Item 1. Financial Statements

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Item 1. Financial Statements

FLEETCOR Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands, Except Share and Par Value Amounts)


	September 30, 2021		December 31, 2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,271,000	$	934,900
Restricted cash	737,937		541,719
Accounts and other receivables (less allowance for credit losses of $90,724 at September 30, 2021 and $86,886 at December 31, 2020)	2,071,523		1,366,775
Securitized accounts receivable—restricted for securitization investors	1,098,000		700,000
Prepaid expenses and other current assets	345,831		412,924

Total current assets	5,524,291		3,956,318
Property and equipment, net	220,643		202,509

Goodwill	5,102,263		4,719,181
Other intangibles, net	2,369,457		2,115,882
Investments	11,857		7,480
Other assets	225,872		193,209
Total assets	$	13,454,383	$	11,194,579
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,726,705	$	1,054,478
Accrued expenses	327,271		282,681
Customer deposits	1,533,145		1,175,322
Securitization facility	1,098,000		700,000
Current portion of notes payable and lines of credit	803,397		505,697
Other current liabilities	177,752		250,133
Total current liabilities	5,666,270		3,968,311
Notes payable and other obligations, less current portion	3,789,981		3,126,926
Deferred income taxes	564,445		498,154
Other noncurrent liabilities	258,702		245,777
Total noncurrent liabilities	4,613,128		3,870,857
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.001 par value; 475,000,000 shares authorized; 127,105,396 shares issued and 81,197,846 shares outstanding at September 30, 2021; and 126,448,078 shares issued and 83,666,163 shares outstanding at December 31, 2020	127		126
Additional paid-in capital	2,850,143		2,749,900
Retained earnings	6,031,438		5,416,945
Accumulated other comprehensive loss	(1,436,044)		(1,363,158)
Less treasury stock, 45,907,550 shares at September 30, 2021 and 42,781,915 shares at December 31, 2020	(4,270,679)		(3,448,402)
Total stockholders’ equity	3,174,985		3,355,411
Total liabilities and stockholders’ equity	$	13,454,383	$	11,194,579


See accompanying notes to unaudited consolidated financial statements.

FLEETCOR Technologies, Inc. and Subsidiaries

Unaudited Consolidated Statements of Income

(In Thousands, Except Per Share Amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues, net	$	755,477	$	585,283	$	2,031,481	$	1,771,522
Expenses:

Processing	149,564		119,856		388,286		474,849
Selling	71,204		46,762		186,511		144,995
General and administrative	121,785		90,868		345,155		283,717
Depreciation and amortization	74,237		63,479		209,184		190,117
Other operating, net	—		(214)		81		(482)
Operating income	338,687		264,532		902,264		678,326
Investment loss (gain)	—		1,330		(9)		(30,008)
Other expense (income), net	1,532		(3,591)		3,683		(10,477)
Interest expense, net	29,033		31,383		92,269		99,474

Total other expense	30,565		29,122		95,943		58,989
Income before income taxes	308,122		235,410		806,321		619,337
Provision for income taxes	74,115		46,593		191,828		124,972
Net income	$	234,007	$	188,817	$	614,493	$	494,365

Basic earnings per share	$	2.86	$	2.26	$	7.42	$	5.87
Diluted earnings per share	$	2.80	$	2.19	$	7.24	$	5.68
Weighted average shares outstanding:
Basic shares	81,836		83,719		82,811		84,170
Diluted shares	83,716		86,273		84,917		87,006

See accompanying notes to unaudited consolidated financial statements.

FLEETCOR Technologies, Inc. and Subsidiaries

Unaudited Consolidated Statements of Comprehensive Income (Loss)

(In Thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	234,007	$	188,817	$	614,493	$	494,365
Other comprehensive loss:
Foreign currency translation losses, net of tax	(179,839)		(10,328)		(102,191)		(577,189)
Net change in derivative contracts, net of tax	8,972		9,167		29,305		(33,482)
Total other comprehensive loss	(170,867)		(1,161)		(72,886)		(610,671)
Total comprehensive income (loss)	$	63,140	$	187,656	$	541,607	$	(116,306)

See accompanying notes to unaudited consolidated financial statements.

FLEETCOR Technologies, Inc. and Subsidiaries

Unaudited 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, 2020	$	126	$	2,749,900	$	5,416,945	$	(1,363,158)	$	(3,448,402)	$	3,355,411
Net income	—		—		184,239		—		—		184,239
Other comprehensive loss, net of tax	—		—		—		(117,861)		—		(117,861)
Acquisition of common stock	—		—		—		—		(170,382)		(170,382)
Share-based compensation	—		17,747		—		—		—		17,747
Issuance of common stock	1		27,344		—		—		—		27,345


