Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Oct. 25, 2019 | |
Document and Entity Information | ||
Entity Registrant Name | CPI Card Group Inc. | |
Entity Central Index Key | 0001641614 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 11,224,191 | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 14,290 | $ 20,291 |
Accounts receivable, net of allowances of $370 and $211, respectively | 44,806 | 43,794 |
Inventories | 22,105 | 9,827 |
Prepaid expenses and other current assets | 3,974 | 4,997 |
Income taxes receivable | 5,202 | 5,564 |
Total current assets | 90,377 | 84,473 |
Plant, equipment and leasehold improvements, net | 43,655 | 39,110 |
Intangible assets, net | 31,951 | 35,437 |
Goodwill | 47,150 | 47,150 |
Other assets | 616 | 1,034 |
Total assets | 213,749 | 207,204 |
Current liabilities: | ||
Accounts payable | 14,844 | 16,511 |
Accrued expenses | 21,571 | 23,853 |
Deferred revenue and customer deposits | 442 | 912 |
Total current liabilities | 36,857 | 41,276 |
Long-term debt | 307,287 | 305,818 |
Deferred income taxes | 8,357 | 5,749 |
Other long-term liabilities | 11,388 | 3,937 |
Total liabilities | 363,889 | 356,780 |
Commitments and contingencies (Note 13) | ||
Stockholders' deficit: | ||
Common Stock; $0.001 par value—100,000,000 shares authorized; 11,224,191 and 11,160,377 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively | 11 | 11 |
Capital deficiency | (111,930) | (112,223) |
Accumulated loss | (38,221) | (36,004) |
Accumulated other comprehensive loss | (1,360) | |
Total stockholders' deficit | (150,140) | (149,576) |
Total liabilities and stockholders' deficit | $ 213,749 | $ 207,204 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Condensed Consolidated Balance Sheets | ||
Allowance on accounts receivable | $ 370 | $ 211 |
Common shares, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common shares, authorized shares (in shares) | 100,000,000 | 100,000,000 |
Common shares, issued shares (in shares) | 11,224,191 | 11,160,377 |
Common shares, outstanding shares (in shares) | 11,224,191 | 11,160,377 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Net sales: | ||||
Net Sales | $ 71,681 | $ 70,987 | $ 205,448 | $ 187,298 |
Cost of sales: | ||||
Depreciation and amortization | 2,751 | 2,669 | 8,216 | 9,620 |
Total cost of sales | 46,262 | 47,679 | 136,127 | 129,687 |
Gross profit | 25,419 | 23,308 | 69,321 | 57,611 |
Operating expenses, net: | ||||
Selling, general and administrative (exclusive of depreciation and amortization shown below) | 15,936 | 17,033 | 49,146 | 48,119 |
Depreciation and amortization | 1,513 | 1,588 | 4,539 | 4,513 |
Litigation settlement gain | (6,000) | |||
Total operating expenses, net | 17,449 | 18,621 | 47,685 | 52,632 |
Income from operations | 7,970 | 4,687 | 21,636 | 4,979 |
Other expense, net: | ||||
Interest, net | (6,085) | (6,151) | (18,847) | (17,243) |
Foreign currency (loss) gain | (40) | 16 | (1,320) | (248) |
Other income, net | 14 | 8 | 25 | 15 |
Total other expense, net | (6,111) | (6,127) | (20,142) | (17,476) |
Income (loss) from continuing operations before income taxes | 1,859 | (1,440) | 1,494 | (12,497) |
Income tax (expense) benefit | (2,515) | 355 | (3,695) | 4,933 |
Net loss from continuing operations | (656) | (1,085) | (2,201) | (7,564) |
Net loss from discontinued operation, net of tax (see Note 3) | (28) | (5,030) | (16) | (22,551) |
Net loss | $ (684) | $ (6,115) | $ (2,217) | $ (30,115) |
Basic and diluted loss per share: | ||||
Basic and diluted loss per share Basic and diluted - Continuing operations (in dollar per share) | $ (0.06) | $ (0.10) | $ (0.20) | $ (0.68) |
Basic and diluted loss per share Basic and diluted - Discontinuing operations (in dollar per share) | 0 | (0.45) | 0 | (2.02) |
Net loss per share (in dollars per share) | $ (0.06) | $ (0.55) | $ (0.20) | $ (2.70) |
Basic and dilutive weighted-average shares outstanding (in shares) | 11,223,715 | 11,159,984 | 11,187,550 | 11,145,946 |
Comprehensive loss: | ||||
Net loss | $ (684) | $ (6,115) | $ (2,217) | $ (30,115) |
Currency translation adjustment | 98 | 31 | (87) | |
Other comprehensive loss from discontinued operations | 3,983 | 3,983 | ||
Reclassification adjustment to foreign currency loss | 1,329 | |||
Total comprehensive loss | (684) | (2,034) | (857) | (26,219) |
Products | ||||
Net sales: | ||||
Net Sales | 33,963 | 34,673 | 99,845 | 90,911 |
Cost of sales: | ||||
Products and Services (exclusive of depreciation and amortization shown below) | 22,182 | 23,796 | 65,769 | 59,076 |
Services | ||||
Net sales: | ||||
Net Sales | 37,718 | 36,314 | 105,603 | 96,387 |
Cost of sales: | ||||
Products and Services (exclusive of depreciation and amortization shown below) | $ 21,329 | $ 21,214 | $ 62,142 | $ 60,991 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders' Deficit - USD ($) $ in Thousands | Common Stock | Capital deficiency | Accumulated earnings (loss) | Accumulated other comprehensive loss | Total |
Beginning balance at Dec. 31, 2017 | $ 11 | $ (113,081) | $ (1,366) | $ (5,138) | $ (119,574) |
Beginning balance (in shares) at Dec. 31, 2017 | 11,134,714 | ||||
Adoption of ASC 606 | 2,795 | 2,795 | |||
Shares issued under stock-based compensation plans (in shares) | 25,663 | ||||
Stock-based compensation | 659 | 659 | |||
Components of comprehensive (loss) income: | |||||
Net loss | (30,115) | (30,115) | |||
Currency translation adjustment | 3,896 | 3,896 | |||
Ending balance at Sep. 30, 2018 | $ 11 | (112,422) | (28,686) | (1,242) | (142,339) |
Ending balance (in shares) at Sep. 30, 2018 | 11,160,377 | ||||
Beginning balance at Jun. 30, 2018 | $ 11 | (112,377) | (22,571) | (5,323) | (140,260) |
Beginning balance (in shares) at Jun. 30, 2018 | 11,159,714 | ||||
Shares issued under stock-based compensation plans (in shares) | 663 | ||||
Stock-based compensation | (45) | (45) | |||
Components of comprehensive (loss) income: | |||||
Net loss | (6,115) | (6,115) | |||
Currency translation adjustment | 4,081 | 4,081 | |||
Ending balance at Sep. 30, 2018 | $ 11 | (112,422) | (28,686) | (1,242) | (142,339) |
Ending balance (in shares) at Sep. 30, 2018 | 11,160,377 | ||||
Beginning balance at Dec. 31, 2018 | $ 11 | (112,223) | (36,004) | (1,360) | $ (149,576) |
Beginning balance (in shares) at Dec. 31, 2018 | 11,160,377 | 11,160,377 | |||
Shares issued under stock-based compensation plans (in shares) | 63,814 | ||||
Stock-based compensation | 293 | $ 293 | |||
Components of comprehensive (loss) income: | |||||
Net loss | (2,217) | (2,217) | |||
Currency translation adjustment | 31 | 31 | |||
Reclassification adjustment to foreign currency loss | $ 1,329 | 1,329 | |||
Ending balance at Sep. 30, 2019 | $ 11 | (111,930) | (38,221) | $ (150,140) | |
Ending balance (in shares) at Sep. 30, 2019 | 11,224,191 | 11,224,191 | |||
Beginning balance at Jun. 30, 2019 | $ 11 | (111,939) | (37,537) | $ (149,465) | |
Beginning balance (in shares) at Jun. 30, 2019 | 11,223,528 | ||||
Shares issued under stock-based compensation plans (in shares) | 663 | ||||
Stock-based compensation | 9 | 9 | |||
Components of comprehensive (loss) income: | |||||
Net loss | (684) | (684) | |||
Ending balance at Sep. 30, 2019 | $ 11 | $ (111,930) | $ (38,221) | $ (150,140) | |
Ending balance (in shares) at Sep. 30, 2019 | 11,224,191 | 11,224,191 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Operating activities | ||
Net loss | $ (2,217) | $ (30,115) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Loss from discontinued operation | 16 | 22,551 |
Depreciation and amortization expense | 12,755 | 14,133 |
Stock-based compensation expense | 316 | 741 |
Amortization of debt issuance costs and debt discount | 1,469 | 1,461 |
Deferred income taxes | 2,608 | (6,169) |
Reclassification adjustment to foreign currency loss | 1,329 | |
Other, net | 6 | 165 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (2,605) | (13,016) |
Inventories | (12,279) | (2,628) |
Prepaid expenses and other assets | 1,659 | 711 |
Income taxes | 331 | 2,207 |
Accounts payable | (358) | 2,108 |
Accrued expenses | (5,574) | 4,725 |
Deferred revenue and customer deposits | (472) | 230 |
Other liabilities | 17 | 1,052 |
Cash used in operating activities - continuing operations | (2,999) | (1,844) |
Cash used in operating activities - discontinued operation | (16) | (2,914) |
Investing activities | ||
Acquisitions of plant, equipment and leasehold improvements | (3,298) | (5,028) |
Cash received for sale of Canadian subsidiary | 1,451 | |
Cash used in investing activities - continuing operations | (1,847) | (5,028) |
Cash used in investing activities - discontinued operation | 0 | (220) |
Financing activities | ||
Proceeds from revolving credit facility | 11,500 | |
Payments on revolving credit facility | (11,500) | |
Payments on financing leases | (1,175) | (388) |
Cash used in financing activities | (1,175) | (388) |
Effect of exchange rates on cash | 36 | 7 |
Net decrease in cash and cash equivalents | (6,001) | (10,387) |
Cash and cash equivalents, beginning of period | 20,291 | 23,205 |
Cash and cash equivalents, end of period | 14,290 | 12,818 |
Supplemental disclosures of cash flow information | ||
Cash paid (refunded) during the period for: Interest | 17,315 | 14,703 |
Cash paid (refunded) during the period for: Income taxes, net payments (refunds) | 675 | (1,299) |
Right-to-use assets obtained in exchange for lease obligations- Operating leases | 8,533 | |
Right-to-use assets obtained in exchange for lease obligations- Financing leases | 5,196 | 821 |
Accounts payable and accrued expenses for acquisitions of plant, equipment and leasehold improvements | $ 159 | $ 171 |
Business Overview and Summary o
Business Overview and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2019 | |
Business Overview and Summary of Significant Accounting Policies | |
Business Overview and Summary of Significant Accounting Policies | CPI Card Group Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated) (Unaudited) 1. Business Overview and Summary of Significant Accounting Policies Business Overview CPI Card Group Inc. (which, together with its subsidiaries, is referred to herein as “CPI” or the “Company”) is engaged in the design, production, data personalization, packaging and fulfillment of Financial Payment Cards, which the Company defines as credit cards, debit cards and prepaid debit cards issued on the networks of the Payment Card Brands (Visa, Mastercard ® , American Express and Discover) in the United States. To a lesser extent, the Company is also engaged in the design, production, data personalization, packaging and fulfillment of retail gift and loyalty cards. As a producer and provider of services for Financial Payment Cards, each of the Company’s secure facilities must be certified by one or more of the Payment Card Brands and is therefore subject to specific requirements and conditions. Noncompliance with these requirements would prohibit the individual facilities of the Company from producing Financial Payment Cards for these entities’ payment card issuers. In the fourth quarter of 2018, the Company entered into a definitive agreement to sell the Company’s Canadian subsidiary to Allcard Limited, a provider of card solutions to the gift and loyalty sectors. The sale agreement did not include the portions of the business relating to Financial Payment Cards, as that business migrated to the Company’s operations in the U.S. or to other service providers in 2019. The transaction closed on April 1, 2019 , and the Company received cash proceeds of $1,451. After the payment of liabilities and transaction costs, including employee termination costs, the sale did not have a significant impact on cash, and no significant loss on sale. In connection with the disposition of the foreign entity, the Company released the related cumulative translation adjustment from “Accumulated Other Comprehensive Loss” on the Balance Sheet into income from continuing operations during the nine months ended September 30, 2019. This adjustment was $1,3 29 and is included in “Foreign Currency Loss” on the Statement of Operations. The Canadian subsidiary was not a significant operating segment and was part of the Other reportable segment. During February 2018, the Company made the decision to consolidate three personalization operations in the United States into two facilities to better enable the Company to optimize operations and achieve market-leading quality and service with a cost-competitive business model. In conjunction with this decision, the Company accelerated the depreciation of certain related assets, which totaled $266 for the three months ended September 30, 2018 and $2,398 for the nine months ended September 30, 2018. The Company recorded severance charges of $0 and $552, and recorded lease termination charges of $0 and $432 in the three and nine months ended September 30, 2018, respectively. The charges were recorded in the U.S. Debit and Credit segment and were included in “Cost of Sales” and “Selling, General, and Administrative Expenses” on the Statement of Operations. Basis of Presentation Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of the results of the interim periods presented. The Condensed Consolidated Balance Sheet as of December 31, 2018 is derived from the audited financial statements as of that date. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. On August 3, 2018, the Company completed the sale of its three facilities in the United Kingdom that produce retail cards, such as gift and loyalty cards, for customers in the United Kingdom and continental Europe, and provide personalization, packaging and fulfillment services. The facilities sold included Colchester, Liverpool and Derby locations. The Company reported the U.K. Limited reporting segment as discontinued operations and restated the comparative financial information for all periods presented in conformity with GAAP. Unless otherwise indicated, information in these notes to the unaudited condensed consolidated financial statements relate to continuing operations. See Note 3 “Discontinued Operation” for further information. Use of Estimates Management uses estimates and assumptions relating to the reporting of assets and liabilities in its preparation of the condensed consolidated financial statements. Significant items subject to such estimates and assumptions include the useful lives of property and equipment, the valuation of goodwill and intangible assets, valuation allowances for inventories and accounts receivable, deferred tax assets, uncertain tax positions, discount rates used to determine right-to-use assets and lease liabilities, and revenue recognized for period-end work in process. Actual results could differ from those estimates. Adoption of New Accounting Standards In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASC Topic 842, Leases (“ASC 842”), which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets. ASC 842 is effective for annual and interim periods beginning after December 15, 2018 (the Company’s fiscal year 2019) with early adoption permitted. The guidance required a modified retrospective approach, with an option to apply the transition provisions of the new guidance at the adoption date without adjusting the comparative periods presented. In July 2018, t he FASB issued additional accounting standard updates clarifying certain provisions, as well as providing for a second transition method allowing entities to initially apply the standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. The Company adopted the new guidance on the effective date of January 1, 2019 and used the adoption date as the date of initial application as allowed under ASC 842. Consequently, historical financial information has not been updated and the disclosures required under the new standard have not be provided for dates and periods before January 1, 2019. The new standard provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight transition practical expedient. The new standard also provides practical expedients for the Company’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify, meaning the Company will not recognize right-of-use assets or lease liabilities for existing and new lease agreements as applicable. The Company also elected the practical expedient to not separate lease and non-lease components for all of its leases. Right-to-use (“ROU’) represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. If applicable, the Company used the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. A lease is deemed to exist when the Company has the right to control the use of identified property, plant or equipment, as conveyed through a contract, for a certain period of time and consideration paid. The right to control is deemed to occur when the Company has the right to obtain substantially all of the economic benefits of the identified assets and the right to direct the use of such assets. As a result of the adoption of ASC 842 the Company recorded $8,025 of operating ROU assets, and corresponding operating lease liabilities of $8,813 on January 1, 2019, relating to existing real estate operating leases. The components of operating and finance lease costs for the three and nine months ended September 30, 2019 were as follows: Three Months Ended Nine Months Ended September 30, 2019 September 30, 2019 Total operating lease costs $ 659 $ 1,967 Finance lease cost: Amortization of right-to-use assets $ $ Interest on lease liabilities Total financing lease costs $ $ The following table reflects balances for operating leases and financing leases: September 30, 2019 Operating leases Operating lease right-to-use assets, net of amortization $ 6,796 Operating lease liability (current) $ 2,218 Long-term operating liability 5,657 Total operating lease liabilities $ 7,875 Financing leases Property, equipment and leasehold improvements $ 7,014 Accumulated depreciation (782) Total financing leases in property, equipment and leasehold improvements, net $ 6,232 Financing lease liability (current) $ 2,207 Long-term financing liability 3,427 Total financing lease liabilities $ 5,634 Finance and operating lease right-to-use assets are recorded in “Plant, equipment and leasehold improvements, net”. Financing and operating lease liabilities are recorded in “Accrued expenses” and “Other long-term liabilities”. Components of lease expense were as follows: September 30, 2019 Weighted Average Remaining Lease Term Operating Leases Financing Leases Weighted Average Discount Rate Operating Leases Financing Leases Future cash payments with respect to lease obligations as of September 30, 2019 were as follows: Operating Financing Lease Leases Year Ending 2019 $ 696 $ 740 2020 2,854 2,332 2021 2,646 1,716 2022 1,371 1,238 2023 1,097 178 Thereafter 602 - Total lease payments 9,266 6,204 Less imputed interest (1,391) (570) Total $ 7,875 $ 5,634 Future cash payments with respect to lease obligations as of December 31, 2018 were as follows: Operating Capital Leases Leases 2019 $ 2,927 $ 521 2020 2,771 474 2021 2,512 243 2022 1,243 256 2023 971 71 Thereafter 652 — Total $ 11,076 $ 1,565 Cash paid on operating leases was $514 and $1,448 during the three and nine months ended September 30, 2019, respectively. As of January 1, 2018, the Company adopted Accounting Standards Update Codification ASC 606, Revenue from Contracts with Customers , which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 also requires an entity to disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company applied ASC 606 as of January 1, 2018 to all its contracts using the modified retrospective method and recognized the cumulative effect of adoption as an adjustment to the opening balance of “Accumulated loss” on the Condensed Consolidated Balance Sheet. Under the new guidance, the Company recognizes certain performance obligations over time as the goods are produced, since those products provide value to only a specified customer, have no alternative use and the Company has the right to payment for work completed on such items. This accelerates the timing of revenue recognition for these arrangements, as revenue is recognized as goods are produced rather than upon shipment or delivery of goods. See Note 2 “Net Sales” for revenue recognition timing and methodology under ASC 606. Recently Issued Accounting Standards In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This ASU changes the model for the recognition of credit losses from an incurred loss model, which recognized credit losses only if it was probable that a loss had been incurred, to an expected loss model, which requires the Company to estimate the total credit losses expected on the portfolio of financial instruments. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not anticipate the adoption of this standard will have a material impact on the Company’s consolidated financial position, results of operations, and cash flows. |
Net Sales
Net Sales | 9 Months Ended |
Sep. 30, 2019 | |
Net Sales. | |
Net Sales | 2. Net Sales The Company disaggregates its net sales by major source as follows: Three Months Ended September 30, 2019 Products Services Total U.S. Debit and Credit $ 34,218 $ 17,284 $ 51,502 U.S. Prepaid Debit — 20,452 20,452 Intersegment eliminations (255) (18) (273) Total $ 33,963 $ 37,718 $ 71,681 Nine Months Ended September 30, 2019 Products Services Total U.S. Debit and Credit $ 100,338 $ 51,179 $ 151,517 U.S. Prepaid Debit — 53,162 53,162 Other 397 1,282 1,679 Intersegment eliminations (890) (20) (910) Total $ 99,845 $ 105,603 $ 205,448 Three Months Ended September 30, 2018 Products Services Total U.S. Debit and Credit $ 34,176 $ 13,826 $ 48,002 U.S. Prepaid Debit — 21,190 21,190 Other 549 1,371 1,920 Intersegment eliminations (52) (73) (125) Total $ 34,673 $ 36,314 $ 70,987 Nine Months Ended September 30, 2018 Products Services Total U.S. Debit and Credit $ 88,340 $ 40,652 $ 128,992 U.S. Prepaid Debit — 52,128 52,128 Other 3,549 4,050 7,599 Intersegment eliminations (978) (443) (1,421) Total $ 90,911 $ 96,387 $ 187,298 Products Net Sales “ Products” net sales are recognized when obligations under the terms of a contract with a customer are satisfied. In most instances, this occurs over time as cards are manufactured for specific customers, have no alternative use, and the Company has an enforceable right to payment for work performed. For work performed but not completed and unbilled, the Company estimates revenue by taking actual costs incurred and applying historical margins for similar types of contracts. Items included in “Products” revenue are the design and production of Financial Payment Cards, including contact-EMV ® , Dual-Interface EMV ® , metal, contactless and magnetic stripe cards, private label credit cards and retail gift cards. Card Once ® printers and consumables are also included in “Products” net sales, and their associated revenues are recognized at the time of shipping. The Company includes gross shipping and handling revenue and cost in net sales and cost of sales, respectively. Services Net Sales Revenue is recognized for “Services” as the services are performed. Items included in “Services” net sales include the personalization and fulfillment of Financial Payment Cards, providing tamper-evident secure packaging and fulfillment services to Prepaid Debit Card program managers, and software as a service personalization of instant issuance debit cards. The Company also generates “Service” revenue click-fees from the Company’s patented card design software, known as MYCA, which provides customers and cardholders the ability to design cards on the internet and customize cards with individualized digital images. “Services” revenue is also generated from personalizing retail gift cards historically in Canada prior to disposition. As applicable, for work performed but not completed and unbilled, the Company estimates revenue by taking actual costs incurred and applying historical margins for similar types of contracts. Customer Contracts The Company often enters into Master Services Agreements (“MSAs”) with its customers. Generally, enforceable rights and obligations for goods and services occur only when a customer places a purchase order or statement of work to obtain goods or services under an MSA. The contract term as defined by ASU 2014-09 is the length of time it takes to deliver the goods or services promised under the purchase order or statement of work. As such, the Company's contracts are generally short term in nature. |
Discontinued Operation
Discontinued Operation | 9 Months Ended |
Sep. 30, 2019 | |
Discontinued Operation | |
Discontinued Operation | 3. Discontinued Operation On August 3, 2018, the Company completed the sale of its United Kingdom facilities that comprised the U.K. Limited reporting segment. The Company reported the sale of the U.K. Limited reporting segment as discontinued operations and restated the comparative financial information for all periods presented in conformity with GAAP. The Company did not retain significant continuing involvement with the discontinued operation subsequent to the disposal. The major line items constituting the loss from the discontinued operation for the three and nine months ended September 30, 2018 are presented in the table below. The amounts relating to the discontinued operation for the three and nine months ended September 30, 2019 were not significant. Three Months Ended Nine Months Ended September 30, 2018 September 30, 2018 Total net sales $ 1,943 $ 10,741 Total cost of sales 1,721 10,221 Selling, general and administrative 1,238 4,303 Impairments - 7,615 Other expense 4,009 4,038 Pretax (loss) from discontinued operation (5,025) (15,436) Pretax loss on sale of discontinued operation (5) (7,248) Total pretax loss on discontinued operation (5,030) (22,684) Income tax benefit - 133 Net (loss) from discontinued operation $ (5,030) $ (22,551) |
