Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | Apr. 22, 2021 | |
Cover Abstract | ||
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2021 | |
Entity Registrant Name | CPI Card Group Inc. | |
Entity Central Index Key | 0001641614 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 11,230,482 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 24,884 | $ 57,603 |
Accounts receivable, net of allowances of $237 and $289, respectively | 60,479 | 54,592 |
Inventories | 33,490 | 24,796 |
Prepaid expenses and other current assets | 5,193 | 5,032 |
Income taxes receivable | 9,152 | 10,511 |
Total current assets | 133,198 | 152,534 |
Plant, equipment, leasehold improvements and operating lease right-of-use assets, net | 38,188 | 39,403 |
Intangible assets, net | 25,058 | 26,207 |
Goodwill | 47,150 | 47,150 |
Other assets | 2,700 | 857 |
Total assets | 246,294 | 266,151 |
Current liabilities: | ||
Accounts payable | 21,792 | 18,883 |
Accrued expenses | 22,618 | 28,149 |
Current portion of long-term debt | 8,027 | |
Deferred revenue and customer deposits | 1,316 | 1,868 |
Total current liabilities | 45,726 | 56,927 |
Long-term debt | 317,503 | 328,681 |
Deferred income taxes | 7,232 | 7,409 |
Other long-term liabilities | 11,409 | 11,171 |
Total liabilities | 381,870 | 404,188 |
Commitments and contingencies (Note 14) | ||
Series A Preferred Stock; $0.001 par value—100,000 shares authorized; 0 shares issued and outstanding at March 31, 2021 and December 31, 2020 | ||
Stockholders’ deficit: | ||
Common stock; $0.001 par value—100,000,000 shares authorized; 11,230,482 shares issued and outstanding at March 31, 2021 and December 31, 2020 | 11 | 11 |
Capital deficiency | (111,807) | (111,858) |
Accumulated loss | (23,780) | (26,190) |
Total stockholders’ deficit | (135,576) | (138,037) |
Total liabilities and stockholders’ deficit | $ 246,294 | $ 266,151 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Condensed Consolidated Balance Sheets | ||
Allowance on accounts receivable | $ 237 | $ 289 |
Preferred shares, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred shares, authorized shares (in shares) | 100,000 | 100,000 |
Preferred shares, issued shares (in shares) | 0 | 0 |
Preferred shares, outstanding shares (in shares) | 0 | 0 |
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) | 11,230,482 | 11,230,482 |
Common shares, outstanding shares (in shares) | 11,230,482 | 11,230,482 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Net sales: | ||
Net Sales | $ 89,092 | $ 73,969 |
Cost of sales: | ||
Depreciation and amortization | 2,416 | 2,755 |
Total cost of sales | 53,371 | 48,321 |
Gross profit | 35,721 | 25,648 |
Operating expenses: | ||
Selling, general and administrative (exclusive of depreciation and amortization shown below) | 16,146 | 16,663 |
Depreciation and amortization | 1,806 | 1,485 |
Total operating expenses | 17,952 | 18,148 |
Income from operations | 17,769 | 7,500 |
Other expense, net: | ||
Interest, net | (8,976) | (6,088) |
Other income (expense), net | 25 | (3) |
Loss on debt extinguishment | (5,048) | (92) |
Total other expense, net | (13,999) | (6,183) |
Income from continuing operations before income taxes | 3,770 | 1,317 |
Income tax (expense) benefit | (1,360) | 465 |
Net income from continuing operations | 2,410 | 1,782 |
Net loss from discontinued operations, net of tax (Note 1) | (26) | |
Net income | $ 2,410 | $ 1,756 |
Earnings per share from continuing operations - Basic and Diluted: (in dollar per share) | $ 0.21 | $ 0.16 |
Earnings per share - Basic and Diluted: (in dollars per share) | $ 0.21 | $ 0.16 |
Basic weighted-average shares outstanding (in shares) | 11,230,482 | 11,224,500 |
Diluted weighted-average shares outstanding (in shares) | 11,639,015 | 11,262,359 |
Comprehensive income: | ||
Net income | $ 2,410 | $ 1,756 |
Total comprehensive income | 2,410 | 1,756 |
Products | ||
Net sales: | ||
Net Sales | 47,013 | 42,501 |
Cost of sales: | ||
Products and Services (exclusive of depreciation and amortization shown below) | 27,287 | 26,379 |
Services | ||
Net sales: | ||
Net Sales | 42,079 | 31,468 |
Cost of sales: | ||
Products and Services (exclusive of depreciation and amortization shown below) | $ 23,668 | $ 19,187 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders' Deficit - USD ($) $ in Thousands | Common Stock | Capital deficiency | Accumulated earnings (loss) | Total |
Beginning balance at Dec. 31, 2019 | $ 11 | $ (111,988) | $ (42,319) | $ (154,296) |
Beginning balance (in shares) at Dec. 31, 2019 | 11,224,191 | |||
Shares issued under stock-based compensation plans (in shares) | 5,628 | |||
Stock-based compensation | 35 | 35 | ||
Components of comprehensive income: | ||||
Net income | 1,756 | 1,756 | ||
Ending balance at Mar. 31, 2020 | $ 11 | (111,953) | (40,563) | (152,505) |
Ending balance (in shares) at Mar. 31, 2020 | 11,229,819 | |||
Beginning balance at Dec. 31, 2020 | $ 11 | (111,858) | (26,190) | $ (138,037) |
Beginning balance (in shares) at Dec. 31, 2020 | 11,230,482 | 11,230,482 | ||
Stock-based compensation | 51 | $ 51 | ||
Components of comprehensive income: | ||||
Net income | 2,410 | 2,410 | ||
Ending balance at Mar. 31, 2021 | $ 11 | $ (111,807) | $ (23,780) | $ (135,576) |
Ending balance (in shares) at Mar. 31, 2021 | 11,230,482 | 11,230,482 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Operating activities | ||
Net income | $ 2,410 | $ 1,756 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Loss from discontinued operations | 26 | |
Depreciation and amortization expense | 4,222 | 4,240 |
Stock-based compensation expense | 51 | 41 |
Amortization of debt issuance costs and debt discount | 887 | 634 |
Loss on debt extinguishment | 5,048 | 92 |
Deferred income taxes | (177) | 537 |
Other, net | 200 | 488 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (5,884) | (911) |
Inventories | (8,885) | 521 |
Prepaid expenses and other assets | 107 | 1,138 |
Income taxes receivable, net | 1,359 | (846) |
Accounts payable | 3,705 | (2,747) |
Accrued expenses | (2,790) | (1,856) |
Deferred revenue and customer deposits | (556) | 177 |
Other liabilities | 447 | (86) |
Cash provided by operating activities - continuing operations | 144 | 3,204 |
Cash used in operating activities - discontinued operations | 0 | (26) |
Investing activities | ||
Capital expenditures for plant, equipment and leasehold improvements | (2,524) | (938) |
Other | 155 | |
Cash used in investing activities | (2,369) | (938) |
Financing activities | ||
Principal payments on First Lien Term loan | (312,500) | |
Principal payments on Senior Credit Facility | (30,000) | |
Proceeds from Senior Notes | 310,000 | |
Proceeds from ABL Revolver, net of discount | 14,750 | |
Proceeds from Senior Credit Facility, net of discount | 29,100 | |
Debt issuance costs | (9,452) | (2,507) |
Payments on debt extinguishment | (2,685) | |
Payments on finance lease obligations | (610) | (593) |
Cash (used in) provided by financing activities | (30,497) | 26,000 |
Effect of exchange rates on cash | 3 | (18) |
Net (decrease) increase in cash and cash equivalents | (32,719) | 28,222 |
Cash and cash equivalents, beginning of period | 57,603 | 18,682 |
Cash and cash equivalents, end of period | 24,884 | 46,904 |
Supplemental disclosures of cash flow information | ||
Cash paid (refunded) during the period for: Interest | 8,382 | 5,538 |
Cash paid (refunded) during the period for: Income taxes | 1 | (232) |
Right-of-use assets obtained in exchange for lease obligations- Operating leases | 432 | 141 |
Right-of-use assets obtained in exchange for lease obligations- Financing leases | 526 | 251 |
Accounts payable, and accrued expenses for capital expenditures for plant, equipment and leasehold improvements | $ 256 | $ 345 |
Business Overview and Summary o
Business Overview and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2021 | |
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 subsidiary companies, is referred to herein as “CPI” or the “Company”) is a payment technology company and leading provider of comprehensive Financial Payment Card solutions in the United States. CPI is engaged in the design, production, data personalization, packaging and fulfillment of “Financial Payment Cards,” which the Company defines as credit, debit and Prepaid Debit Cards issued on the networks of the “Payment Card Brands” (Visa, Mastercard ® , American Express ® and Discover ® in the United States and Interac, in Canada). The Company defines “Prepaid Debit Cards” as debit cards issued on the networks of the Payment Card Brands, but not linked to a traditional bank account. CPI also offers an instant card issuance solution, which provides banks the ability to issue a personalized debit or credit card within the bank branch to individual cardholders. CPI serves its customers through a network of high-security production and card services facilities in the United States, each of which is audited for compliance with the standards of the Payment Card Industry Security Standards Council (the “PCI Security Standards Council”) by one or more of the Payment Card Brands. CPI’s leading network of high-security production facilities allows the Company to optimize its solutions offerings and effectively meet customers needs. COVID-19 Update The COVID-19 pandemic has impacted economies and societies globally. The long-term implications of COVID-19 on the Company’s results of operations and overall financial performance remain uncertain. The health and safety of CPI employees remain paramount, and the Company continues to follow response protocols based on precautions and other appropriate measures recommended by the Centers for Disease Control and Prevention, as well as various state and local executive orders, health orders and guidelines. The Company believes the global impacts from COVID-19 have contributed to certain adverse effects on its supply chain including access to, and higher pricing of, certain raw materials which may continue in the future. CPI closely monitors its supply chain and has purchased and may continue to purchase additional inventory to help mitigate potential supply chain constraints. The current economic environment has affected the available labor pool in the areas in which the Company operates which may result in increased labor cost and turnover in our facilities. The Company will continue to monitor and respond as the situation evolves. All of CPI’s operations have remained open and continue to provide direct and essential support to the financial services industry. See Item 1A, Risk Factors , in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (the “SEC”) for further discussion of the possible impact of the COVID-19 pandemic on our business. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, changes in net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitation and technical corrections to tax depreciation methods for qualified improvement property. Refer to Note 11 “Income Taxes” for a discussion of the CARES Act income tax impacts on the Company. In addition, CPI deferred employer social security payments in 2020 in accordance with the CARES Act. While the Company is participating in certain programs under the CARES Act, the CARES Act and its guidance are subject to change. 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 8 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, 2020 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, 2020. Discontinued Operations On August 3, 2018, the Company completed the sale of its three facilities in the United Kingdom that produced retail cards, such as gift and loyalty cards, for customers in the United Kingdom and continental Europe, and provided personaliz ation, 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 in accordance with GAAP. The Company did not retain significant continuing involvement with the discontinued operations subsequent to the disposal. The impact of the discontinued operations was insignificant to the Company’s condensed consolidated statement of operations for the three months ended March 31, 2020. Use of Estimates Management uses estimates and assumptions relating to the reporting of assets and liabilities at the date of the financial statements, the reported revenues and expenses recognized during the reporting period, and certain financial statement disclosures in the preparation of the condensed consolidated financial statements. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, goodwill and intangible assets, leases, liability for sales tax, valuation allowances for inventories and deferred taxes, revenue recognized for work performed but not completed and uncertain tax positions. Actual results could differ from those estimates. Recent Accounting Standards Recently Issued Accounting Standards In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“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. The effective date of ASU 2016-13 was amended by ASU 2019-10 , Credit Losses Effective Dates. Since CPI is a smaller reporting company, adoption of this accounting standard is effective for the Company for fiscal years beginning after December 15, 2022, and interim periods therein, with early adoption permi tted. The Company has elected not to early adopt this accounting standard in the current fiscal year 2021. The Company is evaluating the impact of adoption of this standard and does not anticipate the application of ASU 2016-13 will have a material impact on the Company’s consolidated financial position and results of operations. Adjustment of Prior Period Financial Statements for Immaterial Items In accordance with Securities and Exchange Commission Staff Accounting Bulletin 99, Materiality, codified in Accounting Standards Codification (“ASC”) 250, Presentation of Financial Statements , during the year ended December 31, 2020, the Company corrected two immaterial items relating to estimated sales tax expense and depreciation expense for prior periods presented by revising the condensed consolidated financial statements and other financial information included herein. For the quarter ended March 31, 2020, the total impact of the prior period adjustment was an increase to “Selling, General and Administrative expenses” (“SG&A”) of $121 for estimated sales tax expense and an increase to “Cost of sales” of $62 for depreciation expense. The total impact on prior fiscal years 2017 to 2019 was an increase to SG&A for estimated sales tax expense of $1,907 and an increase to “Cost of sales” for depreciation expense of $476. Refer to Note 14, “Commitments and Contingencies” for additional discussion of the estimated sales tax liability recorded in “Accrued expenses” on the condensed consolidated balance sheet. |
Net Sales
Net Sales | 3 Months Ended |
Mar. 31, 2021 | |
Net Sales. | |
Net Sales | 2. Net Sales The Company disaggregates its net sales by major source as follows: Three Months Ended March 31, 2021 Products Services Total Debit and Credit $ 47,179 $ 22,638 $ 69,817 Prepaid Debit — 19,458 19,458 Intersegment eliminations (166) (17) (183) Total $ 47,013 $ 42,079 $ 89,092 Three Months Ended March 31, 2020 Products Services Total Debit and Credit $ 42,911 $ 16,928 $ 59,839 Prepaid Debit — 14,540 14,540 Intersegment eliminations (410) — (410) Total $ 42,501 $ 31,468 $ 73,969 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 and 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” net sales are manufactured Financial Payment Cards, including contact-EMV ® , contactless dual-interface EMV, contactless and magnetic stripe cards, our eco-focused solutions including Second Wave and Earthwise TM “high content” upcycled plastic cards, metal cards, private label credit cards and retail gift cards. Card Once ® printers and consumables are also included in “Products” net sales, and their associate d revenues are recognized at the time of shipping. The Company includes gross shipping and handling revenue in net sales, and shipping and handling costs in cost of sales. EMV ® is a registered trademark in the U.S. and other countries and an unregistered trademark elsewhere. The EMV trademark is owned by EMV Co, LLC . Services Net Sales Net sales are recognized for “Services” as the services are performed. Items included in “Services” net sales include the personalization and fulfillment of Financial Payment Cards, including CPI On-Demand ® personalization, providing tamper-evident secure packaging and fulfillment services to Prepaid Debit Card program managers and software-as-a-service personalization of instant issuance debit and credit cards. The Company also generates “Services” net sales from usage-fees generated from the Company’s patented card design software, known as MYCA TM , which provides customers and cardholders the ability to design cards on the internet and customize cards with individualized digital images. 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 ASC 606, Revenue from Contracts with Customers , 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. |
Accounts Receivable
Accounts Receivable | 3 Months Ended |
Mar. 31, 2021 | |
Accounts Receivable | |
Accounts Receivable | 3. Accounts Receivable Accounts receivable consisted of the following: March 31, 2021 December 31, 2020 Trade accounts receivable $ 49,708 $ 44,305 Unbilled accounts receivable 11,008 10,576 60,716 54,881 Less allowance for doubtful accounts (237) (289) $ 60,479 $ 54,592 |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2021 | |
Inventories | |
Inventories | 4 . Inventories Inventories consisted of the following: March 31, 2021 December 31, 2020 Raw materials $ 31,802 $ 23,009 Finished goods 4,727 4,635 Inventory reserve (3,039) (2,848) $ 33,490 $ 24,796 |
Plant, Equipment, Leasehold Imp
Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets | 3 Months Ended |
Mar. 31, 2021 | |
Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets | |
Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets | 5. Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets Plant, equipment, leasehold improvements and operating lease right-of-use assets consisted of the following: March 31, 2021 December 31, 2020 Machinery and equipment $ 57,714 $ 55,459 Machinery and equipment under financing leases 9,858 9,974 Furniture, fixtures and computer equipment 4,331 4,410 Leasehold improvements 13,896 15,083 Construction in progress 1,381 2,386 87,180 87,312 Less accumulated depreciation and amortization (55,925) (55,092) Operating lease right-of-use assets, net of accumulated amortization 6,933 7,183 $ 38,188 $ 39,403 Depreciation expense of plant, equipment and leasehold improvements, including depreciation of assets under financing leases, was $3,073 and $3,091 for the three months ended March 31, 2021 and 2020, respectively. Operating lease right-of-use assets, net of accumulated amortization, are further described in Note 9, Financing and Operating Leases. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 3 Months Ended |
Mar. 31, 2021 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | 6. Goodwill and Other Intangible Assets The Company reports all of its goodwill in the Debit and Credit segment at March 31, 2021 and December 31, 2020. Goodwill is tested for impairment at least annually on October 1 or more frequently when an event occurs or circumstances change that indicates the carrying value may not be recoverable. The Company did not identify a triggering event requiring a quantitative test for impairment as of March 31, 2021. Intangible assets consist of customer relationships, technology and software and trademarks. Intangible amortization expense was $1,149 and $1,149 for the three months ended March 31, 2021 and 2020, respectively. At March 31 , 2021 and December 31, 2020, intangible assets, excluding goodwill, were comprised of the following: March 31, 2021 December 31, 2020 Weighted Average Accumulated Net Book Accumulated Net Book Life (Years) Cost Amortization Value Cost Amortization Value Customer relationships 17.2 $ 55,454 $ (32,961) $ 22,493 $ 55,454 (32,141) $ 23,313 Technology and software 8 7,101 (6,113) 988 7,101 (5,881) 1,220 Trademarks 8.7 3,330 (1,753) 1,577 3,330 (1,656) 1,674 Intangible assets subject to amortization $ 65,885 $ (40,827) $ 25,058 $ 65,885 $ (39,678) $ 26,207 The estimated future aggregate amortization expense for the identified amortizable intangibles noted above as of March 31, 2021 was as follows: 2021 (excluding the three months ended March 31, 2021) $ 3,203 2022 3,867 2023 3,867 2024 3,630 2025 3,440 Thereafter 7,051 $ 25,058 |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 3 Months Ended |
Mar. 31, 2021 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | 7. 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 the 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 Estimated Value as of Fair Value as of Fair Value Measurement at March 31, 2021 March 31, March 31, (Using Fair Value Hierarchy) 2021 2021 Level 1 Level 2 Level 3 Liabilities: Senior Notes $ 310,000 $ 324,725 $ — $ 324,725 $ — ABL Revolver $ 15,000 $ 15,000 $ — $ 15,000 $ — Carrying Estimated Value as of Fair Value as of Fair Value Measurement at December 31, 2020 December 31, December 31, (Using Fair Value Hierarchy) 2020 2020 Level 1 Level 2 Level 3 Liabilities: First Lien Term Loan $ 312,500 $ 287,500 $ — $ 287,500 $ — Senior Credit Facility 30,000 30,000 $ — $ — $ 30,000 The aggregate fair value of the Company’s Senior Notes (as defined in Note 10, Long-Term Debt) was based on bank quotes. The fair value measurement associated with the ABL Revolver (as defined in Note 10, Long-Term Debt) approximates its carrying value as of March 31, 2021, given the close proximity to the date the Company entered into the credit facility on March 15, 2021, and the applicable interest rates and nature of the security interest in Company assets. The carrying amounts for cash and cash equivalents, accounts receivable and accounts payable each approximate fair value. |
Accrued Expenses
Accrued Expenses | 3 Months Ended |
Mar. 31, 2021 | |
Accrued Expenses. | |
Accrued Expenses | 8. Accrued Expenses Accrued expenses consisted of the following: March 31, 2021 December 31, 2020 Accrued payroll and related employee expenses $ 5,007 $ 4,938 Accrued employee performance bonus 2,117 4,873 Employer payroll tax, including social security deferral 2,794 3,034 Accrued rebates 1,668 1,178 Sales tax liability 1,805 1,696 Accrued interest 1,262 4,145 Operating and financing lease liability (current portion) 4,016 4,407 Other 3,949 3,878 Total accrued expenses $ 22,618 $ 28,149 The estimated sales tax liability is further described in Note 14, Commitments and Contingencies and Note 1, Business Overview and Summary of Significant Accounting Policies. |
Financing and Operating Leases
Financing and Operating Leases | 3 Months Ended |
Mar. 31, 2021 | |
Financing and Operating Leases | |
Financing and Operating Leases | 9. Financing and Operating Leases Right-of-use (“ROU”) represents 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. 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. The components of operating and finance lease costs were as follows: Three Months Ended Three Months Ended March 31, 2021 March 31, 2020 Operating lease costs $ 509 $ 671 Variable lease costs 164 173 Short-term operating lease costs 172 - Total expense from operating leases $ 845 $ 844 Finance lease cost: Right-of-use amortization expense Interest on lease liabilities Total financing lease costs $ 506 $ 456 The following table reflects balances for operating and financing leases: March 31, 2021 December 31, 2020 Operating leases Operating lease right-of-use assets, net of amortization $ 6,933 $ 7,183 Operating lease liability (current) $ 1,958 $ 2,267 Long-term operating liability 5,540 5,491 Total operating lease liabilities $ 7,498 $ 7,758 Financing leases Property, equipment and leasehold improvements $ 9,858 $ 9,974 Accumulated depreciation (2,086) (2,422) Total property, equipment and leasehold improvements, net $ 7,772 $ 7,552 Financing lease liability (current) $ 2,058 $ 2,140 Long-term financing liability 3,050 3,052 Total financing lease liabilities $ 5,108 $ 5,192 Finance and operating lease ROU assets are recorded in “Plant, equipment, leasehold improvements, and operating lease right-of-use assets, net.” Financing and operating lease liabilities are recorded in “Accrued expenses” and “Other long-term liabilities.” Future cash payment with respect to lease obligations as of March 31, 2021 were as follows: Operating Financing Lease Leases 2021 (excluding the three months ended March 31, 2021) 2,022 1,856 2022 1,782 2,112 2023 1,643 1,176 2024 1,442 366 2025 862 107 Thereafter 1,808 26 Total lease payments 9,559 5,643 Less imputed interest (2,061) (535) Total $ 7,498 $ 5,108 |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2021 | |
Long-Term Debt. | |
Long-Term Debt | 10. Long-Term Debt At March 31, 2021 and December 31, 2020, long-term debt consisted of the following: Interest March 31, December 31, Rate (1) 2021 2020 Senior Notes 8.625 % $ 310,000 $ — ABL Revolver 1.356 % 15,000 — First Lien Term Loan 5.500 % — 312,500 Senior Credit Facility 9.500 % — 30,000 Unamortized deferred financing costs (7,497) (3,804) Unamortized discount — (1,988) Total long-term debt $ 317,503 $ 336,708 Less current maturities — (8,027) Long-term debt, net of current maturities $ 317,503 $ 328,681 (1 ) The Senior Notes bear interest at a fixed rate. The variable interest rate on the ABL Revolver was 1.356% as of March 31, 2021. The variable interest rate on the First Lien Term Loan and Senior Credit Facility was 5.5% and 9.5%, respec tively, as of December 31, 2020. On March 15, 2021, the Company completed a private offering by its wholly-owned subsidiary, CPI CG Inc. (the “Issuer”), of $310,000 aggregate principal amount of 8.625% senior secured notes due 2026 (the “Senior Notes”) and related guarantees. The notes and related guarantees were offered and sold in a private transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), to persons reasonably believed to be qualified institutional buyers in accordance with Rule 144A under the Securities Act and outside the United States to certain non-U.S. persons in compliance with Regulation S under the Securities Act. In addition, the Company and CPI CG Inc. as borrower entered into a credit agreement with Wells Fargo Bank, National Association, as lender, administrative agent and collateral agent, providing for an asset-based, senior secured revolving credit facility of up to $50,000 (the “ABL Revolver”). In connection with the issuance of the Senior Notes and entry into the ABL Revolver, the Company terminated its existing credit facilities consisting of a $30,000 senior credit agreement, dated as of March 6, 2020, among the Company, CPI CG Inc., as borrower, the lenders party thereto and Guggenheim Credit Services, LLC as administrative agent and collateral agent (the “Senior Credit Facility”), and a $435,000 first lien term loan (the “First Lien Term Loan”), dated as of August 17, 2015 as amended, among the Company, the borrower, the lenders party thereto, GLAS USA LLC, as administrative agent and GLAS Americas LLC, as collateral agent . Net proceeds from the Senior Notes, together with cash on hand and initial borrowings of $15,000 under the ABL Revolver, were used to pay in full and terminate the Senior Credit Facility and First Lien Term Loan on March 15, 2021, and to pay related fees and expenses. As of March 15, 2021, the Company had outstanding borrowings of $30,000, plus accrued and unpa id interest, under the Senior Credit Facility, and $304,746, plus accrued and unpaid interest, under the First Lien Term Loan. In addition, early termination of the Senior Credit Facility required payment of a “make-whole” premium of $2,635 as an early termination penalty, which was paid on March 15, 2021, and recorded as interest expense on the condensed consolidated statement of comprehensive income for the three months ended March 31, 2021. The Senior Notes bear interest at a rate of 8.625% per annum and mature on March 15, 2026. Interest is payable on the Senior Notes on March 15 and September 15 of each year, beginning on September 15, 2021. The ABL Revolver matures on the earliest to occur of March 15, 2026 and the date that is 90 days prior to the maturity of the Senior Notes. Borrowings under the ABL Revolver bear interest at a rate per annum that ranges from the LIBOR Rate plus 1.25% to the LIBOR Rate plus 1.75%, or the Base Rate plus 0.25% to the Base Rate plus 0.75%, based on the average daily borrowing capacity under the ABL Revolver over the most recently completed month. The Company may elect to apply either the LIBOR Rate or Base Rate interest to borrowings at its discretion. The unused portion of the ABL Revolver commitment accrues a commitment fee, which ranges from 0.375% to 0.50% per annum, based on the average daily borrowing capacity under the ABL Revolver over the immediately preceding month. The Senior Notes are guaranteed by the Company and certain of its current and future wholly-owned domestic subsidiaries (other than the Issuer) that guarantee the ABL Revolver, and are secured by substantially all of the assets of the Issuer and the guarantors, subject to customary exceptions. The ABL Revolver is guaranteed by the Company and its subsidiaries (other than the Issuer and excluded subsidiaries), and is secured by substantially all of the assets of the Issuer and the guarantors, subject to customary exceptions. The Senior Notes and the ABL Revolver contain covenants limiting the ability of the Company, the Issuer and the Company’s restricted subsidiaries to, among other things, incur or guarantee additional debt or issue disqualified stock or certain preferred stock; create or incur liens; pay dividends, redeem stock or make other distributions; make certain investments; create restrictions on the ability of the Issuer and its restricted subsidiaries to pay dividends to the Company or make other intercompany transfers; transfer or sell assets; merge or consolidate; and enter into certain transactions with affiliates, subject to a number of important exceptions and qualifications as set forth in the respective agreements. The Company may have obligations to make an offer to repay the Senior Notes, requiring prepayment in advance of the maturity date, upon the occurrence of certain events including a change of control, certain asset sales and based on an annual excess cash flow calculation. The annual excess cash flow calculation is determined pursuant to the terms of that certain Indenture, dated as of March 15, 2021, by and among Issuer, the Company, the subsidiary guarantors and U.S. Bank National Association, with any required prepayments to be made after the issuance of the Company’s annual financial statements. As of December 31, 2020, $8,027 of debt principal was classified as a current liability as a result of an excess free cash flow calculation for 2020 pursuant to the terms of the Senior Credit Facility and the First Lien Term Loan. The Company offered to prepay the balance, pursuant to the terms of the Senior Credit Facility and the First Lien Term Loan, which resulted in a required principal prepayment of $7,754 to the First Lien Term Loan lenders on March 4, 2021, plus accrued interest thereon. Deferred Financing Costs and Discount Certain costs and discounts 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. The debt issuance costs recorded on the Senior Notes were $7,558 and are reported as a reduction to the long-term debt balance in the quarter ended March 31, 2021. The net discount and debt issuance costs on the ABL Revolver were $2,144 and are recorded as other assets (current and long term) on the condensed consolidated balance sheet as of March 31, 2021. During the three months ended March 31, 2021, the Company recorded a $5,048 loss on debt extinguishment relating to the unamortized deferred financing costs and debt discount in connection with the termination of the Senior Credit Facility and First Lien Term Loan. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2021 | |
Income Taxes | |
Income Taxes | 11. Income Taxes During the three months ended March 31, 2021 , the Company recognized an income tax expense of $1,360 on a pre-tax income of $3,770, representing an effective income tax rate of 36.1%. For the three months ended March 31, 2020, the Company recognized an income tax benefit of $465 on a pre-tax income of $1,317, representing an effective income tax rate of (35.3)%. For the three months ended March 31, 2021 and 2020, the effective tax rate differs from the U.S. federal statutory income tax rate as follows: March 31, 2021 2020 Tax at federal statutory rate % 21.0 % State taxes, net 46.0 Valuation allowance 100.6 Permanent items 47.9 Tax benefit CARES Act (250.9) Other (0.6) 0.1 Effective income tax rate 36.1 % (35.3) % In March 2020, the CARES Act was signed into law. The CARES Act allows companies with net operating losses (“NOLs”) originating in 2018, 2019, or 2020 to carry back those losses for five years and temporarily eliminates the tax law provision that limits the use of NOLs to 80% of taxable income. The CARES Act increases the Internal Revenue Code Section 163(j) interest deduction limit for 2019 and 2020, and allows for the acceleration of refunds of alternative minimum tax credits. For the three months ended March 31, 2020 , the Company recorded an estimated tax benefit for certain provisions in the CARES Act including the carryback of losses and the increase to the interest deduction limitation, resulting in a tax rate benefit of 250.9%. The Company’s income tax receivable on the condensed consolidated balance sheet as of March 31, 2021, relates primarily to U.S. federal income tax receivables relating to prior tax years, including NOL carrybacks relating to the CARES Act income tax refund. The Company believes that it is reasonably possible that approximately $852 of its unrecognized tax benefits may be recognized in the next one year period as a result of settlement with the taxing authorities. As such, this balance is reflected in “Accrued expenses” in the Company’s condensed consolidated balance sheet as of March 31, 2021. |
Stockholders' Deficit
Stockholders' Deficit | 3 Months Ended |
Mar. 31, 2021 | |
Stockholders’ Deficit | |
Stockholders’ Deficit | 12. Stockholders’ Deficit Common Stock Common Stock has a par value of $0.001 per share. Holders of Common Stock are entitled to receive dividends and distributions subject to the participation rights of holders of all classes of stock at the time outstanding, as such holders may have prior rights as to dividends pursuant to the rights of any series of Preferred Stock. Upon any liquidation, dissolution or winding up of the Company, after required payments are made to holders of any series of Preferred Stock, any remaining assets of the Company will be distributed ratably to the holders of Common Stock. Holders of Common Stock are entitled to one vote per share. |
Earnings per Share
Earnings per Share | 3 Months Ended |
Mar. 31, 2021 | |
Earnings per Share | |
Earnings per Share | 13. Earnings per Share Basic and diluted earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended March 31, 2021 2020 Numerator: Net income from continuing operations 2,410 1,782 Net loss from discontinued operations — (26) Net income $ 2,410 $ 1,756 Denominator: Basic weighted-average common shares outstanding 11,230,482 11,224,500 Dilutive shares 408,533 37,859 Diluted weighted-average common shares outstanding 11,639,015 11,262,359 Earnings per share from continuing operations - Basic and Diluted: 0.21 Earnings (loss) per share from discontinued operations - Basic and Diluted: — (0.00) Earnings per share - Basic and Diluted: $ 0.21 $ 0.16 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies | |
Commitments and Contingencies | 14. Commitments and Contingencies Commitments Refer to Note 9 “Financing and Operating Leases” for details on the Company’s future cash payments with respect to financing and operating leases. During the normal course of business, the Company enters into non-cancellable agreements to purchase goods and services, including production equipment and information technology systems. The Company leases real property for its facilities under non-cancellable operating lease agreements. Land and facility leases expire at various dates between 2022 and 2028 and contain various provisions for rental adjustments and renewals. The leases typically require the Company to pay property taxes, insurance and normal maintenance costs. 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 expense. The Company expenses professional fees associated with litigation claims and assessments as incurred. Smart Packaging Solutions SA v. CPI Card Group Inc. On April 20, 2021, Smart Packaging Solutions, SA (“SPS”) filed a patent infringement lawsuit against the Company in the United States District Court for the District of Delaware seeking an unspecified amount of damages and equitable relief. In the complaint, SPS alleges that the Company infringed four patents that SPS has exclusively licensed from Feinics AmaTech Teoranta. The patents all relate to antenna technology. SPS alleges that the Company incorporates the patented technology into its products that use contactless communication. The Company does not manufacture antennas; it purchases certain antenna-related components from SPS and a number of other suppliers. The Company has not been formally served with the complaint and thus has not yet filed an answer. The Company intends to investigate and pursue its rights relating to the claims and to defend the suit vigorously. However, no assurance can be given that this matter will be resolved favorably. Accordingly, it is not yet possible to reliably determine any potential liability that could result from this matter in the event of an adverse determination, and no liability has been recorded as of March 31, 2021 or December 31, 2020. In addition to the matter described above, the Company may be subject to routine legal proceedings in the ordinary course of business. The Company believes that the ultimate resolution of any such matters will not have a material adverse effect on its business, financial condition or results of operations. Estimated Sales Tax Liability The Company is evaluating a state sales tax liability analysis for states in which it has economic nexus and collecting exemption documentation from its customers. It is probable that the Company will be subject to sales tax liabilities plus interest and penalties relating to historical activity in certain states. The estimated liability for sales tax as of March 31, 2021 and December 31, 2020 was $1,805 and $1,696, respectively, and is recorded in a ccrued expenses in the condensed consolidated balance sheets. The liability increased from the estimate recorded in the prior period due to ongoing activity. In addition, as the Company remits cash to the applicable state tax authorities for historical sales tax and interest, the liability balance will decrease. Due to the estimates involved in the analysis, the Company expects that the estimated liability will change in the future, and may exceed the current estimate. The Company also may be subject to examination by the relevant state tax authorities. Sales tax recovered from customers reduces the estimated expense when it is received or probable of collection . Future changes to the liability that impact the condensed consolidated statements of operations will be recorded within “Selling, general, and administrative expenses.” |
Stock Based Compensation
Stock Based Compensation | 3 Months Ended |
Mar. 31, 2021 | |
Stock Based Compensation | |
