Document and Entity Information - USD ($) $ in Millions |
12 Months Ended | ||
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Dec. 31, 2019 |
Feb. 20, 2020 |
Jun. 30, 2019 |
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Document and Entity Information | |||
Entity Registrant Name | CPI Card Group Inc. | ||
Entity Central Index Key | 0001641614 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Interactive Data Current | Yes | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 11,224,191 | ||
Entity Public Float | $ 11.0 | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | true | ||
Entity Shell Company | false | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
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Consolidated Balance Sheets | ||
Allowance on accounts receivable | $ 395 | $ 211 |
Preferred shares, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred shares, authorized shares (in shares) | 100,000 | 100,000 |
Preferred shares, issued shares (in shares) | 0 | 0 |
Preferred shares, outstanding shares (in shares) | 0 | 0 |
Common shares, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common shares, authorized shares (in shares) | 100,000,000 | 100,000,000 |
Common shares, issued shares (in shares) | 11,224,191 | 11,160,377 |
Common shares, outstanding shares (in shares) | 11,224,191 | 11,160,377 |
Business |
12 Months Ended |
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Dec. 31, 2019 | |
Business | |
Business | 1. Business CPI Card Group Inc., (which, together with its subsidiary companies, is referred to herein as “CPI” or the “Company”) is engaged in the design, production, data personalization, packaging and fulfillment of Financial Payment Cards, which the Company defines as credit cards, debit cards and prepaid debit cards issued on the networks of the Payment Card Brands (Visa, Mastercard, American Express and Discover) and Interac (in Canada). The Company also offers an instant card issuance system and services, which provides card issuing bank customers the ability to issue a personalized debit or credit card within the bank branch to individual cardholders. As a producer and provider of services for Financial Payment Cards, each of the Company’s secure facilities must be compliant and registered with one or more of the Payment Card Brands and is therefore subject to specific requirements and conditions. Noncompliance with these requirements would prohibit the individual facilities of the Company from producing Financial Payment Cards for these entities’ payment card issuers. In the fourth quarter of 2018, the Company entered into a definitive agreement to sell the Canadian subsidiary. The sale agreement did not include the portions of the business relating to Financial Payment Cards, as that business migrated to the Company’s operations in the U.S. or to other service providers in 2019. The transaction closed on April 1, 2019, and the Company received cash proceeds of $1,451. After the payment of liabilities and transaction costs, including employee termination costs, the sale did not have a significant impact on cash, and no significant loss on sale. In connection with the disposition of the foreign entity, the Company released the related cumulative translation adjustment from “Accumulated Other Comprehensive Loss” on the Balance Sheet into income from continuing operations during the year ended December 31, 2019. This adjustment was $1,329 and is included in “Foreign Currency Loss” on the Statement of Operations. The Canadian subsidiary was not a significant operating segment and was part of the Other reportable segment On August 3, 2018, the Company completed the sale of the U.K. Limited segment. The historical financial position, results of operations, and cash flows for the U.K. segment have been restated for all periods to conform with discontinued operations presentation. Unless otherwise indicated, financial information within this document relates to continuing operations. In 2018, the Company consolidated three personalization operations in the United States into two facilities to better enable the Company to optimize operations and achieve market-leading quality and service with a market-competitive business model. In conjunction with this decision, the Company accelerated the depreciation of certain related assets, which totaled $2,398 for the year ended December 31, 2018. The Company recorded severance charges of $552, and recorded lease termination charges of $476 during the year ended December 31, 2018. The charges were recorded in the U.S. Debit and Credit segment and were included in “Cost of sales” and “Selling, general and administrative” expenses on the Consolidated Statement of Operations. The Company’s business consists of the following reportable segments: U.S. Debit and Credit, U.S. Prepaid Debit and Other. U.S. Debit and Credit Segment The U.S. Debit and Credit segment primarily produces Financial Payment Cards and provides integrated card services to card-issuing banks in the United States. Products manufactured by this segment primarily include EMV and non-EMV Financial Payment Cards, including contact, contactless, and dual-interface cards, CPI MetalsTM, a premium metal card and Second WaveTM payment cards featuring a core made with recovered