Item 1. Financial Statements

106K characters. Original on sec.gov · Markdown

Item 1. Financial Statements

FLEETCOR Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands, Except Share and Par Value Amounts)


	March 31, 2022		December 31, 2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,298,226	$	1,520,027
Restricted cash	791,212		730,668
Accounts and other receivables (less allowance for credit losses of $118,911 at March 31, 2022 and $98,719 at December 31, 2021)	2,304,643		1,793,274
Securitized accounts receivable—restricted for securitization investors	1,436,000		1,118,000
Prepaid expenses and other current assets	346,165		326,079

Total current assets	6,176,246		5,488,048
Property and equipment, net	254,432		236,294

Goodwill	5,180,832		5,078,978
Other intangibles, net	2,314,338		2,335,385
Investments	71,062		52,016
Other assets	224,503		213,932
Total assets	$	14,221,413	$	13,404,653
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,957,054	$	1,406,350
Accrued expenses	376,370		369,054
Customer deposits	1,586,979		1,788,705
Securitization facility	1,436,000		1,118,000
Current portion of notes payable and lines of credit	490,983		399,628
Other current liabilities	244,542		208,614
Total current liabilities	6,091,928		5,290,351
Notes payable and other obligations, less current portion	4,416,356		4,460,039
Deferred income taxes	588,664		566,291
Other noncurrent liabilities	220,049		221,392
Total noncurrent liabilities	5,225,069		5,247,722
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.001 par value; 475,000,000 shares authorized; 127,349,188 shares issued and 77,339,047 shares outstanding at March 31, 2022; and 127,113,023 shares issued and 78,879,551 shares outstanding at December 31, 2021	127		127
Additional paid-in capital	2,920,192		2,878,751
Retained earnings	6,474,394		6,256,442
Accumulated other comprehensive loss	(1,263,437)		(1,464,616)
Less treasury stock, 50,010,141 shares at March 31, 2022 and 48,233,471 shares at December 31, 2021	(5,226,860)		(4,804,124)
Total stockholders’ equity	2,904,416		2,866,580
Total liabilities and stockholders’ equity	$	14,221,413	$	13,404,653


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 March 31,
	2022		2021
Revenues, net	$	789,241	$	608,623
Expenses:

Processing	174,194		116,428
Selling	76,889		52,082
General and administrative	143,522		108,362
Depreciation and amortization	76,802		65,729
Other operating, net	113		57
Operating income	317,721		265,965
Investment loss (gain)	152		(9)
Other expense, net	869		1,743
Interest expense, net	22,030		28,551

Total other expense	23,051		30,285
Income before income taxes	294,670		235,680
Provision for income taxes	76,718		51,441
Net income	$	217,952	$	184,239

Basic earnings per share	$	2.80	$	2.21
Diluted earnings per share	$	2.75	$	2.15
Weighted average shares outstanding:
Basic shares	77,737		83,475
Diluted shares	79,286		85,764

See accompanying notes to unaudited consolidated financial statements.

FLEETCOR Technologies, Inc. and Subsidiaries

Unaudited Consolidated Statements of Comprehensive Income

(In Thousands)


	Three Months Ended March 31,
	2022		2021
Net income	$	217,952	$	184,239
Other comprehensive income (loss):
Foreign currency translation gains (losses), net of tax	182,949		(129,157)
Net change in derivative contracts, net of tax	18,230		11,296
Total other comprehensive income (loss)	201,179		(117,861)
Total comprehensive income	$	419,131	$	66,378

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, 2021	$	127	$	2,878,751	$	6,256,442	$	(1,464,616)	$	(4,804,124)	$	2,866,580
Net income	—		—		217,952		—		—		217,952
Other comprehensive income, net of tax	—		—		—		201,179		—		201,179
Acquisition of common stock	—		—		—		—		(422,736)		(422,736)
Share-based compensation	—		32,631		—		—		—		32,631
Issuance of common stock	—		8,810		—		—		—		8,810


Balance at March 31, 2022	$	127	$	2,920,192	$	6,474,394	$	(1,263,437)	$	(5,226,860)	$	2,904,416


	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

See accompanying notes to unaudited consolidated financial statements.

