Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences include, but are not limited to, those identified below and those described in Item 1A “Risk Factors” appearing elsewhere in this report. All foreign currency amounts that have been converted into U.S. dollars in this discussion are based on the exchange rate as reported by Oanda for the applicable periods.

General Business

Fleetcor is the global leader in workforce payment products. We primarily go to market with our fuel card payments product solutions, corporate payments products, toll products, lodging cards and gift cards. Our products are used in 53 countries around the world, with our primary geographies in the U.S., Brazil and the U.K., which accounted for approximately 92% of our revenue in 2016. Our core products are primarily sold to businesses, retailers, major oil companies and marketers and government entities. Our payment programs enable our customers to better manage and control their commercial payments, card programs, and employee spending and provide card-accepting merchants with a high volume customer base that can increase their sales and customer loyalty. We also provide a suite of fleet related and workforce payment solution products, including mobile telematics services, fleet maintenance management and employee benefit and transportation related payments. In 2016, we processed approximately 2.2 billion transactions on our proprietary networks and third-party networks (which includes approximately 1.3 billion transactions related to our SVS product, acquired with Comdata). We believe that our size and scale, geographic reach, advanced technology and our expansive suite of products, services, brands and proprietary networks contribute to our leading industry position.

We provide our payment products and services in a variety of combinations to create customized payment solutions for our customers and partners. We collectively refer to our suite of product offerings as workforce productivity enhancement products for commercial businesses. We sell a range of customized fleet and lodging payment programs directly and indirectly to our customers through partners, such as major oil companies, leasing companies and petroleum marketers. We refer to these major oil companies, leasing companies, petroleum marketers, value-added resellers (VARs) and other referral partners with whom we have strategic relationships as our “partners.” We provide our customers with various card products that typically function like a charge card to purchase fuel, lodging, food, toll, transportation and related products and services at participating locations.

We support our products with specialized issuing, processing and information services that enable us to manage card accounts, facilitate the routing, authorization, clearing and settlement of transactions, and provide value-added functionality and data, including customizable card-level controls and productivity analysis tools. In order to deliver our payment programs and services and process transactions, we own and operate proprietary “closed-loop” networks through which we electronically connect to merchants and capture, analyze and report customized information in North America and internationally. We also use third-party networks to deliver our payment programs and services in order to broaden our card acceptance and use. To support our payment products, we also provide a range of services, such as issuing and processing, as well as specialized information services that provide our customers with value-added functionality and data. Our customers can use this data to track important business productivity metrics, combat fraud and employee misuse, streamline expense administration and lower overall workforce and fleet operating costs. Depending on our customers’ and partners’ needs, we provide these services in a variety of outsourced solutions ranging from a comprehensive “end-to-end” solution (encompassing issuing, processing and network services) to limited back office processing services.

FleetCor’s predecessor company was organized in the United States in 1986. In 2000, our current chief executive officer joined us and we changed our name to FleetCor Technologies, Inc. Since 2000, we have grown significantly through a combination of organic initiatives, product and service innovation and over 70 acquisitions of businesses and commercial account portfolios. Our corporate headquarters are located in Norcross, Georgia. As of December 31, 2016, we employed approximately 7,100 employees, approximately 2,270 of whom are located in the United States.

Executive Overview

We operate in two segments, which we refer to as our North America and International segments. See “Results of Operations” for additional segment information.

Our revenue is reported net of the wholesale cost for underlying products and services. In this report, we refer to this net revenue as “revenue.” For the years ended December 31, 2016, 2015 and 2014, our North America and International segments generated the following revenue:

		Year ended December 31,
		2016							2015							2014
(in millions)		Revenues, net				% of total revenues, net			Revenues, net				% of total revenues, net			Revenues, net				% of total revenues, net
North America		$	1,279.1			69.8	%		$	1,232.0			72.3	%		$	668.3			55.7	%
International		552.4				30.2	%		470.9				27.7	%		531.1				44.3	%
		$	1,831.5			100.0	%		$	1,702.9			100.0	%		$	1,199.4			100.0	%

Revenues, net, Net Income and Net Income Per Diluted Share. Set forth below are revenues, net, net income and net income per diluted share for the years ended December 31, 2016, 2015 and 2014.

		Year ended December 31,
(in thousands, except per share amounts)		2016				2015				2014
Revenues, net		$	1,831,546			$	1,702,865			$	1,199,390
Net income		$	452,385			$	362,431			$	368,707
Net income per diluted share		$	4.75			$	3.85			$	4.24

Sources of Revenue

Transactions. In both of our segments, we derive revenue from transactions. As illustrated in the diagram below, a transaction is defined as a purchase by a customer. Our customers include holders of our card products and those of our partners, for whom we manage card programs, members of our proprietary networks who are provided access to our products and services and commercial businesses to whom we provide workforce payment productivity solutions. Revenue from transactions is derived from our merchant and network relationships, as well as our customers and partners. Through our merchant and network relationships we primarily offer fuel cards, corporate cards, virtual cards, purchasing cards, T&E cards, gift cards, stored value payroll cards, vehicle maintenance, food, fuel, toll and transportation cards and vouchers or lodging services to our customers.

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

Illustrative Transaction Flow

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

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

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

Illustrative Revenue Model for Fuel Purchases

(unit of one gallon)

Illustrative Revenue Model						Merchant Payment Methods
Retail Price		$	3.00			i) Cost Plus Mark-up:						ii) Percentage Discount:						iii) Fixed Fee:
Wholesale Cost		(2.86		)		Wholesale Cost		$	2.86			Retail Price		$	3.00			Retail Price		$	3.00
						Mark-up		0.05				Discount (3%)		(0.09		)		Fixed Fee		(0.09		)
FleetCor Revenue		$	0.14
Merchant Commission		$	(0.05	)		Price Paid to Merchant		$	2.91			Price Paid to Merchant		$	2.91			Price Paid to Merchant		$	2.91
Price Paid to Merchant		$	2.91

Revenues by geography, product and source. Set forth below are further breakdowns of revenue by geography, product and source for the years ended December 31, 2016 and 2015 (in millions):

		Year Ended December 31,
		2016							2015
Revenue by Geography*		Revenues, net				% of total revenues, net			Revenues, net				% of total revenues, net
United States		$	1,279			70	%		$	1,232			72	%
United Kingdom		229				13			248				15
Brazil		168				9			85				5
Other		156				8			138				8
Consolidated revenues, net		$	1,832			100	%		$	1,703			100	%

		Year Ended December 31,
		2016							2015
Revenue by Product Category*		Revenues, net				% of total revenues, net			Revenues, net				% of total revenues, net
Fuel cards		$	1,124			61	%		$	1,116			66	%
Gift		185				10			170				10
Corporate payments		180				10			162				10
Tolls		103				6			9				1
Lodging		101				5			92				5
Other		140				8			154				9
Consolidated revenues, net		$	1,832			100.0	%		$	1,703			100.0	%

		Year Ended December 31,
		2016							2015
Major Sources of Revenue*		Revenues, net				% of total revenues, net			Revenues, net				% of total revenues, net
Customer
Processing and program fees		$	904			49	%		$	776			46	%
Late fees and finance charges		113				6			110				6
Other		30				2			28				2
		$	1,047			57			$	914			54
Merchant
Interchange (Fuel)1		278				15			294				17
Interchange (Nonfuel)2		173				9			162				10
Tied to fuel-price spreads		200				11			211				12
Program fees		133				7			123				7
		784				43			789				46
Consolidated revenues, net		$	1,832			100	%		$	1,703			100	%

1Interchange revenue directly influenced by the absolute price of fuel and other interchange primarily related to fuel products.

2Interchange revenue primarily related to nonfuel products.

*Columns may not calculate due to impact of rounding.

Revenue per transaction. Set forth below is revenue per transaction information for the years ended December 31, 2016, 2015 and 2014:

		Year ended December 31,
		2016				2015				2014
Transactions (in millions)
North America		1,718.7				1,667.5				459.9
International		507.8				183.9				192.5
Total transactions		2,226.5				1,851.4				652.4
Revenue per transaction
North America		$	0.74			$	0.74			$	1.45
International		1.09				2.56				2.76
Consolidated revenue per transaction		0.82				0.92				1.84
Consolidated adjusted revenue per transaction3		0.78				0.86				1.69

3 Adjusted revenues is a non-GAAP financial measure defined as revenues, net less merchant commissions. We believe this measure is a more effective way to evaluate our revenue performance. We use adjusted revenues as a basis to evaluate our revenues, net of the commissions that are paid to merchants to participate in our card programs. Adjusted revenues is a supplemental non-GAAP financial measure of operating performance. See the heading entitled "Management's Use of Non-GAAP Financial Measures."

From 2015 to 2016, total transactions increased from 1.9 billion to 2.2 billion, an increase of 375.1 million or 20.3%. North American segment transactions increased approximately 3% in 2016 as compared to 2015 due primarily to growth in our PacPride, MasterCard and corporate payments businesses. Transaction volumes in our international segment increased by approximately 176% over 2015, primarily due to the acquisition of STP and Travelcard during the third quarter of 2016, the addition of new Shell fuel card markets in 2015 and 2016 and additional transactions from a small acquisition in Brazil in the first quarter of 2016.

From 2014 to 2015, total transactions increased from 652.4 million to 1.9 billion, an increase of 1.2 billion, or 183.8%. We experienced an increase in transactions in our North America segment primarily due to our acquisition of Comdata in November 2014, of which 1.3 billion and 270 million transactions are attributable to SVS for 2015 and 2014, respectively, as well as from organic growth in our U.S. businesses. Transaction volumes in our international segment decreased slightly by 4.5% primarily due to market softness in some of our international businesses.

Set forth below is further breakdown of revenue per transaction by product information for the years ended December 31, 2016 and 2015 (in millions, except per transaction data):

		Year Ended December 31,
		2016				2015
Fuel Cards
Transactions		502.5				473.0
Revenues, net per transaction		$	2.24			$	2.36
Revenues, net		$	1,124.2			$	1,115.6
Gift
Transactions		1,327.4				1,300.4
Revenues, net per transaction		$	0.14			$	0.13
Revenues, net		$	184.7			$	170.1
Corporate Payments
Transactions		38.7				31.9
Revenues, net per transaction		$	4.64			$	5.09
Revenues, net		$	179.6			$	162.3
Tolls
Transactions		326.7				12.4
Revenues, net per transaction		$	0.31			$	0.75
Revenues, net		$	102.7			$	9.3
Lodging
Transactions		13.3				13.7
Revenues, net per transaction		$	7.58			$	6.70
Revenues, net		$	100.7			$	91.8
Other4
Transactions		18.0				20.0
Revenues, net per transaction		$	7.76			$	7.70
Revenues, net		$	139.6			$	153.8

4Other includes telematics, maintenance and transportation benefits related businesses.

