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Wright Express Extends Its Existing Fuel-Price Risk Management Program And Announces Changes To The Program

Stocks in this article: WXS

Wright Express Corporation (NYSE: WXS), a leading global provider of value-based business payment processing and information management solutions, announced today that it has extended its existing fuel-price risk management program through the first quarter of 2014.

As part of the Company’s regular review of its hedging strategy and in light of recent corporate acquisitions, it is modifying its program beginning in the third quarter of 2013. Specifically, the amount of fuel hedged has been reduced from approximately 80% to 60% of fuel-price-related earnings exposure, while maintaining the use of a costless collar.

On September 17, 2012, the Company purchased instruments to cover a portion of its anticipated domestic fuel-price-related earnings exposure for the third and fourth quarters of 2013, and first quarter of 2014. At this time, Wright Express has hedged approximately 60% of its estimated exposure through the third-quarter of 2013, 40% of its estimated fourth-quarter 2013 exposure and 20% of its estimated first-quarter 2014 exposure. Going forward, the Company intends to hedge approximately 60% of its domestic fuel-price-related earnings exposure in every quarter on a rolling basis. Since the Company’s Fleet One acquisition has not closed, the Company did not include Fleet One exposure in the September 17, 2012 purchase.

The instruments are designed to enhance the visibility and predictability of the Company's future earnings. The program uses instruments that create a "costless collar" based upon both the U.S. Department of Energy's weekly diesel fuel price index and NYMEX unleaded gasoline contracts. The September 17 purchase locked in a fuel price range of approximately $3.41 to $3.47 per gallon. The following table states the approximate range of the collar and percentage of fuel-price-related earnings exposure:

   

Q3 2012

 

Q4 2012

 

Q1 2013

 

Q2 2013

  Q3 2013   Q4 2013   Q1 2014
Average low end of range   3.45   3.46   3.42   3.44   3.47   3.41   3.41
Average top end of range   3.51   3.52   3.48   3.50   3.53   3.47   3.47
Approximate % locked in   80%   80%   80%   80%   60%   40%   20%

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