WEX - 10-K annual report

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10-K or any amendment to this

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed using the closing price of the common stock on June 30, 2006 was $1,155,012,719 (for purposes of this calculation, directors, officers and 10 percent or greater stockholders are assumed to be affiliates).

There were 40,442,677 shares of common stock $0.01 par value outstanding as of February 16, 2007.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive Proxy Statement for the 2007 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K.

          All references to “we,” “us,” “our,” “Wright Express,” or the “Company,” in the Annual Report on Form 10-K mean Wright Express Corporation and all entities owned or controlled by Wright Express Corporation, except where it is clear that the term means only Wright Express Corporation.

          All references to “Cendant Corporation,” “Cendant,” or “our former parent company” in the Annual Report on Form 10-K mean Cendant Corporation, our former parent company that, on February 22, 2005, divested 100 percent of its ownership interest in Wright Express Corporation through an initial public offering. During 2006, Cendant Corporation became Avis Budget Group Inc., also referred to as “Avis” in the Annual Report on Form 10-K. As a result, the Wright Express Corporation Tax Receivable Agreement with Cendant has been transferred to Avis.

          Wright Express is a leading provider of payment processing and information management services to the U.S. commercial and government vehicle fleet industry. Wright Express provides these services for approximately 295,000 commercial and government fleets containing 4.3 million vehicles. Wright Express markets these services directly, as well as through more than 125 strategic relationships, and offers a MasterCard-branded corporate card.

          We collect a broad array of information at the point of sale including the amount of the expenditure, the identity of the driver and vehicle, the odometer reading, the identity of the fuel or vehicle maintenance provider and the items purchased. We use this information to provide fleets with purchase controls, comprehensive information,

and analytical tools to effectively manage their vehicle fleets and control costs. We provide value to our customers by providing customized offerings with accepting merchants, processing payments and providing unique information management services to our fleets.

          Over the past 20 years we have built our network to have site acceptance at over 90 percent of the nation’s retail fuel locations and over 45,000 vehicle maintenance locations. Our network, which is deployed at fuel and maintenance locations that use our proprietary software, is referred to as “closed” because only Wright Express transactions can be processed in this network. We believe our network is one of the largest closed fuel and vehicle maintenance networks of its kind, which allows us to offer customers broad site acceptance. Our closed network also affords us access to a higher level of fleet-specific information and control than is widely available on the networks of MasterCard, Visa, American Express or Discover. This closed network allows us to improve and refine the information reporting we provide to our fleet customers and strategic relationships.

          The vehicle maintenance portion of our proprietary closed network, which we refer to as the Wright Express Service Network, fulfills fleets’ vehicle maintenance needs, such as roadside service and assistance, replacement tires, glass, brakes and mufflers, oil changes and car washes.

          On February 16, 2005, Wright Express LLC, a Delaware limited liability company, converted into Wright Express Corporation, a Delaware corporation, and 100 percent of the ownership interests in Wright Express LLC were converted into 40 million shares of common stock and 100 shares of non-voting convertible, redeemable preferred stock. On the same day, our former corporate parent sold all 40 million shares of common stock in an initial public offering (“IPO”) and all 100 shares of non-voting convertible, redeemable preferred stock in a private placement.

          Our operations are organized into the following operating segments, which are discussed in greater detail in Item 8, Note 22, “Segment Information,” in the accompanying consolidated financial statements:

          Wright Express Corporation owns all of the outstanding shares of Wright Express Financial Services Corporation (“FSC”), a Utah industrial bank, which began operations in June 1998. Under FSC’s bank charter, generally, we do not need to be separately licensed in individual states in order to extend credit to our customers. FSC approves the customer applications for most of the Company’s funded programs and is the issuing bank for the Company’s MasterCard programs. FSC has an independent board of directors. FSC owns all of the outstanding shares of Wright Express Canada Ltd. (“WEXCanada”). WEXCanada was incorporated in January 2007 to assist us in funding transactions with Canadian companies. We received all necessary approvals to commence operations by November 2006.

     Payment processing

          In a payment processing transaction we pay the purchase price for the fleet customer’s transaction, less our payment processing fees, to the fuel or vehicle maintenance provider, and we collect the total purchase price from the fleet customer, typically within one month from the billing date. Payment processing fees are typically based on a percentage of the aggregate dollar amount of the customer’s purchase. We provide short-term funding, through

FSC, of the expenditure for transactions made for fleet customers in our direct channel and certain fleet customers of our strategic relationships, which in 2006 accounted for approximately 181 million payment processing transactions.

     Transaction processing

          In a transaction processing transaction we earn a fixed fee per transaction and do not typically provide short-term funding. Fleet customers of our strategic relationships conducted over 58 million transaction processing transactions in 2006.

     Information management

          We provide standard and customized information to customers through monthly vehicle analysis reports, custom reports and our website, WEXOnline^®. These reports contain information about each transaction by driver and vehicle. We also flag any unusual transactions or transactions that fall outside of pre-established parameters in these reports. Through our website, WEXOnline^®, customers can access their account information, including their account history and recent transactions, and download details concerning current and past transactions. They can quickly access, use and download this information to manage and track the usage and efficiency of their fleets’ vehicles, monitor driver behavior and spending, track maintenance schedules and more effectively manage fleet costs. The reports we provide to customers help them reduce the amount of administrative time they spend in recording and monitoring expenses.

          We enable our customers to monitor and control their fleets’ expenditures. Through WEXOnline^®, fleet managers can set pre-determined limits on the amount of money their drivers can charge, the frequency with which their drivers can purchase fuel, the type of products and services that their drivers can purchase and the time of day or days when their drivers can make purchases. In addition, through WEXOnline^®, fleet managers can perform real-time modifications to any pre-determined limits or add or remove driver identification numbers and vehicle cards in response to changes or to mitigate risk of unauthorized transactions. They also can elect to be notified by email when limits are exceeded in eight purchase categories, including limits on transactions within a time range, gallons per day and allowable fuel types. Our purchase controls allow fleet drivers to purchase essential items and services when needed, but deter them from making excessive or unauthorized purchases.

     Account management

          We provide the following account management services:

          According to Havill & Company, Inc.’s most recent U.S. Commercial Fleet Market Forecast, published in February 2005, there are approximately 41 million fleet vehicles in the United States. Fleet vehicles include automobiles and trucks used by businesses or government agencies. We are not aware of any more recently published data on industry statistics.

          Vehicle fleets are categorized by vehicle type and fleet size. Vehicle types include heavy trucks (with a gross vehicle weight greater than 19,500 lbs.), medium trucks (with a gross vehicle weight between 10,000 and 19,500 lbs.), light trucks (with a gross vehicle weight below 10,000 lbs.) and automobiles. The fleets for which we provide services are predominantly comprised of medium trucks, light trucks and automobiles.

          The following table categorizes commercial and government trucks fleets by size and weight class:

          The following table categorizes commercial and government automobiles fleets by size:

          The following table categorizes fuel consumption and expenditures by commercial and government fleets by vehicle type:

          We use derivative instruments to manage the impact of volatility in fuel prices. We enter into put and call option contracts (“Options”) based on the wholesale price of unleaded gasoline and retail price of diesel fuel. These contracts expire on a monthly basis according to the schedule below. The Options are intended to lock in a range of prices during any given quarter on a portion of our forecasted earnings subject to fuel price variations. Our fuel price risk management program is designed to purchase derivative instruments to manage the Company’s fuel price-related earnings exposure. We plan to continue locking in about 90 percent of our earnings exposure every quarter, on a rolling basis. The following table presents information about the Options as of January 31, 2007:

          The Options limit the impact fuel price fluctuations have on our cash flows. The Options that we have entered into:

          Our fuel price derivatives for gasoline are based on a wholesale index; our fuel price derivatives for diesel fuel are based on a retail index. We earn our payment processing revenues based on retail fuel prices. Differences between the indices and the actual retail prices may create a mismatch, which may result in an increase or decrease to our realized gains and losses.