FLEETCOR Technologies, Inc. and Subsidiaries

Unaudited Consolidated Statements of Cash Flows

(In Thousands)


	Three Months Ended March 31,
	2022		2021
Operating activities
Net income	$	217,952	$	184,239
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation	21,140		17,624
Stock-based compensation	32,631		17,747
Provision for credit losses on accounts and other receivables	25,478		2,477
Amortization of deferred financing costs and discounts	1,968		1,471
Amortization of intangible assets and premium on receivables	55,662		48,105


Deferred income taxes	1,900		4,497
Investment loss (gain)	152		(9)
Other non-cash operating loss	113		57

Changes in operating assets and liabilities (net of acquisitions/dispositions):
Accounts and other receivables	(818,969)		(468,593)
Prepaid expenses and other current assets	(23,261)		59,269
Other assets	(8,940)		4,609

Accounts payable, accrued expenses and customer deposits	381,921		206,357
Net cash (used in) provided by operating activities	(112,253)		77,850
Investing activities
Acquisitions, net of cash acquired	(35,864)		(43,727)
Purchases of property and equipment	(31,387)		(19,526)
Proceeds from disposal of investment	—		9

Net cash used in investing activities	(67,251)		(63,244)
Financing activities

Proceeds from issuance of common stock	8,810		27,345
Repurchase of common stock	(422,736)		(162,041)
Borrowings on securitization facility, net	318,000		215,000
Deferred financing costs	(337)		—

Principal payments on notes payable	(45,063)		(41,188)
Borrowings from revolver	490,000		330,000
Payments on revolver	(400,000)		(353,851)
Borrowings (payments) on swing line of credit, net	1,505		(33,311)

Other	—		1,467
Net cash used in financing activities	(49,821)		(16,579)
Effect of foreign currency exchange rates on cash	68,068		(43,124)
Net decrease in cash and cash equivalents and restricted cash	(161,257)		(45,097)
Cash and cash equivalents and restricted cash, beginning of period	2,250,695		1,476,619
Cash and cash equivalents and restricted cash, end of period	$	2,089,438	$	1,431,522
Supplemental cash flow information
Cash paid for interest	$	33,967	$	27,732
Cash paid for income taxes	$	72,296	$	32,041



See accompanying notes to unaudited consolidated financial statements.

FLEETCOR Technologies, Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

March 31, 2022

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, 2021.

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 March 31, 2022 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 ongoing conflict between Russia and Ukraine, 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 (losses), which are recorded within other expense, net in the Unaudited Consolidated Statements of Income for the three months ended March 31 as follows (in millions):


	Three Months Ended March 31,
	2022		2021
Foreign exchange (losses)	$	(0.4)	$	(1.2)

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


	Three Months Ended March 31,
	2022		2021
Foreign currency gains (losses) on long-term intra-entity transactions	$	146.0	$	(66.3)

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. Based on our assessment of the current capital market conditions and related impact on our access to cash, we have reclassified all cash held at our Russian businesses of $124 million to restricted cash as of March 31, 2022.

Financial Instruments - Credit Losses

The Company accounts for financial assets' expected credit losses in accordance with Accounting Standards Codification (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 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. Revenues from contracts with customers, within the scope of ASC 606, represent approximately 75% of total consolidated revenues, net, for the three months ended March 31, 2022. 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. In addition, in its cross-border payments business, the Company writes foreign currency forward and option contracts for its customers to facilitate future payments in foreign currencies.

Disaggregation of Revenues

The Company provides its services to customers across different payment solutions and geographies. Revenue by solution (in millions) for the three months ended March 31 was as follows:


Revenues, net by Solution*	Three Months Ended March 31,
	2022		%		2021		%
Fuel	$	318.5	40	%	$	261.9	43	%
Corporate Payments	183.8		23	%	116.4		19	%
Tolls	84.9		11	%	69.0		11	%
Lodging	94.6		12	%	59.0		10	%
Gift	43.5		6	%	43.4		7	%
Other	63.9		8	%	58.9		10	%
Consolidated revenues, net	$	789.2	100	%	$	608.6	100	%


*Columns may not calculate due to rounding.

Revenue by geography (in millions) for the three months ended March 31 was as follows:


Revenues, net by Geography*	Three Months Ended March 31,
	2022		%		2021		%
United States	$	471.8	60	%	$	370.4	61	%
Brazil	102.5		13	%	81.9		13	%
United Kingdom	94.6		12	%	75.6		12	%
Other	120.3		15	%	80.6		13	%
Consolidated revenues, net	$	789.2	100	%	$	608.6	100	%


*Columns may not calculate due to rounding.