Revenue per transaction is derived from the various revenue types as discussed above and can vary based on geography, the relevant merchant relationship, the payment product utilized and the types of products or services purchased, the mix of which would be influenced by our acquisitions, organic growth in our business, and the overall macroeconomic environment, including fluctuations in foreign currency exchange rates. Revenue per transaction per customer changes as the level of services we provide to a customer increases or decreases, as macroeconomic factors change and as adjustments are made to merchant and customer rates. See “Results of Operations” for further discussion of transaction volumes and revenue per transaction.

Sources of Expenses

We incur expenses in the following categories:

•

Merchant commissions—In certain of our card programs, we incur merchant commissions expense when we reimburse merchants with whom we have direct, contractual relationships for specific transactions where a customer purchases products or services from the merchant. In the card programs where it is paid, merchant commissions equal the difference between the price paid by us to the merchant and the merchant’s wholesale cost of the underlying products or services.

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

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

•

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

•

Depreciation and amortization—Our depreciation expenses include depreciation of property and equipment, consisting of computer hardware and software (including proprietary software development amortization expense), card-reading equipment, furniture, fixtures, vehicles and buildings and leasehold improvements related to office space. Our amortization expenses include amortization of intangible assets related to customer and vendor relationships, trade names and trademarks and non-compete agreements. We are amortizing intangible assets related to business acquisitions and certain private label contracts associated with the purchase of accounts receivable.

•	Other operating, net—Our other operating, net includes other operating expenses and income items unusual to the period and presented separately.

•	Equity method investment loss—Our equity method investment loss relates to our minority interest in Masternaut Group Holdings Limited (“Masternaut”), a provider of telematics solutions to commercial fleets in Europe, which we account for using the equity method.

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

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

•	Loss on early extinguishment of debt—Loss on early extinguishment of debt relates to our write-off of debt issuance costs associated with the refinancing of our Existing Credit Facility and entry into our New Credit Agreement, along with our recent acquisition of Comdata.

•	Provision for income taxes—The provision for income taxes consists primarily of corporate income taxes related to profits resulting from the sale of our products and services in the United States and internationally. Our worldwide effective tax rate is lower than the U.S. statutory rate of 35%, due primarily to lower rates in foreign jurisdictions and foreign-sourced non-taxable income.

Adjusted Revenues, Adjusted Net Income and Adjusted Net Income Per Diluted Share. Set forth below are adjusted revenues, adjusted net income and adjusted net income per diluted share for the years ended December 31, 2016, 2015 and 2014.

		Year Ended December 31,
		2016				2015				2014
(in thousands except per share amounts)
Adjusted revenues		$	1,727,201			$	1,594,608			$	1,103,136
Adjusted net income		$	659,176			$	592,625			$	447,670
Adjusted net income per diluted share		$	6.92			$	6.30			$	5.15

We use adjusted revenues as a basis to evaluate our revenues, net of the commissions that are paid to merchants that participate in certain of our card programs. The commissions paid to merchants can vary when market spreads fluctuate in much the same way as revenues are impacted when market spreads fluctuate. Thus, we believe this is a more effective way to evaluate our revenue performance on a consistent basis. We use adjusted net income and adjusted net income per diluted share to eliminate the effect of items that we do not consider indicative of our core operating performance on a consistent basis. Adjusted revenues, adjusted net income and adjusted net income per diluted share are supplemental non-GAAP financial measures of operating performance. See the heading entitled “Management’s Use of Non-GAAP Financial Measures.”

Factors and Trends Impacting our Business

We believe that the following factors and trends are important in understanding our financial performance:

•

Fuel prices—Our fleet customers use our products and services primarily in connection with the purchase of fuel. Accordingly, our revenue is affected by fuel prices, which are subject to significant volatility. A change in retail fuel prices could cause a decrease or increase in our revenue from several sources, including fees paid to us based on a percentage of each customer’s total purchase. Changes in the absolute price of fuel may also impact unpaid account balances and the late fees and charges based on these amounts. See “Sources of Revenue” above for further information related to the absolute price of fuel.

•

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

•

Acquisitions—Since 2002, we have completed over 70 acquisitions of companies and commercial account portfolios. Acquisitions have been an important part of our growth strategy, and it is our intention to continue to seek opportunities to increase our customer base and diversify our service offering through further strategic acquisitions. The impact of acquisitions has, and may continue to have, a significant impact on our results of operations and may make it difficult to compare our results between periods.

•	Interest rates—Our results of operations are affected by interest rates. We are exposed to market risk changes in interest rates on our cash investments and debt.

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

•

Foreign currency changes—Our results of operations are significantly impacted by changes in foreign currency rates; namely, by movements of the Australian dollar, Brazilian real, British pound, Canadian dollar, Czech koruna, Euro, Mexican peso, New Zealand dollar and Russian ruble, relative to the U.S. dollar. Approximately 70%, 72% and 56% of our revenue in 2016, 2015 and 2014, respectively, was derived in U.S. dollars and was not affected by foreign currency exchange rates. See “Results of Operations” for information related to foreign currency impact on our total revenue, net.

•	Expenses— Over the long term, we expect that our general and administrative expense will decrease as a percentage of revenue as our revenue increases. To support our expected revenue growth, we plan to continue to incur additional sales and marketing expense by investing in our direct marketing, third-party agents, internet marketing, telemarketing and field sales force.

Acquisitions and Investments

During 2016, we completed acquisitions with an aggregate purchase price of $1.3 billion, net of cash acquired of $51.3 million, which includes deferred payments made during the period related to prior acquisitions of $6.1 million.

•

In August 2016, we acquired all of the outstanding stock of STP for approximately $1.23 billion, net of cash acquired of $40.2 million. STP is an electronic toll payments company in Brazil and also provides cardless fuel payments at a number of Shell sites throughout Brazil. The purpose of this acquisition was to expand our presence in the toll market in the Brazil. We financed the acquisition using a combination of existing cash and borrowings under our existing credit facility.

•	During 2016, we acquired additional fuel card portfolios in the U.S. and the United Kingdom, additional Shell fuel card markets in Europe and Travelcard in the Netherlands totaling approximately $76.7 million, net of cash acquired of $11.1 million.

•	During 2016, we made additional investments of $7.9 million related to our equity method investment at Masternaut. We also received a $9.2 million return of our investment in Masternaut.

The results of operations from the fuel card portfolio acquired in the U.S. are included within our North America segment, from the date of acquisition. The results of operations of STP, the fuel card portfolio in the United Kingdom, the additional Shell markets, the Travelcard business in the Netherlands and the small business in Brazil are included within our International segment, from the date of acquisition.

During 2015, we completed acquisitions of Shell portfolios related to our fuel card businesses in Europe, as well as a small acquisition internationally, with an aggregate purchase price of $46.3 million, each included within our International segment from the date of acquisition, and made additional investments of $8.4 million related to our equity method investment at Masternaut and deferred payments of $3.4 million related to acquisitions occurring in prior years.

During 2014, we completed acquisitions with an aggregate purchase price of $3.67 billion, net of cash acquired of $165.8 million.

•	In April 2014, we completed an equity method investment in Masternaut, Europe’s largest provider of telematics solutions to commercial fleets. We own 44% of the outstanding equity of Masternaut. This investment is included in “Equity method investment” in our consolidated balance sheets.

•	In July 2014, we also acquired PacPride, a U.S. fuel card business, and in August 2014, we acquired a fuel card business from Shell in Germany (“Shell Germany”). The purpose of these acquisitions was to strengthen our presence in the U.S. marketplace and establish our presence in the German fuel card market, respectively.

•

In November 2014, we acquired Comdata Inc. (“Comdata”) for $3.4 billion. Comdata is a leading business-to-business provider of innovative electronic payment solutions. As an issuer and a processor, Comdata provides fleet, virtual card and gift card solutions to over 20,000 customers. Comdata has approximately 1,300 employees and enables over $54 billion in payments annually. This acquisition complemented the Company’s current fuel card business in the U.S. and added a new product with the virtual payments business. FleetCor financed the acquisition with approximately $2.4 billion of new debt and the issuance of 7.6 million shares of FleetCor common stock, including amounts applied at the closing to the repayment of Comdata’s debt.

The results of operations of the Shell Germany business are included within our International segment, from the date of acquisition. The results of operations from PacPride and Comdata are included within our North America segment, from the date of acquisition.

Results of Operations

Year ended December 31, 2016 compared to the year ended December 31, 2015

The following table sets forth selected consolidated statement of income and selected operational data for the years ended December 31, 2016 and 2015 (in millions, except percentages).

		Year ended December 31, 2016				% of total revenue			Year ended December 31, 2015				% of total revenue			Increase (decrease)				% Change
Revenues, net:
North America		$	1,279.1			69.8	%		$	1,232.0			72.3	%		$	47.1			3.8	%
International		552.4				30.2	%		470.9				27.7	%		81.5				17.3	%
Total revenues, net		1,831.5				100.0	%		1,702.9				100.0	%		128.7				7.6	%
Consolidated operating expenses:
Merchant commissions		104.3				5.7	%		108.3				6.4	%		(3.9		)		(3.6	)%
Processing		355.4				19.4	%		331.1				19.4	%		24.3				7.4	%
Selling		131.4				7.2	%		109.1				6.4	%		22.4				20.5	%
General and administrative		283.6				15.5	%		297.7				17.5	%		(14.1		)		(4.7	)%
Depreciation and amortization		203.3				11.1	%		193.5				11.4	%		9.8				5.1	%
Other operating, net		(0.7		)		—	%		(4.2		)		0.2	%		(3.6		)		(83.7	)%
Operating income		754.2				41.2	%		667.5				39.2	%		86.6				13.0	%
Equity method investment loss		36.4				2.0	%		57.7				3.4	%		(21.3		)		(37.0	)%
Other expense (income), net		3.0				0.2	%		2.5				0.1	%		0.5				18.2	%
Interest expense, net		71.9				3.9	%		71.3				4.2	%		0.6				0.8	%
Provision for income taxes		190.5				10.4	%		173.6				10.2	%		17.0				9.8	%
Net income		$	452.4			24.7	%		$	362.4			21.3	%		$	90.0			24.8	%
Operating income for segments:
North America		$	506.4						$	442.0						$	64.4			14.6	%
International		247.7							225.5							22.3				9.9	%
Operating income		$	754.2						$	667.5						$	86.6			13.0	%
Operating margin for segments:
North America		39.6		%					35.9		%					3.7		%
International		44.8		%					47.9		%					(3.0		)%
Total		41.2		%					39.2		%					2.0		%

Revenues and revenue per transaction

Our consolidated revenue increased from $1,702.9 million in 2015 to $1,831.5 million in 2016, an increase of $128.7 million, or 7.6%. The increase in our consolidated revenue was primarily due to:

•	The impact of acquisitions completed in 2016, which contributed approximately $87 million in additional revenue.