          Wright Express strives to be the leading information solutions provider and payment processor for all sized fleets and mid-size businesses seeking specific corporate card products. We believe that the opportunities in the fleet markets vary by size and that these segments are optimally acquired and accessed through multiple marketing channels. Management currently estimates that approximately one-third of the 41 million commercial and government fleet vehicles are purchasing their fuel on a fleet card offering. Of the estimated two thirds of the market not using a fleet card, we believe more than half are still purchasing with cash. The market presents us with strong organic growth potential. Our strategy is to drive growth in this market by focusing on a strong, effective and comprehensive sales and marketing effort in the development of products and services that meet the needs of fleets of all sizes.

          Our approach is to leverage our core competitive strengths – sales and marketing, portfolio management, customer service and product differentiation — to improve our performance in acquiring and retaining customers, and in creating products that add value by satisfying new and existing customers’ needs. Our fleet card solutions cut across the whole market and target fleets of all sizes and all vehicle types.

          With the small fleet segment, which we consider to be fleets of less than 25 vehicles, there is less awareness of fleet card products. We are developing sales and marketing capabilities that target this segment, and we have expertise in the data modeling and direct marketing techniques required to identify and connect with small fleets. Because of this expertise, we believe there is potential for long-term organic growth in our core fleet card solutions business through our direct, co-brand, and private label marketing channels.

          In the mid-size business and small fleet market, we continue to provide new services, aggregate services and data to provide information and solutions that differentiate us from our competitors.

          In the large fleet market there is a strong awareness of fleet card offerings. We are focused on continuing to develop innovative products and services that meet the needs of this market, as well as providing customized information management to serve the complex needs of larger businesses.

          In addition, we are looking at the marketplace for potential acquisitions and/or alliances that can accelerate our growth or enhance our strategic position. We expect to focus on transactions or relationships in contiguous markets that complement our core competencies. We are seeking out opportunities that are fleet, payment processing, or information-solutions related and which we believe have the potential to drive growth.

          We market our payment processing and information management services to fleets through three primary channels: direct, co-branded and private label. Our experienced inside and outside sales forces and our marketing team, which have expertise in direct marketing, database analysis and marketing strategy and execution, drive our sales and marketing efforts. We also utilize industry tradeshows, advertising and other awareness campaigns to market our services.

          By collecting and analyzing customer data acquired for more than 20 years, we have created a detailed profile of representative fleet customers and have also developed a proprietary database that allows us to better market to the fleet industry. We provide market opportunity analyses, customer acquisition models and detailed marketing plans to our sales force and the sales forces of companies with which we have co-branded or private label relationships.

     Direct

          In our direct channel we market our services, branded with the Wright Express name, directly to commercial and government vehicle fleets, which allows us to have a direct relationship with our fleet customers. As of December 31, 2006, we had approximately 88,000 fleet customers in our direct channel, with approximately 1.9 million total vehicles.

          The fleet customers in our direct channel include fleets of all sizes and vehicle categories. We use our inside sales force to attract small fleets, such as contracting, landscaping and plumbing businesses. Our mid-size fleet customers are typically regional businesses, such as dairies, beverage companies and grocery chains. We use our outside sales force to market to these customers. Our large fleet customers consist of national and large regional fleets. In marketing our services to these customers, we emphasize our ability to offer national site acceptance, a high level of customer service, and on-line tools to monitor, control and customize their fleet management capabilities. To attract and retain large fleet customers we use both our outside sales force, which focuses on the acquisition of new business, and internal account managers, who focus on servicing and growing revenue from existing customers.

     Co-branded

          In our co-branded channel we market our services for, and in collaboration with, approximately 100 fleet management companies and automotive manufacturers using their brand names and our Wright Express logo. These companies seek to offer our payment processing and information management services to their fleet customers as part of a larger package of fleet services that they provide. As of December 31, 2006, we had approximately 27,000 fleet customers in our co-branded channel, with approximately 1.2 million total vehicles.

          We use this channel to reach the small, mid-size and large fleet customers of our co-branded relationships. We are able to expand the base of customers to whom we provide our services by combining the marketing and sales efforts of our own sales force with the efforts of the sales forces of our co-branded relationships.

     Private label

          In our private label channel we market our services for, and in collaboration with, over 20 fuel retailers, using only their brand names. The fuel retailers with which we have formed strategic relationships offer our payment processing and information management services to their fleet customers in order to establish and enhance customer loyalty. These fleets use these services to purchase fuel at locations of the fuel retailer with whom we have the private label relationship. As of December 31, 2006, we had approximately 178,000 fleet customers, in our private label channel, with approximately 1.2 million total vehicles.

          The customers in this channel are typically small fleets. The fleet drivers often do not travel beyond a defined geographic area and are not unduly burdened by limiting their fuel purchases to the fuel locations of a particular fuel retailer within that area. We primarily rely on the marketing efforts of our private label relationships to attract customers in this channel; however, many of these fuel retailers also rely on our sales and marketing expertise.

          We offer the following MasterCard products:

          The Company has a strong competitive position in its fleet segment. Our product features and extensive account management services are key factors behind our leadership position in the fleet industry. We face considerable competition in both business segments. Our competitors vie with us for prospective direct fleet customers as well as for companies with which we form strategic relationships. We compete with companies that perform payment and transaction processing or similar services. Financial institutions that issue Visa, MasterCard and American Express credit and charge cards currently compete against us primarily in the small fleet category of our fleet segment and in the corporate charge card category of our MasterCard segment.

          In both of our operating segments the most significant competitive factors are breadth of features, functionality, price and servicing capability.

          The Company’s wholly owned bank subsidiary, FSC, is a Utah industrial bank that began operations in June 1998. Through FSC, the Company is able to issue certificates of deposit that support its ability to fund transactions. FSC approves the customer applications for most of the Company’s funded programs and is the issuing bank for the Company’s MasterCard programs. FSC has an independent board of directors.

          The Company and FSC are subject to certain federal and state laws and regulations governing insured depository institutions and their affiliates. FSC is subject to supervision and examination by both the Utah Department of Financial Institutions (“UTDFI”), and the FDIC. The Company and FSC are also subject to certain restrictions on transactions with affiliates set forth in the Federal Reserve Act. The Company is subject to anti-tying provisions in the Bank Holding Company Act. Utah laws and regulations limit the loans FSC may make to one borrower and the types of investments FSC may make.

          Set forth below is a description of the material elements of the laws, regulations, policies and other regulatory matters affecting Wright Express.

     Restrictions on intercompany borrowings and transactions

          The Federal Reserve Act (“FRA”) restricts the extent to which the Company may borrow or otherwise obtain credit from, sell assets to, or engage in certain other transactions with FSC. In general, these restrictions require that any such extensions of credit by FSC must be fully secured. There is no limit on such transactions to the extent they are secured by a cash deposit or pledged United States government securities. It is also possible to pledge designated amounts of other specified kinds of collateral if the aggregate of such transactions are limited to 10 percent of FSC’s capital stock and surplus with respect to any single affiliate, and to 20 percent of FSC’s capital stock and surplus with respect to all affiliates if FSC had more than one affiliate.