Contract Liabilities

Deferred revenue contract liabilities for customers subject to ASC 606 were $67.0 million and $73.7 million as of March 31, 2022 and December 31, 2021, respectively. We expect to recognize approximately $39.3 million of these amounts in revenues within 12 months and the remaining $27.7 million over the next five years as of March 31, 2022. Revenue recognized in the three months ended March 31, 2022 that was included in the deferred revenue contract liability as of December 31, 2021 was approximately $19.3 million.

Spot Trade Offsetting

The Company uses spot trades to facilitate cross-currency corporate payments in its cross-border payments business. 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 March 31, 2022 and December 31, 2021 (in millions):


	March 31, 2022						December 31, 2021
	Gross		Offset on the Balance Sheet		Net		Gross		Offset on the Balance Sheet		Net
Assets
Accounts Receivable	$	3,506.7	$	(3,347.8)	$	158.9	$	1,185.9	$	(1,057.7)	$	128.2


Liabilities
Accounts Payable	$	3,407.7	$	(3,347.8)	$	59.9	$	1,199.5	$	(1,057.7)	$	141.8

Reclassifications and Adjustments

During 2021, the Company identified and corrected an immaterial error in the presentation of Deferred income taxes and changes in Accounts payable, accrued expenses and customer deposits, both presented within Net cash provided by operating activities, in our prior year Consolidated Statement of Cash Flows. The impact of this correction for three months ended March 31, 2021 was an increase to the adjustment to reconcile net income to net cash provided by operating activities related to deferred income taxes of $3.5 million, with a corresponding decrease to changes in accounts payable, accrued expenses and customer deposits in operating activities of $3.5 million. There was no impact to net cash provided by operating activities in the Unaudited Consolidated Statement of Cash Flows.

Additionally, certain disclosures for prior periods have been reclassified to conform with current year presentation.

Adoption of New Accounting Standards

Reference Rate Reform

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" (“ASU 2020-04”). The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The guidance was 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 adoption of ASU 2020-04 did not have a material impact on the Company's consolidated financial statements. The Company transitioned from LIBOR to the Sterling Overnight Index Average Reference Rate (“SONIA”) plus a SONIA adjustment of 0.0326% for sterling borrowings, the Euro Interbank Offered Rate for euro borrowings, and the Tokyo Interbank Offered Rate for yen borrowings. The Company has availed itself to the practical expedients related to any changes in the reference rate related to our debt and interest rate swaps. 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 ASC 606 as if it had originated the contracts. The acquirer may assess how the acquiree applied ASC 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's adoption of this ASU on January 1, 2022, did not have a material impact on the Company's results of operations, financial condition, or cash flows.

2. Accounts and Other Receivables

The Company's accounts and securitized accounts receivable include the following at March 31, 2022 and December 31, 2021 (in thousands):


	March 31, 2022		December 31, 2021
Gross domestic accounts receivable	$	1,096,335	$	994,063
Gross domestic securitized accounts receivable	1,436,000		1,118,000
Gross foreign receivables	1,327,219		897,930
Total gross receivables	3,859,554		3,009,993
Less allowance for credit losses	(118,911)		(98,719)
Net accounts and securitized accounts receivable	$	3,740,643	$	2,911,274

The Company maintains a $1.6 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 March 23, 2022, the Company entered into the tenth amendment to the Securitization Facility. The amendment increased the Securitization Facility commitment from $1.3 billion to $1.6 billion.

A rollforward of the Company’s allowance for credit losses related to accounts receivable for the three months ended March 31 is as follows (in thousands):


	2022		2021
Allowance for credit losses beginning of period	$	98,719	$	86,886
Provision for credit losses	25,478		2,477
Write-offs	(15,417)		(5,963)
Recoveries	2,847		8,264
Impact of foreign currency	7,284		(3,762)
Allowance for credit losses end of period	$	118,911	$	87,902

3. Fair Value Measurements

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 as of March 31, 2022 and December 31, 2021 (in thousands):


	Fair Value		Level 1		Level 2		Level 3
March 31, 2022
Assets:
Repurchase agreements	$	404,448	$	—	$	404,448	$	—
Money market	42,473		—		42,473		—
Certificates of deposit	189		—		189		—
Interest Rate Swaps	1,429		—		1,429		—

