock-based compensation		26,676			19,275			21,743
Provision for losses on accounts receivable		18,867			21,896			19,226
Amortization of deferred financing costs		3,276			2,279			1,864
Amortization of intangible assets		49,313			32,376			19,590
Amortization of premium on receivables		3,263			3,265			3,266
Deferred income taxes		(5,453	)		(3,337	)		(2,920	)
Loss on early extinguishment of debt		—			—			2,669
Changes in operating assets and liabilities (net of acquisitions):
Restricted cash		5,430			2,088			6,579
Accounts receivable		(45,005	)		(71,102	)		(80,024	)
Prepaid expenses and other current assets		(74	)		(6,847	)		17,581
Other assets		38,906			(46,553	)		(1,935	)
Excess tax benefits related to stock-based compensation		(32,535	)		(29,355	)		(13,727	)
Accounts payable, accrued expenses, and customer deposits		11,635			(18,840	)		126,927

Net cash provided by operating activities		375,685			135,460			279,625

Investing activities
Acquisitions, net of cash acquired		(728,343	)		(190,447	)		(333,763	)
Purchases of property and equipment		(20,785	)		(19,111	)		(13,454	)

Net cash used in investing activities		(749,128	)		(209,558	)		(347,217	)

Financing activities
Excess tax benefits related to stock-based compensation		32,535			29,355			13,727
Repurchase of common stock		—			(200,000	)		—
Proceeds from issuance of common stock		30,438			27,187			8,477
Borrowings on securitization facility, net		51,000			18,000			136,000
Deferred financing costs paid		(1,970	)		(3,776	)		(7,839	)
Proceeds from notes payable		—			250,000			300,000
Principal payments on notes payable		(28,125	)		(30,414	)		(338,965	)
Borrowings from revolver- A Facility		783,663			455,000			125,000
Payments on revolver- A Facility		(261,516	)		(480,000	)		—
Borrowings from revolver- B Facility		16,715			—			—
Payments on foreign revolver- B Facility		(8,552	)		—			—
Payments on acquired debt		(164,083	)		—			—
Borrowings from swing line of credit, net		—			(1,874	)		—
Other		(14,380	)		(1,490	)		(179	)

Net cash provided by financing activities		435,725			61,988			236,221

Effect of foreign currency exchange rates on cash		(7,826	)		10,600			1,726

Net increase (decrease) in cash		54,456			(1,510	)		170,355
Cash and cash equivalents at beginning of year		283,649			285,159			114,804

Cash and cash equivalents at end of year	$	338,105		$	283,649		$	285,159

Supplemental cash flow information
Cash paid for interest	$	25,886		$	14,760		$	14,961

Cash paid for income taxes	$	99,308		$	38,169		$	49,205

See accompanying notes.

FleetCor Technologies, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2013

1. Description of Business

FleetCor Technologies Inc. and its subsidiaries (the Company) 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. The Company’s payment programs enable its 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.

The Company provides payment products and services in a variety of combinations to create customized payment solutions for customers and partners. The Company sells these products and services directly and indirectly through partners with whom it has strategic relationships, such as major oil companies and petroleum marketers. The Company refers to these major oil companies and petroleum marketers as “partners.” The Company provides customers with various card products that typically function like a charge card to purchase fuel, lodging, food, toll road fees and related products and services at participating locations. The Company’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.

In order to deliver payment programs and services and process transactions, the Company owns and operates proprietary “closed-loop” networks through which the Company electronically connects to merchants and captures, analyzes and reports customized information. The Company also uses third-party networks to deliver its payment programs and services in order to broaden its card acceptance and use. To support the payment products, the Company also provides a range of services, such as issuing and processing, as well as specialized information services that provide customers with value-added functionality and data. 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.

The Company’s reportable segments, North America and International, reflect the Company’s global organization. Within these segments, services are provided to commercial fleets, major oil companies, and petroleum marketers. In North America, the Company primarily sells a fuel card product, as well as a fleet telematics offering, which allows customers to track the location of mobile workers in field based businesses, primarily to small and mid-sized fleets. The Company also provides lodging and transportation management services in North America. In its International segment, the Company provides small and mid-sized fleets with fuel cards to control and manage spending. Additionally, the Company provides a similar fuel product in its International segment to over-the-road trucking fleets, shipping fleets and other operators of heavily industrialized equipment, that when utilized at the fueling site and by the vehicle, significantly reduces the likelihood of unauthorized and fraudulent transactions and allows fleet owners to monitor and control fuel consumption. The Company also provides a vehicle maintenance service offering in its International segment that helps fleet customers to better manage their vehicle maintenance, service, and repair needs. Furthermore, the Company also provides prepaid fuel, transportation, toll and food vouchers and cards internationally that may be used as a form of payment in restaurants, grocery stores, gas stations, public transportation and toll roads.

In 2013, the Company processed approximately 328 million transactions on its proprietary networks and third-party networks.

2. Summary of Significant Accounting Policies

Revenue Recognition and Presentation

Revenue is derived from the Company’s merchant and network relationships as well as from customers and partners. The Company recognizes revenue on fees generated through services to commercial fleets, commercial businesses, major oil companies, petroleum marketers and leasing companies and records revenue net of the wholesale cost of the underlying products and services based on the following: (i) the Company is not the primary obligor in the arrangement and is not responsible for fulfillment and the acceptability of the product; (ii) the Company has no inventory risk, does not bear the risk of product loss and does not make any changes to the product or have any involvement in the product specifications; (iii) the Company does not have significant latitude with respect to establishing the price for the product and (iv) the amount the Company earns for its services is fixed, within a limited range.

Through the Company’s merchant and network relationships the Company primarily provides fuel, vehicle maintenance, prepaid cards or lodging services to its customers. The Company derives its revenue from the Company’s merchant and network relationships based on 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. The Company’s net revenue consists of margin on fuel sales and fees for technical support, processing, communications and reporting. 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 difference between the price the Company pays to a merchant and the merchant’s wholesale cost for the underlying products and services is considered a merchant commission and is recognized as expense when the fuel purchase transaction is executed. The Company recognizes revenue from merchant and network relationships when persuasive evidence of an arrangement exists, the services have been provided to the customer, the sales price is fixed or determinable and collectability is reasonably assured. The Company has entered into agreements with major oil companies and petroleum marketers that specify that a transaction is deemed to be captured when the Company has validated that the transaction has no errors and have accepted and posted the data to the Company’s records.

The Company also derives revenue from customers and partners from a variety of program fees including transaction fees, card fees, network fees, report fees, subscription fees and other transaction-based fees, which typically are calculated based on measures such as percentage of dollar volume processed, number of transactions processed, or some combination thereof. Such services are provided through proprietary networks or through the use of third-party networks. Transaction fees and other transaction-based fees generated from our proprietary networks and third-party networks are recognized at the time the transaction is captured. Card fees, network fees and program fees are recognized as the Company fulfills its contractual service obligations. In addition, the Company recognizes revenue from late fees and finance charges. Such fees are recognized net of a provision for estimated uncollectible amounts, at the time the fees and finance charges are assessed.

The Company also charges its customers transaction fees to load value onto fuel, food, toll and transportation vouchers and cards. The Company recognizes the fee revenue upon providing the activated fuel, food, toll and transportation vouchers and cards to the customer. Revenue is recognized from the processing arrangements with merchants when persuasive evidence of an arrangement exists, the services have been provided, the sales price is fixed or determinable and collectability is reasonably assured. Revenue is recognized on lodging and transportation management services when the lodging stay or transportation service is completed. Revenue is also derived from the sale of equipment in certain of the Company’s businesses, which is recognized at the time the device is sold and the risks and rewards of ownership have passed. This revenue is recognized gross of the cost of sales related to the equipment in revenues, net within the consolidated statements of income. The related cost of sales for the equipment is recorded within processing expenses. The Company has recorded $9.3 million and $4.7 million of expenses related to sales of equipment within the processing expenses line of the consolidated statements of income for the year ended December 31, 2013 and 2012, respectively.

The Company’s fiscal year ends on December 31. In certain of the Company’s U.K. businesses, the Company records the operating results using a 4-4-5 week accounting cycle with the fiscal year ending on the Friday on or immediately preceding December 31. Fiscal years 2013, 2012 and 2011 all include 52 weeks for the businesses reporting using a 4-4-5 accounting cycle.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP). The consolidated financial statements include all normal and recurring adjustments that are necessary for a fair presentation of the Company’s financial position and operating results.

The accompanying consolidated financial statements include the accounts of FleetCor Technologies, Inc. and all of its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Credit Risk and Reserve for Losses on Receivables

The Company controls credit risk by performing periodic credit evaluations of its customers. Payments from customers are generally due within 14 days of billing. The Company routinely reviews its accounts receivable balances and makes provisions for probable doubtful accounts based primarily on the aging of those balances. Accounts receivable are deemed uncollectible and removed from accounts receivable and the allowance for doubtful accounts when internal collection efforts have been exhausted and accounts have been turned over to a third-party collection agency. Recoveries from the third-party collection agency are not significant.

Fair Value Measurements

The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, accounts payable, derivative instruments, notes payable and short and long-term debt. The carrying values for current financial assets and liabilities, including cash and cash equivalents, restricted cash, accounts receivable and accounts payable, approximate their fair values due to the short maturity of such instruments. The fair values of certain of the Company’s short and long-term debt approximates their carrying values as they bear interest at variable rates.