Stock Based Compensation | 15. Stock-Based Compensation CPI Card Group Inc. Omnibus Incentive Plan In 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 1,200,000 shares of common stock for issuance under the Omnibus Plan. As of March 31, 2021, there were 185,113 shares available for grant under the Omnibus Plan. During the three months ended March 31, 2021, and during the fiscal year ended December 31, 2020, 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, 2020 706,372 $ 6.44 Forfeited — - - Outstanding as of March 31, 2021 706,372 $ 6.19 Options vested and exercisable as of March 31, 2021 670,876 $ 6.12 Options vested and expected to vest as of March 31, 2021 706,372 $ 6.19 The following is a summary of the activity in unvested stock options under the Omnibus Plan: Weighted-Average Options Grant-Date Fair Value Unvested as of December 31, 2020 45,319 $ 1.10 Vested (9,823) 1.79 Unvested as of March 31, 2021 35,496 $ 0.91 Unvested stock options of 35,496 as of March 31, 2021 will vest entirely in 2021. The following table summarizes the changes in the number of outstanding restricted stock units: Weighted- Average Weighted- Remaining Average Amortization Grant-Date Period Shares Fair Value (in Years) Outstanding as of December 31, 2020 180,001 $ 2.12 Forfeited — Outstanding as of March 31, 2021 180,001 $ 2.12 1.50 The Company granted 180,001 restricted stock units to employees on October 2, 2020. The restricted stock unit awards contain conditions associated with continued employment or service and vest two years from the date of grant. On the vesting date, shares of common stock will be issued to the award recipients. Unvested restricted stock units of 180,001 as of March 31, 2021 will vest entirely in October 2022. Compensation expense for the Omnibus Plan for the three months ended March 31, 2021 and 2020 was $51 and $41, respectively. As of March 31, 2021, the total unrecognized compensation expense related to unvested options and restricted stock units is $289, which the Company expects to recognize over an estimated weighted-average period of approximately 1.5 years. |
Segment Reporting
Segment Reporting | 3 Months Ended |
Mar. 31, 2021 | |
Segment Reporting | |
Segment Reporting | 16. Segment Reporting The Company has identified reportable segments as those consolidated subsidiaries that represent 10% or more of its net sales, 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 net sales 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 useful as a supplement to 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 to identify strategies to improve the allocation of resources amongst segments. As of March 31, 2021 , the Company’s reportable segments were as follows: Debit and Credit; Prepaid Debit; and Other. Debit and Credit Segment The Debit and Credit segment primarily produces Financial Payment Cards and provides integrated card services, including card personalization and fulfilment services, to card-issuing banks primarily in the United States. Products manufactured by this segment primarily include EMV and non-EMV Financial Payment Cards, including contact and contactless dual-interface cards, and plastic and encased metal cards, and our eco-focused solutions including Second Wave payment cards featuring a core made with recovered ocean bound plastic and Earthwise “high content” plastic cards . The Company also sells Card Once instant card issuance solutions, and private label credit cards that are not issued on the networks of the Payment Cards Brands. The Company provides CPI On-Demand services, where images, personalized payment cards, and related collateral are produced on a one-by-one, on demand basis for customers. The Debit and Credit segment operations are each audited for compliance by multiple Payment Card Brands. Prepaid Debit Segment The Prepaid Debit segment primarily provides integrated card services to Prepaid Debit Card providers in the United States, including tamper-evident security packaging. This segment also produces Financial Payment Cards issued on the networks of the Payment Card Brands that are included in the tamper-evident security packages. The Prepaid Debit segment facilities are audited for compliance with the standards of the PCI Security Standards Council by multiple Payment Card Brands. Other The Other segment includes corporate expenses and the loss on debt extinguishment. Performance Measures of Reportable Segments Net Sales and EBITDA of the Company’s reportable segments for the three months ended March 31, 2021 and 2020, were as follows: Net Sales Three Months Ended March 31, 2021 2020 Debit and Credit $ 69,817 $ 59,839 Prepaid Debit 19,458 14,540 Intersegment eliminations (183) (410) Total $ 89,092 $ 73,969 EBITDA Three Months Ended March 31, 2021 2020 Debit and Credit $ 22,400 $ 14,959 Prepaid Debit 7,573 4,660 Other (13,005) (7,974) Total $ 16,968 $ 11,645 The following table provides a reconciliation of total segment EBITDA to net income for the three months ended March 31, 2021 and 2020: Three Months Ended March 31, 2021 2020 Total segment EBITDA $ 16,968 $ 11,645 Interest, net (8,976) (6,088) Income tax (expense) benefit (1,360) 465 Depreciation and amortization (4,222) (4,240) Net loss from discontinued operations — (26) Net income $ 2,410 $ 1,756 Balance Sheet Data of Reportable Segments Total assets of the Company’s reportable segments at March 31, 2021 and December 31, 2020, were as follows: March 31, 2021 December 31, 2020 Debit and Credit $ 200,341 $ 215,846 Prepaid Debit 37,926 34,734 Other 8,027 15,571 Total assets $ 246,294 $ 266,151 Net Sales to Geographic Locations, Property, Equipment and Leasehold Improvements and Long-Lived Assets 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) | 3 Months Ended |
Mar. 31, 2021 | |
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 8 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, 2020 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, 2020. |
Discontinued Operations | Discontinued Operations On August 3, 2018, the Company completed the sale of its three facilities in the United Kingdom that produced retail cards, such as gift and loyalty cards, for customers in the United Kingdom and continental Europe, and provided personaliz ation, 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 in accordance with GAAP. The Company did not retain significant continuing involvement with the discontinued operations subsequent to the disposal. The impact of the discontinued operations was insignificant to the Company’s condensed consolidated statement of operations for the three months ended March 31, 2020. |
Use of Estimates | Use of Estimates Management uses estimates and assumptions relating to the reporting of assets and liabilities at the date of the financial statements, the reported revenues and expenses recognized during the reporting period, and certain financial statement disclosures in the preparation of the condensed consolidated financial statements. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, goodwill and intangible assets, leases, liability for sales tax, valuation allowances for inventories and deferred taxes, revenue recognized for work performed but not completed and uncertain tax positions. Actual results could differ from those estimates. |
Recent Accounting Pronouncements | Recent Accounting Standards Recently Issued Accounting Standards In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“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. The effective date of ASU 2016-13 was amended by ASU 2019-10 , Credit Losses Effective Dates. Since CPI is a smaller reporting company, adoption of this accounting standard is effective for the Company for fiscal years beginning after December 15, 2022, and interim periods therein, with early adoption permi tted. The Company has elected not to early adopt this accounting standard in the current fiscal year 2021. The Company is evaluating the impact of adoption of this standard and does not anticipate the application of ASU 2016-13 will have a material impact on the Company’s consolidated financial position and results of operations. |
Adjustment of Prior Period Financial Statements for Immaterial Items | Adjustment of Prior Period Financial Statements for Immaterial Items In accordance with Securities and Exchange Commission Staff Accounting Bulletin 99, Materiality, codified in Accounting Standards Codification (“ASC”) 250, Presentation of Financial Statements , during the year ended December 31, 2020, the Company corrected two immaterial items relating to estimated sales tax expense and depreciation expense for prior periods presented by revising the condensed consolidated financial statements and other financial information included herein. For the quarter ended March 31, 2020, the total impact of the prior period adjustment was an increase to “Selling, General and Administrative expenses” (“SG&A”) of $121 for estimated sales tax expense and an increase to “Cost of sales” of $62 for depreciation expense. The total impact on prior fiscal years 2017 to 2019 was an increase to SG&A for estimated sales tax expense of $1,907 and an increase to “Cost of sales” for depreciation expense of $476. Refer to Note 14, “Commitments and Contingencies” for additional discussion of the estimated sales tax liability recorded in “Accrued expenses” on the condensed consolidated balance sheet. |
Net Sales (Tables)
Net Sales (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Net Sales. | |
Schedule of disaggregation of net sales by major source | Three Months Ended March 31, 2021 Products Services Total Debit and Credit $ 47,179 $ 22,638 $ 69,817 Prepaid Debit — 19,458 19,458 Intersegment eliminations (166) (17) (183) Total $ 47,013 $ 42,079 $ 89,092 Three Months Ended March 31, 2020 Products Services Total Debit and Credit $ 42,911 $ 16,928 $ 59,839 Prepaid Debit — 14,540 14,540 Intersegment eliminations (410) — (410) Total $ 42,501 $ 31,468 $ 73,969 |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Accounts Receivable | |
Schedule of accounts receivable | March 31, 2021 December 31, 2020 Trade accounts receivable $ 49,708 $ 44,305 Unbilled accounts receivable 11,008 10,576 60,716 54,881 Less allowance for doubtful accounts (237) (289) $ 60,479 $ 54,592 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Inventories | |
Schedule of inventories | March 31, 2021 December 31, 2020 Raw materials $ 31,802 $ 23,009 Finished goods 4,727 4,635 Inventory reserve (3,039) (2,848) $ 33,490 $ 24,796 |
Plant, Equipment, Leasehold I_2
Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets | |
Schedule of plant, equipment, leasehold improvements and operating lease right-to-use assets | March 31, 2021 December 31, 2020 Machinery and equipment $ 57,714 $ 55,459 Machinery and equipment under financing leases 9,858 9,974 Furniture, fixtures and computer equipment 4,331 4,410 Leasehold improvements 13,896 15,083 Construction in progress 1,381 2,386 87,180 87,312 Less accumulated depreciation and amortization (55,925) (55,092) Operating lease right-of-use assets, net of accumulated amortization 6,933 7,183 $ 38,188 $ 39,403 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Goodwill and Other Intangible Assets | |
Schedule of intangible assets excluding goodwill | March 31, 2021 December 31, 2020 Weighted Average Accumulated Net Book Accumulated Net Book Life (Years) Cost Amortization Value Cost Amortization Value Customer relationships 17.2 $ 55,454 $ (32,961) $ 22,493 $ 55,454 (32,141) $ 23,313 Technology and software 8 7,101 (6,113) 988 7,101 (5,881) 1,220 Trademarks 8.7 3,330 (1,753) 1,577 3,330 (1,656) 1,674 Intangible assets subject to amortization $ 65,885 $ (40,827) $ 25,058 $ 65,885 $ (39,678) $ 26,207 |
Schedule of future aggregate amortization expense for identified amortizable intangibles | The estimated future aggregate amortization expense for the identified amortizable intangibles noted above as of March 31, 2021 was as follows: 2021 (excluding the three months ended March 31, 2021) $ 3,203 2022 3,867 2023 3,867 2024 3,630 2025 3,440 Thereafter 7,051 $ 25,058 |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Fair Value of Financial Instruments | |
Schedule of financial assets and liabilities subject to fair value measurements | 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 Estimated Value as of Fair Value as of Fair Value Measurement at March 31, 2021 March 31, March 31, (Using Fair Value Hierarchy) 2021 2021 Level 1 Level 2 Level 3 Liabilities: Senior Notes $ 310,000 $ 324,725 $ — $ 324,725 $ — ABL Revolver $ 15,000 $ 15,000 $ — $ 15,000 $ — Carrying Estimated Value as of Fair Value as of Fair Value Measurement at December 31, 2020 December 31, December 31, (Using Fair Value Hierarchy) 2020 2020 Level 1 Level 2 Level 3 Liabilities: First Lien Term Loan $ 312,500 $ 287,500 $ — $ 287,500 $ — Senior Credit Facility 30,000 30,000 $ — $ — $ 30,000 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Accrued Expenses. | |
Schedule of Accrued Expenses | March 31, 2021 December 31, 2020 Accrued payroll and related employee expenses $ 5,007 $ 4,938 Accrued employee performance bonus 2,117 4,873 Employer payroll tax, including social security deferral 2,794 3,034 Accrued rebates 1,668 1,178 Sales tax liability 1,805 1,696 Accrued interest 1,262 4,145 Operating and financing lease liability (current portion) 4,016 4,407 Other 3,949 3,878 Total accrued expenses $ 22,618 $ 28,149 |
Financing and Operating Leases
Financing and Operating Leases (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Financing and Operating Leases | |
Schedule of operating and finance lease costs | Three Months Ended Three Months Ended March 31, 2021 March 31, 2020 Operating lease costs $ 509 $ 671 Variable lease costs 164 173 Short-term operating lease costs 172 - Total expense from operating leases $ 845 $ 844 Finance lease cost: Right-of-use amortization expense Interest on lease liabilities Total financing lease costs $ 506 $ 456 |
Schedule of balances for operating and financing leases | March 31, 2021 December 31, 2020 Operating leases Operating lease right-of-use assets, net of amortization $ 6,933 $ 7,183 Operating lease liability (current) $ 1,958 $ 2,267 Long-term operating liability 5,540 5,491 Total operating lease liabilities $ 7,498 $ 7,758 Financing leases Property, equipment and leasehold improvements $ 9,858 $ 9,974 Accumulated depreciation (2,086) (2,422) Total property, equipment and leasehold improvements, net $ 7,772 $ 7,552 Financing lease liability (current) $ 2,058 $ 2,140 Long-term financing liability 3,050 3,052 Total financing lease liabilities $ 5,108 $ 5,192 |
Schedule of future cash payments with respect to lease obligations | Future cash payment with respect to lease obligations as of March 31, 2021 were as follows: Operating Financing Lease Leases 2021 (excluding the three months ended March 31, 2021) 2,022 1,856 2022 1,782 2,112 2023 1,643 1,176 2024 1,442 366 2025 862 107 Thereafter 1,808 26 Total lease payments 9,559 5,643 Less imputed interest (2,061) (535) Total $ 7,498 $ 5,108 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Long-Term Debt. | |
Schedule of long-term debt | Interest March 31, December 31, Rate (1) 2021 2020 Senior Notes 8.625 % $ 310,000 $ — ABL Revolver 1.356 % 15,000 — First Lien Term Loan 5.500 % — 312,500 Senior Credit Facility 9.500 % — 30,000 Unamortized deferred financing costs (7,497) (3,804) Unamortized discount — (1,988) Total long-term debt $ 317,503 $ 336,708 Less current maturities — (8,027) Long-term debt, net of current maturities $ 317,503 $ 328,681 (1 ) The Senior Notes bear interest at a fixed rate. The variable interest rate on the ABL Revolver was 1.356% as of March 31, 2021. The variable interest rate on the First Lien Term Loan and Senior Credit Facility was 5.5% and 9.5%, respec tively, as of December 31, 2020. |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Income Taxes | |
Schedule of effective income tax rate reconciliation | March 31, 2021 2020 Tax at federal statutory rate % 21.0 % State taxes, net 46.0 Valuation allowance 100.6 Permanent items 47.9 Tax benefit CARES Act (250.9) Other (0.6) 0.1 Effective income tax rate 36.1 % (35.3) % |
Earnings per Share (Tables)
Earnings per Share (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Earnings per Share | |
Computation of basic and diluted earnings per share | Three Months Ended March 31, 2021 2020 Numerator: Net income from continuing operations 2,410 1,782 Net loss from discontinued operations — (26) Net income $ 2,410 $ 1,756 Denominator: Basic weighted-average common shares outstanding 11,230,482 11,224,500 Dilutive shares 408,533 37,859 Diluted weighted-average common shares outstanding 11,639,015 11,262,359 Earnings per share from continuing operations - Basic and Diluted: 0.21 Earnings (loss) per share from discontinued operations - Basic and Diluted: — (0.00) Earnings per share - Basic and Diluted: $ 0.21 $ 0.16 |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Stock Based Compensation | |
Summary of outstanding and exercisable stock options | Weighted- Weighted- Average Average Remaining Exercise Contractual Term Options Price (in Years) Outstanding as of December 31, 2020 706,372 $ 6.44 Forfeited — - - Outstanding as of March 31, 2021 706,372 $ 6.19 Options vested and exercisable as of March 31, 2021 670,876 $ 6.12 Options vested and expected to vest as of March 31, 2021 706,372 $ 6.19 |
Schedule of vesting for unvested options | Weighted-Average Options Grant-Date Fair Value Unvested as of December 31, 2020 45,319 $ 1.10 Vested (9,823) 1.79 Unvested as of March 31, 2021 35,496 $ 0.91 |
Summary of changes in outstanding restricted stock units | Weighted- Average Weighted- Remaining Average Amortization Grant-Date Period Shares Fair Value (in Years) Outstanding as of December 31, 2020 180,001 $ 2.12 Forfeited — Outstanding as of March 31, 2021 180,001 $ 2.12 1.50 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Segment Reporting | |
Schedule of revenue and EBITDA of the company's reportable segments | Net Sales Three Months Ended March 31, 2021 2020 Debit and Credit $ 69,817 $ 59,839 Prepaid Debit 19,458 14,540 Intersegment eliminations (183) (410) Total $ 89,092 $ 73,969 EBITDA Three Months Ended March 31, 2021 2020 Debit and Credit $ 22,400 $ 14,959 Prepaid Debit 7,573 4,660 Other (13,005) (7,974) Total $ 16,968 $ 11,645 |
Schedule of reconciliation of total segment EBITDA to income before taxes | Three Months Ended March 31, 2021 2020 Total segment EBITDA $ 16,968 $ 11,645 Interest, net (8,976) (6,088) Income tax (expense) benefit (1,360) 465 Depreciation and amortization (4,222) (4,240) Net loss from discontinued operations — (26) Net income $ 2,410 $ 1,756 |
Schedule of total assets of the company's reportable segments | March 31, 2021 December 31, 2020 Debit and Credit $ 200,341 $ 215,846 Prepaid Debit 37,926 34,734 Other 8,027 15,571 Total assets $ 246,294 $ 266,151 |
Business Overview and Summary_3
Business Overview and Summary of Significant Accounting Policies - Adjustment of Prior Financial Statements for Immaterial Items (Details) $ in Thousands | Aug. 03, 2018facility | Mar. 31, 2021USD ($) | Mar. 31, 2020USD ($) | Dec. 31, 2020item | Dec. 31, 2019USD ($) |
Adjustment of Prior Period Financial Statements for Immaterial Items | |||||
Selling, general and administrative | $ 16,146 | $ 16,663 | |||
Cost of goods and services sold | 2,416 | $ 2,755 | |||
Number of facilities | facility | 3 | ||||
Revision of 2017 Through 2020 Immaterial Errors | |||||
Adjustment of Prior Period Financial Statements for Immaterial Items | |||||
Number of immaterial items corrected | item | 2 | ||||
Revision of 2017 Through 2020 Immaterial Errors | Revision of Prior Period Error Correction Adjustment | |||||
Adjustment of Prior Period Financial Statements for Immaterial Items | |||||
Selling, general and administrative | 121 | $ 1,907 | |||
Cost of goods and services sold | $ 62 | $ 476 |
Net Sales (Details)