Accounts Receivable
Accounts Receivable | 9 Months Ended |
Sep. 30, 2019 | |
Accounts Receivable | |
Accounts Receivable | 4. Accounts Receivable Accounts receivable consisted of the following: September 30, 2019 December 31, 2018 Trade accounts receivable $ 39,927 $ 36,428 Unbilled accounts receivable 5,249 7,577 45,176 44,005 Less allowance for doubtful accounts (370) (211) Accounts receivable, net $ 44,806 $ 43,794 |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2019 | |
Inventories | |
Inventories | 5 . Inventories Inventories are summarized below: September 30, 2019 December 31, 2018 Raw materials $ 17,963 $ 8,235 Finished goods 5,309 2,991 Inventory reserve (1,167) (1,399) $ 22,105 $ 9,827 |
Plant, Equipment and Leasehold
Plant, Equipment and Leasehold Improvements | 9 Months Ended |
Sep. 30, 2019 | |
Plant, Equipment and Leasehold Improvements | |
Plant, Equipment and Leasehold Improvements | 6. Plant, Equipment and Leasehold Improvements Plant, equipment and leasehold improvements consisted of the following: September 30, 2019 December 31, 2018 Machinery and equipment $ 53,647 $ 62,067 Machinery and equipment under financing leases 7,014 1,812 Furniture, fixtures and computer equipment 4,456 7,730 Leasehold improvements 14,892 19,651 Construction in progress 1,188 1,596 81,197 92,856 Less accumulated depreciation (44,338) (53,746) Operating lease right-of-use assets, net of accumulated amortization 6,796 — $ 43,655 $ 39,110 Depreciation expense of plant, equipment and leasehold improvements, including depreciation of assets under financing leases, was $3,105 and $3,093 for the three months ended September 30, 2019 and 2018, respectively, and $9,268 and $10,641 for the nine months ended September 30, 2019, and 2018, respectively. Operating lease right-of-use assets, net of amortization, are further described in Note 1, Business Overview and Summary of Significant Accounting Policies. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 9 Months Ended |
Sep. 30, 2019 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | 7. Goodwill and Other Intangible Assets The Company reports all of its goodwill in its U.S. Debit and Credit segment at September 30, 2019 and December 31, 2018. Intangible assets consist of customer relationships, technology and software, non-compete agreements and trademarks. Intangible amortization expense was $1,159 and $1,164 for the three months ended September 30, 2019 and 2018, respectively, and $3,487 and $3,492 for the nine months ended September 30, 2019 and 2018, respectively. At September 30, 2019 and December 31, 2018, intangible assets, excluding goodwill, were comprised of the following: September 30, 2019 December 31, 2018 Average Life Accumulated Net Book Accumulated Net Book (Years) Cost Amortization Value Cost Amortization Value Customer relationships 12 to 20 $ 55,454 $ (28,045) $ 27,409 $ 55,454 (25,587) $ 29,867 Technology and software 7 to 10 7,101 (4,720) 2,381 7,101 (4,024) 3,077 Trademarks 7.5 to 10 3,330 (1,169) 2,161 3,330 (877) 2,453 Non-compete agreements 5 to 8 491 (491) — 491 (451) 40 Intangible assets subject to amortization $ 66,376 $ (34,425) $ 31,951 $ 66,376 $ (30,939) $ 35,437 The estimated future aggregate amortization expense for the identified amortizable intangibles noted above as of September 30, 2019 was as follows: 2019 $ 1,150 2020 4,595 2021 4,352 2022 3,867 2023 3,867 Thereafter 14,120 $ 31,951 |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 9 Months Ended |
Sep. 30, 2019 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | 8. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). In determining fair value, the Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. Level 2— Observable inputs other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term for the assets or liabilities. Level 3— Valuations based on unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. The Company’s financial assets and liabilities that are not required to be re-measured at fair value in the Condensed Consolidated Balance Sheets were as follows: Carrying Value as of Fair Value as of Fair Value Measurement at September 30, 2019 September 30, September 30, (Using Fair Value Hierarchy) 2019 2019 Level 1 Level 2 Level 3 Liabilities: First Lien Term Loan $ 312,500 $ 246,875 $ — $ 246,875 $ — Carrying Value as of Fair Value as of Fair Value Measurement at December 31, 2018 December 31, December 31, (Using Fair Value Hierarchy) 2018 2018 Level 1 Level 2 Level 3 Liabilities: First Lien Term Loan $ 312,500 $ 203,125 $ — $ 203,125 $ — The aggregate fair value of the Company’s First Lien Term Loan, as defined in Note 10 “Long-Term Debt and Credit Facility,” was based on bank quotes. The carrying amounts for cash and cash equivalents, accounts receivable and accounts payable each approximate fair value. |
Accrued Liabilities
Accrued Liabilities | 9 Months Ended |
Sep. 30, 2019 | |
Accrued Liabilities | |
Accrued Liabilities | 9. Accrued Liabilities Accrued liabilities consisted of the following: September 30, 2019 December 31, 2018 Accrued payroll and related employee expenses $ 4,233 $ 4,040 Accrued employee performance bonus 3,574 7,137 Accrued Interest 4,834 5,058 Operating and financing lease liability (current portion) 4,425 521 Other 4,505 7,097 Total accrued expenses $ 21,571 $ 23,853 |
Long-Term Debt and Credit Facil
Long-Term Debt and Credit Facility | 9 Months Ended |
Sep. 30, 2019 | |
Long-Term Debt and Credit Facility | |
Long-Term Debt and Credit Facility | 10. Long-Term Debt and Credit Facility At September 30, 2019 and December 31, 2018, long-term debt and credit facilities consisted of the following: Interest September 30, December 31, Rate (1) 2019 2018 First Lien Term Loan (1) 6.71 % $ 312,500 $ 312,500 Unamortized discount (1,940) (2,448) Unamortized deferred financing costs (3,273) (4,234) Total Long-term debt $ 307,287 $ 305,818 (1 ) Interest Rate at September 30, 2019. Interest rate at December 31, 2018 was 7.02%. First Lien Credit Facility On August 17, 2015, the Company entered into a first lien credit facility (the “First Lien Credit Facility”) with a syndicate of lenders providing for a $435,000 first lien term loan (the “First Lien Term Loan”) and a $40,000 revolving credit facility (the “Revolving Credit Facility”). The First Lien Term Loan and the Revolving Credit Facility have maturity dates of August 17, 2022 and August 17, 2020, respectively. The First Lien Credit Facility is secured by a first-priority security interest in substantially all of the Company’s assets constituting equipment, inventory, receivables, cash and other tangible and intangible property. Interest rates under the First Lien Credit Facility are based, at the Company’s election, on a Eurodollar rate, subject to an interest rate floor of 1.0%, plus a margin of 4.50%, or a base rate plus a margin of 3.50%. The First Lien Credit Facility contains customary nonfinancial covenants, including among other things, certain restrictions or limitations on indebtedness, issuance of liens, investments, dividends, redemptions and other distributions to equity holders, asset sales, certain mergers or consolidations, sales, transfers, leases or dispositions of substantially all of the Company’s assets and affiliate transactions. The First Lien Credit Facility also contains a requirement that, as of the last day of any fiscal quarter, if the amount the Company has drawn under the Revolving Credit Facility is greater than 50% of the aggregate principal amount of all commitments of the lenders thereunder, the Company maintain a first lien net leverage ratio not in excess of 7.0 times trailing twelve month Adjusted EBITDA, as defined in the agreement. As of September 30, 2019, the Company was in compliance with all covenants under the First Lien Credit Facility. The First Lien Credit Facility also requires prepayment in advance of the maturity date upon the occurrence of certain customary events, including based on an annual excess cash flow calculation, pursuant to the terms of the agreement, with any required payments to be made after the issuance of the Company’s annual financial statements. The Company was not required to make any prepayments of the First Lien Term Loan with respect to our 2018 annual financial statements. At September 30, 2019, the Company did not have any outstanding amounts under the Revolving Credit Facility and has $19,950 available for borrowing. Additional amounts may be available for borrowing under the term of the Revolving Credit Facility, up to the full $40,000, to the extent the Company’s net leverage ratio does not exceed 7.0 times Adjusted EBITDA, as defined in the agreement. The interest rate on the Revolving Credit Facility is the Federal base rate plus 3.5%. The Company has one outstanding letter of credit for $50 relating to the security deposit on a real property lease agreement. The Company pays a fee on outstanding letters of credit at the applicable margin, which was 4.50% as of September 30, 2019 and December 31, 2018, in addition to a fronting fee of 0.125% per annum. In addition, the Company is required to pay an unused commitment fee ranging from 0.375% per annum to 0.50% per annum of the average unused portion of the revolving commitments. The unused commitment fee is determined on the basis of a grid that results in a lower unused commitment fee as the Company’s total net leverage ratio declines. Deferred Financing Costs Certain costs incurred with borrowings or the establishment or modification of credit facilities are reflected as a reduction to the long-term debt balance. These costs are amortized as an adjustment to interest expense over the life of the borrowing using the effective-interest rate method. |
Income Taxes - Continuing Opera
Income Taxes - Continuing Operations | 9 Months Ended |
Sep. 30, 2019 | |
Income Taxes - Continuing Operations | |
Income Taxes - Continuing Operations | 11. Income Taxes – Continuing Operations During the three months ended September 30, 2019, the Company recognized an income tax expense of $2,515 on a pre-tax income of $1,859, compared to an income tax benefit of $355 on a pre-tax loss of $1,440 for the pr ior year period . During the nine months ended September 30, 2019, the Company recognized an income tax expense of $3,695 on pre-tax income of $1,494, representing an effective income tax rate of 247.3%. For the nine months ended September 30, 2018, the Company recognized an income tax benefit of $4,933 on a pre-tax loss of $12,497, representing an effective income tax rate of 39.5%. For the nine months ended September 30, 2019 and 2018, the effective tax rate differs from the U.S. federal statutory income tax rate as follows: September 30, 2019 2018 Tax at federal statutory rate 21.0 % 21.0 % State Taxes, net 38.0 0.5 Valuation allowance 174.1 (2.5) Tax benefit U.K. discontinued operation — 27.7 Other 14.2 (7.2) Effective income tax rate 247.3 % 39.5 % The effective tax rate differs from the federal U.S. statutory rate primarily due to the impact of tax expense recorded related to a partial valuation allowance of $2,600 on certain U.S. deferred tax assets at an effective income tax rate impact of 174.1% for the nine months ended September 30, 2019 . The partial valuation allowance is due to the limitation on the deductibility of business interest expense which is a provision of U.S. government tax reform legislation enacted in December 2017. For the nine months ended September 30, 2018, the primary reason that the effective tax rate differs from the federal U.S. statutory rate is due to a tax benefit recorded in connection with the U.K. Limited discontinued operation. The Company’s income tax receivable on the condensed consolidated balance sheet as of September 30, 2019, is primarily comprised of a $5,005 U.S. federal income tax receivable relating to a prior tax year. |
Loss per Share
Loss per Share | 9 Months Ended |
Sep. 30, 2019 | |
Loss per Share | |