Business Combinations

Business combinations completed by the Company have been accounted for under the acquisition method of accounting. The acquisition method requires that the acquired assets and liabilities, including contingencies, be recorded at fair value determined on the acquisition date and changes thereafter reflected in income. For significant acquisitions, the Company obtains independent third party valuation studies for certain of the assets acquired and liabilities assumed to assist the Company in determining fair value. Goodwill represents the excess of the purchase price over the fair values of the tangible and intangible assets acquired and liabilities assumed. The estimation of the fair values of the assets acquired and liabilities assumed involves a number of estimates and assumptions that could differ materially from the actual amounts recorded. The results of the acquired businesses are included in the Company’s results of operations beginning from the completion date of the applicable transaction.

These estimates are revised during an allocation period as necessary when, and if, information becomes available to further define and quantify the fair value of the assets acquired and liabilities assumed. The allocation period does not exceed one year from the date of the acquisition. To the extent additional information to refine the original allocation becomes available during the allocation period, the allocation of the purchase price is adjusted. Should information become available after the allocation period, those items are adjusted through operating results. The direct costs of the acquisition are recorded as operating expenses. Certain acquisitions include additional contingent consideration related to future earn-outs based on the growth of the market. Contingent earn-outs are recorded at fair value at the date of the acquisition, and are remeasured each reporting period, with any changes in fair value recorded in the consolidated statements of income. The Company estimates the fair value of the acquisition-related contingent consideration using various valuation approaches, as well as significant unobservable inputs, reflecting the Compay’s assessment of the assumptions market participants would use to value these liabilities.

Impairment of Long-Lived Assets and Intangibles

The Company tests its long-lived assets for impairment in accordance with relevant authoritative guidance. The Company evaluates if impairment indicators related to its property, plant and equipment and other long-lived assets are present. These impairment indicators may include a significant decrease in the market price of a long-lived asset or asset group, a significant adverse change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition, or a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group. If impairment indicators are present, the Company estimates the future cash flows for the asset or asset group. The sum of the undiscounted future cash flows attributable to the asset or asset group is compared to its carrying amount. The cash flows are estimated utilizing various projections of revenues and expenses, working capital and proceeds from asset disposals on a basis consistent with the strategic plan. If the carrying amount exceeds the sum of the undiscounted future cash flows, the Company determines the assets’ fair value by discounting the future cash flows using a discount rate required for a similar investment of like risk and records an impairment charge as the difference between the fair value and the carrying value of the asset group. Generally, the Company performs its testing of the asset group at the business-line level, as this is the lowest level for which identifiable cash flows are available.

The Company completes an asset impairment test of goodwill at least annually or more frequently if facts or circumstances indicate that goodwill might be impaired. Goodwill is tested for impairment at the reporting unit level, and the impairment test consists of two steps, as well as a qualitative assessment, as appropriate. The Company has performed a step 0 qualitative assessment of certain of its reporting units. In this qualitative assessment, the Company individually considered the following items for each reporting unit where the Company determined a qualitative analysis to be appropriate: the macroeconomic conditions, including any deterioration of general conditions, limitations on accessing capital, fluctuations in foreign exchange rates and other developments in equity and credit markets; industry and market conditions, including any deterioration in the environment where the reporting unit operates, increased competition, changes in the products/services and regulator and political developments; cost of doing business; overall financial performance, including any declining cash flows and performance in relation to planned revenues and earnings in past periods; other relevant reporting unit specific facts, such as changes in management or key personnel or pending litigation; events affecting the reporting unit, including changes in the carrying value of net assets, likelihood of disposal and whether there were any other impairment considerations within the business; the overall performance of our share price in relation to the market and our peers; and a quantitative stress test of the previously completed step 1 test from the prior year, updated with current year results, weighted-average cost of capital rates and future projections.

The Company completed step 1 of the goodwill impairment testing for certain of our reporting units for which the qualitative assessment was not performed. In this first step, the reporting unit’s carrying amount, including goodwill, is compared to its fair value which is measured based upon, among other factors, a discounted cash

flow analysis, as well as market multiples for comparable companies. If the carrying amount of the reporting unit is greater than its fair value, goodwill is considered impaired and step two must be performed. Step two measures the impairment loss by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit to all the assets and liabilities of that unit (including unrecognized intangibles) as if the reporting unit had been acquired in a business combination. The excess of fair value over the amounts allocated to the assets and liabilities of the reporting unit is the implied fair value of goodwill. The excess of the carrying amount over the implied fair value is the impairment loss.

The Company estimated the fair value of its reporting units using a combination of the income approach and the market approach. The income approach utilizes a discounted cash flow model incorporating management’s expectations for future revenue, operating expenses, earnings before interest, taxes, depreciation and amortization, capital expenditures and an anticipated tax rate. The Company discounted the related cash flow forecasts using our estimated weighted-average cost of capital for each reporting unit at the date of valuation. The market approach utilizes comparative market multiples in the valuation estimate. Multiples are derived by relating the value of guideline companies, based on either the market price of publicly traded shares or the prices of companies being acquired in the marketplace, to various measures of their earnings and cash flow. Such multiples are then applied to the historical and projected earnings and cash flow of the reporting unit in developing the valuation estimate.

Preparation of forecasts and the selection of the discount rates involve significant judgments about expected future business performance and general market conditions. Significant changes in our forecasts, the discount rates selected or the weighting of the income and market approach could affect the estimated fair value of one or more of our reporting units and could result in a goodwill impairment charge in a future period.

Based on the goodwill asset impairment analysis performed quantitatively and qualitatively on October 1, 2013, the Company determined that the fair value of each of our reporting units is in excess of the carrying value. No events or changes in circumstances have occurred since the date of this most recent annual impairment test that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The Company also evaluates indefinite-lived intangible assets (primarily trademarks and trade names) for impairment annually. The Company also tests for impairment if events and circumstances indicate that it is more likely than not that the fair value of an indefinite-lived intangible asset is below its carrying amount. Estimates critical to the Company’s evaluation of indefinite-lived intangible assets for impairment include the discount rate, royalty rates used in its evaluation of trade names, projected average revenue growth and projected long-term growth rates in the determination of terminal values. An impairment charge is recorded if the carrying amount of an indefinite-lived intangible asset exceeds the estimated fair value on the measurement date.

Property, Plant and Equipment and Definite-Lived Intangible Assets

Property, plant and equipment are stated at cost and depreciated on the straight-line basis. Definite-lived intangible assets, consisting primarily of customer relationships, are stated at fair value upon acquisition and are amortized over their estimated useful lives. Customer and merchant relationship useful lives are estimated using historical attrition rates.

The Company develops software that is used in providing processing and information management services to customers. A significant portion of the Company’s capital expenditures are devoted to the development of such internal-use computer software. Software development costs are capitalized once technological feasibility of the software has been established. Costs incurred prior to establishing technological feasibility are expensed as incurred. Technological feasibility is established when the Company has completed all planning, designing, coding and testing activities that are necessary to determine that the software can be produced to meet its design specifications, including functions, features and technical performance requirements. Capitalization of costs

ceases when the software is ready for its intended use. Software development costs are amortized using the straight-line method over the estimated useful life of the software. The Company capitalized software costs of $12.8 million, $10.6 million and $6.5 million in 2013, 2012 and 2011, respectively. Amortization expense for software totaled $7.3 million, $5.7 million and $4.1 million in 2013, 2012 and 2011, respectively.

Income Taxes

The Company accounts for income taxes in accordance with relevant authoritative literature. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the associated temporary differences became deductible. The Company evaluates on a quarterly basis whether it is more likely than not that its deferred tax assets will be realized in the future and concludes whether a valuation allowance must be established.

The Company does not provide deferred taxes for the undistributed earnings of the Company’s foreign subsidiaries that are considered to be indefinitely reinvested outside of the United States in accordance with authoritative literature. The Company includes any estimated interest and penalties on tax related matters in income taxes payable and income tax expense.

Current accounting guidance clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under the relevant authoritative literature, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50 percent likelihood of being sustained.

Cash Equivalents

Cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or less. Restricted cash represents customer deposits repayable on demand.

Foreign Currency Translation

Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at the rates of exchange in effect at period-end. The related translation adjustments are made directly to accumulated other comprehensive income. Income and expenses are translated at the average monthly rates of exchange in effect during the year. Gains and losses from foreign currency transactions of these subsidiaries are included in net income. The Company recognized a foreign exchange loss of $0.4 million for each of the years ended December 31, 2013 and 2012, and foreign exchange gain for the year ended December 31, 2011 of $0.6 million, which are recorded within other income, net in the Consolidated Statements of Income.

Stock-Based Compensation

The Company accounts for employee stock options and restricted stock in accordance with relevant authoritative literature. Stock options are granted with an exercise price estimated to be equal to the fair market value on the date of grant as authorized by the Company’s board of directors. Options granted have vesting provisions ranging

from one to six years and vesting of the options is generally based on the passage of time or performance. Stock option grants are generally subject to forfeiture if employment terminates prior to vesting. The Company has selected the Black-Scholes option pricing model for estimating the grant date fair value of stock option awards granted. The Company has considered the retirement and forfeiture provisions of the options and utilized its historical experience to estimate the expected life of the options. The Company bases the risk-free interest rate on the yield of a zero coupon U.S. Treasury security with a maturity equal to the expected life of the option from the date of the grant. Prior to July 2012, due to the limited time the Company had been public, the Company estimated the volatility of the share price of the Company’s common stock by considering the historical volatility of the stock of similar public entities. In determining the appropriateness of the public entities included in the volatility assumption the Company considered a number of factors, including the entity’s life cycle stage, size, financial leverage, and products offered. Beginning July 1, 2012, the Company began utilizing the volatility of the share price of the Company’s common stock to estimate the volatility assumption for the Black-Scholes option pricing model. Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the requisite service period based on the number of years for which the requisite service is expected to be rendered.