Net Sales (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Disaggregation of Revenue | ||
Net Sales | $ 89,092 | $ 73,969 |
Operating Segments | Debit and Credit | ||
Disaggregation of Revenue | ||
Net Sales | 69,817 | 59,839 |
Operating Segments | Prepaid Debit | ||
Disaggregation of Revenue | ||
Net Sales | 19,458 | 14,540 |
Intersegment eliminations | ||
Disaggregation of Revenue | ||
Net Sales | (183) | (410) |
Products | ||
Disaggregation of Revenue | ||
Net Sales | 47,013 | 42,501 |
Products | Operating Segments | Debit and Credit | ||
Disaggregation of Revenue | ||
Net Sales | 47,179 | 42,911 |
Products | Intersegment eliminations | ||
Disaggregation of Revenue | ||
Net Sales | (166) | (410) |
Services | ||
Disaggregation of Revenue | ||
Net Sales | 42,079 | 31,468 |
Services | Operating Segments | Debit and Credit | ||
Disaggregation of Revenue | ||
Net Sales | 22,638 | 16,928 |
Services | Operating Segments | Prepaid Debit | ||
Disaggregation of Revenue | ||
Net Sales | 19,458 | $ 14,540 |
Services | Intersegment eliminations | ||
Disaggregation of Revenue | ||
Net Sales | $ (17) |
Accounts Receivable (Details)
Accounts Receivable (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Accounts Receivable | ||
Trade accounts receivable | $ 49,708 | $ 44,305 |
Unbilled accounts receivable | 11,008 | 10,576 |
Accounts receivable, gross | 60,716 | 54,881 |
Less allowance for doubtful accounts | (237) | (289) |
Accounts receivable, net | $ 60,479 | $ 54,592 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Inventories | ||
Raw materials | $ 31,802 | $ 23,009 |
Finished goods | 4,727 | 4,635 |
Inventory reserve | (3,039) | (2,848) |
Inventory | $ 33,490 | $ 24,796 |
Plant, Equipment, Leasehold I_3
Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Plant, Equipment and Leasehold Improvements | |||
Plant, equipment and leasehold improvements, gross | $ 87,180 | $ 87,312 | |
Less accumulated depreciation and amortization | (55,925) | (55,092) | |
Operating lease right-of-use assets, net of accumulated amortization | 6,933 | 7,183 | |
Total property, equipment and leasehold improvements, net | 38,188 | 39,403 | |
Depreciation | 3,073 | $ 3,091 | |
Machinery and equipment | |||
Plant, Equipment and Leasehold Improvements | |||
Plant, equipment and leasehold improvements, gross | 57,714 | 55,459 | |
Machinery and equipment under financing leases | |||
Plant, Equipment and Leasehold Improvements | |||
Plant, equipment and leasehold improvements, gross | 9,858 | 9,974 | |
Furniture, fixtures and computer equipment | |||
Plant, Equipment and Leasehold Improvements | |||
Plant, equipment and leasehold improvements, gross | 4,331 | 4,410 | |
Leasehold improvements | |||
Plant, Equipment and Leasehold Improvements | |||
Plant, equipment and leasehold improvements, gross | 13,896 | 15,083 | |
Construction in progress | |||
Plant, Equipment and Leasehold Improvements | |||
Plant, equipment and leasehold improvements, gross | $ 1,381 | $ 2,386 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Intangible Assets | |||
Intangible amortization expense | $ 1,149 | $ 1,149 | |
Intangible assets subject to amortization, Gross Book Value | 65,885 | $ 65,885 | |
Intangible assets subject to amortization, Accumulated Amortization | (40,827) | (39,678) | |
Intangible assets subject to amortization, Net Book Value | $ 25,058 | 26,207 | |
Customer relationships | |||
Intangible Assets | |||
Weighted Average Life | 17 years 2 months 12 days | ||
Intangible assets subject to amortization, Gross Book Value | $ 55,454 | 55,454 | |
Intangible assets subject to amortization, Accumulated Amortization | (32,961) | (32,141) | |
Intangible assets subject to amortization, Net Book Value | $ 22,493 | 23,313 | |
Technology and software | |||
Intangible Assets | |||
Weighted Average Life | 8 years | ||
Intangible assets subject to amortization, Gross Book Value | $ 7,101 | 7,101 | |
Intangible assets subject to amortization, Accumulated Amortization | (6,113) | (5,881) | |
Intangible assets subject to amortization, Net Book Value | $ 988 | 1,220 | |
Trademarks | |||
Intangible Assets | |||
Weighted Average Life | 8 years 8 months 12 days | ||
Intangible assets subject to amortization, Gross Book Value | $ 3,330 | 3,330 | |
Intangible assets subject to amortization, Accumulated Amortization | (1,753) | (1,656) | |
Intangible assets subject to amortization, Net Book Value | $ 1,577 | $ 1,674 |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets - Future Aggregate Amortization Expense (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Estimated future aggregate amortization expense | ||
2021 (excluding the three months ended March 31, 2021) | $ 3,203 | |
2022 | 3,867 | |
2023 | 3,867 | |
2024 | 3,630 | |
2025 | 3,440 | |
Thereafter | 7,051 | |
Intangible assets subject to amortization, Net Book Value | $ 25,058 | $ 26,207 |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Mar. 15, 2021 | Dec. 31, 2020 |
Senior Notes | |||
Liabilities: | |||
Carrying amount | $ 310,000 | $ 310,000 | |
ABL Revolver | |||
Liabilities: | |||
Carrying amount | 15,000 | ||
Level 2 | Senior Notes | |||
Liabilities: | |||
Long-term debt | 324,725 | ||
Level 2 | ABL Revolver | |||
Liabilities: | |||
Long-term debt | 15,000 | ||
First Lien Credit Facility | |||
Liabilities: | |||
Carrying amount | $ 312,500 | ||
First Lien Credit Facility | Term Loan | |||
Liabilities: | |||
Carrying amount | 312,500 | ||
First Lien Credit Facility | Level 2 | Term Loan | |||
Liabilities: | |||
Long-term debt | 287,500 | ||
Senior Credit Facility | |||
Liabilities: | |||
Carrying amount | 30,000 | ||
Senior Credit Facility | Term Loan | |||
Liabilities: | |||
Carrying amount | 30,000 | ||
Senior Credit Facility | Level 3 | Term Loan | |||
Liabilities: | |||
Long-term debt | 30,000 | ||
Estimate of Fair Value | Senior Notes | |||
Liabilities: | |||
Long-term debt | 324,725 | ||
Estimate of Fair Value | ABL Revolver | |||
Liabilities: | |||
Long-term debt | $ 15,000 | ||
Estimate of Fair Value | First Lien Credit Facility | Term Loan | |||
Liabilities: | |||
Long-term debt | 287,500 | ||
Estimate of Fair Value | Senior Credit Facility | Term Loan | |||
Liabilities: | |||
Long-term debt | $ 30,000 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Accrued Expenses. | ||
Accrued payroll and related employee expenses | $ 5,007 | $ 4,938 |
Accrued employee performance bonus | 2,117 | 4,873 |
Employer payroll tax, including social security deferral | 2,794 | 3,034 |
Accrued rebates | 1,668 | 1,178 |
Sales tax liability | 1,805 | 1,696 |
Accrued interest | 1,262 | 4,145 |
Operating and financing lease liability (current portion) | 4,016 | 4,407 |
Other | 3,949 | 3,878 |
Total accrued expenses | $ 22,618 | $ 28,149 |
Financing and Operating Lease_2
Financing and Operating Leases - Components of Operating and Finance Lease Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Operating lease cost: | ||
Operating lease costs | $ 509 | $ 671 |
Variable lease costs | 164 | 173 |
Short-term operating lease costs | 172 | |
Total expense from operating leases | 845 | 844 |
Finance lease cost: | ||
Right-of-use amortization expense | 293 | 327 |
Interest on lease liabilities | 213 | 129 |
Total financing lease cost | $ 506 | $ 456 |
Financing and Operating Lease_3
Financing and Operating Leases - Operating and Financing Leases (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Leases | ||
Operating lease right-of-use assets, net of amortization | $ 6,933 | $ 7,183 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Property, Plant, Equipment and Operating Lease Right-of-Use Asset | Property, Plant, Equipment and Operating Lease Right-of-Use Asset |
Operating lease liability (current) | $ 1,958 | $ 2,267 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Accrued Liabilities, Current | Accrued Liabilities, Current |
Long-term operating liability | $ 5,540 | $ 5,491 |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | Other Liabilities, Noncurrent | Other Liabilities, Noncurrent |
Total operating lease liabilities | $ 7,498 | $ 7,758 |
Property, equipment and leasehold improvements | 87,180 | 87,312 |
Accumulated depreciation | (55,925) | (55,092) |
Total property, equipment and leasehold improvements, net | 38,188 | 39,403 |
Financing lease liability (current) | $ 2,058 | $ 2,140 |
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List] | Accrued Liabilities, Current | Accrued Liabilities, Current |
Long-term financing liability | $ 3,050 | $ 3,052 |
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | Other Liabilities, Noncurrent | Other Liabilities, Noncurrent |
Total financing lease liabilities | $ 5,108 | $ 5,192 |
Financing leases | ||
Leases | ||
Property, equipment and leasehold improvements | 9,858 | 9,974 |
Accumulated depreciation | (2,086) | (2,422) |
Total property, equipment and leasehold improvements, net | $ 7,772 | $ 7,552 |
Financing and Operating Lease_4
Financing and Operating Leases - Lease Maturity (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Operating Leases | ||
2021 (excluding the three months ended March 31, 2021) | $ 2,022 | |
2022 | 1,782 | |
2023 | 1,643 | |
2024 | 1,442 | |
2025 | 862 | |
Thereafter | 1,808 | |
Total operating lease payment | 9,559 | |
Less imputed interest | (2,061) | |
Total operating lease liabilities | 7,498 | $ 7,758 |
Financing Leases | ||
2021 (excluding the three months ended March 31, 2021) | 1,856 | |
2022 | 2,112 | |
2023 | 1,176 | |
2024 | 366 | |
2025 | 107 | |
Thereafter | 26 | |
Total financing lease payment | 5,643 | |
Less imputed interest | (535) | |
Total financing lease liabilities | $ 5,108 | $ 5,192 |
Long-Term Debt - Long-Term Debt
Long-Term Debt - Long-Term Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Mar. 15, 2021 | Dec. 31, 2020 |
Long-term Debt | |||
Unamortized deferred financing costs | $ (7,497) | $ (3,804) | |
Unamortized discount | (1,988) | ||
Total long-term debt | 317,503 | 336,708 | |
Less current maturities of long-term debt | (8,027) | ||
