Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

189K characters. Original on sec.gov · Markdown

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



			Page
Report of Independent Registered Public Accounting Firm			58
Consolidated Balance Sheets at December 31, 2020 and 2019			60
Consolidated Statements of Income for the Years Ended December 31, 2020, 2019 and 2018			61
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019 and 2018			62
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2020, 2019 and 2018			63
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018			64
Notes to Consolidated Financial Statements			65

Table of Contents

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of FLEETCOR Technologies, Inc. and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of FLEETCOR Technologies, Inc. and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 26, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Table of Contents


						Valuation of Goodwill
Description of the Matter						At December 31, 2020, the Company’s goodwill was $4.7 billion. As discussed in Note 2 to the consolidated financial statements, the Company completes an impairment test of goodwill at least annually or more frequently if facts and circumstances indicate that goodwill might be impaired. Goodwill is tested for impairment at the reporting unit level and involves estimating the fair value of each identified reporting unit which is measured based upon, among other factors, a discounted cash flow analysis, as well as market multiples for comparable companies. Auditing the Company's estimate of reporting unit fair value involved a high degree of subjectivity as estimates underlying the determination of reporting unit fair value using the discounted cash flow model were based on significant assumptions that are sensitive to change and are affected by expected future market and economic conditions. These assumptions included forecasts for Revenue, net, Earnings before Interest Taxes Depreciation and Amortization (EBITDA), and long-term growth rates as well as the discount rates, which reflected risk-based factors based on the reporting units’ geographical location and business risk.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment review process, including controls over management’s review of the significant assumptions described above. For example, we tested controls over management’s review of the reporting units’ long-term growth rates and discount rates used in the determination of the reporting units’ estimated fair values. To test the estimated fair value of the Company’s reporting units, our audit procedures included, among others, assessing the methodologies used by the Company and testing the significant assumptions discussed above, inclusive of the underlying data used by the Company in its development of these assumptions. We involved our valuation specialists to assist us with these procedures. Our valuation specialists evaluated management’s estimation of the discount rates used in the reporting units’ fair value calculations, performed a comparison of market multiples to observable transactions, and independently recalculated the discount rates for the respective reporting units. We also compared earnings forecasts to historical results and, for certain reporting units, to current industry and economic trends, and performed sensitivity analyses of the significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the significant assumptions.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 2002.

Atlanta, Georgia

February 26, 2021

Table of Contents

FLEETCOR Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands, Except Share and Par Value Amounts)


	December 31,
	2020		2019
Assets
Current assets:
Cash and cash equivalents	$	934,900	$	1,271,494
Restricted cash	541,719		403,743
Accounts and other receivables (less allowance for credit losses of $86,886 at December 31, 2020 and $70,890 at December 31, 2019)	1,366,775		1,568,961
Securitized accounts receivable—restricted for securitization investors	700,000		970,973
Prepaid expenses and other current assets	412,924		403,400

Total current assets	3,956,318		4,618,571


Property and equipment, net	202,509		199,825
Goodwill	4,719,181		4,833,047
Other intangibles, net	2,115,882		2,341,882
Investments	7,480		30,440
Other assets	193,209		224,776
Total assets	$	11,194,579	$	12,248,541
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,054,478	$	1,249,586
Accrued expenses	282,681		275,511
Customer deposits	1,175,322		1,007,631
Securitization facility	700,000		970,973
Current portion of notes payable and lines of credit	505,697		775,865
Other current liabilities	250,133		183,502
Total current liabilities	3,968,311		4,463,068
Notes payable and other obligations, less current portion	3,126,926		3,289,947
Deferred income taxes	498,154		519,980
Other noncurrent liabilities	245,777		263,930
Total noncurrent liabilities	3,870,857		4,073,857
Commitments and contingencies (Note 15)
Stockholders’ equity:
Common stock, $0.001 par value; 475,000,000 shares authorized; 126,448,078 shares issued and 83,666,163 shares outstanding at December 31, 2020; and 124,626,786 shares issued and 85,342,156 shares outstanding at December 31, 2019	126		124
Additional paid-in capital	2,749,900		2,494,721
Retained earnings	5,416,945		4,712,729
Accumulated other comprehensive loss	(1,363,158)		(972,465)
Less treasury stock (42,781,915 shares and 39,284,630 shares at December 31, 2020 and 2019, respectively)	(3,448,402)		(2,523,493)
Total stockholders’ equity	3,355,411		3,711,616
Total liabilities and stockholders’ equity	$	11,194,579	$	12,248,541


See accompanying notes.

Table of Contents

FLEETCOR Technologies, Inc. and Subsidiaries

Consolidated Statements of Income

(In Thousands, Except Per Share Amounts)


	Year Ended December 31,
	2020		2019		2018 1
Revenues, net	$	2,388,855	$	2,648,848	$	2,433,492
Expenses:

Processing	596,363		530,669		487,695
Selling	192,732		204,806		182,593
General and administrative	374,678		407,210		389,172
Depreciation and amortization	254,802		274,210		274,609
Other operating (income) expense, net	(1,985)		523		8,725
Operating income	972,265		1,231,430		1,090,698
Investment (gain) loss, net	(30,008)		3,470		7,147
Other (income) expense, net	(10,055)		93		(152,166)
Interest expense, net	129,803		150,048		138,494
Loss on extinguishment of debt	—		—		2,098
Total other expense (income)	89,740		153,611		(4,427)
Income before income taxes	882,525		1,077,819		1,095,125
Provision for income taxes	178,309		182,746		283,642
Net income	$	704,216	$	895,073	$	811,483
Basic earnings per share	$	8.38	$	10.36	$	9.14
Diluted earnings per share	$	8.12	$	9.94	$	8.81
Weighted average shares outstanding:
Basic shares	84,005		86,401		88,750
Diluted shares	86,719		90,070		92,151

1 The Company applied the modified retrospective transition method when adopting ASU 2016-02 "Leases", therefore the Company's 2018 prior results were not restated to reflect ASU 2016-02. Refer to footnote 14.


See accompanying notes.

Table of Contents

FLEETCOR Technologies, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In Thousands)


	Year Ended December 31,
	2020		2019		2018
Net income	$	704,216	$	895,073	$	811,483
Other comprehensive loss:
Foreign currency translation losses, net of tax	(367,249)		(15,855)		(362,001)

Net change in derivative contracts, net of tax	(23,444)		(42,752)		—
Total other comprehensive loss	(390,693)		(58,607)		(362,001)
Total comprehensive income	$	313,523	$	836,466	$	449,482

See accompanying notes.

Table of Contents

FLEETCOR Technologies, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

(In Thousands)


	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balance at December 31, 2017	$	122	$	2,214,224	$	2,958,921	$	(551,857)	$	(944,888)	$	3,676,522
Net income	—		—		811,483		—		—		811,483
Cumulative effect of change in accounting principle	—		—		47,252		—		—		47,252
Other comprehensive loss from currency exchange, net of tax of $0	—		—		—		(362,001)		—		(362,001)
Acquisition of common stock	—		(33,000)		—		—		(925,696)		(958,696)
Share-based compensation expense	—		69,939		—		—		—		69,939
Issuance of common stock	1		55,680		—		—		—		55,681
Balance at December 31, 2018	123		2,306,843		3,817,656		(913,858)		(1,870,584)		3,340,180
Net income	—		—		895,073		—		—		895,073


Other comprehensive loss from currency exchange, net of tax of $0	—		—		—		(58,607)		—		(58,607)
Acquisition of common stock	—		(42,000)		—		—		(652,909)		(694,909)
Share-based compensation expense	—		60,953		—		—		—		60,953
Issuance of common stock	1		168,925		—		—		—		168,926
Balance at December 31, 2019	124		2,494,721		4,712,729		(972,465)		(2,523,493)		3,711,616
Net income	—		—		704,216		—		—		704,216

Other comprehensive loss, net of tax	—		—		—		(390,693)		—		(390,693)
Acquisition of common stock	—		75,000		—		—		(924,909)		(849,909)
Share-based compensation expense	—		43,384		—		—		—		43,384
Issuance of common stock	2		136,795		—		—		—		136,797
Balance at December 31, 2020	$	126	$	2,749,900	$	5,416,945	$	(1,363,158)	$	(3,448,402)	$	3,355,411

See accompanying notes.

Table of Contents

FLEETCOR Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In Thousands)


	Year Ended Year Ended December 31,
	2020		2019		20181
Operating activities
Net income	$	704,216	$	895,073	$	811,483
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	65,181		62,784		52,936
Stock-based compensation	43,384		60,953		69,939
Provision for losses on accounts and other receivables	158,549		74,309		64,377
Amortization of deferred financing costs and discounts	6,486		5,106		5,342
Amortization of intangible assets and premium on receivables	189,620		211,426		221,673

Deferred income taxes	(15,112)		37,883		(2,750)
Loss on extinguishment of debt	—		—		2,098
Investment (gain) loss	(30,008)		3,470		7,147
Gain on sale of assets/business	—		—		(152,750)
Other non-cash operating income2	(1,985)		522		8,607
Changes in operating assets and liabilities (net of acquisitions/disposition):
Accounts receivable and other receivables	264,140		(196,028)		(159,024)
Prepaid expenses and other current assets	(14,521)		(185,391)		(27,650)
Other assets	12,656		(6,792)		(25,432)

Accounts payable, accrued expenses and customer deposits	89,983		198,756		27,386
Net cash provided by operating activities	1,472,589		1,162,071		903,382
Investing activities
Acquisitions, net of cash acquired	(80,787)		(448,277)		(20,843)
Purchases of property and equipment	(78,425)		(75,170)		(81,387)
Proceeds from disposal of an asset/business	—		—		98,735
Proceeds from disposal of investment	52,963		—		—
Other	—		(255)		(22,775)
Net cash used in investing activities	(106,249)		(523,702)		(26,270)
Financing activities

Proceeds from issuance of common stock	136,797		168,925		55,680
Repurchase of common stock	(849,910)		(694,909)		(958,696)
(Payments) borrowings on securitization facility, net	(270,973)		84,973		75,000
Deferred financing costs paid and debt discount	(2,637)		(2,868)		(4,927)
Proceeds from issuance of notes payable	—		700,000		363,430
Principal payments on notes payable	(175,285)		(138,500)		(498,305)
Borrowings from revolver	1,243,500		1,811,509		1,493,091
Payments on revolver	(1,496,907)		(2,292,349)		(1,099,040)
(Payments) borrowings on swing line of credit, net	(1,042)		52,996		(4,935)

Other	(344)		52		887
Net cash used in financing activities	(1,416,801)		(310,171)		(577,815)
Effect of foreign currency exchange rates on cash	(148,157)		(17,854)		(65,274)
Net (decrease) increase in cash and cash equivalents and restricted cash	(198,618)		310,344		234,023
Cash and cash equivalents and restricted cash, beginning of year	1,675,237		1,364,893		1,130,870
Cash and cash equivalents and restricted cash, end of year	$	1,476,619	$	1,675,237	$	1,364,893
Supplemental cash flow information
Cash paid for interest	$	126,460	$	178,417	$	156,749
Cash paid for income taxes	$	165,315	$	200,525	$	207,504

2**Comparable disclosure provided to conform with 2020 presentation.




See accompanying notes.

Table of Contents

FLEETCOR Technologies, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

1. Description of Business

FLEETCOR Technologies, Inc. (the "Company", "we", "us" and "our") is a leading global provider of digital payment solutions that enables businesses to control purchases and make payments more effectively and efficiently. Since its incorporation in 2000, FLEETCOR has continued to deliver on its mission: to provide businesses with “a better way to pay”. FLEETCOR has been a member of the S&P 500 since 2018 and trades on the New York Stock Exchange under the ticker FLT.