     Restrictions on dividends

          The FRA also limits the dividends FSC may pay to the Company. In addition, FSC is subject to various regulatory policies and requirements relating to the payment of dividends, including requirements to maintain capital above regulatory minimums. A state or federal regulatory authority can determine, under certain circumstances relating to the financial condition of a bank, that the payment of dividends would be an unsafe or unsound practice and can prohibit payment. FSC may not pay a dividend to us if it is undercapitalized or would become undercapitalized as a result of paying the dividend. Utah law permits an industrial bank to pay dividends only from undivided earnings.

     Company obligations to FSC

          Any non-deposit obligation of FSC to the Company is subordinate, in right of payment, to deposits and other indebtedness of FSC. In the event of the Company’s bankruptcy, any commitment by the Company to a federal bank regulatory agency to maintain the capital of FSC will be assumed by the bankruptcy trustee and entitled to priority of payment.

     Restrictions on ownership of Wright Express common stock

          FSC, and therefore the Company, is subject to bank regulations that impose requirements on entities that control 5 percent or more of Wright Express common stock. These requirements are discussed in detail in ITEM 1A – RISK FACTORS under the heading “If any entity controls 5 percent or more of our common stock and such entity has caused a violation of applicable banking laws by its failure to obtain any required approvals prior to acquiring such common stock, we will have the power to restrict such entity’s ability to vote such shares.”

          We pursue the protection of our trademarks and patents by applying to register them in the United States. We have obtained federal trademark registration of a number of marks, includingWright Express^®, WEX^®, WEXOnline^® and WEXIndex^®. In addition, we seek to protect our proprietary rights through the use of confidentiality agreements with employees, consultants, advisors and others.

          As of December 31, 2006, we had 685 employees. None of our employees are subject to a collective bargaining agreement.

          The Company’s principal executive offices are located at 97 Darling Avenue, South Portland, ME 04106, telephone (207) 773-8171, and Internet address www.wrightexpress.com. The Company’s annual, quarterly and current reports, proxy statements and certain other information filed with the SEC, as well as amendments thereto, may be obtained free of charge from our web site. These documents are posted to our web site as soon as reasonably practicable after we have filed or furnished these documents with the SEC. These documents are also available at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. The Company’s Audit Committee Charter, Compensation Committee Charter, Governance Committee Charter, Corporate Governance Guidelines and codes of conduct are available without charge through the “Corporate Governance” portion of the Investor Relations page of the Company’s web site, as well.

          Copies will also be provided to any shareholder upon written request to Investor Relations at the address above or by telephone at (866) 230-1633.

          The Company’s Internet site and the information contained therein are not incorporated into this Form 10-K.

          Our Chief Executive Officer and Chief Financial Officer have provided the certification required by Rule 13a-14(a) under the Exchange Act of 1934, as amended, copies of which are filed as exhibits to this Form 10-K. In addition, an annual Chief Executive Officer certification was submitted by our Chief Executive Officer to the New York Stock Exchange on April 11, 2006, in accordance with the New York Stock Exchange’s listing requirements.

     The majority of our revenues are related to the dollar amount of fuel purchased by our customers, and, as a result, volatility in fuel prices could have an adverse effect on our payment processing revenues.

          In 2006, approximately 68 percent of our total revenues were attributable to fees paid to us by fuel and vehicle maintenance providers based on a negotiated percentage of the purchase price paid by our customers. Our customers primarily purchase fuel. Accordingly, our revenues are largely dependent on fuel prices, which are prone to significant volatility. For example, we estimate that during 2006, a 10 cent decline in average fuel prices below average actual prices would have resulted in approximately a $7.9 million decline in 2006 revenue. We have benefited from historically high fuel prices during most of 2006, as well as all of 2005 and 2004, and a significant decline in the price of fuel in future periods could have a material adverse effect on our total revenues.

          We have implemented a fuel price derivatives program to normalize our cash flows related to fuel price volatility. This program is designed to reduce volatility in cash flows but may increase the volatility of our operating results. See an explanation of our program in our “Fuel Price Derivatives” discussion in ITEM 1 – BUSINESS.

          Fuel prices are dependent on several factors, all of which are beyond our control. These factors include, among others:

     Derivative transactions may not adequately stabilize our cash flows and may cause volatility in our earnings.

          Because the majority of our revenues are subject to fuel price volatility, we utilize fuel price sensitive derivative instruments to manage our exposure to this volatility by seeking to limit fluctuations in our cash flows. For a more detailed discussion of these derivative instruments see our “Fuel Price Derivatives” discussion in ITEM 1 – BUSINESS. These instruments may expose us to the risk of financial loss if, for example, the counterparties fail to perform under the contracts governing those arrangements, we unwind our position before the expiration of the contract or there is a significant change in fuel prices. The success of our fuel price derivatives program depends upon, among other things, our ability to forecast the amount of fuel purchased by fleets using our services. To the extent our forecasts are inaccurate these derivative contracts may be inadequate to protect us against significant changes in fuel prices or over-expose us to fuel price volatility. Realized and unrealized gains and losses on these contracts will be recorded each quarter to reflect changes in the market value of the underlying contracts. As a result, our quarterly net income may be prone to significant volatility.

     Our industry has become increasingly competitive, which makes it more difficult for us to maintain profit margins at historical levels.

          We face and may continue to face increased levels of competition in each category of the overall industry from several companies that seek to offer competing capabilities and services. Historically, we have primarily been able to provide customers with a unique spectrum of services and capabilities and, therefore, we have not considered price to be the exclusive or even the primary basis on which we compete. As our competitors have continued to

develop their service offerings, it has become increasingly more difficult for us to compete solely on the basis of superior capabilities or service. In some areas of our business we have been forced to respond to competitive pressures by reducing our fees. We have seen erosion of our historical profit margins as we use our pricing strategies to encourage existing strategic relationships to sign long-term contracts. If these trends continue and if competition intensifies, our profitability may be adversely impacted.

          While we have traditionally offered our services to all categories of the fleet industry, some of our competitors have successfully garnered significant share in particular categories of the overall industry. To the extent that our competitors are regarded as leaders in specific categories, they may have an advantage over us as we attempt to further penetrate these categories.

          We also face increased competition in our efforts to enter into new strategic relationships and renew existing strategic relationships on the same terms.

     Our business and operating results are dependent on several key strategic relationships, the loss of which could adversely affect our results of operations.

          Revenue we received from services we provided to our top five strategic relationships accounted for approximately 20 percent of our total revenues in 2006. Accordingly, we are dependent on maintaining our strategic relationships and our results of operations would be lower in the event that these relationships were terminated.

          Likewise, we have agreements with the major oil companies and fuel retailers whose locations accept our payment processing services. The termination of any of these agreements would reduce the number of locations where our payment processing services are accepted; therefore, we could lose our competitive advantage and our operating results could be adversely affected.

     Decreased demand for fuel and other vehicle products and services could harm our business and results of operations.

          Our results of operations are dependent on the number of transactions we process and the dollar value of those transactions. We believe that our transaction volume is correlated with general economic conditions in the United States. A downturn in the United States economy is generally characterized by reduced commercial activity and, consequently, reduced purchasing of fuel and other vehicle products and services.

          In addition, demand for fuel and other vehicle products and services may be reduced by other factors that are beyond our control, such as the development by vehicle manufacturers and adoption by our fleet customers of vehicles with greater fuel efficiency or alternative fuel sources.

     Our failure to effectively implement new technology could jeopardize our position as a leader in our industry.