ocean-bound plastic. The Company also sells instant card issuance solutions, and Private Label Credit Cards that are not issued on the networks of the Payment Cards Brands. The Company provides CPI On-Demand services, and produces images, personalized payment cards, and related collateral on a one-by-one, on demand basis for its customers. This segment also provides a variety of integrated card services, including card personalization and fulfillment services and instant issuance solutions. The U.S. Debit and Credit segment operations are each audited for compliance by multiple Payment Card Brands. Many customers require the Company to comply with the standards of the PCI Security Standards Council. U.S. Prepaid Debit Segment The U.S. Prepaid Debit segment primarily provides integrated card services to Prepaid Debit Card providers in the United States, including tamper-evident security packaging. This segment also produces Financial Payment Cards issued on the networks of the Payment Card Brands that are included in the tamper-evident security packages. The U.S. Prepaid Debit segment operation is audited for compliance by multiple Payment Card Brands. Many customers require the Company to comply with the standards of the PCI Security Standards Council. Other The Other segment includes corporate expenses and a less significant operation that generated sales from the production of Financial Payment Cards and retail gift cards, and card personalization and fulfillment services in Canada, prior to its sale. The sale agreement did not include the portions of the business relating to Financial Payment Cards, as those business customers of the Canadian subsidiary migrated to the Company’s operations in the U.S. or to other service providers in 2019.
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Summary of Significant Accounting Policies |
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Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying Consolidated Financial Statements include the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents and they are stated at cost, which approximates fair value. Trade Accounts Receivable and Concentration of Credit Risk Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company performs ongoing credit evaluations of its customers and generally requires no collateral to secure accounts receivable.
The Company maintains an allowance for potentially uncollectible accounts receivable based upon its assessment of the collectability of accounts receivable. Accounts are written off against the allowance when it is determined collection will not occur. The allowance for bad debt activity for the years ended December 31, 2019 and 2018 is summarized as follows:
The increase in bad debt expense during 2019 primarily relates to reserves established for outstanding receivables from the Company’s Canadian operations that were disposed on April 1, 2019. For the year ended December 31, 2019 one customer represented 18% of the Company’s consolidated net sales. For the year ended December 31, 2018 one customer represented 19% of the Company’s consolidated net sales. Inventories Inventories consist of raw materials, and finished goods and are measured at the lower of cost or net realizable value (determined on the first-in, first-out, specific identification or weighted-average method basis). Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Finished goods inventory represents primarily stock cards and Card@Once printers. The stock cards are ready to be personalized as customer orders are received. Plant, Equipment and Leasehold Improvements Plant, equipment and leasehold improvements are recorded at cost. Accumulated depreciation is computed using the straight-line method over the lesser of the estimated useful life of the related assets (generally 3 to 10 years for machinery and equipment, furniture, computer equipment, and leasehold improvements) or, when applicable, the lease term. Maintenance and repairs that do not extend the useful life of the respective assets are charged to expense as incurred. Long-lived assets with finite lives are reviewed for impairment whenever events indicate that the carrying amount of the asset or the carrying amounts of the asset group containing the asset may not be recoverable. In such reviews, estimated undiscounted future cash flows associated with these assets or asset groups are compared with their carrying value to determine if a write-down to fair value is required. Goodwill and Intangible Assets Goodwill is not amortized, but instead is tested for impairment at least annually on October 1 or more frequently when an event occurs or circumstances change that indicates the carrying value may not be recoverable. For impairment evaluations, the Company first makes a qualitative assessment with respect to goodwill. During 2017, the Company early adopted ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”) in conjunction with its annual impairment testing effective October 1, 2017. In accordance with ASU 2017-04, an entity should perform its goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount, and recognize an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value. During the year-ended December 31, 2019, the Company’s reporting units for goodwill