Cover
Cover - shares | 3 Months Ended | |
Mar. 31, 2024 | May 06, 2024 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2024 | |
Document Transition Report | false | |
Entity File Number | 001-40336 | |
Entity Registrant Name | Karat Packaging Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 83-2237832 | |
Entity Address, Address Line One | 6185 Kimball Avenue | |
Entity Address, City or Town | Chino | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 91708 | |
City Area Code | 626 | |
Local Phone Number | 965-8882 | |
Title of 12(b) Security | Common Stock, $0.001 par value | |
Trading Symbol | KRT | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 19,975,032 | |
Entity Central Index Key | 0001758021 | |
Document Fiscal Year Focus | 2024 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Current assets | ||
Cash and cash equivalents (including $4,327 and $13,566 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | $ 13,144 | $ 23,076 |
Short-term investments (including $7,038 and $0 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | 33,515 | 26,343 |
Accounts receivable, net of allowance for bad debt of $342 and $392 at March 31, 2024 and December 31, 2023, respectively | 30,111 | 27,763 |
Inventories | 79,272 | 71,528 |
Prepaid expenses and other current assets (including $78 and $82 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | 4,492 | 6,219 |
Total current assets | 160,534 | 154,929 |
Property and equipment, net (including $43,882 and $44,185 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | 93,853 | 95,226 |
Deposits | 229 | 1,047 |
Goodwill | 3,510 | 3,510 |
Intangible assets, net | 320 | 327 |
Operating right-of-use assets | 19,360 | 20,739 |
Other non-current assets (including $67 and $53 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | 1,232 | 619 |
Total assets | 279,038 | 276,397 |
Current liabilities | ||
Accrued expenses (including $171 and $591 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | 11,318 | 10,576 |
Customer deposits (including $0 and $116 associated with variable interest entity at March 31, 2024 and December 31, 2023) | 725 | 951 |
Long-term debt, current portion (including $1,139 and $1,122 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | 1,139 | 1,122 |
Operating lease liabilities, current portion | 4,439 | 4,800 |
Other current liabilities (including $2,186 and $1,302 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | 3,875 | 3,200 |
Total current liabilities | 48,190 | 44,401 |
Deferred tax liability | 4,197 | 4,197 |
Long-term debt, net of current portion and debt discount of $187 and $203 at March 31, 2024 and December 31, 2023, respectively (including $48,116 and $48,396 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively, and debt discount of $187 and $203 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | 48,116 | 48,396 |
Operating lease liabilities, net of current portion | 17,754 | 16,687 |
Other non-current liabilities | 389 | 26 |
Total liabilities | 118,646 | 113,707 |
Commitments and Contingencies (Note 14) | ||
Karat Packaging Inc. stockholders’ equity | ||
Preferred stock, $0.001 par value, $10,000,000 shares authorized, no shares issued and outstanding, as of March 31, 2024 and December 31, 2023 | 0 | 0 |
Common stock, $0.001 par value, $100,000,000 shares authorized, $19,995,032 and $19,972,032 shares issued and outstanding, respectively, as of March 31, 2024 and $19,988,482 and $19,965,482 shares issued and outstanding, respectively, as of December 31, 2023 | 20 | 20 |
Additional paid in capital | 87,094 | 86,667 |
Treasury stock, $0.001 par value, $23,000 shares as of both March 31, 2024 and December 31, 2023 | (248) | (248) |
Retained earnings | 67,537 | 67,679 |
Total Karat Packaging Inc. stockholders’ equity | 154,403 | 154,118 |
Noncontrolling interest | 5,989 | 8,572 |
Total stockholders’ equity | 160,392 | 162,690 |
Total liabilities and stockholders’ equity | 279,038 | 276,397 |
VIE, Primary Beneficiary | ||
Current assets | ||
Cash and cash equivalents (including $4,327 and $13,566 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | 4,327 | 13,566 |
Short-term investments (including $7,038 and $0 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | 7,038 | 0 |
Prepaid expenses and other current assets (including $78 and $82 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | 78 | 82 |
Property and equipment, net (including $43,882 and $44,185 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | 43,882 | 44,185 |
Other non-current assets (including $67 and $53 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | 67 | 53 |
Current liabilities | ||
Accounts Payable, Current | 68 | 63 |
Accrued expenses (including $171 and $591 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | 171 | 591 |
Customer deposits (including $0 and $116 associated with variable interest entity at March 31, 2024 and December 31, 2023) | 0 | 116 |
Long-term debt, current portion (including $1,139 and $1,122 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | 1,139 | 1,122 |
Other current liabilities (including $2,186 and $1,302 associated with variable interest entity at March 31, 2024 and December 31, 2023, respectively) | 2,186 | 1,302 |
Nonrelated Party | ||
Current liabilities | ||
Accounts Payable, Current | 21,394 | 18,446 |
Related Party | ||
Current liabilities | ||
Accounts Payable, Current | $ 5,300 | $ 5,306 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Cash and cash equivalents | $ 13,144 | $ 23,076 |
Short-term investments | 33,515 | 26,343 |
Allowance for bad debt | 342 | 392 |
Prepaid expenses and other current assets | 4,492 | 6,219 |
Property and equipment, net | 93,853 | 95,226 |
Other non-current assets | 1,232 | 619 |
Accrued expenses | 11,318 | 10,576 |
Customer deposits | 725 | 951 |
Long-term debt, current portion | 1,139 | 1,122 |
Other current liabilities | 3,875 | 3,200 |
Long-term debt, net of current portion | $ 187 | $ 203 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 19,995,032 | 19,988,482 |
Common stock, shares outstanding (in shares) | 19,972,032 | 19,965,482 |
Treasury stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Treasury stock, shares (in shares) | 23,000 | 23,000 |
VIE, Primary Beneficiary | ||
Cash and cash equivalents | $ 4,327 | $ 13,566 |
Short-term investments | 7,038 | 0 |
Prepaid expenses and other current assets | 78 | 82 |
Property and equipment, net | 43,882 | 44,185 |
Other non-current assets | 67 | 53 |
Accounts payable | 68 | 63 |
Accrued expenses | 171 | 591 |
Customer deposits | 0 | 116 |
Long-term debt, current portion | 1,139 | 1,122 |
Other current liabilities | 2,186 | 1,302 |
Long-term debt, net of current portion | 48,116 | 48,396 |
Debt discount | $ 187 | $ 203 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Income Statement [Abstract] | ||
Net sales | $ 95,613 | $ 95,801 |
Cost of goods sold | 58,011 | 57,657 |
Gross profit | 37,602 | 38,144 |
Operating expenses: | ||
Selling expenses | 10,763 | 8,701 |
General and administrative expenses (including $556 and $671 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | 16,769 | 16,629 |
Impairment expense and loss, net, on disposal of machinery | 1,994 | 82 |
Total operating expenses | 29,526 | 25,412 |
Operating income | 8,076 | 12,732 |
Other income (expenses) | ||
Rental income (including $255 and $247 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | 291 | 247 |
Other income (expense), net | 55 | (208) |
Gain (loss) on foreign currency transactions | 122 | (427) |
Interest income (including $213 and $16 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | 431 | 67 |
Interest expense (including $517 and $406 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | (524) | (407) |
Total other income (expenses), net | 375 | (728) |
Income before provision for income taxes | 8,451 | 12,004 |
Provision for income taxes | 1,975 | 2,818 |
Net income | 6,476 | 9,186 |
Net income attributable to noncontrolling interest | 310 | 181 |
Net income attributable to Karat Packaging Inc. | $ 6,166 | $ 9,005 |
Basic and diluted earnings per share: | ||
Basic (in dollars per share) | $ 0.31 | $ 0.45 |
Diluted (in dollars per share) | $ 0.31 | $ 0.45 |
Weighted average common shares outstanding, basic (in shares) | 19,969,606 | 19,886,585 |
Weighted average common shares outstanding, diluted (in shares) | 20,075,485 | 19,939,923 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
General and administrative expenses | $ 16,769 | $ 16,629 |
Rental income | 291 | 247 |
Interest income | 431 | 67 |
Interest expense | 524 | 407 |
VIE, Primary Beneficiary | ||
General and administrative expenses | 556 | 671 |
Rental income | 255 | 247 |
Interest income | 213 | 16 |
Interest expense | $ 517 | $ 406 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) - USD ($) $ in Thousands | Total | Total Stockholders’ Equity Attributable to Karat Packaging Inc. | Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Noncontrolling Interest |
Balance at the beginning of period (in shares) at Dec. 31, 2022 | 19,908,005 | ||||||
Balance at the beginning of period at Dec. 31, 2022 | $ 151,933 | $ 141,682 | $ 20 | $ (248) | $ 85,792 | $ 56,118 | $ 10,251 |
Treasury stock, balance at the beginning of period (in shares) at Dec. 31, 2022 | (23,000) | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Issuance of common stock upon vesting of restricted stock units (in shares) | 2,452 | ||||||
Issuance of common stock upon vesting of restricted stock units | (14) | (14) | (14) | ||||
Stock-based compensation | 277 | 277 | 277 | ||||
Net income | 9,186 | 9,005 | 9,005 | 181 | |||
Balance at the end of period (in shares) at Mar. 31, 2023 | 19,910,457 | ||||||
Balance at the end of period at Mar. 31, 2023 | $ 161,382 | 150,950 | $ 20 | $ (248) | 86,055 | 65,123 | 10,432 |
Treasury stock, balance at the end of period (in shares) at Mar. 31, 2023 | (23,000) | ||||||
Balance at the beginning of period (in shares) at Dec. 31, 2023 | 19,965,482 | 19,988,482 | |||||
Balance at the beginning of period at Dec. 31, 2023 | $ 162,690 | 154,118 | $ 20 | $ (248) | 86,667 | 67,679 | 8,572 |
Treasury stock, balance at the beginning of period (in shares) at Dec. 31, 2023 | (23,000) | (23,000) | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Cash dividends declared | $ (5,992) | (5,992) | (5,992) | ||||
Issuance of common stock upon vesting of restricted stock units (in shares) | 3,750 | ||||||
Stock-based compensation | $ 375 | 375 | 375 | ||||
Exercise of common stock options (in shares) | 2,800 | 2,800 | |||||
Exercise of stock options | $ 52 | 52 | 52 | ||||
Global Wells noncontrolling membership interest redemption | (3,209) | (316) | (316) | (2,893) | |||
Net income | $ 6,476 | 6,166 | 6,166 | 310 | |||
Balance at the end of period (in shares) at Mar. 31, 2024 | 19,972,032 | 19,995,032 | |||||
Balance at the end of period at Mar. 31, 2024 | $ 160,392 | $ 154,403 | $ 20 | $ (248) | $ 87,094 | $ 67,537 | $ 5,989 |
Treasury stock, balance at the end of period (in shares) at Mar. 31, 2024 | (23,000) | (23,000) |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (Parenthetical) | 3 Months Ended |
Mar. 31, 2024 $ / shares | |
Statement of Stockholders' Equity [Abstract] | |
Dividends paid to stockholders (in dollars per share) | $ 0.30 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Cash flows from operating activities | ||
Net income | $ 6,476 | $ 9,186 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization (including $303 and $304 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | 2,629 | 2,633 |
Adjustments to allowance for bad debt | (12) | (652) |
Adjustments to inventory reserve | 40 | 288 |
Write-off of inventory | 293 | 216 |
Impairment of operating right-of-use asset | 1,993 | 0 |
Loss, net, on disposal of machinery and equipment | 1 | 82 |
Amortization of loan fees (including $15 and $16 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | 23 | 17 |
Accrued interest on certificates of deposit (including $38 and $0 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | (126) | 0 |
Stock-based compensation | 375 | 277 |
Amortization of operating right-of-use assets | 1,466 | 997 |
(Increase) decrease in operating assets | ||
Accounts receivable (including $0 and $7 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | (2,336) | (2,409) |
Inventories | (8,077) | (207) |
Prepaid expenses and other current assets (including $4 and $52 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | 1,727 | 1,023 |
Other non-current assets (including $14 and $88 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | (190) | 9 |
Increase (decrease) in operating liabilities | ||
Accounts payable (including $5 and $1 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | 3,367 | (1,978) |
Accrued expenses (including $420 and $415 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | 742 | (1,127) |
Related party payable | (6) | 4,967 |
Income taxes payable | 0 | 1,782 |