Foreign exchange contracts	172,835		—		172,835		—
Total assets	$	621,374	$	—	$	621,374	$	—
Cash collateral for foreign exchange contracts	$	29,249	$	—	$	—	$	—
Liabilities:
Interest rate swaps	$	7,921	$	—	$	7,921	—
Foreign exchange contracts	148,579		—		148,579		—
Total liabilities	$	156,500	$	—	$	156,500	$	—
Cash collateral obligation for foreign exchange contracts	$	16,937	$	—	$	—	$	—

December 31, 2021
Assets:
Repurchase agreements	$	477,069	$	—	$	477,069	$	—
Money market	43,023		—		43,023		—
Certificates of deposit	958		—		958		—

Foreign exchange contracts	120,859		—		120,859		—
Total assets	$	641,909	$	—	$	641,908	$	—
Cash collateral for foreign exchange contracts	$	25,881	$	—	$	—	$	—
Liabilities:
Interest rate swaps1	$	30,733	$	—	$	30,733	$	—
Foreign exchange contracts	89,925		—		89,925		—
Total liabilities	$	120,658	$	—	$	120,658	$	—
Cash collateral obligation for foreign exchange contracts	$	24,803	$	—	$	—	$	—

1During 2022, the Company identified and corrected an immaterial error in the presentation of the December 31, 2021 interest rate swap liabilities in the table above. Such amount was incorrectly bracketed, which has since been corrected. The liability was correctly presented and classified in the Company's Consolidated Balance Sheet at December 31, 2021.

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 Sheet at March 31, 2022 and December 31, 2021. Cash collateral deposited for foreign exchange derivatives is recorded within restricted cash in our Consolidated Balance Sheet at March 31, 2022 and December 31, 2021.

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 March 31, 2022 and December 31, 2021.

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 $71.1 million at March 31, 2022.

The Company typically reviews Long-lived assets and Goodwill for impairment annually in the fourth quarter and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or if an indicator of impairment exists. The recent military conflict between Russia and Ukraine has created significant uncertainty and risk in the economic environment in which the Russia reporting unit operates. As such, the Company conducted an analysis during the first quarter of 2022. The Company continues to monitor the economic uncertainty, while assessing the financial impact and outlook for the Russia reporting unit. As a result of the Company's analysis, and in consideration of the totality of events and circumstances, there was no impairment recorded during the first quarter of 2022.

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.

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 January 25, 2022, the Board increased the aggregate size of the Program by $1.0 billion, to $6.1 billion. Since the beginning of the Program through March 31, 2022, 21,845,168 shares have been repurchased for an aggregate purchase price of $4.9 billion, leaving the Company up to $1.2 billion of remaining authorization available under the Program for future repurchases in shares of its common stock.

5. Stock-Based Compensation

The following table summarizes the expense recognized within general and administrative expenses in the Unaudited Consolidated Statements of Income related to share-based payments recognized in the three months ended March 31 (in thousands):


	Three Months Ended March 31,
	2022		2021
Stock options	$	17,837	$	4,590
Restricted stock	14,794		13,157
Stock-based compensation	$	32,631	$	17,747

The tax benefits recorded on stock-based compensation and upon the exercises of options were $17.8 million and $14.1 million for the three months ended March 31, 2022 and 2021, respectively.

The following table summarizes the Company’s total unrecognized compensation cost related to stock based compensation as of March 31, 2022 (cost in thousands):


	Unrecognized Compensation Cost		Weighted Average Period of Expense Recognition (in Years)
Stock options	$	100,898	2.00
Restricted stock	83,266		1.35
Total	$	184,164

Stock Options

The following summarizes the changes in the number of shares of common stock under option for the three months ended March 31, 2022 (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, 2021	5,447	$	176.52	3,798	$	145.18			$	257,707
Granted	588	226.36					$	65.66
Exercised	(119)	68.38							20,523
Forfeited	(4)	252.50
Outstanding at March 31, 2022	5,912	$	183.61	3,805	$	150.28			$	403,008
Expected to vest as of March 31, 2022	2,107	$	243.79

The aggregate intrinsic value of stock options exercisable at March 31, 2022 was $377.4 million. The weighted average remaining contractual term of options exercisable at March 31, 2022 was 4.3 years.