Long-term debt, net of current maturities | $ 317,503 | $ 328,681 | |
Senior Notes | |||
Long-term Debt | |||
Interest rate (as a percent) | 8.625% | ||
Long-term debt | $ 310,000 | $ 310,000 | |
ABL Revolver | |||
Long-term Debt | |||
Interest rate (as a percent) | 1.356% | ||
Long-term debt | $ 15,000 | ||
First Lien Credit Facility | |||
Long-term Debt | |||
Interest rate (as a percent) | 5.50% | ||
Long-term debt | $ 312,500 | ||
Senior Credit Facility | |||
Long-term Debt | |||
Interest rate (as a percent) | 9.50% | ||
Long-term debt | $ 30,000 |
Long-Term Debt - First Lien Cre
Long-Term Debt - First Lien Credit Facility (Details) - USD ($) $ in Thousands | Mar. 15, 2021 | Mar. 04, 2021 | Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 |
Long-term Debt | |||||
Proceeds from Revolving Credit Facility | $ 14,750 | ||||
Amount outstanding | $ 8,027 | ||||
Loss on debt extinguishment | (5,048) | $ (92) | |||
Senior Notes | |||||
Long-term Debt | |||||
Interest rate (as a percent) | 8.625% | ||||
Long-term debt | $ 310,000 | $ 310,000 | |||
Debt instrument term | 90 days | ||||
Debi issuance cost | $ 7,558 | ||||
ABL Revolver | |||||
Long-term Debt | |||||
Maximum borrowing capacity | 50,000 | ||||
Long-term debt | 15,000 | ||||
Proceeds from Revolving Credit Facility | 15,000 | ||||
Debi issuance cost | $ 2,144 | ||||
ABL Revolver | Minimum | |||||
Long-term Debt | |||||
Percentage of commitment fee | 0.375% | ||||
ABL Revolver | Maximum | |||||
Long-term Debt | |||||
Percentage of commitment fee | 0.50% | ||||
ABL Revolver | Base rate | Minimum | |||||
Long-term Debt | |||||
Applicable margin over reference rate (as a percent) | 0.25% | ||||
ABL Revolver | Base rate | Maximum | |||||
Long-term Debt | |||||
Applicable margin over reference rate (as a percent) | 0.75% | ||||
ABL Revolver | LIBOR | Minimum | |||||
Long-term Debt | |||||
Applicable margin over reference rate (as a percent) | 1.25% | ||||
ABL Revolver | LIBOR | Maximum | |||||
Long-term Debt | |||||
Applicable margin over reference rate (as a percent) | 1.75% | ||||
First Lien Credit Facility | |||||
Long-term Debt | |||||
Long-term debt | 312,500 | ||||
Amount outstanding | 304,746 | ||||
Principal prepayment | $ 7,754 | ||||
First Lien Credit Facility | Term Loan | |||||
Long-term Debt | |||||
Extinguishment of Debt, Amount | $ 435,000 | ||||
Long-term debt | 312,500 | ||||
Senior Credit Facility | |||||
Long-term Debt | |||||
Extinguishment of Debt, Amount | $ 30,000 | ||||
Long-term debt | 30,000 | ||||
Amount outstanding | 30,000 | ||||
Early termination penalty | $ 2,635 | ||||
Senior Credit Facility | Term Loan | |||||
Long-term Debt | |||||
Long-term debt | $ 30,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Taxes | ||
Income tax (expense) benefit | $ (1,360) | $ 465 |
Income (loss) before income taxes | $ 3,770 | $ 1,317 |
Operating Loss Carryforwards, Period | 5 years |
Income Taxes - Effective Income
Income Taxes - Effective Income Tax Rate Reconciliation (Details) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Effective Income Tax Rate Reconciliation | ||
Tax at federal statutory rate (as a percent) | 21.00% | 21.00% |
State taxes, net (as a percent) | 11.80% | 46.00% |
Valuation allowance (as a percent) | 0.00% | 100.60% |
Permanent items (as a percent) | 3.90% | 47.90% |
Tax benefit CARES Act (as a percent) | 0.00% | (250.90%) |
Other (as a percent) | (0.60%) | 0.10% |
Effective income tax rate (as a percent) | 36.10% | (35.30%) |
Income Taxes - Unrecognized Tax
Income Taxes - Unrecognized Tax Benefits (Details) $ in Thousands | Mar. 31, 2021USD ($) |
Unrecognized Tax Benefits | |
Unrecognized tax benefits expected to be recognized in next twelve months | $ 852 |
Stockholders' Deficit (Details)
Stockholders' Deficit (Details) | Mar. 31, 2021item$ / shares | Dec. 31, 2020$ / shares |
Stockholders' Deficit | ||
Common shares, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 |
Common Stock | ||
Class of Stock | ||
Voting rights per share | item | 1 |
Earnings per Share (Details)
Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Numerator: | ||
Net income from continuing operations | $ 2,410 | $ 1,782 |
Net loss from discontinued operations | (26) | |
Net income | $ 2,410 | $ 1,756 |
Denominator: | ||
Basic weighted-average common shares outstanding (in shares) | 11,230,482 | 11,224,500 |
Dilutive shares | 408,533 | 37,859 |
Diluted weighted-average shares outstanding (in shares) | 11,639,015 | 11,262,359 |
Earnings per share from continuing operations - Basic and Diluted: (in dollar per share) | $ 0.21 | $ 0.16 |
Earnings (loss) per share from discontinued operations - Basic and Diluted: (in dollars per share) | 0 | |
Earnings per share - Basic and Diluted: (in dollars per share) | $ 0.21 | $ 0.16 |
Commitments and Contingencies -
Commitments and Contingencies - Contingencies (Details) | Apr. 20, 2021item | Mar. 31, 2021USD ($) | Dec. 31, 2020USD ($) |
Commitments and Contingencies | |||
Sales tax liability | $ 1,805,000 | $ 1,696,000 | |
Pending Litigation | |||
Commitments and Contingencies | |||
Sales tax liability | 1,805,000 | 1,696,000 | |
Smart Packaging Solutions SA v. CPI Card Group, Inc. | Pending Litigation | |||
Commitments and Contingencies | |||
The number of patents involved in lawsuit | item | 4 | ||
Loss contingency accrual | $ 0 | $ 0 |
Stock Based Compensation - Omni
Stock Based Compensation - Omnibus Incentive Plan (Details) - Omnibus Plan - Stock Options - $ / shares | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | Oct. 31, 2015 | |
Stock based compensation | |||
Number of shares authorized | 1,200,000 | ||
Number of shares available for grant | 185,113 | ||
Stock options granted (in shares) | 0 | 0 | |
Number of shares | |||
Balance at beginning of year (in shares) | 706,372 | ||
Balance at end of year (in shares) | 706,372 | 706,372 | |
Options: Options vested and exercisable | 670,876 | ||
Options: Options vested and expected to vest | 706,372 | ||
Weighted-Average Exercise Price | |||
Balance at beginning of year (in dollars per share) | $ 15.20 | ||
Balance at end of year (in dollars per share) | 15.20 | $ 15.20 | |
Weighted-Average Exercise Price: Options vested and exercisable | 15.92 | ||
Weighted-Average Exercise Price: Options vested and expected to vest | $ 15.20 | ||
Weighted- Average Remaining Contractual Term (in Years) | |||
Balance (in years) | 6 years 2 months 9 days | 6 years 5 months 9 days | |
Weighted-Average Remaining Contractual Term (in Years): Options vested and exercisable | 6 years 1 month 13 days | ||
Weighted-Average Remaining Contractual Term (in Years): Options vested and expected to vest | 6 years 2 months 9 days | ||
Number of unvested options scheduled to vest | |||
Non-Vested Options as of beginning of period | 45,319 | ||
Vested (in shares) | (9,823) | ||
Non-Vested Options as of end of period | 35,496 | 45,319 | |
Weighted-Average Grant Date Fair Value | |||
Non-Vested, beginning balance | $ 1.10 | ||
Vested: Weighted-Average Grant Date Fair Value | 1.79 | ||
Non-Vested, ending balance | $ 0.91 | $ 1.10 | |
2021 | |||
Number of unvested options scheduled to vest | |||
Non-Vested Options as of end of period | 35,496 |
Stock Based Compensation - Rest
Stock Based Compensation - Restricted Stock Units (Details) - USD ($) $ / shares in Units, $ in Thousands | Oct. 02, 2020 | Mar. 31, 2021 | Mar. 31, 2020 |
Restricted stock units | |||
Number of Restricted Stock Units | |||
Granted (in shares) | 180,001 | ||
Weighted Average Grant Date Fair Value | |||
Vesting period | 2 years | ||
Omnibus Plan | |||
Weighted Average Grant Date Fair Value | |||
Unrecognized compensation expense | $ 289 | ||
Period over which compensation expense expected to recognize | 1 year 6 months | ||
Omnibus Plan | Restricted stock units | |||
Number of Restricted Stock Units | |||
Units outstanding at the beginning of the period (in shares) | 180,001 | ||
Units outstanding at the end of the period (in shares) | 180,001 | ||
Weighted Average Grant Date Fair Value | |||
Units outstanding at the beginning of the period (in dollars per shares) | $ 2.12 | ||
Units outstanding at the end of the period (in dollars per shares) | $ 2.12 | ||
Weighted-Average Remaining Amortization Period | 1 year 6 months | ||
Compensation expense | $ 51 | $ 41 | |
Omnibus Plan | Restricted stock units | 2022 | |||
Number of Restricted Stock Units | |||
Granted (in shares) | 180,001 |
Segment Reporting - Revenue and
Segment Reporting - Revenue and EBITDA from Continuing Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Segment Reporting | ||
Revenue | $ 89,092 | $ 73,969 |
EBITDA | 16,968 | 11,645 |
Debit and Credit | ||
Segment Reporting | ||
EBITDA | 22,400 | 14,959 |
Prepaid Debit | ||
Segment Reporting | ||
EBITDA | 7,573 | 4,660 |
Other | ||
Segment Reporting | ||
EBITDA | (13,005) | (7,974) |
Operating Segments | Debit and Credit | ||
Segment Reporting | ||
Revenue | 69,817 | 59,839 |
Operating Segments | Prepaid Debit | ||
Segment Reporting | ||
Revenue | 19,458 | 14,540 |
Intersegment eliminations | ||
Segment Reporting | ||
Revenue | $ (183) | $ (410) |
Segment Reporting - Reconciliat
Segment Reporting - Reconciliation of EBITDA to net income (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Reconciliation of total segment EBITDA to income before taxes | ||
Total segment EBITDA | $ 16,968 | $ 11,645 |
Interest, net | (8,976) | (6,088) |
Income tax (expense) benefit | (1,360) | 465 |
Depreciation and amortization | (4,222) | (4,240) |
Net loss from discontinued operations | (26) | |
Net income | $ 2,410 | $ 1,756 |
Segment Reporting - Balance She
Segment Reporting - Balance Sheet Data (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Segment Reporting | ||
Total assets | $ 246,294 | $ 266,151 |
Debit and Credit | ||
Segment Reporting | ||
Total assets | 200,341 | 215,846 |
Prepaid Debit | ||
Segment Reporting | ||
Total assets | 37,926 | 34,734 |
Other | ||
Segment Reporting | ||
Total assets | $ 8,027 | $ 15,571 |