          As a provider of information management and payment processing services, we must constantly adapt and respond to the technological advances offered by our competitors and the informational requirements of our customers, including those related to the Internet, in order to maintain and improve upon our competitive position. We may not be able to expand our technological capabilities and service offerings as rapidly as our competitors, which could jeopardize our position as a leader in our industry.

     We are dependent on technology systems and electronic communications networks managed by third parties, which could result in our inability to prevent service disruptions.

          Our ability to process and authorize transactions electronically depends on our ability to electronically communicate with our fuel and vehicle maintenance providers through point-of-sale devices and electronic networks that are owned and operated by third parties. The electronic communications networks upon which we depend are often subject to disruptions of various magnitudes and durations. Any severe disruption of one or all of these networks could impair our ability to authorize transactions or collect information about such transactions, which, in turn, could harm our reputation for dependable service and adversely affect our results of operations. In addition, our ability to collect enhanced data relating to our customers’ purchases may be limited by the use of older point-of-sale devices by fuel and vehicle maintenance providers. To the extent that fuel and vehicle maintenance providers within our network are slow to adopt advanced point-of-sale devices, we may not be able to offer the services and capabilities our customers demand.

     If we fail to adequately assess and monitor credit risks of our customers, we could experience an increase in bad debt expense.

          We are subject to the credit risk of our customers, many of which are small to mid-sized businesses. We use various formulae and models to screen potential customers and establish appropriate credit limits, but these formulae and models cannot eliminate all potential bad credit risks and may not prevent us from approving applications that are fraudulently completed. Increases in average fuel prices can require us to periodically increase credit limits for a significant number of our customers. Moreover, businesses that are good credit risks at the time of application may become bad credit risks over time and we may fail to detect such change. In times of economic recession, the number of our customers who default on payments owed to us tends to increase. If we fail to adequately manage our credit risks, our bad debt expense could be significantly higher than it has been in the past.

     The loss or suspension of the charter for our Utah industrial bank or changes in regulatory requirements could be disruptive to operations and increase costs.

          FSC’s bank regulatory status enables FSC to issue certificates of deposit, accept money market deposits and borrow federal funds. These funds are used to support our payment processing operations, which require the Company to make payments to fuel and maintenance providers on behalf of fleets. FSC operates under a uniform set of state lending laws, and its operations are subject to extensive state and federal regulation. FSC is regulated and examined by The Utah Department of Financial Institutions on the state level, and the Federal Deposit Insurance Corporation on the federal level. Continued licensing and federal deposit insurance are subject to ongoing satisfaction of compliance and safety and soundness requirements. FSC must be well capitalized and satisfy a range of additional capital requirements. If FSC were to lose its bank charter, Wright Express would either outsource its credit support activities or perform these activities itself, which would subject the Company to the credit laws of each individual state in which Wright Express conducts business. Any such change would be disruptive to Wright Express’ operations and could result in significant incremental costs. In addition, changes in the bank regulatory environment, including the implementation of new or varying measures or interpretations by the state of Utah or the U.S. federal government, may significantly affect or restrict the manner in which the Company conducts business in the future.

     We may not be able to adequately protect the data we collect about our customers, which could subject us to liability and damage our reputation.

          We collect and store data about our customers and their fleets, including bank account information and spending data. Our customers expect us to keep this information in our confidence. We may experience attempts by experienced programmers or “hackers” to penetrate our network security. A party who is able to penetrate our network security could misappropriate our proprietary information or cause interruptions in our WEXOnline^® web site. We may be required to expend significant capital and other resources to protect against the threat of such security breaches or to alleviate problems caused by such breaches. Moreover, any security breach or inadvertent transmission of information about our customers could expose us to liability and/or litigation and cause damage to our reputation.

     We may incur substantial losses due to fraudulent use of our charge cards.

          When we fund customer transactions, we may under certain circumstances bear the risk of losses due to fraudulent use of our charge cards, which could be substantial. We do not maintain any insurance to protect us against any such losses.

     In an increasing interest rate environment, interest expense on the unhedged portion of our borrowings on our credit facility will increase and we may not be able to replace our maturing certificates of deposit with new certificates of deposit that carry the same interest rates.

          We had $151 million of indebtedness outstanding at December 31, 2006, under our credit agreement, of which $71 million bears interest at rates that vary with changes in overall market interest rates. Rising interest rates will result in reduced net income.

          The certificates of deposit that our industrial bank subsidiary uses to finance payments to major oil companies carry fixed rates from issuance to maturity. Upon maturity, the certificates of deposit will be replaced by issuing new certificates of deposit to the extent that they are needed to finance payments primarily to oil companies. In a rising interest rate environment, FSC will not be able to replace maturing certificates of deposit with new certificates of deposit that carry the same interest rates. Rising interest rates will result in reduced net income to the extent that certificates of deposit mature and need to be replaced. At December 31, 2006, FSC had outstanding $294.3 million in certificates of deposit maturing within one year and $95.3 million in certificates of deposit maturing within one to three years.

     The debt covenants on our credit facility may restrict our operating flexibility.

          At December 31, 2006, we had outstanding a total of $151 million on our credit facility. The credit agreement contains restrictions on our ability to, among other things:

          The restrictions contained in the credit agreement could inhibit our ability to finance our future operations or capital needs or make acquisitions that may be in our best interest. In addition, our credit agreement requires that we comply with several financial maintenance covenants. Specifically, our credit agreement contains financial covenants requiring us to maintain a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio at the end of each fiscal quarter. The credit agreement requires us to maintain a maximum consolidated leverage ratio of 2.50 to 1.00 at the end of each fiscal quarter until September 30, 2007, 2.00 to 1.00 at the end of each fiscal quarter from October 1, 2007, until September 30, 2008 and 1.50 to 1.00 at the end of each fiscal quarter from October 1, 2008, until the maturity date. The credit agreement also requires us to maintain a minimum consolidated fixed charge coverage ratio of 1.25 to 1.00 at the end of each fiscal quarter until December 31, 2006, and 1.50 to 1.00 at the end of each fiscal quarter until the maturity date. Our ability to comply with these financial requirements and other restrictions may be affected by events beyond our control, and our inability to comply with them could result in a default under our credit agreement. If a default occurs under our credit agreement, the lenders under the revolving credit facility or term loan could elect to declare all of the outstanding borrowings, as well as accrued interest and fees, to be due and payable and require us to apply all of our available cash to repay those borrowings. In addition, a default may result in higher rates of interest and the inability to obtain additional capital.

     Historical transactions with our former parent company may adversely affect our financial statements.

          Historical transactions involving our former parent company, Cendant Corporation, may be reviewed from time to time by external parties that may include, but are not limited to, former subsidiaries or operating companies of Cendant Corporation, as well as government regulatory organizations. The decision by one or more of these organizations to undertake a review is beyond our control. While management does not believe, nor has any knowledge, of any transaction that would be in error or otherwise adjusted, corrections to the financial statements of Cendant Corporation, or its successor or its current or former affiliates, could adversely affect our financial statements.

     Our ability to attract and retain qualified employees is critical to the success of our business and the failure to do so may materially adversely affect our performance.

          We believe our employees, including our executive management team, are our most important resource and, in our industry and geographic area, competition for qualified personnel is intense. If we were unable to retain and attract qualified employees, our performance could be materially adversely affected.

     If any entity controls 5 percent or more of our common stock and such entity has caused a violation of applicable banking laws by its failure to obtain any required approvals prior to acquiring that common stock, we have the power to restrict such entity’s ability to vote shares held by it.