Restricted Stock

The following table summarizes the changes in the number of shares of restricted stock and restricted stock units for the three months ended March 31, 2022 (shares in thousands):


	Shares	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2021	278	$	278.57
Granted	324	223.00
Vested	(117)	270.93
Canceled or forfeited	(33)	348.85
Outstanding at March 31, 2022	452	$	235.48

6. Acquisitions

2022 Acquisitions

Levarti

On March 1, 2022, the Company completed the acquisition of Levarti, an airline software platform company for a net purchase price of $23.7 million. 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 Levarti 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 (in thousands):


Current assets	$	754
Long term assets	286
Goodwill	14,491
Intangibles	11,800
Current liabilities	(660)
Noncurrent liabilities	(2,926)



Aggregate purchase price	$	23,744

The estimated preliminary 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	$	100
Proprietary Technology	10	3,500
Customer Relationships	16	8,200



		$	11,800

Other

In February 2022, the Company also made investments of $7.8 million in an electric vehicle charging payments business and $5.0 million in an electric vehicle data analytics business.

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 $421.8 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 with an estimated fair value of $18.3 million. 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 of certain goodwill, intangible assets, income taxes and working capital adjustments.

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


Trade and other receivables	$	178,396
Prepaid expenses and other current assets	2,555
Property, plant and equipment	254
Other long term assets	9,866
Goodwill	136,471
Intangibles	175,800
Accounts payable and accrued expenses	(31,048)
Other current liabilities	(38,866)
Deferred tax liabilities	(983)
Other noncurrent liabilities	(7,495)
Customer deposits	(3,118)




Aggregate purchase price	$	421,832

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


	Useful Lives (in Years)	Value
Trade Names and Trademarks	Indefinite	$	14,500
Proprietary Technology	4	14,400
Lodging Network	20	800
Customer Relationships	15	146,100



		$	175,800

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 $459.1 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 $70.1 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	51,074
Goodwill	256,402
Intangibles	237,900
Accounts payable and accrued expenses	(39,234)
Other current liabilities	(81,430)
Customer deposits	(375,049)
Other noncurrent liabilities	(97,855)
Aggregate purchase price	$	70,092

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 Names and Trademarks	2	$	5,400
Proprietary Technology	4	11,800
Banking Relationships	20	1,800
Licenses	20	2,600
Customer Relationships	10	216,300


		$	237,900

Roger

On January 13, 2021, the Company completed the acquisition of Roger, rebranded Corpay One, 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.

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


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

Other assets	28
Goodwill	34,359
Other intangibles	5,400
Current liabilities	(925)

Deferred income taxes	(6)
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	13	600


		$	5,400

Other

On December 15, 2021, the Company acquired a mobile fuel payments solution in Russia for a net purchase price of $5.0 million. Acquisition accounting for this acquisition is preliminary as the Company is still completing the valuation of certain goodwill, intangible assets, income taxes and working capital adjustments. The results from the acquisition are reported in the International segment. During 2021, the Company made an investment of $37.8 million in a joint venture in Brazil with CAIXA. The Company also made investments in other businesses of $6.8 million. The Company financed all of these investments and acquisitions using a combination of available cash and borrowings under its existing credit facility.

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, 2021		Acquisitions		Acquisition Accounting Adjustments		Foreign Currency		March 31, 2022
Segment
North America	$	3,814,258	$	14,491	$	6,703	$	1,827	$	3,837,279
Brazil	546,148		—		—		93,315		639,463
International	718,572		—		—		(14,482)		704,090
	$	5,078,978	$	14,491	$	6,703	$	80,660	$	5,180,832

As of March 31, 2022 and December 31, 2021, other intangibles consisted of the following (in thousands):


		March 31, 2022						December 31, 2021
	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	16.2	$	2,963,613	$	(1,236,300)	$	1,727,313	$	2,925,719	$	(1,167,218)	$	1,758,501
Trade names and trademarks—indefinite lived	N/A	479,333		—		479,333		466,327		—		466,327
Trade names and trademarks—other	7.1	12,163		(5,987)		6,176		12,093		(5,235)		6,858
Software	6.0	281,347		(207,212)		74,135		272,461		(198,628)		73,833
Non-compete agreements	4.3	81,576		(54,195)		27,381		78,145		(48,279)		29,866
Total other intangibles		$	3,818,032	$	(1,503,694)	$	2,314,338	$	3,754,745	$	(1,419,360)	$	2,335,385

Changes in foreign exchange rates resulted in a $31.1 million increase to the net carrying values of other intangibles in the three months ended March 31, 2022. Amortization expense related to intangible assets for the three months ended March 31, 2022 and 2021 was $54.9 million and $47.3 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):