Balance at March 31, 2021	127		2,794,991		5,601,184		(1,481,019)		(3,618,784)		3,296,499
Net income	—		—		196,247		—		—		196,247
Other comprehensive income, net of tax	—		—		—		215,842		—		215,842
Acquisition of common stock	—		—		—		—		(246,203)		(246,203)
Share-based compensation	—		17,885		—		—		—		17,885
Issuance of common stock	—		8,577		—		—		—		8,577
Balance at June 30, 2021	127		2,821,453		5,797,431		(1,265,177)		(3,864,987)		3,488,847
Net income	—		—		234,007		—		—		234,007
Other comprehensive loss, net of tax	—		—		—		(170,867)		—		(170,867)
Acquisition of common stock	—		—		—		—		(405,692)		(405,692)
Share-based compensation	—		16,453		—		—		—		16,453
Issuance of common stock	—		12,237		—		—		—		12,237
Balance at September 30, 2021	$	127	$	2,850,143	$	6,031,438	$	(1,436,044)	$	(4,270,679)	$	3,174,985


	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balance at December 31, 2019	$	124	$	2,494,721	$	4,712,729	$	(972,465)	$	(2,523,493)	$	3,711,616
Net income	—		—		147,060		—		—		147,060
Other comprehensive loss, net of tax	—		—		—		(619,659)		—		(619,659)
Acquisition of common stock	—		75,000		—		—		(605,237)		(530,237)
Share-based compensation	—		14,175		—		—		—		14,175
Issuance of common stock	1		73,273		—		—		—		73,274
Balance at March 31, 2020	125		2,657,169		4,859,789		(1,592,124)		(3,128,730)		2,796,229
Net income	—		—		158,488		—		—		158,488
Other comprehensive income, net of tax	—		—		—		10,149		—		10,149
Acquisition of common stock	—		—		—		—		(32,230)		(32,230)
Share-based compensation	—		8,989		—		—		—		8,989
Issuance of common stock	1		24,808		—		—		—		24,809
Balance at June 30, 2020	126		2,690,966		5,018,277		(1,581,975)		(3,160,960)		2,966,434
Net income	—		—		188,817		—		—		188,817
Other comprehensive loss, net of tax	—		—		—		(1,161)		—		(1,161)
Acquisition of common stock	—		—		—		—		(238,396)		(238,396)
Share-based compensation	—		11,905		—		—		—		11,905
Issuance of common stock	—		10,151		—		—		—		10,151
Balance at September 30, 2020	$	126	$	2,713,022	$	5,207,094	$	(1,583,136)	$	(3,399,356)	$	2,937,750

See accompanying notes to unaudited consolidated financial statements.

FLEETCOR Technologies, Inc. and Subsidiaries

Unaudited Consolidated Statements of Cash Flows

(In Thousands)


	Nine Months Ended September 30,
	2021		2020
Operating activities
Net income	$	614,493	$	494,365
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	55,605		48,150
Stock-based compensation	52,085		35,069
Provision for credit losses on accounts and other receivables	19,419		152,485
Amortization of deferred financing costs and discounts	4,903		5,028
Amortization of intangible assets and premium on receivables	153,579		141,967
Loss on extinguishment of debt	6,230		—

Deferred income taxes	16,246		(5,747)
Investment gain	(9)		(30,008)

Other	81		(482)
Changes in operating assets and liabilities (net of acquisitions/dispositions):
Accounts and other receivables	(1,020,900)		49,690
Prepaid expenses and other current assets	190,543		26,105
Other assets	28,370		6,129

Accounts payable, accrued expenses and customer deposits	478,896		291,945
Net cash provided by operating activities	599,541		1,214,696
Investing activities
Acquisitions, net of cash acquired	(545,052)		(72,557)
Purchases of property and equipment	(74,455)		(55,019)
Proceeds from disposal of investment	—		52,963
Other	(2,281)		—
Net cash used in investing activities	(621,788)		(74,613)
Financing activities

Proceeds from issuance of common stock	48,159		95,780
Repurchase of common stock	(822,277)		(788,409)
Borrowings (payments) on securitization facility, net	398,000		(282,973)
Deferred financing costs	(21,508)		(2,474)
Proceeds from notes payable	1,150,000		—
Principal payments on notes payable	(462,438)		(134,097)
Borrowings from revolver	1,140,000		1,198,500
Payments on revolver	(798,851)		(1,287,899)
Payments on swing line of credit, net	(51,049)		(20,111)

Other	(811)		(244)
Net cash provided by (used in) financing activities	579,225		(1,221,927)
Effect of foreign currency exchange rates on cash	(24,660)		(222,533)
Net increase (decrease) in cash and cash equivalents and restricted cash	532,318		(304,377)
Cash and cash equivalents and restricted cash, beginning of period	1,476,619		1,675,237
Cash and cash equivalents and restricted cash, end of period	$	2,008,937	$	1,370,860
Supplemental cash flow information
Cash paid for interest	$	96,146	$	98,564
Cash paid for income taxes	$	147,028	$	119,089



See accompanying notes to unaudited consolidated financial statements.

FLEETCOR Technologies, Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

September 30, 2021

1. Summary of Significant Accounting Policies

Basis of Presentation

Throughout this Quarterly Report on Form 10-Q, the terms “our,” “we,” “us,” and the “Company” refers to FLEETCOR Technologies, Inc. and its subsidiaries. The Company prepared the accompanying unaudited interim consolidated financial statements in accordance with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States (“GAAP”). The unaudited interim consolidated financial statements reflect all adjustments considered necessary for fair presentation. These adjustments consist of normal recurring accruals and estimates that impact the carrying value of assets and liabilities. Actual results may differ from these estimates.

