Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined statement of operations for the year ended December 31, 2009, and the six months ended June 30, 2010, are based on the historical financial statements of Wright Express Corporation (the “Company”) and RD Card Holdings Australia Pty Ltd (the “Target”) after giving effect to the Company’s acquisition of the Target as described at Item 2.01 of this Form 8-K and applying the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements. The Company’s Form 10-Q filed on November 8, 2010, contained a consolidated balance sheet which included the acquisition of the Target. Accordingly, no pro forma condensed balance sheet is being presented herein.
The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2010 and year ended December 31, 2009 are presented as if the Target acquisition had occurred on January 1, 2009, and carried forward through each of the respective periods.
The acquisition has been accounted for under the acquisition method of accounting in accordance with ASC 805-10. Under the acquisition method of accounting, the total estimated purchase price, calculated as described in Note 1 to these unaudited pro forma condensed combined financial statements, is allocated to the net tangible and intangible assets acquired and liabilities assumed based on various estimates. These preliminary estimates and assumptions are subject to change during the purchase price allocation period as we finalize the valuations of net tangible assets, intangible assets and other working capital. Therefore, some of the amounts reflected in the pro forma statements of operations may change.
The unaudited pro forma condensed combined financial information has been prepared by management for illustrative purposes only in accordance with Article 11 of SEC Regulation S-X and are not necessarily indicative of the consolidated financial position or results of operations in future periods or the results that actually would have been realized had the Company and the Target been a combined company during the specified periods. Certain reclassification adjustments have been made in the presentation of the Target historical amounts to conform the Target’s financial statement basis of presentation to that followed by the Company. The unaudited pro forma condensed combined financial information, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with the Company’s historical consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2009, and its Forms 10-Q for the periods ended September 30, 2010, June 30, 2010, and March 31, 2010, and the Target’s historical consolidated financial statements for the year ended December 31, 2009.
WRIGHT EXPRESS CORPORATION
PRO FORMA CONDENSED
COMBINED CONSOLIDATED STATEMENTS OF INCOME OF WRIGHT EXPRESS
CORPORATION AND RD CARD HOLDINGS AUSTRALIA PTY LTD
For the year ended December 31, 2009
(in thousands, except per share data)
(Unaudited)
PRO FORMA CONDENSED
COMBINED CONSOLIDATED STATEMENTS OF INCOME OF WRIGHT EXPRESS
CORPORATION AND RD CARD HOLDINGS AUSTRALIA PTY LTD
For the year ended December 31, 2009
(in thousands, except per share data)
(Unaudited)
Historical | Pro Forma | |||||||||||||||
Wright | RD Card | |||||||||||||||
Express | Holdings | Adjustments | Combined | |||||||||||||
Service Revenues | ||||||||||||||||
Payment processing revenue | $ | 215,620 | $ | 12,045 | $ | (504 | )A | $ | 227,161 | |||||||
Transaction processing revenue | 17,532 | 10,907 | — | 28,439 | ||||||||||||
Account servicing revenue | 37,001 | 5,510 | — | 42,511 | ||||||||||||
Finance fees | 32,816 | 3,559 | — | 36,375 | ||||||||||||
Other | 12,011 | 13,455 | 2,546 | A | 28,012 | |||||||||||
Total service revenues | 314,980 | 45,476 | 2,042 | 362,498 | ||||||||||||
Product Revenues | ||||||||||||||||
Hardware and equipment sales | 3,244 | — | — | 3,244 | ||||||||||||
Total revenues | 318,224 | 45,476 | 2,042 | 365,742 | ||||||||||||
Expenses | ||||||||||||||||
Salary and other personnel | 75,123 | 8,598 | — | 83,721 | ||||||||||||
Service fees | 27,666 | 1,160 | 2,546 | A | 31,372 | |||||||||||
Provision for credit losses | 17,715 | 1,786 | — | 19,501 | ||||||||||||
Technology leasing and support | 9,327 | 876 | — | 10,203 | ||||||||||||
Occupancy and equipment | 8,718 | 6,006 | 14,724 | |||||||||||||
Advertising | 4,974 | — | — | 4,974 | ||||||||||||
Marketing | 2,737 | 1,282 | — | 4,019 | ||||||||||||
Postage and shipping | 3,105 | — | — | 3,105 | ||||||||||||
Communications | 2,703 | — | — | 2,703 | ||||||||||||
Depreciation and amortization | 21,930 | 10,637 | 5,370 | E | 37,937 | |||||||||||
Operating interest expense | 13,274 | — | — | 13,274 | ||||||||||||
Cost of hardware and equipment sold | 2,803 | — | — | 2,803 | ||||||||||||
Other | 9,999 | — | (1,177 | )A,B | 8,822 | |||||||||||
Total operating expenses | 200,074 | 30,345 | 6,739 | 237,158 | ||||||||||||
Operating income | 118,150 | 15,131 | (4,697 | ) | 128,584 | |||||||||||
Financing interest expense | (6,210 | ) | (18,162 | ) | �� | 7,506 | D | (16,866 | ) | |||||||
(Loss) gain on foreign currency transactions | (40 | ) | 5,075 | — | 5,035 | |||||||||||
Gain on settlement of portion of amounts due under tax receivable agreement | 136,485 | — | — | 136,485 | ||||||||||||
Net realized and unrealized gains (losses) on fuel price derivatives | (22,542 | ) | — | — | (22,542 | ) | ||||||||||
Increase in amount due under tax receivable agreement | (599 | ) | — | — | (599 | ) | ||||||||||
Income before income taxes | 225,244 | 2,044 | 2,809 | 230,097 | ||||||||||||
Income taxes | 85,585 | 882 | (1,076 | )C | 85,391 | |||||||||||
Net income | $ | 139,659 | $ | 1,162 | $ | 3,885 | $ | 144,706 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 3.65 | $ | 3.78 | ||||||||||||
Diluted | $ | 3.55 | $ | 3.68 | ||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 38,303 | 38,303 | ||||||||||||||
Diluted | 39,364 | 39,364 | ||||||||||||||
WRIGHT EXPRESS CORPORATION
PRO FORMA CONDENSED
COMBINED CONSOLIDATED STATEMENTS OF INCOME OF WRIGHT EXPRESS
CORPORATION AND RD CARD HOLDINGS AUSTRALIA PTY LTD
For the six months ended June 30, 2010
(in thousands, except per share data)
(Unaudited)
PRO FORMA CONDENSED
COMBINED CONSOLIDATED STATEMENTS OF INCOME OF WRIGHT EXPRESS
CORPORATION AND RD CARD HOLDINGS AUSTRALIA PTY LTD
For the six months ended June 30, 2010
(in thousands, except per share data)
(Unaudited)
Historical | Pro Forma | |||||||||||||||
Wright | RD Card | |||||||||||||||
Express | Holdings | Adjustments | Combined | |||||||||||||
Service Revenues | ||||||||||||||||
Payment processing revenue | $ | 123,368 | $ | 7,375 | $ | (329 | )A | $ | 130,414 | |||||||
Transaction processing revenue | 8,401 | 6,051 | — | 14,452 | ||||||||||||
Account servicing revenue | 16,510 | 3,207 | — | 19,717 | ||||||||||||
Finance fees | 16,886 | 2,230 | — | 19,116 | ||||||||||||
Other | 8,683 | 6,572 | (63 | )A | 15,192 | |||||||||||
Total service revenues | 173,848 | 25,435 | (392 | ) | 198,891 | |||||||||||
Product Revenues | ||||||||||||||||
Hardware and equipment sales | 1,433 | — | — | 1,433 | ||||||||||||
Total revenues | 175,281 | 25,435 | (392 | ) | 200,324 | |||||||||||
Expenses | ||||||||||||||||
Salary and other personnel | 40,067 | 5,495 | — | 45,562 | ||||||||||||
Service fees | 17,062 | 460 | (63 | )A | 17,459 | |||||||||||
Provision for credit losses | 8,762 | 900 | — | 9,662 | ||||||||||||
Technology leasing and support | 6,085 | 701 | — | 6,786 | ||||||||||||
Occupancy and equipment | 4,087 | 3,782 | 7,869 | |||||||||||||
Depreciation and amortization | 11,610 | 6,888 | 748 | E | 19,246 | |||||||||||
Operating interest expense | 2,871 | — | — | 2,871 | ||||||||||||
Cost of hardware and equipment sold | 1,198 | — | — | 1,198 | ||||||||||||
Other | 12,002 | 1,160 | (753 | )A,B | 12,409 | |||||||||||
Total operating expenses | 103,744 | 19,386 | (68 | ) | 123,062 | |||||||||||
Operating income | 71,537 | 6,049 | (324 | ) | 77,262 | |||||||||||
Financing interest expense | (1,419 | ) | (6,732 | ) | 4,664 | D | (3,487 | ) | ||||||||
Gain on foreign currency transactions | 43 | 1,356 | — | 1,399 | ||||||||||||
Gain on settlement of portion of amounts due under tax receivable agreement | ||||||||||||||||
Net realized and unrealized gains (losses) on fuel price derivatives | 7,583 | — | — | 7,583 | ||||||||||||
(Increase) decrease in amount due under tax receivable agreement | ||||||||||||||||
Income before income taxes | 77,744 | 673 | 4,340 | 82,757 | ||||||||||||
Income taxes | 29,154 | 198 | 1,360 | C | 30,712 | |||||||||||
Net income | $ | 48,590 | $ | 475 | $ | 2,980 | $ | 52,045 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 1.26 | $ | 1.35 | ||||||||||||
Diluted | $ | 1.24 | $ | 1.33 | ||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 38,582 | 38,582 | ||||||||||||||
Diluted | 39,115 | 39,115 | ||||||||||||||
Basis of Presentation
On September 14, 2010, the Company, through its wholly-owned subsidiary, Wright Express Australia Holdings Pty Ltd, completed its acquisition of all of the outstanding shares of RD Card Holdings Australia Pty Ltd from RD Card Holdings Limited and an intra-group note receivable from RD Card Holdings Limited (the “RD Transaction”). This acquisition extends the Company’s international presence and provides global revenue diversification. The purchase price and related allocations for the RD Transaction have not been finalized.
The Agreement has been attached as an exhibit to provide investors and security holders with information regarding its terms.
The unaudited pro forma condensed combined statements of operations of the Company and the Target for the year ended December 31, 2009, and the six months ended June 30, 2010, are presented as if the Company’s acquisition of the Target had been consummated on January 1, 2009, and carried forward for each of the respective periods. The unaudited pro forma condensed combined statements of operations of the Company and the Target for the year ended December 31, 2009, and the six months ended June 30, 2010, have been prepared using the historical consolidated statements of operations data of the Company and the Target for the year ended December 31, 2009, and the six months ended June 30, 2010, and giving effect to the Company’s acquisition of the Target using the acquisition method of accounting and applying the assumptions and adjustments described in the accompanying notes to these unaudited pro forma condensed combined income statements.
Pro Forma Adjustments ($ in thousands)
A. | Adjustments reflect the reclassification of the Target’s accounts to conform to the Company’s accounting policies. | |
B. | Adjustment to eliminate historical management fee expense paid to the Target’s former owners. | |
C. | Assuming the acquisition occurred on January 1, 2009, adjustment to the tax provision reflects the tax expense for the Target and for the adjustments to earnings detailed within these pro forma condensed financial statements. The effective tax rate for the Target is the statutory tax rate of 30 percent adjusted for the tax effects of items which are not deductible or taxable in calculating taxable income. | |
D. | Net adjustment reflects the elimination of Target’s interest expense on borrowings not assumed in the acquisition, offset by interest expense on the Company’s borrowings to finance the acquisition. The Company financed the acquisition through borrowings under its $75,000 term note with a 364 day maturity and borrowings under its existing revolving line-of-credit facilities. Borrowings under the term note bear interest at a rate of LIBOR plus 2.5 percent. Borrowings under the revolving line of credit facility are assumed to bear interest at a rate of LIBOR plus 0.875 percent for 2009 and LIBOR plus 0.70 percent for the six months ended June 30, 2010. These rates are based on the pro forma leverage ratios. In connection with the financing, the Company incurred approximately $2,300 in bank fees and other expenses which were recorded as deferred financing costs to be amortized over the life of the loans. | |
E. | Amounts relate to estimated amortization expense on definite-lived intangibles acquired. These amortizing intangibles total $93,200 and will be expensed over a weighted average life of 4.5 years. The definite-lived intangible assets are amortized over the period of time that the assets are expected to contribute directly or indirectly to future discounted cash flows. |