Loss per Share | 12. Loss per Share Basic and diluted loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. The following table sets forth the computation of basic and diluted loss per share: Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Numerator: Net loss from continuing operations $ (656) $ (1,085) $ (2,201) $ (7,564) Net loss from discontinued operation (28) (5,030) (16) (22,551) Net loss $ (684) $ (6,115) $ (2,217) $ (30,115) Denominator: Basic and Diluted weighted-average common shares outstanding 11,223,715 11,159,984 11,187,550 11,145,946 Basic and diluted-Continuing operations $ (0.06) $ (0.10) $ (0.20) $ (0.68) Basic and diluted-Discontinued operation (0.00) (0.45) (0.00) (2.02) Basic and diluted net loss per share $ (0.06) $ (0.55) $ (0.20) $ (2.70) The Company reported a net loss for the three and nine months ended September 30, 2019 and 2018. Accordingly, the potentially dilutive effect of 840,819 and 666,101 stock options and 9,256 and 68,811 restricted stock units were excluded from the computation of diluted earnings per share as of September 30, 2019 and 2018, respectively, as their inclusion would be anti-dilutive. |
Commitments and Contingencies;
Commitments and Contingencies; Litigation Settlement | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies; Litigation Settlement | |
Commitments and Contingencies; Litigation Settlement | 13. Commitments and Contingencies; Litigation Settlement Contingencies In accordance with applicable accounting guidance, the Company establishes an accrued liability when loss contingencies are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. As a matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. Once the loss contingency is deemed to be both probable and estimable, the Company will establish an accrued liability and record a corresponding amount of litigation-related expense. The Company expenses professional fees associated with litigation claims and assessments as incurred. Heckermann v. Montross et al. , Case No. 1:17-CV-01673 (D. Del.) (the “Derivative Suit”) On November 20, 2017, a purported CPI stockholder filed a stockholder derivative complaint in the United States District Court for the District of Delaware (the “Court”) against certain of CPI’s former officers and current and former directors, along with the sponsors of CPI’s October 2015 initial public offering (“IPO”). CPI is also named as a nominal defendant. The derivative complaint asserts claims under §§10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 and seeks, among other things, injunctive relief, damages and costs. It alleges false or misleading statements and omissions in the Registration Statement filed by CPI in connection with its IPO and subsequent public filings and statements. The derivative complaint also asserts claims for purported breaches of fiduciary duties, unjust enrichment, mismanagement and waste of corporate assets. On March 28, 2018, the Court entered the parties’ stipulated order staying the Derivative Suit pending final determination of In Re CPI Card Group Inc. Securities Litigation, Case No. 1:16-CV-04531 (S.D.N.Y.) (the “Class Action”) , which was dismissed in its entirety, with prejudice, on February 25, 2019. Under its terms, the stay of the Derivative Suit was lifted 30 days after the entry of final judgment in the Class Action which was entered on February 25, 2019. The Derivative Suit litigation is ongoing. Given the current stage of this matter, the range of any potential loss is not probable or estimable and no liability has been recorded as of September 30, 2019 and December 31, 2018. Litigation Settlement CPI Card Group Inc. v. Multi Packaging Solutions, Inc., et al. Second Case During the summer of 2017, the Company and its subsidiary, CPI Card Group – Minnesota, Inc. (together, the “Company Plaintiffs”), commenced a lawsuit in the United States District Court for the District of Minnesota against a former employee, Multi Packaging Solutions, Inc. (“MPS”), and two MPS employees as individuals (collectively, the Defendants). On June 12, 2019, the Company Plaintiffs and the Defendants reached a settlement pursuant to which the case was resolved and dismissed by mutual agreement on terms that provided for, among other things, a cash payment to the Company. The Company received a $6,000 cash settlement payment during the second quarter of 2019, and recorded the gain within income from operations, in the Other segment. The case was dismissed in its entirety, with prejudice, by court order on July 12, 2019. For further information see Part II-Item 1. Legal Proceedings. In addition to the matters described above, the Company is subject to routine legal proceedings in the ordinary course of business. The Company believes that the ultimate resolution of these matters will not have a material adverse effect on its business, financial condition or results of operations. |
Stock Based Compensation
Stock Based Compensation | 9 Months Ended |
Sep. 30, 2019 | |
Stock Based Compensation | |
Stock Based Compensation | 14. Stock-Based Compensation CPI Card Group Inc. Omnibus Incentive Plan During October 2015, the Company adopted the CPI Card Group Inc. Omnibus Incentive Plan (the “Omnibus Plan”) pursuant to which cash and equity based incentives may be granted to participating employees, advisors and directors. The Company had reserved 800,000 shares of common stock for issuance under the Omnibus Plan. Effective September 25, 2017, the Omnibus Plan was amended and restated, providing for an increase in the number of shares of common stock authorized for issuance thereunder by 400,000. The increase was made effective in the fourth quarter of 2017 by stockholder approval in accordance with applicable law, after which the Company had reserved 1,200,000 shares of common stock for issuance. As of September 30, 2019, there were 228,555 shares available for grant under the Omnibus Plan. During the nine months ended September 30, 2019, the Company did not grant any awards of non-qualified stock options. The following is a summary of the activity in outstanding stock options under the Omnibus Plan: Weighted- Weighted- Average Average Remaining Exercise Contractual Term Options Price (in Years) Outstanding as of December 31, 2018 910,627 $ Granted — — Forfeited (69,808) Outstanding as of September 30, 2019 840,819 $ 7.62 Options vested and exercisable as of September 30, 2019 517,794 7.52 Options vested and expected to vest 840,819 7.62 The following is a summary of the activity in non-vested stock options under the Omnibus Plan: Weighted-Average Number Grant-Date Fair Value Non-vested as of December 31, 2018 605,352 $ 3.14 Granted - - Forfeited (51,567) 3.25 Vested (230,760) 2.28 Non-vested as of September 30, 2019 323,025 $ 3.74 Unvested options as of September 30, 2019, will vest as follows: 2019 45,345 2020 225,980 2021 51,700 Total unvested options as of September 30, 2019 323,025 The weighted-average grant-date fair value of options granted was as follows: Three Months Ended September 30, 2019 2018 Weighted-average grant-date fair value of options granted $ n/a $ 1.20 The following table summarizes the changes in the number of outstanding restricted stock units: Weighted- Average Weighted- Remaining Average Amortization Grant-Date Period Units Fair Value (in Years) Outstanding as of December 31, 2018 68,649 $ 6.25 Granted — Vested (57,563) 3.15 Forfeited (1,830) 21.75 Outstanding as of September 30, 2019 9,256 $ 22.44 0.60 During the nine months ended September 30, 2019, the Company did not grant any awards of restricted stock units. Unvested restricted stock units as of September 30, 2019, will vest as follows: 2019 — 2020 9,013 2021 243 Total unvested restricted stock units as of September 30, 2019 9,256 The following table summarizes the changes in the number of outstanding cash performance units: Units Outstanding as of December 31, 2018 425,012 Granted Vested (212,505) Forfeited (40,181) Outstanding as of September 30, 2019 172,326 These awards will settle in cash in three annual payments on the first, second and third anniversaries of the date of grant. The cash performance units are based on the performance of the Company’s stock, measured based on the Company’s stock price at each of the first, second and third anniversaries of the grant date of March 22, 2017, compared to the Company’s stock price on the date of grant. During the nine months of 2019, the second tranche of the cash performance units vested. Accordingly, the Company made a cash payment of $106 to the award recipients. The Company recognizes compensation expense on a straight-line basis for each annual performance period. The cash performance units are accounted for as a liability and re-measured to fair value at the end of each reporting period. As of September 30, 2019, the Company recognized a liability of $73 in “Accrued expenses” in the Condensed Consolidated Balance Sheet for unsettled cash performance units. Compensation expense for the Omnibus Plan for the three months ended September 30, 2019 and 2018 was $9 and $(42), as a result of forfeitures, respectively. Compensation expense for the nine months ended September 30, 2019 and 2018 was $317 and $741, respectively. As of September 30, 2019, the total unrecognized compensation expense related to unvested options, restricted stock units and cash performance unit awards under the Omnibus Plan was $217, which the Company expects to recognize over an estimated weighted-average period of 0.93 years. CPI Holdings I, Inc. Amended and Restated 2007 Stock Option Plan In 2007, the Company’s Board of Directors adopted the CPI Holdings I, Inc. Amended and Restated 2007 Stock Option Plan (the “Option Plan”). Under the provisions of the Option Plan, stock options may be granted to employees, directors and consultants at an exercise price greater than or equal to (and not less than) the fair market value of a share on the date the option is granted. During the nine months ended September 30, 2019, the remaining 6,600 outstanding shares were exercised. As such, there were no outstanding shares remaining as of September 30, 2019. Compensation expense and unrecorded compensation expense related to options previously granted under the Option Plan, for the three and nine months ended September 30, 2019 and 2018, were de minimis. |
Segment Reporting
Segment Reporting | 9 Months Ended |
Sep. 30, 2019 | |
Segment Reporting | |
Segment Reporting | 15. Segment Reporting The Company has identified reportable segments as those consolidated subsidiaries that represent 10% or more of its revenue, EBITDA (as defined below) or total assets, or when the Company believes information about the segment would be useful to the readers of the financial statements. The Company’s chief operating decision maker is its Chief Executive Officer who is charged with management of the Company and is responsible for the evaluation of operating performance and decision making about the allocation of resources to operating segments based on measures, such as revenue and EBITDA. EBITDA is the primary measure used by the Company’s chief operating decision maker to evaluate segment operating performance. As the Company uses the term, EBITDA is defined as income before interest expense, income taxes, depreciation and amortization. The Company’s chief operating decision maker believes EBITDA is a meaningful measure and is superior to available GAAP measures as it represents a transparent view of the Company’s operating performance that is unaffected by fluctuations in property, equipment and leasehold improvement additions. The Company’s chief operating decision maker uses EBITDA to perform periodic reviews and comparison of operating trends and identify strategies to improve the allocation of resources amongst segments. On August 3, 2018, the Company completed the sale of the U.K. Limited segment. See Note 3 “Discontinued Operation” for further information. The Company has restated all historical periods presented within these financial statements and has not included U.K. Limited as a reportable segment. As of September 30, 2019, the Company’s reportable segments were as follows: U.S. Debit and Credit, U.S. Prepaid Debit, and Other. The Other category includes the Company’s corporate headquarters and a less significant operating segment that historically derived its revenue from the production of financial payment cards and retail gift cards in Canada. The Company’s Canadian subsidiary was sold on April 1, 2019. The sale agreement did not include the portions of the business relating to Financial Payment Cards, as those business customers of the Canadian subsidiary migrated to the Company’s operations in the U.S. or to other service providers in 2019. Performance Measures of Reportable Segments Revenue and EBITDA of the Company’s reportable segments for the three and nine months ended September 30, 2019, and 2018, were as follows: Net Sales Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 U.S. Debit and Credit $ 51,502 $ 48,002 $ 151,517 $ 128,992 U.S. Prepaid