Customer deposits (including $0 and $17 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | (507) | (326) |
Operating lease liabilities | (1,474) | (1,067) |
Other non-current liabilities | 155 | 474 |
Net cash provided by operating activities | 6,559 | 14,185 |
Cash flows from investing activities | ||
Purchases of property and equipment | (163) | (1,042) |
Proceeds on disposal of property and equipment | 23 | 25 |
Deposits paid for joint venture investment | 0 | (2,900) |
Deposits refunded from joint venture investment | 0 | 950 |
Deposits paid for property and equipment | (761) | (1,718) |
Purchases of short-term investments (including $7,000 and $0 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | (12,190) | (10,000) |
Redemption of short-term investments | 5,144 | 0 |
Net cash used in investing activities | (7,947) | (14,685) |
Cash flows from financing activities | ||
Proceeds from long-term debt (including $0 and $8,000 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | 0 | 8,000 |
Payments for lender fees | 0 | (61) |
Payments on long-term debt (including $278 and $241 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | (278) | (241) |
Tax withholding on vesting of restricted stock units | 0 | (14) |
Proceeds from exercise of common stock options | 52 | 0 |
Dividends paid to shareholders | (5,992) | 0 |
Payment for Global Wells noncontrolling membership interest redemption (including $2,010 and $0 associated with variable interest entity for the three months ended March 31, 2024 and 2023, respectively) | (2,326) | 0 |
Net cash (used in) provided by financing activities | (8,544) | 7,684 |
Net (decrease) increase in cash and cash equivalents | (9,932) | 7,184 |
Cash and cash equivalents | ||
Beginning of year | 23,076 | 16,041 |
End of year | 13,144 | 23,225 |
Supplemental disclosures of non-cash investing and financing activities: | ||
Transfers from deposit to property and equipment | 1,148 | 4,381 |
Non-cash purchases of property and equipment | 159 | 1,159 |
Supplemental disclosures of cash flow information: | ||
Income tax refund | 13 | 0 |
Cash paid for interest | $ 502 | $ 421 |
CONDENSED CONSOLIDATED STATEM_6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Depreciation and amortization | $ 2,629 | $ 2,633 |
Amortization of loan fees | (23) | (17) |
Accrued interest on certificates of deposit | 126 | 0 |
Accounts receivable | 2,336 | 2,409 |
Prepaid expenses and other current assets | (1,727) | (1,023) |
Other assets | 190 | (9) |
Accounts payable | 3,367 | (1,978) |
Accrued expenses | 742 | (1,127) |
Customer deposits | (507) | (326) |
Purchases of short-term investments | 12,190 | 10,000 |
Proceeds from long-term debt | 0 | 8,000 |
Payments on long-term debt | 278 | 241 |
Payment for Global Wells noncontrolling membership interest redemption | 2,326 | 0 |
VIE, Primary Beneficiary | ||
Depreciation and amortization | 303 | 304 |
Amortization of loan fees | 15 | 16 |
Accrued interest on certificates of deposit | 38 | 0 |
Accounts receivable | 0 | 7 |
Prepaid expenses and other current assets | 4 | 52 |
Other assets | (14) | 88 |
Accounts payable | 5 | (1) |
Accrued expenses | (420) | (415) |
Customer deposits | 0 | 17 |
Purchases of short-term investments | 7,000 | 0 |
Proceeds from long-term debt | 0 | 8,000 |
Payments on long-term debt | 278 | 241 |
Payment for Global Wells noncontrolling membership interest redemption | $ 2,010 | $ 0 |
Nature of Operations
Nature of Operations | 3 Months Ended |
Mar. 31, 2024 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | Nature of Operations Lollicup USA Inc. (“Lollicup”) was incorporated on January 21, 2001 under the laws of the State of California as an S-corporation. Effective January 1, 2018, Lollicup elected to convert from an S-Corporation to a C-Corporation. Karat Packaging Inc. (“Karat Packaging”) was incorporated on September 26, 2018 as a Delaware corporation and became the holding company for Lollicup (collectively, the “Company”) through a share exchange with the shareholders of Lollicup. On April 15, 2021, the Company completed an initial public offering of shares of its common stock. The shares are listed on the NASDAQ Global Market under the symbol "KRT". The Company is a manufacturer and distributor of single-use disposable products used in a variety of restaurant and foodservice settings. The Company supplies a wide range of products such as food containers, tableware, cups, lids, cutlery, and straws. The products are available in plastic, paper, bagasse, biopolymer-based, and other compostable forms. In addition to manufacturing and distribution, the Company offers customized solutions to customers, including new product development, design, printing, and logistics services, and distributes certain specialty food and beverages products, such as syrups, boba, and coffee drinks. The Company supplies products to national and regional distributors, supermarkets, airlines, restaurants, and convenience stores as well as to smaller chains and businesses including coffee houses, bubble tea cafes, pizza parlors, and frozen yogurt shops. The Company currently operates manufacturing facilities and distribution centers in Chino, California; Rockwall, Texas, and Kapolei, Hawaii. In addition, the Company operates seven other distribution centers located in Puyallup, Washington; Summerville, South Carolina; Branchburg, New Jersey; Kapolei, Hawaii; Aurora, Illinois; and Sugar Land, Texas. In February 2024, the Company entered into a lease agreement for an additional distribution center in Mesa, Arizona and is currently in the process of setting up this location to be fully operational by the second quarter of 2024. During the three months ended March 31, 2024, the Company subleased its City of Industry, California warehouse, resulting in a non-cash impairment of the right-of-use ("ROU") asset. See Note 11 — Leases for further discussion. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2024 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles as promulgated in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all the information and footnotes required by US GAAP for complete financial statements. The financial information as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 is unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2024. The condensed consolidated balance sheet at December 31, 2023 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by US GAAP for complete financial statements. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2023, as included in the Company's Annual Report on Form 10-K filed on March 15, 2024. Principles of Consolidation: The condensed consolidated financial statements include the accounts of Karat Packaging and its wholly-owned and controlled operating subsidiaries: Lollicup, Lollicup Franchising, LLC (“Lollicup Franchising”), and Global Wells, a variable interest entity wherein the Company is the primary beneficiary. All intercompany accounts and transactions have been eliminated. Estimates and Assumptions: Management uses estimates and assumptions in preparing financial statements in accordance with US GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ materially from the estimates that were assumed in preparing the condensed consolidated financial statements. Reporting Segments: The Company manages and evaluates its operations in one reportable segment. This segment consists of manufacturing and distribution of a broad portfolio of single-use products that are used to serve food and beverages and are available in plastic, paper, bagasse, biopolymer-based, and other compostable forms. It also consists of the distribution of certain specialty food and beverage products, such as syrup, boba, and coffee drinks, as well as restaurant and warehouse supplies. The Company’s long-lived assets are all located in the United States, and its revenues are almost entirely generated in the United States. Variable Interest Entities: The Company has a variable interest in Global Wells located in Rockwall, Texas. In 2017, Lollicup along with three other unrelated parties formed Global Wells, of which Lollicup received a 13.5% ownership interest and a 25% voting intere st. On February 29, 2024, Global Wells and one of its members (the "Selling Member") entered into a membership interest redemption agreement, under which the Selling Member sold and Global Wells purchased and redeemed all of the Selling Member's 10.8% ownership interest in Global Wells for a total cash consideration of $3,208,000, net of tax withholding. Subsequent to the redemption, the ownership interests and voting power of the remaining members of Global Wells were adjusted proportionally, with Lollicup's ownership interest increasing to 15.1% and voting interest increasing to 33.3%. On February 16, 2024, Global Wells made an advance cash payment of $2,325,000 to the Selling Member, with the remaining balance expected to be paid before December 31, 2024. The purpose of Global Wells is to own, construct, and manage warehouses and manufacturing facilities. Global Wells’ operating agreement may require its members to make additional contributions upon the unanimous decision of the members or when the cash in Global Wells’ bank account falls below $50,000. In the event that a member is unable to make an additional capital contribution, the other members will be required to make contributions to offset the amount that member cannot contribute, up to $25,000. Global Wells was determined to be a variable interest entity in accordance with ASC Topic 810, Consolidations , however, at the time the investment was made, it was determined that Lollicup was not the primary beneficiary. In 2018, Lollicup entered into an operating lease with Global Wells (the “Texas Lease”). In 2020, the Company entered into another operating lease with Global Wells (the “New Jersey Lease”). Upon entering into the Texas Lease with Lollicup on March 23, 2018, it was determined that Lollicup holds current and potential rights that give it the power to direct activities of Global Wells that most significantly impact Global Wells’ economic performance, the ability to receive significant benefits, and the obligation to absorb potentially significant losses, resulting in Lollicup having a controlling financial interest in Global Wells. As a result, Lollicup was deemed to be the primary beneficiary of Global Wells and has consolidated Global Wells under the risk and reward model of ASC 810, for the period from March 23, 2018. The monthly lease payments for both the Texas Lease and New Jersey Lease are eliminated upon consolidation. Assets recognized as a result of consolidating Global Wells do not represent additional assets that could be used to satisfy claims against the Company’s general assets. Conversely, liabilities recognized as a result of consolidating Global Wells do not represent additional claims of the Company’s general assets; rather they represent claims against the specific assets of Global Wells. See Note 8 — Long-Term Debt for a description of the two term loans that Global Wells had with financial institutions as of March 31, 2024 . Noncontrolling Interests: The Company consolidates its variable interest entity, Global Wells, in which the Company is the primary beneficiary. Noncontrolling interests represent third-party equity ownership interests in Global Wells. The Company recognizes noncontrolling interests as equity in the condensed consolidated financial statements separate from the Company’s stockholders’ equity. The amount of net income attributable to noncontrolling interests is disclosed in the condensed consolidated statements of income. Tax payments made by the Company on behalf of the noncontrolling interests are deducted from their equity balances, as shown in the condensed consolidated statements of stockholders’ equity. Revenue Recognition: The Company generates revenues from product sales to customers that include national and regional chains, distributors, small local restaurants, and those that purchase for individual consumption primarily through our online stores. The Company considers revenue disaggregated by customer type to most accurately reflect the nature and uncertainty of its revenue and cash flows that are affected by economic factors. For the three months ended March 31, 2024 and 2023, net sales disaggregated by customer type consist of the amounts shown below. Three Months Ended March 31, 2024 2023 (in thousands) National and regional chains $ 21,470 $ 21,368 Distributors 52,827 54,647 Online 14,879 13,655 Retail 6,437 6,131 $ 95,613 $ 95,801 • National and regional chains revenue: National and regional chains revenue is derived from chain restaurants and businesses with locations across multiple states. Revenue from transactions with national and regional chains is recognized at a point in time upon transfer of control of promised products to customers. Transfer of control typically occurs when the title and