The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Use of estimates

The preparation of financial statements in conformity with GAAP 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 financial statements and the reported amounts of revenue and expenses during the reporting periods. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. These financial statements were prepared using information reasonably available as of September 30, 2021 and through the date of this Report. The accounting estimates used in the preparation of the Company’s consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Actual results may differ from these estimates due to the uncertainty around the magnitude and duration of the COVID-19 pandemic, as well as other factors.

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 expense (income), net in the Unaudited Consolidated Statements of Income for the three and nine months ended September 30 as follows (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Foreign exchange (losses) gains	$	(1.2)	$	3.7	$	(2.9)	$	3.2

The Company recorded foreign currency gains on long-term intra-entity transactions included as a component of foreign currency translation losses, net of tax, in the Unaudited Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30 as follows (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Foreign currency (losses) gains on long-term intra-entity transactions	$	(46.0)	$	50.4	$	(20.2)	$	235.8

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 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 of these derivatives are recorded in revenues, net in the Unaudited Consolidated Statements of Income.

The Company recognizes current cross-border payments derivatives in prepaid expense 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 Unaudited Consolidated Statements of Cash Flows. Refer to Note 13.

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.

Financial Instruments - Credit Losses

The Company accounts for financial assets' expected credit losses in accordance with ASC 326. 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 forward-looking 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.

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 (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 solutions. The Company also provides other payment solutions for fleet maintenance, employee benefits and long haul transportation-related services. Revenues from contracts with customers, within the scope of ASC 606, represent approximately 75% of total consolidated revenues, net, for both the three and nine months ended September 30, 2021. The Company accounts for revenues comprised of 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 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 derivatives accounting (ASC 815, "Derivatives").

Disaggregation of Revenues

The Company provides its services to customers across different payment solutions and geographies. Revenue by solution (in millions) for the three and nine months ended September 30 was as follows:


Revenues, net by Solution *	Three Months Ended September 30,								Nine Months Ended September 30,
	2021		%		2020		%		2021		%		2020		%
Fuel	$	306.8	41	%	$	255.1	44	%	$	863.8	43	%	$	797.0	45	%
Corporate Payments	168.7		22	%	106.5		18	%	425.5		21	%	319.0		18	%
Tolls	79.0		10	%	67.6		12	%	219.4		11	%	215.4		12	%
Lodging	85.2		11	%	52.9		9	%	206.5		10	%	150.5		8	%
Gift	48.6		6	%	39.1		7	%	124.3		6	%	108.0		6	%
Other	67.2		9	%	64.1		11	%	192.1		9	%	181.6		10	%
Consolidated revenues, net	$	755.5	100	%	$	585.3	100	%	$	2,031.5	100	%	$	1,771.5	100	%


*Columns may not calculate due to rounding.

Revenue by geography (in millions) for the three and nine months ended September 30 was as follows:


Revenues, net by Geography*	Three Months Ended September 30,								Nine Months Ended September 30,
	2021		%		2020		%		2021		%		2020		%
United States	$	488.2	65	%	$	357.1	61	%	$	1,271.5	63	%	$	1,089.9	62	%
Brazil	94.9		13	%	79.6		14	%	262.5		13	%	253.7		14	%
United Kingdom	81.9		11	%	70.2		12	%	241.0		12	%	192.8		11	%
Other	90.5		12	%	78.3		13	%	256.5		13	%	235.1		13	%
Consolidated revenues, net	$	755.5	100	%	$	585.3	100	%	$	2,031.5	100	%	$	1,771.5	100	%


*Columns may not calculate due to rounding.

Contract Liabilities

Deferred revenue contract liabilities for customers subject to ASC 606 were $59.6 million and $73.0 million as of September 30, 2021 and December 31, 2020, respectively. We expect to recognize approximately $37.9 million of these amounts in revenues within 12 months and the remaining $21.7 million over the next five years as of September 30, 2021. Revenue recognized in the nine months ended September 30, 2021 that was included in the deferred revenue contract liability as of December 31, 2020 was approximately $35.2 million.

Spot Trade Offsetting

The Company uses spot trades to facilitate cross-currency corporate payments in its cross-border payments business. 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 spot trade liabilities against spot trade receivables at the counter-party level. 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. The following table presents the Company’s spot trade assets and liabilities at their fair value at September 30, 2021 and December 31, 2020 (in millions):


	September 30, 2021						December 31, 2020
	Gross		Offset on the Balance Sheet		Net		Gross		Offset on the Balance Sheet		Net
Assets
Accounts Receivable	$	2,337.7	$	(2,235.1)	$	102.6	$	521.5	$	(478.2)	$	43.3


Liabilities
Accounts Payable	$	2,291.6	$	(2,235.1)	$	56.5	$	527.5	$	(478.2)	$	49.3

Adoption of New Accounting Standards

Income Taxes

On December 18, 2019, the Financial Accounting Standards Board (FASB) issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which removes certain exceptions to the general principles of ASC 740 and simplifies other areas. 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 adopted this guidance on January 1, 2021, which did not have a material impact on the Company's results of operations, financial condition, or cash flows.