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

•

Partially offsetting this growth was the negative impact of the macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a negative impact on our consolidated revenue for 2016 over the comparable period in 2015 of approximately $109 million. We believe the impact of lower fuel prices, primarily in the U.S., and lower fuel spread margins, had an unfavorable impact on consolidated revenues of approximately $66 million. Additionally, changes in foreign exchange rates had an unfavorable impact on consolidated revenues of approximately $43 million due to unfavorable fluctuations in rates in most geographies in 2016 compared to 2015.

Consolidated revenue per transaction decreased from $0.92 in 2015 to $0.82 in 2016, a decrease of $0.10, or 10.6%. This decrease was due primarily to the unfavorable impact of the macroeconomic environment, the mix impact of acquisitions (STP, Travelcard and a small acquisition in Brazil), which have a much lower revenue per transaction than the historical average, partially offset by organic growth. Excluding these items, revenue per transaction increased approximately 5% to $0.97 in 2016 compared to $0.92 in 2015.

Revenue per transaction can vary based on the geography, the relevant merchant and customer relationship, the payment product utilized, and the types of products or services purchased. The revenue mix was influenced by our acquisitions, organic growth in the business, and fluctuations in the macroeconomic environment, including fuel prices, fuel spread margins and foreign exchange rates.

North America segment revenues and revenue per transaction

North America revenues increased from $1,232.0 million in 2015 to $1,279.1 million in 2016, an increase of $47.1 million, or 3.8%. The increase in our North America segment revenue was primarily due to:

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

•

Partially offsetting the organic growth was the negative impact of macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a negative impact on our North America segment revenue in 2016 over the comparable period in 2015 of approximately $65 million, primarily due to the impact of lower fuel prices and lower fuel spread margins.

North America segment revenue per transaction was $0.74 in 2015 and $0.74 in 2016. Revenue per transaction in our North America segment for 2016, excluding the negative impact of the macroeconomic environment of approximately $65 million, increased approximately 6% to $0.78 in 2016 compared to $0.74 in 2015.

International segment revenue

International segment revenues increased from $470.9 million in 2015 to $552.4 million in 2016, an increase of $81.5 million, or 17.3%. The increase in our International segment revenue was primarily due to:

•	The impact of acquisitions during 2016, which contributed approximately $87 million in additional revenue.

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

•

Partially offsetting this growth was the negative impact of the macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a negative impact on our International segment revenue for 2016 over the comparable period in 2015 of approximately $44 million, primarily due to unfavorable fluctuations in foreign exchange rates in most geographies where we do business and slightly lower fuel prices.

International segment revenue per transaction decreased from $2.56 in 2015 to $1.09 in 2016, a decrease of $1.47 per transaction, or 57.5%. This decrease was due primarily to the unfavorable impact of foreign exchange rates across most geographies and the mix impact of acquisitions (STP, Travelcard and a small acquisition in Brazil), which have a much lower revenue per transaction than the historical average, partially offset by organic growth. Excluding these items, our International revenue per transaction increased approximately 4% to $2.66 in 2016 compared to $2.56 in 2015.

Consolidated operating expenses

Merchant commission. Merchant commissions decreased from $108.3 million in 2015 to $104.3 million in 2016, a decrease of$3.9 million, or 3.6%. This decrease was primarily due to the fluctuation of the margin between the wholesale cost and retail price of fuel, which impacted merchant commissions in certain card programs, as well as the impact of fluctuations in foreign exchange rates.

Processing. Processing expenses increased from $331.1 million in 2015 to $355.4 million in 2016, an increase of $24.3 million, or 7.4%. Increases in processing expenses were primarily due to ongoing expenses related to acquisitions completed in 2016, and incremental bad debt expense, partially offset by the impact of fluctuations in foreign exchange rates and lower negotiated vendor processing costs.

Selling. Selling expenses increased from $109.1 million in 2015 to $131.4 million in 2016, an increase of $22.4 million, or 20.5%. Increases in spending were primarily due to ongoing expenses related to acquisitions completed in 2016 as well as

additional sales and marketing spending in certain markets, partially offset by the impact of fluctuations in foreign exchange rates.

General and administrative. General and administrative expense decreased from $297.7 million in 2015 to $283.6 million in 2016, a decrease of $14.1 million, or 4.7%. The decrease was primarily due to decreased stock based compensation of approximately $26 million from the comparable period in 2015 and the impact of fluctuations in foreign exchange rates, partially offset by ongoing expenses related to acquisitions completed in 2016 and an incremental $2 million in acquisition related expenses over 2015.

Depreciation and amortization. Depreciation and amortization increased from $193.5 million in 2015 to $203.3 million in 2016, an increase of $9.8 million, or 5.1%. The increase was primarily due to ongoing expenses related to acquisitions completed in 2016, partially offset by movements in and adjustments from changes in foreign exchange rates of approximately $2 million.

Other operating, net. Other operating, net decreased from $4.2 million in 2015 to $0.7 million in 2016. The decrease is due to favorable reversals of various contingent liabilities for tax indemnifications related to our acquisitions of DB and VB in Brazil in 2015.

Equity method investment loss

Losses at our equity method investment decreased from $57.7 million in 2015 to $36.4 million in 2016. The decrease was primarily due to a non-recurring gain of $13.8 million during 2016, as well as less costs incurred to restructure the operations of the business and a smaller impairment of our investment, compared to 2015.

We regularly evaluate our investments, which are not carried at fair value, for other than temporary impairment in accordance with U. S. GAAP. During the fourth quarter of 2016, we determined that the performance improvement initiatives planned at Masternaut were more challenging to implement than we originally projected. As a result, we recorded a $36.1 million non-cash impairment charge in our equity method investment in 2016, compared to a $40 million charge in 2015.

Interest expense, net

Interest expense was $71.3 million in 2015 compared to $71.9 million in 2016. The following table sets forth the average interest rates paid on borrowings under our Credit Facility, excluding the relevant unused credit facility fees.

		2016			2015
Term loan A		2.05	%		1.94	%
Term loan B		3.75	%		3.75	%
Domestic Revolver A		2.07	%		1.95	%
Foreign Revolver A		1.84	%		2.36	%
Foreign swing line		1.84	%		2.29	%

The average unused credit facility fee for Domestic Revolver A was 0.31% and 0.35% in 2016 and 2015, respectively.

Provision for income taxes

The provision for income taxes increased from $173.6 million in 2015 to $190.5 million in 2016, an increase of $17.0 million, or 9.8%. The increase in income taxes from 2015 to 2016 was primarily driven by the increase in book earnings for 2016 as compared to 2015. The increase in taxes was partially offset by a decrease in our effective tax rate from 32.4% in 2015 to 29.7% in 2016. The decrease in our effective tax rate was primarily due to the adoption of ASU 2016-09, "Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting", which resulted in excess tax benefits being recorded as a reduction of income tax expense during 2016, rather than additional paid in capital as discussed in the summary of significant accounting policies footnote. We also had a non-recurring net gain recorded by our equity method investment, which favorably impacted pre-tax earnings but was not subject to U.S. income taxes and the impact of certain tax planning initiatives that were implemented during 2016. We pay taxes in many different taxing jurisdictions, including the U.S., most U.S. states and many non-U.S. jurisdictions. The tax rates in certain non-U.S. taxing jurisdictions are lower than the U.S. tax rate. Consequently, as our earnings fluctuate between taxing jurisdictions, our effective tax rate fluctuates.

Net income

For the reasons discussed above, our net income increased from $362.4 million in 2015 to $452.4 million in 2016, an increase of $90.0 million, or 24.8%.

Operating income and operating margin

Consolidated operating income

Operating income increased from $667.5 million in 2015 to $754.2 million in 2016, an increase of $86.6 million, or 13.0%. Consolidated operating margin was 39.2% in 2015 and 41.2% in 2016. The increase in operating income was primarily due to acquisitions completed in 2016, $26 million less stock based compensation expense compared to 2015 and organic growth in the business, partially offset by the negative impact of the macroeconomic environment of approximately $82 million, driven by lower fuel prices and spreads, and unfavorable fluctuations in foreign exchange rates.

For the purpose of segment operating results, we calculate segment operating income by subtracting segment operating expenses from segment revenue. Segment operating margin is calculated by dividing segment operating income by segment revenue.

North America segment operating income

North America operating income increased from $442.0 million in 2015 to $506.4 million in 2016, an increase of $64.4 million, or 14.6%. North America operating margin was 35.9% in 2015 and 39.6% in 2016. The increase in operating income was due primarily to less stock based compensation expense compared to 2015 and organic growth in the business, partially offset by the negative impact of the macroeconomic environment of approximately $56 million, driven by lower fuel prices and lower fuel spread margins.

International segment operating income

International operating income increased from $225.5 million in 2015 to $247.7 million in 2016, an increase of $22.3 million, or 9.9%. International operating margin was 47.9% in 2015 and 44.8% in 2016. The increase in operating income was due primarily to acquisitions completed in 2016 and organic growth in the business, partially offset by the approximately $26 million unfavorable impact of the macroeconomic environment, specifically unfavorable changes in foreign exchange rates, as well as the negative impact of fuel prices internationally. The impact of changes in fuel price spreads was negligible.

Year ended December 31, 2015 compared to the year ended December 31, 2014

The following table sets forth selected consolidated statement of income and selected operational data for the years ended December 31, 2015 and 2014 (in millions, except percentages).

		Year ended December 31, 2015				% of total revenue			Year ended December 31, 2014				% of total revenue			Increase (decrease)				% Change
North America		$	1,232.0			72.3	%		$	668.3			55.7	%		$	563.6			84.3	%
International		470.9				27.7	%		531.1				44.3	%		(60.2		)		(11.3	)%
Total revenues, net		1,702.9				100.0	%		1,199.4				100.0	%		503.5				42.0	%
Consolidated operating expenses:
Merchant commissions		108.3				6.4	%		96.3				8.0	%		12.0				12.5	%
Processing		331.1				19.4	%		173.3				14.5	%		157.7				91.0	%
Selling		109.1				6.4	%		75.5				6.3	%		33.5				44.4	%
General and administrative		297.7				17.5	%		206.0				17.2	%		91.8				44.5	%
Depreciation and amortization		193.5				11.4	%		112.4				9.4	%		81.1				72.2	%
Other operating, net		(4.2		)		0.2	%		(29.5		)		2.5	%		(25.3		)		(85.6	)%
Operating income		667.5				39.2	%		565.4				47.1	%		102.1				18.1	%
Equity method investment loss		57.7				3.4	%		8.6				0.7	%		49.1				571.7	%
Other expense (income), net		2.5				0.1	%		(0.7		)		NM			(3.2		)		NM
Interest expense, net		71.3				4.2	%		28.9				2.4	%		42.5				147.2	%
Loss on early extinguishment of debt		—				—	%		15.8				1.3	%		(15.8		)		(100.0	)%
Provision for income taxes		173.6				10.2	%		144.2				12.0	%		29.3				20.3	%
Net income		$	362.4			21.3	%		$	368.7			30.7	%		$	(6.3	)		(1.7	)%
Operating income for segments:
North America		$	442.0						$	287.3						$	154.7			53.9	%
International		225.5							278.1							(52.7		)		(18.9	)%
Operating income		$	667.5						$	565.4						$	102.1			18.1	%
Operating margin for segments:
North America		35.9		%					43.0		%					(7.1		)%
International		47.9		%					52.4		%					(4.5		)%
Total		39.2		%					47.1		%					(7.9		)%

NM = Not Meaningful

Revenues and revenue per transaction

Our consolidated revenue increased from $1,199.4 million in 2014 to $1,702.9 million in 2015, an increase of $503.5 million, or 42.0%. The increase in our consolidated revenue was primarily due to the following:

•	The impact of acquisitions completed in 2014, which contributed approximately $528 million in additional revenue in 2015 over the comparable period in 2014.

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

•

Partially offsetting this growth was the negative impact of the macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a negative impact on our consolidated revenue for 2015 over the comparable period in 2014 of approximately $167 million. We believe changes in foreign exchange rates had an unfavorable impact on consolidated revenues of approximately $92 million, due to unfavorable fluctuations in rates in all geographies, in 2015 over 2014. Additionally, the impact of lower fuel prices,

partially offset by higher fuel spread margins, had an additional unfavorable impact on consolidated revenues of approximately $75 million.

Consolidated revenue per transaction decreased from $1.84 in 2014 to $0.92 in 2015, a decrease of $0.92 per transaction or 50.0%. Excluding the impact of the SVS business, which had approximately 1.3 billion and 270 million transactions in 2015 and 2014, respectively, at a lower revenue per transaction, revenue per transaction for 2015 decreased 10.2 % to $2.78 from $3.10 over the comparable period in 2014. Revenue per transaction can vary based on the geography, the relevant merchant and customer relationship, the payment product utilized, and the types of products or services purchased. The revenue mix was influenced by our acquisitions, organic growth in the business, and fluctuations in the macroeconomic environment, primarily fuel prices and foreign exchange rates.

North America segment revenues and revenue per transaction

North America revenue increased from $668.3 million in 2014 to $1,232.0 million in 2015, an increase of $563.6 million, or 84.3%. The increase in our North America revenue was primarily due to:

•	The impact of acquisitions completed in 2014, which contributed approximately $528 million in additional revenue in 2015 over the comparable period in 2014.

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

•

Partially offsetting this growth was the negative impact of the macroeconomic environment. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a negative impact on our North America segment revenue for 2015 over the comparable period in 2014 of approximately $72 million, primarily due to the impact of lower fuel prices in the U.S., partially offset by higher fuel spread margins.

North America segment revenue per transaction decreased from $1.45 in 2014 to $0.74 in 2015, a decrease of $0.71 or 49.2%. Excluding the impact of the SVS business, which had approximately 1.3 billion and 270 million transactions in 2015 and 2014, respectively, at a lower revenue per transaction, revenue per transaction in our North America segment in 2015 decreased 15.9% to $2.89 from $3.44 over the comparable period in 2014. Revenue per transaction can vary based on the geography, the relevant merchant and customer relationship, the payment product utilized, and the types of products and services purchased. Revenue per transaction decreased primarily due to the impact of lower fuel prices and fuel price spreads during 2015 versus the prior year.

International segment revenue

International segment revenue decreased from $531.1 million in 2014 to $470.9 million in 2015, a decrease of $60.2 million, or 11.3%. The decrease in International segment revenue was due primarily to the following:

•

The impact of the macroeconomic environment, which is included within organic growth. Although we cannot precisely measure the impact of the macroeconomic environment, in total we believe it had a negative impact on our International segment revenue for 2015 over the comparable period in 2014 of approximately $95 million, primarily due to changes in foreign exchange rates and lower fuel prices internationally. Unfavorable fluctuations in foreign exchange rates in all geographies had an unfavorable impact on revenues in 2015 over the comparable period in 2014 of approximately $92 million.

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

International segment revenue per transaction decreased from $2.76 in 2014 to $2.56 in 2015, a decrease of $0.20 per transaction or 7.2%, due primarily to the unfavorable impact of foreign exchange rates across all of our geographies. This unfavorable impact was partially offset by organic revenue growth in several products.

Consolidated operating expenses

Merchant commission. Merchant commissions increased from $96.3 million in 2014 to $108.3 million in 2015, an increase of $12.0 million, or 12.5%. This increase was due primarily to the fluctuation of the margin between the wholesale cost and retail price of fuel, which impacted merchant commissions in certain card programs, as well as the impact of higher volume in certain revenue streams where merchant commission are paid, partially offset by decreases due to changes in foreign exchange rates.

Processing. Processing expenses increased from $173.3 million in 2014 to $331.1 million in 2015, an increase of $157.7 million, or 91.0%. Our processing expenses primarily increased due to the impact of our acquisition of Comdata completed in the fourth quarter of 2014, partially offset by decreases due to changes in foreign exchange rates.

Selling. Selling expenses increased from $75.5 million in 2014 to $109.1 million in 2015, an increase of $33.5 million, or 44.4%. The increase was primarily due to our acquisition of Comdata completed in the fourth quarter of 2014, as well as additional sales and marketing spending in certain markets, partially offset by decreases due to changes in foreign exchange rates.

General and administrative. General and administrative expense increased from $206.0 million in 2014 to $297.7 million in 2015, an increase of $91.8 million, or 44.5%. The increase was primarily due to the impact of our acquisition of Comdata completed in the fourth quarter of 2014 and incremental stock based compensation of $52.5 million, partially offset by decreases due to changes in foreign exchange rates.

Depreciation and amortization. Depreciation and amortization increased from $112.4 million in 2014 to $193.5 million in 2015, an increase of $81.1 million, or 72.2%. The increase was primarily due to our acquisition of Comdata completed during the fourth quarter of 2014, which resulted in an increase of $91.3 million related to the amortization of acquired intangible assets for customer and vendor relationships, trade names and trademarks, non-compete agreements and software, as well as depreciation of acquired fixed assets, partially offset by decreases due to changes in foreign exchange rates.

Other operating, net. Other operating, net decreased from a $29.5 million favorable impact in 2014 to a $4.2 million favorable impact in 2015, a decrease of $25.3 million, or 85.8%. In 2015, the balance relates primarily to the net favorable impact of the additional reversals of various contingent liabilities for tax indemnifications related to our acquisitions of DB and VB in Brazil. Included in other operating, net in 2014 is $28.1 million of favorable impact related to fair value adjustments recorded for contingent consideration arrangements for our acquisition of VB in Brazil and $1.4 million from the reversal of other various contingent liabilities for tax indemnifications related to our acquisitions of DB and VB in Brazil.

Equity method investment loss

On April 28, 2014, we acquired a minority interest in Masternaut, a provider of telematics solutions to commercial fleets in Europe, which we account for as an equity method investment. The increase in equity method investment loss from $8.6 million in 2014 to $57.7 million in 2015 was primarily due to a non-cash impairment charge of $40 million recorded in the fourth quarter of 2015.

We regularly evaluate our investments, which are not carried at fair value, for other than temporary impairment in accordance with U. S. GAAP. During the fourth quarter of 2015, we determined that the performance improvement initiatives at Masternaut will take longer to implement than we originally projected. As a result, we have recorded a $40 million non-cash impairment charge in our equity method investment.

Interest expense, net

Interest expense increased from $28.9 million in 2014 to $71.3 million in 2015, an increase of $42.5 million, or 147.2%. The increase is due to an increase in borrowings in 2015 over 2014, primarily due to funding of the purchase price for our acquisition of Comdata. The following table sets forth the average interest rates paid on borrowings under our Credit Facility, excluding the relevant unused credit facility fees.

		2015			2014
Term loan A		1.94	%		1.92	%
Term loan B		3.75	%		3.75	%
Domestic Revolver A		1.95	%		1.92	%
Foreign Revolver A		2.36	%		2.27	%
Foreign Revolver B		—			4.43	%
Foreign swing line		2.29	%		2.24	%

The average unused credit facility fee for Domestic Revolver A was 0.35% and 0.31% in 2015 and 2014, respectively. The average unused credit facility fee for Foreign Revolver B was 0.30% in 2014.

Loss on early extinguishment of debt

Loss on early extinguishment of debt in 2014 relates to our write-off of $15.8 million of debt issuance costs associated with the refinancing of our Existing Credit Facility and entry into our New Credit Agreement, along with our acquisition of Comdata.

Provision for income taxes

The provision for income taxes increased from $144.2 million in 2014 to $173.6 million in 2015, an increase of $29.3 million, or 20.3%. Our effective tax rate increased from 28.1% in 2014 to 32.4% in 2015. We pay taxes in many different taxing jurisdictions, including the U.S., most U.S. states and many non-U.S. jurisdictions. The tax rates in certain non-U.S. taxing jurisdictions are lower than the U.S. tax rate. Consequently, as our earnings fluctuate between taxing jurisdictions, our effective tax rate fluctuates. The increase in the effective tax rate was due primarily to the non-deductible impairment charge of $40 million related to our minority investment in Masternaut, as well as the inclusion of the Comdata business, which operates primarily in the U.S. with a higher overall tax rate. Partially offsetting these negative impacts was the continued decrease in the U.K. statutory tax rates. These initiatives involved amending tax returns for several prior years and produced tax savings of approximately $7.9 million recorded in 2015. We expect that the impact of these planning initiatives will have a favorable impact on tax rates in future years. Included in 2014, was one-time tax favorability due to entity reorganization in Brazil, which allowed the reversal of deferred tax liability of $9.5 million, setup at the time of acquisition in 2013.

Net income

For the reasons discussed above, our net income decreased from $368.7 million in 2014 to $362.4 million in 2015, a decrease of $6.3 million, or 1.7%.

Operating income and operating margin

Consolidated operating income

Operating income increased from $565.4 million in 2014 to $667.5 million in 2015, an increase of $102.1 million, or 18.1%. Consolidated operating margin was 47.1% in 2014 and 39.2% in 2015. The increase in operating income was due primarily to the impact of our acquisition of Comdata completed in November 2014. These increases were partially offset by the negative impact of the macroeconomic environment, primarily due to lower fuel prices in North America and unfavorable changes in foreign exchange rates, as previously discussed. Changes in foreign exchange rates had an unfavorable impact on consolidated operating income of approximately $53 million due to unfavorable fluctuations in rates in all geographies. Results were also negatively impacted by the increase in amortization and depreciation expense related to assets acquired in 2014 and increased stock based compensation expense during 2015. The decrease in operating margin was due primarily to the impact of increased operating expenses associated with Comdata, including increased depreciation and amortization expense.

For the purpose of segment operating results, we calculate segment operating income by subtracting segment operating expenses from segment revenue. Similarly, segment operating margin is calculated by dividing segment operating income by segment revenue.

North America segment operating income

North America operating income increased from $287.3 million in 2014 to $442.0 million in 2015, an increase of $154.7 million, or 53.9%. North America operating margin was 43.0% in 2014 and 35.9% in 2015. The increase in operating income was due primarily to the impact of our acquisition of Comdata in November 2014, as well as organic growth in the business. The decrease in operating margin was due primarily to the impact of increased operating expenses associated with Comdata, including increased depreciation and amortization. In addition, we had increased stock based compensation expense, the majority of which is recorded in our North American segment. Furthermore, operating results were also negatively impacted by the macroeconomic environment, primarily due to lower fuel prices, partially offset by higher fuel spread margins.

International segment operating income

International operating income decreased from $278.1 million in 2014 to $225.5 million in 2015, a decrease of $52.7 million, or 18.9%. International operating margin was 52.4% in 2014 and 47.9% in 2015. The decrease in operating income was due primarily to the unfavorable impact of the macroeconomic environment, specifically unfavorable changes in foreign exchange rates, which we believe negatively impacted operating income by approximately $53 million, as well as the negative impact of fuel prices internationally. The negative impact of the environment was partially offset by the impact of organic growth in the

business driven by increases in volume and revenue per transaction, in local currency. The impact of changes in fuel price spreads was negligible.

Liquidity and capital resources

Our principal liquidity requirements are to service and repay our indebtedness, complete acquisitions of businesses and commercial account portfolios and meet working capital, tax and capital expenditure needs.

Sources of liquidity

At December 31, 2016, our cash balances totaled $643.8 million, with approximately $168.8 million restricted. Restricted cash represents customer deposits in the Czech Republic and in our Comdata business in the U.S., which we are restricted from using other than to repay customer deposits.

At December 31, 2016, cash and cash equivalents held in foreign subsidiaries where we have determined we are permanently reinvested was $312.2 million. All of the cash and cash equivalents held by our foreign subsidiaries, excluding restricted cash, are available for general corporate purposes. Our current intent is to permanently reinvest these funds outside of the U.S. Our current expectation for funds held in our foreign subsidiaries is to use the funds to finance foreign organic growth, to pay for potential future foreign acquisitions and to repay any foreign borrowings that may arise from time to time. We currently believe that funds generated from our U.S. operations, along with available borrowing capacity in the U.S. will be sufficient to fund our U.S. operations for the foreseeable future, and therefore do not foresee a need to repatriate cash held by our foreign subsidiaries in a taxable transaction to fund our U.S. operations. However, if at a future date or time these funds are needed for our operations in the U.S. or we otherwise believe it is in our best interests to repatriate all or a portion of such funds, we may be required to accrue and pay U.S. taxes to repatriate these funds. No assurances can be provided as to the amount or timing thereof, the tax consequences related thereto or the ultimate impact any such action may have on our results of operations or financial condition.

We utilize an accounts receivable Securitization Facility to finance a majority of our domestic fuel card receivables, to lower our cost of borrowing and more efficiently use capital. We generate and record accounts receivable when a customer makes a purchase from a merchant using one of our card products and generally pay merchants before collecting the receivable. As a result, we utilize the Securitization Facility as a source of liquidity to provide the cash flow required to fund merchant payments while we collect customer balances. These balances are primarily composed of charge balances, which are typically billed to the customer on a weekly, semimonthly or monthly basis, and are generally required to be paid within 14 days of billing. We also consider the undrawn amounts under our Securitization Facility and Credit Facility as funds available for working capital purposes and acquisitions. At December 31, 2016, we had the ability to generate approximately $112 million of additional liquidity under our Securitization Facility. At December 31, 2016, we had approximately $420 million available under our Credit Facility.

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

Cash flows

The following table summarizes our cash flows for the years ended December 31, 2016, 2015 and 2014.

		Year ended December 31,
(in millions)		2016				2015				2014
Net cash provided by operating activities		$	705.9			$	754.6			$	608.3
Net cash used in investing activities		(1,389.6		)		(99.4		)		(2,594.1		)
Net cash provided by (used in) financing activities		754.0				(648.1		)		2,162.3

Operating activities. Net cash provided by operating activities decreased from $754.6 million in 2015 to $705.9 million in 2016. The decrease was primarily due to changes in working capital driven by fluctuations in receivables and payables, largely

due to timing of month end transactions and volume. Cash flow was favorably impacted by additional net income of $90 million during 2016 over the comparable period in 2015.

Net cash provided by operating activities increased from $608.3 million in 2014 to $754.6 million in 2015, despite a slight decrease in net income. The increase was primarily due to changes in working capital and increases in certain non-cash expenses, including amortization of intangible assets of $73.6 million, stock-based compensation of $52.5 million and equity method investment loss of $49.1 million.

Investing activities. Net cash used in investing activities increased from $99.4 million in 2015 to $1,389.6 million in 2016. This increase was primarily due to the increase in cash paid for our STP and Travel Card acquisitions completed in 2016.

Net cash used in investing activities decreased from $2,594.1 million in 2014 to $99.4 million in 2015. This decrease was primarily due to the reduction in cash outlay for acquisitions, over the comparable period.

Financing activities. Net cash from financing activities increased from net cash used of $648.1 million in 2015 to net cash provided of $754.0 million in 2016. The increase was primarily due to an increase in net borrowings on our revolving credit facility and term loans of $952.2 million and $585.0 million, respectively, to fund acquisitions during 2016.

Net cash from financing activities decreased from net cash provided of $2,162.3 million in 2014 to net cash used of $648.1 million in 2015. The change is primarily due to increased net borrowings on our Credit Facility and Securitization Facility in 2014 to fund the purchase price for Comdata. Additionally, we made payments on contingent consideration arrangements of $42 million in 2015 that were not made in 2014.

Capital spending summary

Our capital expenditures increased from $41.9 million in 2015 to $59.0 million in 2016, an increase of $17 million, or 40.9%. This increase is primarily due to increased spending on strategic projects, including continued investment in our GFN application.

Our capital expenditures increased from $27.1 million in 2014 to $41.9 million in 2015, an increase of $14.8 million, or 54.7%. The increase was primarily due to the impact of our acquisition of Comdata in November 2014.

Credit Facility

On June 22, 2011, FleetCor Technologies Operating Company, LLC, and certain of our domestic and foreign owned subsidiaries, as designated co-borrowers, entered into a Credit Agreement, which was a five-year, $900 million Credit Agreement (the “Credit Agreement”) with Bank of America, N.A., as administrative agent, swing line lender and L/C issuer, and a syndicate of financial institutions.

On October 24, 2014, FleetCor Technologies Operating Company, LLC, and certain of our domestic and foreign owned subsidiaries, as designated co-borrowers (the “Borrowers”), entered into a new $3.36 billion Credit Agreement (the New Credit Agreement), with Bank of America, N.A., as administrative agent, swing line lender and local currency issuer, and a syndicate of financial institutions (the “Lenders”). The New Credit Agreement provided for senior secured credit facilities consisting of (a) a revolving A credit facility in the amount of $1.0 billion, with sublimits for letters of credit, swing line loans and multicurrency borrowings, (b) a revolving B facility in the amount of $35 million for loans in Australian Dollars or New Zealand Dollars, (c) a term A loan facility in the amount of $2.02 billion and (d) a term B loan facility in the amount $300 million. 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. The New Credit Agreement also contains an accordion feature for borrowing an additional $500 million in term A or revolver A and term B. Proceeds from the New Credit Facility may be used for working capital purposes, acquisitions, and other general corporate purposes. The proceeds of the New Credit Facility were used to paydown borrowings under the Credit Agreement. On November 14, 2014 in order to finance a portion of the Comdata Acquisition and to refinance our Credit Agreement, we made initial borrowings under the New Credit Agreement.

On August 22, 2016, the Company entered into the first amendment to the New Credit Agreement, which increased the size of our Term A loan from $2.02 billion to $2.62 billion. The proceeds from the additional $600 million in term A loan were used to partially finance the STP acquisition. On January 20, 2017, the Company entered into the second amendment to the New Credit Agreement, which established a new term B loan ("Term B-2 Loan") in the amount of $245 million to replace the existing term

B Loan. Interest on the Term B-2 loan facility accrues based on the Eurocurrency Rate or the Base Rate at 2.25% for Eurocurrency Loans and at 1.25% for Base Rate Loans.

The obligations of the Borrowers under the New Credit Agreement are secured by substantially all of the assets of FleetCor and its domestic subsidiaries, pursuant to a security agreement and includes a pledge of (i) 100% of the issued and outstanding equity interests owned by us of each Domestic Subsidiary and (2) 66% of the voting shares of the first-tier foreign subsidiaries, but excluding real property, personal property located outside of the United States, accounts receivables and related assets subject to the Securitization Facility and certain investments required under money transmitter laws to be held free and clear of liens. At December 31, 2016, we had $2.4 billion in borrowings outstanding on the term A loan, excluding the related debt discount, $245 million in borrowings outstanding on term B loan excluding the related debt discount, $465 million in borrowings outstanding on the domestic revolving A facility, $123.4 million in borrowings outstanding on the foreign revolving A facility and $26.6 million in borrowings outstanding on the revolving A facility swing line of credit.

