Feb 5, 2015
Executives
Eric R. Dey - Chief Financial Officer, Chief Accounting Officer and Secretary Ronald F.
Clarke - Chairman, Chief Executive Officer, President and Chairman of Executive & Acquisitions Committee
Analysts
David Togut - Evercore ISI, Research Division Philip Stiller - Citigroup Inc, Research Division Ramsey El-Assal - Jefferies LLC, Research Division Tien-tsin Huang - JP Morgan Chase & Co, Research Division Darrin D. Peller - Barclays Capital, Research Division James Schneider - Goldman Sachs Group Inc., Research Division
Operator
Greetings, and welcome to the FleetCor Technologies Fourth Quarter 2014 Earnings Conference Call. And a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Eric Dey, Chief Financial Officer for FleetCor Technologies. Thank you.
Mr. Dey, you may begin.
Eric R. Dey
Good afternoon, everyone, and thank you for joining us today. By now, everyone should have access to our fourth quarter press release.
It can be found at www.fleetcor.com under the Investor Relations section. Throughout this conference call, we will be presenting non-GAAP financial information, including adjusted revenues, adjusted net income, adjusted net income per diluted share and adjusted EBITDA.
This information is not calculated in accordance with GAAP and may be calculated differently than other companies’ similarly titled non-GAAP information. Quantitative reconciliations of historical non-GAAP financial information to the most directly comparable GAAP information appears in today's press release and on our website as previously described.
Also, we are providing 2015 guidance on a non-GAAP basis. Finally, before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements.
This includes forward-looking statements about our 2015 guidance, new products and fee initiatives, and expectations regarding business development and acquisitions. They are not guarantees of future performance, and therefore, you should not put undue reliance on them.
These results are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of those risks are mentioned in today's press release on Form 8-K filed with the Securities and Exchange Commission.
Others are described in our Annual Report on Form 8-K (sic) [ Form 10-K ]. These documents are available on our website as previously described and at www.sec.gov.
With that out of the way, I would like to turn the call over to Ron Clarke, our Chairman and CEO.
Ronald F. Clarke
Okay, Eric, thanks. Good afternoon, and as always, we appreciate you joining today.
Upfront here, I'm going to plan to cover 3 subjects: first, I'll comment on the quarter on Q4; second, I'll review some of our highlights from 2014; and then finally, I'll discuss our 2015 outlook. Okay, so onto the quarter.
We reported Q4 results that were very strong and actually beat against our internal forecast. We reported revenue of $377 million, up 47% and cash EPS of $1.39, up 29%.
So 47% top line, 29% bottom line. So a good way to think about the quarter is in 3 distinct pieces, which we described in Q4 Exhibit #4, which accompanies our press release.
So in that, component number one, the base or the core FleetCor business reported $1.45 in cash EPS for the quarter. Component 2, Comdata, which we owned for about 6 weeks in the quarter, contributed $70 million revenue but actually minus $0.06 in cash EPS.
As you may recall, we had expected Comdata to be about a cash EPS push, but higher integration, bonus, severance and advisory fees caused a bit of a negative return here. Then lastly, component 3, where a set of unusual adjustments that were quite positive to GAAP earnings in the aggregate but had no impact, 0 impact on our cash EPS.
Eric will cover these unusual items in some detail in the section. So let me go back and talk a bit about the base or the core, FleetCor business in the quarter, which is really the story of a pretty wild macro environment.
So in the quarter, and particularly in December, we saw U.S. fuel prices plunge, FX weaken even more, but market spreads actually expand to really unprecedented levels.
The net effect of these 3 factors, though, created only about a $3 million revenue positive contribution and call it $0.02 of positive cash EPS. So the happy from broader market spreads was offset by lower fuel price and weaker FX.
The other drivers of Q4 were: one, our MasterCard product, again, up 24% in the quarter despite $0.30 lower fuel prices. We implemented a couple of our newest oil partners, Husky and Ultramar.
Our CLC business was up 22%. Our U.K.
business was up 16%. We got a contribution from Shell Germany, which is our new full outsourcing arrangement with Shell.
It's now fully operational, contributed a few million in the quarter. And then, of course, Comdata added, again, about $70 million in the quarter.
So in summary, the quarter was driven by spreads being better than weak FX and low fuel price. Our big business is doing well, some of our new wins coming online and then, the addition of Comdata.
Lastly, and you may find this a bit surprising, our Russia business was actually up 9% in local currency despite everything going on there. Okay, let me now transition over to full year 2014, in which we reported revenue of $1.2 billion, up 34% and cash EPS of $5.15, up 27%.
So 34% top line, 27% bottom line for the full year. In terms of highlights for 2014.
Here's just a few. One, we entered Germany, the fifth largest economy in the world, through our new outsourcing arrangement with Shell, went live on time in September and on budget.
Two, we on-boarded some new oil partner wins in North America and progressed the implementation of our new Caltex Australia and Chevron International relationships. Three, we added a group of new executive talent, mostly in market leaders in Brazil, Germany, Canada and the U.K.
We completed 3 acquisitions in 2014, including the Comdata deal, our largest in history. And then finally, our stock FLT continued to perform quite well, up about 26% for 2014.
So look, 27% profit growth, a number of new wins, we entered Continental Europe, we added some new executive talent and we completed the Comdata deal. So all in all, a very good 2014.