Pending Adoption of Recently Issued Accounting Standard

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 interest rate swap contracts. Cross currency derivatives are not impacted by this ASU.

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

In October 2021, the FASB issued ASU 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805) ("ASU 2021-08"), which requires an acquirer to account for revenue contracts acquired in a business combination in accordance with Topic 606 as if it had originated the contracts. The acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired contracts. This update also provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a

business combination. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption is permitted, including adoption in an interim period. Adoption during an interim period requires retrospective application to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application. The Company is evaluating the effect of ASU 2021-08 on our consolidated financial statements.

2. Accounts and Other Receivables

The Company's accounts and securitized accounts receivable include the following at September 30, 2021 and December 31, 2020 (in thousands):


	September 30, 2021		December 31, 2020
Gross domestic accounts receivable	$	1,204,323	$	719,675
Gross domestic securitized accounts receivable	1,098,000		700,000
Gross foreign receivables	957,924		733,986
Total gross receivables	3,260,247		2,153,661
Less allowance for credit losses	(90,724)		(86,886)
Net accounts and securitized accounts receivable	$	3,169,523	$	2,066,775

The Company maintains a $1.3 billion revolving trade accounts receivable securitization facility (the "Securitization Facility"). Accounts receivable collateralized within our Securitization Facility primarily 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 multi-seller banks and asset-backed commercial paper conduits (Conduit). Funding maintains a subordinated interest, in the form of over-collateralization, in a portion of the receivables sold. 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. On September 15, 2021, the Company entered into the ninth amendment to the Securitization Facility. The amendment increased the Securitization Facility commitment from $1.0 billion to $1.3 billion.

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 first quarter of 2020. The Company's estimated expected credit losses as of September 30, 2021 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 nine months ended September 30 is as follows (in thousands):


	2021		2020
Allowance for credit losses beginning of period	$	86,886	$	70,890
Provision for credit losses	19,419		152,485
Write-offs	(24,563)		(138,939)
Recoveries	11,519		7,861
Impact of foreign currency	(2,537)		(8,415)
Allowance for credit losses end of period	$	90,724	$	83,882

3. 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. 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.

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 following table presents the Company’s financial assets and liabilities which are measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020 (in thousands):


	Fair Value		Level 1		Level 2		Level 3
September 30, 2021
Assets:
Repurchase agreements	$	509,186	$	—	$	509,186	$	—
Money market	43,275		—		43,275		—
Certificates of deposit	773		—		773		—


Foreign exchange contracts	142,007		—		142,007		—
Total assets	$	695,241	$	—	$	695,241	$	—
Cash collateral for foreign exchange contracts	$	28,912	$	—	$	—	$	—
Liabilities:
Interest rate swaps	$	49,057	$	—	$	49,057	—
Foreign exchange contracts	107,942		—		107,942		—
Total liabilities	$	156,999	$	—	$	156,999	$	—
Cash collateral obligation for foreign exchange contracts	$	25,056	$	—	$	—	$	—

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	$	—	$	—	$	—

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 Unaudited Consolidated Balance Sheet at September 30, 2021 and December 31, 2020. Cash collateral deposited for foreign exchange derivatives is recorded within restricted cash in our Unaudited Consolidated Balance Sheet at September 30, 2021 and December 31, 2020.

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 September 30, 2021 and December 31, 2020.

The Company’s assets that are measured at fair value on a nonrecurring basis or 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. The carrying amount of investments without readily determinable fair values was $11.9 million at September 30, 2021.

The fair value of the Company’s 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.

4. 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 July 27, 2021, the Board increased the aggregate size of the Program by $1.0 billion, to $5.1 billion. Since the beginning of the Program through September 30, 2021, 17,742,577 shares have been repurchased for an aggregate purchase price of $3.9 billion, leaving the Company up to $1.2 billion available under the Program for future repurchases in shares of its common stock.

Any stock repurchases may be made at times and in such amounts as deemed appropriate. The timing and amount of stock repurchases, if any, will depend on a variety of factors including the stock price, market conditions, corporate and regulatory requirements, and any additional constraints related to material inside information the Company may possess. Any repurchases have been and are expected to be funded by a combination of available cash flow from the business, working capital and debt.

5. Stock-Based Compensation

The Company has a Stock Incentive Plan (the "Plan") which permits the Board to grant share based payment awards to employees and directors.

The table below summarizes the expense related to share-based payments recognized in the three and nine months ended September 30 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Stock options	$	3,792	$	5,294	$	13,394	$	18,069
Restricted stock	12,661		6,610		38,691		16,999
Stock-based compensation	$	16,453	$	11,904	$	52,085	$	35,069

The tax benefits recorded on stock-based compensation were $33.2 million and $52.1 million for the nine months ended September 30, 2021 and 2020, respectively.