	March 31, 2022		December 31, 2021
Term Loan A note payable, net of discounts	$	2,723,420	$	2,763,162
Term Loan B note payable, net of discounts	1,867,605		1,871,505
Revolving line of credit A Facility	315,000		225,000


Revolving line of credit B Facility —foreign swing line	1,314		—

Total notes payable and other obligations	4,907,339		4,859,667
Securitization Facility	1,436,000		1,118,000
Total notes payable, credit agreements and Securitization Facility	$	6,343,339	$	5,977,667
Current portion	$	1,926,983	$	1,517,628
Long-term portion	4,416,356		4,460,039
Total notes payable, credit agreements and Securitization Facility	$	6,343,339	$	5,977,667

On March 23, 2022, the Company entered into the tenth amendment to the Securitization Facility. The amendment increased the Securitization Facility commitment from $1.3 billion to $1.6 billion and replaced LIBOR with Secured Overnight Financing Rate ("SOFR") plus a SOFR Adjustment of 0.10%. The Company has unamortized debt issuance costs of $2.6 million and $2.5 million related to the Securitization Facility as of March 31, 2022 and December 31, 2021, respectively, recorded within other assets in the Unaudited Consolidated Balance Sheets. The maturity date for the Company's Securitization Facility is March 29, 2024.

The Company was in compliance with all financial and non-financial covenants under the Credit Agreement and Securitization Facility at March 31, 2022.

9. Income Taxes

The provision for income taxes differs from amounts computed by applying the U.S. federal tax rate of 21% for 2022 and 2021 to income before income taxes for the three months ended March 31, 2022 and 2021 due to the following (in thousands):


	2022				2021
Computed “expected” tax expense	$	61,881	21.0	%	$	49,493	21.0	%
Changes resulting from:
Foreign income tax differential	(2,015)		(0.7)	%	(3,830)		(1.6)	%
Excess tax benefit related to stock-based compensation	(3,210)		(1.1)	%	(9,413)		(4.0)	%
State taxes net of federal benefits	4,992		1.7	%	2,685		1.1	%

Foreign withholding	3,199		1.1	%	3,643		1.5	%
GILTI, net of foreign tax credits	1,288		0.4	%	2,992		1.3	%
Nondeductible stock-based compensation	1,430		0.5	%	797		0.3	%
Increase in tax expense due to uncertain tax positions	1,664		0.6	%	2,412		1.0	%
Sub-part F Income	3,654		1.2	%	1,326		0.6	%


Other	3,835		1.3	%	1,336		0.6	%
Provision for income taxes	$	76,718	26.0	%	$	51,441	21.8	%

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 months ended March 31 is as follows (in thousands, except per share data):


	Three Months Ended March 31,
	2022		2021
Net income	$	217,952	$	184,239
Denominator for basic earnings per share	77,737		83,475
Dilutive securities	1,549		2,289
Denominator for diluted earnings per share	79,286		85,764
Basic earnings per share	$	2.80	$	2.21
Diluted earnings per share	$	2.75	$	2.15

Diluted earnings per share for the three months ended March 31, 2022 and 2021 excludes the effect of 2.1 million and 0.1 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 an immaterial amount and 0.2 million shares of performance-based restricted stock for which the performance criteria have not yet been achieved for the three month periods ended March 31, 2022 and 2021, 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 month periods ended March 31 in thousands):


	Three Months Ended March 31,
	20221		2021
Revenues, net:
North America	$	547,382	$	402,206
Brazil	102,538		81,923
International	139,321		124,494
	$	789,241	$	608,623
Operating income:
North America	$	196,930	$	162,576
Brazil	37,328		32,225
International	83,463		71,164
	$	317,721	$	265,965
Depreciation and amortization:
North America	$	53,307	$	40,533
Brazil	13,121		12,287
International	10,374		12,909
	$	76,802	$	65,729
Capital expenditures:
North America	$	21,594	$	11,530
Brazil	5,978		3,350
International	3,815		4,646
	$	31,387	$	19,526

1 Results from the 2022 acquisition of Levarti 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 then-pending 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, and the court heard oral argument in the case on February 10, 2022.

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 opposed the FTC’s motion for a stay or to voluntarily dismiss, and the court denied the FTC’s motion on February 7, 2022. The court also set a tentative trial date of June 7, 2022, which subsequently was moved to August 29, 2022. 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 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 give 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 Derivatives and Hedging.

