Business Context and Reporting Period
Company: Wright Express Corporation (WEX Inc.)
Filing Type: Form 8-K (Current Report)
Date of Report: August 26, 2009
Event Date: August 26, 2009 (Transaction execution); August 31, 2009 (Press release)
Context: The Company entered into a material definitive agreement to extend its fuel-price risk management program.
Key Financial Metrics and Transaction Details
This filing reports a specific hedging transaction rather than periodic financial results (revenue, profit, cash flow). Key metrics related to the transaction include:
- Instrument Type: Costless collar (purchased put options, sold call options).
- Counterparty: Bank of America, N.A.
- Underlying Assets: Wholesale price of gasoline and retail price of diesel fuel.
- Notional Amount: Approximately 9 million gallons of gasoline and diesel fuel.
- Price Floor: Weighted average retail floor price of approximately $2.70 per gallon.
- Price Ceiling: Weighted average retail ceiling price of approximately $2.76 per gallon.
- Expiration: Monthly basis during the last two quarters of 2010 and the first quarter of 2011.
- Settlement Basis: NYMEX New York Harbor Reformulated Gasoline Blendstock and U.S. DOE weekly retail on-highway diesel fuel price.
Material Changes Versus Prior Period
The filing does not provide comparative financial data or a discussion of material changes in revenue, profit, or margins versus prior periods. The material change reported is the extension of the existing fuel-price risk management program through new derivative contracts.
Guidance, Outlook, and Risks
Management Commentary: The Company issued a press release on August 31, 2009, announcing the extension of its fuel-price risk management program. The transaction is designed to be a "costless collar," implying no upfront premium cost to the Company.
Risks and Contingencies: The primary risk addressed is fuel price volatility. The contracts limit exposure by establishing a price floor and ceiling for the specified period. The filing does not disclose other specific risks or contingencies beyond the terms of the derivative contracts.
Key Facts for Investor Verification
- Verify the impact of the $2.70 floor and $2.76 ceiling on future fuel cost margins relative to current market prices.
- Confirm the total volume of fuel consumption expected during the contract period (Q3-Q4 2010 and Q1 2011) to assess the hedge's coverage ratio.
- Review the full text of the August 31, 2009 press release (Exhibit 99.1) for additional strategic context.
- Monitor future filings for any mark-to-market adjustments or settlements related to these derivative contracts.