All right. So let me transition now over to our outlook for 2015.
So today, we're providing guidance of $1,625,000,000 in revenue at the midpoint and $6.05 in cash EPS at the midpoint. The $6.05 cash EPS reflects about 17% growth rate over 2014's $5.15.
The story of 2015 is really a macro environment story. So in the $6.05 cash EPS guidance today, we're making the following environmental assumptions: one, that FX will continue to be weak all year and remain at the kind of mid-January levels; two, that U.S.
fuel prices will average $2.58 a gallon, which is approximately 30% below our 2014 averages; and finally, that market spreads will be better than historic levels but worse than 2014 and produce about $20 million less in revenue for us. So in aggregate, when you take these 3 factors together, they create approximately $160 million revenue headwind for us.
And approximately $1 of cash EPS headwind versus 2014. So quite significant.
So if we bridge you back to the $6.35 cash EPS guidance we provided on October 30, at that time, we were expecting the 2,000 environment to create approximately a $0.20 headwind to our 2015 plans. But in the months since October 30, fuel prices, FX and even our market spread assumptions have dramatically worsened, which has added about $0.80 of incremental cash EPS headwind to our 2015 plan.
But we decided to reduce guidance about $0.30 from $6.35 in October to $6.05 today, and our plan is to power through the additional $0.50 headwind by doing a few things: one, accelerating Comdata's cost and price synergies; two, implementing some price recovery initiatives; and three, fortunately relying on some better exit rates or better fundamentals in our base business. Look, obviously, we don't know how the environment will actually play out this year.
But if it turns favorable either later this year or next, we could get back some of this dollar and cash EPS headwind. So lastly, let me comment just a bit on Comdata.
We're expecting Comdata to make a meaningful contribution this year in 2015, and our plan is to grow Comdata earnings about 20% over 2014 pro forma, and that assumes that we'll own SVS for only one quarter. So look, it's hard to plan a business like ours that faces this amount of environmental shock.
But the good news is that we would have guided to a much higher, much higher 2015 EPS estimate had the environment stayed constant. And second, our assumptions are calling for sustained low fuel prices and weak FX, which could obviously go in a better direction over time.
So with that, let me turn the call back over to Eric, so that he can provide some more information on the quarter, the year and our outlook. Eric?
Eric R. Dey
Thank you, Ron. For the fourth quarter of 2014, we reported revenue of $376.7 million, an increase of 47% from the fourth quarter of 2013.
Comdata, which was acquired on November 14, 2014, contributed approximately 27 percentage points of the revenue growth or $70 million to the fourth quarter of 2014 results. The revenue from our North American segment increased 97% to $246.7 million from $125.4 million in the fourth quarter of 2013.
Revenue from our International segment was approximately flat at $130 million in the fourth quarter of both 2014 and 2013, due primarily to unfavorable foreign exchange rates in the quarter. For the fourth quarter of 2014, GAAP net income increased 61% to $109.5 million or $1.21 per diluted share from $68.1 million or $0.80 per diluted share in the fourth quarter of 2013.
Included in GAAP net income in the fourth quarter of 2014 was an estimated loss of approximately $19 million related to the Comdata acquisition, including all deal-related expenses of approximately $26 million, and approximately $29 million in gain from unusual items reflecting adjustments to purchase accounting entries for contingent consideration and tax indemnifications for the company's 2013 acquisitions of DB and VB in Brazil. The other financial metrics that we routinely use are adjusted revenues and adjusted net income, which we sometimes also refer to as cash net income or cash EPS.
Adjusted revenues equal our GAAP revenues less merchant commissions. We use adjusted revenues as a basis to evaluate the company's revenues, net of the commissions that are paid to merchants who participate in certain card programs.
A reconciliation of adjusted revenues and adjusted net income to GAAP numbers are provided in Exhibit 1 of our press release. Adjusted revenues in the fourth quarter of 2014 increased 44% to $343.4 million compared to $237.7 million in the fourth quarter of 2013.
Comdata contributed approximately 29 percentage points of the adjusted revenue growth or $70 million to the fourth quarter of 2014 results. Adjusted net income for the fourth quarter of 2014 increased 37% to $125.8 million or $1.39 per diluted share compared to $92.1 million or $1.08 per diluted share in the fourth quarter of 2013.
Included in adjusted net income per diluted share for the fourth quarter of 2014 was an estimated loss of approximately $0.06 per diluted share related to the Comdata acquisition, including all deal-related expenses. For the fourth quarter of 2014, transaction volumes increased 321% to 379.1 million transactions compared to 90.1 million transactions in the fourth quarter of 2013.
North American segment transactions grew 682%, driven primarily by the acquisition of Comdata on November 14 and organic growth in our U.S. businesses.
Transaction volumes in our International segment grew 2% and were primarily impacted by organic growth in the business. For a discussion on revenue per transaction, we are going to exclude the impact of the SVS business, which had approximately 270 million transactions in the quarter at a very low revenue per transaction.
Revenue per transaction for the fourth quarter of 2014, excluding the SVS business, increased 17% to $3.31 from $2.84 in the fourth quarter of 2013. Revenue per transaction can vary based on the geography, the relevant merchant and customer relationship, the payment product utilized and the types of products or services purchased.