Interest on amounts outstanding under the New Credit Agreement (other than the Term B-2 loan) accrues based on the British Bankers Association LIBOR Rate (the Eurocurrency Rate), plus a margin based on a leverage ratio, or our option, the Base Rate (defined as the rate equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the prime rate announced by Bank of America, N.A., or (c) the Eurocurrency Rate plus 1.00%) plus a margin based on a leverage ratio. Interest is payable quarterly in arrears. 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 credit facility. At December 31, 2016, the interest rate on the term loan A and the domestic revolving A facility was 2.52%, the interest rate on the foreign revolving A facility was 2.01%, the interest rate on the revolving A facility swing line of credit was 1.97% and the interest rate on the term loan B facility was 3.77%. The unused credit facility fee was 0.35% for all facilities at December 31, 2016.

The stated maturity dates for the term A loan, revolving loans, and letters of credit under the New Credit Agreement is November 14, 2019 and November 14, 2021 for the Term B-2 loan. The term loans are payable in quarterly installments and are due on the last business day of each March, June, September, and December with the final principal payment due on the respective maturity date. 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.

Our New Credit Agreement contains a number of negative covenants restricting, among other things, limitations on liens (with exceptions for our Securitization Facility) and investments, incurrence or guarantees of indebtedness, mergers, acquisitions, dissolutions, liquidations and consolidations, dispositions, dividends and other restricted payments and prepayments of other indebtedness. In particular, we are not permitted to make any restricted payments (which includes any dividend or other distribution) except that the we may declare and make dividend payments or other distributions to our stockholders so long as (i) on a pro forma basis both before and after the distribution the consolidated leverage ratio is not greater than 3.00:1.00 and we are in compliance with the financial covenants and (ii) no default or event of default shall exist or result therefrom. The New Credit Agreement also contains customary events of default. The New Credit Agreement includes financial covenants where the Company is required to maintain a consolidated leverage ratio to consolidated EBITDA of less than (i) 4.25 to 1.0 as of the end of any fiscal quarter prior to December 31, 2015; (ii) 4.00 to 1.0 as of any fiscal quarter after December 31, 2015 but on or prior to December 31, 2016; (iii) 3.75 to 1.0 as of any fiscal quarter after December 31, 2016 but on or prior to June 30, 2018; 3.50 to 1.0 as of any fiscal quarter after June 30, 2018; and a consolidated interest coverage ratio of no more than 4.00 to 1.0.

During 2016, we made principal payments of $116 million on the term A loan, $2.5 million on the Term B-2 loan, $730 million on the domestic revolving A facility, $56.8 million on the foreign revolving A facility and $13.5 million on the foreign revolving A facility swing line of credit.

Securitization Facility

We are a party to a receivables purchase agreement among FleetCor Funding LLC, as seller, PNC Bank, National Association as administrator, and various purchaser agents, conduit purchasers and related committed purchasers parties thereto, which was amended and restated for the Fifth time as of November 14, 2014. We refer to this arrangement as the Securitization Facility. There have been several amendments to the Securitization Facility. The current purchase limit under the Securitization Facility is $950 million and the Securitization Facility expires on November 14, 2017. The Securitization Facility contains certain customary financial covenants.

There is a program fee equal to one month LIBOR or the Commercial Paper Rate plus 0.90%. At December 31, 2016 and 2015, the company used the Commercial Paper Rate of 0.85% plus 0.90% and 0.43% plus 0.90%, respectively. The unused facility fee is payable at a rate of 0.40% as of December 31, 2016 and 2015.

Under a related purchase and sale agreement, dated as of December 20, 2004, and most recently amended on November 14, 2014 to include Comdata as an originator, between FleetCor Funding LLC, as purchaser, and certain of our subsidiaries, as originators, the receivables generated by the originators are deemed to be sold to FleetCor Funding LLC immediately and without further action upon creation of such receivables. At the request of FleetCor Funding LLC, as seller, undivided percentage ownership interests in the receivables are ratably purchased by the purchasers in amounts not to exceed their respective commitments under the facility. Collections on receivables are required to be made pursuant to a written credit and collection policy and may be reinvested in other receivables, may be held in trust for the purchasers, or may be distributed. Fees are paid to each purchaser agent for the benefit of the purchasers and liquidity providers in the related purchaser group in accordance with the Securitization Facility and certain fee letter agreements.

The Securitization Facility provides for certain termination events, which includes nonpayment, upon the occurrence of which the administrator may declare the facility termination date to have occurred, may exercise certain enforcement rights with respect to the receivables, and may appoint a successor servicer, among other things.

We were in compliance with all financial and non-financial covenant requirements related to our Securitization Facility as of December 31, 2016.

Other Liabilities

In connection with our acquisition of certain businesses, we owe final payments of $3.0 million, which are payable in the next twelve months.

Stock Repurchase Program

On February 4, 2016, the Company’s Board of Directors approved a stock repurchase program (the "Program") under which the Company may begin purchasing up to $500 million of its common stock over the next 18 month period. Any stock repurchases may be made at times and in such amounts as deemed appropriate. The timing and amount of stock repurchases, if any, will depend on a variety of factors including the stock price, market conditions, corporate and regulatory requirements, and any additional constraints related to material inside information the Company may possess. Any repurchases have been and are expected to be funded by available cash flow from the business and working capital. There were 1,259,145 common shares totaling $187.7 million repurchased under the Program during 2016.

Critical accounting policies and estimates

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

See Footnote 2 to the Consolidated Financial Statements, Summary of Significant Accounting Policies.

Revenue recognition and presentation

Revenue is derived from our merchant and network relationships as well as from customers and partners. We recognize revenue on fees generated through services primarily to commercial fleets, commercial businesses, major oil companies, petroleum marketers and leasing companies and record revenue net of the wholesale cost of the underlying products and services based on the following: (i) we are not the primary obligor in the arrangement and we are not responsible for fulfillment and the

acceptability of the product; (ii) we have no inventory risk, do not bear the risk of product loss and do not make any changes to the product or have any involvement in the product specifications; (iii) we do not have significant latitude with respect to establishing the price for the product (predominantly fuel) and (iv) the amount we earn for our services is fixed, within a limited range. We recognize revenue from merchant and network relationships, processing and other arrangements 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, as more fully described below.

Through our merchant and network relationships we provide fuel, prepaid cards, vehicle maintenance, lodging, food, toll, and transportation related services to our customers. We derive revenue from our 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. Our revenue consists of margin on 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 we pay 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. We have entered into agreements with major oil companies, petroleum marketers and leasing companies, among others, that specify that a transaction is deemed to be captured when we have validated that the transaction has no errors and have accepted and posted the data to our records.

We also derive revenue from customers and partners from a variety of program fees including transaction fees, card fees, network fees, report 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 we fulfill our contractual service obligations. In addition, we recognize revenue from late fees and finance charges, in jurisdictions where permitted under local regulations, primarily in the U.S. and Canada. Such fees are recognized net of a provision for estimated uncollectible amounts, at the time the fees and finance charges are assessed and services are provided. The Company ceases billing and accruing for late fees and finance charges approximately 30-40 days after the customer’s balance becomes delinquent.

We also charge our customers transaction fees to load value onto prepaid fuel, food, toll and transportation vouchers and cards. We recognize fee revenue upon providing the activated fuel, food, toll and transportation vouchers and prepaid cards to the customer. 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 our 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. We have recorded $91.6 million of expenses related to sales of equipment within the processing expenses line of the consolidated statements of income in 2016.

Our fiscal year ends on December 31. In certain of our U.K. businesses, we record 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 2015 and 2014 include 52 weeks for the businesses reporting using a 4-4-5 accounting cycle.

We deliver both stored value cards and card-based services primarily in the form of gift cards. For multiple-deliverable customer contracts, stored value cards and card-based services are separated into two units of accounting. Stored valued cards are generally recognized upon shipment to the customer. Card-based services are recognized when the card services are rendered.

Accounts receivable

As described above under the heading “Securitization Facility,” we maintain a revolving trade accounts receivable Securitization Facility. The current purchase limit under the Securitization Facility is $950 million. Accounts receivable collateralized within our Securitization Facility relate to trade receivables resulting from charge card activity. Pursuant to the terms of the Securitization Facility, we transfer certain of our domestic receivables, on a revolving basis, to FleetCor Funding LLC (Funding), a wholly-owned bankruptcy remote subsidiary (Conduit). In turn, Funding sells, without recourse, on a revolving basis, up to $950 million of undivided ownership interests in this pool of accounts receivable to a multi-seller, asset-backed commercial paper 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.

We utilize proceeds from the sale of our accounts receivable as an alternative to other forms of financing, effectively reducing our overall borrowing costs. We have agreed to continue servicing the sold receivables for the financial institutions at market rates, which approximates our cost of servicing. We retain 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.

On November 14, 2014, in order to finance a portion of the Comdata acquisition, the Company and certain of its subsidiaries entered into a New Receivables Purchase Agreement. Under the terms of the New Receivables Purchase agreement, the purchase limit was increased from $500 million to $1.2 billion, and the term of the facility was extended to November 14, 2017. On November 5, 2015, the first amendment to the fifth amended and restated receivables purchase agreement was entered into which allowed the Company to enter into a new contract with BP and modified the eligible receivables definition and on December 1, 2015, the second amendment to the fifth amended and restated receivables purchase agreement was entered into which reduced the commitments from $1.2 billion to $950 million.

All foreign receivables are owned receivables and are not included in our receivable securitization program. At December 31, 2016 and 2015, there was $591 million and $614 million, respectively, of short-term debt outstanding under our Securitization Facility.

Credit risk and reserve for losses on receivables

We control credit risk by performing periodic credit evaluations of our customers. Payments from customers are generally due within 14 days of billing. We routinely review our accounts receivable balances and make provisions for probable doubtful accounts based primarily on the aging of those balances. Accounts receivable are deemed uncollectible once they age past 90 days and are deemed uncollectible from the customer. We provide an allowance for receivables aged less than 90 days that we expect will be uncollectible based on historical collections experience and would include accounts that have filed for bankruptcy. At December 31, 2016, approximately 95% of outstanding accounts receivable were current. Accounts receivable deemed uncollectible are 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.

Impairment of long-lived assets, intangibles and equity method investment

We test our other long-lived assets for impairment in accordance with relevant authoritative guidance. We evaluate whether impairment indicators related to our 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, we estimate the future cash flows for the asset or group of assets. The sum of the undiscounted future cash flows attributable to the asset or group of assets is compared to their 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 management’s intended actions. If the carrying amount exceeds the sum of the undiscounted future cash flows, we determine 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, we perform our testing of the asset group at the business-line level, as this is the lowest level for which identifiable cash flows are available.