Debit 20,452 21,190 53,162 52,128 Other — 1,920 1,679 7,599 Intersegment eliminations (273) (125) (910) (1,421) Total $ 71,681 $ 70,987 $ 205,448 $ 187,298 EBITDA Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 U.S. Debit and Credit $ 11,417 $ 9,136 $ 32,387 $ 24,788 U.S. Prepaid Debit 8,342 8,831 20,001 18,337 Other (7,551) (8,999) (19,292) (24,246) Total $ 12,208 $ 8,968 $ 33,096 $ 18,879 The following table provides a reconciliation of total segment EBITDA from continuing operations to net loss from continuing operations for the three and nine months ended September 30, 2019, and 2018: Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Total segment EBITDA from continuing operations $ 12,208 $ 8,968 $ 33,096 $ 18,879 Interest, net (6,085) (6,151) (18,847) (17,243) Income tax (expense) benefit (2,515) 355 (3,695) 4,933 Depreciation and amortization (4,264) (4,257) (12,755) (14,133) Net loss from continuing operations $ (656) $ (1,085) $ (2,201) $ (7,564) Balance Sheet Data of Reportable Segments Total assets of the Company’s reportable segments at September 30, 2019, and December 31, 2018, were as follows: September 30, 2019 December 31, 2018 U.S. Debit and Credit $ 174,139 $ 169,567 U.S. Prepaid Debit 30,432 25,117 Other 9,178 12,520 Total assets $ 213,749 $ 207,204 Net Sales by Products and Services Net sales from products and services sold by the Company for the three and nine months ended September 30, 2019 and 2018 were as follows: Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Products net sales (a) $ 33,963 $ 34,673 $ 99,845 $ 90,911 Services net sales (b) 37,718 36,314 105,603 96,387 Total net sales $ 71,681 $ 70,987 $ 205,448 $ 187,298 (a) “ Products” net sales include the design and production of Financial Payment Cards in contact-EMV, Dual-Interface EMV, metal, contactless and magnetic stripe card formats. The Company also generates “Products” revenue from the sale of Card Once printers and consumables, private label credit cards and retail gift cards. (b) “ Services” net sales include revenue from the personalization and fulfillment of Financial Payment Cards, providing tamper-evident security packaging and fulfillment services to Prepaid Debit Card program managers and software as a service personalization of instant issuance debit cards. The Company also generates “Services” revenue from click-fees generated from the Company’s patented card design software, known as MYCA, which provides customers and cardholders the ability to design cards on the internet and customize cards with individualized digital images. “Services” revenue is also generated from personalizing retail gift cards, historically generated in Canada prior to the disposition. Net Sales to Geographic Locations, Property, Equipment and Leasehold Improvements and Long-Lived Assets Subsequent to the sale of the Company’s U.K. Limited segment and reclassification to discontinued operations, and the sale of the Company’s Canada operations on April 1, 2019, the Company’s Net Sales, Property, Equipment and Leasehold Improvements, and Long-Lived assets relating to geographic locations outside of the United States is insignificant. |
Business Overview and Summary_2
Business Overview and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Business Overview and Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of the results of the interim periods presented. The Condensed Consolidated Balance Sheet as of December 31, 2018 is derived from the audited financial statements as of that date. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. On August 3, 2018, the Company completed the sale of its three facilities in the United Kingdom that produce retail cards, such as gift and loyalty cards, for customers in the United Kingdom and continental Europe, and provide personalization, packaging and fulfillment services. The facilities sold included Colchester, Liverpool and Derby locations. The Company reported the U.K. Limited reporting segment as discontinued operations and restated the comparative financial information for all periods presented in conformity with GAAP. Unless otherwise indicated, information in these notes to the unaudited condensed consolidated financial statements relate to continuing operations. See Note 3 “Discontinued Operation” for further information. |
Use of Estimates | Use of Estimates Management uses estimates and assumptions relating to the reporting of assets and liabilities in its preparation of the condensed consolidated financial statements. Significant items subject to such estimates and assumptions include the useful lives of property and equipment, the valuation of goodwill and intangible assets, valuation allowances for inventories and accounts receivable, deferred tax assets, uncertain tax positions, discount rates used to determine right-to-use assets and lease liabilities, and revenue recognized for period-end work in process. Actual results could differ from those estimates. |
Adoption of New Accounting Standards and Recently Issued Accounting Standards | Adoption of New Accounting Standards In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASC Topic 842, Leases (“ASC 842”), which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets. ASC 842 is effective for annual and interim periods beginning after December 15, 2018 (the Company’s fiscal year 2019) with early adoption permitted. The guidance required a modified retrospective approach, with an option to apply the transition provisions of the new guidance at the adoption date without adjusting the comparative periods presented. In July 2018, t he FASB issued additional accounting standard updates clarifying certain provisions, as well as providing for a second transition method allowing entities to initially apply the standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. The Company adopted the new guidance on the effective date of January 1, 2019 and used the adoption date as the date of initial application as allowed under ASC 842. Consequently, historical financial information has not been updated and the disclosures required under the new standard have not be provided for dates and periods before January 1, 2019. The new standard provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight transition practical expedient. The new standard also provides practical expedients for the Company’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify, meaning the Company will not recognize right-of-use assets or lease liabilities for existing and new lease agreements as applicable. The Company also elected the practical expedient to not separate lease and non-lease components for all of its leases. Right-to-use (“ROU’) represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. If applicable, the Company used the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. A lease is deemed to exist when the Company has the right to control the use of identified property, plant or equipment, as conveyed through a contract, for a certain period of time and consideration paid. The right to control is deemed to occur when the Company has the right to obtain substantially all of the economic benefits of the identified assets and the right to direct the use of such assets. As a result of the adoption of ASC 842 the Company recorded $8,025 of operating ROU assets, and corresponding operating lease liabilities of $8,813 on January 1, 2019, relating to existing real estate operating leases. The components of operating and finance lease costs for the three and nine months ended September 30, 2019 were as follows: Three Months Ended Nine Months Ended September 30, 2019 September 30, 2019 Total operating lease costs $ 659 $ 1,967 Finance lease cost: Amortization of right-to-use assets $ $ Interest on lease liabilities Total financing lease costs $ $ The following table reflects balances for operating leases and financing leases: September 30, 2019 Operating leases Operating lease right-to-use assets, net of amortization $ 6,796 Operating lease liability (current) $ 2,218 Long-term operating liability 5,657 Total operating lease liabilities $ 7,875 Financing leases Property, equipment and leasehold improvements $ 7,014 Accumulated depreciation (782) Total financing leases in property, equipment and leasehold improvements, net $ 6,232 Financing lease liability (current) $ 2,207 Long-term financing liability 3,427 Total financing lease liabilities $ 5,634 Finance and operating lease right-to-use assets are recorded in “Plant, equipment and leasehold improvements, net”. Financing and operating lease liabilities are recorded in “Accrued expenses” and “Other long-term liabilities”. Components of lease expense were as follows: September 30, 2019 Weighted Average Remaining Lease Term Operating Leases Financing Leases Weighted Average Discount Rate Operating Leases Financing Leases Future cash payments with respect to lease obligations as of September 30, 2019 were as follows: Operating Financing Lease Leases Year Ending 2019 $ 696 $ 740 2020 2,854 2,332 2021 2,646 1,716 2022 1,371 1,238 2023 1,097 178 Thereafter 602 - Total lease payments 9,266 6,204 Less imputed interest (1,391) (570) Total $ 7,875 $ 5,634 Future cash payments with respect to lease obligations as of December 31, 2018 were as follows: Operating Capital Leases Leases 2019 $ 2,927 $ 521 2020 2,771 474 2021 2,512 243 2022 1,243 256 2023 971 71 Thereafter 652 — Total $ 11,076 $ 1,565 Cash paid on operating leases was $514 and $1,448 during the three and nine months ended September 30, 2019, respectively. As of January 1, 2018, the Company adopted Accounting Standards Update Codification ASC 606, Revenue from Contracts with Customers , which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 also requires an entity to disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company applied ASC 606 as of January 1, 2018 to all its contracts using the modified retrospective method and recognized the cumulative effect of adoption as an adjustment to the opening balance of “Accumulated loss” on the Condensed Consolidated Balance Sheet. Under the new guidance, the Company recognizes certain performance obligations over time as the goods are produced, since those products provide value to only a specified customer, have no alternative use and the Company has the right to payment for work completed on such items. This accelerates the timing of revenue recognition for these arrangements, as revenue is recognized as goods are produced rather than upon shipment or delivery of goods. See Note 2 “Net Sales” for revenue recognition timing and methodology under ASC 606. Recently Issued Accounting Standards In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This ASU changes the model for the recognition of credit losses from an incurred loss model, which recognized credit losses only if it was probable that a loss had been incurred, to an expected loss model, which requires the Company to estimate the total credit losses expected on the portfolio of financial instruments. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not anticipate the adoption of this standard will have a material impact on the Company’s consolidated financial position, results of operations, and cash flows. |
Business Overview and Summary_3
Business Overview and Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Business Overview and Summary of Significant Accounting Policies | |
Schedule of operating and finance lease costs | Three Months Ended Nine Months Ended September 30, 2019 September 30, 2019 Total operating lease costs $ 659 $ 1,967 Finance lease cost: Amortization of right-to-use assets $ $ Interest on lease liabilities Total financing lease costs $ $ |
Schedule of balance sheet information for operating leases and financing leases | September 30, 2019 Operating leases Operating lease right-to-use assets, net of amortization $ 6,796 Operating lease liability (current) $ 2,218 Long-term operating liability 5,657 Total operating lease liabilities $ 7,875 Financing leases Property, equipment and leasehold improvements $ 7,014 Accumulated depreciation (782) Total financing leases in property, equipment and leasehold improvements, net $ 6,232 Financing lease liability (current) $ 2,207 Long-term financing liability 3,427 Total financing lease liabilities $ 5,634 |
Schedule of Components of lease expense | September 30, 2019 Weighted Average Remaining Lease Term Operating Leases Financing Leases Weighted Average Discount Rate Operating Leases Financing Leases |
Lease maturity schedule | Future cash payments with respect to lease obligations as of September 30, 2019 were as follows: Operating Financing Lease Leases Year Ending 2019 $ 696 $ 740 2020 2,854 2,332 2021 2,646 1,716 2022 1,371 1,238 2023 1,097 178 Thereafter 602 - Total lease payments 9,266 6,204 Less imputed interest (1,391) (570) Total $ 7,875 $ 5,634 |