The revenue mix is influenced by our acquisitions, organic growth in the business and fluctuations in the macroeconomic environment. When we talk about the macroeconomic environment, we are referring to the impact that market fuel spread margins, fuel prices, foreign exchange rates and the economy in general can have on our business.
Fuel spread margins for the quarter were at record levels in the U.S., which resulted in a favorable impact to revenues in the fourth quarter. And although we cannot precisely calculate the impact of these changes, we believe it positively impacted our revenues in the North American segment by approximately $24 million in the quarter.
Changes in foreign exchange rates were unfavorable in all geographies for the quarter and overall, we believe negatively impacted revenue during the quarter by approximately $11 million. And finally, fuel prices decreased during the quarter, and although we cannot precisely calculate the impact of these changes, we believe negatively impacted revenues by approximately $10 million.
So in total, the macroeconomic environment was very mixed, but overall, had an approximately $3 million favorable impact to FleetCor's consolidated revenues. Revenue per transaction, excluding SVS, for the fourth quarter was up in the North America segment and down slightly in the International segment.
Revenue per transaction increased 29% in North America, due primarily to the higher fuel spread margins during the quarter, the positive mix impact of signing up customers who use higher revenue per transaction products than the average, organic growth in many of our higher margin products and the Comdata acquisition, excluding SVS, completed in the fourth quarter. These positive factors were partially offset by the impact of lower fuel prices in the quarter.
In the International segment, revenue per transaction decreased 2% due primarily to unfavorable foreign exchange rates in all of our geographies. This unfavorable impact was partially offset by organic revenue growth in several lines of business, particularly in the U.K.
Now let's shift over and discuss some of the other drivers of our fourth quarter performance. For our North American segment, most of our lines of business performed well, resulting in approximately 41% organic growth rate in the quarter, excluding the impact of the Comdata acquisition.
Some of the positive drivers in North America revenues during the quarter were similar to the last several quarters, including the exceptional performance of our MasterCard product, which had revenue growth of approximately 24% over the fourth quarter of 2013, which included the approximate $0.30 drop in fuel prices versus prior year, driven primarily by increases in volume. The CLC Group, provider of our lodging card programs, had another solid quarter, with 22% revenue growth over the fourth quarter of 2013.
This revenue growth was driven primarily by increases in our CheckINN Direct product, which targets smaller accounts. As I mentioned earlier, record fuel spread margins in the quarter positively impacted our revenue for the quarter by approximately $24 million, partially offset by the impact of lower fuel prices during the quarter of approximately $10 million.
And finally, the fourth quarter also benefited from our acquisition of Comdata, which closed in November of 2014 and contributed approximately $70 million in revenue for the quarter. Results in our International business were impacted by strong organic growth in our U.K.
business, which posted double-digit revenue growth over last year in local currency and the rollout of Shell Germany, which went live in August. As of now, the economy in Russia remains soft, and foreign exchange rates continue to be unfavorable.
However, in spite of these headwinds, our business in Russia continues to be up from the prior year in local currency. Organic growth in the International segment was approximately 8% for the fourth quarter in constant currency; however, as I mentioned earlier, unfavorable foreign exchange rates in all geographies negatively impacted revenues by approximately $11 million in the quarter.
Now moving down the income statement. Total operating expenses for the fourth quarter were $204.1 million compared to $149.5 million in the fourth quarter of 2013, an increase of 37%.
As a percentage of total revenues, operating expenses decreased to 54.2% of revenue compared to 58.5% in the fourth quarter of 2013. Included in operating expenses are merchant commissions, processing expenses, bad debt, selling and general administrative expense, depreciation and amortization expense and other operating net.
Included in the fourth quarter operating expense were normal operating expenses related to Comdata for the period of time that we owned the business in 2014. In addition, Comdata recorded deal-related expenses of approximately $26 million, including legal fees, accounting, tax and various advisers and severance, et cetera.
Also included in operating expenses for the quarter was approximately a $29 million gain in unusual items, reflecting adjustments to purchase accounting entries for contingent consideration and tax indemnification for the company's 2013 acquisitions of DB and VB in Brazil. So quite a few moving parts for the quarter.
Credit losses were $6.3 million for the quarter or 13 basis points compared to $4.8 million or 10 basis points in the fourth quarter of 2013. The slight increase in bad debt was primarily due to the inclusion of Comdata operations for part of the quarter in 2014.
Depreciation and amortization increased 56% to $37.8 million in the fourth quarter of 2014 from $24.2 million in the fourth quarter of 2013. The increase was primarily due to amortization of intangible assets related to the Comdata acquisition.
Interest expense increased 140% to $13.2 million in the fourth quarter of 2014 from $5.5 million in the fourth quarter of 2013. The increase in interest expense was due primarily to additional borrowing to finance the Comdata acquisition.
Also, the company booked $15.8 million for loss on extinguishment of debt related to the new financing for the Comdata acquisition. Our effective tax rate for the fourth quarter of 2014 was 21.9% compared to 31.9% for the fourth quarter of 2013.
The decrease in the effective tax rate was due primarily to a $9.5 million reversal of a deferred tax liability established in conjunction with the DB acquisition in Brazil and as a result of the completion of some entity consolidation. Also, the fourth quarter of 2013 includes an unfavorable income tax adjustment related to changes in the tax law in Mexico, which required the company to record $1.5 million of additional income tax expense in the fourth quarter of 2013.