FLEETCOR’s vision is that every payment is digital, every purchase is controlled, and every related decision is informed. Digital payments are faster and more secure than paper-based methods such as checks, and provide timely and detailed data which can be utilized to effectively reduce unauthorized purchases and fraud, automate data entry and reporting, and eliminate reimbursement processes. Combining this payment data with analytical tools delivers insights, which managers can use to better run their businesses. The Company's wide range of digitized solutions generally provides control, reporting, and automation benefits over the payment methods businesses often used, such as cash, paper checks, general purpose credit cards, as well as employee pay and reclaim processes.

Our Corporate Payments solutions, which simplify and automate payments, are designed to help businesses streamline the back-office operations associated with making outgoing payments. Companies can save time, cut costs, and manage B2B payment processing more efficiently with our suite of Corporate Payment solutions, including accounts payable (AP) automation, virtual cards, cross-border payments, purchasing and T&E cards. Our Expense Management solutions can help control and monitor employee spending and includes Fuel, Tolls, and Lodging. These solutions are purpose-built to provide customers with greater control and visibility of employee spending when compared with less specialized payment methods, such as cash or general-purpose credit cards. The Company also provides several other payments solutions, including Gift and other B2B payment solutions.

Our proprietary processing and card management solutions provide customers with capabilities including: customizable user-level controls, detailed transaction reporting, programmable alerts, configurable networks, contract price validation and audit, and tax management and reporting. Our customers can use these data, controls and tools to combat fraud and employee misuse, streamline expense administration and potentially lower their operating costs.

We utilize both proprietary and third-party payment acceptance networks to deliver our solutions. In our proprietary networks, which tend to be geographically distinct, transactions are processed on systems operated by us, and only at select participating merchants with whom we’ve contracted directly for acceptance. Third-party networks are operated by independent parties, and tend to be more broadly accepted, which is the primary benefit compared with our proprietary networks. Mastercard and VISA are our primary third-party network partners in North America and Europe, respectively.

We actively market and sell our solutions to current and prospective customers leveraging a multi-channel approach. This go-to-market strategy includes direct sales forces, comprehensive digital channels, and strategic partner relationships. Our capabilities are also offered through indirect sales channels (e.g., major oil companies and fuel marketers for Fuel, and retail establishments for Tolls) and on a branded or “white label” basis, indirectly through a broad range of resellers and partners across Fuel, Lodging, and Corporate Payments. In doing so, we leverage their sales networks to expand our reach into new customer segments, new industry verticals, and new geographies faster and at a significantly lower cost.

The Company has three reportable segments, North America, International, and Brazil. The Company reports these three segments as they reflect how we organize and manage our global employee base, manage operating performance, contemplate the differing regulatory environments across geographies, and help us isolate the impact of foreign exchange fluctuations on our financial results.

2. Basis of Presentation and Summary of Significant Accounting Policies

Use of Estimates

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

Principles of Consolidation

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

Table of Contents

The Company’s fiscal year ends on December 31. In certain of the Company’s U.K. businesses, the Company records the operating results using a 4-4-5 week accounting cycle with the fiscal year ending on the Friday on or immediately preceding December 31. Fiscal years 2020, 2019, and 2018 include 52 weeks for the businesses reporting using a 4-4-5 accounting cycle.

COVID-19 Update

In March 2020, the World Health Organization declared the outbreak of the COVID-19 virus a global pandemic. The pandemic continues to cause major disruptions to businesses and markets worldwide as the virus spreads or has a resurgence in certain jurisdictions. A number of countries as well as many states and cities within the U.S. have implemented measures in an effort to contain the virus, including physical distancing, travel restrictions, border closures, limitations on public gatherings, work from home and closure of or restrictions on nonessential businesses. The effects of the outbreak are still evolving, and the ultimate severity and duration of the pandemic and the implications on global economic conditions remains uncertain.

Financial Instruments-Credit Losses

The Company adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", on January 1, 2020, under which the Current Expected Credit Loss methodology for measurement of credit losses on financial assets measured at amortized cost basis, replaces the previous incurred loss impairment methodology. The Company’s financial assets subject to credit losses are primarily trade receivables. The Company utilizes a combination of aging and loss-rate methods to develop an estimate of current expected credit losses, depending on the nature and risk profile of the underlying asset pool, based on product, size of customer and historical losses. Expected credit losses are estimated based upon an assessment of risk characteristics, historical payment experience, and the age of outstanding receivables, adjusted for forward-looking economic conditions. The allowances for remaining financial assets measured at amortized cost basis are evaluated based on underlying financial condition, credit history, and current and forecast economic conditions. The estimation process for expected credit losses includes consideration of qualitative and quantitative risk factors associated with the age of asset balances, expected timing of payment, contract terms and conditions, changes in specific customer risk profiles or mix of customers, geographic risk, economic trends and relevant environmental factors. At December 31, 2020 and 2019, approximately 97% and 98%, respectively, of outstanding accounts receivable were current. Accounts receivable deemed uncollectible are removed from accounts receivable and the allowance for credit losses 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.

Business Combinations

Business combinations completed by the Company have been accounted for under the acquisition method of accounting. The acquisition method requires that the acquired assets and liabilities, including contingencies, be recorded at fair value determined as of the acquisition date. For significant acquisitions, the Company obtains independent third-party valuation studies for certain of the assets acquired and liabilities assumed to assist the Company in determining fair value. Goodwill represents the excess of the purchase price over the fair values of the tangible and intangible assets acquired and liabilities assumed. The results of the acquired businesses are included in the Company’s results of operations beginning from the completion date of the 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 involve 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. The Company estimates the fair value of the acquisition-related contingent consideration using various valuation approaches, as well as significant unobservable inputs, reflecting the Company’s assessment of the assumptions market participants would use to value these liabilities.

Impairment of Long-Lived Assets, Goodwill, Intangibles and Investments

The Company regularly evaluates whether events and circumstances have occurred that indicate the carrying amount of property and equipment and finite-life intangible assets may not be recoverable. When factors indicate that these long-lived assets should be evaluated for possible impairment, the Company assesses the potential impairment by determining whether the carrying amount of such long-lived assets will be recovered through the future undiscounted cash flows expected from use of the asset and its eventual disposition. If the carrying amount of the asset is determined not to be recoverable, a write-down to fair value is recorded. Fair values are determined based on quoted market prices or discounted cash flow analysis as applicable. The Company regularly evaluates whether events and circumstances have occurred that indicate the useful lives of property and equipment and finite-life intangible assets may warrant revision.

Table of Contents

The Company completes 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. The Company first performs a qualitative assessment of certain of its reporting units. Factors considered in the qualitative assessment include general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of our reporting units, events or changes affecting the composition or carrying amount of the net assets of our reporting units, sustained decrease in our share price, and other relevant entity-specific events. If the Company elects to bypass the qualitative assessment or if it determines, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, a quantitative test would be required. The Company then performs the goodwill impairment test for each reporting unit by comparing the reporting unit’s carrying amount, including goodwill, 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. Estimates critical to the Company’s evaluation of goodwill for impairment include the discount rate, projected revenue and earnings before interest taxes depreciation and amortization (EBITDA) growth, and projected long-term growth rates in the determination of terminal values. If the carrying amount of the reporting unit is greater than its fair value, goodwill is considered impaired.

Based on the goodwill asset impairment analysis performed quantitatively as of October 1, 2020, the Company determined that the fair value of each of its reporting units was in excess of the carrying value. No events or changes in circumstances have occurred since the date of this most recent annual impairment test that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

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

The Company regularly evaluates the carrying value of its investments, which are not carried at fair value, for impairment. The company has elected to measure certain investments in equity instruments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes for similar investments of the issuer. Investments classified as trading securities are carried at fair value with any unrealized gain or loss recorded within investment (gain) loss in the Consolidated Statements of Income.

Property, Plant and Equipment and Definite-Lived Intangible Assets

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

The Company develops software that is used in providing processing and information management services to customers. A significant portion of the Company’s capital expenditures are devoted to the development of such internal-use computer software. Software development costs are capitalized once technological feasibility of the software has been established. Costs incurred prior to establishing technological feasibility are expensed as incurred. Technological feasibility is established when the Company has completed all planning, designing, coding and testing activities that are necessary to determine that the software can be produced to meet its design specifications, including functions, features and technical performance requirements. Capitalization of costs ceases when the software is ready for its intended use. Software development costs are amortized using the straight-line method over the estimated useful life of the software. The Company capitalized software costs of $51.6 million, $49.8 million and $37.3 million in 2020, 2019 and 2018, respectively. Amortization expense for software totaled $40.2 million, $37.2 million and $24.2 million in 2020, 2019 and 2018, respectively.

Income Taxes

The Company accounts 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 Company has elected to treat the Global Intangible Low Taxed Income (GILTI) inclusion as a current period expense.

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 become deductible. The Company evaluates on a quarterly basis whether it is more likely than not that its deferred tax assets will be realized in the future and concludes whether a valuation allowance must be established.

The Company accounts 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. The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely

Table of Contents

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. The Company includes any estimated interest and penalties on tax related matters in income tax expense. See Note 13 for further information regarding income taxes.

Cash, Cash Equivalents, and Restricted Cash

Cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or less. Restricted cash represents customer deposits repayable on demand, as well as collateral received from customers for cross-currency transactions in our cross-border payments business, which are restricted from use other than to repay customer deposits, as well as secure and settle cross-currency transactions.

Foreign Currency Translation

Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at the rates of exchange in effect at period-end. The related translation adjustments are recorded to accumulated other comprehensive income. Income and expenses are translated at the average monthly rates of exchange in effect during the year. Gains and losses from foreign currency transactions of these subsidiaries are included in net income. The Company recognized foreign exchange gains (losses), which are recorded within other (income) expense, net in the Consolidated Statements of Income for the years ended December 31 as follows (in millions):


						2020						2019						2018
Foreign exchange gains (losses)						$	2.9					$	0.7					$	(0.1)

The Company recorded foreign currency losses on long-term intra-entity transactions included as a component of foreign currency translation (losses) gains, net of tax, in the Consolidated Statements of Comprehensive Income for the years ended December 31 as follows (in millions):


						2020						2019						2018
Foreign currency losses on long-term intra-entity transactions						$	219.8					$	88.1					$	79.6

Derivatives

The Company uses derivatives to minimize its exposures related to changes in interest rates and to facilitate cross-currency corporate payments by writing derivatives to customers.

The Company is exposed to the risk of changing interest rates because its borrowings are subject to variable interest rates. In order to mitigate this risk, the Company utilizes derivative instruments. Interest rate swap contracts designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The Company hedges a portion of its variable rate debt utilizing derivatives designated as cash flow hedges.

Changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recorded to the derivative assets/liabilities and offset against accumulated other comprehensive income (loss), net of tax. Derivative fair value changes that are recorded in accumulated other comprehensive income (loss) are reclassified to earnings in the same period or periods that the hedged item affects earnings, to the extent the derivative is effective in offsetting the change in cash flows attributable to the hedged risk. The portions of the change in fair value that are either considered ineffective or are excluded from the measure of effectiveness are recognized immediately within earnings.

In the Company's cross-border payments business, the majority of revenue is from exchanges of currency at spot rates, which enables customers to make cross-currency payments. In addition, the Company writes foreign currency forward and option contracts for its customers to facilitate future payments. The duration of these derivative contracts at inception is generally less than one year. The Company aggregates its foreign exchange exposures arising from customer contracts, including forwards, options and spot exchanges of currency, as necessary, and economically hedges the net currency risks by entering into offsetting derivatives with established financial institution counterparties. The changes in fair value related to these derivatives are recorded in revenues, net in the Consolidated Statements of Income.

The Company recognizes current cross-border payments derivatives in prepaid expenses and other current assets and other current liabilities and derivatives greater than one year in other assets and other noncurrent liabilities in the accompanying Consolidated Balance Sheets at their fair value. All cash flows associated with derivatives are included in cash flows from operating activities in the Consolidated Statements of Cash Flows. Refer to Note 17.

Table of Contents

Stock-Based Compensation

The Company accounts for employee stock options and restricted stock in accordance with relevant authoritative literature. Stock options are granted with an exercise price equal to the fair market value on the date of grant as authorized by the Company’s Board of Directors. Options granted have vesting provisions ranging from one to five years and vesting of the options is generally based on the passage of time or performance. Stock option grants are subject to forfeiture if employment terminates prior to vesting. The Company has selected the Black-Scholes option pricing model for estimating the grant date fair value of stock option awards. The Company has considered the retirement and forfeiture provisions of the options and utilized its historical experience to estimate the expected life of the options. Option forfeitures are accounted for upon occurrence. The Company bases the risk-free interest rate on the yield of a zero coupon U.S. Treasury security with a maturity equal to the expected life of the option from the date of the grant. 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 over 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 to four years. The fair value of restricted stock where the shares vest based on the passage of time or performance is based on the grant date fair value of the Company’s stock. The fair value of restricted stock units granted with market based vesting conditions is estimated using the Monte Carlo simulation valuation model. The risk-free interest rate and volatility assumptions used within the Monte Carlo simulation valuation 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 units and awards and performance-based stock option awards, the Company must also make assumptions regarding the likelihood of achieving performance goals. If actual results differ significantly from these estimates, stock-based compensation expense and the Company’s results of operations could be materially affected.

Deferred Financing Costs/Debt Discounts

Costs incurred to obtain financing are amortized over the term of the related debt, using the effective interest method and are included within interest expense. The Company capitalized additional debt issuance costs of $2.6 million associated with refinancing its Credit Facility and Securitization Facility in 2020 and $2.9 million with refinancing its Credit Facility in 2019. At December 31, 2020 and 2019, the Company had net deferred financing costs of $6.4 million and $7.4 million, respectively, related to the revolver under the Credit Facility and the Securitization Facility, each recorded within prepaid expenses and other current assets, on the Consolidated Balance Sheets. At December 31, 2020 and 2019, the Company had deferred financing costs of $7.1 million and $7.9 million, respectively, related to the term notes under the Credit Facility, recorded as a discount to the term debt outstanding within the current portion of notes payable and lines of credit and notes payable and other obligations, less current portion, respectively, in the Consolidated Balance Sheets.

Comprehensive Income (Loss)

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

Accounts Receivable

The Company maintains a $1 billion revolving trade accounts receivable Securitization Facility. Accounts receivable collateralized within our Securitization Facility relate to trade receivables resulting from charge card activity in the U.S. Pursuant to the terms of the Securitization Facility, the Company transfers certain of its domestic receivables, on a revolving basis, to FLEETCOR Funding LLC (Funding), a wholly-owned bankruptcy remote subsidiary. In turn, Funding transfers, without recourse, on a revolving basis, an undivided ownership interest in this pool of accounts receivable to a multi-seller, asset-backed commercial paper conduit (Conduit). Funding maintains a subordinated interest, in the form of over-collateralization, in a portion of the receivables sold to the Conduit. Purchases by the Conduit are financed with the sale of highly-rated commercial paper.

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

The Company’s Consolidated Balance Sheets and Statements of Income reflect the activity related to securitized accounts receivable and the corresponding securitized debt, including interest income, fees generated from late payments, provision for losses on accounts receivable and interest expense. The cash flows from borrowings and repayments associated with the securitized debt are presented as cash flows from financing activities. The maturity date for the Company's Securitization Facility is November 12, 2021.

Table of Contents

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


	2020		2019
Gross domestic unsecuritized accounts receivables	$	719,675	$	734,410
Gross domestic securitized accounts receivable	700,000		970,973
Gross foreign receivables	733,986		905,441
Total gross receivables	2,153,661		2,610,824
Less allowance for credit losses	(86,886)		(70,890)
Net accounts and securitized accounts receivable	$	2,066,775	$	2,539,934

The Company recorded a $90.1 million provision for credit losses and write-off related to a customer receivable in our foreign currency trading business during the year ended December 31, 2020. The Company's estimated expected credit losses as of December 31, 2020, included estimated adjustments for economic conditions related to COVID-19. A rollforward of the Company’s allowance for credit losses related to accounts receivable for the years ended December 31 is as follows (in thousands):


	2020		2019		2018
Allowance for credit losses beginning of year	$	70,890	$	59,963	$	46,031
Provision for credit losses	158,549		74,309		64,377
Write-offs	(146,063)		(67,732)		(50,287)
Recoveries1	9,603		4,798		3,644
Impact of foreign currency1	(6,093)		(448)		(3,802)
Allowance for credit losses end of year	$	86,886	$	70,890	$	59,963

1Comparable disclosure provided to conform with 2020 presentation. Activity previously included within write-offs.

Advertising

The Company expenses advertising costs as incurred. Advertising expense was $28.5 million, $33.7 million and $26.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Earnings Per Share

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

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

Spot Trade Offsetting

The Company uses spot trades to facilitate cross-currency corporate payments in its cross-border payments business. Timing in the receipt of cash from the customer results in intermediary balances in the receivable from the customer and the payment to the customer's counterparty. In accordance with ASC Subtopic 210-20, "Offsetting," the Company applies offsetting to spot trade assets and liabilities associated with contracts that include master netting agreements, as a right of setoff exists, which the Company believes to be enforceable. As such, the Company has netted the Company's exposure with these customer's counterparties, with the receivables from the customer. The Company recognizes all spot trade assets, net in accounts receivable and all spot trade liabilities, net in accounts payable, each net at the customer level, in its Consolidated Balance Sheets at their fair value.

Table of Contents

The following table presents the Company’s spot trade assets and liabilities at their fair value for the years ended December 31, 2020 and 2019 (in millions):


	December 31, 2020						December 31, 2019
	Gross		Offset on the Balance Sheet		Net		Gross		Offset on the Balance Sheet		Net
Assets
Accounts Receivable	$	521.5	$	(478.2)	$	43.3	$	1,139.1	$	(1,084.6)	$	54.5


Liabilities
Accounts Payable	$	527.5	$	(478.2)	$	49.4	$	1,140.4	$	(1,084.6)	$	55.8

Adoption of New Accounting Standards

Cloud Computing Arrangements

On August 29, 2018, the FASB issued ASU 2018-15, "Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract", that provides guidance on implementation costs incurred in a cloud computing arrangement (CCA) that is a service contract. The ASU, which was released in response to a consensus reached by the EITF at its June 2018 meeting, aligns the accounting for such costs with the guidance on capitalizing costs associated with developing or obtaining internal-use software. Specifically, the ASU amends ASC 350 to include in its scope implementation costs of a CCA that is a service contract and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized in such a CCA. The Company adopted this guidance on January 1, 2020, which did not have a material impact on the Company's results of operations, financial condition, or cash flows.

Fair Value Measurement

On August 28, 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement", which removes, modifies, and adds certain disclosure requirements related to fair value measurements in ASC 820. The guidance is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The guidance on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other guidance should be applied retrospectively to all periods presented upon their effective date. The Company adopted this guidance on January 1, 2020, which did not have a material impact on the Company's results of operations, financial condition, or cash flows.

Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (the "update"), which changes how companies measure and recognize credit impairment for many financial assets. The new expected credit loss model requires companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets (including trade receivables) that are in the scope of the update. The update also made amendments to the current impairment model for held-to-maturity and available-for-sale debt securities and certain guarantees. The Company adopted this guidance on January 1, 2020, which did not have a material impact on the Company's results of operations, financial condition, or cash flows. The Company has made updates to its policies and internal controls over financial reporting as a result of the adoption.

In April 2019, the FASB issued ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments", which clarifies certain aspects of accounting for credit losses, hedging activities, and financial instruments. For clarifications around credit losses, the effective date is the same as the effective date in ASU 2016-13. For entities that have adopted ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", ASU 2019-04 is effective the first annual reporting period beginning after the date of issuance of ASU 2019-04 and may be early adopted. The Company adopted this guidance on January 1, 2020, which did not have a material impact on the Company's results of operations, financial condition, or cash flows. The Company has made updates to its policies and internal controls over financial reporting as a result of the adoption.

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.

Table of Contents

Income Taxes

On December 18, 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (ASU 2019-12), which is meant to simplify and reduce the cost of accounting for income taxes by removing certain exceptions to the general principles of ASC 740, among other application clarifications. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption permitted. The Company's adoption of this ASU is not expected to have a material impact on the Company's results of operations, financial condition, or cash flows.

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (ASU 2020-04), which provides optional expedients and exceptions to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022 for which an entity has elected certain optional expedients and are retained through the end of the hedging relationship. The amendments in this update also include a general principle that permits an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. If elected, the optional expedients for contract modifications must be applied consistently for all eligible contracts or eligible transactions within the relevant ASC Topic or Industry Subtopic that contains the guidance that otherwise would be required to be applied. The amendments in this update were effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is evaluating the effect of ASU 2020-04 on its consolidated financial statements, but expects it to be applied to our interest rate swap accounting once the underlying floating rate related to our Credit Facility changes.

3. Revenue

The Company provides payment solutions to our business, merchant, consumer and payment network customers. Our payment solutions are primarily focused on specific commercial spend categories, including Corporate Payments, Fuel, Lodging, Tolls, as well as Gift solutions (stored value cards and e-cards). The Company provides solutions that help businesses of all sizes control, simplify and secure payment of various domestic and cross-border payables using specialized payment products. The Company also provides other payment solutions for fleet maintenance, employee benefits and long haul transportation-related services.

Payment Services

The Company’s primary performance obligation for the majority of its payment solutions (Corporate Payments, Fuel, Lodging, and Gift, among others) is to stand-ready to provide authorization and processing services (payment services) for an unknown or unspecified quantity of transactions and the consideration received is contingent upon the customer’s use (e.g., number of transactions submitted and processed) of the related payment services. Accordingly, the total transaction price is variable. Payment services involve a series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer. As a result, the Company allocates and recognizes variable consideration in the period it has the contractual right to invoice the customer. For the tolls payment solution, the Company's primary performance obligation is to stand-ready each month to provide access to the toll network and process toll transactions. Each period of access is determined to be distinct and substantially the same as the customer benefits over the period of access.

The Company records revenue for its payment services net of (i) the cost of the underlying products and services; (ii) assessments and other fees charged by the credit and debit payment networks (along with any rebates provided by them); (iii) customer rebates and other discounts; and (iv) taxes assessed (e.g. VAT and VAT-like taxes) by a government, imposed concurrent with, a revenue producing transaction.

The majority of the transaction price the Company receives for fulfilling the Payment Services performance obligation are comprised of one or a combination of the following: 1) interchange fees earned from the payment networks; 2) discount fees earned from merchants; 3) fees calculated based on a number of transactions processed; 4) fees calculated based upon a percentage of the transaction value for the underlying goods or services (i.e. fuel, food, toll, lodging, and transportation cards and vouchers); and 5) monthly access fees.

The Company recognizes revenue when the underlying transactions are complete and its performance obligations are satisfied. Transactions are considered complete depending upon the related payment solution but generally when the Company has authorized the transaction, validated that the transaction has no errors and accepted and posted the data to the Company’s records.

Table of Contents

The Company's performance obligation for its foreign exchange payment services is providing a foreign currency payment to a customer’s designated recipient and therefore, the Company recognizes revenue on foreign exchange payment services when the underlying payment is made. Revenues from foreign exchange payment services are primarily comprised of the difference between the exchange rate set by the Company to the customer and the rate available in the wholesale foreign exchange market.

Gift Card Products and Services

The Company’s Gift solution delivers both stored value cards and e-cards (cards), and card-based services primarily in the form of gift cards to retailers. These activities each represent performance obligations that are separate and distinct. Revenue for stored valued cards is recognized (gross of the underlying cost of the related card, recorded in processing expenses within the Consolidated Statements of Income) at the point in time when control passes to the Company's customer, which is generally upon shipment.

Card-based services consist of transaction processing and reporting of gift card transactions where the Company recognizes revenue based on an output measure of elapsed time for an unknown or unspecified quantity of transactions. As a result, the Company allocates and recognizes variable consideration over the estimated period of time over which the performance obligation is satisfied.

Other

The Company accounts for revenue from late fees and finance charges, in jurisdictions where permitted under local regulations, primarily in the U.S. and Canada in accordance with ASC 310, "Receivables". 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.

The Company also writes foreign currency forward and option contracts for its customers to facilitate future payments in foreign currencies, and recognizes revenue in accordance with authoritative fair value and derivative accounting (ASC 815, "Derivatives").

Revenue is also derived from the sale of equipment in certain of the Company’s businesses, which is recognized at the time the device is sold and control has passed to the customer. 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 in processing expenses within the Consolidated Statements of Income.

Revenues from contracts with customers, within the scope of Topic 606, represents approximately 75% of total consolidated revenues, net, for the year ended December 31, 2020.

Disaggregation of Revenues

The Company provides its services to customers across different payment solutions and geographies. Revenue by solution (in millions) as of and for the years ended December 31 (in thousands):


	Year Ended December 31,
	2020		2019		2018
Revenue by Solution Category1	Revenues, net		Revenues, net		Revenues, net
Fuel	$	1,057,188	$	1,172,954	$	1,125,532
Corporate payments	433,952		449,975		415,856
Tolls	291,958		357,209		332,689
Lodging	207,037		212,597		175,505
Gift	154,376		180,236		186,646
Other	244,344		275,877		197,264
Consolidated revenues, net	$	2,388,855	$	2,648,848	$	2,433,492

1Reflects certain reclassifications of revenue between solution categories as the Company realigned its Corporate Payments solution, resulting in reclassification of Payroll Card revenue from Corporate Payments to Other.

Table of Contents

The table below presents the Company's revenues, net by geography as of and for the years ended December 31 (in thousands).


Revenues, net by location:	2020		2019		2018
United States (country of domicile)	$	1,467,513	$	1,595,266	$	1,481,785
Brazil	344,248		427,918		400,111
United Kingdom	262,852		275,218		257,651
Other	314,242		350,446		293,945
Consolidated Revenues, net	$	2,388,855	$	2,648,848	$	2,433,492

Contract Liabilities

Deferred revenue contract liabilities for customers subject to ASC 606 were $73.0 million and $71.8 million as of December 31, 2020 and 2019, respectively. We expect to recognize approximately $43.7 million of these amounts in revenues within 12 months and the remaining $29.3 million over the next five years as of December 31, 2020. The amount and timing of revenue recognition is affected by several factors, including contract modifications and terminations, which could impact the estimate of amounts allocated to remaining performance obligations and when such revenues could be recognized. Revenue recognized for the year ended December 31, 2020, that was included in the deferred revenue contract liability as of January 1, 2020, was approximately $37.7 million.

Costs to Obtain or Fulfill a Contract

With the adoption of ASC 606, the Company began capitalizing the incremental costs of obtaining a contract with a customer if the Company expects to recover those costs. The incremental costs of obtaining a contract are those that the Company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, a sales commission).

Costs incurred to fulfill a contract are capitalized if those costs meet all of the following criteria:

a.The costs relate directly to a contract or to an anticipated contract that the Company can specifically identify.

b.The costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future.

c.The costs are expected to be recovered.

In order to determine the appropriate amortization period for contract costs, the Company considered a combination of factors, including customer attrition rates, estimated terms of customer relationships, the useful lives of technology used by the Company to provide products and services to its customers, whether further contract renewals are expected and if there is any incremental commission to be paid on a contract renewal. Contract acquisition and fulfillment costs are amortized using the straight-line method over the expected period of benefit (ranging from five to ten years). Costs to obtain a contract with an expected period of benefit of one year or less are recognized as an expense when incurred. The amortization of contract acquisition costs associated with sales commissions that qualify for capitalization will be recorded as selling expense in the Company’s Consolidated Statements of Income. The amortization of contract acquisition costs associated with cash payments for client incentives is included as a reduction of revenues in the Company’s Consolidated Statements of Income. Amortization of capitalized contract costs recorded in selling expense was $15.3 million, $14.3 million and $12.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Costs to obtain or fulfill a contract are classified as contract cost assets within prepaid expenses and other current assets and other assets in the Company’s Consolidated Balance Sheets. The Company had capitalized costs to obtain a contract of $15.1 million and $14.8 million within prepaid expenses and other current assets and $37.2 million and $39.7 million within other assets in the Company’s Consolidated Balance Sheets, for the year ended December 31, 2020 and 2019, respectively.

The Company has recorded $65.5 million, $76.4 million and $83.9 million of expenses related to sales of equipment in processing expenses within the Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018, respectively.

Practical Expedients

ASC 606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations; however, as allowed by ASC 606, the Company elected to exclude this disclosure for any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. As described above, the Company's most significant performance obligations consist of variable consideration under a stand-ready series of distinct days of service. Such variable consideration meets the specified criteria for the disclosure exclusion; therefore, the majority of the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied is variable consideration that is not required for this disclosure. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.

Table of Contents

The Company elected to exclude all sales taxes and other similar taxes from the transaction price. Accordingly, the Company presents all collections from customers for these taxes on a net basis, rather than having to assess whether the Company is acting as an agent or a principal in each taxing jurisdiction.

In certain arrangements with customers, the Company has determined that certain promised services and products are immaterial in the context of the contract, both quantitatively and qualitatively.

As a practical expedient, the Company is not required to adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the Company transfers a promised service or product to a customer and when the customer pays for the service or product will be one year or less. As of December 31, 2020, the Company’s contracts with customers did not contain a significant financing component.

4. Fair Value Measurements

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

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

Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.
Level 2: Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Table of Contents

The following table presents the Company’s financial assets and liabilities which are measured at fair values on a recurring basis as of December 31, 2020 and 2019, (in thousands):


	Fair Value		Level 1		Level 2		Level 3
December 31, 2020
Assets:
Repurchase agreements	$	446,116	$	—	$	446,116	$	—
Money market	48,227		—		48,227		—
Certificates of deposit	188		—		188		—

Foreign exchange contracts	155,846		—		155,846		—
Total assets	$	650,377	$	—	$	650,377	$	—
Cash collateral for foreign exchange contracts	$	18,229	$	—	$	—	$	—
Liabilities:
Interest rate swaps	$	87,873	$	—	$	87,873	$	—
Foreign exchange contracts	140,272		—		140,272		$	—
Total liabilities	$	228,145	$	—	$	228,145	$	—
Cash collateral obligation for foreign exchange contracts	$	38,569	$	—	$	—	$	—

December 31, 2019
Assets:
Repurchase agreements	$	833,658	$	—	$	833,658	$	—
Money market	54,978		—		54,978		—
Certificates of deposit	27,022		—		27,022		—
Trading securities	22,955		22,955		—		—
Foreign exchange contracts	72,076		—		72,076		—
Total assets	$	1,010,689	$	22,955	$	987,734	$	—
Cash collateral for foreign exchange contracts	$	6,086	$	—	$	—	$	—
Liabilities:
Interest rate swaps	$	56,418	—		$	56,418	—
Foreign exchange contracts	$	60,909	—		$	60,909	—
Total liabilities	$	117,327	$	—	$	117,327	$	—
Cash collateral obligation for foreign exchange contracts	$	25,618	$	—	$	—	$	—

The Company utilizes Level 1 fair value for financial assets designated as trading securities for which there are quoted market prices. During the year ended December 31, 2020, the Company recognized a $30.0 million gain on trading securities sold. Cash flow from trading securities sold was recognized within the Investing section of the Statement of Cash Flows based on the nature of the investment.

The Company has highly-liquid investments classified as cash equivalents, with original maturities of 90 days or less, included in our Consolidated Balance Sheets. The Company utilizes Level 2 fair value determinations derived from directly or indirectly observable (market based) information to determine the fair value of these highly liquid investments. The Company has certain cash and cash equivalents that are invested on an overnight basis in repurchase agreements, money markets and certificates of deposit. The value of overnight repurchase agreements is determined based upon the quoted market prices for the treasury securities associated with the repurchase agreements. The value of money market instruments is determined based upon the financial institutions' month-end statement, as these instruments are not tradable and must be settled directly by us with the respective financial institution. Certificates of deposit are valued at cost, plus interest accrued. Given the short-term nature of these instruments, the carrying value approximates fair value. Foreign exchange derivative contracts are carried at fair value, with changes in fair value recognized in the Consolidated Statements of Income. The fair value of the Company's derivatives is derived with reference to a valuation from a derivatives dealer operating in an active market, which approximates the fair value of these instruments.

The fair value represents the net settlement if the contracts were terminated as of the reporting date. Cash collateral received for foreign exchange derivatives is recorded within customer deposits in our Consolidated Balance Sheets. Cash collateral deposited for foreign exchange derivatives is recorded within restricted cash in our Consolidated Balance Sheet.

Table of Contents

The level within the fair value hierarchy and the measurement technique are reviewed quarterly. Transfers between levels are deemed to have occurred at the end of the quarter. There were no transfers between fair value levels during the periods presented for 2020 and 2019.

The Company’s assets that are measured at fair value on a nonrecurring basis and are evaluated with periodic testing for impairment include property, plant and equipment, investments, goodwill and other intangible assets. Estimates of the fair value of assets acquired and liabilities assumed in business combinations are generally developed using key inputs such as management’s projections of cash flows on a held-and-used basis (if applicable), discounted as appropriate, management’s projections of cash flows upon disposition and discount rates. Accordingly, these fair value measurements are in Level 3 of the fair value hierarchy.

The Company determines the fair values of its derivatives based on quoted market prices or pricing models using current market rates. The amounts exchanged are calculated by reference to the notional amounts and by other terms of the derivatives, such as interest rates, foreign currency exchange rates, commodity rates or other financial indices. The Company's derivatives are over-the-counter instruments with liquid markets.

The Company regularly evaluates the carrying value of its investments and during the first quarter of 2019, determined that the fair value of its telematics investment was below cost and recorded an impairment of the investment of $15.7 million based on observable price changes. Since initial date of the telematics investments, the Company has recorded cumulative impairment losses of $136.3 million. The Company sold its remaining investment in the second quarter of 2019. Refer to Note 16. The carrying amount of investments without readily determinable fair values is $7.5 million at December 31, 2020.

In 2018, the fair value of the Company's investment in Qui was impaired as a result of a decline in operating results and difficulty in obtaining financing. The Company concluded that this decline in fair value was below cost and recorded a $7.1 million impairment loss in investment loss related to the Qui investment.

The fair value of the Company’s cash, accounts receivable, securitized accounts receivable and related facility, prepaid expenses and other current assets, accounts payable, accrued expenses, customer deposits and short-term borrowings approximate their respective carrying values due to the short-term maturities of the instruments. The carrying value of the Company’s debt obligations approximates fair value as the interest rates on the debt are variable market based interest rates that reset on a quarterly basis. These are each Level 2 fair value measurements, except for cash, which is a Level 1 fair value measurement.

5. Stockholders' Equity

The Company's Board of Directors (the "Board") has approved a stock repurchase program (as updated from time to time, the "Program") authorizing the Company to repurchase its common stock from time to time until February 1, 2023. On October 22, 2020, the Board increased the aggregate size of the Program by $1.0 billion, to $4.1 billion. Since the beginning of the Program, 14,616,942 shares have been repurchased for an aggregate purchase price of $3.1 billion, leaving the Company up to $1.0 billion available under the Program for future repurchases in shares of its common stock. There were 3,497,285 common shares totaling $940.8 million in 2020; 2,211,866 common shares totaling $636.8 million in 2019 and 4,793,687 common shares totaling $925.7 million in 2018; repurchased under the Program.

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 we may possess. Any repurchases have been and are expected to be funded by a combination of available cash flow from the business, working capital and debt.

On December 14, 2018, as part of the Program, the Company entered an accelerated share repurchase (ASR) agreement (2018 ASR Agreement) with a third-party financial institution to repurchase $220 million of its common stock. Pursuant to the 2018 ASR Agreement, the Company delivered $220 million in cash and received 1,057,035 shares on December 14, 2018. An additional 117,751 shares were received on January 29, 2019 upon completion of the 2018 ASR Agreement.

On December 18, 2019, as part of the Program, the Company entered an accelerated stock repurchase agreement (2019 ASR Agreement) with a third-party financial institution to repurchase $500 million of its common stock. Pursuant to the 2019 ASR Agreement, the Company delivered $500 million in cash and received 1,431,989 shares on December 18, 2019. An additional 175,340 shares were received on February 20, 2020 upon completion of the 2019 ASR Agreement.

The Company accounted for each ASR Agreement as two separate transactions: (i) as shares of reacquired common stock for the shares delivered to the Company upon effectiveness of each ASR agreement and (ii) as a forward contract indexed to the Company's common stock for the undelivered shares. The initial delivery of shares was included in treasury stock at cost and results in an immediate reduction of the outstanding shares used to calculate the weighted average common shares outstanding for basic and diluted earnings per share. The forward contracts indexed to the Company's own common stock met the criteria for equity classification, and these amounts were initially recorded in additional paid-in capital.

Table of Contents

6. Stock Based Compensation

The Company accounts for stock-based compensation pursuant to relevant authoritative guidance, which requires measurement of compensation cost for all stock awards at fair value on the date of grant and recognition of compensation, net of estimated forfeitures, over the requisite service period for awards expected to vest. The Company has a Stock Incentive Plan (the "Plan"), pursuant to which permit the Company's board of directors grants equity to employees and directors. Under the Plan, a maximum of 16.75 million shares of our common stock is approved to be issued for grants of restricted stock and stock options. At December 31, 2020, there were 2.5 million shares available to be granted under the Plan.

The table below summarizes the expense recognized within general and administrative expenses in the Consolidated Statements of Income related to share-based payments recognized for the years ended December 31 (in thousands):


	2020		2019		2018
Stock options	$	23,407	$	32,736	$	43,443
Restricted stock	19,977		28,217		26,496
Stock-based compensation	$	43,384	$	60,953	$	69,939

The tax benefits recorded on stock based compensation expense and upon the exercises of options were $70.6 million, $61.6 million and $37.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The following table summarizes the Company’s total unrecognized compensation cost related to stock-based compensation as of December 31, 2020 (cost in thousands):


	Unrecognized Compensation Cost		Weighted Average Period of Expense Recognition (in Years)
Stock options	$	35,286	2.30
Restricted stock	26,948		1.97
Total	$	62,234

Stock Options

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


	Shares	Weighted Average Exercise Price		Options Exercisable at End of Year	Weighted Average Exercise Price of Exercisable Options		Weighted Average Fair Value of Options Granted During the Year		Aggregate Intrinsic Value
Outstanding at December 31, 2017	8,031	$	109.78	4,029	$	75.80			$	663,815
Granted	412	204.59					$	50.07
Exercised	(708)	73.26							79,588
Forfeited	(119)	155.41
Outstanding at December 31, 2018	7,616	117.58		5,174	98.39				518,954
Granted	431	244.35					$	57.99
Exercised	(1,482)	115.53							255,242
Forfeited	(302)	167.35
Outstanding at December 31, 2019	6,263	124.38		5,137	109.03				1,022,860
Granted	503	215.36					$	53.18
Exercised	(1,681)	80.84							322,823
Forfeited	(121)	194.61
Outstanding at December 31, 2020	4,964	$	146.69	3,994	$	130.37			$	626,107
Expected to vest at December 31, 2020	970	$	213.89

Table of Contents

The following table summarizes information about stock options outstanding at December 31, 2020 (shares in thousands):


Exercise Price	Options Outstanding	Weighted Average Remaining Vesting Life in Years	Options Exercisable
$10.00 – $150.74	3,541	0.01	3,488
$151.49 – $165.96	242	0.27	190
$172.68 – $199.75	495	1.60	198
$202.02 – $209.05	45	1.54	14
$213.69 – $231.70	351	2.83	37
$248.28 – $263.21	271	2.08	64
$288.37 – $319.55	19	2.63	3
	4,964		3,994

The aggregate intrinsic value of stock options exercisable at December 31, 2020 was $569.0 million. The weighted average remaining contractual term of options exercisable at December 31, 2020 was 4.8 years.

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


	2020		2019		2018
Risk-free interest rate	0.37	%	2.40	%	2.57	%
Dividend yield	—		—		—
Expected volatility	31.00	%	26.40	%	26.92	%
Expected life (in years)	3.9		3.7		3.8

The weighted-average remaining contractual life for options outstanding was 5.3 years at December 31, 2020.

Restricted Stock

The fair value of restricted stock units granted with market based vesting conditions was estimated using the Monte Carlo simulation valuation model with the following assumptions during 2019. There were no restricted stock shares granted with market based vesting conditions in 2020 and 2018.


	2019
Risk-free interest rate	1.48	%
Dividend yield	—
Expected volatility	25.40	%
Expected life (in years)	2.36

Table of Contents

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


	Shares	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2017	365	$	155.58
Granted	107	200.71
Cancelled	(47)	339.34
Issued	(251)	154.85
Outstanding at December 31, 2018	174	190.73
Granted	232	212.79
Cancelled	(49)	225.96
Issued	(114)	206.05
Outstanding at December 31, 2019	243	246.34
Granted	171	252.36
Cancelled	(100)	249.17
Issued	(140)	227.20
Outstanding at December 31, 2020	174	$	265.29

7. Acquisitions

Subsequent to 2020

On January 13, 2021, the Company acquired Roger, a global accounts payable (AP) cloud software platform for small businesses located in Denmark, for approximately $40 million. This acquisition is not expected to be material to the financial results of the Company.

2020 Acquisitions

On August 10, 2020, the Company completed the acquisition of a business in the lodging space in the U.S. The results from the acquisition are reported in the North America segment. On November 30, 2020, the Company completed the acquisition of a fuel card provider in New Zealand. The results from the acquisition are reported in the International segment. The aggregate purchase price of these acquisitions was approximately $78 million, net of cash acquired. The Company financed these acquisitions using a combination of available cash and borrowings under its existing credit facility. The Company signed noncompete agreements with certain parties affiliated with the lodging business with an estimated fair value of $3.8 million. These noncompete agreements were accounted for separately from the business acquisitions.

The following table summarizes the preliminary acquisition accounting for these acquisitions (in thousands):


Trade and other receivables	$	5,031
Prepaid expenses and other current assets	930
Property, plant and equipment	3,178
Other long term assets	1,049
Goodwill	28,934
Intangibles	40,850
Liabilities	(1,204)
Other noncurrent liabilities	(782)

Aggregate purchase price	$	77,986

Table of Contents

The estimated fair value of intangible assets acquired and the related estimated useful lives consisted of the following (in thousands):


	Useful Lives (in Years)	Value
Trade Name and Trademarks	5	$	1,800
Licensed Software and Technology	10	4,400
Proprietary Technology	5	8,400
Supplier Network	10	300
Customer Relationships	16	25,950


		$	40,850

The accounting for these acquisitions is preliminary as the Company is still completing the valuation of certain goodwill, intangible assets, income taxes and working capital adjustments.

2019 Acquisitions

During 2019, the Company completed acquisitions with an aggregate purchase price of $417 million.

On April 1, 2019, the Company completed the acquisition of NvoicePay, a provider of full accounts payable automation for businesses. The aggregate purchase price of this acquisition was approximately $208 million, net of cash acquired of $4.1 million. This acquisition further expanded the Company's corporate payments product offering. The Company financed the acquisition using a combination of available cash and borrowings under its existing credit facility. The results from NvoicePay are reported in the North America segment. Along with the acquisition of NvoicePay, the Company signed noncompete agreements with certain parties with an estimated fair value of $10.7 million that were accounted for separately from the business acquisition.

The following table summarizes the final acquisition accounting for NvoicePay (in thousands):


Trade and other receivables	$	1,513
Prepaid expenses and other current assets	396
Property, plant and equipment	1,030
Other long term assets	5,612
Goodwill	168,990
Intangibles	44,750
Liabilities	(4,415)
Other noncurrent liabilities	(6,130)
Deferred tax liabilities	(4,178)
Aggregate purchase price	$	207,568

The estimated fair value of intangible assets acquired and the related estimated useful lives consisted of the following (in thousands):


	Useful Lives (in Years)	Value
Trade Name and Trademarks	Indefinite	$	8,700
Proprietary Technology	6	15,600
Referral Partners	10	810
Supplier Network	10	2,640
Customer Relationships	16	17,000
		$	44,750

Other

During 2019, the Company acquired SOLE Financial, a payroll card provider in the U.S.; r2c, a fleet maintenance, compliance and workshop management software provider in the U.K.; and Travelliance, an airline lodging provider in the U.S. The aggregate purchase price of these acquisitions was approximately $209 million, net of cash. The Company signed noncompete

Table of Contents

agreements with certain parties with an estimated fair value of $8.1 million that were accounted for separately from the business acquisitions.

The following table summarizes the final acquisition accounting for these acquisitions (in thousands):


Trade and other receivables	$	92,990
Prepaid expenses and other current assets	1,833
Property, plant and equipment	922
Other long term assets	4,593
Goodwill	123,487
Intangibles	80,726
Liabilities	(78,858)
Other noncurrent liabilities	(4,657)
Deferred tax liabilities	(11,188)
Aggregate purchase price	$	209,848

The fair value of intangible assets acquired and the related useful lives consisted of the following (in thousands):


	Useful Lives (in Years)	Value
Trade Names and Trademarks	2 - indefinite	$	9,928
Technology	5 -10	14,010
Lodging Network	10	300
Referral Partners	20	2,200
Customer Relationships	Varies	54,288
		$	80,726

8. Goodwill and Other Intangible Assets

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


	December 31, 2019		Acquisitions		Acquisition Accounting Adjustments		Foreign Currency		December 31, 2020
Segment
North America	$	3,369,173	$	24,984	$	(1,908)	$	8,523	$	3,400,772
Brazil	756,975		—		—		(171,114)		585,861
International	706,899		3,950		—		21,699		732,548
	$	4,833,047	$	28,934	$	(1,908)	$	(140,892)	$	4,719,181


	December 31, 2018		Acquisitions		Acquisition Accounting Adjustments		Foreign Currency		December 31, 2019
Segment
North America	$	3,087,875	$	268,866	$	2,914	$	9,518	$	3,369,173
Brazil	784,325		—		—		(27,350)		756,975
International	669,874		19,531		—		17,494		706,899
	$	4,542,074	$	288,397	$	2,914	$	(338)	$	4,833,047

At December 31, 2020 and 2019, approximately $793.8 million and $861.4 million of the Company’s goodwill is deductible for tax purposes, respectively. Acquisition accounting adjustments recorded in 2020 and 2019 are a result of the Company completing its acquisition accounting and working capital adjustments for certain prior year acquisitions.

Table of Contents

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


		2020						2019
	Weighted- Avg Useful Life (Years)	Gross Carrying Amounts		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amounts		Accumulated Amortization		Net Carrying Amount
Customer and vendor agreements	17.4	$	2,671,104	$	(1,105,702)	$	1,565,402	$	2,698,327	$	(943,537)	$	1,754,790
Trade names and trademarks—indefinite lived	N/A	475,376		—		475,376		496,306		—		496,306
Trade names and trademarks—other	11.6	7,041		(3,431)		3,610		5,384		(2,877)		2,507
Software	6.3	248,686		(194,187)		54,499		242,783		(180,839)		61,944
Non-compete agreements	4.1	65,804		(48,809)		16,995		65,560		(39,225)		26,335
Total other intangibles		$	3,468,011	$	(1,352,129)	$	2,115,882	$	3,508,360	$	(1,166,478)	$	2,341,882

Changes in foreign exchange rates resulted in $83.7 million and $2.0 million decreases to the carrying values of other intangible assets in the years ended December 31, 2020 and 2019, respectively. Amortization expense related to intangible assets for the years ended December 31, 2020, 2019 and 2018 was $184.2 million, $206.9 million and $216.3 million, respectively.