impairment testing changed, based on the Company’s chief operating decision maker’s review of financial information and allocation of resources. As a result of this change in reporting units for goodwill impairment testing, the Company allocated goodwill, on a relative fair value, to the new reporting units. All of the Company’s goodwill is included in the U.S. Debit and Credit segment. The Company generally bases its measurement of the fair value of a reporting unit on a blended analysis of the present value of future discounted cash flows and the market valuation approach. The discounted cash flows model indicates the fair value of the reporting unit based on the present value of the cash flows that the Company expects the reporting unit to generate in the future. The Company's significant estimates in the discounted cash flows model include: its weighted average cost of capital; discrete and long-term rate of growth and profitability of the reporting unit's business; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison of the reporting unit to publicly traded companies in similar lines of business. Significant estimates in the market valuation approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment, and assessing comparable revenue and operating income multiples in estimating the fair value of the reporting unit. Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets, and are reviewed for impairment whenever events indicate that the carrying amount of the asset may not be recoverable. In such reviews, estimated undiscounted future cash flows associated with these assets are compared with their carrying value to determine if a write-down to fair value is required. Income Taxes The Company accounts for income taxes using an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. The Company has deferred tax assets and liabilities and maintains valuation allowances where it is more likely than not that all or a portion of deferred tax assets will not be realized. To the extent the Company determines that it will not realize the benefit of some or all of its deferred tax assets, then these deferred tax assets will be adjusted through the Company’s income tax expense in the period in which this determination is made. The Company recognizes the tax benefits from uncertain tax positions only when it is more likely than not, based on the technical merits of the position, that the tax position will be sustained upon examination, including the resolution of any related appeals or litigation. The tax benefits recognized in the consolidated financial statements from such a position are measured as the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. Stock-Based Compensation The Company accounts for stock-based compensation pursuant to ASC 718, Share-Based Payments. All stock-based compensation to employees is required to be measured at fair value and expensed over the requisite service period. The Company accounts for forfeitures as they occur and reverses previously recognized expense for the unvested portion of the forfeited shares. The Company recognizes compensation expense on awards on a straight-line basis over the vesting period for each tranche of an award. Refer to Note 16 “Stock Based Compensation” for additional discussion regarding details of the Company's stock-based compensation plans. Net Sales Products Net Sales “Products” net sales are recognized when obligations under the terms of a contract with a customer are satisfied. In most instances, this occurs over time as cards are manufactured for specific customers, have no alternative use, and the Company has an enforceable right to payment for work performed. For work performed but not completed and unbilled, the Company estimates revenue by taking actual costs incurred and applying historical margins for similar types of contracts. Items included in “Products” revenue are the design and production of Financial Payment Cards, including contact-EMV, Dual-Interface EMV®, metal, contactless and magnetic stripe cards, private label credit cards and retail gift cards. Card@Once® printers and consumables are also included in “Products” net sales, and their associated revenues are recognized at the time of shipping. The Company includes gross shipping and handling revenue in net sales, and shipping and handling costs in cost of sales.
Services Net Sales
Revenue is recognized for “Services” as the services are performed. Items included in “Services” net sales include the personalization and fulfillment of Financial Payment Cards, providing tamper-evident secure packaging and fulfillment services to Prepaid Debit Card program managers, and software as a service personalization of instant issuance debit cards. The Company also generates “Service” revenue usage-fees from the Company’s patented card design software, known as MYCA, which provides customers and cardholders the ability to design cards on the internet and customize cards with individualized digital images. “Services” revenue is also generated from personalizing retail gift cards historically in Canada prior to disposition. As applicable, for work performed but not completed and unbilled, the Company estimates revenue by taking actual costs incurred and applying historical margins for similar types of contracts.