          As owners of a Utah industrial bank, we are subject to banking regulations that require any entity that controls 5 percent or more of our common stock to obtain the prior approval of Utah banking authorities, and any person or entity who controls 10 percent or more of our common stock must obtain the prior approval of federal banking regulators. A failure to comply with these requirements could result in sanctions, including the loss of our Utah industrial bank charter. Our certificate of incorporation requires that if any stockholder fails to provide us with satisfactory evidence that any required approvals have been obtained, we may, or will if required by state or federal regulators, restrict such stockholder’s ability to vote such shares with respect to any matter subject to a vote of our stockholders.

     Provisions in our charter documents, Delaware law and applicable banking law may delay or prevent our acquisition by a third party.

          Our certificate of incorporation, by-laws and our rights plan contain several provisions that may make it more difficult for a third party to acquire control of us without the approval of our board of directors. These provisions include, among other things, a classified board of directors, the elimination of stockholder action by written consent, advance notice for raising business or making nominations at meetings of stockholders, and “blank check” preferred stock. Blank check preferred stock enables our board of directors, without stockholder approval, to designate and issue additional series of preferred stock with such special dividend, liquidation, conversion, voting or other rights, including the right to issue convertible securities with no limitations on conversion, and rights to dividends and proceeds in a liquidation that are senior to the common stock, as our board of directors may determine. These provisions may make it more difficult or expensive for a third party to acquire a majority of our outstanding voting common stock. We also are subject to certain provisions of Delaware law, which could delay, deter or prevent us from entering into an acquisition, including Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in a business combination with an interested stockholder unless specific conditions are met. These provisions also may delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our stockholders receiving a premium over the market price for their common stock.

          In addition, because we own a Utah industrial bank, any purchaser of our common stock who would own 5 percent or more of our common stock after such purchase would be required to obtain the prior consent of Utah banking authorities and any purchaser of our common stock who would own 10 percent or more of our common stock would be required to obtain the consent of federal banking authorities prior to consummating any such

acquisition. These regulatory requirements may preclude or delay the purchase of a relatively large ownership stake by certain potential investors.

     Our stockholder rights plan could prevent you from receiving a premium over the market price for your shares of common stock from a potential acquirer.

          Our board of directors approved a stockholder rights plan, which entitles our stockholders to acquire shares of our common stock at a price equal to 50 percent of the then current market value in limited circumstances when a third party acquires 15 percent or more of our outstanding common stock or announces its intent to commence a tender offer for at least 15 percent of our common stock, in each case, in a transaction that our board of directors does not approve. The existence of these rights would significantly increase the cost of acquiring control of our Company without the support of our board of directors because, under these limited circumstances, all of our stockholders, other than the person or group who caused the rights to become exercisable, would become entitled to purchase shares of our common stock at a discount. The existence of the rights plan could therefore deter potential acquirers and thereby reduce the likelihood that you will receive a premium for your common stock in an acquisition.

          Not applicable.

          All of our facilities are leased, including our 67,000 square foot corporate headquarters in South Portland, Maine. We lease five smaller buildings in the South Portland area. Three of these buildings, totaling 72,000 square feet, are used for technical and customer service employees. We sublease 15,000 square feet of one building to a third party, the 14,000 square feet remaining square footage houses part of our customer service operation. The fifth building is 7,500 square feet and is our warehouse. We lease 11,500 square feet of office space in Salt Lake City, Utah to support our bank operations and a second call center location. These facilities are adequate for our current use. See Item 8, Note 6, “Property, Equipment and Capitalized Software, Net

          As of the date of this filing, we are not involved in any material legal proceedings. We also were not involved in any material legal proceedings that were terminated during the fourth quarter of 2006. However, from time to time, we are subject to other legal proceedings and claims in the ordinary course of business, none of which we believe are likely to have a material adverse effect on our financial position, results of operations or cash flows.

          No matters were submitted to a vote of security holders during the three months ended December 31, 2006.

          The principal market for the Company’s common stock is the New York Stock Exchange (“NYSE”), ticker symbol WXS. The following table sets forth, for the indicated calendar periods, the reported intraday high and low sales prices of the common stock on the NYSE Composite Tape.

          As of February 16, 2007, the closing price of our common stock was $29.13 per share, there were 40,442,677 shares of our common stock outstanding, and there were 6 holders of record of our common stock.

          The Company has not declared any dividends on its common stock since it commenced trading on the NYSE on February 16, 2005. The timing and amount of future dividends will be (i) dependent upon the Company’s results of operations, financial condition, cash requirements and other relevant factors, (ii) subject to the discretion of the Board of Directors of the Company, and (iii) payable only out of the Company’s surplus or current net profits in accordance with the General Corporation Law of the State of Delaware.

          The Company has certain restrictions on the dividends it may pay. These restrictions are discussed in Item 8, Note 11, “Financing Debt” in the accompanying consolidated financial statements. In addition, the Company’s wholly-owned industrial bank subsidiary has certain restrictions with regard to the dividends it may pay to the Company. These restrictions are discussed in this Form 10-K in ITEM 1 – BUSINESS under the caption, “Restrictions on dividends.”

          The Company does not currently intend to pay cash dividends on its common stock in the foreseeable future.

          The following table provides information as of December 31, 2006, with respect to shares of common stock that may be issued under Wright Express 2005 Equity and Incentive Plan, which is the Company’s only equity plan.

          The following table sets forth our summary historical financial information for the periods ended and as of the dates indicated. You should read the following historical financial information along with ITEM 7 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS contained in this Form 10-K and the Consolidated Financial Statements and related notes thereto. The 2003 through 2006 fiscal year financial information included in the table below is derived from audited financial statements:

          This discussion should be read in conjunction with our audited financial statements as of December 31, 2006, and for the three years then ended and the notes accompanying those financial statements. In addition, this discussion contains forward-looking statements which are covered by the Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995 as discussed on page 4 of this Annual Report on Form 10-K.

          Wright Express is a leading provider of payment processing and information management services to the vehicle fleet industry. We collect a broad array of information at the point of sale including the amount of the expenditure, the identity of the driver and vehicle, the odometer reading, the identity of the fuel or vehicle maintenance provider and the items purchased. We use this information to provide fleets with purchase controls, comprehensive information, and analytical tools to effectively manage their vehicle fleets and control costs. Our network, which is deployed at fuel and maintenance locations that use our proprietary software, is referred to as “closed” because only Wright Express transactions can be processed in this network.

          Our operations are organized as follows:

          The Company utilizes its wholly-owned bank subsidiary, Wright Express Financial Services Corporation, a Utah-chartered industrial bank that is regulated, supervised and regularly examined by the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation, to facilitate and manage transactions for vehicle fleets through its proprietary closed network of major oil companies, fuel retailers and vehicle maintenance providers.

         Fleet

          The following table reflects comparative operating results and key operating statistics within our fleet operating segment:

          Payment processing revenue increased $37.0 million for 2006, as compared to 2005. This increase is primarily due to a 13 percent increase in the average price per gallon of fuel as well as a 9 percent increase in the number of payment processing transactions. In addition, gallons of fuel per payment processing fuel transaction increased 2 percent.

          Excluding the purchase of the ExxonMobil fleet receivable accounts on December 27, 2006, our 2006 transaction processing transactions decreased by 3.5 million transactions from the prior year. This is primarily due to conversions of portfolios from transaction processing services to payment processing services and the sale of certain locations primarily by one of our private label partners.

          Finance fees increased $6.3 million for 2006, primarily due to higher average daily account receivable balances subject to late fees. These higher balances can be partially attributed to elevated fuel prices and an increase in the number of payment processing transactions. The increase is also due to the changes we have made to the

formula for calculating balances subject to finance fees and an increase to annual percentage rates used to calculate finance fees.