We complete an 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. As deemed appropriate, we have performed a qualitative assessment of certain of our reporting units. In this qualitative assessment we individually considered the following items for each reporting unit where we 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.

In step 1 of the goodwill impairment test for our reporting units, 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.

We estimate the fair value of our 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. We discount the related cash flow forecasts using an 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 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 on October 1, 2016, we 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 our most recent annual impairment test that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

We also evaluate indefinite-lived intangible assets (primarily trademarks and trade names) for impairment annually. We also test 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 our evaluation of indefinite-lived intangible assets for impairment include the discount rate, royalty rates used in our 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.

We also regularly evaluate the carrying value of our equity method investment, which is not carried at fair value, for other-than-temporary impairment. We estimate the fair value of our equity method investment 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. We discount the related cash flow forecasts using an 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 our equity method investment in developing the valuation estimate. During the fourth quarters of 2016 and 2015, we determined that the performance improvement initiatives in our equity method investment in Masternaut Group Holdings Limited ("Masternaut") will take longer and be more challenging to implement than originally projected, based on revised cash flow projections provided by the business. As a result, we have recorded a $36.1 million and $40 million non-cash impairment charge in our equity method investment for 2016 and 2015, respectively.

Income taxes

We account for income taxes 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. On a quarterly basis, we evaluate whether it is more likely than not that our deferred tax assets will be realized in the future and conclude whether a valuation allowance must be established.

We do not provide deferred taxes for the undistributed earnings of our foreign subsidiaries that are considered to be indefinitely reinvested outside of the United States in accordance with relevant authoritative literature. If in the future these earnings are repatriated to the United States, or if we determine that the earnings will be remitted in the foreseeable future, additional tax provisions may be required.

Current 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. We include any estimated interest and penalties on tax related matters in income tax expense.

Business combinations

We have accounted for business combinations under the acquisition method of accounting. The acquisition method requires that the acquired assets and liabilities including contingencies, be recorded at fair value determined as of the acquisition date and changes thereafter reflected in income. For significant acquisitions, we obtain independent third party valuation studies for certain of the assets acquired and liabilities assumed to assist in determining fair value. Goodwill represents the excess of the purchase price over the fair value of the tangible and intangible assets acquired and liabilities assumed. The results of the acquired businesses are included in our results of operations beginning from the completion date of the applicable transaction.

Estimates of fair value 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. Provisional estimates of the fair values of the assets acquired and liabilities assumed involves a number of estimates and assumptions that could differ materially from the final amounts recorded. 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 contingent consideration related to the performance of the acquired operations following the acquisition. Contingent consideration is recorded at estimated fair value at the date of the acquisition and is remeasured each reporting period, with any changes in fair value recorded in the consolidated statements of income. We estimate the fair value of the acquisition-related contingent consideration using various valuation approaches, as well as significant unobservable inputs, reflecting our assessment of the assumptions market participants would use to value these liabilities.

Stock-based compensation

We account 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 our board of directors. Options granted have vesting provisions ranging from one to six years. Stock option grants are subject to forfeiture if employment terminates prior to vesting. We have selected the Black-Scholes option pricing model for estimating the grant date fair value of stock option awards granted. We have considered the retirement and forfeiture provisions of the options and utilized our historical experience to estimate the expected life of the options. We base 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. 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 subject to forfeiture if employment terminates prior to vesting. The vesting of shares granted is generally based on the passage of time, performance or market conditions, or a combination of these. Shares vesting based on the passage of time have vesting provisions of one year. The fair value of restricted stock shares where the shares vest based on the passage of time or performance is based on the grant date fair value of our 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 and performance based stock option awards, we must also make assumptions regarding the likelihood of achieving performance goals. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially affected.

Adoption of New Accounting Standards

Going Concern

In August 2013, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-15 “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern”, which requires entities to perform interim and annual assessments of the entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements. This ASU is effective for fiscal years ending after December 15, 2016 and interim periods thereafter, with early adoption permitted. Our adoption of this ASU did not have a material impact on the results of operations, financial condition, or cash flows, as it is disclosure based.

Simplification of Guidance on Debt Issuance Costs

In April 2015, the FASB issued ASU 2015-3, “Interest—Imputation of Interest”, which changes the presentation of debt issuance costs in financial statements as a direct deduction from the related debt liability rather than as an asset. This ASU is effective for us for fiscal years ending after December 15, 2015 and interim periods. Early adoption is permitted. In August 2015, the FASB issued ASU 2015-15, “Interest-Imputation of Interest: Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements”, which is effective immediately. The SEC staff clarified that entities may continue presenting unamortized debt issuance costs for line-of-credit arrangements as an asset.We adopted this new guidance on January 1, 2016. As a result of the adoption of this ASU, $0.6 million and $1.5 million of unamortized debt issuance costs were retrospectively adjusted from prepaid expenses and other current assets to the current portion of notes payable and lines of credit and other assets to notes payable and other obligations, less current portion, respectively, in the our Consolidated Balance Sheet as of December 31, 2015.

Accounting for Employee Stock-Based Payment

In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting", which requires excess tax benefits recognized on stock-based compensation expense be reflected in the consolidated statements of operations as a component of the provision for income taxes on a prospective basis. ASU 2016-09 also requires excess tax benefits recognized on stock-based compensation expense be classified as an operating activity in the consolidated statements of cash flows rather than a financing activity. Companies can elect to apply this provision retrospectively or prospectively. ASU 2016-09 also requires entities to elect whether to account for forfeitures as they occur or estimate expected forfeitures over the course of a vesting period. This ASU is effective for us for annual periods beginning after December 15, 2016. Early adoption is permitted.

During the third quarter of 2016, we elected to early adopt ASU 2016-09. The adoption of this ASU resulted in excess tax benefits being recorded as a reduction of income tax expense prospectively for all periods during 2016, rather than additional paid in capital, and an increase in the number of dilutive shares outstanding at the end of each period, which resulted in an increase to diluted earnings per share during the respective period. As required by ASU 2016-09, excess tax benefits recognized on stock-based compensation expense are classified as an operating activity in our consolidated statements of cash flows on a prospective basis within changes in accounts payable, accrued expenses and customer deposits. In accordance with ASU 2016-09, prior periods related to the classification of excess tax benefits have not been adjusted. We also elected to account for forfeitures as they occur, rather than estimate expected forfeitures over the course of a vesting period. As a result of the adoption of ASU 2016-09, the net cumulative effect of this change was not material.

The following table shows the impact of retrospectively applying ASU 2016-09 to the previously issued consolidated statements of operations for the three month period ended March 31 and the three and six month periods ended June 30 (in thousands, except per share amounts):

		Three Months Ended March 31, 2016												Three Months Ended June 30, 2016
		As Previously Reported				Adjustments				As Recast				As Previously Reported				Adjustments				As Recast
Income before income taxes		$	156,912			$	—			$	156,912			$	162,348			$	—			$	162,348
Provision for income taxes		46,940				(1,118		)		45,822				48,163				(2,068		)		46,095
Net income		$	109,972			$	1,118			$	111,090			$	114,185			$	2,068			$	116,253
Earnings per share:
Basic earnings per share		$	1.19			$	0.01			$	1.20			$	1.23			$	0.02			$	1.25
Diluted earnings per share		$	1.17			$	—			$	1.17			$	1.21			$	0.01			$	1.22
Weighted average common shares outstanding:
Basic		92,516				—				92,516				92,665				—				92,665
Diluted		94,329				701				95,030				94,549				729				95,279

		Six Months Ended June 30, 2016
		As Previously Reported				Adjustments				As Recast
Income before income taxes		$	319,260			$	—			$	319,260
Provision for income taxes		95,103				(3,186		)		$	91,917
Net income		$	224,157			$	3,186			$	227,343
Earnings per share:
Basic earnings per share		$	2.42			$	0.04			$	2.46
Diluted earnings per share		$	2.37			$	0.02			$	2.39
Weighted average common shares outstanding:
Basic		92,591				—				92,591
Diluted		94,437				700				95,137

The following table shows the impact of retrospectively applying this guidance to the Consolidated Statement of Cash flows for the three months ended March 31, 2016 and six months ended June 30, 2016 (in thousands):

		Three Months Ended March 31, 2016												Six Months Ended June 30, 2016
		As Previously Reported				Adjustments				As Recast				As Previously Reported				Adjustments				As Recast
Net cash provided by operating activities		$	121,505			$	1,118			$	122,623			$	208,856			$	3,186			$	212,042
Net cash used in investing activities		(20,745		)		—				(20,745		)		(37,924		)		—				(37,924		)
Net cash used in financing activities		(157,389		)		(1,118		)		(158,507		)		(118,303		)		(3,186		)		(121,489		)
Effect of foreign currency exchange rates on cash		8,795				—				8,795				(6,696		)		—				(6,696		)
Net (decrease) increase in cash		$	(47,834	)		$	—			$	(47,834	)		$	45,933			$	—			$	45,933

Simplification of Balance Sheet Classification of Deferred Taxes

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”, which requires entities to present deferred tax assets (DTAs) and deferred tax liabilities (DTLs) as noncurrent in a classified balance sheet. It thus simplifies the current guidance, which requires entities to separately present DTAs and DTLs as current or noncurrent in a classified balance sheet. Netting of DTAs and DTLs by tax jurisdiction is still required under the new guidance. This ASU is effective for us for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. During the fourth quarter of 2016, we elected to early adopt ASU 2015-17 on a

prospective basis and prior periods were not retrospectively adjusted. Our adoption of this ASU did not have a material impact on the results of operations, financial condition, or cash flows.

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.