The following table summarizes the Company’s total unrecognized compensation cost related to stock-based compensation as of September 30, 2021 (cost in thousands):


	Unrecognized Compensation Cost		Weighted Average Period of Expense Recognition (in Years)
Stock options	$	95,662	1.79
Restricted stock	40,650		0.94
Total	$	136,312

Stock Options

Stock options are granted with an exercise price estimated to be equal to the fair market value on the date of grant as authorized by the Board. 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 following summarizes the changes in the number of shares of common stock under option for the nine months ended September 30, 2021 (shares/options and aggregate intrinsic value in thousands):


	Shares	Weighted Average Exercise Price		Options Exercisable at End of Period	Weighted Average Exercise Price of Exercisable Options		Weighted Average Fair Value of Options Granted During the Period		Aggregate Intrinsic Value
Outstanding at December 31, 2020	4,964	$	146.69	3,994	$	130.37			$	626,107
Granted	1,081	261.27					$	66.87
Exercised	(585)	81.05							109,727
Forfeited	(20)	231.52
Outstanding at September 30, 2021	5,440	$	176.24	3,765	$	144.74			$	463,948
Expected to vest as of September 30, 2021	1,675	$	247.05

The aggregate intrinsic value of stock options exercisable at September 30, 2021 was $439.0 million. The weighted average remaining contractual term of options exercisable at September 30, 2021 was 4.5 years.

The fair value of stock option awards granted was estimated using the Black-Scholes option pricing model, as well as the Monte-Carlo simulation model for market-based options, with the following weighted-average assumptions for grants or modifications during the nine months ended September 30, 2021 and 2020:


	September 30,
	2021		2020
Risk-free interest rate	0.55	%	0.38	%
Dividend yield	—		—
Expected volatility	35.75	%	30.91	%
Expected life (in years)	3.4		3.9

Restricted Stock

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 following table summarizes the changes in the number of shares of restricted stock and restricted stock units for the nine months ended September 30, 2021 (shares in thousands):


	Shares	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2020	174	$	265.29
Granted	213	272.83
Vested	(72)	258.16
Canceled or forfeited	(29)	283.14
Outstanding at September 30, 2021	286	$	278.40

6. Acquisitions

2021 Acquisitions

ALE

On September 1, 2021, the Company completed the acquisition of ALE Solutions, Inc. (ALE), a leader in lodging solutions to the insurance industry, for a net purchase price of $426.5 million. The purpose of this acquisition is to expand the Company's lodging business into the insurance vertical. The Company financed the acquisition using a combination of available cash and borrowings under its existing credit facility. The results from the acquisition are reported in the North America segment.

In connection with this acquisition, the Company signed noncompete agreements with certain parties affiliated with the business for which the Company is still completing the valuation. These noncompete agreements were accounted for separately from the business acquisition. Acquisition accounting for ALE is preliminary as the Company is still completing the valuation for goodwill, intangible assets, income taxes, working capital, and contingencies.

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


Current assets	$	144,584
Long term assets	9,582
Goodwill	142,848
Intangibles	174,592
Current liabilities	(36,657)
Noncurrent liabilities	(8,479)



Aggregate purchase price	$	426,470

AFEX

On June 1, 2021, the Company completed the acquisition of Associated Foreign Exchange (AFEX), a U.S. based, cross-border payment solutions provider, for $459.0 million. This includes $210.3 million of cash and cash equivalents and $178.7 million of restricted cash, resulting in a net purchase price of $69.9 million. The purpose of this acquisition is to further expand the Company's cross border payment solutions. The Company financed the acquisition using a combination of available cash and borrowings under its existing credit facility. The results from the acquisition are reported in the North America segment.

In connection with this acquisition, the Company signed noncompete agreements with certain parties affiliated with the business with an estimated fair value of $4.1 million. These noncompete agreements were accounted for separately from the business acquisition.Acquisition accounting for AFEX is preliminary as the Company is still completing the valuation of certain goodwill, intangible assets, income taxes and working capital adjustments.

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


Trade and other receivables	$	8,159
Prepaid expenses and other current assets	108,402
Property, plant and equipment	1,723
Other long term assets	50,912
Goodwill	254,664
Intangibles	242,100
Accounts payable and accrued expenses	(39,272)
Other current liabilities	(81,430)
Customer deposits	(375,049)
Other noncurrent liabilities	(100,265)
Aggregate purchase price	$	69,944

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	2	$	5,400
Licensed Software and Technology	20	2,600
Proprietary Technology	4	11,800
Supplier Network	20	1,800
Customer Relationships	10	220,500


		$	242,100

Roger

On January 13, 2021, the Company completed the acquisition of Roger, rebranded CorpayOne, a global accounts payable (AP) cloud software platform for small businesses, for $39.0 million, net of cash acquired. The Company financed the acquisition using a combination of available cash and borrowings under its existing credit facility. The results from the acquisition are reported in the North America segment. Acquisition accounting for Roger is preliminary as the Company is still completing the valuation for goodwill, intangible assets, income taxes, working capital, and evaluation of acquired contingencies.