Awards of restricted stock and restricted stock units are independent of stock option grants and are generally subject to forfeiture if employment terminates prior to vesting. The vesting of the shares granted is generally based on the passage of time, performance or market conditions. Shares vesting based on the passage of time have vesting provisions ranging from one to four years. The fair value of restricted stock shares based on performance or time is based on the grant date fair value of the Company’s stock. The fair value of restricted stock shares based on market conditions is estimated using the Monte Carlo option pricing model. The risk-free interest rate and volatility assumptions used within the Monte Carlo option pricing model are calculated consistently with those applied in the Black-Scholes options pricing model utilized in determining the fair value of the stock option awards. For performance-based restricted stock awards, the Company must also make assumptions regarding the likelihood of achieving performance goals. If actual results differ significantly from these estimates, stock-based compensation expense and the Company’s results of operations could be materially affected.

Deferred Financing Costs

Costs incurred to obtain financing, net of accumulated amortization, are amortized over the term of the related debt. In June 2011, the Company wrote-off $1.7 million and $1.0 million in deferred debt issuance costs associated with the extinguishment of the 2005 Facility and CCS Credit Facility, respectively. Additionally, the Company incurred debt issuance costs associated with its new Credit Facility of $7.2 million in June 2011, $3.0 million in November 2012, and $1.4 million in March 2013. At December 31, 2013 and 2012, the Company had net deferred financing costs of $6.8 million and $8.1 million, respectively, which are included in other long term assets in the consolidated Balance Sheets.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the total of net income and all other changes in equity that result from transactions and other economic events of a reporting period other than transactions with owners.

Accounts Receivable

The Company maintains a $500 million revolving trade accounts receivable Securitization Facility. Pursuant to the terms of the Securitization Facility, the Company transfers certain of its domestic receivables, on a revolving basis, to FleetCor Funding LLC (Funding) a wholly-owned bankruptcy remote subsidiary. In turn, Funding sells, without recourse, on a revolving basis, up to $500 million of undivided ownership interests in this pool of accounts receivable to a multi-seller, asset-backed commercial paper conduit (Conduit). Funding maintains a subordinated interest, in the form of over collateralization, in a portion of the receivables sold to the Conduit. Purchases by the Conduit are financed with the sale of highly-rated commercial paper.

The Company utilizes proceeds from the sale of its accounts receivable as an alternative to other forms of debt, effectively reducing its overall borrowing costs. The Company has agreed to continue servicing the sold receivables for the financial institution at market rates, which approximates the Company’s cost of servicing. The Company retains a residual interest in the accounts receivable sold as a form of credit enhancement. The residual interest’s fair value approximates carrying value due to its short-term nature. Funding determines the level of funding achieved by the sale of trade accounts receivable, subject to a maximum amount.

The Company’s consolidated balance sheets and statements of income reflect the activity related to securitized accounts receivable and the corresponding securitized debt, including interest income, fees generated from late payments, provision for losses on accounts receivable and interest expense. The cash flows from borrowings and repayments, associated with the securitized debt, are presented as cash flows from financing activities.

On February 3, 2014, the Company extended the term of its asset securitization facility to February 2, 2015. The Company capitalized $0.5 million in deferred financing fees in connection with this extension.

The Company’s accounts receivable and securitized accounts receivable include the following at December 31 (in thousands):


	2013			2012
Gross domestic accounts receivables	$	107,627		$	96,964
Gross domestic securitized accounts receivable		349,000			298,000
Gross foreign receivables		488,140			447,940

Total gross receivables		944,767			842,904
Less allowance for doubtful accounts		(22,416	)		(19,463	)

Net accounts and securitized accounts receivable	$	922,351		$	823,441

A rollforward of the Company’s allowance for doubtful accounts related to accounts receivable for the years ended December 31 is as follows (in thousands):


	2013			2012			2011
Allowance for doubtful accounts beginning of year	$	19,463		$	15,315		$	14,256
Add:
Provision for bad debts		18,866			21,896			19,226
Less:
Write-offs		(15,913	)		(17,748	)		(18,167	)

Allowance for doubtful accounts end of year	$	22,416		$	19,463		$	15,315

All foreign receivables are Company owned receivables and are not included in the Company’s receivable securitization program. At December 31, 2013 and 2012, there was $349 million and $298 million, respectively, of short-term debt outstanding under the Company’s accounts receivable Securitization Facility.

Purchase of Receivables

The Company recorded a premium on the purchase of receivables in prior years, which represented the amount paid in excess of the fair value of the receivables at the time of purchase. This premium is included in other long-term assets in the Consolidated Balance Sheets and is being amortized over its remaining useful life. At December 31, 2013 and 2012, the remaining net premium on the purchase of receivables was $16.4 million and $19.7 million, respectively.

Advertising

The Company expenses advertising costs as incurred. Advertising expense were $12.3 million, $11.5 million and $8.9 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Earnings Per Share

The Company reports basic and diluted earnings per share. Basic earnings per share is calculated using the weighted average of common stock and non-vested, non-forfeitable restricted shares outstanding, unadjusted for dilution, and net income is adjusted for preferred stock accrued dividends to arrive at income attributable to common shareholders.

Diluted earnings per share is calculated using the weighted average shares outstanding and contingently issuable shares less weighted average shares recognized during the period. The net outstanding shares have been adjusted for the dilutive effect of common stock equivalents, which consist of outstanding stock options and unvested forfeitable restricted stock units.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation in the Consolidated Balance Sheets and Consolidated Statements of Cash Flows.

Adoption of New Accounting Standards

Qualitative Impairment Test for Indefinite-Lived Intangibles

In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2012-02, “Intangibles—Goodwill and Other,” which gives companies the option to first perform a qualitative assessment to determine whether it is more likely than not that an indefinite lived intangible asset is impaired. The proposed guidance is similar to ASU 2011-08 for goodwill. Companies would consider relevant events and circumstances that may affect the significant inputs used in determining the fair value of an indefinite-lived intangible asset. A company that concludes that it is more likely than not that the fair value of such an asset exceeds its carrying amount would not need to calculate the fair value of the asset in the current year. However, if a company concludes that it is more likely than not that the asset is impaired; it must calculate the fair value of the asset and compare that value with its carrying amount, as is required by current guidance. ASU 2012-02 will be applied prospectively for annual and interim impairment tests performed. ASU 2012-02 was effective for and adopted by the Company beginning January 1, 2013. The Company’s adoption of this ASU did not affect the Company’s results of operations, financial condition, or cash flows.

Accumulated Other Comprehensive Income

In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (AOCI)” (ASU 2013-02). Under ASU 2013-02, an entity is required to provide information about the amounts reclassified out of AOCI by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in the financial statements. ASU 2013-02 did not change the current requirements for reporting net income or other comprehensive income in the financial statements. ASU 2013-02 was effective for the Company on January 1, 2013. Since ASU 2013-02 is a disclosure-only standard, its adoption did not affect the Company’s results of operations, financial condition, or cash flows. The Company has not reclassified any items out of AOCI to the statement of income during the year ended December 31, 2013.

Disclosures about Offsetting Assets and Liabilities

In December 2011, the FASB issued FASB ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities,” which requires entities to disclose information about offsetting and related arrangements to enable users of financial statements to understand the effect of those arrangements on an entity’s financial position. The amendments require enhanced disclosures about financial instruments and derivative instruments that are either (i) offset in accordance with current literature or (ii) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with current literature. ASU 2011-11 is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. This standard was effective for the Company beginning October 1, 2013. In January 2013, the FASB issued Accounting Standards Update 2013-01, Scope Clarification of Disclosures about Offsetting Assets and Liabilities, to limit the scope of the new balance sheet offsetting disclosure requirements to derivatives (including bifurcated embedded derivatives), repurchase agreements and reverse repurchase agreements, and securities borrowing and lending transactions. As the Company is not party to any derivatives, repurchase agreements, reverse repurchase agreements, securities borrowing and lending transactions the adoption of these standards did not have a material impact on the presentation of the Company’s disclosures within our financial statements.

Pending Adoption of Recently Issued Accounting Standards

From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company’s management believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption.

Foreign Currency

In March 2013, the FASB issued ASU 2013-05 “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity”, which indicates that the entire amount of a cumulative translation adjustment (“CTA”) related to an entity’s investment in a foreign entity should be released when there has been a sale of a subsidiary or group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in the foreign entity, loss of a controlling financial interest in an investment in a foreign entity (i.e., the foreign entity is deconsolidated) or step acquisition for a foreign entity (i.e., when an entity has changed from applying the equity method for an investment in a foreign entity to consolidating the foreign entity). The ASU does not change the requirement to release a pro rata portion of the CTA of the foreign entity into earnings for a partial sale of an equity method investment in a foreign entity. This ASU is effective for the Company for fiscal years and interim periods within those fiscal years beginning on or after December 15, 2013. The Company’s adoption of this ASU is not expected to affect the Company’s results of operations, financial condition, or cash flows unless transactions within the scope of the ASU occur.

Unrecognized Tax Benefit When an NOL Exists

In July 2013, the FASB issued ASU 2013-11 “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”, which indicates that to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This ASU is effective for the Company for fiscal years and interim periods within those fiscal years beginning on or after December 15, 2013. The Company’s adoption of this ASU is not expected to affect the Company’s results of operations, financial condition, or cash flows unless transactions within the scope of the ASU occur.

3. Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis. The carrying value of the Company’s cash, accounts receivable, securitized accounts receivable and related facility, prepaid expenses and other current assets, accounts payable, accrued expenses, customer deposits and short-term borrowings approximate their respective carrying values due to the short-term maturities of the instruments. The carrying value of the Company’s debt obligations approximates fair value as the interest rates on the debt are variable market based interest rates that reset on a quarterly basis.

The Company’s nonfinancial assets which are measured at fair value on a nonrecurring basis include property, plant and equipment, goodwill and other intangible assets. As necessary, the Company generally uses projected cash flows, discounted as appropriate under the relevant guidance, to estimate the fair values of the assets using key inputs such as management’s projections of cash flows on a held-and-used basis (if applicable), management’s projections of cash flows upon disposition and discount rates. Accordingly, these fair value measurements fall in Level 3 of the fair value hierarchy. These assets and certain liabilities are measured at fair value on a nonrecurring basis as part of the Company’s annual impairment assessments and as circumstances require.

Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). These valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions.

As the basis for evaluating such inputs, a three-tier value hierarchy prioritizes the inputs used in measuring fair value as follows:

	•		Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.

	•		Level 2: Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

	•		Level 3: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

We have highly liquid investments classified as cash equivalents, with original maturities of 90 days or less, included in our consolidated balance sheets. Level 2 fair value determinations are derived from directly or indirectly observable (market based) information. Such inputs are the basis for the fair values of the Company’s derivative instruments. The Company has certain cash and cash equivalents that are invested on an overnight basis in repurchase agreements. The value of overnight repurchase agreements is determined based upon the quoted market prices for the treasury securities associated with the repurchase agreements. Certificates of deposit are valued at cost, plus interest accrued. Given the short term nature of these instruments, the carrying value approximates fair value.

The Company estimated the fair value of acquisition-related contingent consideration using various valuation approaches including the Monte Carlo Simulation approach and the probability-weighted discounted cash flow approach. Acquisition-related contingent consideration liabilities are classified as Level 3 liabilities because the Company uses unobservable inputs to value them, reflecting the Company’s assessment of the assumptions market participants would use to value these liabilities. Changes in the fair value of contingent consideration are recorded as income or expense in the consolidated statements of operations.

The following table presents the Company’s financial assets and liabilities which are measured at fair values on a recurring basis and that are subject to the disclosure requirements of the authoritative guidance as of December 31, 2013 and 2012 (in thousands).


	Fair Value		Level 1		Level 2		Level 3
December 31, 2013
Assets:
Repurchase agreements	$	162,126	$	—	$	162,126	$	—
Certificates of deposit		9,038		—		9,038		—

Total cash equivalents	$	171,164	$	—	$	171,164	$	—
Liabilities:
Acquisition related contingent consideration	$	80,476	$	—	$	—	$	80,476
December 31, 2012
Assets:
Repurchase agreements	$	128,269	$	—	$	128,269	$	—
Certificates of deposit		11,849		—		11,849		—

Total cash equivalents	$	140,118	$	—	$	140,118	$	—

4. Stock Transactions

Common Stock

On November 26, 2012, the Company entered into a stock repurchase agreement (the “Repurchase Agreement”) with investment funds associated with Summit Partners and Bain Capital (the “Repurchase Stockholders”), related party affiliates, to repurchase up to $200,000,000 of shares of the Company’s common stock directly from the Repurchase Stockholders (the “Share Repurchase”) in a private transaction at a price per share equal to the price paid by the underwriter in the underwritten secondary offering announced on November 26, 2012 by the Company.

The Company repurchased approximately 3.9 million shares of its common stock from the Repurchase Stockholders at $51.91 per share. The repurchase of shares from the Repurchase Stockholders was approved pursuant to the Company’s policy regarding related party transactions. The Company funded the Share Repurchase with borrowings under its credit facilities. The repurchased shares are included with Treasury Stock within the Consolidated Balance Sheets.

5. Share Based Compensation

The Company accounts for stock-based compensation pursuant to relevant authoritative guidance, which requires measurement of compensation cost for all stock awards at fair value on the date of grant and recognition of compensation, net of estimated forfeitures, over the requisite service period for awards expected to vest. The Company has Equity Compensation Plans (the Plans) pursuant to which the Company’s board of directors may grant stock options or restricted stock to employees. The Company is authorized to issue grants of restricted stock and stock options to purchase up to 26,963,150 shares for the years ended December 31, 2013, 2012 and 2011, respectively. On May 13, 2013, the Company’s stockholders authorized an increase of 6,500,000 shares of common stock available for grant pursuant to the 2010 Equity Compensation Plan. Giving effect to this increase, there were 6,837,714 additional shares remaining available for grant under the Plans at December 31, 2013.

The table below summarizes the expense related to share-based payments for the years ended December 31 (in thousands):


	2013		2012		2011
Stock options	$	11,677	$	10,341	$	9,654
Restricted stock		14,999		8,934		12,089

Stock-based compensation	$	26,676	$	19,275	$	21,743

The tax benefits recorded on stock based compensation were $9.8 million, $6.8 million and $7.2 million for the years ended December 31, 2013, 2012 and 2011, respectively.

The following table summarizes the Company’s total unrecognized compensation cost related to stock-based compensation as of December 31, 2013:


	Unrecognized Compensation Cost		Weighted Average Period of Expense Recognition (in Years)
Stock options	$	22,492		1.71
Restricted stock		22,312		1.04

Total	$	44,804

In connection with making fair value estimates related to the Company’s stock option and restricted stock grants prior to the initial public offering, management considered various factors including third-party equity transactions and certain commonly used valuation techniques. The Company sold convertible preferred stock to third parties in 2005, 2006 and 2009. In addition, in 2007 the Company repurchased common stock and preferred stock from the holders at a negotiated value which the Company believed represented fair value. These third-party transactions served as a basis for determining the fair value of our common stock at various dates. In situations where the Company sold preferred stock that included conversion and dividend features the Company considered such features in those instruments and the fact that such instruments could not be freely traded in determining a fair value for its common stock. Generally, the Company concluded that the fair value of its common stock was 10% to 25% less than the preferred stock at the date of such third-party transactions due to the features attributable to the preferred stock holders. In periods prior to third-party transactions and in intervening periods subsequent to the third-party transactions the Company utilized various earnings and revenue multiples to estimate the fair value of its common stock or to serve as an additional factor in determining fair value.

Stock Options

Stock options are granted with an exercise price estimated to be equal to the fair market value on the date of grant, as authorized by the Company’s board of directors. Options granted have vesting provisions ranging from one to six years. Stock option grants are generally subject to forfeiture if employment terminates prior to vesting. The Company issues new shares upon stock option exercises.

The following summarizes the changes in the number of shares of common stock under option for the following periods (shares and aggregate intrinsic value in thousands):


	Shares			Weighted Average Exercise Price		Options Exercisable at End of Year		Weighted Average Exercise Price of Exercisable Options		Weighted Average Fair Value of Options Granted During the Year		Aggregate Intrinsic Value
Outstanding at December 31, 2010		10,229		$	12.79		5,168	$	6.06			$	128,472
Granted		526			30.56					$	9.72
Exercised		(2,008	)		4.51								50,921
Forfeited		(406	)		20.96

Outstanding at December 31, 2011		8,341			15.51		4,394		10.13				119,802
Granted		1,223			36.94						10.82
Exercised		(2,925	)		9.38								129,488
Forfeited		(74	)		20.43

Outstanding at December 31, 2012		6,565			22.17		2,666		14.71				206,636
Granted		307			80.77						23.00
Exercised		(1,425	)		21.13								136,807
Forfeited		(116	)		28.68

Outstanding at December 31, 2013		5,331			25.68		2,589		16.57				487,673
Vested and expected to vest at December 31, 2013		5,331		$	25.68

The following table summarizes information about stock options outstanding at December 31, 2013 (shares in thousands):


Exercise Price	Options Outstanding		Weighted Average Remaining Vesting Life in Years		Options Exercisable
$1.20 – 6.548		517		—		517
10.00 – 14.00		832		—		832
18.00 – 20.00		287		1.00		142
23.00		1,980		1.38		754
27.83 – 34.72		290		1.44		108
35.04 – 40.65		1,070		2.48		236
47.63 – 58.02		108		2.96		—
74.99 – 87.61		212		3.46		—
111.09		35		3.81		—

		5,331				2,589

The aggregate intrinsic value of options exercisable at December 31, 2013 was $260 million. The weighted average remaining contractual term of options exercisable at December 31, 2013 was 5.6 years.

The fair value of stock option awards granted was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions for the years ended December 31 as follows:


	2013			2012			2011
Risk-free interest rate		0.76	%		0.59	%		1.47	%
Dividend yield		—			—			—
Expected volatility		34.95	%		36.49	%		37.83	%
Expected life (in years)		4.00			4.00			4.03

The Company considered the retirement and forfeiture provisions of the options and utilized its historical experience to estimate the expected life of the options.

Prior to July 2012, due to the limited time the Company had been public, the Company estimated the volatility of the share price of the Company’s common stock by considering the historical volatility of the stock of similar public entities. In determining the appropriateness of the public entities included in the volatility assumption the Company considered a number of factors, including the entity’s life cycle stage, size, financial leverage, and products offered. Beginning July 1, 2012, the Company began utilizing the volatility of the share price of the Company’s common stock to estimate the volatility assumption for the Black-Scholes option pricing model.

The risk-free interest rate is based on the yield of a zero coupon U.S. Treasury security with a maturity equal to the expected life of the option from the date of the grant.

The weighted-average remaining contractual life for options outstanding was 6.7 and 7.4 years at December 31, 2013 and 2012, respectively.