Now turning to the balance sheet. We ended the quarter with approximately $612 million in total cash, approximately $135 million of which is restricted and are primarily customer deposits.
On October 24, we signed documents to enter into a new $3.355 billion credit facility, consisting of a Term A loan of $2,020,000,000, a revolving credit facility of $1,035,000,000 and a Term B loan of $300 million. These new bank facilities are used to refinance our existing Term A loan and revolving credit facility and help finance the Comdata acquisition.
At year-end, we had approximately $2,020,000,000 outstanding on our Term A loan, $250 million outstanding on our Term B loan and $648 million drawn on our revolver, leaving $387 million of undrawn availability. Also, on November 14, we entered into a new 3-year $1.2 billion AR securitization facility in conjunction with the Comdata acquisition.
At December 31, we had approximately $675 million borrowed against the facility. As of December 31, 2014, our leverage ratio was 3.05x EBITDA.
The 3.05x EBITDA is well below our covenant level of 4.25x EBITDA. We intend to use our free cash flow to temporary pay down the balance on our revolving credit facility and securitization facility and maintain liquidity for acquisitions and other corporate purposes.
Finally, we are not a capital-intensive business, and we spent only $8.1 million on CapEx during the fourth quarter of 2014, including approximately $2 million on Comdata. Now onto our outlook for 2015.
For 2015, we have a number of macroeconomic headwinds affecting our business, primarily foreign exchange rates and fuel prices. We are estimating that foreign exchange rates will negatively impact revenue by approximately $65 million compared to the 2014 average, and the absolute price of fuel is expected to be a headwind of revenue of approximately $75 million versus 2014 average.
In addition, we believe market spreads will be better than historic levels, but contribute approximately $20 million less revenue than 2014 spreads. In aggregate, these 3 environmental factors create approximately $160 million revenue headwind and approximately $1 cash EPS headwind versus the 2014 averages.
That being said, we expect total revenues to be between $1.6 billion and $1,650,000,000; adjusted net income to be between $560 million and $580 million; and adjusted net income per diluted share to be between $5.95 and $6.15 or $6.05 at the midpoint. Our adjusted net income per diluted share guidance at the midpoint of the range represents a 17% growth rate over the $5.15 per diluted share reported in 2014, despite the macroeconomic headwinds mentioned above.
Also in Ron's remarks, he provided the bridge from our preliminary guidance of $6.35 and adjusted net income per diluted share that we provided on our third quarter conference call on October 30 versus our current guidance. At that time, we were expecting the 2015 macro environment to create approximately a $0.20 headwind to our 2015 guidance.
But since that time, fuel prices, foreign exchange rates and market spread assumptions have continued to worsen, adding an incremental $0.80 headwind to our 2015 plan. However, despite this, we have reduced our guidance by only $0.30 from $6.35 to $6.05 at the midpoint and expect to offset the additional $0.50 by accelerating Comdata's cost and price synergies, implementing some price recovery initiatives and relying on better 2014 exit rates or better fundamentals in the business.
As Ron said earlier, we don't know how the environment will actually play out in 2015, but if it improves, either later this year or next, some of the $1 headwind may come back as a tailwind. Some of the assumptions that we have made in preparing this guidance include the following: weighted fuel prices equal to $2.58 per gallon average for 2015 compared to $3.56 per gallon average in 2014; market spreads slightly better than average levels in the first quarter of 2015, neutral in the second quarter and worse in the third and particularly fourth quarters; foreign exchange rates equal to the 7-day average ended January 13, 2015.
We are including the SVS business in the first quarter guidance as we expect to own the business for the entire quarter. We expect continued weakness in the company's Russian business, a full year tax rate of 32.1%, fully diluted shares outstanding of 94.3 million shares and no impact related to acquisitions or material new partnership agreements not already disclosed.
For those of you that are looking for guidance for the first quarter, I want to remind everyone that our business has some seasonality and that typically, the first quarter is the lowest in terms of both revenue and profit. First quarter seasonality is impacted by weather, holidays in the U.S., Christmas being celebrated in Russia in January and lower business levels in Brazil, where most businesses are on summer break in the first quarter and the Carnival celebration in the first quarter as well.
Also, as we previously disclosed, we are exploring the possible sale of the SVS business that we acquired with Comdata. In any event, we expect to own the business in the first quarter and are including the SVS business in the first quarter guidance.
With that said, we are expecting our first quarter adjusted net income per diluted share to be between $1.38 and $1.42. Our first quarter guidance at the midpoint represents a 25% increase versus prior year.
For the second quarter, we are expecting adjusted net income per diluted share to be similar to the first quarter, and the second quarter excludes any impact related to SVS. Additionally, our volume is built throughout the year and our new asset initiatives gained momentum throughout the year, resulting in a much higher earnings per share in the third and fourth quarters.
We also have no plans to provide quarterly guidance going forward, but rather to update our annual guidance each quarter. And with that said, operator, we'll open it up for questions.
Operator
[Operator Instructions] The first question today comes from David Togut of Evercore ISI.
David Togut - Evercore ISI, Research Division
Thank you for providing the helpful detail on macro factors. You said that your plan would have been $7 in cash EPS, excluding the 3 macro factors you called out, which would have been about a 36% gain in cash EPS for 2015.
Can you talk about the underlying assumptions behind the $7, just so we can understand where the business would have been on a constant currency basis and holding fuel price and fuel spread impacts flat year-over-year?
