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MarketScreener Homepage  >  Equities  >  Nyse  >  FLEETCOR Technologies, Inc.    FLT

FLEETCOR TECHNOLOGIES, INC.

(FLT)
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FLEETCOR TECHNOLOGIES : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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11/12/2019 | 06:16am EST
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the unaudited consolidated
financial statements and related notes appearing elsewhere in this report. In
addition to historical information, this discussion contains forward-looking
statements that involve risks, uncertainties and assumptions that could cause
actual results to differ materially from management's expectations. See "Special
Cautionary Notice Regarding Forward-Looking Statements". All foreign currency
amounts that have been converted into U.S. dollars in this discussion are based
on the exchange rate as reported by OANDA for the applicable periods.
This management's discussion and analysis should also be read in conjunction
with the management's discussion and analysis and consolidated financial
statements and related notes included in our Annual Report on Form 10-K for the
year ended December 31, 2018.
General Business
FLEETCOR is a leading global business payments company that simplifies the way
businesses manage and pay their expenses. The FLEETCOR portfolio of brands helps
companies automate, secure, digitize and control payments to, or on behalf of,
their employees and suppliers. FLEETCOR serves businesses, partners and
merchants in North America, Latin America, Europe, and Asia Pacific.
FLEETCOR has two reportable segments, North America and International. We report
these two segments as they align with our senior executive organizational
structure, reflect how we organize and manage our employees around the world,
manage operating performance, contemplate the differing regulatory environments
in North America versus other geographies, and help us isolate the impact of
foreign exchange fluctuations on our financial results.
Our payment solutions provide our customers with a payment method designed to be
superior to and more robust and effective than what they use currently, whether
they use a competitor's product or another alternative method such as cash or
check. Our solutions are comprised of payment products, networks and associated
services.
FLEETCOR is a global payments company primarily focused on business to business
payments. We simplify the way businesses manage and pay for expenses and operate
in five categories: Fuel, Lodging, Tolls, Corporate Payments and Gift. Our
products are focused on delivering a better, more efficient way to pay, through
specialized products, systems, and payment and merchant networks. While the
actual payment mechanisms vary from category to category, they are structured to
afford control and reporting to the end user. The methods of payment generally
function like a charge card, prepaid card, one-time use virtual card, and
electronic RFID, etc. Each category is unique in its focus, customer base and
target markets, but they also share a number of characteristics. Customers are
primarily business to business, have recurring revenue models, specialized
networks which create barriers to entry, have high Earnings Before Interest,
Taxes, Depreciation and Amortization ("EBITDA") margins, and have similar
selling systems, which can be leveraged in each business. Additionally, we
provide other payment products including fleet maintenance, employee benefits
and long haul transportation-related services. Our products are used in 82
countries around the world, with our primary geographies being the U.S., Brazil
and the United Kingdom, which combined accounted for approximately 88% of our
revenue in 2018.
FLEETCOR uses both proprietary and third-party networks to deliver our payment
solutions. FLEETCOR owns and operates proprietary networks with well-established
brands throughout the world, bringing incremental sales and loyalty to
affiliated merchants. Third-party networks are used to broaden payment product
acceptance and use. In 2018, we processed approximately 2.9 billion transactions
within these networks, of which approximately 1.4 billion were related to our
Gift product line.
FLEETCOR capitalizes on its products' specialization with sales and marketing
efforts by deploying product-dedicated sales forces to target specific customer
segments. We market our products directly through multiple sales channels,
including field sales, telesales and digital marketing, and indirectly through
our partners, which include major oil companies, leasing companies, petroleum
marketers, value-added resellers ("VARs") and referral partners.
We believe that our size and scale, product breadth and specialization,
geographic reach, proprietary networks, robust distribution capabilities and
advanced technology contribute to our industry leading position.
Executive Overview
We operate in two segments, which we refer to as our North America and
International segments. Our revenue is generally reported net of the cost for
underlying products and services purchased through our payment products. In this
Quarterly Report on Form 10-Q, we refer to this net revenue as "revenue". See
"Results of Operations" for additional segment information.

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Revenues, net, by Segment. For the three and nine months ended September 30, 2019 and 2018, our North America and International segments generated the following revenue (in millions):

                                    Three Months Ended September 30,                                               Nine Months Ended September 30,
                               2019                                  2018                                    2019                                  2018
                                         % of                                  % of                                    % of                                  % of
                                         total                                 total                                   total                                 total
(Unaudited)       Revenues, net      revenues, net      Revenues, net      revenues, net        Revenues, net      revenues, net      Revenues, net      revenues, net
North America   $     442.7                65.0 %     $         412.8            66.6 %       $       1,257.6            64.5 %     $       1,148.0            64.1 %
International         238.3                35.0 %               206.8            33.4 %                 692.4            35.5 %               642.1            35.9 %
                $     681.0               100.0 %     $         619.6           100.0 %       $       1,950.0           100.0 %     $       1,790.1           100.0 %



Revenues, net, Net Income and Net Income Per Diluted Share. Set forth below are
revenues, net, net income and net income per diluted share for the three and
nine months ended September 30, 2019 and 2018 (in millions, except per share
amounts).

                                                                           Nine Months Ended September
                                      Three Months Ended September 30,                 30,
(Unaudited)                                 2019               2018            2019           2018
Revenues, net                        $           681.0     $     619.6$  1,950.0$   1,790.1
Net income                           $           225.8     $     157.7$    659.6$     509.5
Net income per diluted share         $            2.49     $      1.71$     7.33$      5.50



Adjusted Net Income and Adjusted Net Income Per Diluted Share. Set forth below
are adjusted net income and adjusted net income per diluted share for the three
and nine months ended September 30, 2019 and 2018 (in millions, except per share
amounts).

                                         Three Months Ended September 30,      Nine Months Ended September 30,
(Unaudited)                                    2019               2018               2019              2018
Adjusted net income                     $           280.6     $     246.6     $          775.7     $     717.9
Adjusted net income per diluted share   $            3.10     $      2.68     $           8.62     $      7.75


Adjusted net income and adjusted net income per diluted share are supplemental
non-GAAP financial measures of operating performance. See the heading entitled
"Management's Use of Non-GAAP Financial Measures" for more information and a
reconciliation of the non-GAAP financial measure to the most directly comparable
financial measure calculated in accordance with GAAP. We use adjusted net income
and adjusted net income per diluted share to eliminate the effect of items that
we do not consider indicative of our core operating performance on a consistent
basis.
Sources of Revenue
In both of our segments, we derive revenue from transactions. A transaction is
defined as a purchase by a customer utilizing one of our payment products at a
participating merchant. The following diagram illustrates a typical transaction
flow, which is representative of many, but not all, of our businesses.
                         Illustrative Transaction Flow

                       [[Image Removed: mdacharta04.jpg]]


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The revenue we derive from transactions is generated from both customers and
merchants. Customers may include commercial businesses (obtained through direct
and indirect channels), as well as partners for whom we manage payment programs.
Merchants, who may also be customers under relevant accounting guidance, may
include those merchants affiliated with our proprietary networks or those
participating in the third-party networks we utilize.
From our customers and partners, we generate revenue through a variety of
program fees, including transaction fees, card fees, network fees and charges.
These fees may be charged as fixed amounts, costs plus a mark-up, or based on a
percentage of the transaction purchase amounts, or a combination thereof. Our
programs include other fees and charges associated with late payments and based
on customer credit risk.
From our merchants and third-party networks, we generate revenue mostly from the
difference between the amount charged to a customer and the amount paid to the
merchant or network for a given transaction, as well as network fees and charges
in certain businesses. The amount paid to a merchant or network may be
calculated as (i) the merchant's wholesale product cost plus a markup; (ii) the
transaction purchase amount less a percentage discount; or (iii) the transaction
purchase amount less a fixed fee per unit.
For a transaction involving the purchase of fuel where the amount paid to the
merchant is calculated under the cost plus markup model, we refer to the
difference between the amount charged to the customer and the amount paid to the
merchant as revenue tied to fuel-price spreads. In all other cases, we refer to
the difference between the amount charged to the customer and the amount paid to
the merchant for a given transaction as interchange revenue.
In our lodging product, we define a transaction as a hotel room night purchased
by a customer. A customer may have multiple room nights per booking. In our
tolls product, the relevant measure of volume is average monthly tags active
during the period. In our corporate payments product, an additional measure of
volume is spend, which represents the dollar amount of payments processed on
behalf of customers through our various networks.