Restricted Stock

The fair value of restricted stock shares based on market conditions was estimated using the Monte Carlo option pricing model with the following assumptions during 2013 and 2011. There were no restricted stock shares granted based on market conditions in 2012.


	2013			2011
Risk-free interest rate		0.42	%		1.25	%
Dividend yield		—			—
Expected volatility		30.00	%		37.00	%
Expected life (in years)		1.75			0.63

The risk-free interest rate and volatility assumptions were calculated consistently with those applied in the Black-Scholes options pricing model utilized in determining the fair value of the stock option awards.

The following table summarizes the changes in the number of shares of restricted stock and restricted stock units for the following periods (shares in thousands):


	Shares			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2010		1,250		$	21.93
Granted		261			31.08
Cancelled		(50	)		21.00
Sold/issued		(621	)		23.12

Outstanding at December 31, 2011		840			23.15
Granted		131			41.69
Cancelled		(25	)		33.49
Issued		(474	)		22.05

Outstanding at December 31, 2012		472			28.98
Granted		358			92.16
Cancelled		(31	)		35.42
Issued		(165	)		30.93

Outstanding at December 31, 2013		634		$	67.83

6. Acquisitions

2013 Acquisitions

During 2013, the Company completed acquisitions with an aggregate purchase price of $848.2 million, net of cash acquired of $35.6 million, including deferred payments of $36.8 million and the estimated fair value of contingent earn out payments of $83.1 million.

For certain acquisitions in 2013, the consideration transferred includes contingent consideration based on achieving specific financial metrics in future periods. The contingent consideration agreements (the “agreements”) require the Company to pay the respective prior owners if earnings before interest, taxes, depreciation and amortization (EBITDA) and revenues grow at a specified rate over the most recent corresponding specified period, based on a sliding scale, and expense growth does not exceed a specified amount during a specified time period. The potential future payments that the Company could be required to make related to these contingent consideration agreements ranges from $0 to $117.3 million. The fair value of the arrangements included in the purchase price allocations was estimated using a Monte Carlo Simulation approach and the probability-weighted discounted cash flow approach and considered historic expenses, historic EBITDA and revenue growth and current projections for the respective acquired entities. The Company recorded $83.1 million of contingent consideration, which is payable in the second half of 2014. As the payments are due within one year of the date of acquisition, the Company did not apply a discount rate to the potential payments. Any changes to the contingent consideration ultimately paid or any changes in the fair value of such amounts would result in additional income or expense in the consolidated Statements of Income.

Fleet Card

On March 25, 2013, the Company acquired certain fuel card assets from GE Capital Australia’s Custom Fleet leasing business. The consideration for the transaction was paid using the Company’s existing cash and credit facilities. GE Capital’s “Fleet Card” is a multi-branded fuel card product with acceptance in over 6,000 fuel outlets and over 7,000 automotive service and repair centers across Australia. Through this transaction, the Company acquired the Fleet Card product, brand, acceptance network contracts, supplier contracts, and approximately one-third of the customer relationships with regards to fuel cards (together, “Fleet Card”). The

remaining customer relationships will be retained by Custom Fleet, and are comprised of companies which have commercial relationships with Custom Fleet beyond fueling, such as fleet management and leasing. The purpose of this acquisition was to establish the Company’s presence in the Australian marketplace. Results from the acquired business have been reported in the Company’s International segment since the date of acquisition. This business acquisition was not material individually or in the aggregate with other current year acquisitions to the Company’s consolidated financial statements. The goodwill related to this acquisition is not deductible for tax purposes.

CardLink

On April 29, 2013, the Company acquired all of the outstanding stock of CardLink. The consideration for the transaction was paid using the Company’s existing cash and credit facilities. CardLink provides a proprietary fuel card program with acceptance at retail fueling stations across New Zealand. CardLink markets its fuel cards directly to mostly small-to-midsized businesses, and provides processing and outsourcing services to oil companies and other partners. With this transaction, the Company entered into a $12.0 million New Zealand dollar ($9.8 million) revolving line of credit, which will be used to fund the working capital needs of the CardLink business. The purpose of this acquisition was to enter the Australia and New Zealand regions and follows the Company’s recent purchase of GE Capital’s Fleet Card business in Australia. Results from the acquired business have been reported in the Company’s International segment since the date of acquisition. This business acquisition was not material individually or in the aggregate with other current year acquisitions to the Company’s consolidated financial statements. The goodwill related to this acquisition is not deductible for tax purposes.

On August 9, 2013, the Company acquired all of the outstanding stock of VB Servicos, Comercio e Administracao LTDA (“VB”), a provider of transportation cards and vouchers in Brazil. The consideration for the transaction was paid using the Company’s existing cash and credit facilities. VB is a provider of transportation cards in Brazil where employers are required by legislation to provide certain employees with prepaid public transportation cards to subsidize their commuting expenses. VB serves over 35,000 business clients and supports approximately 800 transportation agencies across Brazil. VB also markets food cards. The purpose of this acquisition was to strengthen the Company’s presence in the Brazilian marketplace. Results from the acquired business have been reported in the Company’s International segment since the date of acquisition. This business acquisition was not material individually or in the aggregate with other current year acquisitions to the Company’s consolidated financial statements. The goodwill related to this acquisition is deductible for tax purposes. The purchase price allocation related to this acquisition is preliminary as the Company is still completing the valuation for intangible assets and certain acquired contingencies and the working capital adjustment period remains open.

Epyx

On October 1, 2013, the Company acquired all of the outstanding stock of Epyx, a provider to the fleet maintenance, service and repair marketplace in the UK. Epyx provides an internet based system and a vehicle repair network of approximately 9,000 service garages to fleet operators in the UK. The Epyx service helps its customers better manage their vehicle maintenance, service, and repair needs. The Epyx service automates repair authorization, schedules service appointments, controls costs, and simplifies overall vehicle service administration. Epyx earns transaction fees on each of the millions of service incidents that it supports each year. The purpose of this acquisition is to allow the Company to extend beyond fleet fueling, in the UK marketplace, to fleet maintenance services, a complementary service to existing fleet customers. Results from the acquired business have been reported in the Company’s International segment since the date of acquisition. This business acquisition was not material individually or in the aggregate with other current year acquisitions to the Company’s consolidated financial statements. The goodwill acquired with this business is not deductible for tax

purposes. The purchase price allocation related to this acquisition is preliminary as the Company is still completing the valuation for intangible assets and the working capital adjustment period remains open.

On October 15, 2013, the Company acquired all of the outstanding stock of DB Trans S.A. (“DB”), a provider of payment solutions for independent truckers in Brazil. The purpose of this acquisition is to strengthen the Company’s presence in the Brazilian marketplace. Results from the acquired business have been reported in the Company’s International segment since the date of acquisition. This business acquisition was not material individually or in the aggregate with other current year acquisitions to the Company’s consolidated financial statements. The goodwill acquired with this business is not deductible for tax purposes. The purchase price allocation related to this acquisition is preliminary as the Company is still completing the valuation for intangible assets and the working capital adjustment period remains open.

NexTraq

On October 17, 2013, the Company acquired all of the outstanding stock of NexTraq, a U.S. based provider of telematics solutions to small and mid-sized businesses. NexTraq provides fleet operators with an internet based system that enhances workforce productivity through real time vehicle tracking, route optimization, job dispatch, and fuel usage monitoring, and has 100,000 active subscribers. The purpose of this acquisition is to provide the Company with a cross marketing opportunity due to the similarity of the commercial fleet customer base. Results from the acquired business have been reported in the Company’s North America segment since the date of acquisition. This business acquisition was not material individually or in the aggregate with other current year acquisitions to the Company’s consolidated financial statements. The goodwill acquired with this business is not deductible for tax purposes. The purchase price allocation related to this acquisition is preliminary as the Company is still completing the valuation for intangible assets and the working capital adjustment period remains open.

2013 Totals

Giving effect to acquisitions described above and assuming each occurred on January 1, 2012, consolidated revenues for the years ended December 31, 2013 and 2012, would have been approximately 12% and 21% higher (unaudited) than reported, respectively. Additionally, income before taxes, net income, basic earnings per share and diluted earnings per share for the years ended December 31, 2013 and 2012, each would have been 3% higher (unaudited) than reported.

The following table summarizes the preliminary allocation of the purchase price for all acquisitions during 2013 (in thousands):


Trade and other receivables	$	71,754
Prepaid expenses and other		12,555
Property and equipment		5,791
Other long term assets		52,885
Goodwill		646,556
Other intangible assets		470,342
Notes and other liabilities assumed		(278,417	)
Deferred tax liabilities		(78,261	)
Other long term liabilities		(55,001	)

Aggregate purchase prices	$	848,204

Intangible assets allocated in connection with the purchase price allocations consisted of the following (in thousands):


	Weighted Average Useful Lives (in Years)		Value
Customer relationships		3 – 20	$	366,072
Trade names and trademarks—indefinite		N/A		46,900
Trade names and trademarks		15		200
Merchant network		10		5,280
Software		3 – 10		36,890
Non-competes		5		15,000

			$	470,342

Goodwill recognized is comprised primarily of expected synergies from combining the operations of the Company and the acquired businesses. The Company incurred and expensed acquisition related costs of $6.0 million in 2013, which are included within general and administrative expenses in the Consolidated Statement of Income for the year ended December 31, 2013. Included within the purchase price allocation above for 2013 are certain indemnification assets and liabilities related to acquired businesses.