          Salary and other personnel expenses were flat year over year. We incurred a charge of $5.7 million in the first quarter of 2005 associated with the issuance of (i) common stock in exchange for Cendant restricted stock units, and (ii) options to purchase shares of our common stock in exchange for Cendant stock options held by our employees. These exchanges were concurrent with our initial public offering. In 2006, we experienced increases in salary and other personnel costs of approximately $5.5 million, primarily due to the increases in the sales staff as we enhance product offerings and increase brand awareness, and increases in general staffing requirements necessary to operate under the regulatory environment of a public company.

          Credit losses were $14.8 million in 2006. We measure our credit loss performance by calculating credit losses as a percentage of total fuel expenditures on payment processing transactions (“Fuel Expenditures”). This metric for credit losses was 15.2 basis points of Fuel Expenditures for 2006 compared to 10.8 basis points of Fuel Expenditures for 2005. The change in our credit loss expense is primarily related to amounts subject to loss due to a larger number of transactions and higher fuel prices. Furthermore, we increased reserves related to one customer totaling approximately $1.7 million. Without the reserve for this specific customer, our credit loss would have been 13.4 basis points of total Fuel Expenditures. Last year credit loss was an historic low for the Company. The 5 year historical range is 11 to 22 basis points of Fuel Expenditures.

          Service fees increased $3.1 million for 2006. These increases were primarily related to the following:

          Operating interest expense increased $7.9 million compared to 2005, as we incurred interest expense to finance our receivables arising from our payment processing transactions. The increase in our interest expense results from an increase in weighted average interest rates to 4.9 percent in 2006 from 3.4 percent in 2005. Our average debt balance for 2006 totaled $381.7 million as compared to our average debt balance of $313.7 million for 2005. The average debt balance increased due to higher average fuel prices as well as an increase in the number of transactions processed. Changes in interest rates generally will create volatility in our operating interest expense.

          Financing interest expense, interest on our term loan and the revolving credit facility, is related primarily to the corporate credit facility that we entered into in February 2005 and secondarily to the preferred stock that we issued as part of our initial public offering. Interest expense for 2006 increased $1.5 million over 2005. Interest expense for 2005 reflects approximately ten months of expense as compared to the twelve months of expense in 2006. The difference in the time the debt was outstanding is partially offset by the average debt balance decreasing to $201.6 million in 2006 compared to $244.3 million in 2005. The outstanding balance on our corporate credit facility at December 31, 2006, was $149.8 million. Also contributing to the increase in interest expense during 2006 was an increase in the average one-month LIBOR rate.

          We own fuel price-sensitive derivative instruments that we purchase on a periodic basis to manage the impact of volatility in fuel prices on our cash flows. Our derivative instruments do not qualify for hedge accounting under Statement of Financial Accounting Standards (“SFAS”) No. 133,Accounting for Derivative Instruments and Hedging Activities. Accordingly, gains and losses on our fuel price-sensitive derivative instruments affect our net income. We recognized unrealized gains of $32.2 million in 2006 compared to unrealized losses of $36.7 million in 2005. We recognized realized losses of $36.4 million in 2006 and $29.1 million in 2005.

          The effective tax rate was 36.0 percent for 2006 and 33.1 percent for 2005. Yearly fluctuations in the effective tax rate are primarily due to the impact of realized and unrealized gains and losses on our fuel price

derivatives on the allocation of taxable income between the states. As the price of fuel changes and impacts our fuel price derivatives, our effective tax rate fluctuates due to changes in the mix of earnings between our legal entities resulting in higher or lower effective tax rates. Included in the provision for income taxes for 2006 is a $1.2 million benefit relating to adjustments to reflect the effective state rates upon filing our 2005 income tax returns in the third quarter of 2006.

     MasterCard

          The following table reflects comparative operating results and key operating statistics within our MasterCard operating segment:

          Payment processing revenue increased approximately $4 million over 2005, primarily due to additional business driven by new customers on our rotating purchase card product which continues to drive growth in our MasterCard segment. Our MasterCard purchase volume grew by over $338 million in 2006 compared to 2005.

          Other revenue overall decreased $0.4 million from 2005 primarily due to the following:

          Operating expenses increased by $1.4 million during 2006 primarily due to an increase in the credit loss reserve of $1.3 million related to one customer. We measure our credit loss performance by calculating credit losses as a percentage total card purchases. This metric for credit losses was 13.8 basis points of total MasterCard purchase volume for 2006 compared to 4.7 basis points for 2005. Apart from the additional credit loss, operating expenses were flat year over year.

     Fleet

          The following table reflects comparative operating results and key operating statistics within our fleet operating segment:

          Payment processing transaction growth was predominantly driven by the increase in vehicles serviced. Increases in average expenditure per payment processing transaction were primarily a result of higher fuel prices over 2004. The positive impact of these key statistics on payment processing revenue was partially offset by 9 percent, compared to a year ago, primarily due to the renegotiation of pricing on long-term contracts with existing strategic relationships.

          Transaction processing revenue grew 4 percent in 2005 versus 10 percent in 2004. This slower growth rate was predominantly due to the fact that two strategic relationships converted 1.1 million transactions from transaction processing to payment processing in 2005.

          Finance fees increased in proportion with higher daily accounts receivable balances subject to late fees. Average daily accounts receivable balances subject to late fees were predominantly higher due to elevated retail fuel prices and an increase in the number of payment processing transactions.

          Total operating expenses increased over 2004 primarily due to the following:

          Financing interest expense is related to the corporate credit facility that we entered into in February 2005 and the preferred stock that we issued as part of our IPO. The details of these obligations are discussed in Item 8, Note 11, “Financing Debt” and Item 8, Note 14, “Preferred Stock” in the accompanying consolidated financial statements. Finance interest expense also includes the gain or loss we incurred related to our interest rate swap agreements discussed in Item 8, Note 10, “Derivative Instruments” in the accompanying consolidated financial statements.

          Also discussed in detail in Item 8, Note 10, “Derivative Instruments” are our fuel price sensitive derivative instruments. These instruments generated the realized and unrealized losses on derivatives in the table above. Of the total losses, approximately $29.1 million were net realized losses in 2005 and $36.7 million represent the unrealized loss at December 31, 2005.

          The Company’s effective income tax rate for 2005 was 33.1 percent. See Item 8, Note 15, “Income Taxes” in the accompanying consolidated financial statements for a more detailed discussion of the Company’s income taxes.

     MasterCard

          The following table reflects comparative operating results and key operating statistics within our MasterCard operating segment:

          Payment processing revenue increased primarily due to the increase in MasterCard purchase volume, year over year along with an 8 percent increase in our net interchange rate. The increase in the rate is due to larger growth within the corporate charge card product which generates higher net interchange rates.

          Transaction processing revenue decreased for the year ended December 31, 2005, while other revenue increased. In 2005, fees were charged at card issuance and recorded as other income. During 2004, fees were charged for transactions processed instead.

          The significant increase in our operating expense is the result of higher MasterCard purchase volume and an increase in interest rates. Average interest rates were 3.4 percent for the year ended December 31, 2005, compared to 1.6 percent for the year ended December 31, 2004.