The future estimated amortization of intangibles at December 31, 2020 is as follows (in thousands):


2021	$	175,253
2022	163,351
2023	157,343
2024	151,390
2025	142,397
Thereafter	850,773

9. Property, Plant and Equipment

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


	Estimated Useful Lives (in Years)	2020		2019
Computer hardware and software	3 to 5	$	393,217	$	341,282
Card-reading equipment	4 to 6	25,427		24,077
Furniture, fixtures, and vehicles	2 to 10	19,575		19,319
Buildings and improvements	5 to 50	30,467		29,127
Property, plant and equipment, gross		468,686		413,805
Less: accumulated depreciation		(266,177)		(213,980)
Property, plant and equipment, net		$	202,509	$	199,825

Depreciation expense related to property and equipment for the years ended December 31, 2020, 2019, and 2018 was $65.2 million, $62.8 million and $52.9 million, respectively. Amortization expense includes $40.2 million, $37.2 million and $24.2 million for capitalized computer software costs for the years ended December 31, 2020, 2019 and 2018, respectively. At December 31, 2020 and 2019, the Company had unamortized computer software costs of $129.9 million and $118.8 million, respectively.

The Company recorded write-offs of property, plant and equipment of $0.3 million, $1.8 million and $8.7 million in other operating (income) expense, net within its Consolidated Statements of Income for the years ended December 31, 2020, 2019, and 2018, respectively.

Table of Contents

10. Accrued Expenses

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


	2020		2019
Accrued bonuses	$	15,903	$	23,595
Accrued payroll and severance	23,189		23,718
Accrued taxes	78,771		70,350
Accrued commissions/rebates	81,450		77,430
Other	83,368		80,418
	$	282,681	$	275,511

11. Debt

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


	2020		2019
Term Loan A note payable (a), net of discounts	$	2,922,042	$	3,080,789
Term Loan B note payable (a), net of discounts	337,347		340,481
Revolving line of credit A Facility(a)	280,000		325,000
Revolving line of credit B Facility(a)	13,650		225,477

Revolving line of credit B Facility —foreign swing line(a)	50,028		52,038
Other obligations(c)	29,556		42,027
Total notes payable, credit agreements, and other obligations	3,632,623		4,065,812
Securitization Facility(b)	700,000		970,973
Total debt	$	4,332,623	$	5,036,785
Current portion	$	1,205,697	$	1,746,838
Long-term portion	3,126,926		3,289,947
Total debt	$	4,332,623	$	5,036,785

(a)The Company has a Credit Agreement, which has been amended multiple times and provides for senior secured credit facilities (collectively, the "Credit Facility") consisting of a revolving credit facility in the amount of $1.285 billion, a term loan A facility in the amount of $3.225 billion and a term loan B facility in the amount of $350 million as of December 31, 2020. The revolving credit facility consists of (a) a revolving A credit facility in the amount of $800 million with sublimits for letters of credit and swing line loans, (b) a revolving B facility in the amount of $450 million with borrowings in U.S. Dollars, Euros, British Pounds, Japanese Yen or other currency as agreed in advance and a sublimit for foreign swing line loans and, (c) a revolving C facility in the amount of $35 million with borrowings in U.S. Dollars, Australian Dollars or New Zealand Dollars. The Credit Agreement also includes an accordion feature for borrowing an additional $750 million in term loan A, term loan B, revolver A or revolver B debt and an unlimited amount when the leverage ratio on a pro-forma basis is less than 3.00 to 1.00. Proceeds from the credit facilities may be used for working capital purposes, acquisitions, and other general corporate purposes. On April 24, 2020, the Company entered into the eighth amendment to the Credit Agreement to add a $250 million revolving D facility. On August 20, 2020, the Company terminated the revolving D facility. The maturity date for the term loan A and revolving credit facilities A, B and C is December 19, 2023. The maturity date for the term loan B is August 2, 2024.

Interest on amounts outstanding under the Credit Agreement (other than the term loan B) 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 on the term loan B facility accrues based on the Eurocurrency Rate plus 1.75% for Eurocurrency Loans and at the Base Rate plus 0.75% for Base Rate Loans. In addition, the Company pays a quarterly commitment fee at a rate per annum ranging from 0.25% to 0.35% of the daily unused portion of the credit facility.

Table of Contents

At December 31, 2020, the interest rate on the term loan A and revolving A facility was 1.65%, the interest rate on the revolving B facility GBP Borrowings was 1.52%, the interest rate on the term loan B was 1.90% and the interest rate on the foreign swing line was 1.53%. The unused credit facility fee was 0.30% for all revolving facilities at December 31, 2020.

The term loans are payable in quarterly installments 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 the option of one, two, three or six 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 twenty business days after such loan is made.

The Company has unamortized debt issuance costs of $5.0 million related to the revolving credit facility at December 31, 2020. The Company has unamortized debt discounts of $5.4 million related to the term A facility and $0.4 million related to the term B facility and deferred financing costs of $1.3 million related to the term A facility and $0.9 million related to the term B facility at December 31, 2020. The effective interest rate incurred on term loans was 2.30% during 2020 related to the discount on debt. Principal payments of $164.8 million were made on the term loans during 2020.

(b)The Company is party to a $1 billion receivables purchase agreement (Securitization Facility). On April 24, 2020, the Company reduced the Securitization Facility commitment from $1.2 billion to $1.0 billion. There is a program fee equal to one month LIBOR plus 1.25% or the Commercial Paper Rate plus 1.15% as of December 31, 2020 and one month LIBOR plus 0.90% or the Commercial Paper Rate plus 0.80% as December 31, 2019. There is a LIBOR floor of 0.375% as of December 31, 2020 and no LIBOR floor as of December 31, 2019. The program fee was 0.34% plus 1.23% as of December 31, 2020 and 1.80% plus 0.88% as of December 31, 2019. The unused facility fee is payable at a rate of 0.40% as of December 31, 2020 and 2019. The Company has unamortized debt issuance costs of $1.4 million and $0.7 million related to the Securitization Facility as of December 31, 2020 and December 31, 2019, respectively, recorded in other assets within the Consolidated Balance Sheets. On November 13, 2020, the Company entered into the seventh amendment to the Securitization Facility. This amendment extended the Securitization Facility termination date to November 12, 2021, added an uncommitted accordion to increase the purchase limit by up to $500 million, revised obligor concentration limits and reserve calculations, added a 0.375% LIBOR floor and modified certain swing line terms. In addition, the program fee for LIBOR borrowings increased from 0.90% to 1.25% and the program fee for Commercial Paper Rate borrowings increased from 0.80% to 1.15%.

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

(c)Other debt includes the long-term portion of deferred payments associated with business acquisitions and deferred revenue.

The Company was in compliance with all financial and non-financial covenants at December 31, 2020. The Company has entered into interest rate swap cash flow contracts with U.S. dollar notional amounts in order to reduce the variability of cash flows in the previously unhedged interest payments associated with $2.0 billion of variable rate debt. Refer to Note 17 for further details.

The contractual maturities of the Company’s total debt at December 31, 2020 are as follows (in thousands):


2021	$	1,205,697
2022	191,713
2023	2,607,293
2024	327,920
2025	—
Thereafter	—

Table of Contents

12. Accumulated Other Comprehensive Loss (AOCI)

The changes in the components of AOCI for the years ended December 31, 2020, 2019 and 2018 are as follows (in thousands):


	Cumulative Foreign Currency Translation		Unrealized (Losses) Gains on Derivative Instruments		Total Accumulated Other Comprehensive (Loss) Income

Balance at December 31, 2017	$	(551,857)	$	—	$	(551,857)
Other comprehensive loss before reclassifications	(362,001)		—		(362,001)


Other comprehensive loss	(362,001)		—		(362,001)
Balance at December 31, 2018	(913,858)		—		(913,858)
Other comprehensive loss before reclassifications	(15,855)		(68,928)		(84,783)
Amounts reclassified from AOCI	—		5,828		5,828
Tax effect	—		20,348		20,348
Other comprehensive loss	(15,855)		(42,752)		(58,607)
Balance at December 31, 2019	(929,713)		(42,752)		(972,465)
Other comprehensive loss before reclassifications	(367,249)		(70,719)		(437,968)
Amounts reclassified from AOCI	—		39,264		39,264
Tax effect	—		8,011		8,011
Other comprehensive loss	(367,249)		(23,444)		(390,693)
Balance at December 31, 2020	$	(1,296,962)	$	(66,196)	$	(1,363,158)

13. Income Taxes

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


	2020		2019		2018
United States	$	457,090	$	505,818	$	622,214
Foreign	425,435		572,001		472,911
Total	$	882,525	$	1,077,819	$	1,095,125

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


	2020		2019		2018
Current:
Federal	$	71,123	$	50,145	$	165,303
State	19,597		10,285		26,036
Foreign	71,921		84,433		95,053
Total current	162,641		144,863		286,392
Deferred:
Federal	143		(10,479)		(19,688)
State	(4,323)		3,745		8,727
Foreign	19,848		44,617		8,211
Total deferred	15,668		37,883		(2,750)
Total provision	$	178,309	$	182,746	$	283,642

The provision for income taxes differs from amounts computed by applying the U.S. federal tax rate of 21% for 2020, 2019, and 2018, respectively, to income before income taxes for the years ended December 31, 2020, 2019 and 2018 due to the following (in thousands):

Table of Contents


	2020				2019				2018
Computed “expected” tax expense	$	185,330	21.0	%	$	226,342	21.0	%	$	229,976	21.0	%
Changes resulting from:
Change in valuation allowance	25,932		2.9		(28,614)		(2.7)		25,193		2.8
Foreign income tax differential	(20,852)		(2.3)		(15,816)		(1.4)		9,921		0.9
State taxes net of federal benefits	7,489		0.8		12,482		1.2		20,480		1.9
Increase in tax expense due to uncertain tax positions	14,848		1.7		—		—		—		—
Foreign-sourced nontaxable income	—		—		—		—		(28,861)		(2.6)
Foreign withholding tax	15,630		1.8		20,360		1.9		20,569		1.9



Excess tax benefits related to stock-based compensation	(58,942)		(6.7)		(38,156)		(3.5)		(19,255)		(1.8)
Revaluation of capital loss deferred tax asset	—		—		(24,279)		(2.3)		—		—
Impact of the Tax Act:

Foreign tax credit- one-time transition tax	—		—		—		—		17,385		1.6
Deferred tax effects	—		—		—		—		7,128		0.1

Sub-part F Income/GILTI	34,990		4.0		49,859		4.6		40,200		3.7
Foreign tax credits	(30,497)		(3.5)		(38,657)		(3.6)		(52,095)		(4.8)
Other	4,381		0.5		19,225		1.8		13,001		1.2
Provision for income taxes	$	178,309	20.2	%	$	182,746	17.0	%	$	283,642	25.9	%

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


	2020		2019
Deferred tax assets:
Accounts receivable, principally due to the allowance for doubtful accounts	$	10,515	$	9,586
Accrued expenses not currently deductible for tax	3,442		2,305
Lease deferral	23,506		24,713
Interest rate swap	21,792		13,781
Stock based compensation	36,015		39,779
Income tax credits	51,264		35,845
Net operating loss carry forwards	83,372		67,108
Accrued escheat	3,567		3,098
Other	11,711		3,522
Deferred tax assets before valuation allowance	245,184		199,737
Valuation allowance	(90,340)		(64,482)
Deferred tax assets, net	154,844		135,255
Deferred tax liabilities:
Intangibles—including goodwill	(481,388)		(499,525)
Basis difference in investment in subsidiaries	(42,313)		(42,314)
Lease deferral	(19,977)		(21,810)
Accrued Expense Liability	(513)		(4,023)
Prepaid expenses	(2,126)		(2,075)
Withholding taxes	(30,488)		(30,366)
Property and equipment and other	(71,342)		(52,467)
Deferred tax liabilities	(648,147)		(652,580)
Net deferred tax liabilities	$	(493,303)	$	(517,325)