In connection with 2013 acquisitions, the Company recorded uncertain tax positions aggregating $15.3 million and contingent liabilities aggregating $55.0, which are included in accrued expenses and other long term liabilities in the consolidated balance sheet, respectively. A portion of these acquired liabilities have been indemnified by the respective sellers. As a result, an indemnification asset of $52.6 million was recorded, of which $2.5 million is included with prepaid expense and other and $50.1 million is included with other long term assets in the consolidated balance sheet. The potential range of acquisition related contingent liabilities that the Company estimates would be incurred and ultimately recoverable, and for which we have recorded indemnification assets in the consolidated balance sheet, is $48.5 million to $52.6 million.

2012 Acquisitions

During 2012, the Company completed several foreign acquisitions with an aggregate purchase price of $207.4 million, net of cash acquired, which includes deferred payments of $11.3 million and contingent earn-out payments of $4.9 million. The Company has estimated the fair value of remaining payments related to this earn out of $0.9 million at December 31, 2013.

Russian Fuel Card Company

On June 15, 2012, the Company acquired all of the outstanding stock of a leading Russian fuel card company. The consideration for the transaction was paid using the Company’s existing cash and credit facilities. In connection with the transaction, a final payment of $11.3 million was paid in December 2013. This deferred payment is included in current portion of notes payable and other obligations, within the consolidated balance sheet. The acquired company is a Russian leader in fuel card systems and serves major oil clients and hundreds of independent fuel card issuers. Its technology allows issuers to share their retail network, thereby expanding the reach of their networks. Results from the acquired Russian business have been reported in the Company’s International segment since the date of acquisition. The purpose of this acquisition was to further expand the Company’s presence in the Russian fuel card marketplace. This business acquisition was not material to the Company’s consolidated financial statements. Goodwill recognized is comprised primarily of expected synergies from combining the operations of the Company and the Russian fuel card company. This business acquisition was not material individually or in the aggregate with other current year acquisitions to the Company’s consolidated financial statements. The goodwill acquired with this business is not deductible for tax purposes.

CTF Technologies, Inc.

On July 3, 2012, the Company acquired all of the outstanding stock of CTF Technologies, Inc. (“CTF”), a British Columbia organization, for $156 million. The consideration for the transaction was paid using the Company’s existing cash and credit facilities. CTF Technologies Do Brasil Ltda and certain of the Company’s other subsidiaries are wholly-owned entities of CTF. The acquisition was carried out pursuant to a plan of arrangement under the Business Corporations Act (British Columbia) and was approved by final order of the Supreme Court of British Columbia. The purpose of the transaction was to establish the Company’s presence in the Brazilian marketplace.

CTF provides fuel payment processing services for over-the-road fleets, ships, mining equipment, and railroads in Brazil. CTF’s payment platform links together fleet operators, banks, and oil companies. CTF earns revenue primarily from a recurring transaction fee paid by the oil companies who purchase services for their fleet customers under multi-year customer contracts. This business acquisition was not material individually or in the aggregate with other current year acquisitions to the Company’s consolidated financial statements. The goodwill acquired with this business is not deductible for tax purposes.

2012 Totals

The following table summarizes the allocation of the purchase price for all acquisitions during 2012, net of cash acquired (in thousands):


Trade and other receivables	$	13,197
Prepaid expenses and other		6,014
Property and equipment		6,701
Goodwill		165,477
Other intangible assets		109,782
Notes and other liabilities assumed		(42,845	)
Deferred tax liabilities		(50,936	)

Aggregate purchase prices	$	207,390

The purchase price is net of cash and cash equivalents acquired, totaling $1.9 million, and also includes deferred payments of $11.3 million and a contingent earn-out payment of $4.9 million.

Intangible assets allocated in connection with the purchase price allocations consisted of the following (in thousands):


	Weighted Average Useful Lives (in Years)		Value
Customer relationships		10 – 20	$	77,678
Trade names and trademarks—indefinite		N/A		16,900
Merchant network		10		4,604
Software		3 – 10		9,800
Non-compete		2 – 6		800

			$	109,782

Goodwill recognized is comprised primarily of expected synergies from combining the operations of the Company and the acquired businesses. The Company incurred acquisition related costs of $2.5 million in 2012, which are included within general and administrative expenses in the Consolidated Statements of Income. These acquisitions did not materially affect revenues and earnings during 2012.

2011 Acquisitions

During 2011, the Company completed several foreign acquisitions with an aggregate purchase price of $333.8 million, net of cash acquired.

Mexican Prepaid Fuel Card and Food Voucher business

In August 2011, the Company acquired all of the stock of Efectivale, a prepaid fuel card and food voucher company in Mexico. The acquired company provides fuel and food card/voucher services to businesses and governmental entities in Mexico and serves over 10,000 businesses, with over 800,000 cardholders and beneficiaries. Purchases are predominately prepaid and revenues are earned both from customers and merchants. Results from the acquired Mexico business are reported in our International segment since the date of acquisition. This business acquisition was not material to the Company’s consolidated financial statements and accordingly, the Company has not provided pro forma information relating to this acquisition. This business acquisition was not material individually or in the aggregate with other current year acquisitions to the Company’s consolidated financial statements. The goodwill acquired with this business is not deductible for tax purposes.

Allstar Business Solutions Limited

On December 13, 2011, the Company acquired all of the outstanding stock of Allstar Business Solutions Limited (Allstar) in the United Kingdom. The purpose of the transaction was to expand the Company’s European commercial fleet card offerings. Results from Allstar have been reported in the Company’s International Segment since the date of acquisition. The total consideration for this acquisition was £200 million, or approximately $312 million, including amounts applied at the closing to the repayment of Allstar’s debt. The consideration for the transaction was paid using FleetCor’s existing cash and credit facilities.

The following table summarizes the allocation of the purchase price for Allstar (in thousands):


Trade and other receivables	$	253,628
Prepaid expenses and other		139
Property and equipment		601
Goodwill		106,279
Other intangible assets		168,200
Notes and other liabilities assumed		(176,326	)
Deferred tax liabilities		(40,357	)

Purchase price	$	312,164

Intangible assets allocated in connection with the purchase price allocation consisted of the following (in thousands):


	Weighted Average Useful Lives (in Years)		2011 Acquisitions
Customer relationships		10 – 20	$	141,600
Trade names and trademarks—indefinite		N/A		18,400
Merchant network		20		8,200

			$	168,200

Goodwill recognized is comprised primarily of expected synergies from combining the operations of the Company and the acquired business. The goodwill acquired with this business is not deductible for tax purposes.

7. Goodwill and Other Intangible Assets

A summary of changes in the Company’s goodwill by reportable business segment is as follows (in thousands):


	December 31, 2012		Acquisitions		Purchase Price Adjustments		Foreign Currency			December 31, 2013
Segment
North America	$	276,714	$	89,880	$	—	$	—		$	366,594
International		649,895		556,676		80		(20,520	)		1,186,131

	$	926,609	$	646,556	$	80	$	(20,520	)	$	1,552,725


	December 31, 2011		Acquisitions		Purchase Price Adjustments		Foreign Currency		December 31, 2012
Segment
North America	$	276,714	$	—	$	—	$	—	$	276,714
International		484,022		165,398		35		440		649,895

	$	760,736	$	165,398	$	35	$	440	$	926,609

Goodwill and other intangible asset purchase price adjustments in 2013 and 2012 are related to working capital adjustments in prior year foreign acquisitions. At December 31, 2013 and 2012, approximately $412.7 million and $238 million of the Company’s goodwill is deductible for tax purposes, respectively.

Other intangible assets consisted of the following at December 31 (in thousands):


			2013							2012
	Useful Lives (Years)		Gross Carrying Amounts		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amounts		Accumulated Amortization			Net Carrying Amount
Customer and vendor agreements		3 to 20	$	850,809	$	(134,998	)	$	715,811	$	487,718	$	(90,920	)	$	396,798
Trade names and trademarks—indefinite lived		N/A		99,690		—			99,690		53,926		—			53,926
Trade names and trademarks—other		3 to 15		3,341		(1,635	)		1,706		3,160		(1,420	)		1,740
Software		3 to 10		47,778		(9,090	)		38,688		15,330		(5,208	)		10,122
Non-compete agreements		2 to 5		18,499		(3,131	)		15,368		3,271		(1,993	)		1,278

Total other intangibles			$	1,020,117	$	(148,854	)	$	871,263	$	563,405	$	(99,541	)	$	463,864

Amortization expense related to intangible assets for the years ended December 31, 2013, 2012 and 2011, was $49.3 million, $32.4 million and $19.6 million, respectively.

The future estimated amortization of intangibles at December 31, 2013 is as follows (in thousands):


2014	$	71,949
2015		71,485
2016		70,633
2017		68,130
2018		64,256
Thereafter		425,120

8. Property, Plant and Equipment

Property, plant and equipment, net consisted of the following at December 31 (in thousands):


	Estimated Useful Lives (in Years)	2013			2012
Computer hardware and software	3 to 7	$	78,460		$	65,988
Card-reading equipment	5		12,649			10,218
Furniture, fixtures, and vehicles	3 to 6		9,420			7,986
Buildings and improvements	10 to 30		10,571			9,710

Property, plant and equipment, gross			111,100			93,902
Less: accumulated depreciation			(57,144	)		(48,706	)

Property, plant and equipment, net		$	53,956		$	45,196

Depreciation expense related to property and equipment for the years ended December 31, 2013, 2012 and 2011 was $16.9 million $14.1 million and $11.5 million, respectively. Depreciation expense includes $7.3 million, $5.7 million and $4.1 million, for capitalized computer software costs for the years ended December 31, 2013, 2012 and 2011, respectively. At December 31, 2013 and 2012, the Company had unamortized computer software costs of $24.6 million and $19.0 million, respectively.