Schedule of future cash payments with respect to operating leases and purchase obligations | Future cash payments with respect to lease obligations as of December 31, 2018 were as follows: Operating Capital Leases Leases 2019 $ 2,927 $ 521 2020 2,771 474 2021 2,512 243 2022 1,243 256 2023 971 71 Thereafter 652 — Total $ 11,076 $ 1,565 |
Net Sales (Tables)
Net Sales (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Net Sales. | |
Schedule of disaggregation of net sales by major source | Three Months Ended September 30, 2019 Products Services Total U.S. Debit and Credit $ 34,218 $ 17,284 $ 51,502 U.S. Prepaid Debit — 20,452 20,452 Intersegment eliminations (255) (18) (273) Total $ 33,963 $ 37,718 $ 71,681 Nine Months Ended September 30, 2019 Products Services Total U.S. Debit and Credit $ 100,338 $ 51,179 $ 151,517 U.S. Prepaid Debit — 53,162 53,162 Other 397 1,282 1,679 Intersegment eliminations (890) (20) (910) Total $ 99,845 $ 105,603 $ 205,448 Three Months Ended September 30, 2018 Products Services Total U.S. Debit and Credit $ 34,176 $ 13,826 $ 48,002 U.S. Prepaid Debit — 21,190 21,190 Other 549 1,371 1,920 Intersegment eliminations (52) (73) (125) Total $ 34,673 $ 36,314 $ 70,987 Nine Months Ended September 30, 2018 Products Services Total U.S. Debit and Credit $ 88,340 $ 40,652 $ 128,992 U.S. Prepaid Debit — 52,128 52,128 Other 3,549 4,050 7,599 Intersegment eliminations (978) (443) (1,421) Total $ 90,911 $ 96,387 $ 187,298 |
Discontinued Operation (Tables)
Discontinued Operation (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Discontinued Operation | |
Schedule of assets, liabilities and operations of discontinued operations | Three Months Ended Nine Months Ended September 30, 2018 September 30, 2018 Total net sales $ 1,943 $ 10,741 Total cost of sales 1,721 10,221 Selling, general and administrative 1,238 4,303 Impairments - 7,615 Other expense 4,009 4,038 Pretax (loss) from discontinued operation (5,025) (15,436) Pretax loss on sale of discontinued operation (5) (7,248) Total pretax loss on discontinued operation (5,030) (22,684) Income tax benefit - 133 Net (loss) from discontinued operation $ (5,030) $ (22,551) |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Accounts Receivable | |
Schedule of accounts receivable | September 30, 2019 December 31, 2018 Trade accounts receivable $ 39,927 $ 36,428 Unbilled accounts receivable 5,249 7,577 45,176 44,005 Less allowance for doubtful accounts (370) (211) Accounts receivable, net $ 44,806 $ 43,794 |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Inventories | |
Schedule of inventories | September 30, 2019 December 31, 2018 Raw materials $ 17,963 $ 8,235 Finished goods 5,309 2,991 Inventory reserve (1,167) (1,399) $ 22,105 $ 9,827 |
Plant, Equipment and Leasehol_2
Plant, Equipment and Leasehold Improvements (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Plant, Equipment and Leasehold Improvements | |
Schedule of plant, equipment and leasehold improvements | September 30, 2019 December 31, 2018 Machinery and equipment $ 53,647 $ 62,067 Machinery and equipment under financing leases 7,014 1,812 Furniture, fixtures and computer equipment 4,456 7,730 Leasehold improvements 14,892 19,651 Construction in progress 1,188 1,596 81,197 92,856 Less accumulated depreciation (44,338) (53,746) Operating lease right-of-use assets, net of accumulated amortization 6,796 — $ 43,655 $ 39,110 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Goodwill and Other Intangible Assets | |
Schedule of intangible assets excluding goodwill | September 30, 2019 December 31, 2018 Average Life Accumulated Net Book Accumulated Net Book (Years) Cost Amortization Value Cost Amortization Value Customer relationships 12 to 20 $ 55,454 $ (28,045) $ 27,409 $ 55,454 (25,587) $ 29,867 Technology and software 7 to 10 7,101 (4,720) 2,381 7,101 (4,024) 3,077 Trademarks 7.5 to 10 3,330 (1,169) 2,161 3,330 (877) 2,453 Non-compete agreements 5 to 8 491 (491) — 491 (451) 40 Intangible assets subject to amortization $ 66,376 $ (34,425) $ 31,951 $ 66,376 $ (30,939) $ 35,437 |
Schedule of future aggregate amortization expense for identified amortizable intangibles | 2019 $ 1,150 2020 4,595 2021 4,352 2022 3,867 2023 3,867 Thereafter 14,120 $ 31,951 |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Fair Value of Financial Instruments | |
Schedule of financial assets and liabilities subject to fair value measurements | Carrying Value as of Fair Value as of Fair Value Measurement at September 30, 2019 September 30, September 30, (Using Fair Value Hierarchy) 2019 2019 Level 1 Level 2 Level 3 Liabilities: First Lien Term Loan $ 312,500 $ 246,875 $ — $ 246,875 $ — Carrying Value as of Fair Value as of Fair Value Measurement at December 31, 2018 December 31, December 31, (Using Fair Value Hierarchy) 2018 2018 Level 1 Level 2 Level 3 Liabilities: First Lien Term Loan $ 312,500 $ 203,125 $ — $ 203,125 $ — |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Accrued Liabilities | |
Schedule of Accrued Liabilities | September 30, 2019 December 31, 2018 Accrued payroll and related employee expenses $ 4,233 $ 4,040 Accrued employee performance bonus 3,574 7,137 Accrued Interest 4,834 5,058 Operating and financing lease liability (current portion) 4,425 521 Other 4,505 7,097 Total accrued expenses $ 21,571 $ 23,853 |
Long-Term Debt and Credit Fac_2
Long-Term Debt and Credit Facility (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Long-Term Debt and Credit Facility | |
Schedule of long-term debt | Interest September 30, December 31, Rate (1) 2019 2018 First Lien Term Loan (1) 6.71 % $ 312,500 $ 312,500 Unamortized discount (1,940) (2,448) Unamortized deferred financing costs (3,273) (4,234) Total Long-term debt $ 307,287 $ 305,818 (1 ) Interest Rate at September 30, 2019. Interest rate at December 31, 2018 was 7.02%. |
Income Taxes _ Continuing Opera
Income Taxes – Continuing Operations (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Income Taxes - Continuing Operations | |
Schedule of effective income tax rate reconciliation | September 30, 2019 2018 Tax at federal statutory rate 21.0 % 21.0 % State Taxes, net 38.0 0.5 Valuation allowance 174.1 (2.5) Tax benefit U.K. discontinued operation — 27.7 Other 14.2 (7.2) Effective income tax rate 247.3 % 39.5 % |
Loss per Share (Tables)
Loss per Share (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Loss per Share | |
Computation of basic and diluted (loss) EPS | Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Numerator: Net loss from continuing operations $ (656) $ (1,085) $ (2,201) $ (7,564) Net loss from discontinued operation (28) (5,030) (16) (22,551) Net loss $ (684) $ (6,115) $ (2,217) $ (30,115) Denominator: Basic and Diluted weighted-average common shares outstanding 11,223,715 11,159,984 11,187,550 11,145,946 Basic and diluted-Continuing operations $ (0.06) $ (0.10) $ (0.20) $ (0.68) Basic and diluted-Discontinued operation (0.00) (0.45) (0.00) (2.02) Basic and diluted net loss per share $ (0.06) $ (0.55) $ (0.20) $ (2.70) |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Summary of changes in outstanding restricted stock units | Weighted- Average Weighted- Remaining Average Amortization Grant-Date Period Units Fair Value (in Years) Outstanding as of December 31, 2018 68,649 $ 6.25 Granted — Vested (57,563) 3.15 Forfeited (1,830) 21.75 Outstanding as of September 30, 2019 9,256 $ 22.44 0.60 |
Schedule of vesting for unvested restricted stock units | 2019 — 2020 9,013 2021 243 Total unvested restricted stock units as of September 30, 2019 9,256 |
Summary of changes in number of outstanding cash performance units | Units Outstanding as of December 31, 2018 425,012 Granted Vested (212,505) Forfeited (40,181) Outstanding as of September 30, 2019 172,326 |
Omnibus Plan | |
Summary of outstanding and exercisable stock options | Weighted- Weighted- Average Average Remaining Exercise Contractual Term Options Price (in Years) Outstanding as of December 31, 2018 910,627 $ Granted — — Forfeited (69,808) Outstanding as of September 30, 2019 840,819 $ 7.62 Options vested and exercisable as of September 30, 2019 517,794 7.52 Options vested and expected to vest 840,819 7.62 |
Summary of activity in non-vested stock options | Weighted-Average Number Grant-Date Fair Value Non-vested as of December 31, 2018 605,352 $ 3.14 Granted - - Forfeited (51,567) 3.25 Vested (230,760) 2.28 Non-vested as of September 30, 2019 323,025 $ 3.74 |
Schedule of vesting for unvested options | 2019 45,345 2020 225,980 2021 51,700 Total unvested options as of September 30, 2019 323,025 |
Weighted average grant date fair value of options granted | Three Months Ended September 30, 2019 2018 Weighted-average grant-date fair value of options granted $ n/a $ 1.20 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Segment Reporting | |
Schedule of revenue and EBITDA of the company's reportable segments | Net Sales Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 U.S. Debit and Credit $ 51,502 $ 48,002 $ 151,517 $ 128,992 U.S. Prepaid Debit 20,452 21,190 53,162 52,128 Other — 1,920 1,679 7,599 Intersegment eliminations (273) (125) (910) (1,421) Total $ 71,681 $ 70,987 $ 205,448 $ 187,298 EBITDA Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 U.S. Debit and Credit $ 11,417 $ 9,136 $ 32,387 $ 24,788 U.S. Prepaid Debit 8,342 8,831 20,001 18,337 Other (7,551) (8,999) (19,292) (24,246) Total $ 12,208 $ 8,968 $ 33,096 $ 18,879 |
Schedule of reconciliation of total segment EBITDA to income before taxes | Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Total segment EBITDA from continuing operations $ 12,208 $ 8,968 $ 33,096 $ 18,879 Interest, net (6,085) (6,151) (18,847) (17,243) Income tax (expense) benefit (2,515) 355 (3,695) 4,933 Depreciation and amortization (4,264) (4,257) (12,755) (14,133) Net loss from continuing operations $ (656) $ (1,085) $ (2,201) $ (7,564) |
Schedule of total assets of the company's reportable segments | September 30, 2019 December 31, 2018 U.S. Debit and Credit $ 174,139 $ 169,567 U.S. Prepaid Debit 30,432 25,117 Other 9,178 12,520 Total assets $ 213,749 $ 207,204 |
Schedule of net sales from product and services sold by the company | Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Products net sales (a) $ 33,963 $ 34,673 $ 99,845 $ 90,911 Services net sales (b) 37,718 36,314 105,603 96,387 Total net sales $ 71,681 $ 70,987 $ 205,448 $ 187,298 (a) “ Products” net sales include the design and production of Financial Payment Cards in contact-EMV, Dual-Interface EMV, metal, contactless and magnetic stripe card formats. The Company also generates “Products” revenue from the sale of Card Once printers and consumables, private label credit cards and retail gift cards. (b) “ Services” net sales include revenue from the personalization and fulfillment of Financial Payment Cards, providing tamper-evident security packaging and fulfillment services to Prepaid Debit Card program managers and software as a service personalization of instant issuance debit cards. The Company also generates “Services” revenue from click-fees generated from the Company’s patented card design software, known as MYCA, which provides customers and cardholders the ability to design cards on the internet and customize cards with individualized digital images. “Services” revenue is also generated from personalizing retail gift cards, historically generated in Canada prior to the disposition. |
Business Overview and Summary_4
Business Overview and Summary of Significant Accounting Policies - Business Overview and Basis of Presentation (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Feb. 28, 2019item | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2019USD ($)item | Sep. 30, 2018USD ($) | Aug. 03, 2018facility | |
Business Overview and Summary of Significant Accounting Policies | ||||||
Minimum number of payment card brands which certify card services | item | 1 | |||||
Proceeds from Divestiture of Interest in Subsidiaries and Affiliates | $ 1,451 | |||||
Reclassification of cumulative translation adjustment from accumulated other comprehensive income | $ 1,329 | $ 1,329 | ||||
Number of personalization operations consolidated | item | 3 | |||||
Number of facilities personalization operations were consolidated into | item | 2 | |||||
Accelerated depreciation | $ 266 | $ 2,398 | ||||
Severance charge | 0 | 552 | ||||
Termination charge | $ 0 | $ 432 | ||||
Sold | U.K. Limited | ||||||
Business Overview and Summary of Significant Accounting Policies | ||||||
Number of facilities sold | facility | 3 |
Business Overview and Summary_5