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 March 31, 2022 and December 31, 2021 (in millions) is presented in the following table.


	Notional
	March 31, 2022		December 31, 2021
Foreign exchange contracts:
Swaps	$	1,188.0	$	2,670.4
Futures, forwards and spot	11,434.1		7,818.3
Written options	12,933.0		11,221.9
Purchased options	11,612.6		10,614.0
Total	$	37,167.7	$	32,324.5

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 March 31, 2022 and December 31, 2021 (in millions):


	March 31, 2022
	Fair Value, Gross				Fair Value, Net
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Derivatives - undesignated:
Foreign exchange contracts	$	359.9	$	335.7	$	172.8	$	148.6
Cash collateral	29.2		16.9		29.2		16.9
Total net of cash collateral	$	330.7	$	318.8	$	143.6	$	131.7


	December 31, 2021
	Fair Value, Gross				Fair Value, Net
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Derivatives - undesignated:
Foreign exchange contracts	$	338.8	$	307.8	$	120.9	$	89.9
Cash collateral	25.9		24.8		25.9		24.8
Total net of cash collateral	$	312.9	$	283.0	$	95.0	$	65.1

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 following table 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 March 31, 2022 and December 31, 2021 (in millions).


		March 31, 2022		December 31, 2021
	Balance Sheet Classification	Fair Value

Derivative Asset	Other current assets	$	138.2	$	94.0
Derivative Asset	Other noncurrent assets	$	34.6	$	26.9
Derivative Liability	Other current liabilities	$	119.3	$	66.9
Derivative Liability	Other noncurrent liabilities	$	29.3	$	23.0

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. The $1.0 billion interest rate swap matured in January 2022. As of March 31, 2022, 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 March 31, 2022		Fixed Rates	Maturity Date
Interest Rate Derivative:
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 following table 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 March 31, 2022 and December 31, 2021 (in millions). See Note 3 for additional information on the fair value of the Company’s swap contracts.


		March 31, 2022		December 31, 2021
	Balance Sheet Classification	Fair Value
Derivatives designated as cash flow hedges:
Swap contracts	Other noncurrent assets	$	1.4	$	—
Swap contracts	Other current liabilities	$	7.9	$	23.4
Swap contracts	Other noncurrent liabilities	$	—	$	7.3

The following table displays the effect of the Company’s derivative financial instruments in the Unaudited Consolidated Statements of Income and other comprehensive (gain) loss for the three months ended March 31 (in millions):


	Three Months Ended March 31,
	2022		2021
Interest Rate Swaps:
Amount of gain recognized in other comprehensive income (loss) on derivatives, net of tax of $(6.0) million and $(3.6) million for 2022 and 2021, respectively	$	(18.2)	$	(11.3)
Amount of loss reclassified from accumulated other comprehensive loss into interest expense	$	8.1	$	12.1

The estimated net amount of the existing losses expected to be reclassified into earnings within the next 12 months is approximately $8.0 million at March 31, 2022.

14. Accumulated Other Comprehensive Loss (AOCL)

The changes in the components of AOCL for the three months ended March 31 are as follows (in thousands):


	March 31, 2022
	Cumulative Foreign Currency Translation		Unrealized (Losses) Gains on Derivative Instruments		Total Accumulated Other Comprehensive (Loss) Income
Balance at December 31, 2021	$	(1,441,505)	$	(23,111)	$	(1,464,616)
Other comprehensive income before reclassifications	182,949		16,094		199,043
Amounts reclassified from AOCI	—		8,148		8,148
Tax effect	—		(6,012)		(6,012)
Other comprehensive income	182,949		18,230		201,179
Balance at March 31, 2022	$	(1,258,556)	$	(4,881)	$	(1,263,437)


	March 31, 2021
	Cumulative Foreign Currency Translation		Unrealized (Losses) Gains on Derivative Instruments		Total Accumulated Other Comprehensive (Loss) Income
Balance at December 31, 2020	$	(1,296,962)	$	(66,196)	$	(1,363,158)
Other comprehensive (loss) income before reclassifications	(129,157)		2,724		(126,433)
Amounts reclassified from AOCI	—		12,146		12,146
Tax effect	—		(3,574)		(3,574)
Other comprehensive (loss) income	(129,157)		11,296		(117,861)
Balance at March 31, 2021	$	(1,426,119)	$	(54,900)	$	(1,481,019)

Previous: Cover and table of contents · Next: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations