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)


	June 30, 2023		December 31, 2022
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,254,243	$	1,435,163
Restricted cash	1,456,992		854,017
Accounts and other receivables (less allowance for credit losses of $172,080 at June 30, 2023 and $149,846 at December 31, 2022)	2,460,650		2,064,745
Securitized accounts receivable—restricted for securitization investors	1,248,000		1,287,000
Prepaid expenses and other current assets	503,684		465,227

Total current assets	6,923,569		6,106,152
Property and equipment, net	329,146		294,692

Goodwill	5,473,603		5,201,435
Other intangibles, net	2,107,081		2,130,974
Investments	69,721		74,281
Other assets	275,533		281,726
Total assets	$	15,178,653	$	14,089,260
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,679,702	$	1,568,942
Accrued expenses	392,652		351,936
Customer deposits	2,013,236		1,505,004
Securitization facility	1,248,000		1,287,000
Current portion of notes payable and lines of credit	823,231		1,027,056
Other current liabilities	279,069		303,517
Total current liabilities	6,435,890		6,043,455
Notes payable and other obligations, less current portion	4,678,258		4,722,838
Deferred income taxes	538,832		527,465
Other noncurrent liabilities	262,237		254,009
Total noncurrent liabilities	5,479,327		5,504,312
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.001 par value; 475,000,000 shares authorized; 128,454,856 shares issued and 73,950,978 shares outstanding at June 30, 2023; and 127,802,590 shares issued and 73,356,709 shares outstanding at December 31, 2022	128		128
Additional paid-in capital	3,176,562		3,049,570
Retained earnings	7,665,306		7,210,769
Accumulated other comprehensive loss	(1,357,263)		(1,509,650)
Less treasury stock, 54,503,878 shares at June 30, 2023 and 54,445,881 shares at December 31, 2022	(6,221,297)		(6,209,324)
Total stockholders’ equity	3,263,436		2,541,493
Total liabilities and stockholders’ equity	$	15,178,653	$	14,089,260


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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues, net	$	948,174	$	861,278	$	1,849,507	$	1,650,519
Expenses:

Processing	205,265		185,588		410,232		359,782
Selling	86,412		79,324		168,004		156,213
General and administrative	159,356		147,446		314,040		290,968
Depreciation and amortization	83,676		78,474		167,908		155,276
Other operating, net	815		(34)		1,478		79
Operating income	412,650		370,480		787,845		688,201
Other expenses:
Investment loss (gain)	18		193		(172)		345
Other (income) expense, net	(2,424)		3,564		(1,678)		4,433
Interest expense, net	88,486		23,070		168,281		45,100

Total other expense	86,080		26,827		166,431		49,878
Income before income taxes	326,570		343,653		621,414		638,323
Provision for income taxes	86,868		81,482		166,877		158,200
Net income	$	239,702	$	262,171	$	454,537	$	480,123
Earnings per share:
Basic earnings per share	$	3.24	$	3.42	$	6.17	$	6.22
Diluted earnings per share	$	3.20	$	3.35	$	6.08	$	6.10
Weighted average shares outstanding:
Basic shares	73,887		76,769		73,705		77,250
Diluted shares	75,001		78,239		74,763		78,762

See accompanying notes to unaudited consolidated financial statements.

FLEETCOR Technologies, Inc. and Subsidiaries

Unaudited Consolidated Statements of Comprehensive Income

(In Thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	239,702	$	262,171	$	454,537	$	480,123
Other comprehensive income (loss):
Foreign currency translation gains (losses), net of tax	59,549		(158,896)		140,656		24,053
Net change in derivative contracts, net of tax	17,204		8,500		11,731		26,730
Total other comprehensive income (loss)	76,753		(150,396)		152,387		50,783
Total comprehensive income	$	316,455	$	111,775	$	606,924	$	530,906

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, 2022	$	128	$	3,049,570	$	7,210,769	$	(1,509,650)	$	(6,209,324)	$	2,541,493
Net income	—		—		214,835		—		—		214,835
Other comprehensive income, net of tax	—		—		—		75,634		—		75,634
Acquisition of common stock	—		—		—		—		(9,597)		(9,597)
Stock-based compensation	—		26,096		—		—		—		26,096
Issuance of common stock	—		33,399		—		—		—		33,399


Balance at March 31, 2023	128		3,109,065		7,425,604		(1,434,016)		(6,218,921)		2,881,860
Net income	—		—		239,702		—		—		239,702
Other comprehensive income, net of tax	—		—		—		76,753		—		76,753
Acquisition of common stock	—		—		—		—		(2,376)		(2,376)
Stock-based compensation	—		34,748		—		—		—		34,748
Issuance of common stock	—		32,749		—		—		—		32,749
Balance at June 30, 2023	$	128	$	3,176,562	$	7,665,306	$	(1,357,263)	$	(6,221,297)	$	3,263,436


	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)
Stock-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
Net income	—		—		262,171		—		—		262,171
Other comprehensive loss, net of tax	—		—		—		(150,396)		—		(150,396)
Acquisition of common stock	—		—		—		—		(372,566)		(372,566)
Stock-based compensation	—		34,017		—		—		—		34,017
Issuance of common stock	1		10,026		—		—		—		10,027
Balance at June 30, 2022	$	128	$	2,964,235	$	6,736,565	$	(1,413,833)	$	(5,599,426)	$	2,687,669

See accompanying notes to unaudited consolidated financial statements.

FLEETCOR Technologies, Inc. and Subsidiaries

Unaudited Consolidated Statements of Cash Flows

(In Thousands)


	Six Months Ended June 30,
	2023		2022
Operating activities
Net income	$	454,537	$	480,123
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	53,739		43,783
Stock-based compensation	60,844		66,648
Provision for credit losses on accounts and other receivables	74,418		52,704
Amortization of deferred financing costs and discounts	3,574		4,131
Amortization of intangible assets and premium on receivables	114,169		111,493
Loss on extinguishment of debt	—		1,934

Deferred income taxes	(11,799)		(10,864)
Investment (gain) loss	(172)		345
Other non-cash operating expense, net	1,478		80
Changes in operating assets and liabilities (net of acquisitions):
Accounts and other receivables	(365,572)		(1,225,705)
Prepaid expenses and other current assets	78,035		(13,088)
Derivative assets and liabilities, net	(14,611)		20,576
Other assets	29,397		(1,283)

Accounts payable, accrued expenses and customer deposits	348,643		510,976
Net cash provided by operating activities	826,680		41,853
Investing activities
Acquisitions, net of cash acquired	(126,694)		(33,744)
Purchases of property and equipment	(78,922)		(66,629)

Other	4,401		—
Net cash used in investing activities	(201,215)		(100,373)
Financing activities
Proceeds from issuance of common stock	66,148		18,837
Repurchase of common stock	(11,973)		(795,302)
Borrowings on securitization facility, net	(39,000)		482,000
Deferred financing costs	—		(337)
Proceeds from notes payable	—		3,000,000
Principal payments on notes payable	(47,000)		(2,777,000)
Borrowings from revolver	4,351,000		1,550,000
Payments on revolver	(4,817,000)		(1,356,000)
Borrowings on swing line of credit, net	255,750		194

Other	264		—
Net cash (used in) provided by financing activities	(241,811)		122,392
Effect of foreign currency exchange rates on cash	38,401		41,866
Net increase in cash and cash equivalents and restricted cash	422,055		105,738
Cash and cash equivalents and restricted cash, beginning of period	2,289,180		2,250,695
Cash and cash equivalents and restricted cash, end of period	$	2,711,235	$	2,356,433
Supplemental cash flow information
Cash paid for interest	$	215,850	$	73,323
Cash paid for income taxes	$	238,769	$	215,653



See accompanying notes to unaudited consolidated financial statements.

FLEETCOR Technologies, Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

June 30, 2023

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 accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In our opinion, 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, 2022.

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 to us as of June 30, 2023 and through the date of this Quarterly Report. The accounting estimates used in the preparation of the Company’s interim 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 impact of changes to monetary policy, 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 loss. 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 and losses, which are recorded within other expense, net in the Unaudited Consolidated Statements of Income, for the three and six months ended June 30, 2023 and 2022 as follows (in millions):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Foreign exchange gains (losses)	$	0.9	$	(1.8)	$	0.2	$	(2.2)

The Company recorded foreign currency gains on long-term intra-entity transactions included as a component of foreign currency translation gains, net of tax, in the Unaudited Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2023 and 2022 as follows (in millions):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Foreign currency gains on long-term intra-entity transactions	$	7.4	$	10.3	$	12.3	$	156.3

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 primarily represents a) customer deposits repayable on demand, b) 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 and secure and settle cross-currency transactions, and c) collateral posted with banks for hedging positions in our cross-border payments business. 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 $216.5 million to restricted cash as of June 30, 2023.

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 Fleet, Corporate Payments, Lodging, Brazil and Other (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, "Revenue Recognition", represent approximately 86% and 87% of total consolidated revenues, net, for the three and six months ended June 30, 2023, respectively. 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 and represent approximately 6% of total consolidated revenues, net for the three and six months ended June 30, 2023. In addition, in its cross-border payments business, the Company writes foreign currency forward and option derivative contracts for its customers to facilitate future payments in foreign currencies. These contracts are accounted for in accordance with ASC 815, "Derivatives and Hedging." Net revenues from realized and unrealized gains and losses related to these derivative contracts represent approximately 8% and 7% of total consolidated revenues for the three and six months ended June 30, 2023, respectively. Our revenue is generally reported net of the cost for underlying products and services purchased through our payment solutions. In this report, we refer to this net revenue as "revenue".