     Fleet

          At the end of 2006 we entered into a new 10-year agreement with ExxonMobil under which ExxonMobil transactions will be payment processing transactions instead of transaction processing transactions in 2006. As such, we expect approximately 20 million transactions recorded as transaction processing transactions will be instead recorded as payment processing transactions in 2007 which will significantly increased revenue. Our payment processing rate will be about 5 to 10 basis points lower than the average for 2006, reflecting the fact that we are not funding these transactions. Furthermore, we will have higher operating interest expense and higher credit loss rates in terms of both dollars and basis points as the portfolio is comprised primarily of small fleets. Finally, we will be seeing higher sales and marketing expenditures as we will control these functions. Acquiring portfolios this large is highly competitive, so there will be a greater impact on revenue versus earnings. Overall, we expect this agreement to be beneficial to 2007 earnings.

          In 2006, the weighted average of our estimate of the retail price equivalent of the underlying strike price of our fuel price derivatives ranged from $1.88 to $1.95. These contracts expired at the end of 2006. As disclosed in Item 8, Note 10, “Derivative Instruments” in the accompanying consolidated financial statements, our realized losses on these contracts totaled $36.4 million. Effective for 2007, the range is $2.33 to $2.40. The higher range should have a positive effect on our income statement. Our fuel price per gallon sensitivity analysis in the “Commodity Price Risk”section of ITEM 7A. – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK provides additional information regarding the expected impact of the higher range.

          Revenues in our fleet operating segment are linked to fuel prices. The forward-looking statements presented here are based on an assumed average retail fuel price of $2.37 per gallon for 2007. Although we expect the number of fuel transactions we process and the average number of gallons per transaction to continue to increase over time, we cannot predict changes in retail fuel prices.

          In our fleet operating segment, we do not expect finance income to grow as fast in 2007 as in 2006.

          We also project an increase in depreciation next year based upon the $12 million of assets placed in service in 2006 and our expected capital spending in 2007.

          We cannot predict what operating interest rates will be, but expect to continue to have access to relatively low cost funds through FSC. We expect average debt to grow in proportion to our growth in vehicles serviced and payment processing transactions processed; however, changes in the price of fuel will impact these balances.

     MasterCard

          In 2007, we do not anticipate additional revenues from events like the MasterCard Corporation initial public offering. The $2.2 million recorded in 2006 is not expected to recur.

          The following table summarizes our financial position at December 31, 2006, compared to December 31, 2005:

          Net accounts receivable have increased as a result of our payment processing transaction growth and significantly higher fuel prices that increased our average expenditure per payment processing transaction. As a result of our higher accounts receivable balance, accounts payable, deposits and borrowed federal funds have increased to fund this balance.

          The Company used approximately $10 million in cash in 2006, as compared to $13 million provided in 2005. In doing so, we converted a transaction processing partner into a payment processing partner. In order to facilitate this conversion, we purchased a portfolio of receivables for approximately $86.8 million in December 2006. We also paid down $71.5 million of principal on our financing debt. We generated over $60 million in operating cash in 2006 as compared to the $41 million cash used in operations during 2005. The primary contributor to the increase in operating cash was the change in our accounts receivable balance, excluding the purchase of the fleet receivables. The cash required to fund additional accounts receivables in 2006 was significantly lower than the cash required to fund the increase in accounts receivables in 2005. The difference between the 2006 increase in accounts receivable and the 2005 increase was primarily due to a higher average price per gallon of fuel in 2005.

          As a consequence of our separation from Cendant, we increased the tax basis of our tangible and intangible assets to their fair market value. This increase in tax basis allows us the ability to reduce the amount of future tax payments to the extent that the Company has future taxable income. We are obligated, however, pursuant to our Tax Receivable Agreement with Cendant, to pay Cendant, on an after-tax basis, 85 percent of the amount of tax we save for each tax period as a result of these increased tax benefits. Therefore our current and expected operating cash flows attributable to the significant step up in tax basis are not expected to have a significant benefit.

          In 2006, we used approximately $12 million for capital expenditures, primarily to continue to build our new software platform and to acquire information systems and personal computer office equipment. This amount was consistent with 2005 expenditures. We expect to spend $13 million to $15 million on capital projects in 2007.

          Management believes that we can adequately fund our cash needs during the next 12 months.

          Our bank subsidiary, FSC, utilizes certificates of deposit to finance our accounts receivable. FSC issues certificates of deposit in denominations of $100,000 or less in various maturities ranging between three months and three years and with fixed interest rates ranging from 4.45 percent to 5.45 percent. As of December 31, 2006, we had approximately $395 million of deposits outstanding. Certificates of deposit are subject to regulatory capital requirements.

          FSC also utilizes federal funds lines of credit to supplement the financing of our accounts receivable. Our federal funds lines of credit increased to $130 million in July of 2006. At December 31, 2006, we had outstanding borrowings of approximately $65 million.

          Our credit facility is comprised of two major components:

          In April 2005, we entered into interest rate swap arrangements (the “Swaps”) with two counterparties. These Swaps were designed as cash flow hedges intended to reduce a portion of the variability of the future interest payments on the Company’s variable rate debt instruments discussed in Item 8, Note 10, “Financing Debt” in the accompanying consolidated financial statements. The following table presents information about the Swaps at December 31, 2006:

          Our credit agreement contains various financial covenants requiring us to maintain certain financial ratios. Specifically, our credit agreement contains financial covenants requiring us to maintain a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio at the end of each fiscal quarter. The credit agreement requires us to maintain a maximum consolidated leverage ratio of 2.50 to 1.00 at the end of each fiscal quarter until September 30, 2007, 2.00 to 1.00 at the end of each fiscal quarter until September 30, 2008 and, thereafter, 1.50 to 1.00 at the end of each fiscal quarter until the maturity date. The credit agreement also requires us to maintain a minimum consolidated fixed charge coverage ratio of 1.25 to 1.00 at the end of each fiscal quarter until December 31, 2006, and 1.50 to 1.00 at the end of each fiscal quarter until the maturity date.

          In addition to the financial covenants, the credit agreement contains various customary restrictive covenants that limit our ability to pay dividends, sell or transfer all or substantially all of our property or assets, incur more indebtedness or make guarantees, grant or incur liens on our assets, make investments, loans, advances or acquisitions, engage in mergers, consolidations, liquidations or dissolutions, enter into sales or leasebacks and change our accounting policies or reporting practices. FSC is not subject to certain of these restrictions. We were in compliance with all material covenants and restrictions at December 31, 2006.

     Liquidity

          Short-term liquidity. Our short-term cash requirements consist primarily of payments to major oil companies for purchases made by our fleet customers, principal and interest payments on our credit facility, cash payments for derivative instruments and other operating expenses. FSC is responsible for substantially all payments to major oil companies and can fund our short-term cash requirements through the issuance of certificates of deposit and borrowed federal funds. Any remaining cash needs are primarily funded through operations. Our revolving credit facility had an available balance of $110 million at December 31, 2006, that could be used to cover any operating cash shortfalls.

          Long-term liquidity. Our long-term cash requirements consist primarily of principal and interest payments on our credit facility, which expires in 2010, and the amounts due to Cendant as part of our tax receivable agreement. As a consequence of our separation from Cendant, we increased our tax basis of intangible assets. This increase in tax basis allows us the ability to reduce the amount of future tax payments to the extent that we have future taxable income. We are obligated, pursuant to our tax receivable agreement with Cendant, to pay to Cendant, on an after-tax basis, 85 percent of the amount of tax we save for each tax period as a result of these tax benefits. We expect to fund these long-term requirements with cash generated from our operating activities. We plan to assess our financing alternatives periodically and may attempt to access the capital markets. If our future resources are insufficient to satisfy our long-term liquidity requirements, or if we enter into an acquisition or strategic arrangement with another company, we may need to sell additional equity or debt securities. There can be no assurances that the Company will be able to obtain financing from external sources on favorable terms or at all.