risk of loss passes to the customer. • Distributors revenue: Distributors revenues are derived from national and regional distributors across the U.S. that purchase the Company’s products for resale and distribution to other businesses such as restaurants, supermarkets, offices, and schools. Revenue from distributions is recognized at a point in time upon transfer of control of promised products to customers. Transfer of control typically occurs when the title and risk of loss passes to the customer. • Online revenue: Online revenue is derived from the Company's online storefront on www.lollicupstore.com, and other e-commerce platforms including Amazon, Walmart, eBay, and TikTok with customers largely consisting of small businesses such as small restaurants, coffee houses, bubble tea cafes, pizza parlors, and frozen yogurt shops . Revenue from online transactions is recognized at a point in time upon transfer of control of promised products to customers. Transfer of control typically occurs when the title and risk of loss passes to the customer. For online sales on third-party e-commerce platforms, the Company is the principal in the three-party arrangement and control of the products remains with the Company at all times until transferring to the end customer or upon return from the end customer. Online platform fees are recognized as selling expenses. • Retail revenue: Retail revenue is derived primarily from regional and local restaurants, coffee houses, bubble tea cafes, pizza parlors, and frozen yogurt shops. Revenue from retail transactions is recognized at a point in time upon transfer of control of promised products to customers. Transfer of control typically occurs when the title and risk of loss passes to the customer. For all of the Company's revenue streams, shipping terms generally indicate when the title and risk of loss have passed, which is generally when products are delivered to customers. During the three months ended March 31, 2024, the Company's revenue and cost of goods sold were understated by approximately $0.7 million and $0.4 million, respectively, for products that had been shipped and recorded as revenue and costs of goods sold in 2023 and not delivered until 2024 . In the prior periods, the Company had assessed the impact of the lag between shipping and delivery to the previously-issued quarterly and annual financial statements, and concluded that the impact on its overall financial statements, including net sales, cost of goods sold, accounts receivable, inventories and customer deposits was immaterial. The Company’s contract liabilities consist primarily of rebates, sales incentives, consideration payable to customers for cooperative advertising, and customer deposits. As of March 31, 2024 and December 31, 2023, the rebates, sales incentives and cooperative advertising were not significant to the financial statements. Customer deposits are included in the current liabilities in the consolidated balance sheets. During the three months ended March 31, 2024 and 2023, the Company recognized revenue of $739,000 and $990,000, respectively, related to customer deposits received as of the beginning of each respective period. Out of Period Adjustment: As previously disclosed in the Company's 2023 Form 10-K, during the quarter ended December 31, 2023, the Company also recorded certain misclassification adjustments for the full year 2023 amounts within the consolidated statement of income with no impact on net income. Those misclassification adjustments were: (1) adjusting online sales third-party platform fees from net sales to selling expenses, (ii) production expenses primarily related to machinery repair and maintenance from general and administrative expenses to cost of goods sold, and (iii) payroll and employee-related costs for the Company's sales team within operating expenses from general and administrative expenses to selling expenses. These misclassification adjustments in the quarter ended December 31, 2023 had no effect on totals for assets and liabilities, shareholders' equity, cash flows or net income for either the quarter ended December 31, 2023 or any of the previously reported quarters in 2023. For the three months ended March 31, 2024, the properly classified amounts related to the online sales platform fees, production expenses and payroll and employee-related costs for the sales team were $2.2 million, $0.6 million and $0.8 million, respectively. Fair Value Measurements: The Company has financial instruments classified within the fair value hierarchy, which consist of the following: • At both March 31, 2024 and December 31, 2023, the Company had money market accounts and certificates of deposit classified as Level 1 and Level 2, respectively, within the fair value hierarchy. The short-term investments comprise of certificates of deposits with an original maturity of longer than 90 days and are reported at their carrying value as current assets on the condensed consolidated balance sheet. The carrying value of these short-term investments approximates fair value as they were purchased near or on March 31, 2024. The following table summarizes the Company’s fair value measurements by level at March 31, 2024 for the assets measured at fair value on a recurring basis: Level 1 Level 2 Level 3 (in thousands) Cash equivalents $ 5,841 $ — $ — Short-term investments — 33,515 — Fair value, March 31, 2024 $ 5,841 $ 33,515 $ — The following table summarize the Company’s fair value measurements by level at December 31, 2023 for the assets measured at fair value on a recurring basis: Level 1 Level 2 Level 3 (in thousands) Cash equivalents $ 5,956 $ 10,000 $ — Short-term investments — 26,343 — Fair value, December 31, 2023 $ 5,956 $ 36,343 $ — The Company has not elected the fair value option as presented by ASC 825, Fair Value Option for Financial Assets and Financial Liabilities , for the financial assets and liabilities that are not otherwise required to be carried at fair value. Under ASC 820, material financial assets and liabilities not carried at fair value, including accounts receivable, accounts payable, related-party payable, accrued expenses, other payables and borrowings under promissory notes and Line of Credit (as defined below), are reported at their carrying value. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, related-party payable, accrued expenses, and other payables at March 31, 2024 and December 31, 2023, approximated fair value because of the short maturity of these instruments. The following is a summary of the carrying amount and estimated fair value of the $23,000,000 and $28,700,000 term loans that mature in September 2026 and July 2027, respectively (the "2026 Term Loan" and "2027 Term Loan," respectively): March 31, 2024 Carrying Amount Estimated Fair Value (in thousands) 2026 Term Loan $ 21,339 $ 19,771 2027 Term Loan 27,916 27,310 $ 49,255 $ 47,081 December 31, 2023 Carrying Amount Estimated Fair Value (in thousands) 2026 Term Loan $ 21,490 $ 19,999 2027 Term Loan 28,028 27,810 $ 49,518 $ 47,809 The fair value of these financial instruments was determined using Level 2 inputs. Certain long-lived non-financial assets and liabilities may be required to be measured at fair value on a nonrecurring basis in certain circumstances, including when there is evidence of impairment. These non-financial assets and liabilities may include assets acquired in a business combination or long-lived assets that are determined to be impaired. During the three months ended March 31, 2024, the Company recorded an impairment against its operating ROU assets of $1,993,000 . See Note 11 — Leases for further information about this impairment charge. With the exception of the ROU impairment, the Company did not have any non-financial assets or liabilities that had been measured at fair value subsequent to initial recognition as of March 31, 2024 and December 31, 2023. New and Recently Adopted Accounting Standards: The Company is an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), and as such, the Company has elected to take advantage of certain reduced public company reporting requirements. In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards, as a result, the Company will adopt new or revised accounting standards on the relevant dates in which adoption of such standards is required for private companies. In March 2023, the FASB issued updated ASU 2023-01 Lease (Topic 842) : Common Control Arrangements . The new guidance amends ASC 842 to require all lessees, including public business entities, to amortize leasehold improvements associated with common control leases over their useful life to the common control group. The Company adopted this new standard on January 1, 2024, by prospectively amortizing all new leasehold improvements recognized on or after the adoption date. The adoption of this new standard did not have a material impact on the Company's financial statements. In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . The new guidance requires enhanced disclosure of significant expenses that are regularly reported to the chief operating decision maker and the nature of segment expense information used to manage operations. The new guidance is effective for all public companies for annual reporting periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company will adopt the new standard in annual reporting period beginning after December 15, 2023 and is currently evaluating the impacts of the new guidance on its disclosure within the financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) : Improvements to Income Tax Disclosures . The new guidance requires disaggregated information about the effective tax rate reconciliation and additional information on taxes paid that meet a quantitative threshold. The new guidance is effective for public companies for annual reporting periods beginning after December 15, 2024, and for non-public companies for annual reporting periods beginning after December 15, 2025, with early adoption permitted for both. The Company will adopt the new standard in annual reporting period beginning after December 15, 2025, and is currently evaluating the impacts of the new guidance on its disclosures within the consolidated financial statements. |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2024 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories Inventories consist of the following: March 31, 2024 December 31, 2023 (in thousands) Raw materials $ 7,288 $ 9,116 Semi-finished goods 1,596 1,343 Finished goods 70,778 61,419 Subtotal 79,662 71,878 Less: inventory reserve (390) (350) Total inventories $ 79,272 $ 71,528 |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2024 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment March 31, 2024 December 31, 2023 (in thousands) Machinery and equipment $ 67,605 $ 67,321 Leasehold improvements 19,085 19,085 Vehicles 7,199 7,038 Furniture and fixtures 1,015 1,015 Building 38,779 38,503 Land 11,907 11,907 Computer hardware and software 93 93 Construction in progress 505 — 146,188 144,962 Less: accumulated depreciation and amortization (52,335) (49,736) Total property and equipment, net $ 93,853 $ 95,226 Depreciation and amortization expense is reported within general and administrative expense except for depreciation and amortization expense related to manufacturing facilities and equipment, which is included in cost of goods sold on the accompanying condensed consolidated statements of income. Depreciation and amortization expense on property and equipment reported within general and administrative expense was $1,013,000 and $1,120,000 for the three months ended March 31, 2024 and 2023, respectively. Depreciation and amortization expense on property and equipment reported within cost of goods sold was $1,609,000 and $1,506,000 for the three months ended March 31, 2024 and 2023, respectively. |
Goodwill
Goodwill | 3 Months Ended |
Mar. 31, 2024 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Goodwill The following table summarizes the activity in the Company's goodwill from December 31, 2023 to March 31, 2024: (in thousands) Balance at December 31, 2023 $ 3,510 Goodwill acquired — Balance at March 31, 2024 $ 3,510 |
Line of Credit
Line of Credit | 3 Months Ended |
Mar. 31, 2024 | |
Debt Disclosure [Abstract] | |