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


Accounts and other receivables	$	110
Prepaid expenses and other current assets	37

Other assets	28
Goodwill	35,676
Other intangibles	5,400
Current liabilities	(925)

Deferred income taxes	(1,323)
Aggregate purchase price	$	39,003

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
Proprietary Technology	10	$	4,800


Customer Relationships	9	600


		$	5,400

Other

During 2021, the Company made investments in other businesses of $4.4 million. The Company financed the investments using a combination of available cash and borrowings under its existing credit facility.

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 $77.6 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 acquisition accounting (in thousands):


Accounts and other receivables	$	4,975
Prepaid expenses and other current assets	145
Property and equipment	3,178
Other assets	1,049
Goodwill	28,038
Other intangibles	42,144
Current liabilities	(1,147)
Deferred income taxes	(782)
Aggregate purchase price	$	77,600

The 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	$	2,161
Licensed Software and Technology	10	4,400
Proprietary Technology	5	8,400
Supplier Network	10	783
Customer Relationships	16	26,400


		$	42,144

The accounting for the acquisition of a fuel card provider in New Zealand acquisition is preliminary and subject to working capital adjustments.

7. Goodwill and Other Intangibles

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


	December 31, 2020		Acquisitions		Acquisition Accounting Adjustments		Foreign Currency		September 30, 2021
Segment
North America	$	3,400,772	$	442,946	$	(9,360)	$	(9,453)	$	3,824,905
Brazil	585,861		—		—		(25,308)		560,553
International	732,548		—		(1,294)		(14,449)		716,805
	$	4,719,181	$	442,946	$	(10,654)	$	(49,210)	$	5,102,263

As of September 30, 2021 and December 31, 2020, other intangibles consisted of the following (in thousands):


		September 30, 2021						December 31, 2020
	Weighted- Avg Useful Lives (Years)	Gross Carrying Amounts		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amounts		Accumulated Amortization		Net Carrying Amount
Customer and vendor relationships	15.9	$	2,959,128	$	(1,127,206)	$	1,831,922	$	2,671,104	$	(1,105,702)	$	1,565,402
Trade names and trademarks—indefinite lived	N/A	450,203		—		450,203		475,376		—		475,376
Trade names and trademarks—other	6.3	12,084		(4,424)		7,660		7,041		(3,431)		3,610
Software	5.6	258,917		(193,658)		65,259		248,686		(194,187)		54,499
Non-compete agreements	3.9	60,360		(45,947)		14,413		65,804		(48,809)		16,995
Total other intangibles		$	3,740,692	$	(1,371,235)	$	2,369,457	$	3,468,011	$	(1,352,129)	$	2,115,882

Changes in foreign exchange rates resulted in a $25.7 million decrease to the net carrying values of other intangibles in the nine months ended September 30, 2021. Amortization expense related to intangible assets for the nine months ended September 30, 2021 and 2020 was $151.2 million and $138.8 million, respectively.

8. Debt

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


	September 30, 2021		December 31, 2020
Term Loan A note payable (a), net of discounts	$	2,802,894	$	2,922,042
Term Loan B note payable (a), net of discounts	1,133,791		337,347
Revolving line of credit A Facility (a)	460,000		280,000
Revolving line of credit B Facility (a)	175,000		13,650

Revolving line of credit B Facility —foreign swing line (a)	—		50,028
Other obligations (c)	21,693		29,556
Total notes payable and other obligations	$	4,593,378	$	3,632,623
Securitization Facility (b)	1,098,000		700,000
Total notes payable, credit agreements and Securitization Facility	$	5,691,378	$	4,332,623
Current portion	$	1,901,397	$	1,205,697
Long-term portion	3,789,981		3,126,926
Total notes payable, credit agreements and Securitization Facility	$	5,691,378	$	4,332,623

(a)The Company has a Credit Agreement that 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 $1.150 billion as of September 30, 2021. 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 swing line loans, and (c) a revolving C facility in the amount of $35 million for 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, revolving A or revolving B facility 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. The maturity date for the term loan A and revolving facilities is December 19, 2023. On April 30, 2021, the Company entered into the ninth amendment to the Credit Agreement. The amendment provided for

a new seven-year $1.15 billion term loan B. The existing term loan B was paid off with proceeds from the new term loan B. The new term loan B has a maturity date of April 30, 2028, and interest rates remain unchanged.

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 at 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 or 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. At September 30, 2021, the interest rate on the term loan A was 1.58%, the interest rate on the term loan B was 1.83%, the interest rate on the revolving A facility and the revolving B facility USD Borrowings was 1.58%. The unused credit facility fee was 0.30% at September 30, 2021.

(b)The Company is party to a $1.3 billion Securitization Facility. On September 15, 2021, the Company entered into the ninth amendment to the Securitization Facility. The amendment increased the Securitization Facility commitment from $1.0 billion to $1.3 billion. There is a program fee equal to one month LIBOR plus 1.00% or the Commercial Paper Rate plus 0.90% as of September 30, 2021, and one month LIBOR plus 1.25% or the Commercial Paper Rate plus 1.15% as of December 31, 2020. The program fee was 0.98% plus 0.09% as of September 30, 2021 and 1.23% plus 0.34% as of December 31, 2020. The unused facility fee is payable at a rate of 0.40% per annum as of September 30, 2021 and December 31, 2020. We have unamortized debt issuance costs of $2.8 million and $1.4 million related to the Securitization Facility as of September 30, 2021 and December 31, 2020, respectively, recorded within other assets in the Unaudited Consolidated Balance Sheets. On March 29, 2021, the Company entered into the eighth amendment to the Securitization Facility. The amendment included a new three year maturity date, reduced the LIBOR floor to 0 bps, improved margins, and increased the swing line from $100 million to $250 million. The maturity date for the Company's Securitization Facility is March 29, 2024.