9. Accrued Expenses

Accrued expenses consisted of the following at December 31 (in thousands):


	2013		2012
Accrued bonuses	$	7,912	$	6,980
Accrued interest		314		65
Accrued payroll		3,640		1,977
Accrued taxes		63,202		48,792
Other		39,802		17,998

	$	114,870	$	75,812

10. Debt

The Company’s debt instruments at December 31 consist primarily of term notes, revolving lines of credit and a Securitization Facility as follows (in thousands):


	2013		2012
Term note payable—domestic(a)	$	496,875	$	525,000
Revolving line of credit A Facility—domestic(a)		425,000		100,000
Revolving line of credit A Facility—foreign(a)		202,839		—
Revolving line of credit B Facility—foreign(a)		7,099		—
Revolving line of credit—New Zealand(c)		—		—
Other debt(d)		5,565		2,092

Total notes payable and other obligations		1,137,378		627,092
Securitization facility(b)		349,000		298,000

Total notes payable, credit agreements and Securitization Facility	$	1,486,378	$	925,092

Current portion	$	1,011,439	$	439,875
Long-term portion		474,939		485,217

Total notes payable, credit agreements and Securitization Facility	$	1,486,378	$	925,092

(a)

The Company entered into a Credit Agreement on June 22, 2011. On March 13, 2012, the Company 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, the Company 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. As amended, the Credit Agreement provides for a $550 million term loan facility and an $850 million revolving credit facility. On March 20, 2013, the Company 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 a designated borrower in Australia and another in New Zealand 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. Interest ranges from the sum of the Base Rate plus 0.25% to 1.25% or the Eurodollar Rate plus 1.25% to 2.25%. In addition, the Company pays a quarterly commitment fee at a rate per annum ranging from 0.20% to 0.40% of the daily unused portion of the Facility. The term note is payable in quarterly installments and is 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. This facility is referred to as the Credit Facility. Principal payments of $28.1 million were made on the term loan during 2013. This facility includes a foreign currency swing line of credit on which the Company borrowed funds during the periods presented. The Company did not have an outstanding unpaid balance on the foreign currency swing line of credit at December 31, 2013 or 2012.

(b)	The Company is party to a $500 million receivables purchase agreement (Securitization Facility) that was amended for the tenth time on February 3, 2014 to extend the facility termination date to February 2, 2015, to change pricing and to return to prorate funding by the participating banks. There is a program fee equal to

one month Libor and the Commercial Paper Rate of 0.24% plus 0.75% and 0.17% plus 0.675% as of December 31, 2012 and 2013, respectively. The unused facility fee is payable at a rate of 0.35% per annum as of December 31, 2012 and 0.30% per annum as of December 31, 2013. As of February 3, 2014, the Program fee is equal to one month Libor and the Commercial Paper Rate plus 0.65% and an unused facility fee of 0.25% per annum if utilization is greater than 75% or 0.30% per annum if utilization is less than 75%. 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.

(c)

In connection with the Company’s acquisition in New Zealand, the Company entered into a $12 million New Zealand dollar ($9.8 million) facility that is used for local working capital needs. This facility is a one year facility that matures on April 30, 2014. A line of credit charge of 0.025% times the facility limit is charged each month plus interest on outstanding borrowings is charged at the Bank Bill Mid-Market (BKBM) settlement rate plus a margin of 1.0%. The Company did not have an outstanding unpaid balance on this facility at December 31, 2013.

(d)	Other debt includes other deferred liabilities associated with certain of our businesses and is recorded within notes payable and other obligations, less current portion in the consolidated Balance Sheets.

The Company was in compliance with all financial covenants at December 31, 2013.

The contractual maturities of the Company’s notes payable at December 31, 2013 are as follows (in thousands):


2014	$	662,439
2015		56,632
2016		57,300
2017		111,340
2018		249,534
Thereafter		133

11. Income Taxes

Income before the provision for income taxes is attributable to the following jurisdictions (in thousands) for years ended December 31:


	2013		2012		2011
United States	$	205,033	$	186,301	$	144,928
Foreign		198,536		124,489		65,949

Total	$	403,569	$	310,790	$	210,877

The provision (benefit) for income taxes for the years ended December 31 consists of the following (in thousands):


	2013			2012			2011
Current:
Federal	$	72,909		$	62,886		$	45,817
State		7,369			4,551			2,578
Foreign		46,026			29,551			17,375

Total current		126,304			96,988			65,770
Deferred:
Federal		(1,287	)		2,295			1,538
State		130			417			132
Foreign		(6,079	)		(5,109	)		(3,898	)

Total deferred		(7,236	)		(2,397	)		(2,228	)

Total provision	$	119,068		$	94,591		$	63,542

The provision for income taxes differs from amounts computed by applying the U.S. federal tax rate of 35% to income before income taxes for the years ended December 31 due to the following (in thousands):


	2013					2012					2011
Computed “expected” tax expense	$	141,249		35.00	%	$	108,777		35.00	%	$	73,807		35.00	%
Changes resulting from:
Foreign income tax differential		(16,021	)	(3.97	)		(11,695	)	(3.76	)		(8,333	)	(3.95	)
State taxes net of federal benefits		4,744		1.18			3,858		1.24			1,923		0.91
Foreign-sourced nontaxable income		(11,967	)	(2.97	)		(8,840	)	(2.84	)		(4,423	)	(2.10	)
Other		1,063		0.26			2,491		0.76			568		0.27

Provision for income taxes	$	119,068		29.50	%	$	94,591		30.40	%	$	63,542		30.13	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31 are as follows (in thousands):


	2013			2012
Deferred tax assets:
Accounts receivable, principally due to the allowance for doubtful accounts	$	4,451		$	4,028
Accrued expenses not currently deductible for tax		—			2,257
Stock based compensation		12,022			8,226
Foreign tax credit		1,349			177
Net operating loss carry forwards		4,438			4,291
Fixed assets		4,135			580
Other		541			643

Deferred tax assets before valuation allowance		26,936			20,202
Valuation allowance		(1,450	)		(1,382	)

Deferred tax assets, net		25,486			18,820

Deferred tax liabilities:
Property and equipment, principally due to differences between book and tax depreciation		(4,180	)		—
Intangibles—including goodwill		(226,396	)		(165,270	)
Basis difference in investment in foreign subsidiaries		(25,145	)		(26,926	)
Other		(14,519	)		(769	)

Deferred tax liabilities		(270,240	)		(192,965	)

Net deferred tax liabilities	$	(244,754	)	$	(174,145	)

The Company’s deferred tax balances are classified in its balance sheets based on net current items and net non-current items as of December 31 as follows (in thousands):


	2013			2012
Current deferred tax assets and liabilities:
Current deferred tax assets	$	4,750		$	6,464
Long term deferred tax assets and liabilities:
Long term deferred tax assets		20,736			12,357
Long term deferred tax liabilities		(270,240	)		(192,966	)

Net long term deferred tax liabilities		(249,504	)		(180,609	)

Net deferred tax liabilities	$	(244,754	)	$	(174,145	)

We reduce federal and state income taxes payable by the tax benefits associated with the exercise of certain stock options. To the extent realized tax deductions for options exceed the amount previously recognized as deferred tax benefits related to share-based compensation for these option awards, we record an excess tax benefit in stockholders’ equity. We recorded excess tax benefits of $32.5 million, $29.4 million and $13.7 million in the years ended 2013, 2012 and 2011, respectively.

At December 31, 2013, U.S. taxes were not provided on earnings of the Company’s foreign subsidiaries. The Company’s intent is for such earnings to be reinvested by the subsidiaries or to be repatriated only when it would be tax effective through the utilization of foreign tax credits. If in the future these earnings are repatriated to the U.S, or if the Company determines that the earnings will be remitted in the foreseeable future, an additional tax provision and related liability may be required. If such earnings were distributed, U.S. income taxes would be partially reduced by available credits for taxes paid to the jurisdictions in which the income was earned.

Cumulative undistributed earnings of non-U.S. subsidiaries for which U.S. taxes have not been provided are included in consolidated retained earnings in the amount of approximately $586.8 million, $388.3 million and $263.8 million at December 31, 2013, 2012 and 2011, respectively. Because of the availability of United States foreign tax credits, it is not practicable to determine the domestic federal income tax liability that would be payable if such earnings were not reinvested indefinitely.

The valuation allowance for deferred tax assets at December 31, 2013 and 2012 was $1.5 million and $1.4 million, respectively. The valuation allowance relates to foreign and state net operating loss carry forwards and foreign tax credit carry forwards. The net change in the total valuation allowance for the years ended December 31, 2013 and 2012 was an increase of $0.1 million and $0.3 million, respectively.

As of December 31, 2013, the Company had aggregate net operating loss carry forwards for state income tax purposes of $18.3 million that are available to offset future state taxable income through 2025. Additionally, the Company had $4.5 million of net operating loss carry forwards for foreign income tax purposes that are available to offset future foreign taxable income. The foreign net operating loss carry forwards will not expire in future years.

The Company recognizes interest and penalties on unrecognized tax benefits (including interest and penalties calculated on uncertain tax positions on which the Company believes it will ultimately prevail) within the provision for income taxes on continuing operations in the consolidated financial statements. This policy is a continuation of the Company’s policy prior to adoption of the guidance regarding uncertain tax positions. During 2013, 2012 and 2011, the Company had recorded accrued interest and penalties related to the unrecognized tax benefits of $8.8 million, $1.5 million and $0.9 million, respectively.