Customer Contracts The Company often enters into Master Services Agreements (“MSAs”) with its customers. Generally, enforceable rights and obligations for goods and services occur only when a customer places a purchase order or statement of work to obtain goods or services under an MSA. The contract term as defined by ASU 2014-09 is the length of time it takes to deliver the goods or services promised under the purchase order or statement of work. As such, the Company's contracts are generally short term in nature.
Use of Estimates The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These accounting principles require management to make assumptions and estimates relating to the reporting of assets and liabilities in its preparation of the Consolidated Financial Statements. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, goodwill and intangible assets, leases, valuation allowances for inventories and deferred taxes, revenue recognized for work performed but not completed, and uncertain tax positions. Actual results could differ from those estimates. Foreign Currency Translation Financial statements of foreign subsidiaries that use local currencies as their functional currency are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and the weighted-average exchange rate for each reporting period for net sales, expenses, gains and losses. Translation adjustments are recorded as a component of Accumulated Other Comprehensive Loss in the accompanying consolidated financial statements. Subsequent to the sale of the UK Ltd. Segment and Canada, the Company has no significant foreign subsidiaries. Foreign currency transaction gains and losses resulting from the process of re-measurement are recorded in “Foreign currency loss” in the accompanying Consolidated Statements of Operations and Comprehensive Loss. For the years ended December 31, 2019 and 2018 there were ($1,327) and ($311) of such foreign currency losses, respectively. During the year ended December 31, 2019, in connection with the sale of the Company’s Canada subsidiary, the Company released the related cumulative translation adjustment of $1,329 from “Accumulated Other Comprehensive Loss” on the Balance Sheet into net loss from continuing operations. Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASC Topic 842, Leases (“ASC 842”), which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets. ASC 842 is effective for annual and interim periods beginning after December 15, 2018 (the Company’s fiscal year 2019) with early adoption permitted. The guidance required a modified retrospective approach, with an option to apply the transition provisions of the new guidance at the adoption date without adjusting the comparative periods presented. In July 2018, the FASB issued additional accounting standard updates clarifying certain provisions, as well as providing for a second transition method allowing entities to initially apply the standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. The Company adopted the new guidance on the effective date of January 1, 2019 and used the adoption date as the date of initial application as allowed under ASC 842. Consequently, historical financial information has not been updated and the disclosures required under the new standard have not be provided for dates and periods before January 1, 2019. The new standard provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight transition practical expedient. The new standard also provides practical expedients for the Company’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify, meaning the Company will not recognize right-of-use assets or lease liabilities for existing and new lease agreements as applicable. The Company also elected the practical expedient to not separate lease and non-lease components for all of its leases. Right-of-use (“ROU’) represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. If applicable, the Company used the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. A lease is deemed to exist when the Company has the right to control the use of identified property, plant or equipment, as conveyed through a contract, for a certain period of time and consideration paid. The right to control is deemed to occur when the Company has the right to obtain substantially all of the economic benefits of the identified assets and the right to direct the use of such assets. As a result of the adoption of ASC 842 the Company recorded $8,025 of operating ROU assets, and corresponding operating lease liabilities of $8,813 on January 1, 2019, relating to existing real estate operating leases. The components of operating and finance lease costs for the year ended December 31, 2019 were as follows:
The following table reflects balances for operating leases and financing leases:
Finance and operating lease right-of-use assets are recorded in “Plant, equipment and leasehold improvements, net”. Financing and operating lease liabilities are recorded in “Accrued expenses” and “Other long-term liabilities”. Components of lease expense were as follows:
Future cash payments with respect to lease obligations as of December 31, 2019 were as follows:
Future cash payments with respect to lease obligations as of December 31, 2018 were as follows:
Cash paid on operating leases was $1,973 during the year ended December 31, 2019.