Disaggregation of Revenues

The Company provides its services to customers across different payment solutions and geographies. The Company's solutions have been merged to align with its segments. Revenue by solution (in millions) for the three and six months ended June 30, was as follows:


Revenues, net by Solution*	Three Months Ended June 30,								Six Months Ended June 30,
	2023		%		2022		%		2023		%		2022		%
Fleet	$	382.6	40	%	$	377.4	44	%	$	755.3	41	%	$	729.0	44	%
Corporate Payments	247.0		26	%	189.7		22	%	474.2		26	%	373.5		23	%
Lodging	136.6		14	%	116.9		14	%	258.9		14	%	211.5		13	%
Brazil	126.1		13	%	111.8		13	%	247.8		13	%	214.4		13	%
Other	56.0		6	%	65.5		8	%	113.3		6	%	122.3		7	%
Consolidated revenues, net	$	948.2	100	%	$	861.3	100	%	$	1,849.5	100	%	$	1,650.5	100	%

*Columns may not calculate due to rounding.

Revenue by geography (in millions) for the three and six months ended June 30, was as follows:


Revenues, net by Geography*	Three Months Ended June 30,								Six Months Ended June 30,
	2023		%		2022		%		2023		%		2022		%
United States	$	534.7	56	%	$	527.7	61	%	$	1,048.4	57	%	$	999.5	61	%
Brazil	126.1		13	%	111.8		13	%	247.8		13	%	214.4		13	%
United Kingdom	111.2		12	%	93.4		11	%	218.9		12	%	188.0		11	%
Other	176.2		19	%	128.4		15	%	334.4		18	%	248.7		15	%
Consolidated revenues, net	$	948.2	100	%	$	861.3	100	%	$	1,849.5	100	%	$	1,650.5	100	%


*Columns may not calculate due to rounding.

Contract Liabilities

Deferred revenue contract liabilities for customers subject to ASC 606 were $50.8 million and $57.7 million as of June 30, 2023 and December 31, 2022, respectively. We expect to recognize approximately $33.6 million of these amounts in revenues within 12 months and the remaining $17.2 million over the next five years as of June 30, 2023. Revenue recognized in the six months ended June 30, 2023 that was included in the deferred revenue contract liability as of December 31, 2022 was approximately $25.8 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 our 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 June 30, 2023 and December 31, 2022 (in millions):


	June 30, 2023						December 31, 2022
	Gross		Offset on the Balance Sheet		Net		Gross		Offset on the Balance Sheet		Net
Assets
Accounts Receivable	$	3,200.8	$	(3,022.6)	$	178.2	$	2,409.8	$	(2,266.0)	$	143.8
Liabilities
Accounts Payable	$	3,093.4	$	(3,022.6)	$	70.8	$	2,332.5	$	(2,266.0)	$	66.5

Reclassifications and Adjustments

Certain disclosures for prior periods have been reclassified to conform with current year presentation, including the breakout of derivatives assets and liabilities, net within the Consolidated Statements of Cash Flows, and the presentation of disaggregated revenues by solution to align with our revenues by segment presentation.

2. Accounts and Other Receivables

The Company's accounts and securitized accounts receivable include the following at June 30, 2023 and December 31, 2022 (in thousands):


	June 30, 2023		December 31, 2022
Gross domestic accounts receivable	$	1,158,555	$	985,873
Gross domestic securitized accounts receivable	1,248,000		1,287,000
Gross foreign receivables	1,474,175		1,228,718


Total gross receivables	3,880,730		3,501,591
Less allowance for credit losses	(172,080)		(149,846)
Net accounts and securitized accounts receivables	$	3,708,650	$	3,351,745

The Company maintains a $1.7 billion revolving trade accounts receivable securitization facility (as amended from time to time, 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 in the form of a legal sale certain of its domestic receivables, on a revolving basis, to FLEETCOR Funding LLC (Funding), a wholly-owned bankruptcy remote subsidiary. In turn, Funding transfers in the form of a legal sale, without recourse, on a revolving basis, an undivided percentage ownership interest in this pool of accounts receivable to unrelated transferees i.e., multi-seller banks and asset-backed commercial paper conduits. Funding retains a residual, subordinated interest in cash flow distribution from the transferred receivables and provides to the transferees an incremental pledge of unsold receivables as a form of over-collateralization to enhance the credit of the transferred receivables. Purchases by the banks and conduits are generally financed with the sale of highly-rated commercial paper.

The Company utilizes proceeds from the securitized 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. 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.

A roll forward of the Company’s allowance for credit losses related to accounts receivable for the six months ended June 30, 2023 and 2022 is as follows (in thousands):


	2023		2022
Allowance for credit losses beginning of period	$	149,846	$	98,719
Provision for credit losses	74,418		52,704
Write-offs	(65,167)		(33,416)
Recoveries	5,943		4,350
Impact of foreign currency	7,040		2,481

Allowance for credit losses end of period	$	172,080	$	124,838

The provision for credit losses and write-offs increased during the six months ended June 30, 2023, as customer spend increased due to new sales and higher fuel prices. These new customers tend to have higher loss rates. Additionally, the Company experienced higher losses among micro-SMB (small-medium business) customers who were more severely impacted by negative economic conditions.

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 June 30, 2023 and December 31, 2022 (in thousands):


	Fair Value		Level 1		Level 2		Level 3
June 30, 2023
Assets:
Repurchase agreements	$	550,268	$	—	$	550,268	$	—
Money market	138,578		—		138,578		—
Certificates of deposit	58,382		—		58,382		—
Treasury bills	48,926		—		48,926		—
Interest rate swaps	29,753		—		29,753		—

Foreign exchange contracts	259,642		—		259,642		—
Total assets	$	1,085,549	$	—	$	1,085,549	$	—
Cash collateral for foreign exchange contracts	$	41,832
Liabilities:

Cross-currency interest rate swap	8,053		—		8,053		—
Foreign exchange contracts	202,853		—		202,853		—
Total liabilities	$	210,906	$	—	$	210,906	$	—
Cash collateral obligation for foreign exchange contracts	$	165,475

December 31, 2022
Assets:
Repurchase agreements	$	444,216	$	—	$	444,216	$	—
Money market	37,821		—		37,821		—
Certificates of deposit	181		—		181		—
Interest rate swaps	11,953		—		11,953		—
Foreign exchange contracts	266,917		—		266,917		—
Total assets	$	761,088	$	—	$	761,088	$	—
Cash collateral for foreign exchange contracts	$	56,103
Liabilities:

Foreign exchange contracts	224,725		—		224,725		—
Total liabilities	$	224,725	$	—	$	224,725	$	—
Cash collateral obligation for foreign exchange contracts	$	148,167

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 in highly liquid investments, such as, repurchase agreements, money markets and certificates of deposit and Treasury bills, with purchased maturities ranging from overnight to 90 days or less. The value of overnight repurchase agreements is determined based upon the quoted market prices for the 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 and certain U.S. Treasury bills 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 liability in our Consolidated Balance Sheet at June 30, 2023 and December 31, 2022. Cash collateral deposited for foreign exchange derivatives is recorded within restricted cash in our Consolidated Balance Sheet at June 30, 2023 and December 31, 2022.

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 June 30, 2023 and December 31, 2022.

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's derivatives are over-the-counter instruments with liquid markets. 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. See Note 13 for additional information on the fair value of the Company’s derivatives.

The Company regularly evaluates the carrying value of its investments. The carrying amount of investments without readily determinable fair values was $69.7 million at June 30, 2023.

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 monthly 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 announced on February 4, 2016 that its Board of Directors (the "Board") 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, 2024. On October 25, 2022, the Company announced the Board increased the aggregate size of the Program by $1.0 billion to $7.1 billion. Since the beginning of the Program through June 30, 2023, 26,338,904 shares have been repurchased for an aggregate purchase price of $5.9 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 stock-based payments recognized in the three and six months ended June 30, 2023 and 2022 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Stock options	$	4,611	$	18,287	$	13,561	$	36,125
Restricted stock	30,137		15,730		47,283		30,523
Stock-based compensation	$	34,748	$	34,017	$	60,844	$	66,648

The tax benefits recorded on stock-based compensation and upon the exercises of options were $6.3 million and $20.0 million for the six months ended June 30, 2023 and 2022, respectively.

The following table summarizes the Company’s total unrecognized compensation cost related to stock based compensation as of June 30, 2023 (cost in thousands):


	Unrecognized Compensation Cost		Weighted Average Period of Expense Recognition (in Years)
Stock options	$	42,202	2.48
Restricted stock	90,600		0.92
Total	$	132,802

Stock Options

The following summarizes the changes in the number of shares of common stock under option for the six months ended June 30, 2023 (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, 2022	5,301	$	188.12	3,512	$	159.46			$	113,681
Granted	186	203.36					$	67.47
Exercised	(401)	158.02							$	22,968
Forfeited	(77)	242.12
Outstanding at June 30, 2023	5,009	$	190.27	3,383	$	164.87			$	316,912
Expected to vest as of June 30, 2023	775	$	223.27

The aggregate intrinsic value of stock options exercisable at June 30, 2023 was $293.7 million. The weighted average remaining contractual term of options exercisable at June 30, 2023 was 3.6 years.

Restricted Stock

The following table summarizes the changes in the number of shares of restricted stock awards and restricted stock units for the six months ended June 30, 2023 (shares in thousands):


	Shares	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022	435	$	237.68
Granted	438	213.09
Issued	(251)	239.09
Cancelled	(17)	234.49
Outstanding at June 30, 2023	605	$	219.39

6. Acquisitions

2023 Acquisitions

During the six months ended June 30, 2023, the Company acquired Global Reach Group, a UK-based global cross-border provider, Mina Digital Limited, a cloud-based electric vehicle charging software platform, and Business Gateway AG, a service, maintenance and repair technology provider, each providing incremental geographic expansion of our products. The aggregate purchase price of these acquisitions was approximately $135.1 million (inclusive of $8.5 million previously-held equity method investment in Mina), net of cash of $104 million. The Company financed the acquisitions using a combination of available cash and borrowings under its existing credit facility. Any noncompete agreements signed in conjunction with these acquisitions were accounted for separately from the business acquisition.

Acquisition accounting 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 aggregate, for the business acquisitions noted above (in thousands):


Trade and other receivables	$	13,758
Prepaid expenses and other current assets	118,079
Other long term assets	9,364
Goodwill	178,865
Intangibles	60,425
Accounts payable and accrued expenses	(86,458)
Other current liabilities	(138,672)
Other noncurrent liabilities	(20,225)
Aggregate purchase price	$	135,136

The table above reflects certain measurement period adjustments made during the three months ended June 30, 2023 to conform to the Company's financial statement presentation. Results from the Global Reach Group are included in the Company's Corporate Payments segment and the results for Mina Digital Limited and Business Gateway AG are included in the Company's Fleet segment.

2022 Acquisitions

During 2022, the Company acquired Levarti, an airline software platform company reported in the Lodging segment; Accrualify, an accounts payable (AP) automation software company reported in the Corporate Payments segment; Plugsurfing, a European EV software and network provider reported in the Fleet segment; and Roomex, a European workforce lodging provider reported in the Lodging segment. The aggregate purchase price of these acquisitions was approximately $197.6 million, net of cash. The Company financed the acquisitions using a combination of available cash and borrowings under its existing credit facility. In connection with one of these acquisitions, the Company signed noncompete agreements of $1.1 million 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 is preliminary (with the exception of Levarti) 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 aggregate, for the business acquisitions noted above (in thousands):


Trade and other receivables	$	13,725
Prepaid expenses and other current assets	4,007
Other long term assets	1,192
Goodwill	161,048
Intangibles	50,145
Accounts payable and accrued expenses	(18,303)
Other current liabilities	(4,960)
Other noncurrent liabilities	(9,282)
Aggregate purchase price	$	197,572

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 - Indefinite	$	4,705
Proprietary Technology	5 - 10	11,646
Lodging / Supplier Network	10 - 20	1,402
Customer Relationships	5 - 20	32,392
		$	50,145

7. Goodwill and Other Intangibles

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


	December 31, 2022		Acquisitions		Acquisition Accounting Adjustments		Foreign Currency		June 30, 2023






Goodwill	$	5,201,435	$	178,865	$	1,877	$	91,426	$	5,473,603

As of June 30, 2023 and December 31, 2022, other intangibles consisted of the following (in thousands):


		June 30, 2023						December 31, 2022
	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	16.0	$	3,018,396	$	(1,456,299)	$	1,562,097	$	2,922,586	$	(1,332,542)	$	1,590,044
Trade names and trademarks—indefinite lived	N/A	431,170		—		431,170		419,270		—		419,270
Trade names and trademarks—other	1.9	50,329		(12,584)		37,745		47,939		(9,111)		38,828
Software	6.0	289,198		(229,852)		59,346		278,460		(216,858)		61,602
Non-compete agreements	4.3	82,166		(65,443)		16,723		80,098		(58,868)		21,230
Total other intangibles		$	3,871,259	$	(1,764,178)	$	2,107,081	$	3,748,353	$	(1,617,379)	$	2,130,974

Changes in foreign exchange rates resulted in a $29.6 million increase to the net carrying values of other intangibles in the six months ended June 30, 2023. Amortization expense related to intangible assets for the six months ended June 30, 2023 and 2022 was $113.3 million and $109.9 million, respectively.

8. Debt

The Company is party to a $6.4 billion Credit Agreement (the "Credit Agreement"), with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, and a syndicate of financial institutions (the "Lenders"). The Credit Agreement includes a term loan A, a term loan B, and a revolving credit facility. As noted in footnote 2, the Company is also party to the Securitization Facility.

The balances of the Company’s debt instruments under the Credit Agreement and the Securitization Facility are as follows (in thousands):


	June 30, 2023		December 31, 2022
Term Loan A note payable, net of discounts	$	2,919,328	$	2,956,053
Term Loan B note payable, net of discounts	1,848,072		1,855,891
Revolving line of credit facilities	731,749		935,000
Other obligations	2,340		2,950



Total notes payable and credit agreements	5,501,489		5,749,894
Securitization Facility	1,248,000		1,287,000
Total notes payable, credit agreements and Securitization Facility	$	6,749,489	$	7,036,894
Current portion	$	2,071,231	$	2,314,056
Long-term portion	4,678,258		4,722,838
Total notes payable, credit agreements and Securitization Facility	$	6,749,489	$	7,036,894

On May 3, 2023, the Company entered into the thirteenth amendment to the Credit Facility. The amendment replaced LIBOR on the term B loan with the Secured Overnight Financing Rate ("SOFR"), plus a SOFR adjustment of 0.10%.

The Company was in compliance with all financial and non-financial covenants under the Credit Agreement and Securitization Facility at June 30, 2023.

9. Income Taxes

The Company's effective tax rate was 26.6% and 23.7% for the three months ended June 30, 2023 and 2022, respectively. Income tax expense is based on an estimated annual effective rate, which requires the Company to make its best estimate of annual pretax accounting income or loss before consideration of tax or benefit discretely recognized in the period in which such occur. Our effective income tax rate for the three months ended June 30, 2023 differs from the U.S. federal statutory rate due primarily to the unfavorable impact of state taxes net of federal benefits, additional taxes on undistributed foreign-sourced income, and foreign withholding taxes on interest income from intercompany notes.

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 six months ended June 30, 2023 and 2022 is as follows (in thousands, except per share data):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	239,702	$	262,171	$	454,537	$	480,123
Denominator for basic earnings per share	73,887		76,769		73,705		77,250
Dilutive securities	1,114		1,470		1,058		1,512
Denominator for diluted earnings per share	75,001		78,239		74,763		78,762
Basic earnings per share	$	3.24	$	3.42	$	6.17	$	6.22
Diluted earnings per share	$	3.20	$	3.35	$	6.08	$	6.10

Diluted earnings per share for the three months ended June 30, 2023 and 2022 excludes the effect of 2.2 million and 2.3 million shares, 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 of performance-based restricted stock for which the performance criteria have not yet been achieved for the three month periods ended June 30, 2023 and 2022.

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 four reportable segments: Fleet, Corporate Payments, Lodging and Brazil. The remaining results are included within Other, which includes our Gift and Payroll Card businesses. These segments align 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 six month periods ended June 30, 2023 and 2022 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	20231		2022		20231		2022
Revenues, net:
Fleet	$	382,609	$	377,361	$	755,321	$	728,954
Corporate Payments	246,952		189,699		474,158		373,467
Lodging	136,564		116,900		258,898		211,476
Brazil	126,081		111,825		247,825		214,362
Other2	55,968		65,493		113,305		122,260
	$	948,174	$	861,278	$	1,849,507	$	1,650,519
Operating income:
Fleet	$	183,657	$	186,790	$	357,189	$	354,635
Corporate Payments	91,755		65,859		167,268		124,066
Lodging	68,246		58,559		122,809		98,339
Brazil	52,802		41,617		107,619		78,945
Other2	16,190		17,655		32,960		32,216
	$	412,650	$	370,480	$	787,845	$	688,201
Depreciation and amortization:
Fleet	$	35,906	$	34,927	$	70,992	$	69,634
Corporate Payments	18,277		16,724		39,148		33,072
Lodging	11,661		10,321		23,059		20,855
Brazil	15,522		14,288		30,075		27,409
Other2	2,310		2,214		4,634		4,306
	$	83,676	$	78,474	$	167,908	$	155,276

1Results from Global Reach Group acquired in the first quarter of 2023 are reported in the Corporate Payments segment.

2Other includes Gift and Payroll Card operating segments.

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 from the Company. The District Court dismissed the Federal Derivative Action on October 21, 2020, and the United States Court of Appeals for the Eleventh Circuit affirmed the dismissal on July 27, 2022, ending the lawsuit. A similar derivative lawsuit that had been filed on January 9, 2019 in the Superior Court of Gwinnett County, Georgia (“State Derivative Action”) was likewise dismissed on October 31, 2022.

On January 20, 2023, the previous State Derivative Action plaintiffs filed a new derivative lawsuit in the Superior Court of Gwinnett County, Georgia. The new lawsuit, City of Aventura Police Officers’ Retirement Fund, derivatively on behalf of FleetCor Technologies, Inc. v. Ronald F. Clarke and Eric R. Dey, alleges that the defendants breached their fiduciary duties by causing or permitting the Company to engage in unfair or deceptive marketing and billing practices, making false and misleading public statements concerning the Company’s fee charges and financial and business prospects, and making improper sales of stock. The complaint seeks approximately $118 million in monetary damages on behalf of the Company, including contribution by defendants as joint tortfeasors with the Company in unfair and deceptive practices, and disgorgement of incentive pay and stock compensation. On January 24, 2023, the previous Federal Derivative Action plaintiffs filed a similar

new derivative lawsuit, Jerrell Whitten, derivatively on behalf of FleetCor Technologies, Inc. v. Ronald F. Clarke and Eric R. Dey, against Mr. Clarke and Mr. Dey in Gwinnett County, Georgia. 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. 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. In the meantime, the FTC’s administrative action is stayed. On August 9, 2022, the District Court for the Northern District of Georgia granted the FTC's motion for summary judgment as to liability for the Company and Ron Clarke, but granted the Company's motion for summary judgment as to the FTC's claim for monetary relief as to both the Company and Ron Clarke. The Company intends to appeal this decision after final judgment is issued. On October 20-21, 2022, the court held a hearing on the scope of injunctive relief. At the conclusion of the hearing, the Court did not enter either the FTC’s proposed order or the Company’s proposed order, and instead suggested that the parties enter mediation. Following mediation, both parties have filed proposed orders with the Court. On June 8, 2023, the Court issued an Order for Permanent Injunction and Other Relief. In the parallel Section 5 administrative action, the FTC moved to lift the stay on June 20, 2023; the Company filed its brief in opposition to lifting the stay on July 3, 2023. The Company filed its notice of appeal to the United States Court of Appeals for the Eleventh Circuit on August 3, 2023. 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.

Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult and requires an extensive degree of judgment, particularly where, as here, the matters involve indeterminate claims for monetary damages and are in the stages of the proceedings where key factual and legal issues have not been resolved. For these reasons, the Company is currently unable to predict the ultimate timing or outcome of, or reasonably estimate the possible losses or a range of possible losses resulting from, the matters described above.

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 the Company is 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".

The aggregate equivalent U.S. dollar notional amount of foreign exchange derivative customer contracts held by the Company as of June 30, 2023 and December 31, 2022 (in millions) is presented in the following table:


	Notional
	June 30, 2023		December 31, 2022
Foreign exchange contracts:
Swaps	$	157.3	$	160.9
Futures and forwards	18,717.5		15,159.4
Written options	18,092.6		13,701.9
Purchased options	14,477.0		11,474.2
Total	$	51,444.4	$	40,496.4

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 derivatives reported in the Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 (in millions):


	June 30, 2023
	Fair Value, Gross				Fair Value, Net
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Derivatives - undesignated:
Foreign exchange contracts	$	587.0	$	530.2	$	259.6	$	202.9
Cash collateral	41.8		165.5		41.8		165.5
Total net of cash collateral	$	545.2	$	364.7	$	217.8	$	37.4


	December 31, 2022
	Fair Value, Gross				Fair Value, Net
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Derivatives - undesignated:
Foreign exchange contracts	$	582.2	$	540.0	$	266.9	$	224.7
Cash collateral	56.1		148.2		56.1		148.2
Total net of cash collateral	$	526.1	$	391.8	$	210.8	$	76.5

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 prepaid expenses and other current assets, other assets, other current liabilities and other noncurrent liabilities the Consolidated Balance Sheets. The Company receives cash from customers as collateral for trade exposures, which is recorded within cash and cash equivalents, restricted cash and customer deposits liability 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 June 30, 2023 and December 31, 2022 (in millions):


		June 30, 2023		December 31, 2022
	Balance Sheet Classification	Fair Value

Derivative Assets	Prepaid expenses and other current assets	$	182.5	$	204.9
Derivative Assets	Other assets	$	77.1	$	62.0
Derivative Liabilities	Other current liabilities	$	144.9	$	184.1
Derivative Liabilities	Other noncurrent liabilities	$	58.0	$	40.6

Cash Flow Hedges

On January 22, 2019, the Company entered into three interest rate swap cash flow contracts (the "swap contracts"). One contract (which matured in January 2022) had a notional value of $1.0 billion, while the other two contracts (with maturity dates of January 2023 and December 2023) each had a notional value of $500 million. The objective of these swap contracts was to reduce the variability of cash flows in the previously unhedged interest payments associated with $2.0 billion of unspecified variable rate debt, the sole source of which is due to changes in the LIBOR benchmark interest rate. At inception, the Company designated these contracts as hedging instruments in accordance with ASC 815, "Derivatives and Hedging."

During January 2023, the Company entered into five receive-variable SOFR, pay-fixed interest rate swap derivative contracts with a cumulative notional U.S. dollar value of $1.5 billion as shown disaggregated in the table below.

On May 4, 2023, the Company amended the remaining LIBOR-based interest rate swap with a notional amount of $500 million from one-month term LIBOR of 2.55% to one-month term SOFR of 2.50%, without further changes to the terms of the swap. The Company applied certain expedients provided in ASU No. 2020-04, Reference Rate Reform (Topic 848), related to changes in critical terms of the hedging relationships due to reference rate reform, which allowed the change in critical terms without dedesignation of the hedging relationship.

As of June 30, 2023, the Company had the following outstanding interest rate swap derivatives that qualify as hedging instruments within designated cash flow hedges of variable interest rate risk (in millions):


Notional Amount	Fixed Rates	Maturity Date
$500	2.50%	12/19/2023
$250	4.01%	7/31/2025
$250	4.02%	7/31/2025
$500	3.80%	1/31/2026
$250	3.71%	7/31/2026
$250	3.72%	7/31/2026

The purpose of these contracts is to reduce the variability of cash flows in interest payments associated with the Company's unspecified variable rate debt, the sole source of which is due to changes in the SOFR benchmark interest rate. The Company has designated these derivative instruments as cash flow hedging instruments, which are expected to be highly effective at offsetting changes in cash flows of the related underlying exposure. As a result, changes in fair value of the interest rate swaps are recorded in accumulated other comprehensive loss. For each of these swap contracts, the Company pays a fixed monthly rate and receives one month SOFR. The Company reclassified $12.4 million from accumulated other comprehensive loss resulting in a benefit to interest expense, net for the six months ended June 30, 2023 related to these interest rate swap contracts.

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.

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 June 30, 2023 and December 31, 2022 (in millions). See Note 3 for additional information on the fair value of the Company’s swap contracts.


		June 30, 2023		December 31, 2022
	Balance Sheet Classification	Fair Value
Derivatives designated as cash flow hedges:
Swap contracts	Prepaid expenses and other current assets	$	28.2	$	12.0
Swap contracts	Other assets	$	1.6	$	—

As of June 30, 2023, the estimated net amount of the existing gains expected to be reclassified into earnings within the next 12 months is approximately $28.2 million.

In August 2023, the Company entered into eight new interest rate swap contracts totaling $2.0 billion, as summarized in the table below (in millions):


Notional Amount	Fixed Rates	Maturity Date
$100	4.35%	7/31/2026
$250	4.40%	7/31/2026
$250	4.40%	7/31/2026
$400	4.33%	7/31/2026
$250	4.29%	1/31/2027
$250	4.29%	1/31/2027
$250	4.19%	7/31/2027
$250	4.19%	7/31/2027

The objective of these contracts is to eliminate the variability of cash flows in interest payments associated with $2.0 billion of unspecified variable rate debt, the sole source of which is due to changes in SOFR benchmark interest rate. For each of these swap contracts, we pay a fixed monthly rate and receive one month term SOFR.

Net Investment Hedge

In February 2023, the Company entered into a cross currency interest rate swap that is designated as a net investment hedge of our investments in euro-denominated operations. This contract effectively converts $500 million of U.S. dollar equivalent to an obligation denominated in euro, and partially offsets the impact of changes in currency rates on our euro-denominated net investments. This contract also creates a positive interest differential on the U.S. dollar-denominated portion of the swap, resulting in a 1.96% interest rate savings on the USD notional.

Hedge effectiveness is tested based on changes in the fair value of the cross currency swap due to changes in the USD/euro spot rate. The Company anticipates perfect effectiveness of the designated hedging relationship and records changes in the fair value of the cross currency interest rate swap associated with changes in the spot rate through accumulated other comprehensive loss. Excluded components associated with the forward differential are recognized directly in earnings as interest expense, net. The Company recognized a benefit of $3.9 million in interest expense, net for the six months ended June 30, 2023 related to these excluded components. The cross currency interest rate swap designated as a net investment hedge is recorded in Other current liabilities at a fair value of $8.1 million as of June 30, 2023.

14. Accumulated Other Comprehensive Loss (AOCL)

The changes in the components of AOCL, net of tax, for the six months ended June 30, 2023 and 2022 are as follows (in thousands):


	June 30, 2023
	Cumulative Foreign Currency Translation		Unrealized (Losses) Gains on Derivative Instruments		Total Accumulated Other Comprehensive (Loss) Income
Balance at December 31, 2022	$	(1,518,640)	$	8,990	$	(1,509,650)
Other comprehensive income before reclassifications	140,656		26,540		167,196
Amounts reclassified from AOCL	—		(12,392)		(12,392)
Tax effect	—		(2,417)		(2,417)
Other comprehensive income, net of tax	140,656		11,731		152,387
Balance at June 30, 2023	$	(1,377,984)	$	20,721	$	(1,357,263)


	June 30, 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	24,053		22,871		46,924
Amounts reclassified from AOCL	—		12,674		12,674
Tax effect	—		(8,815)		(8,815)
Other comprehensive income, net of tax	24,053		26,730		50,783
Balance at June 30, 2022	$	(1,417,452)	$	3,619	$	(1,413,833)

15. Subsequent Event

Russia

During the second quarter of 2023, the Company signed definitive documents to sell its Russia business. At June 30, 2023, the sale was not considered probable due to continued uncertainty regarding regulatory approvals and ongoing discussions regarding the nature and timing of deal completion. As such, the assets and liabilities associated with the Company's Russian business were not classified as held for sale as of June 30, 2023. During August 2023, the Company received the outstanding regulatory approvals. Pending the resolution of remaining elements of the transaction, including funding requirements, the Company expects the sale to close during the third quarter of 2023. The business in Russia accounted for approximately 3.4% and 8.7% of our consolidated net revenues and net income for the six months ended June 30, 2023, respectively, and accounted for approximately 3.3% and 7.2% of consolidated net revenues and net income for the year ended December 31, 2022, respectively. Assets in Russia were approximately 2.6% and 3.2% of consolidated assets at June 30, 2023 and December 31, 2022, respectively.

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