Ronald F. Clarke
Yes, Dave. It's Ron.
So in constant currency, the plan is basically organic revenue growth was targeted at 10% for this year, for '15. And then second, we have, as you can imagine, some initiatives, both revenue and cost synergies, both in the Comdata deal and some of our previous assets.
So those will be the 2 core drivers, basically, of the growth.
David Togut - Evercore ISI, Research Division
And you called out 20% expected growth in Comdata earnings for this year. What would that have added up to just on an accretion basis on a per share metric?
Ronald F. Clarke
Yes, we're not going to provide the exact number, but what I would say is that thing is penciling out to be a bit better than the numbers we quoted back in the fall. I think we gave you $0.50 to $0.60, if I recall, and I'd say it's coming in a little bit stronger, Dave, than that.
And remember, the reason why is that the Comdata has obviously 0 FX impact because it's all here. And then b, there's kind of only one line of business that has any kind of significant fuel price impact.
So it's not affected nearly as much as the core FleetCor business.
David Togut - Evercore ISI, Research Division
I see. And then...
Ronald F. Clarke
We bought that. It's a good thing to buy in this macro environment.
David Togut - Evercore ISI, Research Division
It certainly helps. If I -- If we look at international, you had over 60% growth in earnings internationally.
Was there any benefit from higher spreads from AllStar in the quarter?
Ronald F. Clarke
Yes, there's almost no spread impact. There's only one business there, which we call TSEC, that has any spread impact and it was de minimis, call it $1 million.
David Togut - Evercore ISI, Research Division
Got it. And then in this environment, Ron, with oil prices down so much, are you seeing an increased propensity to outsource by the big oil companies?
Ronald F. Clarke
You know I think there's more talk, David. Obviously, they're looking for all kinds of ways to reduce costs.
We've actually gotten some calls, as you can imagine, the last 30 days. But I'd say it's still early days.
David Togut - Evercore ISI, Research Division
Understood. And then just shifting gears to possible Visa Europe card, which you've talked about in the past.
Any update there now that it seems that the European regulators will exclude commercial cards from regulations?
Ronald F. Clarke
Yes, which is obviously a little bit of "good environmental news." So the update there, again, we have 2 different products.
So in the U.K., we have a deal with Visa and that product, which we call our AllStar Premiere card, is actually in market. I think we have 2,000 to 3,000 cards actually live, working.
So we've got that kind of in a controlled environment to make sure it works well. And then second is our more generic universal card, which -- what we've launched in Germany, and that thing is in kind of its final field test now.
And we expect to put clients literally live on that product next month in Germany.
David Togut - Evercore ISI, Research Division
And then do you have a specific plan to roll that out throughout Europe as you roll out the Shell business?
Ronald F. Clarke
Yes. The plan, just to remind, is to go into another 5 or 6 markets later this spring, kind of May, June.
And so if we have success with the universal card in Germany, the idea would be to follow along and launch it in those other markets.
David Togut - Evercore ISI, Research Division
Just a quick final question for me. Do you have growth assumptions for 2015 for direct MasterCard and CLC?
Ronald F. Clarke
Yes. And they're both, as you can imagine, high, both high double-digits again for 2015.
Operator
And next question comes from Philip Stiller of Citi.
Philip Stiller - Citigroup Inc, Research Division
Appreciate all the detail and the guidance. So I guess one thing I was wondering about was the assumptions around SVS.
Perhaps, if you could give us some detail in terms of revenue or earnings contribution for the time of ownership that you're assuming? And then if there's any assumptions in the guidance about use of proceeds if you do end up selling the business?
Eric R. Dey
Hey Phil, this is Eric. I would say, first and foremost, from a contribution perspective, I mean, it wasn't a lot.
It's a smaller, obviously, piece of the business from a profit respective. So it was low single-digit cents in cash net income for the quarter.
And what's the second part of that your question again, Phil?
Philip Stiller - Citigroup Inc, Research Division
Any details in revenue, and then if you're making assumptions about paying down debt with any percent you might get?
Eric R. Dey
From a revenue perspective, we didn't provide any specific detail on one product or one particular line of business. So we're really not going to comment on that specifically.
And regarding sale, if we do sell the business, what we would do with the proceeds. We do not have any of that built into our guidance.
So obviously, if we took cash proceeds and paid down debt, that would have an incremental benefit to our P&L.
Philip Stiller - Citigroup Inc, Research Division
Okay, great. And something you guys might be able to provide a little bit more detail in terms of Comdata synergies.
I know it's obviously a big target of yours. Just wondering if you could tell us what you're assuming in the guidance.
And then, Ron, I think maybe you said the Comdata earnings would grow 20% beyond '15. So I just want to make sure we're not pushing stuff into this year and the growth beyond this year is not 20%.
Ronald F. Clarke
Yes, we've accelerated. So we basically have gotten the cost synergies locked.
There's of bunch redundant things we chase, so that's in the sort of $10 million to $15 million range. But I think I told you this, we've elected in our plan to basically reinvest those dollars into sales and marketing because we want to try to grow the businesses.
So from the cost synergy side, we've got that money, but we've kind of turned around and poured it back in the growth. And I'd say, we've made good progress on the revenue synergy side and again, we've accelerated a bit of that into this year because of these headwinds.
And that's quite a bit bigger than the cost synergies, so it is -- I'd say, it's pretty significant. And in terms of yes, earnings, so the number 20% that we quote is basically excluding SVS.
We take kind of the pro forma from '14 without SVS, look at our plan for '15, net things up in earnings; pretax, above 20%. And yes, our 3-year model is to grow that thing 20%-plus, '15, '16 and '17, which again was a key for us to do that trade so that asset could grow at the FleetCor line average target, which again is 20%.
Philip Stiller - Citigroup Inc, Research Division
Good to hear. Last question, and then I'll turn it over.
You mentioned price realization. Just wondering, I guess, is this something that's kind of a nice byproduct of the lower fuel price environment that perhaps allows you to push that further this year?
Ronald F. Clarke
Yes, look, I think whenever an end client's total bill drops by 30%, to someone spending $100,000 a month on fuel and the thing goes down to $70,000 to get a couple of bucks for what we do, I think, is easier. But I wouldn't say it's super easy.
Everybody's pinching pennies. And so we've been very, very thoughtful as part of that pieces of where Comdata maybe has opportunities that didn't take advantage of, and that's where we have gone.
We're trying be very, very careful in protecting those -- the relationships and the volume, but basically, kind of taking money where we can. So again, a lot of that is really already in place, sitting here the 1st of February.
So I'd say, our confidence is pretty high there.
Operator
And next question comes from Ramsey El-Assal of Jefferies.
Ramsey El-Assal - Jefferies LLC, Research Division
A bit of a follow-up question. You mentioned that one of the levers, obviously, that might be able to work to offset some of the macro headwind is price.
Can you be any more specific about sort of which parts of your business contain the larger pricing opportunities? Anything about specific segments or geographies or products?
Or is it more of a uniform statement across-the-board? Or how should we think about that?
Ronald F. Clarke
Yes, Ramsey, that's a good question. I would say that we obviously looked everywhere, right, when we saw these headwinds at the end of last year.
I'd say that probably some fair amount of it is planned here where the fuel price impact is greater. But I'd say, of the total number that we're chasing, 40% of it is International, maybe 60% is here.
And obviously, we looked at all kinds of things. We look at floors, on merchant contracts, when prices drop, we look at rebate levels we give people -- we look at interest rate levels.
So we look across every lever, everywhere and decide which things impact kind of customers least to make sure we kind of spread the thing around, and we're obviously testing our way into a bunch of those things to make sure there's not a big impact. But I'd say, again, it's ground that we've covered before and I think, again, we've got pretty good confidence in it.
Ramsey El-Assal - Jefferies LLC, Research Division
Okay. Switching gears on SVS.
Is there a probability we should assign to you guys hanging on to this asset on a more permanent basis? Or are you really still quite set on divesting it, just taking your time trying to find the right opportunity?
Or how should we think about SVS long term?
Ronald F. Clarke
Yes, again, I'd say, the honest answer is we don't know. I'll give you a bit of not of an update that we think there's more interest in the asset than maybe we had thought.
And so I'd say that it's probably more likely than not that we would sell that asset. But I'd say it's still too early to call.
Ask me in 60 days.
Ramsey El-Assal - Jefferies LLC, Research Division
Okay, last one for me is just about the M&A pipeline in '15. I mean, granted it's not on an organic basis but it could also theoretically contribute to closing some of the gap from numbers from the macro environment.
What is the -- how would -- how should we gauge the kind of quality of your M&A pipeline here and your appetite to kind of to do deals while you're digesting Comdata? Are you moving on parallel tracks?
Or is this something that we should kind of not expect as much of this year than prior cycles?
Ronald F. Clarke
No, no. Our appetite is high.
Again, we did a lot of that work as we signed last summer and we've got into the target that we had kind of 3x and obviously, we're delevering from here. We've got, Eric, what?
$400 million, $500 million in liquidity in the current lines that we have today?
Eric R. Dey
Yes, that's correct.
Ronald F. Clarke
So I -- and we've transitioned, Ramsey, most of the Comdata integration work to our ops people, if you will, not our deal team. So I'd say that our plan and the objective for me and that deal team is to put $1.5 billion to $2 billion to work over 3 years.
And I'd say that this is the game we're in. We like assets and getting assets and doing things.
And so sitting here today in front of me, we've got 3 or 4 conversations on the deal side and looking at, call it, 3 or 4 conversations on the partner side now that we're in. I'd say, I characterize them as generally earlier innings.
I wouldn't say any of these are kind of Q1, but I would say that our expectations is we're going to try to do something on both partners and deals in this year. We've got the liquidity, we've got the management.
And so if one of these things looks right, then we'll go forward.
Operator
And next question comes from Tien-tsin Huang of JPMorgan.
Tien-tsin Huang - JP Morgan Chase & Co, Research Division
So just a follow-up to Ramsey's question. The strong dollar, Ron, does that entice you to be more aggressive in bidding on International assets?
Ronald F. Clarke
Yes, we like that, Tien-tsin. Yes, for sure.
Eric R. Dey
Spending money is good.
Tien-tsin Huang - JP Morgan Chase & Co, Research Division
Yes, so that does open things up. But it sounds like the pipeline hasn't changed too much.
Is that a fair statement?