The Company files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The statute of limitations for the Company’s U.S. federal income tax returns has expired for years prior to 2010. The statute of limitations for the Company’s U.K. income tax returns has expired for years prior to 2011. The statute of limitations has expired for years prior to 2010 for the Company’s Czech Republic income tax returns, 2010 for the Company’s Russian income tax returns, 2008 for the Company’s Mexican income tax returns, 2008 for the Company’s Brazilian income tax returns, 2008 for the Company’s Luxembourg income tax returns, 2009 for the Company’s New Zealand income tax returns, and 2013 for the Company’s Australian income tax returns.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits including interest for the years ended December 31, 2013, 2012 and 2011 is as follows (in thousands):


Unrecognized tax benefits at December 31, 2010	$	3,912
Additions based on tax provisions related to the current year		524
Additions based on tax provisions related to the prior year		1,010
Deductions based on settlement/expiration of prior year tax positions		(452	)

Unrecognized tax benefits at December 31, 2011		4,994
Additions based on tax provisions related to the current year		1,870
Additions based on tax provisions related to the prior year		716
Deductions based on settlement/expiration of prior year tax positions		(503	)

Unrecognized tax benefits at December 31, 2012		7,077
Additions based on tax provisions related to the current year		1,337
Additions related to prior years for 2013 acquisitions		15,249
Deductions based on settlement/expiration of prior year tax positions		(2,062	)

Unrecognized tax benefits at December 31, 2013	$	21,601

As of December 31, 2013 the Company had total unrecognized tax benefits of $21.6 million of which $6.3 million, if recognized, would affect its effective tax rate. It is not anticipated that there are any unrecognized tax benefits that will significantly increase or decrease within the next twelve months.

12. Leases

The Company enters into noncancelable operating lease agreements for equipment, buildings and vehicles. The minimum lease payments for the noncancelable operating lease agreements are as follows (in thousands):


2014	$	8,625
2015		7,606
2016		6,370
2017		6,059
2018		5,105
Thereafter		5,464

Rent expense for noncancelable operating leases approximated $9.8 million, $8.5 million and $6.2 million, for the years ended December 31, 2013, 2012 and 2011, respectively. The leases are generally renewable at the Company’s option for periods of one to five years.

13. Commitments and Contingencies

In the ordinary course of business, the Company is involved in various pending or threatened legal actions. The Company has recorded reserves for certain legal proceedings. The amounts recorded are estimated and as additional information becomes available, the Company will reassess the potential liability related to its pending litigation and revise its estimate in the period that information becomes known. In the opinion of management, the amount of ultimate liability, if any, with respect to these actions will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.

As part of certain acquisitions in 2013, the purchase price includes provisions for contingent consideration based on achieving certain financial metrics in future periods. The contingent consideration agreements (the “agreements”) require the Company to pay the respective prior owners if earnings before interest, taxes, depreciation and amortization (EBITDA) and revenues grow at a specified rate over the most recent corresponding specified period, based on a sliding scale, and expense growth does not exceed a specified amount during a specified time period. Any changes to the contingent consideration ultimately paid or any changes in the fair value of such amounts would result in additional income or expense on the consolidated Statements of Income. There has been no material change to the fair value of contingent consideration liability from the fair value recorded at the date of acquisition as of December 31, 2013, except for fluctuations due to changes in foreign exchange rates. At December 31, 2013, contingent consideration for these acquisitions is $80.5 million, and is included in other liabilities within the accompanying consolidated balance sheet.

In connection with 2013 acquisitions, the Company recorded uncertain tax positions aggregating $15.3 million and contingent liabilities aggregating $55.0, which are included in accrued expenses and other long term liabilities in the consolidated balance sheet, respectively. A portion of these acquired liabilities have been indemnified by the respective sellers. As a result, an indemnification asset of $52.6 million was recorded, of which $2.5 million is included with prepaid expense and other and $50.1 million is included with other long term assets in the consolidated balance sheet. The internal estimates recorded for the contingent liabilities are subject to change based on our final evaluation of the information available at the acquisition date. Any changes to the contingent liability based on our final conclusion will be accompanied by a corresponding change to the indemnification asset.

14. Earnings Per Share

The Company reports basic and diluted earnings per share. Basic earnings per share is computed by dividing net income attributable to shareholders of the Company by the weighted average number of common shares outstanding during the reported period. Diluted earnings per share reflect the potential dilution related to equity-based incentives using the if-converted and treasury stock method. The calculation and reconciliation of basic and diluted earnings per share for the years ended December 31 (in thousands, except per share data):


	2013		2012		2011
Net income	$	284,501	$	216,199	$	147,335

Denominator for basic earnings per share		81,793		83,328		80,610
Dilutive securities		2,862		2,408		3,044

Denominator for diluted earnings per share		84,655		85,736		83,654

Basic earnings per share	$	3.48	$	2.59	$	1.83
Diluted earnings per share		3.36		2.52		1.76

Basic shares includes the impact of share-based payment awards classified as participating securities, which are not material to the calculation of basic shares. The calculation of diluted earnings per share for the year ended December 31, 2011 excludes the effect of 0.4 million shares of common stock, that may be issued upon the exercise of employee stock options because such effect would be antidilutive. There were no antidilutive shares for the years ended December 31, 2012 and 2013.

15. Segments

The Company reports information about its operating segments in accordance with the authoritative guidance related to segments. The Company’s reportable segments represent components of the business for which separate financial information is evaluated regularly by the chief operating decision maker in determining how to allocate resources and in assessing performance. The Company operates in two reportable segments, North America and International. Certain operating segments are aggregated in both our North America and International reportable segments. The Company has aggregated these operating segments due to commonality of the products in each of their business lines having similar economic characteristics, services, customers and processes. There were no significant intersegment sales.

The results from the Efectivale business acquired during the third quarter of 2011, Allstar business acquired during the fourth quarter of 2011, a Russian fuel card business acquired during the second quarter of 2012, CTF Technologies, Inc. acquired during the third quarter of 2012, Fleet Card acquired during the first quarter of 2013, CardLink acquired during the second quarter of 2013, VB acquired during the third quarter of 2013 and DB and Epyx acquired during the fourth quarter of 2013 are reported in the Company’s International segment. The NexTraq business acquired during the fourth quarter of 2013 is reported in the Company’s North America segment.

The Company’s segment results are as follows as of and for the years ended December 31 (in thousands):


	2013		2012		2011
Revenues, net:
North America	$	460,705	$	400,164	$	348,784
International		434,466		307,370		170,807

	$	895,171	$	707,534	$	519,591

Operating income:
North America	$	220,526	$	196,677	$	153,687
International		200,106		128,251		72,647

	$	420,632	$	324,928	$	226,334

Depreciation and amortization:
North America	$	22,267	$	20,289	$	19,845
International		50,470		31,747		16,326

	$	72,737	$	52,036	$	36,171

Capital expenditures:
North America	$	6,132	$	7,735	$	6,840
International		14,653		11,376		6,614

	$	20,785	$	19,111	$	13,454

Long-lived assets (excluding goodwill):
North America	$	173,608	$	152,516	$	113,030
International		852,390		447,391		351,135

	$	1,025,998	$	599,907	$	464,165

The Company attributes revenues, net from external customers to individual countries based upon the country in which the related services were rendered. The table below presents certain financial information related to the Company’s significant foreign operations as of and for the years ended December 31 (in thousands):


	2013			2012			2011
Revenues, net:
United States (country of domicile)	$	460,111		$	399,573		$	348,065
United Kingdom		198,762			153,305			80,778
Czech Republic		N/A	1		N/A	1		54,542


	2013		2012
Long-lived assets (excluding goodwill):
United States (country of domicile)	$	173,354	$	152,175
United Kingdom		352,538		225,050
Brazil		293,055		81,934

1	In 2012 and 2013, revenues in the Czech Republic were less than 10% of the Company’s consolidated total revenues.

No single customer represented more than 10% of the Company’s consolidated revenue in 2013 and 2012. In 2011, a major-oil partner, accounted for approximately 11% of the Company’s consolidated revenues, net. The revenues from this significant customer are presented within the Company’s North America segment. Agreements with the major oil company partners typically have initial terms of five to ten years with current remaining terms ranging from two to seven years.

16. Selected Quarterly Financial Data (Unaudited)


Fiscal Quarters Year Ended December 31, 2013	First		Second		Third		Fourth
Revenues, net	$	193,651	$	220,869	$	225,150	$	255,501
Operating income		94,253		109,074		111,255		106,050
Net income		64,662		73,099		78,620		68,120

Earnings per share:
Basic earnings per share	$	0.80	$	0.90	$	0.96	$	0.83
Diluted earnings per share		0.77		0.87		0.93		0.80

Weighted average shares outstanding:
Basic weighted average shares outstanding		81,222		81,573		81,974		82,388
Diluted weighted average shares outstanding		83,960		84,461		84,905		85,277


Fiscal Quarters Year Ended December 31, 2012	First		Second		Third		Fourth
Revenues, net	$	146,165	$	171,820	$	186,932	$	202,617
Operating income		64,475		81,448		85,834		93,171
Net income		42,079		54,401		59,648		60,071

Earnings per share:
Basic earnings per share	$	0.51	$	0.65	$	0.71	$	0.72
Diluted earnings per share		0.49		0.63		0.69		0.70

Weighted average shares outstanding:
Basic weighted average shares outstanding		82,565		83,294		84,002		83,378
Diluted weighted average shares outstanding		85,164		85,737		86,224		85,750

The sum of the quarterly earnings per common share amounts for 2013 and 2012 do not equal the earnings per common share for the years ended December 31, 2013 and 2012 due to rounding.

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