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The following table presents revenue and revenue per key performance metric by product for the three months ended September 30, 2019 and 2018 (in millions).*

                                             As Reported                                 Pro Forma and Macro Adjusted3
                                   Three Months Ended September 30,                     Three Months Ended September 30,
(Unaudited)                  2019         2018        Change      % Change  

2019 2018 Change % Change FUEL '- Revenues, net1 $ 295.6$ 283.2$ 12.4

           4  %  

299.7 $ 272.3$ 27.4 10 % '- Transactions1

             129.4        129.8        (0.4 )         -  %        129.4        126.1         3.3           3  %
'- Revenues, net per
transaction               $   2.28$   2.18$  0.10           5  %     $   2.32$   2.16$  0.16           7  %
CORPORATE PAYMENTS
'- Revenues, net          $  138.5$  105.5$  33.0          31  %  

$ 139.4$ 112.0$ 27.4 24 % '- Transactions

               14.4         13.1         1.3          10  %         14.4         13.3         1.1           9  %
'- Revenues, net per
transaction               $   9.62$   8.05$  1.57          20  %  

$ 9.68$ 8.44$ 1.24 15 % '- Spend volume4 $ 18,417$ 13,817$ 4,601 33 %

     $ 18,574$ 13,817$ 4,757          34  %
'- Revenue, net per
spend $                       0.75 %       0.76 %     (0.01 )%       (2 )%         0.75 %       0.81 %     (0.06 )%       (7 )%
TOLLS
'- Revenues, net1         $   88.7$   76.4$  12.3          16  %     $   89.3$   76.4$  12.9          17  %
'- Tags (average
monthly)5                      5.1          4.7         0.4           8  %          5.1          4.7         0.4           8  %
'- Revenues, net per
tag                       $  17.43$  16.14$  1.28           8  %     $  17.54$  16.14$  1.40           9  %
LODGING
'- Revenues, net          $   56.4$   48.0$   8.4          17  %     $   56.4$   48.0$   8.4          17  %
'- Room nights                 4.4          4.5        (0.1 )        (2 )%          4.4          4.5        (0.1 )        (2 )%
'- Revenues, net per
room night                $  12.74$  10.64$  2.11          20  %     $  12.74$  10.64$  2.11          20  %
GIFT
'- Revenues, net          $   48.5$   56.7$  (8.2 )       (14 )%     $   48.5$   57.8$  (9.4 )       (16 )%
'- Transactions              277.8        277.6         0.3           -  %        277.8        277.9        (0.1 )         -  %
'- Revenues, net per
transaction               $   0.17$   0.20$ (0.03 )       (15 )%     $   0.17$   0.21$ (0.03 )       (16 )%
OTHER2
'- Revenues, net1         $   53.4$   49.8$   3.6           7  %     $   54.6$   50.9$   3.7           7  %
'- Transactions1              12.4         12.4           -           -  %         12.4         12.4           -           -  %
'- Revenues, net per
transaction               $   4.29$   4.00$  0.30           7  %     $   4.39$   4.09$  0.30           7  %
FLEETCOR CONSOLIDATED
REVENUES
'- Revenues, net          $  681.0$  619.6$  61.5          10  %  

$ 687.8$ 617.5$ 70.3 11 %



1 Reflects certain reclassifications of revenue in 2018 between product
categories as the Company realigned its Brazil business into product lines,
resulting in refinement of revenue classified as fuel versus tolls and the
eCash/OnRoad product being fuel versus other.
2 Other includes telematics, maintenance, food, and transportation related
businesses.
3 See heading entitled "Management's Use of Non-GAAP Financial Measures" for a
reconciliation of pro-forma and Macro Adjusted revenue by product and metrics,
non-GAAP measures, to the comparable financial measure calculated in accordance
with GAAP.
4Corporate payments spend in the fourth quarter of 2018 was $14,750.6 million.
5Toll tags in the fourth quarter of 2018 was 4.8 million.
* Columns may not calculate due to rounding.


Revenue per transaction is derived from the various revenue types as discussed
above and can vary based on geography, the relevant merchant relationship, the
payment product utilized and the types of products or services purchased, the
mix of which would be influenced by our acquisitions, organic growth in our
business, and the overall macroeconomic environment, including fluctuations in
foreign currency exchange rates, fuel prices and fuel spread margins. Revenue
per transaction per customer changes as the level of services we provide to a
customer increases or decreases, as macroeconomic factors change and as
adjustments are made to merchant and customer rates. See "Results of Operations"
for further discussion of transaction volumes and revenue per transaction.

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Sources of Expenses
We incur expenses in the following categories:

• Processing-Our processing expense consists of expenses related to

processing transactions, servicing our customers and merchants, bad debt

expense and cost of goods sold related to our hardware sales in certain

businesses.

• Selling-Our selling expenses consist primarily of wages, benefits, sales

commissions (other than merchant commissions) and related expenses for our

sales, marketing and account management personnel and activities.

• General and administrative-Our general and administrative expenses include

compensation and related expenses (including stock-based compensation) for

      our executives, finance and accounting, information technology, human
      resources, legal and other administrative personnel. Also included are
      facilities expenses, third-party professional services fees, travel and
      entertainment expenses, and other corporate-level expenses.


•     Depreciation and amortization-Our depreciation expenses include

depreciation of property and equipment, consisting of computer hardware and

software (including proprietary software development amortization expense),

card-reading equipment, furniture, fixtures, vehicles and buildings and

leasehold improvements related to office space. Our amortization expenses

include amortization of intangible assets related to customer and vendor

      relationships, trade names and trademarks, software and non-compete
      agreements. We are amortizing intangible assets related to business
      acquisitions and certain private label contracts associated with the
      purchase of accounts receivable.

• Other operating, net-Our other operating, net includes other operating

expenses and income items that do not relate to our core operations or that

occur infrequently.

• Investment loss-Our investment results primarily relate to impairment

charges related to our investments.

• Other expense (income), net-Our other expense (income), net includes

proceeds/costs from the sale of assets, foreign currency transaction gains

or losses and other miscellaneous operating costs and revenue.

• Interest expense, net-Our interest expense, net includes interest expense

on our outstanding debt, interest income on our cash balances and interest

      on our interest rate swaps.


•     Provision for income taxes-Our provision for income taxes consists
      primarily of corporate income taxes related to profits resulting from the
      sale of our products and services on a global basis.


Factors and Trends Impacting our Business
We believe that the following factors and trends are important in understanding
our financial performance:

• Global economic conditions-Our results of operations are materially

affected by conditions in the economy generally, both in North America and

internationally. Factors affected by the economy include our transaction

volumes, the credit risk of our customers and changes in tax laws across

the globe. These factors affected our businesses in both our North America

and International segments.

• Foreign currency changes-Our results of operations are significantly

impacted by changes in foreign currency exchange rates; namely, by

movements of the Australian dollar, Brazilian real, British pound, Canadian

dollar, Czech koruna, Euro, Mexican peso, New Zealand dollar and Russian

ruble, relative to the U.S. dollar. Approximately 60% of our revenue in

both the nine months ended September 30, 2019 and 2018, was derived in U.S.

dollars and was not affected by foreign currency exchange rates. See

"Results of Operations" for information related to foreign currency impact

on our total revenue, net.

• Fuel prices-Our fleet customers use our products and services primarily in

connection with the purchase of fuel. Accordingly, our revenue is affected

by fuel prices, which are subject to significant volatility. A change in

retail fuel prices could cause a decrease or increase in our revenue from

several sources, including fees paid to us based on a percentage of each

customer's total purchase. Changes in the absolute price of fuel may also

impact unpaid account balances and the late fees and charges based on these

amounts. We believe approximately 13% and 14% of revenues, net were

directly impacted by changes in fuel price in the three months ended

September 30, 2019 and 2018, respectively. We believe approximately 13% and

15% of revenues, net were directly impacted by changes in fuel price in the

nine months ended September 30, 2019 and 2018, respectively.

• Fuel-price spread volatility-A portion of our revenue involves transactions

where we derive revenue from fuel-price spreads, which is the difference

between the price charged to a fleet customer for a transaction and the

price paid to the merchant for the same transaction. In these transactions,

the price paid to the merchant is based on the wholesale cost of fuel. The

merchant's wholesale cost of fuel is dependent on several factors

including, among others, the factors described above affecting fuel prices.

      The fuel price that we charge to our customer is dependent on several
      factors including, among others, the fuel price paid to the merchant,
      posted retail fuel prices and competitive fuel prices. We experience
      fuel-price spread contraction when the merchant's wholesale cost of fuel

increases at a faster rate than the fuel price we charge to our customers,

or the fuel price we charge to our customers decreases at a faster rate

than the merchant's wholesale cost of fuel. The inverse of these situations

      produces fuel-price spread expansion. We believe



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approximately 5% of revenues, net were directly impacted by fuel-price spreads
in both the three months ended September 30, 2019 and 2018, respectively. We
believe approximately 5% of revenues, net were directly impacted by fuel-price
spreads in both the nine months ended September 30, 2019 and 2018, respectively.
•     Acquisitions-Since 2002, we have completed over 75 acquisitions of

companies and commercial account portfolio. Acquisitions have been an

important part of our growth strategy, and it is our intention to continue

      to seek opportunities to increase our customer base and diversify our
      service offering through further strategic acquisitions. The impact of
      acquisitions has, and may continue to have, a significant impact on our

results of operations and may make it difficult to compare our results

between periods.

• Interest rates-Our results of operations are affected by interest rates. We

      are exposed to market risk to changes in interest rates on our cash
      investments and debt. On January 22, 2019, the Company entered
      into three 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. For

each of these swap contracts, we will pay a fixed monthly rate and receive

one month LIBOR.

• Expenses-Over the long term, we expect that our general and administrative

expense will decrease as a percentage of revenue as our revenue increases.

To support our expected revenue growth, we plan to continue to incur

additional sales and marketing expense by investing in our direct

marketing, third-party agents, internet marketing, telemarketing and field

sales force.

• Taxes-We pay taxes in various taxing jurisdictions, including the U.S.,

most U.S. states and many non-U.S. jurisdictions. The tax rates in certain

      non-U.S. taxing jurisdictions are different than the U.S. tax rate.
      Consequently, as our earnings fluctuate between taxing jurisdictions, our
      effective tax rate fluctuates.



Acquisitions and Investments
On October 1, 2019, the Company acquired Travelliance, an airline lodging
provider primarily located in the U.S for approximately $120 million. This
acquisition is not expected to be material to the financial results of the
Company.
On April 1, 2019, we completed the acquisition of NvoicePay, a provider of full
accounts payable automation for businesses in the U.S. The aggregate purchase
price of this acquisition was approximately $208 million, net of cash acquired
of $4.1 million. Additionally, on April 1, 2019, we acquired a small maintenance
software platform based in the U.K. On July 8, 2019, we made another small
acquisition in the payroll card provider space in the U.S. The aggregate
purchase price of these acquisitions was approximately $104 million, net of
cash.
During 2018, we completed acquisitions with an aggregate purchase price of $16.8
million, net of cash acquired of $11.0 million and made deferred payments of
$3.9 million related to acquisitions occurring in prior years. During 2018, we
made investments in other businesses of $4.2 million and payments on a seller
note for a prior acquisition of $1.6 million.

Asset Disposition


In October 2018, we completed the sale of the Chevron portfolio, resulting in a
pre-tax gain of $152.8 million during the fourth quarter of 2018. Revenues
generated from the Chevron portfolio had historically been included in our North
America segment.



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Results of Operations
Three months ended September 30, 2019 compared to the three months ended
September 30, 2018
The following table sets forth selected consolidated statement of income and
selected operational data for the three months ended September 30, 2019 and 2018
(in millions, except percentages)*.
                        Three Months Ended      % of total      Three Months Ended     % of total      Increase
(Unaudited)             September 30, 2019        revenue      September 

30, 20181 revenue (decrease) % Change Revenues, net: North America $

           442.7              65.0  %   $         412.8              66.6  %   $      29.9         7.2  %
International                    238.3              35.0  %             206.8              33.4  %          31.6        15.3  %
Total revenues,
net                              681.0             100.0  %             619.6             100.0  %          61.5         9.9  %
Consolidated
operating
expenses:
Processing                       135.0              19.8  %             128.4              20.7  %           6.6         5.2  %
Selling                           51.8               7.6  %              44.8               7.2  %           7.0        15.6  %
General and
administrative                    98.1              14.4  %              98.1              15.8  %             -           -  %
Depreciation and
amortization                      67.3               9.9  %              67.3              10.9  %           0.1         0.1  %
Other operating,
net                               (0.3 )               -  %                 -                 -  %          (0.3 )        NM
Operating income                 329.1              48.3  %             281.1              45.4  %          48.1        17.1  %
Investment loss                      -                 -  %               7.1               1.2  %          (7.1 )    (100.0 )%
Other (income)
expense, net                      (0.1 )               -  %               0.3                 -  %           0.4          NM
Interest expense,
net                               36.5               5.4  %              36.1               5.8  %           0.4         1.2  %
Provision for
income taxes                      67.0               9.8  %              79.9              12.9  %         (12.9 )     (16.2 )%
Net income           $           225.8              33.2  %   $         157.7              25.5  %   $      68.1        43.2  %
Operating income
for segments:
North America        $           207.0                        $         177.8                        $      29.2        16.4  %
International                    122.2                                  103.3                               18.9        18.2  %
Operating income     $           329.1                        $         281.1                        $      48.1        17.1  %
Operating margin
for segments:
North America                     46.8 %                                 43.1 %                              3.7 %
International                     51.3 %                                 50.0 %                              1.3 %
Total                             48.3 %                                 45.4 %                              3.0 %


NM = Not Meaningful
1Reflects reclassifications from previously disclosed amounts to conform to
current presentation.
*The sum of the columns and rows may not calculate due to rounding.

Revenues

Our consolidated revenues were $681.0 million in the three months ended
September 30, 2019, an increase of $61.5 million or 9.9%, from $619.6 million in
the three months ended September 30, 2018. The increase in our consolidated
revenue was primarily due to:
•     Organic growth of approximately 11% on a constant fuel price, fuel spread

margin, foreign currency and acquisition basis, driven by increases in both

volume and revenue per transaction in certain of our payment programs.


•     The impact of acquisitions completed in 2019, which contributed
      approximately $9 million in additional revenue.

• Although we cannot precisely measure the impact of the macroeconomic

environment, in total we believe it had a negative impact on our

consolidated revenue for the three months ended September 30, 2019 over the

comparable period in 2018 of approximately $7 million. Foreign exchange

      rates had an unfavorable impact on consolidated revenues in the three
      months ended September 30, 2019 over the comparable period in 2018 of
      approximately $7



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million, primarily due to unfavorable changes in foreign exchange rates mostly
in Brazil and the U.K. Favorable fuel spread margins of approximately $3 million
were offset by unfavorable fuel prices of approximately $3 million, in the three
months ended September 30, 2019 over the comparable period in 2018.
•     The increases were partially offset by a decrease to consolidated revenues
      of approximately $11 million due to the disposition of fuel portfolio
      during the fourth quarter of 2018.



North America segment revenues
North America revenues were $442.7 million in the three months ended
September 30, 2019, an increase of $29.9 million or 7.2%, from $412.8 million in
the three months ended September 30, 2018. The increase in our North America
segment revenue was primarily due to:
•     Organic growth of approximately 8%, on a constant fuel price, fuel spread

margin and acquisition and disposition basis, driven by increases in both

volume and revenue per transaction in certain of our payment programs.


•     The impact of acquisitions completed in 2019, which contributed
      approximately $8 million in additional revenue.

• Although we cannot precisely measure the impact of the macroeconomic

environment, in total we believe it had a negative impact on our North

America segment revenue in three months ended September 30, 2019 over the

comparable period in 2018 of approximately $1 million, primarily due to

unfavorable impact of foreign exchanges rates in Canada. Favorable fuel

spread margins of approximately $3 million were offset by unfavorable fuel

prices of approximately $3 million, in the three months ended September 30,

2019 over the comparable period in 2018.

• The increases were partially offset by a decrease to North America revenues

      of approximately $11 million due to the disposition of fuel portfolio
      during the fourth quarter of 2018.



International segment revenues
International segment revenues were $238.3 million in the three months ended
September 30, 2019, an increase of $31.6 million or 15.3%, from $206.8 million
in the three months ended September 30, 2018. The increase in our International
segment revenue was primarily due to:
•     Organic growth of approximately 17% on a constant fuel price, fuel spread
      margin and acquisition basis, driven by increases in both volume and
      revenue per transaction in certain of our payment programs.


•     The impact of an acquisition completed in 2019, which contributed
      approximately $1 million in additional revenue.

• Although we cannot precisely measure the impact of the macroeconomic

environment, in total we believe it had a negative impact on our

International segment revenue for the three months ended September 30, 2019

over the comparable period in 2018 of approximately $6 million primarily

due to unfavorable foreign exchange rates mostly in Brazil and the U.K.

Revenues by geography and product category. Set forth below are further breakdowns of revenue by geography and product category for the three months ended September 30, 2019 and 2018 (in millions).

                                                     Three Months Ended September 30,
Revenues, net by Geography*                   2019                                     2018
                                                     % of total                               % of total
(Unaudited)                     Revenues, net       revenues, net       Revenues, net        revenues, net
United States                 $           414               61 %      $            391               63 %
Brazil                                    106               16 %                    92               15 %
United Kingdom                             68               10 %                    63               10 %
Other                                      93               14 %                    73               12 %
Consolidated revenues, net    $           681              100 %      $            620              100 %


* Columns may not calculate due to rounding.

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                                                    Three Months Ended September 30,
Revenues, net by Product
Category*1                                   2019                                      2018
                                                    % of total                                % of total
(Unaudited)                   Revenues, net        revenues, net        Revenues, net        revenues, net
Fuel                        $           296               44 %        $            283               46 %
Corporate Payments                      138               20 %                     105               17 %
Tolls                                    89               13 %                      76               12 %
Lodging                                  56                8 %                      48                8 %
Gift                                     48                7 %                      57                9 %
Other                                    53                8 %                      50                8 %
Consolidated revenues,
net                         $           681              100 %        $            620              100 %


1 Reflects certain reclassifications of revenue in 2018 between product
categories as the Company realigned its Brazil business into product lines,
resulting in refinement of revenue classified as fuel versus tolls and the
eCash/OnRoad product being fuel versus other.
* Columns may not calculate due to rounding.
Consolidated operating expenses
Processing. Processing expenses were $135.0 million in the three months ended
September 30, 2019, an increase of $6.6 million or 5.2%, from $128.4 million in
the comparable prior period. Increases in processing expenses were primarily due
to organic growth in the business, as well as expenses related to acquisitions
completed in 2019 of approximately $4 million, partially offset by the favorable
impact of fluctuations in foreign exchange rates of approximately $1 million and
a decrease in bad debt expense of approximately $2 million.
Selling. Selling expenses were $51.8 million in the three months ended
September 30, 2019, an increase of $7.0 million or 15.6%, from $44.8 million in
the comparable prior period. Increases in selling expenses are primarily due to
additional spending in certain lines of business, as well as expenses related to
acquisitions completed in 2019 of approximately $3 million, partially offset by
the favorable impact of fluctuations in foreign exchange rates of approximately
$1 million.
General and administrative. General and administrative expenses remained
constant at $98.1 million in both the three months ended September 30, 2019 and
2018, respectively. Increases in general and administrative expenses were
primarily due to acquisitions completed in 2019 of approximately $4 million and
additional investments in information technology of approximately $4 million.
These increases were partially offset by a decrease in stock compensation
expense of approximately $4 million and by the favorable impact of fluctuations
in foreign exchange rates of approximately $1 million.

Depreciation and amortization. Depreciation and amortization expenses remained
constant at $67.3 million in both the three months ended September 30, 2019 and
2018. Depreciation and amortization expenses remained consistent primarily due
to expenses related to acquisitions completed in 2019 of approximately $1
million, offset by the favorable impact of fluctuations in foreign exchange
rates of approximately $1 million.

Investment loss. Investment loss of $7 million was recorded in the three months
ended September 30, 2018, related to a non-cash impairment charge recorded to a
cost method investment.

Interest expense, net. Interest expense was $36.5 million in the three months
ended September 30, 2019, an increase of $0.4 million or 1.2%, from $36.1
million in the comparable prior period. The increase in interest expense is
primarily due to the impact of acquisitions closed in 2019 and increases in
LIBOR. The following table sets forth the average interest rates paid on
borrowings under our Credit Facility, excluding the related unused facility fees
and swaps.
                                     Three Months Ended September 30,
(Unaudited)                              2019                 2018
Term loan A                                3.73 %               3.59 %
Term loan B                                4.25 %               4.09 %
Revolver A, B & C USD Borrowings           3.87 %               3.59 %
Revolver B GBP Borrowings                  2.21 %               2.12 %
Foreign swing line                         2.17 %               2.16 %


The average unused facility fee for the Credit Facility was 0.30% in both the three month periods ending September 30, 2019 and 2018, respectively.

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On January 22, 2019, we entered into three interest rate swap cash flow
contracts. The objective of these interest rate swap contracts is to reduce the
variability of cash flows in the previously unhedged interest payments
associated with $2 billion of variable rate debt, tied to the one month LIBOR
benchmark interest rate. During the three months ended September 30, 2019, as a
result of these swap contracts, we incurred additional interest expense of $1.6
million or 0.31% over the average LIBOR rates on $2 billion of borrowings.
Provision for income taxes. The provision for income taxes in the three months
ended September 30, 2019 was $67.0 million, a decrease of $12.9 million or
16.2%, as compared to $79.9 million in the three months ended September 30,
2018. We provide for income taxes during interim periods based on an estimate of
our effective tax rate for the year. Discrete items and changes in the estimate
of the annual tax rate are recorded in the period they occur. The decrease in
the provision for taxes for the three month period ending September 30, 2019
over the comparable period in 2018 was primarily due to a $22.7 million true-up
in the third quarter of 2018 for our provisional transition tax liability
originally recorded at the end of 2017 in connection with the Tax Cuts and Jobs
Act of 2017. The provision for taxes was further reduced due to higher excess
tax benefits on share based compensation in the three months ended September 30,
2019 as compared to the three months ended September 30, 2018.
Our effective tax rate for the three months ended September 30, 2019 was 22.9%
compared to 33.6% for three months ended September 30, 2018. Excluding the
impact of the transitional tax adjustment in 2018, our tax rate in the third
quarter of 2018 would have been 23.4%.

We pay taxes in different taxing jurisdictions, including the U.S., most U.S.
states and many non-U.S. jurisdictions. The tax rates in certain non-U.S. taxing
jurisdictions are different than the U.S. tax rate. Consequently, as our
earnings fluctuate between taxing jurisdictions, our effective tax rate
fluctuates.
Net income. For the reasons discussed above, our net income increased to $225.8
million in the three months ended September 30, 2019, an increase of $68.1
million or 43.2%, from $157.7 million in the three months ended September 30,
2018.
Operating income and operating margin
Consolidated operating income. Operating income was $329.1 million in the three
months ended September 30, 2019, an increase of $48.1 million or 17.1%, from
$281.1 million in the comparable prior period. Our operating margin was 48.3%
and 45.4% for the three months ended September 30, 2019 and 2018, respectively.
These increases were driven primarily by organic growth and acquisitions
completed in 2019. The increases were partially offset by a decrease to
operating income of approximately $8 million due to the disposition of fuel
portfolio during the fourth quarter of 2018, and the negative impact of the
macroeconomic environment of approximately $4 million, driven by unfavorable
movements in foreign exchange rates and unfavorable fuel prices, partially
offset by higher fuel price spreads.
For the purpose of segment operating results, we calculate segment operating
income by subtracting segment operating expenses from segment revenue. Segment
operating margin is calculated by dividing segment operating income by segment
revenue.

North America segment operating income. North America operating income was
$207.0 million in the three months ended September 30, 2019, an increase of
$29.2 million or 16.4%, from $177.8 million in the comparable prior period.
North America operating margin was 46.8% and 43.1% for the three months ended
September 30, 2019 and 2018, respectively. These increases were due primarily to
organic growth and acquisitions completed in 2019. The increases were partially
offset by a decrease to North America operating income of approximately $8
million due to the disposition of fuel portfolio during the fourth quarter of
2018.

International segment operating income. International operating income was
$122.2 million in the three months ended September 30, 2019, an increase of
$18.9 million or 18.2%, from $103.3 million in the comparable prior period.
International operating margin was 51.3% and 50.0% for the three months ended
September 30, 2019 and 2018, respectively. These increases were due primarily to
organic growth. These increases were partially offset by the negative impact of
the macroeconomic environment of approximately $3 million, driven primarily by
unfavorable movements in foreign exchange rates.


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Nine months ended September 30, 2019 compared to the nine months ended
September 30, 2018
The following table sets forth selected consolidated statement of income data
for the nine months ended September 30, 2019 and 2018 (in millions, except
percentages)*.
                    Nine Months Ended    % of total     Nine Months Ended     % of total      Increase
(Unaudited)        September 30, 2019      revenue     September 30, 20181      revenue      (decrease)      % Change
Revenues, net:
North America      $      1,257.6            64.5  %   $      1,148.0             64.1  %   $     109.5          9.5  %
International               692.4            35.5  %            642.0             35.9  %          50.4          7.8  %
Total revenues,
net                       1,950.0           100.0  %          1,790.1            100.0  %         159.9          8.9  %
Consolidated
operating
expenses:
Processing                  384.6            19.7  %            356.1             19.9  %          28.5          8.0  %
Selling                     152.9             7.8  %            135.9              7.6  %          17.0         12.5  %
General and
administrative              297.6            15.3  %            284.9             15.9  %          12.8          4.5  %
Depreciation and
amortization                205.7            10.5  %            207.4             11.6  %          (1.7 )       (0.8 )%
Other operating,
net                          (1.5 )          (0.1 )%             (0.1 )              -  %          (1.3 )         NM
Operating income            910.6            46.7  %            806.0             45.0  %         104.7         13.0  %
Investment loss              15.7             0.8  %              7.1              0.4  %           8.5        119.1  %
Other expense,
net                           0.6               -  %              0.5                -  %           0.2         35.1  %
Interest
expense, net                115.1             5.9  %            100.3              5.6  %          14.8         14.8  %
Provision for
income taxes                119.7             6.1  %            188.6             10.5  %         (68.9 )      (36.5 )%
Net income         $        659.6            33.8  %   $        509.5             28.5  %   $     150.1         29.5  %
Operating income
for segments:
North America      $        563.6$        495.1$      68.5         13.8  %
International               347.1                               310.9                              36.2         11.6  %
Operating income   $        910.6$        806.0$     104.7         13.0  %
Operating margin
for segments:
North America                44.8 %                              43.1 %                             1.7 %
International                50.1 %                              48.4 %                             1.7 %
Consolidated                 46.7 %                              45.0 %                             1.7 %



NM = Not Meaningful
1Reflects reclassifications from previously disclosed amounts to conform to
current presentation.
*The sum of the columns and rows may not calculate due to rounding.

Revenues

Our consolidated revenues increased from $1,790.1 million in the nine months
ended September 30, 2018 to $1,950.0 million in the nine months ended
September 30, 2019, an increase of $159.9 million, or 8.9%. The increase in our
consolidated revenue was primarily due to:
•     Organic growth of approximately 12% on a constant fuel price, fuel spread

margin, foreign currency and pro forma basis, driven by increases in both

volume and revenue per transaction in certain of our payment programs.

• The impact of acquisitions during 2019, which contributed approximately $15

million in additional revenue.

• Although we cannot precisely measure the impact of the macroeconomic

environment, in total we believe it had a negative impact on our

consolidated revenue for the nine months ended September 30, 2019 over the

comparable period in 2018 of approximately $40 million. Foreign exchange

rates had an unfavorable impact on consolidated revenues of approximately

      $52 million due to unfavorable fluctuations in foreign exchange rates
      primarily in Brazil and the U.K. and lower fuel prices of $2 million,
      partially offset by favorable fuel spread margins of approximately $14
      million.



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• The increases were partially offset by a decrease to consolidated revenues

of approximately $19 million due to the disposition of fuel portfolio

during the fourth quarter of 2018.



North America segment revenues
North America revenues increased from $1,148.0 million in the nine months ended
September 30, 2018 to $1,257.6 million in the nine months ended September 30,
2019, an increase of $109.5 million, or 9.5%. The increase in our North America
segment revenue was primarily due to:
•     Organic growth of approximately 10%, on a constant fuel price, fuel spread

margin and pro forma basis, driven by increases in both volume and revenue

per transaction in certain of our payment programs.

• The impact of our acquisitions during 2019, which contributed approximately

$13 million in additional revenue.

• Although we cannot precisely measure the impact of the macroeconomic

environment, in total we believe it had a positive impact on our North

America segment revenue in the nine months ended September 30, 2019 over

the comparable period in 2018 of approximately $6 million. This was

primarily due to favorable fuel spread margins of approximately $14

million, partially offset by the unfavorable impact of foreign exchange

      rates in Canada of $4 million and lower fuel prices of approximately $4
      million.

• The increases were partially offset by a decrease to North America revenues

      of approximately $19 million due to the disposition of fuel portfolio
      during the fourth quarter of 2018.



International segment revenues
International segment revenues increased from $642.0 million in the nine months
ended September 30, 2018 to $692.4 million in the nine months ended
September 30, 2019, an increase of $50.4 million, or 7.8%. The increase in our
International segment revenue was primarily due to:
•     Organic growth of approximately 14% on a constant macroeconomic and pro

forma basis, driven by increases in both volume and revenue per transaction

in certain of our payment programs.

• The impact of an acquisition in 2019, which contributed approximately $2

million in additional revenue.

• Although we cannot precisely measure the impact of the macroeconomic

      environment, in total we believe it had a negative impact on our
      International segment revenue for the nine months ended September 30, 2019
      over the comparable period in 2018 of approximately $46 million.
      Unfavorable foreign exchange rates negatively impacted consolidated

revenues by approximately $48 million primarily due to unfavorable changes

in foreign exchange rates mostly in Brazil and the U.K., partially offset

by the favorable impact of higher fuel prices on consolidated revenues of

approximately $2 million.

Revenues by geography and product category. Set forth below are further breakdowns of revenue by geography and product category for the nine months ended September 30, 2019 and 2018 (in millions).

                                                    Nine Months Ended September 30,
Revenues, net by Geography*                   2019                                   2018
                                                    % of total                              % of total
(Unaudited)                    Revenues, net       revenues, net       Revenues, net       revenues, net
United States                 $        1,174               60 %      $         1,082               60 %
Brazil                                   316               16 %                  296               17 %
United Kingdom                           205               11 %                  192               11 %
Other                                    256               13 %                  220               12 %
Consolidated revenues, net    $        1,950              100 %      $         1,790              100 %


* Columns may not calculate due to rounding.

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                                                   Nine Months Ended September 30,
Revenues, net by Product
Category*1                                   2019                                    2018
                                                   % of total                               % of total
(Unaudited)                  Revenues, net        revenues, net        Revenues, net       revenues, net
Fuel                        $          874               45 %        $           827               46 %
Corporate Payments                     376               19 %                    300               17 %
Tolls                                  264               14 %                    246               14 %
Lodging                                148                8 %                    132                7 %
Gift                                   133                7 %                    139                8 %
Other                                  156                8 %                    147                8 %
Consolidated revenues,
net                         $        1,950              100 %        $         1,790              100 %


1 Reflects certain reclassifications of revenue in 2018 between product
categories as the Company realigned its Brazil business into product lines,
resulting in refinement of revenue classified as fuel versus tolls and the
eCash/OnRoad product being fuel versus other.
* Columns may not calculate due to rounding.
Consolidated operating expenses
Processing. Processing expenses increased from $356.1 million in the nine months
ended September 30, 2018 to $384.6 million in the nine months ended
September 30, 2019, an increase of $28.5 million, or 8.0%. Increases in
processing expenses were primarily due to organic growth in the business,
incremental bad debt expense of approximately $11 million and expenses related
to acquisitions completed in 2019 of approximately $7 million, partially offset
by the favorable impact of fluctuations in foreign exchange rates of
approximately $10 million.
Selling. Selling expenses increased from $135.9 million in the nine months ended
September 30, 2018 to $152.9 million in the nine months ended September 30,
2019, an increase of $17.0 million, or 12.5%. Increases in selling expenses are
primarily due to additional spending in certain lines of business, as well as
expenses related to acquisitions completed in 2019 of approximately $5 million,
which were partially offset by the favorable impact of fluctuations in foreign
exchange rates of approximately $4 million.
General and administrative. General and administrative expenses increased from
$284.9 million in the nine months ended September 30, 2018 to $297.6 million in
the nine months ended September 30, 2019, an increase of $12.8 million, or 4.5%.
The increase was primarily due to investments in information technology of
approximately $11 million, acquisitions completed in 2019 of approximately $9
million and legal settlements of $4 million over the comparable prior period.
These increases were partially offset by the favorable impact of fluctuations in
foreign exchange rates of approximately $7 million and a decrease in stock
compensation expense of approximately $5 million.

Depreciation and amortization. Depreciation and amortization decreased from
$207.4 million in the nine months ended September 30, 2018 to $205.7 million in
the nine months ended September 30, 2019, a decrease of $1.7 million, or 0.8%.
The decrease was primarily due to the favorable impact of foreign exchange rates
of approximately $7 million, partially offset by expenses related to
acquisitions completed in 2019 of approximately $5 million.

Other operating, net. Other operating, net was $1.5 million in the nine months
ended September 30, 2019, compared to other operating, net of $0.1 million in
the nine months ended September 30, 2018, an immaterial change.

Investment loss. Investment loss of $15.7 million in the nine months ended
September 30, 2019 relates to an impairment charge to our telematics investment,
as compared to an investment loss of $7.1 million in the nine months ended
September 30, 2018 related to a non-cash impairment charge recorded at a cost
method investment during the third quarter of 2018. During the first quarter of
2019, we determined that the fair value of our investment was below cost and
recorded an impairment of the investment of $15.7 million based on observable
price changes. The investment was sold in the second quarter at an amount
approximating carrying value.

Other expense, net. Other expense, net was $0.6 million in the nine months ended
September 30, 2019, compared to other expense, net of $0.5 million in the nine
months ended September 30, 2018, an immaterial change.

Interest expense, net. Interest expense increased from $100.3 million in the
nine months ended September 30, 2018 to $115.1 million in the nine months ended
September 30, 2019, an increase of $14.8 million, or 14.8%. The increase in
interest expense is primarily due to the impact of additional borrowings to
repurchase our common stock and to finance acquisitions completed in 2019, as
well as increases in LIBOR. The following table sets forth the average interest
rates paid on borrowings under our Credit Facility, excluding the related unused
facility fees and swaps.

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                              Nine Months Ended September 30,
(Unaudited)                       2019                2018
Term loan A                         3.89 %               3.43 %
Term loan B                         4.41 %               3.87 %
Domestic Revolver A                 3.97 %               3.42 %
Revolver B GBP Borrowings           2.22 %               2.06 %
Foreign swing line                  2.17 %               2.09 %


The average unused facility fee for the Credit Facility was 0.30% and 0.31% in
the nine months ending September 30, 2019 and 2018, respectively. On January 22,
2019, we entered into three interest rate swap contracts. The objective of these
interest rate swap contracts is to reduce the variability of cash flows in the
previously unhedged interest payments associated with $2 billion of variable
rate debt, tied to the one month LIBOR benchmark interest rate. During the nine
months ended September 30, 2019, as a result of these swaps, we incurred
additional interest expense of approximately $2.2 million or 0.16% over the
average LIBOR rates on $2 billion of borrowings.
Provision for income taxes. The provision for income taxes decreased from $188.6
million in the nine months ended September 30, 2018 to $119.7 million in the
nine months ended September 30, 2019, a decrease of $68.9 million, or 36.5%. We
provide for income taxes during interim periods based on an estimate of our
effective tax rate for the year. Discrete items and changes in the estimate of
the annual tax rate are recorded in the period they occur. The second quarter of
2019 included an income tax benefit of $65 million due to the final disposition
of our Masternaut investment, which will allow us to carryback the capital loss
on our investment in Masternaut and offset it against a previously recorded
capital gain from the sale of Nextraq in the third quarter of 2017.
Our effective tax rate was 15.4% for the nine months ended September 30, 2019 as
compared to 27.0% in the nine months ended September 30, 2018. Our effective tax
rate for the nine months ended September 30, 2019 reflects the reversal of our
valuation allowance in our telematics investment and the remeasurement of the
related deferred tax asset due to the capital loss realized on the investment
that was carried back to 2017 when the US federal tax rate was 35%.  Our tax
rate was also impacted by the impairment charge to our book investment in
Masternaut in the first quarter. Excluding these discreet items, our tax rate
for the nine months ended September 30, 2019 would have been 23.3%.
We pay taxes in different taxing jurisdictions, including the U.S., most U.S.
states and many non-U.S. jurisdictions. The tax rates in certain non-U.S. taxing
jurisdictions are different than the U.S. tax rate. Consequently, as our
earnings fluctuate between taxing jurisdictions, our effective tax rate
fluctuates. Also, the excess tax benefit on share based compensation is part of
the effective tax rate. As a result, the tax rate is impacted by the number of
stock options exercised or restricted shares vested during the reporting period.
Net income. For the reasons discussed above, our net income increased from
$509.5 million in the nine months ended September 30, 2018 to $659.6 million in
the nine months ended September 30, 2019, an increase of $150.1 million, or
29.5%.
Operating income and operating margin
Consolidated operating income. Operating income increased from $806.0 million in
the nine months ended September 30, 2018 to $910.6 million in the nine months
ended September 30, 2019, an increase of $104.7 million, or 13.0%. Our operating
margin was 45.0% and 46.7% for the nine months ended September 30, 2018 and
2019, respectively. The increase in operating income was driven primarily by
organic growth. The increase was partially offset by a decrease to operating
income of approximately $14 million due to the disposition of fuel portfolio
during the fourth quarter of 2018, the negative impact of the macroeconomic
environment of approximately $13 million, driven primarily by unfavorable
movements in foreign exchange rates of approximately $25 million partially
offset by favorable fuel price spreads of approximately $14 million. These
increases were also offset by increased bad debt expense of approximately $11
million and investments in information technology of approximately $11 million.
For the purpose of segment operating results, we calculate segment operating
income by subtracting segment operating expenses from segment revenue. Segment
operating margin is calculated by dividing segment operating income by segment
revenue.

North America segment operating income. North America operating income increased
from $495.1 million in the nine months ended September 30, 2018 to $563.6
million in the nine months ended September 30, 2019, an increase of $68.5
million, or 13.8%. North America operating margin was 43.1% and 44.8% for the
nine months ended September 30, 2018 and 2019, respectively. The increase in
operating income was due primarily to organic growth and the positive impact of
the

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macroeconomic environment of approximately $8 million. The increases were
partially offset by a decrease to operating income of approximately $14 million
due to the disposition of fuel portfolio during the fourth quarter of 2018 and
additional bad debt expense of approximately $11 million.

International segment operating income. International operating income increased
from $310.9 million in the nine months ended September 30, 2018 to $347.1
million in the nine months ended September 30, 2019, an increase of $36.2
million, or 11.6%. International operating margin was 48.4% and 50.1% for the
nine months ended September 30, 2018 and 2019, respectively. The increase in
operating income was due primarily to organic growth. These increases were
partially offset by the negative impact of the macroeconomic environment of
approximately $21 million, driven primarily by unfavorable movements in foreign
exchange rates.

Liquidity and capital resources
Our principal liquidity requirements are to service and repay our indebtedness,
make acquisitions of businesses and commercial account portfolio, repurchase
shares of our common stock and meet working capital, tax and capital expenditure
needs.
Sources of liquidity. At September 30, 2019, our cash balances totaled $1,465.9
million, with approximately $407.1 million restricted. Restricted cash
represents customer deposits in the Czech Republic and in our Comdata business
in the U.S., as well as collateral received from customers for cross-currency
transactions in our Cambridge business, which are restricted from use other than
to repay customer deposits, as well as secure and settle cross-currency
transactions.
At September 30, 2019, cash and cash equivalents held in foreign subsidiaries
where we have determined we are permanently reinvested is $871.3 million. All of
the cash and cash equivalents held by our foreign subsidiaries, excluding
restricted cash, are available for general corporate purposes. Our current
intent is to permanently reinvest these funds outside of the U.S. Our current
expectation for funds held in our foreign subsidiaries is to use the funds to
finance foreign organic growth, to pay for potential future foreign acquisitions
and to repay any foreign borrowings that may arise from time to time. We
currently believe that funds generated from our U.S. operations, along with
available borrowing capacity in the U.S. will be sufficient to fund our U.S.
operations for the foreseeable future, and therefore do not foresee a need to
repatriate cash held by our foreign subsidiaries to fund our U.S. operations. We
are currently evaluating undistributed foreign earnings for which we have not
provided deferred taxes for foreign withholding tax, as these earnings are
considered to be indefinitely reinvested. The amount of these unrecorded
deferred taxes is not expected to be material.
We utilize an accounts receivable Securitization Facility to finance a majority
of our domestic receivables, to lower our cost of borrowing and more efficiently
use capital. We generate and record accounts receivable when a customer makes a
purchase from a merchant using one of our card products and generally pay
merchants before collecting the receivable. As a result, we utilize the
Securitization Facility as a source of liquidity to provide the cash flow
required to fund merchant payments while we collect customer balances. These
balances are primarily composed of charge balances, which are typically billed
to the customer on a weekly, semimonthly or monthly basis, and are generally
required to be paid within 14 days of billing. We also consider the undrawn
amounts under our Securitization Facility and Credit Facility as funds available
for working capital purposes and acquisitions. At September 30, 2019, we had no
additional liquidity under our Securitization Facility. At September 30, 2019,
we had approximately $1,285 million available under our Credit Facility.
Based on our current forecasts and anticipated market conditions, we believe
that our current cash balances, our available borrowing capacity and our ability
to generate cash from operations, will be sufficient to fund our liquidity needs
for at least the next twelve months. However, we regularly evaluate our cash
requirements for current operations, commitments, capital requirements and
acquisitions, and we may elect to raise additional funds for these purposes in
the future, either through the issuance of debt or equity securities. We may not
be able to obtain additional financing on terms favorable to us, if at all.
Cash flows
The following table summarizes our cash flows for the nine month periods ended
September 30, 2019 and 2018 (in millions).
                                                 Nine Months Ended September 30,
(Unaudited)                                        2019                   

2018

Net cash provided by operating activities $ 791.1 $

555.4

Net cash used in investing activities                (383.5 )                 (71.3 )
Net cash used in financing activities                (260.5 )               

(356.3 )



Operating activities. Net cash provided by operating activities was $791.1
million in the nine months ended September 30, 2019, an increase from $555.4
million in the comparable prior period. The increase in operating cash flows was
primarily due to higher net income and favorable working capital adjustments
primarily due to the timing of cash receipts and payments in the nine months
ended September 30, 2019 over the comparable period in 2018.

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Investing activities. Net cash used in investing activities was $383.5 million
in the nine months ended September 30, 2019 compared to $71.3 million in the
nine months ended September 30, 2018. The increase was primarily due to the
increase in cash paid for acquisitions completed in 2019.
Financing activities. Net cash used in financing activities was $260.5 million
in the nine months ended September 30, 2019, compared to $356.3 million in the
nine months ended September 30, 2018. The decreased use of cash is primarily due
incremental borrowings of incremental Term A Loan in the amount of $700 million,
as well as fewer repurchases of our common stock of $321 million in the nine
months ended September 30, 2019 over the comparable period in 2018. These
reductions in cash usage were partially offset by net payments made on our
revolving debt of $963 million during the nine months ended September 30, 2019.
Capital spending summary
Our capital expenditures were $48.7 million in the nine months ended
September 30, 2019, a decrease of $7.6 million or 13.6%, from $56.3 million in
the comparable prior period.
Credit Facility
FLEETCOR Technologies Operating Company, LLC, and certain of our domestic and
foreign owned subsidiaries, as designated co-borrowers (the "Borrowers"), are
parties to a $4.86 billion Credit Agreement (the "Credit Agreement"), with Bank
of America, N.A., as administrative agent, swing line lender and local currency
issuer, and a syndicate of financial institutions (the "Lenders"), which has
been amended multiple times. The Credit Agreement provides for senior secured
credit facilities (collectively, the "Credit Facility") consisting of a
revolving credit facility in the amount of $1.285 billion, a term loan A
facility in the amount of $3.225 billion and a term loan B facility in the
amount of $350.0 million as of September 30, 2019. The revolving credit facility
consists of (a) a revolving A credit facility in the amount of $800 million with
sublimits for letters of credit and swing line loans, (b) a revolving B facility
in the amount of $450 million for borrowings in U.S. Dollars, Euros, British
Pounds, Japanese Yen or other currency as agreed in advance, and a sublimit for
swing line loans, and (c) a revolving C facility in the amount of $35 million
for borrowings in U.S. Dollars, Australian Dollars or New Zealand Dollars. The
Credit Agreement also includes an accordion feature for borrowing an additional
$750 million in term loan A, term loan B, revolver A or revolver B debt and an
unlimited amount when the leverage ratio on a proforma basis is less than 3.00
to 1.00. Proceeds from the Credit Facility may be used for working capital
purposes, acquisitions, and other general corporate purposes. On August 2, 2019,
we entered into the sixth amendment to the Credit Agreement, which included an
incremental term A loan in the amount of $700 million and changes to the
consolidated leverage ratio definition and negative covenant related to
indebtedness. The term loan A and revolver maturity dates are December 19, 2023,
and the term loan B maturity date is August 2, 2024.
Interest on amounts outstanding under the Credit Agreement (other than the term
loan B) accrues based on the British Bankers Association LIBOR Rate (the
"Eurocurrency Rate"), plus a margin based on a leverage ratio, or our option,
the Base Rate (defined as the rate equal to the highest of (a) the Federal Funds
Rate plus 0.50%, (b) the prime rate announced by Bank of America, N.A., or
(c) the Eurocurrency Rate plus 1.00%) plus a margin based on a leverage ratio.
Interest on the term loan B loan facility accrues based on the Eurocurrency Rate
plus 2.00% for Eurocurrency Loans or at the Base Rate plus 1.00% for Base Rate
Loans. In addition, we pay a quarterly commitment fee at a rate per annum
ranging from 0.25% to 0.35% of the daily unused portion of the credit facility.
At September 30, 2019, the interest rate on the term loan A was 3.54%, and the
interest rate on the term loan B was 4.04%. The unused credit facility fee was
0.30% for all revolving facilities at September 30, 2019.
The term loans are payable in quarterly installments and are due on the last
business day of each March, June, September, and December with the final
principal payment due on the respective maturity date. Borrowings on the
revolving line of credit are repayable at our option of one, two, three or six
months after borrowing, depending on the term of the borrowing on the facility.
Borrowings on the foreign swing line of credit are due no later than twenty
business days after such loan is made.
The Credit Facility contains representations, warranties and events of default,
as well as certain affirmative and negative covenants, customary for financings
of this nature. These covenants include limitations on the ability to pay
dividends and make other restricted payments under certain circumstances and
compliance with certain financial ratios. As of September 30, 2019, we were in
compliance with each of the covenants under the Credit Facility.
Our Credit Agreement contains a number of negative covenants restricting, among
other things, limitations on liens (with exceptions for our Securitization
Facility) and investments, incurrence or guarantees of indebtedness, mergers,
acquisitions, dissolutions, liquidations and consolidations, dispositions,
dividends and other restricted payments and prepayments of other indebtedness.
In particular, we are not permitted to make any restricted payments (which
includes any dividend or other distribution) except that we may declare and make
dividend payments or other distributions to our stockholders so long as (i) on a
pro forma basis both before and after the distribution the consolidated leverage
ratio is not greater than 3.25:1.00 and we are in compliance with the financial
covenants and (ii) no default or event of default shall exist or result
therefrom. The Credit Agreement also contains customary events of default. The
Credit Agreement includes financial covenants where the Company

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is required to maintain a consolidated leverage ratio of less than or equal
to 4.00 to 1.00 as of the end of any fiscal quarter provided that in connection
with any Material Acquisition the leverage ratio may be increased to 4.25 to
1.00 for the quarter in which the Material Acquisition is consummated and the
next three fiscal quarters; and a consolidated interest coverage ratio of no
less than 4.00 to 1.00.
The obligations of the Borrowers under the Credit Agreement are secured by
substantially all of the assets of FLEETCOR and its domestic subsidiaries,
pursuant to a security agreement and includes a pledge of (i) 100% of the issued
and outstanding equity interests owned by us of each Domestic Subsidiary and
(ii) 66% of the voting shares of the first-tier foreign subsidiaries, but
excluding real property, personal property located outside of the U.S., accounts
receivables and related assets subject to the Securitization Facility and
certain investments required under money transmitter laws to be held free and
clear of liens.
At September 30, 2019, we had $3.1 billion in borrowings outstanding on the term
loan A, net of discounts and $341.7 million in borrowings outstanding on the
term loan B, net of discounts. We have unamortized debt issuance costs of $7.1
million related to the revolver as of September 30, 2019 recorded within other
assets in the unaudited consolidated balance sheet. We have unamortized debt
discounts and debt issuance costs related to the term loans of $8.4 million and
$2.8 million at September 30, 2019, respectively.
During the nine months ended September 30, 2019, we made principal payments of
$97.3 million on the term loans, $1,177 million on the revolving A facility,
$780.3 million on the revolving B facility, $35 million on the revolving C
facility and $101.5 million on the swing line revolving facilities.
Cash Flow Hedges
On January 22, 2019, we entered into three 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. These swap contracts qualify as hedging instruments and have been
designated as cash flow hedges. For each of these swap contracts, we will pay a
fixed monthly rate and receive one month LIBOR. We reclassified approximately
$2.2 million of losses from accumulated other comprehensive income into interest
expense during the nine months ended September 30, 2019 as a result of these
hedging instruments.
Securitization Facility
We are a party to a receivables purchase agreement among FleetCor Funding LLC,
as seller, PNC Bank, National Association as administrator, and various
purchaser agents, conduit purchasers and related committed purchasers parties
thereto, which was amended and restated for the fifth time as of November 14,
2014. We refer to this arrangement as the Securitization Facility. There have
been several amendments to the Securitization Facility, with the latest on April
22, 2019. The Securitization Facility expires on November 14, 2020 and contains
certain customary financial covenants.
There is a program fee equal to one month LIBOR plus 0.90% or the Commercial
Paper Rate plus 0.80%. The program fee was 2.06% plus 0.88% and 2.52% plus 0.89%
as of September 30, 2019 and December 31, 2018, respectively. The unused
facility fee is payable at a rate of 0.40% per annum as of September 30, 2019
and December 31, 2018, respectively. We have unamortized debt issuance costs of
$0.9 million related to the Securitization Facility as of September 30, 2019
recorded within other assets in the unaudited consolidated balance sheet.
The Securitization Facility provides for certain termination events, which
includes nonpayment, upon the occurrence of which the administrator may declare
the facility termination date to have occurred, may exercise certain enforcement
rights with respect to the receivables, and may appoint a successor servicer,
among other things.
We were in compliance with the financial covenant requirements related to our
Securitization Facility as of September 30, 2019.
Stock Repurchase Program
The Company's Board of Directors has approved a stock repurchase program, as
updated from time to time, (the "Program"), which was most recently updated on
October 22, 2019, with an authorized increase in the size of the Program by $1
billion, under which the Company may purchase up to an aggregate of $3.1 billion
of its common stock through the period ending February 1, 2023. Since the
beginning of the Program, 9,238,760 shares have been repurchased for an
aggregate purchase price of $1.6 billion, leaving the Company up to $1.5 billion
available under the Program for future repurchases in shares of its common
stock.

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Any stock repurchases under the Program may be made at times and in such amounts
as deemed appropriate. The timing and amount of stock repurchases, if any, will
depend on a variety of factors including the stock price, market conditions,
corporate and regulatory requirements, and any additional constraints related to
material inside information the Company may possess. Any repurchases have been
and are expected to be funded by a combination of available cash flow from the
business, working capital and debt.
Critical accounting policies and estimates
In applying the accounting policies that we use to prepare our consolidated
financial statements, we necessarily make accounting estimates that affect our
reported amounts of assets, liabilities, revenue and expenses. Some of these
estimates require us to make assumptions about matters that are highly uncertain
at the time we make the accounting estimates. We base these assumptions and the
resulting estimates on historical information and other factors that we believe
to be reasonable under the circumstances, and we evaluate these assumptions and
estimates on an ongoing basis. In many instances, however, we reasonably could
have used different accounting estimates and, in other instances, changes in our
accounting estimates could occur from period to period, with the result in each
case being a material change in the financial statement presentation of our
financial condition or results of operations. We refer to estimates of this type
as critical accounting estimates.
Accounting estimates necessarily require subjective determinations about future
events and conditions. During the three months ended September 30, 2019, other
than noted in footnote 1, "Summary of Significant Accounting Policies" and
footnote 2, "Leases", related to our adoption of new lease guidance, we have not
adopted any new critical accounting policies that had a significant impact upon
our consolidated financial statements, have not changed any critical accounting
policies and have not changed the application of any critical accounting
policies from the year ended December 31, 2018. For critical accounting
policies, refer to the Critical Accounting Estimates in Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in our Annual Report on Form 10-K for the year ended December 31, 2018
and our summary of significant accounting policies in footnote 1 of our notes to
the unaudited consolidated financial statements in this Quarterly Report
Form 10-Q.
Management's Use of Non-GAAP Financial Measures
We have included in the discussion above certain financial measures that were
not prepared in accordance with GAAP. Any analysis of non-GAAP financial
measures should be used only in conjunction with results presented in accordance
with GAAP. Below, we define the non-GAAP financial measures, provide a
reconciliation of the non-GAAP financial measure to the most directly comparable
financial measure calculated in accordance with GAAP, and discuss the reasons
that we believe this information is useful to management and may be useful to
investors.

Pro forma and macro adjusted revenue and key performance metric by product. We
define the pro forma and macro adjusted revenue as revenue, net as reflected in
our statement of income, adjusted to eliminate the impact of the macroeconomic
environment and the impact of acquisitions and dispositions. The macroeconomic
environment includes the impact that market fuel spread margins, fuel prices and
foreign exchange rates have on our business. We use pro forma and macro adjusted
revenue and key performance metric to evaluate the organic growth in our revenue
and the associated performance metric. Set forth below is a reconciliation of
pro forma and macro adjusted revenue and key performance metric to the most
directly comparable GAAP measure, revenue, net and performance metric (in
millions):

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                                                Revenue                            Key Performance Metric
                                     Three Months Ended September 30,         Three Months Ended September 30,
(Unaudited)                           2019*                2018*                  2019*                2018*
FUEL - TRANSACTIONS
Pro forma and macro adjusted     $       299.7$        272.3                 129.4                 126.1
Impact of
acquisitions/dispositions/Uber               -                 10.9                     -                   3.8
Impact of fuel prices/spread               0.2                    -                     -                     -
Impact of foreign exchange
rates                                     (4.3 )                  -                     -                     -
As reported                      $       295.6$        283.2                 129.4                 129.8
CORPORATE PAYMENTS -
TRANSACTIONS
Pro forma and macro adjusted     $       139.4$        112.0                  14.4                  13.3
Impact of
acquisitions/dispositions                    -                 (6.5 )                   -                  (0.2 )
Impact of fuel prices/spread              (0.1 )                  -                     -                     -
Impact of foreign exchange
rates                                     (0.9 )                  -                     -                     -
As reported                      $       138.5$        105.5                  14.4                  13.1
CORPORATE PAYMENTS - SPEND
Pro forma and macro adjusted                                                       18,574                13,817
Impact of
acquisitions/dispositions                                                               -                     -
Impact of fuel prices/spread           Intentionally Left Blank                         -                     -
Impact of foreign exchange
rates                                                                                (156 )                   -
As reported                                                                        18,417                13,817
TOLLS - TAGS
Pro forma and macro adjusted     $        89.3       $         76.4                   5.1                   4.7
Impact of
acquisitions/dispositions                    -                    -                     -                     -
Impact of fuel prices/spread                 -                    -                     -                     -
Impact of foreign exchange
rates                                     (0.6 )                  -                     -                     -
As reported                      $        88.7       $         76.4                   5.1                   4.7
LODGING - ROOM NIGHTS
Pro forma and macro adjusted     $        56.4       $         48.0                   4.4                   4.5
Impact of
acquisitions/dispositions                    -                    -                     -                     -
Impact of fuel prices/spread                 -                    -                     -                     -
Impact of foreign exchange
rates                                        -                    -                     -                     -
As reported                      $        56.4       $         48.0                   4.4                   4.5
GIFT - TRANSACTIONS
Pro forma and macro adjusted     $        48.5       $         57.8                 277.8                 277.9
Impact of
acquisitions/dispositions                    -                 (1.2 )                   -                  (0.3 )
Impact of fuel prices/spread                 -                    -                     -                     -
Impact of foreign exchange
rates                                        -                    -                     -                     -
As reported                      $        48.5       $         56.7                 277.8                 277.6
OTHER1- TRANSACTIONS
Pro forma and macro adjusted     $        54.6       $         50.9                  12.4                  12.4
Impact of
acquisitions/dispositions                    -                 (1.1 )                   -                     -
Impact of fuel prices/spread                 -                    -                     -                     -
Impact of foreign exchange
rates                                     (1.2 )                  -                     -                     -
As reported                      $        53.4       $         49.8                  12.4                  12.4

FLEETCOR CONSOLIDATED REVENUES
Pro forma and macro adjusted     $       687.8$        617.5
Impact of
acquisitions/dispositions                    -                  2.1
Impact of fuel prices/spread               0.2                    -               Intentionally Left Blank
Impact of foreign exchange
rates                                     (6.9 )                  -
As reported                      $       681.0$        619.6

* Columns may not calculate due to rounding. 1Other includes telematics, maintenance, and transportation related businesses.



Adjusted net income and adjusted net income per diluted share. We have defined
the non-GAAP measure adjusted net income as net income as reflected in our
statement of income, adjusted to eliminate (a) non-cash stock based compensation
expense related to share based compensation awards, (b) amortization of deferred
financing costs, discounts and intangible assets, amortization of the premium
recognized on the purchase of receivables, and our proportionate share of
amortization of

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intangible assets at our equity method investment, and (c) other non-recurring
items, including the impact of the Tax Act, impairment of investment, asset
write-offs, restructuring costs, gains and related taxes due to disposition of
assets and a business, loss on extinguishment of debt, legal settlements, and
the unauthorized access impact.
We have defined the non-GAAP measure adjusted net income per diluted share as
the calculation previously noted divided by the weighted average diluted shares
outstanding as reflected in our statement of income.
We use adjusted net income to eliminate the effect of items that we do not
consider indicative of our core operating performance. We believe it is useful
to exclude non-cash stock based compensation expense from adjusted net income
because non-cash equity grants made at a certain price and point in time do not
necessarily reflect how our business is performing at any particular time and
stock based compensation expense is not a key measure of our core operating
performance. We also believe that amortization expense can vary substantially
from company to company and from period to period depending upon their financing
and accounting methods, the fair value and average expected life of their
acquired intangible assets, their capital structures and the method by which
their assets were acquired. Therefore, we have excluded amortization expense
from adjusted net income. We also believe one-time non-recurring gains, losses,
and impairment charges do not necessarily reflect how our investments and
business are performing. We believe that adjusted net income and adjusted net
income per diluted share are appropriate supplemental measures of financial
performance and may be useful to investors to understanding our operating
performance on a consistent basis. Adjusted net income and adjusted net income
per diluted share are not intended to be a substitute for GAAP financial
measures and should not be used as such.
Set forth below is a reconciliation of adjusted net income and adjusted net
income per diluted share to the most directly comparable GAAP measure, net
income and net income per diluted share (in thousands, except per share
amounts)*:

                                          Three Months Ended September 30,           Nine Months Ended September 30,
(Unaudited)                                   2019                 2018                 2019                 2018
Net income                             $       225,805$       157,694$       659,563$       509,483
Stock based compensation                        15,273                20,702              46,120                54,207
Amortization of intangible assets,
premium on receivables, deferred
financing costs and discounts                   52,907                55,482             163,048               173,239
Impairment of investment                             -                 7,147              15,660                 7,147
Legal settlements                                    -                     -               3,474                     -
Restructuring costs                                  -                   481                   -                 3,917
Unauthorized access impact                           -                   322                   -                 2,065
Total pre-tax adjustments                       68,180                84,134             228,302               240,575
Income tax impact of pre-tax
adjustments at the effective tax
rate1                                          (15,177 )             (17,977 )           (49,023 )             (54,904 )
Impact of investment sale, other
discrete item and tax reform2                    1,782                22,731             (63,098 )              22,731
Adjusted net income                    $       280,590$       246,582$       775,744$       717,885
Adjusted net income per diluted
share                                  $          3.10       $          2.68     $          8.62       $          7.75
Diluted shares                                  90,522                92,081              89,976                92,671


1 Excludes the results of the Company's investments on our effective tax rate,
as results from our investments are reported within the consolidated statements
of income on a post-tax basis and no tax-over-book outside basis differences
related to our investments reversed during the periods. Also excludes the impact
of a Section 199 tax adjustment related to a prior tax year on the 2019
effective income tax rate.
2 Represents the impact to taxes from the disposition of our investment in
Masternaut of $64.9 million in the second quarter of 2019 and impact of tax
reform adjustments included in our effective tax rate of $22.7 million in the
third quarter of 2018, respectively. Also, includes the impact of a Section 199
adjustment related to a prior tax year in the third quarter of 2019 results of
$1.8 million.
*Columns may not calculate due to rounding.






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Special Cautionary Notice Regarding Forward-Looking Statements
This report contains forward-looking statements within the meaning of the
federal securities laws. Statements that are not historical facts, including
statements about FleetCor's beliefs, expectations and future performance, are
forward-looking statements. Forward-looking statements can be identified by the
use of words such as "anticipate," "intend," "believe," "estimate," "plan,"
"seek," "project" or "expect," "may," "will," "would," "could" or "should," the
negative of these terms or other comparable terminology.
These forward-looking statements are not a guarantee of performance, and you
should not place undue reliance on such statements. We have based these
forward-looking statements largely on preliminary information, internal
estimates and management assumptions, expectations and plans about future
conditions, events and results. Forward-looking statements are subject to many
uncertainties and other variable circumstances, such as delays or failures
associated with implementation of, or adaption to, new technology; fuel price
and spread volatility; changes in credit risk of customers and associated
losses; the actions of regulators relating to payment cards or resulting from
investigations; failure to maintain or renew key business relationships; failure
to maintain competitive product offerings; failure to maintain or renew sources
of financing; failure to complete, or delays in completing, anticipated new
partnership and customer arrangements or acquisitions and to successfully
integrate or otherwise achieve anticipated benefits from such partnership and
customer arrangements or acquired businesses; failure to successfully expand
business internationally; other risks related to our international operations,
including the potential impact to our business as a result of the United
Kingdom's referendum to leave the European Union; the impact of foreign exchange
rates on operations, revenue and income; the effects of general economic and
political conditions on fueling patterns and the commercial activity of fleets;
risks related to litigation; the impact of new tax regulations and the
resolution of tax contingencies resulting in additional tax liabilities; as well
as the other risks and uncertainties identified under the caption "Risk Factors"
in our Annual Report on Form 10-K for the year ended December 31, 2018 filed
with the Securities and Exchange Commission on March 1, 2019 and in our
Quarterly Report on Form 10-Q for the three months ended March 31, 2019 filed
with the Securities and Exchange Commission on May 10, 2019, Quarterly Report on
Form 10-Q for the three months ended June 30, 2019 filed with the Securities and
Exchange Commission on August 9, 2019 and this Quarterly Report. These factors
could cause our actual results and experience to differ materially from any
forward-looking statement. The forward-looking statements included in this
presentation are made only as of the date hereof. We do not undertake, and
specifically disclaim, any obligation to update any such statements as a result
of new information, future events or developments, except as specifically stated
or to the extent required by law. You may get FLEETCOR'sSecurities and Exchange
Commission ("SEC") filings for free by visiting the SEC web site at www.sec.gov.
This report includes non-GAAP financial measures, which are used by the Company
and investors as supplemental measures to evaluate the overall operating
performance of companies in our industry. By providing these non-GAAP financial
measures, together with reconciliations, we believe we are enhancing investors'
understanding of our business and our results of operations, as well as
assisting investors in evaluating how well we are executing strategic
initiatives. See "Management's Use of Non-GAAP Financial Measures" elsewhere in
this Quarterly Report on on Form 10-Q for additional information regarding these
GAAP financial measures and a reconciliation to the nearest corresponding GAAP
measure.

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