Line of Credit | Line of Credit Pursuant to the terms of the Business Loan Agreement, dated February 23, 2018, between Lollicup, as borrower, and Hanmi Bank, as lender (as amended, the “Loan Agreement”), the Company has a line of credit with a maximum borrowing capacity of $40,000,000 (the “Line of Credit”) secured by the Company’s assets. The Company is not required to pay a commitment (unused) fee on the undrawn portion of the Line of Credit and interest is payable monthly. The Company is required to comply with certain financial covenants, including a minimum current ratio, minimum debt to earnings before interest, taxes, depreciation and amortization ("EBITDA") ratio and a minimum fixed charge coverage ratio. On March 14, 2023, the Company amended the Line of Credit. Prior to March 14, 2023, interest accrued at the annual rate of prime less 0.25% with a minimum floor of 3.25%. The amendment on March 14, 2023, among other things, (1) extended the maturity date to March 14, 2025, and (2) revised the interest on any Line of Credit borrowings to an annual rate of one month term Secured Overnight Financing Rate ("SOFR") plus 2.50%, with a SOFR floor of 1.0%. The Line of Credit also includes a standby letter of credit sublimit, which was amended and increased to $5,000,000 from $2,000,000 on June 20, 2023. The Company had no borrowings outstanding under the Line of Credit as of both March 31, 2024 and December 31, 2023. The amount issued under the standby letter of credit was $3,813,000 and $3,766,000 as of March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024, the maximum remaining amount that could be borrowed under the Line of Credit was $36,187,000. As of both March 31, 2024 and December 31, 2023, the Company was in compliance with the financial covenants under the Line of Credit. Long-term debt consists of the following: March 31, 2024 December 31, 2023 (in thousands) The 2026 Term Loan, with an initial balance of $16,115,000 and an option to request for additional advances up to a maximum of $6,885,000 through September 2022, which the Company exercised in February 2022. Interest accrues at a fixed rate of 3.5% per annum. Principal and interest payments of $116,000 are due monthly throughout the term of the loan, with the remaining principal balance due at maturity. The loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by Global Wells and one of the Company’s stockholders. In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt service coverage ratio. $ 21,398 $ 21,555 The 2027 Term Loan, with an initial balance of $20,700,000 and an option to request for additional advances up to a maximum of $8,000,000 through June 30, 2023, which the Company exercised in March 2023. Interest accrues at a fixed rate of 4.375% per annum. Prior to August 1, 2023, principal and interest payments of $104,000 are due monthly. Beginning August 1, 2023, monthly principal and interest payments increased to $144,000 for the remainder of the loan term, with the remaining principal balance due at maturity. The loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by one of the Company’s stockholders. In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt coverage ratio. $ 28,044 $ 28,166 Long-term debt 49,442 49,721 Less: unamortized loan fees (187) (203) Less: current portion (1,139) (1,122) Long-term debt, net of current portion $ 48,116 $ 48,396 At March 31, 2024, future maturities are: (in thousands) 2024 (remainder) $ 843 2025 1,179 2026 20,798 2027 26,622 $ 49,442 The Company was in compliance with all of its financial covenants as of both March 31, 2024 and December 31, 2023. |
Accrued Expenses
Accrued Expenses | 3 Months Ended |
Mar. 31, 2024 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Accrued Expenses The following table summarizes information related to accrued expense liabilities: March 31, 2024 December 31, 2023 (in thousands) Accrued miscellaneous expenses $ 2,328 $ 1,271 Accrued payroll 964 1,685 Accrued ocean freight and other import costs 3,730 3,513 Accrued sale and use taxes 1,006 1,006 Accrued professional services fees 944 845 Accrued vacation and sick pay 984 619 Accrued property tax 314 552 Accrued shipping expenses 603 525 Accrued sales discount expense 372 487 Accrued interest expense 73 73 Total accrued expenses $ 11,318 $ 10,576 |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2024 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Line of Credit Pursuant to the terms of the Business Loan Agreement, dated February 23, 2018, between Lollicup, as borrower, and Hanmi Bank, as lender (as amended, the “Loan Agreement”), the Company has a line of credit with a maximum borrowing capacity of $40,000,000 (the “Line of Credit”) secured by the Company’s assets. The Company is not required to pay a commitment (unused) fee on the undrawn portion of the Line of Credit and interest is payable monthly. The Company is required to comply with certain financial covenants, including a minimum current ratio, minimum debt to earnings before interest, taxes, depreciation and amortization ("EBITDA") ratio and a minimum fixed charge coverage ratio. On March 14, 2023, the Company amended the Line of Credit. Prior to March 14, 2023, interest accrued at the annual rate of prime less 0.25% with a minimum floor of 3.25%. The amendment on March 14, 2023, among other things, (1) extended the maturity date to March 14, 2025, and (2) revised the interest on any Line of Credit borrowings to an annual rate of one month term Secured Overnight Financing Rate ("SOFR") plus 2.50%, with a SOFR floor of 1.0%. The Line of Credit also includes a standby letter of credit sublimit, which was amended and increased to $5,000,000 from $2,000,000 on June 20, 2023. The Company had no borrowings outstanding under the Line of Credit as of both March 31, 2024 and December 31, 2023. The amount issued under the standby letter of credit was $3,813,000 and $3,766,000 as of March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024, the maximum remaining amount that could be borrowed under the Line of Credit was $36,187,000. As of both March 31, 2024 and December 31, 2023, the Company was in compliance with the financial covenants under the Line of Credit. Long-term debt consists of the following: March 31, 2024 December 31, 2023 (in thousands) The 2026 Term Loan, with an initial balance of $16,115,000 and an option to request for additional advances up to a maximum of $6,885,000 through September 2022, which the Company exercised in February 2022. Interest accrues at a fixed rate of 3.5% per annum. Principal and interest payments of $116,000 are due monthly throughout the term of the loan, with the remaining principal balance due at maturity. The loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by Global Wells and one of the Company’s stockholders. In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt service coverage ratio. $ 21,398 $ 21,555 The 2027 Term Loan, with an initial balance of $20,700,000 and an option to request for additional advances up to a maximum of $8,000,000 through June 30, 2023, which the Company exercised in March 2023. Interest accrues at a fixed rate of 4.375% per annum. Prior to August 1, 2023, principal and interest payments of $104,000 are due monthly. Beginning August 1, 2023, monthly principal and interest payments increased to $144,000 for the remainder of the loan term, with the remaining principal balance due at maturity. The loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by one of the Company’s stockholders. In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt coverage ratio. $ 28,044 $ 28,166 Long-term debt 49,442 49,721 Less: unamortized loan fees (187) (203) Less: current portion (1,139) (1,122) Long-term debt, net of current portion $ 48,116 $ 48,396 At March 31, 2024, future maturities are: (in thousands) 2024 (remainder) $ 843 2025 1,179 2026 20,798 2027 26,622 $ 49,442 The Company was in compliance with all of its financial covenants as of both March 31, 2024 and December 31, 2023. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2024 | |
Share-Based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation In January 2019, the Company’s board of directors adopted the 2019 Stock Incentive Plan (the “Plan”). A total of 2,000,000 shares of common stock were authorized and reserved for issuance under the Plan in the form of incentive or nonqualified stock options and stock awards. A committee appointed by the board of directors of the Company determines the terms and conditions of each grant under the Plan. Employees, directors, and consultants are eligible to receive stock options and stock awards under the Plan. The aggregate number of shares available under the Plan and the number of shares subject to outstanding options may be increased or decreased by the Plan administrator to reflect any changes in the outstanding common stock by reason of any recapitalization, reorganization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock or similar transaction. The exercise price of incentive stock options may not be less than the fair market value of the common stock at the date of grant. The exercise price of incentive stock options granted to individuals that own greater than 10% of the voting stock may not be less than 110% of the fair market value of the common stock at the date of grant. The term of each incentive and nonqualified option is based upon conditions as determined by the option agreement; however, the term can be no more than ten years from the date of the grant. In the case of an incentive stock option granted to an optionee who, at the time the option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any parent or subsidiary, the term of the option will be a shorter term as provided in the option agreement, but not more than five years from the date of the grant. As of March 31, 2024, a total of 1,293,017 shares of common stock were available for further award grants under the Plan. For the three months ended March 31, 2024 and 2023, the Company recognized a total of $375,000 and $277,000 in stock-based compensation expense, respectively. The Company recognizes stock-based compensation over the vesting period, which generally ranges from two (2) to three (3) years for both the restricted stock units and stock options. Stock Options A summary of the Company’s stock option activity under the Plan for the period ended March 31, 2024 is as follows: Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contract Life (In Years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2023 386,473 $ 18.58 7.8 $ 2,424 Exercised (2,800) $ 18.86 Forfeited (33,333) $ 18.86 Outstanding at March 31, 2024 350,340 $ 18.55 7.6 $ 3,525 Vested and expected to vest at March 31, 2024 350,340 $ 18.55 7.6 $ 3,525 Exercisable at March 31, 2024 230,340 $ 18.55 7.6 $ 2,316 There were no stock options granted during the three months ended March 31, 2024. At March 31, 2024, total remaining stock-based compensation cost for unvested stock options under the Plan was approximately $123,000. The cost is expected to be recognized over a weighted-average period of 0.6 years. The aggregate intrinsic value is calculated by subtracting the exercise price of the option from the closing price of the Company’s common stock on March 29, 2024, the last trading day prior to March 31, 2024, multiplied by the number of shares per each option. Restricted Stock Units A summary of the Company’s unvested restricted stock units activity under the Plan for the period ended March 31, 2024 is as follows: Number of Shares Outstanding Weighted Average Grant Date Fair Value Unvested at December 31, 2023 5,346 16.71 Granted 91,004 29.38 Vested (3,750) 16.53 Unvested at March 31, 2024 92,600 29.17 On March 12, 2024, the Company's Compensation Committee of the Board of Directors approved a grant totaling $91,000 restricted stock units to certain key employees. The grant date fair value of these restricted stock units was $2,674,000. The restricted stock units vest at various times between May 2024 and May 2026. At March 31, 2024, total remaining stock-based compensation cost for unvested restricted stock units was approximately $2,375,000. The cost is expected to be recognized over a weighted-average period of 1.3 years. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2024 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share (a) Basic Basic earnings per share is calculated by dividing the net income attributable to equity holders of the Company for the period by the weighted average number of common shares outstanding during the period. Three Months Ended March 31, 2024 2023 (in thousands, except per share data) Net income attributable to Karat Packaging Inc. $ 6,166 $ 9,005 Weighted average shares 19,970 19,887 Basic earnings per share $ 0.31 $ 0.45 (b) Diluted Diluted earnings per share is calculated based upon the weighted average number of common shares and common equivalent shares outstanding during the period, calculated using the treasury stock method. Under the treasury stock method, exercise proceeds include the amount the employee must pay for exercising stock options and the amount of compensation cost related to stock awards for future services that the Company has not yet recognized. Common equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect. The following table summarizes the calculation of diluted earnings per share: Three Months Ended March 31, 2024 2023 (in thousands, except per share data) Net income attributable to Karat Packaging Inc. $ 6,166 $ 9,005 Weighted average shares 19,970 19,887 Dilutive shares Stock options and restricted stock units 105 53 Total dilutive shares 20,075 19,940 Diluted earnings per share $ 0.31 $ 0.45 |