As of January 1, 2018, the Company adopted Accounting Standards Update Codification ASC 606, Revenue from Contracts with Customers, which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 also requires an entity to disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company applied ASC 606 as of January 1, 2018 to all its contracts using the modified retrospective method and recognized the cumulative effect of adoption as an adjustment to the opening balance of “Accumulated loss” on the Consolidated Balance Sheet. Under the new guidance, the Company recognizes certain performance obligations over time as the goods are produced, since those products provide value to only a specified customer, have no alternative use and the Company has the right to payment for work completed on such items. This accelerates the timing of revenue recognition for these arrangements, as revenue is recognized as goods are produced rather than upon shipment or delivery of goods. See Note 3 “Net Sales” for revenue recognition timing and methodology under ASC 606.
Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This ASU changes the model for the recognition of credit losses from an incurred loss model, which recognized credit losses only if it was probable that a loss had been incurred, to an expected loss model, which requires the Company to estimate the total credit losses expected on the portfolio of financial instruments. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not anticipate the adoption of this standard will have a material impact on the Company’s consolidated financial position, results of operations, and cash flows. |
Net Sales |
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Net Sales | 3. Net Sales
The Company disaggregates its net sales by major source as follows:
Products Net Sales “Products” net sales are recognized when obligations under the terms of a contract with a customer are satisfied. In most instances, this occurs over time as cards are manufactured for specific customers and have no alternative use and the Company has an enforceable right to payment for work performed. For work performed but not completed and unbilled, the Company estimates revenue by taking actual costs incurred and applying historical margins for similar types of contracts. Items included in “Products” revenue are manufactured Financial Payment Cards, including in contact-EMV, Dual-Interface EMV, contactless and magnetic stripe cards, Second Wave, metal, private label credit cards and retail gift cards. Card@Once printers and consumables are also included in “Products” revenue, and their associated revenues are recognized at the time of shipping. The Company includes gross shipping and handling revenue in net sales, and shipping and handling costs in cost of sales. Services Net Sales Net sales are recognized for “Services” as the services are performed. Items included in “Services” net sales include the personalization and fulfillment of Financial Payment Cards, providing tamper-evident secure packaging and fulfillment services to Prepaid Debit Card program managers and software as a service personalization of instant issuance debit cards. For work performed but not completed and unbilled, the Company estimates revenue by taking actual costs incurred and applying historical margins for similar types of contracts. Customer Contracts The Company often enters into Master Services Agreements (“MSAs”) with its customers. Generally, enforceable rights and obligations for goods and services occur only when a customer places a purchase order or statement of work to obtain goods or services under an MSA. The contract term as defined by ASC 606 is the length of time it takes to deliver the goods or services promised under the purchase order or statement of work. As such, the Company's contracts are generally short term in nature. |
Discontinued Operation |
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Discontinued Operation | 4. Discontinued Operation On August 3, 2018, the Company completed the sale of its United Kingdom facilities that comprised the U.K. Limited reporting segment. The Company did not retain significant continuing involvement with the discontinued operation subsequent to the disposal. In connection with the sale, the Company performed a goodwill impairment test and recorded a charge of $6,366 in the second quarter of 2018. The impairment was a result of continued market softness in the U.K. Limited segment, resulting in lower sales and margins and an expected sales price below the carrying value of the segment. The Company also recorded an impairment charge of $1,249 to customer relationship intangible assets related to the U.K. Limited segment in the second quarter of 2018. The Company recorded a $7,248 loss on sale of U.K Limited for the year ended December 31, 2018. In connection with the substantial liquidation of the foreign entity, the Company released the related cumulative translation adjustment from accumulated other comprehensive loss into loss from discontinued operations. This adjustment was $3,983 and is included in other expense (income), net in the schedule below. The major line items constituting the loss of the discontinued operation for the year ended December 31, 2019 and 2018 were as follows:
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Inventories |
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Inventories | 5. Inventories
Inventories are summarized below:
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Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-use Assets |
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Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-use Assets |
6. Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-use Assets
Plant, equipment, leasehold improvements and operating lease right-of-use assets consist of the following:
Amounts recorded for the depreciation of plant, equipment and leasehold improvements were $12,384 and $13,749 for the years ended December 31, 2019 and 2018, respectively.