Ronald F. Clarke
Yes, it's always, Tien-tsin, if you're looking at what we look at, right, there's things coming in and some that's frozen out as fuel prices collapse, so sellers decide to hold, new things come in. So I'd say that even though we say to you guys, "Hey, we're looking at some number of things," don't -- obviously don't assume it's the same 3 or 4 things today that we were looking at last summer when you would have asked.
But we've got people out. Like I've said, we've got relationships everywhere, so we're active in contacting people and trying to get people into conversations all the time.
Tien-tsin Huang - JP Morgan Chase & Co, Research Division
Okay. That's good to know.
And then I heard that Russian came in up 9%, but International growth looked like it was slowed a little bit to 2%, as I see this right here. So what's -- was that a surprise relative to plan?
Ronald F. Clarke
Yes, it's FX, Tien-tsin. So again, if you look at our Russia business in the quarter, frankly, we -- I was a bit shocked just to see that business was, with everything going on, up 9% local currency.
It's not in front of me, but I think the thing was still up something for the full year in local currency. But I think the currency is down, Eric, close to what, 50%?
3-year?
Eric R. Dey
Yes, typically...
Ronald F. Clarke
So when you convert the thing, it's obviously way down, Tien-tsin, for both the quarter and the year.
Tien-tsin Huang - JP Morgan Chase & Co, Research Division
How about just overall transaction growth for International?
Eric R. Dey
Yes, transaction growth, Tien-tsin, in the quarter and internationally was a couple of percent and obviously, it was lot higher than that on a full year basis, around 18%. So it's going to vary by geography as you would imagine.
So some parts of the world are a little stronger than others. The U.K.
is performing fairly well and then there's other parts of the world that have been a little softer, like Brazil. I think we've called that out on a couple of other calls.
The economy there has softened, which has certainly impacted volumes. The Czech Republic is a little bit soft as well.
But again, that's just the way it goes. Some businesses are doing -- are very strong and some are impacted by economies in some other geographies.
Ronald F. Clarke
Yes, Tien-tsin, I'd just add, which is a little bit funny. When we're kind of closing out our budget with our board at the end of the year, and the world was moving, right, moving the wrong way, the that's kind of fascinating is we were able to take up our numbers a bit because the fundamentals, both volume and rate, sans the fuel price and the FX, are actually better and we're exiting, as I said in my comments, better than we thought.
So if you can wave away all the smoke here, I'd say things are actually healthier here at FleetCor than they've been.
Tien-tsin Huang - JP Morgan Chase & Co, Research Division
All right, great. That's good to hear.
Just one more if you don't mind. Just the tax rate, I guess, is going up.
You didn't call that out as a headwind, but it looks like it's $0.17 drag to our numbers. So tax rate is going up to 32%, is that a sustainable level?
Eric R. Dey
Yes, Tien-tsin, I mean, it really isn't changing a whole lot from 2014. We had kind of $9.5 million tax favorability that we recognized in the quarter related to some purchase accounting true-ups in Brazil.
So it's a one-time noncash favorability. We had to book the tax expense.
Excluding that, taxes came in more in the 30%, 31% range. And the difference between where we ended the year and next year is purely due to Comdata, which is mostly in the United States.
And, as you know, it's a much higher tax rate than we would expect internationally.
Operator
The next question comes from Darrin Peller of Barclays.
Darrin D. Peller - Barclays Capital, Research Division
Just a quick -- very quickly to follow up on all the discussion around deals. I mean, I think in the past, you've been saying now $750 million potential capital use per year for acquisitions.
Is that still on track despite sort of all the noise in the environment? And then just a couple of more operating questions.
Ronald F. Clarke
Darrin, it's Ron. Kind of the goal we have in the company is we think about spending our free cash flow.
I don't have it in front of me, but I think the number's around $600 million this year. And if you look at our model, that thing, obviously, is growing 20%.
So that's the right zip code, kind of $600 million, $700 million, $800 million, call it, $1.5 billion to $2 billion over 3 years. And I think the appetite question was a good one earlier.
It's what we do, right? A big part of the game of the company is finding assets that we know and working them.
And so I'd say, that we're still eager to do that.
Darrin D. Peller - Barclays Capital, Research Division
Great. Just -- like, I mean, just to help deconstruct this extra $0.50 embedded in your guidance basically, given that you're really only moving it by 30 despite $0.80 headwind.
Again, you broke down pricing potential exit run rate being stronger and then synergies from Comdata. I guess I'm just trying to figure out, is this basically -- usually, you guys still maintain and leave some conservatism from synergy potential from deals.
I mean, would this kind of use it all up in a way, is what I'm kind of getting at, or is there still more opportunity in Comdata than what maybe you're even potentially including here that could come? And then maybe just help us deconstruct if there's -- how much of this is from pricing?
Or just overall core strength in the business versus Comdata would be really helpful.
Ronald F. Clarke
Yes, I think that's a good question. I'd say that we've spent an awful lot of time studying the Comdata business and had a whole set of ideas of how to improve profit performance.
And I'd say that the major difference is just pace. So when you look at the kind of the 3-year plan, we had kind of staged, "Hey, we're going to do 1, 2, 3 in '15 and we're going to do 4, 5, 6."
And I'd say because of these headwinds, we elected to accelerate a few of the things that we had thought about initially, sooner. So I'd say that there's still a bunch of things that we haven't pulled the trigger on there because we kind of -- we're looking at it over a 3-year plan.