Leases
Leases | 3 Months Ended |
Mar. 31, 2024 | |
Leases [Abstract] | |
Leases | Leases The Company primarily leases manufacturing facilities, distribution centers, and office spaces with lease terms expiring through 2031. The Company recognized the following lease costs in the accompanying condensed consolidated statement of income: Three Months Ended March 31, 2024 2023 (in thousands) Operating lease expense $ 1,820 $ 1,333 Short-term lease expense 9 13 Variable lease expense 373 247 Total lease expense $ 2,202 $ 1,593 For the three months ended March 31, 2024 and 2023, rent expense included in operating expenses was $1,931,000 and $1,365,000, respectively, and rent expense included in cost of goods sold was $271,000 and $228,000, respectively. The following table presents supplemental information related to operating leases: March 31, 2024 December 31, 2023 Weighted average remaining lease term 4.49 years 4.51 years Weighted average discount rate 6.5 % 6.2 % Three Months Ended March 31, 2024 2023 (in thousands) Cash paid for amounts included in measurement of lease obligations: Operating cash flows from operating leases $ 1,829 $ 1,363 As of March 31, 2024, future lease payments under operating leases were as follows: (in thousands) 2024 (remainder) $ 4,319 2025 5,621 2026 5,802 2027 4,537 2028 3,139 Thereafter 2,372 Total future lease payments 25,790 Less: imputed interest (3,597) Total lease liability balance $ 22,193 During the three months ended March 31, 2024, the Company recorded a non-cash impairment of a ROU asset of $1,993,000 resulting from the sublease of its City of Industry warehouse in California. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2024 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions On April 6, 2022, the Company entered into a joint venture agreement (the "JV Agreement") to establish a new corporation, Bio Earth, to build a bagasse factory in Taiwan. The JV Agreement stipulated an investment by the Company of approximately $6,500,000 for a 49% interest in Bio Earth. During the year ended December 31, 2022, the Company made payments of $5,876,000 and received a refund of $1,876,000 under the JV agreement. During the three months ended March 31, 2023, the Company made additional payments of $2,900,000 and received a refund of $900,000 under the JV Agreement. On May 8 2023, the Company entered into a Share Transfer Agreement (the "Share Transfer Agreement"), with approval of the Board of Directors, to sell all of its equity interest in Bio Earth to Keary Global Ltd. ("Keary Global") for a total consideration of approximately $6,100,000 (the "Share Transfer"), representing the total net deposits made by the Company of $6,000,000 under the JV Agreement as discussed above and interest accruing at 5% per annum. Keary Global and its affiliate, Keary International are both owned or controlled by Jeff Yu, brother of the Company's Chief Executive Officer, Alan Yu. Concurrent with the Share Transfer Agreement, the Company also entered into an agreement with Keary Global, Bio Earth and Happiness Moon Co., Ltd. (“Happiness Moon”) pursuant to which (i) Lollicup agreed to transfer all Bio Earth shares, as well as its rights and obligations under the JV Agreement to Keary Global, (ii) Happiness Moon and Bio Earth agree to foregoing and (iii) Bio Earth shall manage the regulatory and registration requirements related to the Share Transfer. As of the end of the second quarter of 2023, the Company had completed the Share Transfer to Keary Global and received the total consideration of $6,100,000 in full. Keary Global Ltd. owns 250,004 shares of the Company's common stock as of March 31, 2024, which Keary Global acquired upon exercise of two convertible notes during the third quarter of 2018. In addition to being a stockholder, Keary Global and Keary International are inventory suppliers and purchasing agents for the Company overseas. The Company has entered into ongoing purchase and supply agreements with Keary Global. At March 31, 2024 and December 31, 2023, the Company has accounts payable due to Keary Global and Keary International of $5,300,000 and $5,306,000, respectively. Purchases for the three months ended March 31, 2024 and 2023 from this related party were $12,693,000 and $11,407,000, respectively. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2024 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes For the three months ended March 31, 2024 and 2023, the Company's income tax expense was $1,975,000 and $2,818,000, with effective tax rate of 23.4% and 23.5%, respectively. For both the three months ended March 31, 2024 and 2023, the Company's effective tax rate differed from the United States federal statutory rate of 21% primarily due to state taxes. In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence, including its operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. Based upon the level of historical taxable income, at this time, the Company determined that sufficient positive evidence existed to conclude that it is more likely than not there will be full utilization of the deferred tax assets in each jurisdiction. As such, as of March 31, 2024, the Company did not record any valuation allowance. The Company remains subject to the Internal Revenue Services ("IRS") examination for the 2020 through 2022 tax years, and has received notice in February 2019 that it is under examination for years 2016 and 2017. Additionally, the Company files multiple state and local income tax returns and remains subject to examination in various of these jurisdictions for the 2019 through 2022 tax years. As of March 31, 2024, and December 31, 2023, the Company did not have any unrecognized tax benefit. In March 2023, the IRS announced the Winter Storm Relief that allowed for taxpayers in California affected by severe winter storms, flooding, landslides, and mudslides to have until November 15, 2023, to file various individual and business tax returns and make tax payments. The Company took advantage of this tax relief in 2023. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2024 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies In May 2023, the Company received a Notice of Investigations and Interim Measures stating that U.S. Customs and Border Protection (“CBP”) had initiated a formal investigation to determine whether the Company had evaded the anti-dumping and countervailing duty orders on lightweight thermal paper from China by transshipping the merchandise through Taiwan. The period of investigation was from January 2022 through the pendency of the investigation. On February 5, 2024, CBP issued its Notice of Determination concluding that the manufacturing procedures performed by the manufacturer in Taiwan, which the Company imported certain thermal paper products from, did not constitute substantial transformation. As of December 31, 2023, the Company had a reserve of $2,738,000, representing the total estimated probable loss on all thermal paper imports under the investigation period minus payments already made. On March 19, 2024, the Company initiated an appeal process by submitting a request for an administrative review of the initial determination issued by CBP. The Company accrued interest of $85,000 during the three months ended March 31, 2024, related to the estimated total probable loss, increasing the total reserve to $2,823,000 . The amount of the final payments could differ materially from the Company's current estimate. Additionally, the Company is a party to, and certain of its property is the subject of, various pending claims and legal proceedings that routinely arise in the ordinary course of its business. Management believes that the outcome of such litigation and claims, should they arise in the future, is not likely to have a material effect on the Company’s financial position or results of income. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2024 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On May 7, 2024, the Company's Board of Directors declared a quarterly cash dividend of $0.35 per share on the Company's common stock, which will be paid on May 24, 2024 to shareholders of record at the close of business on May 17, 2024. |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Pay vs Performance Disclosure | ||
Net income | $ 6,166 | $ 9,005 |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended |
Mar. 31, 2024 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2024 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles as promulgated in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all the information and footnotes required by US GAAP for complete financial statements. The financial information as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 is unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2024. The condensed consolidated balance sheet at December 31, 2023 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by US GAAP for complete financial statements. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2023, as included in the Company's Annual Report on Form 10-K filed on March 15, 2024. |
Principles of Consolidation | Principles of Consolidation: The condensed consolidated financial statements include the accounts of Karat Packaging and its wholly-owned and controlled operating subsidiaries: Lollicup, Lollicup Franchising, LLC (“Lollicup Franchising”), and Global Wells, a variable interest entity wherein the Company is the primary beneficiary. All intercompany accounts and transactions have been eliminated. |
Estimates and Assumptions | Estimates and Assumptions: Management uses estimates and assumptions in preparing financial statements in accordance with US GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ materially from the estimates that were assumed in preparing the condensed consolidated financial statements. |
Reporting Segments | Reporting Segments: The Company manages and evaluates its operations in one reportable segment. This segment consists of manufacturing and distribution of a broad portfolio of single-use products that are used to serve food and beverages and are available in plastic, paper, bagasse, biopolymer-based, and other compostable forms. It also consists of the distribution of certain specialty food and beverage products, such as syrup, boba, and coffee drinks, as well as restaurant and warehouse supplies. The Company’s long-lived assets are all located in the United States, and its revenues are almost entirely generated in the United States. |
Variable Interest Entities | Variable Interest Entities: The Company has a variable interest in Global Wells located in Rockwall, Texas. In 2017, Lollicup along with three other unrelated parties formed Global Wells, of which Lollicup received a 13.5% ownership interest and a 25% voting intere st. On February 29, 2024, Global Wells and one of its members (the "Selling Member") entered into a membership interest redemption agreement, under which the Selling Member sold and Global Wells purchased and redeemed all of the Selling Member's 10.8% ownership interest in Global Wells for a total cash consideration of $3,208,000, net of tax withholding. Subsequent to the redemption, the ownership interests and voting power of the remaining members of Global Wells were adjusted proportionally, with Lollicup's ownership interest increasing to 15.1% and voting interest increasing to 33.3%. On February 16, 2024, Global Wells made an advance cash payment of $2,325,000 to the Selling Member, with the remaining balance expected to be paid before December 31, 2024. The purpose of Global Wells is to own, construct, and manage warehouses and manufacturing facilities. Global Wells’ operating agreement may require its members to make additional contributions upon the unanimous decision of the members or when the cash in Global Wells’ bank account falls below $50,000. In the event that a member is unable to make an additional capital contribution, the other members will be required to make contributions to offset the amount that member cannot contribute, up to $25,000. Global Wells was determined to be a variable interest entity in accordance with ASC Topic 810, Consolidations , however, at the time the investment was made, it was determined that Lollicup was not the primary beneficiary. In 2018, Lollicup entered into an operating lease with Global Wells (the “Texas Lease”). In 2020, the Company entered into another operating lease with Global Wells (the “New Jersey Lease”). Upon entering into the Texas Lease with Lollicup on March 23, 2018, it was determined that Lollicup holds current and potential rights that give it the power to direct activities of Global Wells that most significantly impact Global Wells’ economic performance, the ability to receive significant benefits, and the obligation to absorb potentially significant losses, resulting in Lollicup having a controlling financial interest in Global Wells. As a result, Lollicup was deemed to be the primary beneficiary of Global Wells and has consolidated Global Wells under the risk and reward model of ASC 810, for the period from March 23, 2018. The monthly lease payments for both the Texas Lease and New Jersey Lease are eliminated upon consolidation. Assets recognized as a result of consolidating Global Wells do not represent additional assets that could be used to satisfy claims against the Company’s general assets. Conversely, liabilities recognized as a result of consolidating Global Wells do not represent additional claims of the Company’s general assets; rather they represent claims against the specific assets of Global Wells. See Note 8 — Long-Term Debt for a description of the two term loans that Global Wells had with financial institutions as of March 31, 2024 . |