          Share Repurchase Program. On February 7, 2007, the Company announced a share repurchase program authorizing the purchase of up to $75 million of its common stock over the next 24 months. The program will be funded primarily through the Company’s future cash flows. Share repurchases will be made on the open market and may be commenced or suspended at any time. The Company’s management, based on its evaluation of market and economic conditions and other factors, will determine the timing and number of shares repurchased.

     Off-balance sheet arrangements

          Operating leases. We lease office space, office equipment and computer equipment under long-term operating leases, which are recorded in occupancy and equipment or technology leasing and support.

          Extension of credit to customers. We have entered into commitments to extend credit in the ordinary course of business. We had approximately $2.7 billion of commitments to extend credit at December 31, 2006, as part of established lending product agreements. Many of these commitments are not expected to be utilized; therefore, management does not believe total unused credit available to customers and customers of strategic relationships represents future cash requirements. Management believes that we can adequately fund actual cash requirements related to these credit commitments through the issuance of certificates of deposit and borrowed federal funds.

          Letters of credit. We are required to post collateral to secure our fuel price sensitive derivative instruments based on the unrealized loss, less any unsecured credit granted by our counter party. At December 31, 2006, this unsecured credit totaled $35 million. We had posted collateral in the form of letters of credit of $100 thousand at December 31, 2006. In addition, we have posted a $2.1 million letter of credit as collateral under the terms of our lease agreement for our corporate offices.

     Contractual obligations

          The table below summarizes the estimated dollar amounts of payments under contractual obligations as of December 31, 2006, for the periods specified:

          Many accounting estimates and assumptions involved in the application of accounting principles generally accepted in the United States of America have a material impact on reported financial condition and operating performance and on the comparability of such reported information over different reporting periods. We base our estimates and judgments on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates. On an ongoing basis, we evaluate our estimates and judgments that we believe are most important to the portrayal of our financial condition and results of operations. We regard an accounting estimate or assumption underlying our financial statements to be most important to the portrayal of our financial condition and results of operations and therefore a “critical accounting estimate” where:

     Reserve for Credit Losses

          Our reserve for credit losses is an estimate of the amounts currently recorded in gross accounts receivable that will ultimately not be collected. The reserve reduces our accounts receivable balances as reported in our financial statements to their net realizable value. Management estimates these reserves based on assumptions and other considerations, including a review of accounts receivable balances which become past due, past loss experience, customer payment patterns, current economic conditions, known fraud activity in the portfolio and industry averages.

          Management utilizes a model to calculate the level of the reserve for credit losses which includes such factors as:

          In addition to the model, management uses their judgment to ensure that the reserve for credit losses that is established is reasonable and appropriate.

          Management believes that the assumptions and other considerations it uses to estimate the reserve for credit losses are appropriate. Management has been materially accurate in past assumptions, however, if actual experience differs from the assumptions and other considerations used in estimating the reserves, the resulting change could have a material adverse effect on our consolidated results of operations, and in certain situations could have a material adverse effect on our financial condition.

          The following table summarizes the impact that differences in estimated loss rates would have on the reserve for credit losses at December 31, 2006:

     Income Taxes

          In calculating our effective tax rate, we apportion income among the various state taxing jurisdictions based upon where we do business. On an ongoing basis, we evaluate the judgments and estimates underlying our calculation of the effective tax rates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the effective tax rate. Changes in the location of taxable income or loss can result in significant changes in the effective tax rate. Materially different results in the amount and timing of our actual results for any period could occur if our management made different judgments or utilized different estimates.

          We make judgments regarding the realizability of our deferred tax assets. In accordance with SFAS No. 109, Accounting for Income Taxes, the carrying value of net deferred tax assets is based on the belief that it is more likely than not that we will generate sufficient future taxable income in certain jurisdictions to realize these deferred tax assets after consideration of all available positive and negative evidence. Future realization of the tax benefit of existing deductible temporary differences or carry forwards ultimately depends on the existence of sufficient taxable income of the appropriate character within the carry back and carry forward period available under the tax law. Future reversals of existing taxable temporary differences, projections of future taxable income excluding reversing temporary differences and carry forwards, taxable income in prior carry back years, and prudent and feasible tax planning strategies that would, if necessary, be implemented to preserve the deferred tax asset, may be considered to identify possible sources of taxable income. At December 31, 2006, we had net deferred tax assets of approximately $377.3 million of which the significant components relate to goodwill deductible for income tax purposes and state net operating losses in tax jurisdictions which require non-consolidated tax returns. Management has determined that the likelihood of realization of the deferred tax asset has met the “more likely than not” criteria established by SFAS No. 109. Thus, no valuation allowances have been established. If future taxable income differs from management’s estimate, allowances may be required and may impact our future net income.

     Changes to Accounting Policies

          During the 12 months ended December 31, 2006, there were no significant changes to accounting policies.

          In February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 155,Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140. This Statement amends SFAS No. 133, and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This Statement resolves issues addressed in SFAS No. 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets. This Statement is effective after the first fiscal year that begins after September 15, 2006. We believe that the adoption of this standard will have no material impact on our financial statements.

          In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (“FIN 48”) to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in an enterprise’s financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We will adopt FIN 48 as of January 1, 2007, as required. We continue to analyze and have not determined the effect, if any, the adoption of FIN 48 will have on our financial position and results of operations.

          In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. SFAS No. 157 is effective for fiscal years beginning after December 15, 2007. We are evaluating the impact, if any, the adoption of SFAS No. 157 will have on our results of operations or financial position.

          In February 2007, the FASB issued SFAS No 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157. We are evaluating the impact, if any, the adoption of SFAS No. 159 will have on the Company’s results of operations or financial position.

          At December 31, 2006, the Company had borrowings of $131 million on our term loan and $20 million on our credit facility that bore interest at a floating rate equal to the one-month LIBOR plus 137.5 basis points. During 2005 we entered into two interest rate swap contracts that end in April of 2007, that fix the interest rate on a portion of the variable rate term loan and the variable rate revolving credit facility.

          The following table presents the impact of changes in LIBOR on projected financing interest expense for 2007 on the unhedged portion of the principal outstanding under the credit facility (see the discussion of our interest rate swaps in ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS in the “Liquidity, Capital Resources and Cash Flows” section):

     The following table reflects the estimated effect of changes in the price of gas, without the effect of our fuel price derivative instruments:

          As discussed in “Fuel Price Derivatives” section of ITEM 1 – BUSINESS, we use derivative instruments to manage the impact of volatility in fuel prices to our cash flows. The table above does not reflect the impact of these derivatives on our pre-tax income, as management cannot predict the changes in market value of these instruments. These market value changes are unrealized and have no cash impact but must be reported as unrealized gains and losses in our operating results.

To the Board of Directors and Stockholders of Wright Express Corporation and Subsidiaries
South Portland, Maine

We have audited the accompanying consolidated balance sheets of Wright Express Corporation and subsidiaries (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of income, stockholders’ or member’s equity, and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment” on July 1, 2005 and chose to transition using the “modified prospective” method.

As discussed in Note 1 to the consolidated financial statements, the Company was an indirect wholly owned subsidiary of Cendant. Cendant divested 100% of its ownership interest in the Company through an Initial Public Offering on February 22, 2005. Included in Note 12 to the Consolidated Financial Statements are transactions with related parties of the Company.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 27, 2007 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting, and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Boston, Massachusetts

February 27, 2007