(c)Other obligations 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 September 30, 2021. 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 13 for further details.

9. Income Taxes

The Company's tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter the Company updates the estimate of the annual effective tax rate, and if our estimated tax rate changes, makes a cumulative adjustment. The Company's quarterly tax provision and quarterly estimate of the annual effective tax rate are subject to significant variation due to several factors, including variability in accurately predicting the pre-tax and taxable income and loss and the mix of jurisdictions to which they relate. Additionally, the Company's effective tax rate can be more or less volatile based on the amount of pre-tax income or loss. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.

The provision for income taxes differs from amounts computed by applying the U.S. federal tax rate of 21% for 2021 and 2020 to income before income taxes for the three months ended September 30, 2021 and 2020 due to the following (in thousands):


	2021				2020
Computed “expected” tax expense	$	64,706	21.0	%	$	49,436	21.0	%
Changes resulting from:
Foreign income tax differential	(2,692)		(0.9)	%	(3,364)		(1.4)	%
Excess tax benefit related to stock-based compensation	(5,044)		(1.6)	%	(13,449)		(5.7)	%
State taxes net of federal benefits	4,927		1.6	%	786		0.3	%


Foreign withholding	3,304		1.1	%	3,764		1.6	%
GILTI, net of foreign tax credits	1,907		0.6	%	2,341		1.0	%
Foreign sourced non taxable income	81		—	%	2,416		1.0	%
Stock-based compensation	1,043		0.3	%	355		0.2	%
Sub-part F Income	2,139		0.7	%	1,746		0.7	%
Other	3,746		1.3	%	2,562		1.1	%
Provision for income taxes	$	74,115	24.1	%	$	46,593	19.8	%

10. 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 three and nine months ended September 30, 2021 and 2020 is as follows (in thousands, except per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	234,007	$	188,817	$	614,493	$	494,365
Denominator for basic earnings per share	81,836		83,719		82,811		84,170
Dilutive securities	1,880		2,554		2,106		2,836
Denominator for diluted earnings per share	83,716		86,273		84,917		87,006
Basic earnings per share	$	2.86	$	2.26	$	7.42	$	5.87
Diluted earnings per share	$	2.80	$	2.19	$	7.24	$	5.68

Diluted earnings per share for both the three months ended September 30, 2021 and 2020 excludes the effect of 0.2 million and 0.3 million, respectively, of common stock that may be issued upon the exercise of employee stock options because such effect would be anti-dilutive. Diluted earnings per share also excludes the effect of 0.2 million and 0.1 million shares of performance-based restricted stock for which the performance criteria have not yet been achieved for the three month periods ended September 30, 2021 and 2020, respectively.

11. Segments

The Company reports information about its operating segments in accordance with the authoritative guidance related to segments. We 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 Chief Operating Decision Maker (CODM) allocates resources, assesses performance and reviews financial information.

The Company’s segment results are as follows for the three and nine month periods ended September 30, 2021 and 2020 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	20211		2020		20211		2020
Revenues, net:
North America	$	520,535	$	383,828	$	1,366,167	$	1,175,950
Brazil	94,888		79,596		262,481		253,722
International	140,054		121,859		402,833		341,850
	$	755,477	$	585,283	$	2,031,481	$	1,771,522
Operating income:
North America	$	213,379	$	153,328	$	554,607	$	372,219
Brazil	39,868		35,600		105,424		104,462
International	85,440		75,604		242,233		201,645
	$	338,687	$	264,532	$	902,264	$	678,326
Depreciation and amortization:
North America	$	49,005	$	39,390	$	133,420	$	115,913
Brazil	12,910		12,260		38,091		39,019
International	12,322		11,829		37,673		35,185
	$	74,237	$	63,479	$	209,184	$	190,117
Capital expenditures:
North America	$	17,572	$	12,053	$	44,427	$	35,590
Brazil	5,795		3,501		15,580		10,309
International	5,323		2,595		14,448		9,120
	$	28,690	$	18,149	$	74,455	$	55,019

1Results from the 2021 acquisitions of Roger, AFEX and ALE are reported in our North America segment.

12. 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.