Table of Contents

The Company’s deferred tax balances are classified in its balance sheets as of December 31 as follows (in thousands):


	2020		2019
Long term deferred tax assets and liabilities:
Long term deferred tax assets	$	4,851	$	2,655
Long term deferred tax liabilities	(498,154)		(519,980)

Net deferred tax liabilities	$	(493,303)	$	(517,325)

The valuation allowance for deferred tax assets changed during 2020 as follows (in thousands):


Balance at December 31, 2017 (after impact of tax reform)	$	59,349
Additions based on changes in deferred tax assets	25,193
Increase in valuation allowance due to rate change from Tax Act	5,824
Balance at December 31, 2018	90,366
Reductions based on changes in deferred tax assets	(28,601)
Additions based on changes in deferred tax assets	2,717
Balance at December 31, 2019	64,482
Additions based on changes in deferred tax assets	25,932
Reductions based on changes in deferred tax assets	(74)
Balance at December 31, 2020	$	90,340

The valuation allowances relate to capital loss carryforwards, income tax credits, foreign net operating loss carryforwards and state net operating loss carryforwards. The net change in the total valuation allowance for the year ended December 31, 2020, was an increase of $25.9 million. The valuation increase from the prior year was primarily due to foreign tax credits generated in Luxembourg due to the payment of various withholding taxes outside of Luxembourg as well as state net operating losses generated in the U.S. in certain states where the Company and its subsidiaries file on a separate company basis.

As of December 31, 2020, the Company had a net operating loss carryforward for U.S. federal income tax purposes of approximately $16.0 million that is available to offset U.S. federal taxable income through 2039. The Company had a net operating loss carryforward for state income tax purposes of approximately $794.2 million that is available to offset future state taxable income through 2039. Additionally, the Company had $114.3 million net operating loss carryforwards for foreign income tax purposes that are available to offset future foreign taxable income. The foreign net operating loss carryforwards will not expire in future years. The Company has provided a valuation allowance against $39.0 million of its deferred tax asset related to the net operating losses as it does not anticipate utilizing the losses in the foreseeable future.

In addition, the Company has foreign tax credits for foreign income purposes in the amount of $51.3 million. The Company has provided a valuation allowance against $51.3 million of the tax credits as it does not anticipate utilizing the credits in the foreseeable future.

During 2020 and 2019, the Company had recorded accrued interest and penalties related to the unrecognized tax benefits of $5.7 million and $3.4 million, respectively. Accumulated interest and penalties were $12.5 million and $12.7 million on the Consolidated Balance Sheets at December 31, 2020 and 2019, respectively. In accordance with the Company's accounting policy, interest and penalties related to unrecognized tax benefits are included as a component of income tax expense.

Table of Contents

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits excluding interest and penalties for the years ended December 31, 2020, 2019 and 2018 is as follows (in thousands):


Unrecognized tax benefits at December 31, 2017	$	31,558
Additions based on tax provisions related to the current year	3,755

Deductions based on settlement/expiration of prior year tax positions	(4,161)
Additions based on tax provisions related to the prior year	3,000
Unrecognized tax benefits at December 31, 2018	34,152
Additions based on tax provisions related to the current year	4,284

Additions based on tax provisions related to the prior year	11,679
Deductions based on settlement/expiration of prior year tax positions	(7,342)
Unrecognized tax benefits at December 31, 2019	42,773
Additions based on tax provisions related to the current year	6,412

Additions based on tax provisions related to the prior year	13,532
Deduction of cumulative interest and penalties	(12,508)

Deductions based on expiration of prior year tax positions	(14,460)
Unrecognized tax benefits at December 31, 2020	$	35,749

In prior years, the Company included interest and penalties related to unrecognized tax benefits in its tabular reconciliation above. A cumulative adjustment has been made in 2020 to remove interest and penalties from the above tabular disclosure.

As of December 31, 2020, the Company had total unrecognized tax benefits of $35.7 million all of which, if recognized, would affect its effective tax rate. It is not anticipated that there are any unrecognized tax benefits that will significantly increase or decrease within the next twelve months.

The Company files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The statute of limitations for the Company’s U.S. federal income tax returns has expired for years prior to 2014. The statute of limitations for state income tax returns has expired for years prior to 2014. The statute of limitations for the Company’s U.K. income tax returns has expired for years prior to 2018. The statute of limitations has expired for years prior to 2017 for the Company’s Czech Republic income tax returns, 2017 for the Company’s Russian income tax returns, 2015 for the Company’s Mexican income tax returns, 2015 for the Company’s Brazilian income tax returns, 2015 for the Company’s Luxembourg income tax returns, 2016 for the Company’s New Zealand income tax returns, and 2018 for the Company’s Australian income tax returns.

14. Leases

The Company primarily leases office space, data centers, vehicles, and equipment. Some of our leases contain variable lease payments, typically payments based on an index. The Company’s leases have remaining lease terms of one year to thirty years, some of which include options to extend from one to five years or more. The exercise of lease renewal options is typically at the Company's sole discretion; therefore, the majority of renewals to extend the lease terms are not reasonably certain to exercise and are not included in Right of Use (ROU) assets and lease liabilities. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at lease commencement, for the purposes of transition, the rate in effect at January 1, 2019. Additional payments based on the change in an index or rate are recorded as a period expense when incurred. Lease modifications result in remeasurement of the lease liability as of the modification date.

Other assets include ROU assets, other current liabilities include short-term operating lease liabilities, and other non-current liabilities include long term lease liabilities at December 31, 2020 and 2019 consist of the following (in millions):


	December 31, 2020		December 31, 2019
ROU assets	$	76.8	$	84.3
Short term lease liabilities	17.0		16.9
Long term lease liabilities	75.4		81.7

The Company does not recognize ROU assets and lease liabilities for short-term leases that have a term of twelve months or less. The effect of short-term leases would not be material to the ROU assets and lease liabilities.

Table of Contents

Under ASC 842, a Company discounts future lease obligations by the rate implicit in the contract, unless the rate cannot be readily determined. As most of our leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. In determining the borrowing rate, the Company considered the applicable lease terms, the Company's cost of borrowing, and for leases denominated in a foreign currency, the collateralized borrowing rate that the Company would obtain to borrow in the same currency in which the lease is denominated.

Total lease costs for the year ended December 31, 2020 and 2019 were $20.7 million and $20.5 million, respectively.

The supplementary cash and non-cash disclosures for the year ended December 31, 2020 and 2019 are as follows (in thousands):


	December 31, 2020		December 31, 2019
Cash paid for operating lease liabilities	$	20,068	$	19,763
ROU assets obtained in exchange for new operating lease obligations 1	$	7,134	$	102,586
Weighted-average remaining lease term (years)	7.07		7.54
Weighted-average discount rate	4.18%		4.64%
1 Includes $55.9 million for operating leases existing on January 1, 2019

Maturities of lease liabilities as of December 31, 2020 were as follows (in thousands):


2021	$	20,183
2022	16,863
2023	15,460
2024	14,753
2025	13,183
Thereafter	28,827
Total lease payments	109,270
Less imputed interest	16,873
Present value of lease liabilities	$	92,397

15. Commitments and Contingencies

In the ordinary course of business, the Company is involved in various pending or threatened legal actions, arbitration proceedings, claims, subpoenas, and matters relating to compliance with laws and regulations (collectively, "legal proceedings"). Based on our current knowledge, management presently does not believe that the liabilities arising from these legal proceedings will have a material adverse effect on our consolidated financial condition, results of operations or cash flows. However, it is possible that the ultimate resolution of these legal proceedings could have a material adverse effect on our results of operations and financial condition for any particular period.

Derivative Lawsuits

On July 10, 2017, a shareholder derivative complaint was filed against the Company and certain of the Company’s directors and officers in the United States District Court for the Northern District of Georgia (“Federal Derivative Action”) seeking recovery on behalf of the Company. The Federal Derivative Action alleges that the defendants issued a false and misleading proxy statement in violation of the federal securities laws; that defendants breached their fiduciary duties by causing or permitting the Company to make allegedly false and misleading public statements concerning the Company’s fee charges, and financial and business prospects; and that certain defendants breached their fiduciary duties through allegedly improper sales of stock. The complaint seeks unspecified monetary damages on behalf of the Company, corporate governance reforms, disgorgement of profits, benefits and compensation by the defendants, restitution, costs, and attorneys’ and experts’ fees. On September 20, 2018, the court entered an order deferring the Federal Derivative Action pending a ruling on motions for summary judgment in the shareholder class action, notice a settlement has been reached in the shareholder class action, or until otherwise agreed to by the parties. After preliminary approval of the proposed settlement of the shareholder class action was granted, the stay on the Federal Derivative Action was lifted. Plaintiffs amended their complaint on February 22, 2020. FLEETCOR filed a motion to dismiss the amended complaint in the Federal Derivative Action on April 17, 2020, which the court granted without leave to amend on October 21, 2020. Plaintiffs filed a notice of appeal to the United States Court of Appeals for the Eleventh Circuit on November 18, 2020. The appeal is pending.

Table of Contents

On January 9, 2019, a similar shareholder derivative complaint was filed in the Superior Court of Gwinnett County, Georgia (“State Derivative Action”), which was stayed pending a ruling on motions for summary judgment in the shareholder class action, notice a settlement has been reached in the shareholder class action, or until otherwise agreed by the parties. On the parties’ joint motion, the court has continued the stay of the State Derivative Action “pending further developments in the first-filed Federal Derivative Action.” The defendants dispute the allegations in the derivative complaints and intend to vigorously defend against the claims.

FTC Investigation

In October 2017, the Federal Trade Commission (FTC) issued a Notice of Civil Investigative Demand to the Company for the production of documentation and a request for responses to written interrogatories. After discussions with the Company, the FTC proposed in October 2019 to resolve potential claims relating the Company’s advertising and marketing practices, principally in its U.S. direct fuel card business within its North American Fuel Card business. The parties reached impasse primarily related to what the Company believes are unreasonable demands for redress made by the FTC.

On December 20, 2019, the FTC filed a lawsuit in the Northern District of Georgia against the Company and Ron Clarke. See FTC v. FLEETCOR and Ronald F. Clarke, No. 19-cv-05727 (N.D. Ga.). The complaint alleges the Company and Clarke violated the FTC Act’s prohibitions on unfair and deceptive acts and practices. The complaint seeks among other things injunctive relief, consumer redress, and costs of suit. The Company continues to believe that the FTC’s claims are without merit. The Company has incurred and continues to incur legal and other fees related to this complaint. Any settlement of this matter, or defense against the lawsuit, could involve costs to the Company, including legal fees, redress, penalties, and remediation expenses. At this time, in view of the complexity and ongoing nature of the matter, we are unable to estimate a reasonably possible loss or range of loss that we may incur to settle this matter or defend against the lawsuit brought by the FTC.

16. Dispositions

Telematics Businesses

As part of the Company's plans to exit the telematics business, the Company sold its investment in Masternaut to Michelin Group during the second quarter of 2019. The Company impaired its investments in Masternaut by an additional $15.7 million during 2019, resulting in no gain or loss when the investment was sold. The Company has recorded cumulative impairment losses associated with its former investment in Masternaut of $136.3 million.

Chevron Portfolio

The Company completed the sale of the Chevron customer portfolio to WEX Inc. resulting in a pre-tax gain of $152.8 million during the fourth quarter of 2018. The gain on the disposal is included in other (income) expense within the Consolidated Statements of Income. The asset was previously reported within the Company's North America segment.