Revenue Recognition

In May 2014, the FASB issued Accounting Standards Codification ("ASC") 606, “Revenue from Contracts with Customers”, which amends the guidance in former ASC 605, Revenue Recognition. This amended guidance requires revenue to be recognized in an amount that reflects the consideration to which the company expects to be entitled for those goods and services when the performance obligation has been satisfied. This amended guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and related cash flows arising from contracts with customers. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date”, which defers the effective date of the new revenue recognition standard by one year. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”, which clarifies how an entity should identify the unit of accounting for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. In April 2016, the FASB issued ASU 2016-10, "Identifying Performance Obligations and Licensing", which clarifies the accounting for intellectual property licenses and identifying performance obligations. In May 2016, the FASB issued ASU 2016-11, "Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting", which rescinds certain SEC guidance in response to announcements made by the SEC staff at the EITF's March 3, 2016 meeting and ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients", which clarifies the guidance on collectibility, non-cash consideration, the presentation of sales and other similar taxes collected from customers and contract modifications and completed contracts at transition. Additionally, ASU 2016-12 clarifies that entities electing the full retrospective transition method would no longer be required to disclose the effect of the change in accounting principle on the period of adoption; however, entities would still be required to disclose the effects on preadoption periods that were retrospectively adjusted. These ASUs are effective for us for reporting periods beginning after December 15, 2017, but permit companies the option to adopt as of the original effective date. We are currently evaluating the impact of the provisions of ASC 606. In 2016, we continued our assessment of the new standard with a focus on identifying the performance obligations included within our revenue arrangements with customers and evaluating our methods of estimating the amount of and timing of variable consideration. The guidance permits the use of either a retrospective or cumulative effect transition method. We anticipate selecting the modified retrospective method, which would result in an adjustment to retained earnings for the cumulative effect, if any, of applying the standard to contracts in process as of the adoption date. Under this method, we would not restate the prior financial statements presented, therefore the new standard requires us to provide additional disclosures of the amount by which each financial statement line item is affected in the current reporting period during 2018, as compared to the guidance that was in effect before the change, and an explanation of the reasons for significant changes, if any. We are continuing our assessment to evaluate the impact of the provisions of ASC 606 on the results of operations, financial condition, and cash flows.

Accounting for Leases

In February 2016, the FASB issued ASU 2016-02, “Leases”, which requires lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases. This ASU also requires disclosures to provide additional information about the amounts recorded in the financial statements. This ASU is effective for us for annual periods beginning after December 15, 2018 and interim periods therein. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition and requires application of the new guidance for leases that exist or are entered into after the beginning of the earliest comparative period presented. We are currently evaluating the impact of this ASU on the results of operations, financial condition, or cash flows.

Accounting for Breakage

In March 2016, the FASB issued ASU 2016-04, “Liabilities-Extinguishments of Liabilities: Recognition of Breakage for Certain Prepaid Stored-Value Products”, which requires entities that sell prepaid stored value products redeemable for goods, services or cash at third-party merchants to derecognize liabilities related to those products for breakage. This ASU is effective for us for reporting periods beginning after December 15, 2017. Early adoption is permitted. The ASU must be adopted using either a modified retrospective approach with a cumulative effect adjustment to retained earnings as of the beginning of the

period of adoption or a full retrospective approach. Our adoption of this ASU is not expected to have a material impact on the results of operations, financial condition, or cash flows.

Cash Flow Classification

In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments", which amends the guidance in ASC 230, Statement of Cash Flows. This amended guidance reduces the diversity in practice that has resulted from the lack of consistent principles related to the classification of certain cash receipts and payments in the statement of cash flows. This ASU is effective for the Company for reporting periods beginning after December 15, 2017. Early adoption is permitted. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively from the earliest date practicable if retrospective application would be impracticable. Our adoption of this ASU is not expected to have a material impact on the results of operations, financial condition, or cash flows.

In November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash", which amends the guidance in ASC 230, Statement of Cash Flows, on the classification and presentation of restricted cash in the statement of cash flows. This ASU is effective for the Company for reporting periods beginning after December 15, 2017. Early adoption is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in this ASU should be applied using a retrospective transition method to each period presented. Our adoption of this ASU is not expected to have a material impact on the results of operations, financial condition, or cash flows.

Contractual obligations

The table below summarizes the estimated dollar amounts of payments under contractual obligations identified below as of December 31, 2016 for the periods specified:

						Payments due by period(a)
(in millions)		Total				Less than 1 year				1-3 years				3-5 years				More than 5 years
Credit Facility		$	3,254.3			$	745.5			$	2,271.8			$	237.0			$	—
Securitization Facility		591.0				591.0				—				—				—
Estimated interest payments- Credit Facility(c)		206.6				81.3				125.3				—				—
Estimated interest payments- Securitization Facility(c)		10.0				10.0				—				—				—
Operating leases		81.8				18.2				25.0				15.6				23.0
Deferred purchase price(b)		3.0				3.0				—				—				—
Other(b)		12.9				—				11.8				0.2				1.0
Total		$	4,159.6			$	1,449.0			$	2,433.8			$	252.9			$	24.0

---

(a)

Deferred income tax liabilities as of December 31, 2016 were approximately $666.1 million. Refer to Note 11 to our audited consolidated financial statements. This amount is not included in the total contractual obligations table because we believe this presentation would not be meaningful. Deferred income tax liabilities are calculated based on temporary differences between the tax bases of assets and liabilities and their respective book bases, which will result in taxable amounts in future years when the liabilities are settled at their reported financial statement amounts. The results of these calculations do not have a direct connection with the amount of cash taxes to be paid in any future periods. As a result, scheduling deferred income tax liabilities as payments due by period could be misleading, as this scheduling would not relate to liquidity needs.

(b)

The long-term portion of contingent consideration agreements and deferred purchase price payments are included with ‘other debt’ in the detail of our debt instruments disclosed in Note 10 to our audited consolidated financial statements. To reconcile the amount of ‘other debt’ as disclosed in the footnote to the contractual obligations table above, the long-term portion of deferred purchase price payments should be combined with ‘Other’.

(c)

We draw upon and pay down on the revolver within our New Credit Agreement and our Securitization Facility borrowings outside of a normal schedule, as excess cash is available. For our variable rate debt, we have assumed the December 31, 2016 interest rates to calculate the estimated interest payments, for all years presented. This analysis also assumes that outstanding principal is held constant at the December 31, 2016 balances for our New Credit Agreement and Securitization Facility, except for mandatory pay downs on the term loans in accordance with the loan documents. We typically expect to settle such interest payments with cash flows from operating activities and/or other short-term borrowings.

Management’s Use of Non-GAAP Financial Measures

We have included in the discussion above certain financial measures that were not prepared in accordance with GAAP. Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. Below, we define the non-GAAP financial measures, provide a reconciliation of the non-GAAP financial measure to the most directly comparable financial measure calculated in accordance with GAAP, and discuss the reasons that we believe this information is useful to management and may be useful to investors.

Adjusted revenues

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

We use adjusted revenues as a basis to evaluate our revenues, net of the commissions that are paid to merchants to participate in our card programs. The commissions paid to merchants can vary when market spreads fluctuate in much the same way as revenues are impacted when market spreads fluctuate. We believe that adjusted revenue is an appropriate supplemental measure of financial performance and may be useful to investors to understanding our revenue performance on a consistent basis. Adjusted revenues are not intended to be a substitute for GAAP financial measures and should not be used as such.

Set forth below is a reconciliation of adjusted revenues to the most directly comparable GAAP measure, revenues, net (in thousands):

		Year Ended December 31,
		2016				2015				2014
Revenues, net		$	1,831,546			$	1,702,865			$	1,199,390
Merchant commissions		104,345				108,257				96,254
Total adjusted revenues		$	1,727,201			$	1,594,608			$	1,103,136

Adjusted net income and adjusted net income per diluted share

We have defined the non-GAAP measure adjusted net income as net income as reflected in our statement of income, adjusted to eliminate (a) non-cash stock-based compensation expense related to share-based compensation awards, (b) amortization of deferred financing costs, discounts and intangible assets, (c) amortization of the premium recognized on the purchase of receivables, (d) loss on the early extinguishment of debt, (e) our proportionate share of amortization of intangible assets at our equity method investment, (f) impairment of equity method investment, (g) non-recurring net gain at equity method investment, and (h) other non-cash adjustments.

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

We use adjusted net income to eliminate the effect of items that we do not consider indicative of our core operating performance. We believe it is useful to exclude non-cash stock based compensation expense from adjusted net income because non-cash equity grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time and stock based compensation expense is not a key measure of our core operating performance. We also believe that amortization expense can vary substantially from company to company and from period to period depending upon their financing and accounting methods, the fair value and average expected life of their acquired intangible assets, their capital structures and the method by which their assets were acquired. Therefore, we have excluded amortization expense from adjusted net income. We believe that adjusted net income and adjusted net income per diluted share are appropriate supplemental measures of financial performance and may be useful to investors to understanding our operating performance on a consistent basis. Adjusted net income and adjusted net income per diluted share are not intended to be a substitute for GAAP financial measures and should not be used as such.

Set forth below is a reconciliation of adjusted net income and adjusted net income per diluted share to the most directly comparable GAAP measure, net income and net income per diluted share (in thousands, except per share amounts):

		Year Ended December 31,
		20164						2015						2014
Net income		$	452,385					$	362,431					$	368,707
Net income per diluted share		$	4.75					$	3.85					$	4.24
Stock based compensation		63,946						90,122						37,649
Amortization of intangible assets		161,635						159,740						86,149
Amortization of premium on receivables		5,165						3,250						3,259
Amortization of deferred financing costs and discounts		7,582						7,049						2,796
Amortization of intangibles at equity method investment		10,093						10,665						7,982
Loss on extinguishment of debt		—						—						15,764
Non-recurring net gain at equity method investment		(10,845		)				—						—
Impairment of equity method investment		36,065						40,000						—
Other non-cash adjustments		—						—						(28,869		)	2
Total pre-tax adjustments		273,641						310,826						124,730
Income tax impact of pre-tax adjustments at the effective tax rate*		(66,850		)				(80,632		)		3		(45,767		)	1
Adjusted net income		$	659,176					$	592,625					$	447,670
Adjusted net income per diluted share		$	6.92					$	6.30					$	5.15
Diluted shares		95,213						94,139						86,982

1The effective tax rate used to calculate the income tax impact of pre-tax adjustments during 2014 excludes the impact of a $9.5 million discrete tax benefit, as well as other non-cash adjustments and their related income tax expense.

2Other non-cash adjustments are unusual items reflecting adjustments to purchase accounting entries for contingent consideration and tax indemnifications for our 2013 acquisitions of DB and VB in Brazil.

3The effective tax rate utilized excludes the impact of a one-time tax benefit recognized during 2015 of approximately $0.8 million, as well as adjustments related to our equity method investment for all periods presented.

4Reflects the impact of the Company's adoption of Accounting Standards Update 2016-09, "Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting", to simplify several aspects of the accounting for the share-based compensation, including the income tax consequences.

*Excludes the results of our equity method investment on our effective tax rate, as results from our equity method investment are reported within the Consolidated Income Statements on a post-tax basis and no tax-over-book outside basis differences related to our equity method investment reversed during 2016.