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 to 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. On April 17, 2021, the FTC filed a motion for summary judgment. On April 22, 2021, the United States Supreme Court held unanimously in AMG Capital Management v. FTC that the FTC does not have authority under current law to seek monetary redress by means of Section 13(b) of the FTC Act, which is the means by which the FTC has sought such redress in this case. FLEETCOR cross-moved for summary judgment regarding the FTC’s ability to seek monetary or injunctive relief on May 17, 2021; the briefing on both parties’ summary judgment motions was completed on July 12, 2021. On August 13, 2021, the FTC filed a motion to stay or to voluntarily dismiss without prejudice the case pending in the Northern District of Georgia in favor of a parallel administrative action under Section 5 of the FTC Act that it filed on August 11, 2021 in the FTC’s administrative process. Apart from the jurisdiction and statutory change, the FTC’s administrative complaint makes the same factual allegations as the FTC’s original complaint filed in December 2019. The Company has opposed the FTC’s motion for a stay or to voluntarily dismiss, and argument is set for December 10, 2021. In the meantime, the FTC’s administrative action is stayed. 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.

13. Derivative Financial Instruments and Hedging Activities

Foreign Currency Derivatives

The Company uses derivatives to facilitate cross-currency corporate payments by writing derivatives within its cross-border solution. The Company writes derivatives, primarily foreign currency forward contracts, and option contracts, 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 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 September 30, 2021 and December 31, 2020 (in millions) is presented in the table below.


	Notional
	September 30, 2021		December 31, 2020
Foreign exchange contracts:
Swaps	$	1,316.5	$	684.5
Futures, forwards and spot	7,287.8		5,467.8
Written options	9,004.2		5,578.1
Purchased options	8,316.0		5,195.0
Total	$	25,924.5	$	16,925.4

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 foreign currency derivatives reported in the Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 (in millions):


	September 30, 2021
	Fair Value, Gross				Fair Value, Net
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Derivatives - undesignated:
Foreign exchange contracts	$	284.2	$	249.8	$	142.0	$	107.9
Cash collateral	28.9		25.1		28.9		25.1
Total net of cash collateral	$	255.3	$	224.7	$	113.1	$	82.8


	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
Cash collateral	18.2		38.6		18.2		38.6
Total net of cash collateral	$	307.9	$	271.9	$	137.6	$	101.7

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 mark-to-market (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. The table below presents the fair value of the Company’s derivative assets and liabilities, as well as their classification on the accompanying Consolidated Balance Sheets, as of September 30, 2021 and December 31, 2020 (in millions).


		September 30, 2021		December 31, 2020
	Balance Sheet Classification	Fair Value

Derivative Asset	Other current assets	$	106.4	$	139.3
Derivative Asset	Other noncurrent assets	$	35.6	$	16.6
Derivative Liability	Other current liabilities	$	74.5	$	127.7
Derivative Liability	Other noncurrent liabilities	$	33.4	$	12.5

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 September 30, 2021, 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		Fixed Rates	Maturity Date
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 accompanying Consolidated Balance Sheets, as of September 30, 2021 and December 31, 2020 (in millions). See Note 3 for additional information on the fair value of the Company’s swap contracts.


		September 30, 2021		December 31, 2020
	Balance Sheet Classification	Fair Value
Derivatives designated as cash flow hedges:
Swap contracts	Other current liabilities	$	33.0	$	49.3
Swap contracts	Other noncurrent liabilities	$	16.0	$	38.6

The table below displays the effect of the Company’s derivative financial instruments in the Unaudited Consolidated Statements of Income and Other Comprehensive Income (Loss) for the nine months ended September 30, 2021 and 2020 (in millions):


	Nine Months Ended September 30,
	2021		2020
Interest Rate Swaps:
Amount of (gain) loss recognized in other comprehensive income (loss) on derivatives, net of tax of $(9.5) million and $24.6 million for 2021 and 2020, respectively	$	(29.3)	$	33.5
Amount of loss reclassified from accumulated other comprehensive loss into interest expense	$	37.1	$	26.9

The estimated net amount of the existing losses expected to be reclassified into earnings within the next 12 months is approximately $33.0 million at September 30, 2021.

14. Accumulated Other Comprehensive Loss (AOCL)

The changes in the components of AOCL for the nine months ended September 30, 2021 and 2020 are as follows (in thousands):


	September 30, 2021
	Cumulative Foreign Currency Translation		Unrealized (Losses) Gains on Derivative Instruments		Total Accumulated Other Comprehensive (Loss) Income
Balance at January 1, 2021	$	(1,296,962)	$	(66,196)	$	(1,363,158)
Other comprehensive income (loss) before reclassifications	(102,191)		1,689		(100,502)
Amounts reclassified from AOCI	—		37,128		37,128
Tax effect	—		(9,512)		(9,512)
Other comprehensive income (loss)	(102,191)		29,305		(72,886)
Balance at September 30, 2021	$	(1,399,153)	$	(36,891)	$	(1,436,044)


	September 30, 2020
	Cumulative Foreign Currency Translation		Unrealized (Losses) Gains on Derivative Instruments		Total Accumulated Other Comprehensive (Loss) Income
Balance at January 1, 2020	$	(929,713)	$	(42,752)	$	(972,465)
Other comprehensive loss before reclassifications	(577,189)		(85,033)		(662,222)
Amounts reclassified from AOCI	—		26,949		26,949
Tax effect	—		24,602		24,602
Other comprehensive loss	(577,189)		(33,482)		(610,671)
Balance at September 30, 2020	$	(1,506,902)	$	(76,234)	$	(1,583,136)

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