Noncontrolling Interests | Noncontrolling Interests: The Company consolidates its variable interest entity, Global Wells, in which the Company is the primary beneficiary. Noncontrolling interests represent third-party equity ownership interests in Global Wells. The Company recognizes noncontrolling interests as equity in the condensed consolidated financial statements separate from the Company’s stockholders’ equity. The amount of net income attributable to noncontrolling interests is disclosed in the condensed consolidated statements of income. Tax payments made by the Company on behalf of the noncontrolling interests are deducted from their equity balances, as shown in the condensed consolidated statements of stockholders’ equity. |
Revenue Recognition | Revenue Recognition: National and regional chains revenue: National and regional chains revenue is derived from chain restaurants and businesses with locations across multiple states. Revenue from transactions with national and regional chains is recognized at a point in time upon transfer of control of promised products to customers. Transfer of control typically occurs when the title and risk of loss passes to the customer. • Distributors revenue: Distributors revenues are derived from national and regional distributors across the U.S. that purchase the Company’s products for resale and distribution to other businesses such as restaurants, supermarkets, offices, and schools. Revenue from distributions is recognized at a point in time upon transfer of control of promised products to customers. Transfer of control typically occurs when the title and risk of loss passes to the customer. • Online revenue: Online revenue is derived from the Company's online storefront on www.lollicupstore.com, and other e-commerce platforms including Amazon, Walmart, eBay, and TikTok with customers largely consisting of small businesses such as small restaurants, coffee houses, bubble tea cafes, pizza parlors, and frozen yogurt shops . Revenue from online transactions is recognized at a point in time upon transfer of control of promised products to customers. Transfer of control typically occurs when the title and risk of loss passes to the customer. For online sales on third-party e-commerce platforms, the Company is the principal in the three-party arrangement and control of the products remains with the Company at all times until transferring to the end customer or upon return from the end customer. Online platform fees are recognized as selling expenses. • Retail revenue: Retail revenue is derived primarily from regional and local restaurants, coffee houses, bubble tea cafes, pizza parlors, and frozen yogurt shops. Revenue from retail transactions is recognized at a point in time upon transfer of control of promised products to customers. Transfer of control typically occurs when the title and risk of loss passes to the customer. For all of the Company's revenue streams, shipping terms generally indicate when the title and risk of loss have passed, which is generally when products are delivered to customers. During the three months ended March 31, 2024, the Company's revenue and cost of goods sold were understated by approximately $0.7 million and $0.4 million, respectively, for products that had been shipped and recorded as revenue and costs of goods sold in 2023 and not delivered until 2024 . In the prior periods, the Company had assessed the impact of the lag between shipping and delivery to the previously-issued quarterly and annual financial statements, and concluded that the impact on its overall financial statements, including net sales, cost of goods sold, accounts receivable, inventories and customer deposits was immaterial. The Company’s contract liabilities consist primarily of rebates, sales incentives, consideration payable to customers for cooperative advertising, and customer deposits. As of March 31, 2024 and December 31, 2023, the rebates, sales incentives and cooperative advertising were not significant to the financial statements. Customer deposits are included in the current liabilities in the consolidated balance sheets. During the three months ended March 31, 2024 and 2023, the Company recognized revenue of $739,000 and $990,000, respectively, related to customer deposits received as of the beginning of each respective period. Out of Period Adjustment: As previously disclosed in the Company's 2023 Form 10-K, during the quarter ended December 31, 2023, the Company also recorded certain misclassification adjustments for the full year 2023 amounts within the consolidated statement of income with no impact on net income. Those misclassification adjustments were: (1) adjusting online sales third-party platform fees from net sales to selling expenses, (ii) production expenses primarily related to machinery repair and maintenance from general and administrative expenses to cost of goods sold, and (iii) payroll and employee-related costs for the Company's sales team within operating expenses from general and administrative expenses to selling expenses. These misclassification adjustments in the quarter ended December 31, 2023 had no effect on totals for assets and liabilities, shareholders' equity, cash flows or net income for either the quarter ended December 31, 2023 or any of the previously reported quarters in 2023. For the three months ended March 31, 2024, the properly classified amounts related to the online sales platform fees, production expenses and payroll and employee-related costs for the sales team were $2.2 million, $0.6 million and $0.8 million, respectively. |
Fair Value Measurements | Fair Value Measurements: The Company has financial instruments classified within the fair value hierarchy, which consist of the following: • At both March 31, 2024 and December 31, 2023, the Company had money market accounts and certificates of deposit classified as Level 1 and Level 2, respectively, within the fair value hierarchy. The short-term investments comprise of certificates of deposits with an original maturity of longer than 90 days and are reported at their carrying value as current assets on the condensed consolidated balance sheet. The carrying value of these short-term investments approximates fair value as they were purchased near or on March 31, 2024. The Company has not elected the fair value option as presented by ASC 825, Fair Value Option for Financial Assets and Financial Liabilities , for the financial assets and liabilities that are not otherwise required to be carried at fair value. Under ASC 820, material financial assets and liabilities not carried at fair value, including accounts receivable, accounts payable, related-party payable, accrued expenses, other payables and borrowings under promissory notes and Line of Credit (as defined below), are reported at their carrying value. Certain long-lived non-financial assets and liabilities may be required to be measured at fair value on a nonrecurring basis in certain circumstances, including when there is evidence of impairment. These non-financial assets and liabilities may include assets acquired in a business combination or long-lived assets that are determined to be impaired. During the three months ended March 31, 2024, the Company recorded an impairment against its operating ROU assets of $1,993,000 . See Note 11 — Leases for further information about this impairment charge. With the exception of the ROU impairment, the Company did not have any non-financial assets or liabilities that had been measured at fair value subsequent to initial recognition as of March 31, 2024 and December 31, 2023. |
New and Recently Adopted Accounting Standards | New and Recently Adopted Accounting Standards: The Company is an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), and as such, the Company has elected to take advantage of certain reduced public company reporting requirements. In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards, as a result, the Company will adopt new or revised accounting standards on the relevant dates in which adoption of such standards is required for private companies. In March 2023, the FASB issued updated ASU 2023-01 Lease (Topic 842) : Common Control Arrangements . The new guidance amends ASC 842 to require all lessees, including public business entities, to amortize leasehold improvements associated with common control leases over their useful life to the common control group. The Company adopted this new standard on January 1, 2024, by prospectively amortizing all new leasehold improvements recognized on or after the adoption date. The adoption of this new standard did not have a material impact on the Company's financial statements. In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . The new guidance requires enhanced disclosure of significant expenses that are regularly reported to the chief operating decision maker and the nature of segment expense information used to manage operations. The new guidance is effective for all public companies for annual reporting periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company will adopt the new standard in annual reporting period beginning after December 15, 2023 and is currently evaluating the impacts of the new guidance on its disclosure within the financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) : Improvements to Income Tax Disclosures . The new guidance requires disaggregated information about the effective tax rate reconciliation and additional information on taxes paid that meet a quantitative threshold. The new guidance is effective for public companies for annual reporting periods beginning after December 15, 2024, and for non-public companies for annual reporting periods beginning after December 15, 2025, with early adoption permitted for both. The Company will adopt the new standard in annual reporting period beginning after December 15, 2025, and is currently evaluating the impacts of the new guidance on its disclosures within the consolidated financial statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Accounting Policies [Abstract] | |
Schedule of Net Sales Disaggregated by Customer Type | For the three months ended March 31, 2024 and 2023, net sales disaggregated by customer type consist of the amounts shown below. Three Months Ended March 31, 2024 2023 (in thousands) National and regional chains $ 21,470 $ 21,368 Distributors 52,827 54,647 Online 14,879 13,655 Retail 6,437 6,131 $ 95,613 $ 95,801 |
Schedule of Fair Value Measurements by Level for the Assets and Liabilities Measured at Fair Value on a Recurring Basis | The following table summarizes the Company’s fair value measurements by level at March 31, 2024 for the assets measured at fair value on a recurring basis: Level 1 Level 2 Level 3 (in thousands) Cash equivalents $ 5,841 $ — $ — Short-term investments — 33,515 — Fair value, March 31, 2024 $ 5,841 $ 33,515 $ — The following table summarize the Company’s fair value measurements by level at December 31, 2023 for the assets measured at fair value on a recurring basis: Level 1 Level 2 Level 3 (in thousands) Cash equivalents $ 5,956 $ 10,000 $ — Short-term investments — 26,343 — Fair value, December 31, 2023 $ 5,956 $ 36,343 $ — |
Schedule of Carrying Values and Estimated Fair Values of Debt | The following is a summary of the carrying amount and estimated fair value of the $23,000,000 and $28,700,000 term loans that mature in September 2026 and July 2027, respectively (the "2026 Term Loan" and "2027 Term Loan," respectively): March 31, 2024 Carrying Amount Estimated Fair Value (in thousands) 2026 Term Loan $ 21,339 $ 19,771 2027 Term Loan 27,916 27,310 $ 49,255 $ 47,081 December 31, 2023 Carrying Amount Estimated Fair Value (in thousands) 2026 Term Loan $ 21,490 $ 19,999 2027 Term Loan 28,028 27,810 $ 49,518 $ 47,809 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories consist of the following: March 31, 2024 December 31, 2023 (in thousands) Raw materials $ 7,288 $ 9,116 Semi-finished goods 1,596 1,343 Finished goods 70,778 61,419 Subtotal 79,662 71,878 Less: inventory reserve (390) (350) Total inventories $ 79,272 $ 71,528 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment, Net | March 31, 2024 December 31, 2023 (in thousands) Machinery and equipment $ 67,605 $ 67,321 Leasehold improvements 19,085 19,085 Vehicles 7,199 7,038 Furniture and fixtures 1,015 1,015 Building 38,779 38,503 Land 11,907 11,907 Computer hardware and software 93 93 Construction in progress 505 — 146,188 144,962 Less: accumulated depreciation and amortization (52,335) (49,736) Total property and equipment, net $ 93,853 $ 95,226 |