So I'd say that the one is about pace. And then on the rest of the question, I'd say, think about it as, call it, 1/3 of the clawback is through fundamentals and exit rates, and kind of the other 2/3 is Comdata and kind of price recovery.
And I think my comment earlier is we study everywhere globally, tweak prices and not do a lot with the clients. So again, I think we've picked what we think is smart and balanced and, of course, we could always push harder.
But we pick what we've analyzed. I could have pushed and kept guidance the same.
But I think we're trying to run the company to make profit growth 20% every year, not just this year. And so I think we took what we think makes some sense.
Darrin D. Peller - Barclays Capital, Research Division
And that's really helpful. Just one last question.
Moving away from Comdata, the -- it looked like International margins were strong. So just a quick comment on the sort of synergies remaining internationally from some of those deals will be helpful.
And the I'll just turn it back to the queue.
Eric R. Dey
Darrin, this is Eric. Yes, I want to remind everybody, if you go back and listen to my script, we had some one-time favorabilities that were booked into the quarter, and they were International.
So we have booked about $30 million of, I would say, purchase accounting reserve reversals into the quarter. And unfortunately, GAAP rules now require us to take those adjustments to the P&L versus to the balance sheet and leave it in purchase accounting.
So again, we had about $30 million of one-time favorability in there.
Ronald F. Clarke
Darrin, let me just -- it's Ron, let me just add to that. I think sitting inside of Eric's comments, remember, we have 3 or 4 assets that we would still call new, relatively new that are getting treated.
And so if you look at the U.K., we bought a company called Epyx, was it, just over a year or a couple of months ago?
Eric R. Dey
Just over a year ago.
Ronald F. Clarke
We've bought a couple of companies down under in Australia and New Zealand, and we went live with that Shell Germany thing that the cost structure has been in the business but not the revenue. And so I'd say that certainly, in Q4, if you looked at those assets versus the prior Q4, they are all way up in profits.
I mean, way, way up in profits because we've had a chance, basically, to put our kind of Phase 1 transformation stuff into those sets of businesses and get traction. So those things, for sure, boost the margins.
Eric R. Dey
But again, I want you to be sure, be clear here that the margins are up if you look at one of the schedules in the press release, 70%. The profit is up internationally, but 30 points of that is the one-time favorability that I was mentioning.
Operator
The next question comes from Jim Schneider of Goldman Sachs.
James Schneider - Goldman Sachs Group Inc., Research Division
With respect to some of the benefits you eventually expect to roll on towards the end of this year, namely pricing and Comdata revenue synergies, can you maybe talk about first, on the pricing, when do you expect to be able to sort of realize some of the pricing and contract actions, and when you can realize those sort of all at once given the contracts you have existing that are already in place? And then on the Comdata revenue side, is that just small over-the-road customers?
And do we expect that's going to be kind of the middle of this year, or is it going to be out to the end of 2015 and into 2016 before you recognize some benefit there on the revenue side?
Ronald F. Clarke
Yes, Jim, it's Ron. I'd say that we are, again, pretty far along on those set of revenue synergies.
And I would say, think of them as big contracts that take time. We're looking everywhere, we went to obviously, both the merchant side and the customer side.
We look at rebates. And so there's a whole series of places where there are -- we're more immediate.
When I used the word accelerate, kind of more immediate pricing actions. So I'd say, you should think about a lot of that, kind of most of that being in our run rate, certainly, by the start of Q2.
James Schneider - Goldman Sachs Group Inc., Research Division
Okay. So that's both pricing and revenue from Comdata, right?
Ronald F. Clarke
Correct. And the other comment I made earlier, which we built a bit into the plan, we basically took the cost savings, the redundancy savings and poured that back in the sales and marketing and management investments.
So we are stepping up on adding people to make sales. So clearly, as you get to the back half of the year, we're assuming we're going to get some return on that incremental $10 million to $15 million.
James Schneider - Goldman Sachs Group Inc., Research Division
That's helpful. And then maybe as a follow-up, can you maybe comment on the European oil company partnerships, specifically?
And what opportunities do you see there, whether you see there's a chance that bids could come in the first half the year, or is it more of a second half kind of phenomenon?
Ronald F. Clarke
Yes, I mean, the first comment I'd make, I think, is the Shell one -- Shell, I think, was kind of the first guy in Europe that gave us chance on the system side. They had a project called H3 and picked our global fuel card system, call it, 3 years ago.
So we've got that in x number of markets. And then maybe being first, they decided, call it, a year ago to let us do kind of a full outsourcing deal in 11 or 12 countries.
And I'd say that, that second thing, and even I got the Shell guy in the room with me has gone exceptionally well. We've done those conversions, we didn't miss a beat, we didn't bum out customers.
We had all the service people in place. We put sales people in place to sell.
So I think the feedback, both from the customer, the partner perspective and ours, which I commented it generated a few million of brand new revenue in Q4, I think that thing is off to a good start and I think that success is making its way into the conversations that we're having with some of the other guys there, I can remember if it was Phil or someone earlier in the call who said "Hey, does the lower fuel price motivate oil companies to look for other cost reduction ideas?" and I think the answer is yes.
And so I've said it before, us having success and giving partners confidence that we can do good work, I think, is the key to them picking us.
Operator
This concludes our time for questions on today's call. Thank you for your participation.
You may now disconnect your lines at this time.