17. Derivative Financial Instruments

The Company uses derivatives to facilitate cross-currency corporate payments by writing derivatives to customers within its cross-border solution. The Company writes derivatives, primarily foreign currency forward contracts, option contracts, and swaps, mostly with small and medium size enterprises that are customers and derives a currency spread from this activity.

Derivative transactions associated with the Company's cross-border solution include:

Forward contracts, which are commitments to buy or sell at a future date a currency at a contract price and will be settled in cash.
Option contracts, which gives the purchaser, the right, but not the obligation to buy or sell within a specified time a currency at a contracted price that may be settled in cash.
Swap contracts, which are commitments to settlement in cash at a future date or dates, usually on an overnight basis.

The credit risk inherent in derivative agreements represents the possibility that a loss may occur from the nonperformance of a counterparty to the agreements. Concentrations of credit and performance risk may exist with counterparties, which includes customers and banking partners, as we are engaged in similar activities with similar economic characteristics related to fluctuations in foreign currency rates. The Company performs a review of the credit risk of these counterparties at the inception of the contract and on an ongoing basis. The Company also monitors the concentration of its contracts with any individual counterparty against limits at the individual counterparty level. The Company anticipates that the counterparties will be able to fully satisfy their obligations under the agreements, but takes action when doubt arises about the counterparties' ability to perform. These actions may include requiring customers to post or increase collateral, and for all counterparties, if the counterparty does not perform under the term of the contract, the contract may be terminated. The Company does not designate any of its foreign exchange derivatives as hedging instruments in accordance with ASC 815.

For derivatives accounted for as hedging instruments, the Company formally designates and documents, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the strategy for

Table of Contents

undertaking the hedge transaction. The Company formally assesses, both at the inception and at least quarterly thereafter, whether the financial instruments used in hedging transactions are effective at offsetting changes in cash flows of the related underlying exposures. Any ineffective portion of a financial instrument's change in fair value is immediately recognized in earnings.

The aggregate equivalent U.S. dollar notional amount of foreign exchange derivative customer contracts held by the Company as of December 31, 2020 and 2019 (in millions) is presented in the table below.


	Notional
	2020		2019
Foreign exchange contracts:
Swaps	$	684.5	$	599.5
Futures, forwards and spot	5,467.8		3,017.1
Written options	5,578.1		6,393.9
Purchased options	5,195.0		5,830.8
Total	$	16,925.4	$	15,841.3

The majority of customer foreign exchange contracts are written in currencies such as the U.S. dollar, Canadian dollar, British pound, euro and Australian dollar.

The following table summarizes the fair value of derivatives reported in the Consolidated Balance Sheets as of December 31, 2020 and 2019 (in millions):


December 31, 2020	Fair Value, Gross				Fair Value, Net
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Derivatives - undesignated:


Foreign exchange contracts	$	326.1	$	310.5	$	155.8	$	140.3
Less: Cash collateral	18.2		38.6		18.2		38.6
Total net derivative assets and liabilities	$	307.9	$	271.9	$	137.6	$	101.7


December 31, 2019	Fair Value, Gross				Fair Value, Net
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Derivatives - undesignated:


Foreign exchange contracts	114.9		103.8		72.1		60.9
Less: Cash collateral	6.1		25.6		6.1		25.6
Total net derivative assets and liabilities	$	108.8	$	78.2	$	66.0	$	35.3

The fair values of derivative assets and liabilities associated with contracts, which include netting terms that the Company believes to be enforceable, have been recorded net within the Consolidated Balance Sheets. The Company receives cash from customers as collateral for trade exposures, which is recorded within cash and cash equivalents and customer deposits in the Consolidated Balance Sheets. The customer has the right to recall their collateral in the event exposures move in their favor, they perform on all outstanding contracts and have no outstanding amounts due to the Company, or they cease to do business with the Company. The Company has trading lines with several banks, most of which require collateral to be posted if certain MTM thresholds are exceeded. Cash collateral posted with banks is recorded within restricted cash and can be recalled in the event that exposures move in the company’s favor or move below the collateral posting thresholds. The Company does not offset fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral. At December 31, 2020, $139.3 million derivative assets and $127.7 million derivative liabilities were recorded in other current assets and other current liabilities, respectively, and $16.6 million derivative assets and $12.5 million derivative liabilities were recorded in other long term assets and other long term liabilities, respectively, in the Consolidated Balance Sheet. At December 31, 2019, $72.1 million derivative assets and $60.9 million derivative liabilities were recorded in other current assets and other current liabilities, respectively, in the Consolidated Balance Sheet. The Company receives cash from customers as collateral for trade exposures, which is recorded within restricted cash and customer deposits in the Consolidated Balance Sheet.

Table of Contents

Cash Flow Hedges

On January 22, 2019, the Company entered into three interest rate swap cash flow contracts (the "swap contracts"). The objective of these swap contracts is to reduce the variability of cash flows in the previously unhedged interest payments associated with $2.0 billion of variable rate debt, the sole source of which is due to changes in the LIBOR benchmark interest rate. As of December 31, 2020, the Company had the following outstanding interest rate derivatives that qualify as hedging instruments and are designated as cash flow hedges of interest rate risk (in millions):


	Notional Amount as of		Fixed Rates	Maturity Date
	December 31, 2020
Interest Rate Derivative:
Interest Rate Swap	$	1,000	2.56%	1/31/2022
Interest Rate Swap	500		2.56%	1/31/2023
Interest Rate Swap	500		2.55%	12/19/2023

For each of these swap contracts, the Company pays a fixed monthly rate and receives one month LIBOR.

The table below presents the fair value of the Company’s interest rate swap contracts, as well as their classification on the Consolidated Balance Sheets, as of December 31, 2020 and 2019 (in millions). See Note 4 for additional information on the fair value of the Company’s swap contracts.


	Balance Sheet Location	December 31, 2020		December 31, 2019
Derivatives designated as cash flow hedges:
Swap contracts	Other current liabilities	$	(49.3)	$	—
Swap contracts	Other noncurrent liabilities	$	(38.6)	$	(56.4)

The table below displays the effect of the Company’s derivative financial instruments in the Consolidated Statements of Income and other comprehensive loss for the twelve months ended December 31, 2020 and 2019 (in millions):


	2020	2019
Interest Rate Swaps:
Amount of loss recognized in other comprehensive income (loss) on derivatives, net of tax of $8.0 million and $20.3 million for 2020 and 2019, respectively	$62.7	$42.8
Amount of loss reclassified from accumulated other comprehensive loss into interest expense	$39.3	$5.8

The estimated net amount of the existing losses expected to be reclassified into earnings within the next 12 months is approximately $49.3 million at December 31, 2020.

18. Earnings Per Share

The Company reports basic and diluted earnings per share. Basic earnings per share is computed by dividing net income attributable to shareholders of the Company by the weighted average number of common shares outstanding during the reported period. Diluted earnings per share reflect the potential dilution related to equity-based incentives using the treasury stock method.

The calculation and reconciliation of basic and diluted earnings per share for the years ended December 31 (in thousands, except per share data) follows:


	2020		2019		2018
Net income	$	704,216	$	895,073	$	811,483
Denominator for basic earnings per share	84,005		86,401		88,750
Dilutive securities	2,714		3,669		3,401
Denominator for diluted earnings per share	86,719		90,070		92,151
Basic earnings per share	$	8.38	$	10.36	$	9.14
Diluted earnings per share	8.12		9.94		8.81

Table of Contents

Diluted earnings per share for the years ended December 31, 2020, 2019, and 2018 excludes the effect of 0.1 million, 19 thousand and 0.4 million shares, respectively, of common stock that may be issued upon the exercise of employee stock options because such effect would be antidilutive. Diluted earnings per share also excludes the effect of 0.1 million, 0.1 million and 0.1 million shares of performance based restricted stock for which the performance criteria have not yet been achieved for the years ended December 31, 2020, 2019 and 2018, respectively.

19. Segments

As previously described in our Annual Report on Form 10-K for the year ended December 31, 2019, the Company historically managed and reported our operating results through two reportable segments, defined by geographic regions: North America and International. In the first quarter of 2020, we evaluated the identification of our operating and reportable segments based upon changes in business models, management reporting, and how the Chief Operating Decision Maker (CODM) is currently allocating resources, assessing performance and reviewing financial information. We determined that these changes caused the composition of our reportable segments to change and that Brazil represented a third operating and reportable segment, which was previously reported in the International segment. We now manage and report our operating results through three operating and reportable segments defined by geographic regions: North America, Brazil and International, which aligns with how the CODM allocates resources, assesses performance and reviews financial information. This change in reporting segments did not impact our determination of reporting units.

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


	2020		2019		20181
Revenues, net:
North America	$	1,581,547	$	1,708,546	$	1,571,466
Brazil	344,248		427,921		400,111
International	463,060		512,381		461,915
	$	2,388,855	$	2,648,848	$	2,433,492
Operating income:
North America	$	547,912	$	754,528	$	674,477
Brazil	148,055		175,642		158,722
International	276,298		301,260		257,499
	$	972,265	$	1,231,430	$	1,090,698
Depreciation and amortization:
North America	$	156,417	$	160,246	$	154,405
Brazil	51,364		64,936		67,167
International	47,021		49,028		53,037
	$	254,802	$	274,210	$	274,609
Capital expenditures:
North America	$	48,426	$	44,238	$	36,514
Brazil	17,116		18,330		22,056
International	12,883		12,602		22,817
	$	78,425	$	75,170	$	81,387
Long-lived assets (excluding goodwill and investments):
North America	$	1,790,661	$	1,860,708	$	1,799,149
Brazil	341,242		487,464		541,891
International	379,697		418,311		400,703
	$	2,511,600	$	2,766,483	$	2,741,743

1The Company applied the modified retrospective transition method when adopting ASC 842, therefore the Company's 2018 prior period results were not restated to reflect ASC 842.

Table of Contents

The following table presents the Company's long-lived assets (excluding goodwill and investments) at December 31 (in thousands).


	2020		2019
Long-lived assets (excluding goodwill):
United States (country of domicile)	$	1,547,423	$	1,860,708
Brazil	341,242		487,464
United Kingdom	269,556		282,351

More than 10% of our revenues in 2020, 2019 and 2018 were derived through our relationship with our open-loop network partner in our North American segment.

20. Selected Quarterly Financial Data (Unaudited)


Fiscal Quarters Year Ended December 31, 2020	First		Second		Third		Fourth
Revenues, net	$	661,093	$	525,146	$	585,283	$	617,333
Operating income	200,983		212,811		264,532		293,939
Net income	147,060		158,488		188,817		209,851
Basic earnings per share	$	1.73	$	1.89	$	2.26	$	2.51
Diluted earnings per share	1.67		1.83		2.19		2.44
Weighted average shares outstanding:
Basic shares	84,902		83,895		83,719		83,514
Diluted shares	88,205		86,570		86,273		85,846


Fiscal Quarters Year Ended December 31, 2019	First		Second		Third		Fourth
Revenues, net	$	621,825	$	647,094	$	681,048	$	698,881
Operating income	284,176		297,317		329,141		320,796
Net income	172,107		261,651		225,805		235,510
Earnings per share:
Basic earnings per share	$	2.00	$	3.03	$	2.61	$	2.72
Diluted earnings per share	1.93		2.90		2.49		2.60
Weighted average shares outstanding:
Basic shares	85,941		86,360		86,662		86,600
Diluted shares	89,244		90,131		90,522		90,427

The sum of the quarterly earnings per common share amounts for 2020 and 2019 may not equal the earnings per common share due to rounding.

The fourth quarter of 2019 includes: a gain of $13.0 million related to the fair value adjustment of a minority investment, a write-off of property, plant and equipment costs of $1.8 million and restructuring related costs of $2.8 million.

Table of Contents

Previous: Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK · Next: Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE