Business Context and Reporting Period
This Form 8-K filing by WEX Inc. reports on events occurring on September 9, 2014, with the report dated September 15, 2014. The filing details the extension of the Company's fuel-price risk management program through the execution of derivative contracts.
Key Financial Metrics
This filing does not report revenue, profit, cash flow, margins, debt, or liquidity metrics. It focuses exclusively on the terms of a specific hedging arrangement.
- Instrument Type: Costless collar (purchase of put options and sale of call options).
- Underlying Assets: Wholesale gasoline and retail diesel fuel.
- Counterparties: Wells Fargo Bank, N.A. and Merrill Lynch Commodities, Inc.
- Aggregate Notional Amount: 11,824,246 gallons.
- Price Floor: Weighted average retail floor of approximately $3.28 per gallon.
- Price Ceiling: Weighted average retail ceiling of approximately $3.34 per gallon.
- Expiration: Monthly settlements during the last two quarters of 2015 and the first quarter of 2016.
Material Changes
The filing describes the establishment of new derivative contracts to manage fuel price volatility. There is no comparative financial data provided in this document to assess changes in financial performance versus prior periods.
Outlook, Risks, and Management Commentary
Management has extended its existing fuel-price risk management program to lock in a narrow price range for fuel costs over the next 18 months. The contracts are settled based on the New York Mercantile Exchange's New York Harbor Reformulated Gasoline Blendstock for Oxygenate Blending and the U.S. Department of Energy's weekly retail on-highway diesel fuel price. The filing incorporates by reference a news release titled "WEX Extends Its Existing Fuel-Price Risk Management Program."
Investor Verification Checklist
- Verify the impact of the $3.28 to $3.34 price collar on future operating margins if market fuel prices deviate significantly from this range.
- Confirm the total notional exposure of 11,824,246 gallons relative to the Company's total fuel volume requirements.
- Review the full text of the news release (Exhibit 99.1) for additional strategic context regarding the risk management program.
- Monitor future filings for any early termination or modification of these contracts.