Business Overview and Summary of Significant Accounting Policies - Components of Operating and Finance Lease Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019 | Sep. 30, 2019 | |
Operating lease cost: | ||
Total operating lease costs | $ 659 | $ 1,967 |
Finance lease cost: | ||
Amortization of right-to-use assets | 273 | 574 |
Interest on lease liabilities | 98 | 160 |
Total financing lease cost | $ 371 | $ 734 |
Business Overview and Summary_6
Business Overview and Summary of Significant Accounting Policies - Operating and Financing Leases (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Leases | ||
Operating lease right-to-use assets, net of amortization | $ 6,796 | |
Operating lease liability (current) | 2,218 | |
Long-term operating liability | 5,657 | |
Total operating lease liabilities | 7,875 | |
Property, equipment and leasehold improvements | 81,197 | $ 92,856 |
Accumulated depreciation | (44,338) | (53,746) |
Total financing leases in property, equipment and leasehold improvements, net | 43,655 | $ 39,110 |
Financing lease liability (current) | 2,207 | |
Long-term financing liability | 3,427 | |
Total financing lease liabilities | 5,634 | |
Financing leases | ||
Leases | ||
Property, equipment and leasehold improvements | 7,014 | |
Accumulated depreciation | (782) | |
Total financing leases in property, equipment and leasehold improvements, net | $ 6,232 |
Business Overview and Summary_7
Business Overview and Summary of Significant Accounting Policies - Components of Lease Expense (Details) | Sep. 30, 2019 |
Weighted Average Remaining Lease Term | |
Weighted Average Remaining Lease Term - Operating Leases | 3 years 7 months 10 days |
Weighted Average Remaining Lease Term - Financing Leases | 2 years 9 months 18 days |
Weighted Average Discount Rate | |
Weighted Average Discount Rate - Operating Leases | 8.95% |
Weighted Average Discount Rate - Financing Leases | 9.22% |
Business Overview and Summary_8
Business Overview and Summary of Significant Accounting Policies - Lease Maturity (Details) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019USD ($) | Sep. 30, 2019USD ($) | |
Operating Leases | ||
2019 | $ 696 | $ 696 |
2020 | 2,854 | 2,854 |
2021 | 2,646 | 2,646 |
2022 | 1,371 | 1,371 |
2023 | 1,097 | 1,097 |
Thereafter | 602 | 602 |
Total operating lease payment | 9,266 | 9,266 |
Less imputed interest | (1,391) | (1,391) |
Total operating lease liabilities | 7,875 | 7,875 |
Cash paid for amounts included in the measurement of lease liabilities | 514 | 1,448 |
Financing Leases | ||
2019 | 740 | 740 |
2020 | 2,332 | 2,332 |
2021 | 1,716 | 1,716 |
2022 | 1,238 | 1,238 |
2023 | 178 | 178 |
Total financing lease payment | 6,204 | 6,204 |
Less imputed interest | (570) | (570) |
Total financing lease liabilities | $ 5,634 | $ 5,634 |
Business Overview and Summary_9
Business Overview and Summary of Significant Accounting Policies - Operating and Capital Leases (Details) $ in Thousands | Dec. 31, 2018USD ($) |
Future Cash Payments, Capital Lease: | |
2019 | $ 521 |
2020 | 474 |
2021 | 243 |
2022 | 256 |
2023 | 71 |
Total | 1,565 |
Future Cash Payments, Operating Leases: | |
2019 | 2,927 |
2020 | 2,771 |
2021 | 2,512 |
2022 | 1,243 |
2023 | 971 |
Thereafter | 652 |
Total | $ 11,076 |
Business Overview and Summar_10
Business Overview and Summary of Significant Accounting Policies - Other (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Jan. 01, 2019 | |
Recently Issued Accounting Pronouncements | ||
Lease, Practical Expedient, Use of Hindsight | false | |
Lease, Practical Expedients, Package | true | |
Operating lease liabilities | $ 7,875 | |
Accounting Standards Update 2016-02 | Adjustment | ||
Recently Issued Accounting Pronouncements | ||
Right-to-use assets | $ 8,025 | |
Operating lease liabilities | $ 8,813 |
Net Sales (Details)
Net Sales (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Disaggregation of Revenue | ||||
Net Sales | $ 71,681 | $ 70,987 | $ 205,448 | $ 187,298 |
Operating Segments | U.S. Debit and Credit | ||||
Disaggregation of Revenue | ||||
Net Sales | 51,502 | 48,002 | 151,517 | 128,992 |
Operating Segments | U.S. Prepaid Debit | ||||
Disaggregation of Revenue | ||||
Net Sales | 20,452 | 21,190 | 53,162 | 52,128 |
Operating Segments | Other | ||||
Disaggregation of Revenue | ||||
Net Sales | 1,920 | 1,679 | 7,599 | |
Intersegment eliminations | ||||
Disaggregation of Revenue | ||||
Net Sales | (273) | (125) | (910) | (1,421) |
Products | ||||
Disaggregation of Revenue | ||||
Net Sales | 33,963 | 34,673 | 99,845 | 90,911 |
Products | Operating Segments | U.S. Debit and Credit | ||||
Disaggregation of Revenue | ||||
Net Sales | 34,218 | 34,176 | 100,338 | 88,340 |
Products | Operating Segments | Other | ||||
Disaggregation of Revenue | ||||
Net Sales | 549 | 397 | 3,549 | |
Products | Intersegment eliminations | ||||
Disaggregation of Revenue | ||||
Net Sales | (255) | (52) | (890) | (978) |
Services | ||||
Disaggregation of Revenue | ||||
Net Sales | 37,718 | 36,314 | 105,603 | 96,387 |
Services | Operating Segments | U.S. Debit and Credit | ||||
Disaggregation of Revenue | ||||
Net Sales | 17,284 | 13,826 | 51,179 | 40,652 |
Services | Operating Segments | U.S. Prepaid Debit | ||||
Disaggregation of Revenue | ||||
Net Sales | 20,452 | 21,190 | 53,162 | 52,128 |
Services | Operating Segments | Other | ||||
Disaggregation of Revenue | ||||
Net Sales | 1,371 | 1,282 | 4,050 | |
Services | Intersegment eliminations | ||||
Disaggregation of Revenue | ||||
Net Sales | $ (18) | $ (73) | $ (20) | $ (443) |
Discontinued Operation (Details
Discontinued Operation (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Major line items constituting the (loss) income of the discontinued operation | ||||
Net (loss) from discontinued operation | $ (28) | $ (5,030) | $ (16) | $ (22,551) |
U.K. Limited | Sold | ||||
Major line items constituting the (loss) income of the discontinued operation | ||||
Total net sales | 1,943 | 10,741 | ||
Total cost of sales | 1,721 | 10,221 | ||
Selling general and administrative | 1,238 | 4,303 | ||
Impairment | 7,615 | |||
Other expense | 4,009 | 4,038 | ||
Pretax (loss) income from discontinued operation | (5,025) | (15,436) | ||
Pre-tax loss on sale of discontinued operation | (5) | (7,248) | ||
Total pretax loss on discontinued operation | (5,030) | (22,684) | ||
Income tax benefit | 133 | |||
Net (loss) from discontinued operation | $ (5,030) | $ (22,551) |
Accounts Receivable (Details)
Accounts Receivable (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Accounts Receivable | ||
Trade accounts receivable | $ 39,927 | $ 36,428 |
Unbilled accounts receivable | 5,249 | 7,577 |
Accounts receivable, gross | 45,176 | 44,005 |
Less allowance for doubtful accounts | (370) | (211) |
Accounts receivable, net | $ 44,806 | $ 43,794 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Inventories | ||
Raw materials | $ 17,963 | $ 8,235 |
Finished goods | 5,309 | 2,991 |
Inventory reserve | (1,167) | (1,399) |
Inventory | $ 22,105 | $ 9,827 |
Plant, Equipment and Leasehol_3
Plant, Equipment and Leasehold Improvements (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Plant, Equipment and Leasehold Improvements | |||||
Plant, equipment and leasehold improvements, gross | $ 81,197 | $ 81,197 | $ 92,856 | ||
Less accumulated depreciation | (44,338) | (44,338) | (53,746) | ||
Operating lease right-to-use assets, net of amortization | 6,796 | 6,796 | |||
Total financing leases in property, equipment and leasehold improvements, net | 43,655 | 43,655 | 39,110 | ||
Depreciation | 3,105 | $ 3,093 | 9,268 | $ 10,641 | |
Machinery and equipment | |||||
Plant, Equipment and Leasehold Improvements | |||||
Plant, equipment and leasehold improvements, gross | 53,647 | 53,647 | 62,067 | ||
Machinery and equipment under financing leases | |||||
Plant, Equipment and Leasehold Improvements | |||||
Plant, equipment and leasehold improvements, gross | 7,014 | 7,014 | 1,812 | ||
Furniture, fixtures and computer equipment | |||||
Plant, Equipment and Leasehold Improvements | |||||
Plant, equipment and leasehold improvements, gross | 4,456 | 4,456 | 7,730 | ||
Leasehold improvements | |||||
Plant, Equipment and Leasehold Improvements | |||||
Plant, equipment and leasehold improvements, gross | 14,892 | 14,892 | 19,651 | ||
Construction in progress | |||||
Plant, Equipment and Leasehold Improvements | |||||
Plant, equipment and leasehold improvements, gross | $ 1,188 | $ 1,188 | $ 1,596 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Intangible Assets [Line Items] | |||||
Intangible amortization expense | $ 1,159 | $ 1,164 | $ 3,487 | $ 3,492 | |
Intangible assets subject to amortization, Cost | 66,376 | 66,376 | $ 66,376 | ||
Intangible assets subject to amortization, Accumulated Amortization | (34,425) | (34,425) | (30,939) | ||
Intangible assets subject to amortization, Net Book Value | 31,951 | 31,951 | 35,437 | ||
Customer relationships | |||||
Intangible Assets [Line Items] | |||||
Intangible assets subject to amortization, Cost | 55,454 | 55,454 | 55,454 | ||
Intangible assets subject to amortization, Accumulated Amortization | (28,045) | (28,045) | (25,587) | ||
Intangible assets subject to amortization, Net Book Value | 27,409 | $ 27,409 | $ 29,867 | ||
Customer relationships | Minimum | |||||
Intangible Assets [Line Items] | |||||
Average Life (Years) | 12 years | 12 years | |||
Customer relationships | Maximum | |||||
Intangible Assets [Line Items] | |||||
Average Life (Years) | 20 years | 20 years | |||
Technology and software | |||||
Intangible Assets [Line Items] | |||||
Intangible assets subject to amortization, Cost | 7,101 | $ 7,101 | $ 7,101 | ||
Intangible assets subject to amortization, Accumulated Amortization | (4,720) | (4,720) | (4,024) | ||
Intangible assets subject to amortization, Net Book Value | 2,381 | $ 2,381 | $ 3,077 | ||
Technology and software | Minimum | |||||
Intangible Assets [Line Items] | |||||
Average Life (Years) | 7 years | 7 years | |||
Technology and software | Maximum | |||||
Intangible Assets [Line Items] | |||||
Average Life (Years) | 10 years | 10 years | |||
Trademarks | |||||
Intangible Assets [Line Items] | |||||
Intangible assets subject to amortization, Cost | 3,330 | $ 3,330 | $ 3,330 | ||
Intangible assets subject to amortization, Accumulated Amortization | (1,169) | (1,169) | (877) | ||
Intangible assets subject to amortization, Net Book Value | 2,161 | $ 2,161 | $ 2,453 | ||
Trademarks | Minimum | |||||
Intangible Assets [Line Items] | |||||
Average Life (Years) | 7 years 6 months | 7 years 6 months | |||
Trademarks | Maximum | |||||
Intangible Assets [Line Items] | |||||
Average Life (Years) | 10 years | 10 years | |||
Non-compete agreements | |||||
Intangible Assets [Line Items] | |||||
Intangible assets subject to amortization, Cost | 491 | $ 491 | $ 491 | ||
Intangible assets subject to amortization, Accumulated Amortization | $ (491) | $ (491) | (451) | ||
Intangible assets subject to amortization, Net Book Value | $ 40 | ||||
Non-compete agreements | Minimum | |||||
Intangible Assets [Line Items] | |||||
Average Life (Years) | 5 years | 5 years | |||
Non-compete agreements | Maximum | |||||
Intangible Assets [Line Items] | |||||
Average Life (Years) | 8 years | 8 years |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets - Future Aggregate Amortization Expense (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Estimated future aggregate amortization expense | ||
2019 | $ 1,150 | |
2020 | 4,595 | |
2021 | 4,352 | |
2022 | 3,867 | |
2023 | 3,867 | |
Thereafter | 14,120 | |
Intangible assets subject to amortization, Net Book Value | $ 31,951 | $ 35,437 |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments (Details) - First Lien Credit Facility - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Liabilities: | ||
Carrying amount | $ 312,500 | $ 312,500 |
Term Loan | ||
Liabilities: | ||
Carrying amount | 312,500 | 312,500 |
Long-term debt | 246,875 | 203,125 |
Level 2 | Term Loan | ||
Liabilities: | ||
Long-term debt | $ 246,875 | $ 203,125 |
Accrued Liabilities (Details)
Accrued Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Accrued Liabilities | ||
Accrued payroll and related employee expenses | $ 4,233 | $ 4,040 |
Accrued employee performance bonus | 3,574 | 7,137 |
Accrued Interest | 4,834 | 5,058 |
Operating and financing lease liability (current portion) | 4,425 | 521 |
Other | 4,505 | 7,097 |
Total accrued expenses | $ 21,571 | $ 23,853 |
Long-Term Debt and Credit Fac_3
Long-Term Debt and Credit Facility - Long-Term Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Long-term Debt | ||
Unamortized discount | $ (1,940) | $ (2,448) |
Unamortized deferred financing costs | (3,273) | (4,234) |
Total long-term debt | $ 307,287 | $ 305,818 |
First Lien Credit Facility | ||
Long-term Debt | ||
Interest rate (as a percent) | 6.71% | 7.02% |
Long-term debt | $ 312,500 | $ 312,500 |
Long-Term Debt and Credit Fac_4
Long-Term Debt and Credit Facility - First Lien Credit Facility (Details) $ in Thousands | Aug. 17, 2015USD ($) | Sep. 30, 2019USD ($)letter | Dec. 31, 2018USD ($) |
Long-term Debt | |||
Fee on outstanding letters of credit (as a percent) | 4.50% | 4.50% | |
Fronting fee for letters of credit (as a percent) | 0.125% | 0.125% | |
Number of outstanding letters of credit | letter | 1 | ||
Letters of credit outstanding | $ 50 | ||
Accrued interest | $ 4,834 | $ 5,058 | |
First Lien Credit Facility | |||
Long-term Debt | |||
Maximum net leverage ratio | 7 | ||
Eurodollar rate | First Lien Credit Facility | |||
Long-term Debt | |||
Applicable margin over reference rate (as a percent) | 4.50% | ||
Eurodollar rate | First Lien Credit Facility | Minimum | |||
Long-term Debt | |||
Interest rate (as a percent) | 1.00% | ||
Base rate | First Lien Credit Facility | |||
Long-term Debt | |||
Applicable margin over reference rate (as a percent) | 3.50% | ||
Term Loan | First Lien Credit Facility | |||
Long-term Debt | |||
Maximum borrowing capacity | $ 435,000 | ||
Revolving Credit Facility | |||
Long-term Debt | |||
Amount outstanding | $ 0 | ||
Remaining borrowing capacity | $ 19,950 | ||
Revolving Credit Facility | Minimum | |||
Long-term Debt | |||
Unused commitment fee (as a percent) | 0.375% | 0.375% | |
Revolving Credit Facility | Maximum | |||
Long-term Debt | |||
Unused commitment fee (as a percent) | 0.50% | 0.50% | |
Revolving Credit Facility | First Lien Credit Facility | |||
Long-term Debt | |||
Maximum borrowing capacity | $ 40,000 | ||
Amount drawn to trigger net leverage requirement (as a percent) | 50.00% | ||
Revolving Credit Facility | Base rate | |||
Long-term Debt | |||
Applicable margin over reference rate (as a percent) | 3.50% |
Income Taxes - Continuing Ope_2
Income Taxes - Continuing Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Taxes - Continuing Operations | ||||
Income tax expense (benefit) | $ 2,515 | $ (355) | $ 3,695 | $ (4,933) |
Loss before income taxes | ||||
Income (loss) before income taxes | $ 1,859 | $ (1,440) | $ 1,494 | $ (12,497) |
Effective income tax rate (as a percent) | 247.30% | 39.50% | ||
Tax expense recorded related to valuation allowance | $ 2,600 | |||
Effective tax rate for tax expense recorded related to valuation allowance (as a percent) | 174.10% |
Income Taxes _ Continuing Ope_2
Income Taxes – Continuing Operations - Effective Income Tax Rate Reconciliation (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Effective Income Tax Rate Reconciliation | ||
Tax at federal statutory rate (as a percent) | 21.00% | 21.00% |
State Taxes, net (as a percent) | 38.00% | 0.50% |
Valuation allowance (as a percent) | 174.10% | (2.50%) |
Tax benefit U.K. discontinued operation | 27.70% | |
Other (as a percent) | 14.20% | (7.20%) |
Effective income tax rate (as a percent) | 247.30% | 39.50% |
Federal income tax receivable | $ 5,005 |
Loss per Share (Details)
Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Numerator: | ||||
Net loss from continuing operations | $ (656) | $ (1,085) | $ (2,201) | $ (7,564) |
Net loss from discontinued operation | (28) | (5,030) | (16) | (22,551) |
Net loss | $ (684) | $ (6,115) | $ (2,217) | $ (30,115) |
Denominator: | ||||
Basic and dilutive EPS-weighted average common shares outstanding (in shares) | 11,223,715 | 11,159,984 | 11,187,550 | 11,145,946 |
Basic and diluted EPS: | ||||
Basic and diluted - Continuing operations (in dollar per share) | $ (0.06) | $ (0.10) | $ (0.20) | $ (0.68) |
Basic and diluted-Discontinued operation (in dollar per share) | 0 | (0.45) | 0 | (2.02) |
Net loss per share (in dollars per share) | $ (0.06) | $ (0.55) | $ (0.20) | $ (2.70) |
Stock Options | ||||
Outstanding stock based awards | ||||
Potential dilutive effect of share-based compensation excluded (in shares) | 840,819 | 666,101 | ||
Restricted stock units | ||||
Outstanding stock based awards | ||||
Potential dilutive effect of share-based compensation excluded (in shares) | 9,256 | 68,811 |
Commitments and Contingencies_2
Commitments and Contingencies; Litigation Settlement (Details) $ in Thousands | Mar. 28, 2018 | Sep. 30, 2019USD ($) | Jun. 30, 2015plaintiff |
Securities Litigation Case | |||
Commitments and Contingencies | |||
The number of patents involved in lawsuit | plaintiff | 2 | ||
Heckermann Montross Suit | |||
Commitments and Contingencies | |||
Period after final judgment the stay is lifted | 30 days | ||
CPI Card Group Inc. v. Multi Packaging Solutions, Inc., et al. Second Case | Settled Litigation | |||
Commitments and Contingencies | |||
Proceeds from settlements | $ | $ 6,000 |
Stock Based Compensation - Omni
Stock Based Compensation - Omnibus Incentive Plan (Details) - Omnibus Plan - USD ($) $ / shares in Units, $ in Thousands | Sep. 25, 2017 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Oct. 31, 2015 |
Weighted-Average Grant Date Fair Value | ||||||
Compensation expense | $ 9 | $ (42) | $ 317 | $ 741 | ||
Stock Options | ||||||
Stock based compensation | ||||||
Number of shares authorized | 1,200,000 | 800,000 | ||||
Number of additional shares authorized | 400,000 | |||||
Number of shares available for grant | 228,555 | 228,555 | ||||
Stock options granted (in shares) | 0 | |||||
Number of shares | ||||||
Balance at beginning of year (in shares) | 910,627 | |||||
Granted (in shares) | 0 | |||||
Forfeited (in shares) | (69,808) | |||||
Balance at end of year (in shares) | 840,819 | 840,819 | ||||
Options: Options vested and exercisable | 517,794 | 517,794 | ||||
Options: Options vested and expected to vest | 840,819 | 840,819 | ||||
Weighted-Average Exercise Price | ||||||
Balance at beginning of year (in dollars per share) | $ 14.99 | |||||
Granted (in dollars per share) | $ 1.20 | |||||
Forfeited (in dollars per share) | 12.45 | |||||
Balance at end of year (in dollars per share) | $ 15.20 | 15.20 | ||||
Weighted-Average Exercise Price: Options vested and exercisable | 16.57 | 16.57 | ||||
Weighted-Average Exercise Price: Options vested and expected to vest | $ 15.20 | $ 15.20 | ||||
Weighted- Average Remaining Contractual Term (in Years) | ||||||
Balance (in years) | 7 years 7 months 13 days | |||||
Weighted-Average Remaining Contractual Term (in Years): Options vested and exercisable | 7 years 6 months 7 days | |||||
Weighted-Average Remaining Contractual Term (in Years): Options vested and expected to vest | 7 years 7 months 13 days | |||||
Number of unvested options scheduled to vest | ||||||
Non-Vested Options as of beginning of period | 605,352 | |||||
Granted (in shares) | 0 | |||||
Forfeited (in shares) | (51,567) | |||||
Vested (in shares) | (230,760) | |||||
Non-Vested Options as of end of period | 323,025 | 323,025 | ||||
Weighted-Average Grant Date Fair Value | ||||||
Non-Vested, beginning balance | $ 3.14 | |||||
Forfeited: Weighted-Average Grant Date Fair Value | 3.25 | |||||
Vested: Weighted-Average Grant Date Fair Value | 2.28 | |||||
Non-Vested, ending balance | $ 3.74 | $ 3.74 | ||||
2019 | Stock Options | ||||||
Number of unvested options scheduled to vest | ||||||
Non-Vested Options as of end of period | 45,345 | 45,345 | ||||
2020 | Stock Options | ||||||
Number of unvested options scheduled to vest | ||||||
Non-Vested Options as of end of period | 225,980 | 225,980 | ||||
2021 | Stock Options | ||||||
Number of unvested options scheduled to vest | ||||||
Non-Vested Options as of end of period | 51,700 | 51,700 |
Stock Based Compensation - Rest
Stock Based Compensation - Restricted Stock Units (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | |
Restricted stock units | |||||
Weighted Average Grant Date Fair Value | |||||
Period over which compensation expense expected to recognize | 11 months 5 days | ||||
Omnibus Plan | |||||
Weighted Average Grant Date Fair Value | |||||
Compensation expense | $ 9 | $ (42) | $ 317 | $ 741 | |
Omnibus Plan | Restricted stock units | |||||
Number of Restricted Stock Units | |||||
Units outstanding at the beginning of the period (in shares) | 68,649 | ||||
Granted (in shares) | 0 | ||||
Vested (in shares) | (57,563) | ||||
Forfeited (in shares) | (1,830) | ||||
Units outstanding at the end of the period (in shares) | 9,256 | 9,256 | |||
Weighted Average Grant Date Fair Value | |||||
Units outstanding at the beginning of the period (in dollars per shares) | $ 6.25 | ||||
Vested (in dollars per share) | 3.15 | ||||
Forfeited (in dollars per share) | 21.75 | ||||
Units outstanding at the end of the period (in dollars per shares) | $ 22.44 | $ 22.44 | |||
Unrecognized compensation expense | $ 217 | ||||
Period over which compensation expense expected to recognize | 7 months 6 days | ||||
Unvested restricted stock (in units) | 9,256 | 68,649 | 9,256 | ||
Omnibus Plan | Restricted stock units | 2020 | |||||
Number of Restricted Stock Units | |||||
Units outstanding at the end of the period (in shares) | 9,013 | 9,013 | |||
Weighted Average Grant Date Fair Value | |||||
Unvested restricted stock (in units) | 9,013 | 9,013 | 9,013 | ||
Omnibus Plan | Restricted stock units | 2021 | |||||
Number of Restricted Stock Units | |||||
Units outstanding at the end of the period (in shares) | 243 | 243 | |||
Weighted Average Grant Date Fair Value | |||||
Unvested restricted stock (in units) | 243 | 243 | 243 |
Stock Based Compensation - Cash
Stock Based Compensation - Cash Performance Units (Details) - Cash Performance $ in Thousands | 9 Months Ended |
Sep. 30, 2019USD ($)shares | |
Stock based compensation | |
Period over which compensation expense expected to recognize | 3 years |
Cash payments made | $ | $ 106 |
Number of Cash Performance Units | |
Units outstanding at the beginning of the period (in shares) | 425,012 |
Vested (in shares) | (212,505) |
Forfeited (in shares) | (40,181) |
Units outstanding at the end of the period (in shares) | 172,326 |
Accrued expenses | |
Stock based compensation | |
Cash performance liability | $ | $ 73 |
Stock Based Compensation - Opti
Stock Based Compensation - Option Plan (Details) | 9 Months Ended |
Sep. 30, 2019shares | |
Stock Options | Option Plan | |
Number of shares | |
Exercised (in shares) | 6,600 |
Segment Reporting - Revenue and
Segment Reporting - Revenue and EBITDA from Continuing Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Segment Reporting | ||||
Revenue | $ 71,681 | $ 70,987 | $ 205,448 | $ 187,298 |
EBITDA | 12,208 | 8,968 | 33,096 | 18,879 |
U.S. Debit and Credit | ||||
Segment Reporting | ||||
EBITDA | 11,417 | 9,136 | 32,387 | 24,788 |
U.S. Prepaid Debit | ||||
Segment Reporting | ||||
EBITDA | 8,342 | 8,831 | 20,001 | 18,337 |
Other | ||||
Segment Reporting | ||||
EBITDA | (7,551) | (8,999) | (19,292) | (24,246) |
Operating Segments | U.S. Debit and Credit | ||||
Segment Reporting | ||||
Revenue | 51,502 | 48,002 | 151,517 | 128,992 |
Operating Segments | U.S. Prepaid Debit | ||||
Segment Reporting | ||||
Revenue | 20,452 | 21,190 | 53,162 | 52,128 |
Operating Segments | Other | ||||
Segment Reporting | ||||
Revenue | 1,920 | 1,679 | 7,599 | |
Intersegment eliminations | ||||
Segment Reporting | ||||
Revenue | $ (273) | $ (125) | $ (910) | $ (1,421) |
Segment Reporting - Reconciliat
Segment Reporting - Reconciliation of EBITDA from Continuing Operations to "Net income (loss) from continuing operations" (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Reconciliation of total segment EBITDA to income before taxes | ||||
Total segment EBITDA from continuing operations | $ 12,208 | $ 8,968 | $ 33,096 | $ 18,879 |
Interest, net | (6,085) | (6,151) | (18,847) | (17,243) |
Income tax (expense) benefit | (2,515) | 355 | (3,695) | 4,933 |
Depreciation and amortization | (4,264) | (4,257) | (12,755) | (14,133) |
Net loss from continuing operations | $ (656) | $ (1,085) | $ (2,201) | $ (7,564) |
Segment Reporting - Balance She
Segment Reporting - Balance Sheet Data (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Segment Reporting | ||
Total assets | $ 213,749 | $ 207,204 |
U.S. Debit and Credit | ||
Segment Reporting | ||
Total assets | 174,139 | 169,567 |
U.S. Prepaid Debit | ||
Segment Reporting | ||
Total assets | 30,432 | 25,117 |
Other | ||
Segment Reporting | ||
Total assets | $ 9,178 | $ 12,520 |
Segment Reporting - Net Sales b
Segment Reporting - Net Sales by Product and Services (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Segment Reporting | ||||
Total net sales | $ 71,681 | $ 70,987 | $ 205,448 | $ 187,298 |
Products | ||||
Segment Reporting | ||||
Total net sales | 33,963 | 34,673 | 99,845 | 90,911 |
Services | ||||
Segment Reporting | ||||
Total net sales | $ 37,718 | $ 36,314 | $ 105,603 | $ 96,387 |