Goodwill (Tables)
Goodwill (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | The following table summarizes the activity in the Company's goodwill from December 31, 2023 to March 31, 2024: (in thousands) Balance at December 31, 2023 $ 3,510 Goodwill acquired — Balance at March 31, 2024 $ 3,510 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expense Liabilities | The following table summarizes information related to accrued expense liabilities: March 31, 2024 December 31, 2023 (in thousands) Accrued miscellaneous expenses $ 2,328 $ 1,271 Accrued payroll 964 1,685 Accrued ocean freight and other import costs 3,730 3,513 Accrued sale and use taxes 1,006 1,006 Accrued professional services fees 944 845 Accrued vacation and sick pay 984 619 Accrued property tax 314 552 Accrued shipping expenses 603 525 Accrued sales discount expense 372 487 Accrued interest expense 73 73 Total accrued expenses $ 11,318 $ 10,576 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Debt Disclosure [Abstract] | |
Schedule of Long-Term Debt | Long-term debt consists of the following: March 31, 2024 December 31, 2023 (in thousands) The 2026 Term Loan, with an initial balance of $16,115,000 and an option to request for additional advances up to a maximum of $6,885,000 through September 2022, which the Company exercised in February 2022. Interest accrues at a fixed rate of 3.5% per annum. Principal and interest payments of $116,000 are due monthly throughout the term of the loan, with the remaining principal balance due at maturity. The loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by Global Wells and one of the Company’s stockholders. In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt service coverage ratio. $ 21,398 $ 21,555 The 2027 Term Loan, with an initial balance of $20,700,000 and an option to request for additional advances up to a maximum of $8,000,000 through June 30, 2023, which the Company exercised in March 2023. Interest accrues at a fixed rate of 4.375% per annum. Prior to August 1, 2023, principal and interest payments of $104,000 are due monthly. Beginning August 1, 2023, monthly principal and interest payments increased to $144,000 for the remainder of the loan term, with the remaining principal balance due at maturity. The loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by one of the Company’s stockholders. In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt coverage ratio. $ 28,044 $ 28,166 Long-term debt 49,442 49,721 Less: unamortized loan fees (187) (203) Less: current portion (1,139) (1,122) Long-term debt, net of current portion $ 48,116 $ 48,396 |
Schedule of Future Maturities | At March 31, 2024, future maturities are: (in thousands) 2024 (remainder) $ 843 2025 1,179 2026 20,798 2027 26,622 $ 49,442 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of Stock Option Activity | A summary of the Company’s stock option activity under the Plan for the period ended March 31, 2024 is as follows: Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contract Life (In Years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2023 386,473 $ 18.58 7.8 $ 2,424 Exercised (2,800) $ 18.86 Forfeited (33,333) $ 18.86 Outstanding at March 31, 2024 350,340 $ 18.55 7.6 $ 3,525 Vested and expected to vest at March 31, 2024 350,340 $ 18.55 7.6 $ 3,525 Exercisable at March 31, 2024 230,340 $ 18.55 7.6 $ 2,316 |
Schedule of Unvested Restricted Stock Unit Activity | A summary of the Company’s unvested restricted stock units activity under the Plan for the period ended March 31, 2024 is as follows: Number of Shares Outstanding Weighted Average Grant Date Fair Value Unvested at December 31, 2023 5,346 16.71 Granted 91,004 29.38 Vested (3,750) 16.53 Unvested at March 31, 2024 92,600 29.17 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share | Basic earnings per share is calculated by dividing the net income attributable to equity holders of the Company for the period by the weighted average number of common shares outstanding during the period. Three Months Ended March 31, 2024 2023 (in thousands, except per share data) Net income attributable to Karat Packaging Inc. $ 6,166 $ 9,005 Weighted average shares 19,970 19,887 Basic earnings per share $ 0.31 $ 0.45 The following table summarizes the calculation of diluted earnings per share: Three Months Ended March 31, 2024 2023 (in thousands, except per share data) Net income attributable to Karat Packaging Inc. $ 6,166 $ 9,005 Weighted average shares 19,970 19,887 Dilutive shares Stock options and restricted stock units 105 53 Total dilutive shares 20,075 19,940 Diluted earnings per share $ 0.31 $ 0.45 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Leases [Abstract] | |
Schedule of Lease Cost | The Company recognized the following lease costs in the accompanying condensed consolidated statement of income: Three Months Ended March 31, 2024 2023 (in thousands) Operating lease expense $ 1,820 $ 1,333 Short-term lease expense 9 13 Variable lease expense 373 247 Total lease expense $ 2,202 $ 1,593 |
Schedule of Supplemental Information Related to Operating Leases | The following table presents supplemental information related to operating leases: March 31, 2024 December 31, 2023 Weighted average remaining lease term 4.49 years 4.51 years Weighted average discount rate 6.5 % 6.2 % Three Months Ended March 31, 2024 2023 (in thousands) Cash paid for amounts included in measurement of lease obligations: Operating cash flows from operating leases $ 1,829 $ 1,363 |
Schedule of Future Lease Payments Under Operating Leases | As of March 31, 2024, future lease payments under operating leases were as follows: (in thousands) 2024 (remainder) $ 4,319 2025 5,621 2026 5,802 2027 4,537 2028 3,139 Thereafter 2,372 Total future lease payments 25,790 Less: imputed interest (3,597) Total lease liability balance $ 22,193 |
Nature of Operations (Details)
Nature of Operations (Details) | 3 Months Ended |
Mar. 31, 2024 distribution_center | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Distribution centers operated by entity | 7 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Narrative (Details) | 3 Months Ended | 12 Months Ended | |||
Feb. 29, 2024 USD ($) | Feb. 16, 2024 USD ($) | Mar. 31, 2024 USD ($) segment | Mar. 31, 2023 USD ($) | Dec. 31, 2017 USD ($) | |
Debt Instrument [Line Items] | |||||
Reportable segment | segment | 1 | ||||
Revenue reclassifications, increase (decrease) | $ 95,613,000 | $ 95,801,000 | |||
Cost of goods sold reclassifications, increase (decrease) | 58,011,000 | 57,657,000 | |||
Revenue recognized | 739,000 | 990,000 | |||
Reclassification to selling expenses | 10,763,000 | 8,701,000 | |||
Reclassification out of general and administrative expense | (16,769,000) | (16,629,000) | |||
Impairment of operating right-of-use asset | 1,993,000 | $ 0 | |||
Revision of Prior Period, Change in Accounting Principle, Adjustment | |||||
Debt Instrument [Line Items] | |||||
Revenue reclassifications, increase (decrease) | 700,000 | ||||
Cost of goods sold reclassifications, increase (decrease) | 400,000 | ||||
Revision of Prior Period, Error Correction, Adjustment | Reclassification Of Platform Fees | |||||
Debt Instrument [Line Items] | |||||
Revenue reclassifications, increase (decrease) | (2,200,000) | ||||
Reclassification to selling expenses | 2,200,000 | ||||
Revision of Prior Period, Error Correction, Adjustment | Reclassification Of Production Expenses | |||||
Debt Instrument [Line Items] | |||||
Cost of goods sold reclassifications, increase (decrease) | 600,000 | ||||
Reclassification out of general and administrative expense | 600,000 | ||||
Revision of Prior Period, Error Correction, Adjustment | Reclassification Of Employee-Related Costs | |||||
Debt Instrument [Line Items] | |||||
Reclassification to selling expenses | 800,000 | ||||
Reclassification out of general and administrative expense | 800,000 | ||||
Global Wells | |||||
Debt Instrument [Line Items] | |||||
Ownership interest (as a percent) | 15.10% | ||||
Voting interest (as a percent) | 33.30% | ||||
Cash consideration | $ 3,208,000 | $ 2,325,000 | |||
Global Wells | Selling Member | |||||
Debt Instrument [Line Items] | |||||
Ownership interest (as a percent) | 10.80% | ||||
2026 Term Loan | |||||
Debt Instrument [Line Items] | |||||
Face amount of loan | 23,000,000 | ||||
2027 Term Loan | |||||
Debt Instrument [Line Items] | |||||
Face amount of loan | $ 28,700,000 | ||||
Global Wells | |||||
Debt Instrument [Line Items] | |||||
Ownership interest (as a percent) | 13.50% | ||||
Voting interest (as a percent) | 25% | ||||
Minimum bank account to make additional contributions from members | $ 50,000 | ||||
Contributions to offset the amount that member cannot contribute (up to) | $ 25,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Disaggregation of Revenue [Line Items] | ||
Net sales | $ 95,613 | $ 95,801 |
National and regional chains | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 21,470 | 21,368 |
Distributors | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 52,827 | 54,647 |
Online | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 14,879 | 13,655 |
Retail | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | $ 6,437 | $ 6,131 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Fair Value Measurements (Details) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Short-term investments | $ 33,515 | $ 26,343 |
Recurring basis | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents | 5,841 | 5,956 |
Short-term investments | 0 | 0 |
Fair value | 5,841 | 5,956 |
Recurring basis | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents | 0 | 10,000 |
Short-term investments | 33,515 | 26,343 |
Fair value | 33,515 | 36,343 |
Recurring basis | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents | 0 | 0 |
Short-term investments | 0 | 0 |
Fair value | $ 0 | $ 0 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Summary of Carrying Values and Estimated Fair Values of Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Debt Instrument [Line Items] | ||
Carrying Amount | $ 49,442 | $ 49,721 |
Carrying Amount | ||
Debt Instrument [Line Items] | ||
Carrying Amount | 49,255 | 49,518 |
Estimated Fair Value | ||
Debt Instrument [Line Items] | ||
Estimated Fair Value | 47,081 | 47,809 |
2026 Term Loan | ||
Debt Instrument [Line Items] | ||
Carrying Amount | 21,398 | 21,555 |
2026 Term Loan | Carrying Amount | ||
Debt Instrument [Line Items] | ||
Carrying Amount | 21,339 | 21,490 |
2026 Term Loan | Estimated Fair Value | ||
Debt Instrument [Line Items] | ||
Estimated Fair Value | 19,771 | 19,999 |
2027 Term Loan | ||
Debt Instrument [Line Items] | ||
Carrying Amount | 28,044 | 28,166 |
2027 Term Loan | Carrying Amount | ||
Debt Instrument [Line Items] | ||
Carrying Amount | 27,916 | 28,028 |
2027 Term Loan | Estimated Fair Value | ||
Debt Instrument [Line Items] | ||
Estimated Fair Value | $ 27,310 | $ 27,810 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventories (Details) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 7,288 | $ 9,116 |
Semi-finished goods | 1,596 | 1,343 |
Finished goods | 70,778 | 61,419 |
Subtotal | 79,662 | 71,878 |
Less: inventory reserve | (390) | (350) |
Total inventories | $ 79,272 | $ 71,528 |
Inventories - Narrative (Detail
Inventories - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Inventory Disclosure [Abstract] | ||
Write-off of inventory | $ 293 | $ 216 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment, Net (Details) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | $ 146,188 | $ 144,962 |
Less: accumulated depreciation and amortization | (52,335) | (49,736) |
Total property and equipment, net | 93,853 | 95,226 |
Machinery and equipment | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | 67,605 | 67,321 |
Leasehold improvements | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | 19,085 | 19,085 |
Vehicles | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | 7,199 | 7,038 |
Furniture and fixtures | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | 1,015 | 1,015 |
Building | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | 38,779 | 38,503 |
Land | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | 11,907 | 11,907 |
Computer hardware and software | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | 93 | 93 |
Construction in progress | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | $ 505 | $ 0 |
Property and Equipment - Narrat
Property and Equipment - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
General and Administrative Expense | ||
Property, Plant and Equipment [Line Items] | ||
Depreciation and amortization expense | $ 1,013 | $ 1,120 |
Cost of Sales | ||
Property, Plant and Equipment [Line Items] | ||
Depreciation and amortization expense | $ 1,609 | $ 1,506 |
Goodwill - Schedule of Goodwill
Goodwill - Schedule of Goodwill (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2024 USD ($) | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | $ 3,510 |
Goodwill acquired | 0 |
Goodwill, ending balance | $ 3,510 |
Line of Credit (Details)
Line of Credit (Details) - USD ($) | Mar. 14, 2023 | Mar. 31, 2024 | Dec. 31, 2023 | Jun. 20, 2023 | Jun. 19, 2023 | Feb. 23, 2018 |
SOFR | ||||||
Line of Credit Facility [Line Items] | ||||||
Interest rate | 2.50% | |||||
Floor interest rate | 1% | |||||
Line of credit | ||||||
Line of Credit Facility [Line Items] | ||||||
Maximum borrowing capacity | $ 36,187,000 | $ 40,000,000 | ||||
Floor rate (as a percent) | 3.25% | |||||
Long-term line of credit, noncurrent | 0 | $ 0 | ||||
Line of credit | Prime Rate | ||||||
Line of Credit Facility [Line Items] | ||||||
Basis spread on variable rate | 0.25% | |||||
Standby letter of credit | ||||||
Line of Credit Facility [Line Items] | ||||||
Maximum borrowing capacity | $ 5,000,000 | $ 2,000,000 | ||||
Long-term line of credit, noncurrent | $ 3,813,000 | $ 3,766,000 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Payables and Accruals [Abstract] | ||
Accrued miscellaneous expenses | $ 2,328 | $ 1,271 |
Accrued payroll | 964 | 1,685 |
Accrued ocean freight and other import costs | 3,730 | 3,513 |
Accrued sale and use taxes | 1,006 | 1,006 |
Accrued professional services fees | 944 | 845 |
Accrued vacation and sick pay | 984 | 619 |
Accrued property tax | 314 | 552 |
Accrued shipping expenses | 603 | 525 |
Accrued sales discount expense | 372 | 487 |
Accrued interest expense | 73 | 73 |
Total accrued expenses | $ 11,318 | $ 10,576 |
Long-Term Debt - Schedule of Lo
Long-Term Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands | 3 Months Ended | 7 Months Ended | ||
Aug. 01, 2023 | Mar. 31, 2024 | Jul. 31, 2023 | Dec. 31, 2023 | |
Debt Instrument [Line Items] | ||||
Carrying Amount | $ 49,442 | $ 49,721 | ||
Less: unamortized loan fees | (187) | (203) | ||
Less: current portion | (1,139) | (1,122) | ||
Long-term debt, net of current portion | 48,116 | 48,396 | ||
2026 Term Loan | ||||
Debt Instrument [Line Items] | ||||
Carrying Amount | 21,398 | 21,555 | ||
Amount converted to term loan | 16,115 | |||
Term loan, accordion feature | $ 6,885 | |||
Fixed interest rate (as a percent) | 3.50% | |||
Monthly principal and interest payments | $ 116 | |||
2027 Term Loan | ||||
Debt Instrument [Line Items] | ||||
Carrying Amount | 28,044 | $ 28,166 | ||
Amount converted to term loan | 20,700 | |||
Term loan, accordion feature | $ 8,000 | |||
Fixed interest rate (as a percent) | 4.375% | |||
Monthly principal and interest payments | $ 144 | $ 104 |
Long-Term Debt - Schedule of Fu
Long-Term Debt - Schedule of Future Maturities (Details) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Future maturities: | ||
2024 | $ 843 | |
2025 | 1,179 | |
2026 | 20,798 | |
2027 | 26,622 | |
Long-term debt | $ 49,442 | $ 49,721 |
Stock-Based Compensation - Narr
Stock-Based Compensation - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 12, 2024 | Mar. 31, 2024 | Mar. 31, 2023 | Jan. 31, 2019 | |
Stock-based Compensation | ||||
Shares reserved for issuance (in shares) | 1,293,017 | 2,000,000 | ||
Stock-based compensation expense | $ 375 | $ 277 | ||
Remaining stock-based compensation expense for unvested stock options | 123 | |||
Remaining stock-based compensation expense for unvested restricted stock units | $ 2,375 | |||
Restricted Stock Units (RSUs) | ||||
Stock-based Compensation | ||||
Cost not yet recognized, period for recognition (in years) | 1 year 3 months 18 days | |||
Granted (in shares) | 91,000 | 91,004 | ||
Grant date fair value | $ 2,674 | |||
Stock Options | ||||
Stock-based Compensation | ||||
Cost not yet recognized, period for recognition (in years) | 7 months 6 days | |||
Maximum | ||||
Stock-based Compensation | ||||
Award term (in years) | 10 years | |||
Maximum | Restricted Stock Units (RSUs) | ||||
Stock-based Compensation | ||||
Vesting period (in years) | 3 years | |||
Maximum | Stock Options | ||||
Stock-based Compensation | ||||
Vesting period (in years) | 3 years | |||
Minimum | Restricted Stock Units (RSUs) | ||||
Stock-based Compensation | ||||
Vesting period (in years) | 2 years | |||
Minimum | Stock Options | ||||
Stock-based Compensation | ||||
Vesting period (in years) | 2 years | |||
Incentive Stock Optionee, Stock Ownership Greater than Ten Percent of Voting Power | ||||
Stock-based Compensation | ||||
Minimum exercise price to fair market value of common stock at the date of grant (as a percent) | 110% | |||
Incentive Stock Optionee, Stock Ownership Greater than Ten Percent of Voting Power | Maximum | ||||
Stock-based Compensation | ||||
Award term (in years) | 5 years |
Stock-Based Compensation - Sche
Stock-Based Compensation - Schedule of Stock Options Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2024 | Dec. 31, 2023 | |
Number of Options | ||
Outstanding at beginning of period (in shares) | 386,473 | |
Exercised (in shares) | (2,800) | |
Forfeited (in shares) | (33,333) | |
Outstanding at end of period (in shares) | 350,340 | 386,473 |
Number of options, vested and expected to vest (in shares) | 350,340 | |
Number of options, exercisable (in shares) | 230,340 | |
Weighted-Average Exercise Price | ||
Outstanding at beginning of period (in dollars per share) | $ 18.58 | |
Exercised (in dollars per share) | 18.86 | |
Forfeited (in dollars per share) | 18.86 | |
Outstanding at end of period (in dollars per share) | 18.55 | $ 18.58 |
Weighted average exercise price, vested and expected to vest (in dollars per share) | 18.55 | |
Weighted average exercise price, exercisable (in dollars per share) | $ 18.55 | |
Stock Option Activity, Additional Disclosures | ||
Weighted average remaining contract life, options outstanding | 7 years 7 months 6 days | 7 years 9 months 18 days |
Weighted average remaining contract life, vested and expected to vest | 7 years 7 months 6 days | |
Weighted average remaining contract life, exercisable | 7 years 7 months 6 days | |
Aggregate intrinsic value, options outstanding | $ 3,525 | $ 2,424 |
Aggregate intrinsic value, vested and expected to vest | 3,525 | |
Aggregate intrinsic value, exercisable | $ 2,316 |
Stock-Based Compensation - Sc_2
Stock-Based Compensation - Schedule of Unvested Restricted Stock Units (Details) - Restricted Stock Units (RSUs) - $ / shares | 3 Months Ended | |
Mar. 12, 2024 | Mar. 31, 2024 | |
Number of Shares Outstanding | ||
Outstanding at beginning of period (in shares) | 5,346 | |
Granted (in shares) | 91,000 | 91,004 |
Vested (in shares) | (3,750) | |
Outstanding at end of period (in shares) | 92,600 | |
Weighted Average Grant Date Fair Value | ||
Outstanding at beginning of period (in dollars per share) | $ 16.71 | |
Granted (in dollars per share) | 29.38 | |
Vested (in dollars per share) | 16.53 | |
Outstanding at end of period (in dollars per share) | $ 29.17 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Earnings Per Share Reconciliation [Abstract] | ||
Net income attributable to Karat Packaging Inc. | $ 6,166 | $ 9,005 |
Weighted average shares (in shares) | 19,969,606 | 19,886,585 |
Basic earnings per share (in dollars per share) | $ 0.31 | $ 0.45 |
Weighted Average Number of Shares Outstanding, Diluted [Abstract] | ||
Net income attributable to Karat Packaging Inc. | $ 6,166 | $ 9,005 |
Weighted average shares (in shares) | 19,969,606 | 19,886,585 |
Dilutive shares | ||
Stock options and restricted stock units (in shares) | 105,000 | 53,000 |
Adjusted weighted average number of common shares (in shares) | 20,075,485 | 19,939,923 |
Diluted earnings per share (in dollars per share) | $ 0.31 | $ 0.45 |
Potentially dilutive shares excluded from diluted earnings per share calculation (in shares) | 19,000 | 434,000 |
Leases - Schedule of Lease Cost
Leases - Schedule of Lease Cost (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Leases [Abstract] | ||
Operating lease expense | $ 1,820 | $ 1,333 |
Short-term lease expense | 9 | 13 |
Variable lease expense | 373 | 247 |
Total lease expense | $ 2,202 | $ 1,593 |
Leases - Narrative (Details)
Leases - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Lessee, Lease, Description [Line Items] | ||
Impairment of operating right-of-use asset | $ 1,993 | $ 0 |
Expected rental income, remainder of the year | 554 | |
Expected rental income in 2025 | 616 | |
Global Wells | Minimum | ||
Lessee, Lease, Description [Line Items] | ||
Monthly lease payment | 62 | |
Global Wells | Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Monthly lease payment | 65 | |
Operating Expense | ||
Lessee, Lease, Description [Line Items] | ||
Lease expense | 1,931 | 1,365 |
Cost of Sales | ||
Lessee, Lease, Description [Line Items] | ||
Lease expense | $ 271 | $ 228 |
Leases - Schedule of Supplement
Leases - Schedule of Supplemental Information Related to Operating Leases (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | |
Leases [Abstract] | |||
Weighted average remaining lease term (in years) | 4 years 5 months 26 days | 4 years 6 months 3 days | |
Weighted average discount rate | 6.50% | 6.20% | |
Cash paid for amounts included in measurement of lease obligations: | |||
Operating cash flows from operating leases | $ 1,829 | $ 1,363 |
Leases - Schedule of Maturities
Leases - Schedule of Maturities of Operating Lease Liabilities (Details) $ in Thousands | Mar. 31, 2024 USD ($) |
Leases [Abstract] | |
2024 (remainder) | $ 4,319 |
2025 | 5,621 |
2026 | 5,802 |
2027 | 4,537 |
Lessee, Operating Lease, Liability, to be Paid, Year Four | 3,139 |
Thereafter | 2,372 |
Total future lease payments | 25,790 |
Less: imputed interest | (3,597) |
Total lease liability balance | $ 22,193 |
Related Party Transactions (Det
Related Party Transactions (Details) | 3 Months Ended | 12 Months Ended | ||||||
Mar. 31, 2024 USD ($) shares | Mar. 31, 2023 USD ($) | Sep. 30, 2018 convertible_note | Dec. 31, 2022 USD ($) | Dec. 31, 2023 USD ($) shares | Jun. 30, 2023 USD ($) | May 08, 2023 USD ($) | Apr. 06, 2022 USD ($) | |
Related Party Transaction [Line Items] | ||||||||
Deposits paid for joint venture investment | $ 0 | $ 2,900,000 | ||||||
Deposits refunded from joint venture investment | $ 0 | 950,000 | ||||||
Common stock, shares outstanding (in shares) | shares | 19,972,032 | 19,965,482 | ||||||
Number of exercised convertible notes | convertible_note | 2 | |||||||
Bio Earth Technology | ||||||||
Related Party Transaction [Line Items] | ||||||||
Deposits paid for joint venture investment | 2,900,000 | $ 5,876,000 | ||||||
Deposits refunded from joint venture investment | 900,000 | $ 1,876,000 | ||||||
Bio Earth Technology | Lollicup Franchising, LLC | ||||||||
Related Party Transaction [Line Items] | ||||||||
Ownership percentage by parent | 49% | |||||||
Bio Earth Technology | Lollicup Franchising, LLC | ||||||||
Related Party Transaction [Line Items] | ||||||||
Committed capital to joint venture | $ 6,500,000 | |||||||
Keary Global | ||||||||
Related Party Transaction [Line Items] | ||||||||
Noncontrolling interest in joint ventures | $ 6,100,000 | $ 6,100,000 | ||||||
Noncontrolling interest in joint ventures, gross | $ 6,000,000 | |||||||
Keary Global | Bio Earth Technology | ||||||||
Related Party Transaction [Line Items] | ||||||||
Ownership percentage by parent | 5% | |||||||
Keary Global | Affiliated Entity | ||||||||
Related Party Transaction [Line Items] | ||||||||
Common stock, shares outstanding (in shares) | shares | 250,004 | |||||||
Keary Global and Keary International | ||||||||
Related Party Transaction [Line Items] | ||||||||
Purchases from related party | $ 12,693,000 | $ 11,407,000 | ||||||
Keary Global and Keary International | Affiliated Entity | ||||||||
Related Party Transaction [Line Items] | ||||||||
Accounts payable | $ 5,300,000 | $ 5,306,000 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | |
Income Tax Disclosure [Abstract] | |||
Provision for income taxes | $ 1,975,000 | $ 2,818,000 | |
Effective tax rate | 23.40% | 23.50% | |
Deferred tax assets, valuation allowance | $ 0 | ||
Uncertain tax positions | $ 0 | $ 0 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Dec. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Loss contingency | $ 2,823 | $ 2,738 |
Accrued interest | $ 85 |
Subsequent Events (Details)
Subsequent Events (Details) | May 07, 2024 $ / shares |
Subsequent Event | |
Subsequent Event [Line Items] | |
Ordinary share per dividend (in dollars per share) | $ 0.35 |