There were no impairments of the Company’s plant, equipment, and leasehold improvement assets for the continuing operations of the Company for the years ended December 31, 2019 and 2018. |
Goodwill and Other Intangible Assets |
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Goodwill and Other Intangible Assets | 7. Goodwill and Other Intangible Assets
All of the Company’s $47,150 of goodwill is included in the U.S. Debit and Credit segment at December 31, 2019 and 2018.
In connection with the sale of the Company’s U.K. Limited segment, the Company performed a goodwill impairment test and recorded a charge of $6,366 in discontinued operations during the year ended December 31, 2018. The impairment was a result of continued market softness in the U.K. operations, resulting in lower sales and margins and an expected sale price below the carrying value of the segment. The Company completed its goodwill impairment testing as of October 1, 2019, and no impairments were recognized as a result of this analysis. CPI’s amortizable intangible assets consist of customer relationships, technology and software, and trademarks. Total intangible assets are being amortized over a weighted-average useful life of 15.7 years. Intangible amortization expense totaled $4,635 and $4,656 for the years ended December 31, 2019 and 2018, respectively. During the year ended December 31, 2019 there were no impairments of the Company’s amortizable intangible assets. The Company recorded an impairment charge of $1,249 to customer relationship intangible assets related to the U.K. Limited segment in the second quarter of 2018, which is reported in discontinued operations. Intangible assets consist of the following:
The estimated future aggregate amortization expense for the identified amortizable intangibles noted above as of December 31, 2019 is as follows:
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Fair Value of Financial Instruments |
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Fair Value of Financial Instruments |
8. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). In determining fair value, the Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
The Company’s financial assets and liabilities that are not required to be remeasured at fair value in the Consolidated Balance Sheets are as follows:
The aggregate fair value of the Company’s First Lien Term Loan, as defined in Note 10, “Long-Term Debt and Credit Facility,” was based on bank quotes. The carrying amounts for cash and cash equivalents approximate fair value due to their short maturities. Nonrecurring fair value measurements include the Company’s goodwill and intangible asset impairments recognized during the year ended December 31, 2018, as determined based on unobservable Level 3 inputs. Refer to Note 7, “Goodwill and Other Intangible Assets”, and Note 4, “Discontinued Operations”. |
Accrued Liabilities |
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Accrued Liabilities | 9. Accrued Liabilities
Accrued liabilities consisted of the following:
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Long-Term Debt and Credit Facility |
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Long-Term Debt and Credit Facility | 10. Long-Term Debt and Credit Facility
Long-term debt consists of the following:
First Lien Credit Facility On August 17, 2015, the Company entered into the first lien credit facility (the “First Lien Credit Facility”) with a syndicate of lenders providing for a $435,000 first lien term loan (the “First Lien Term Loan”) and a $40,000 revolving credit facility (the “Revolving Credit Facility”). The First Lien Term Loan matures August 17, 2022 and the Revolving Credit Facility was terminated on March 6, 2020. On March 6, 2020, the Company entered into a new $30,000 senior credit facility (the “Senior Credit Facility”), which matures on May 17, 2022. The Revolving Credit Facility was terminated concurrently with the closing of the new Senior Credit Facility on March 6, 2020. Refer to Note 19- Subsequent Event for further information. The Revolving Credit Facility was, and the First Lien Credit Facility is, secured by a first-priority security interest in substantially all of the Company's assets constituting equipment, inventory, receivables, cash and other tangible and intangible property. Interest rates under the First Lien Term Loan are based, at the Company's election, on a Eurodollar rate, subject to an interest rate floor of 1.0%, plus a margin of 4.50% or a base rate plus a margin of 3.50%. The interest rate as of December 31, 2019 was 6.71%. The First Lien Term Loan contains customary nonfinancial covenants, including among other things, restrictions on indebtedness, issuance of liens, investments, dividends, redemptions and other distributions to equity holders, asset sales, certain mergers or consolidations, sales, transfers, leases or dispositions of substantially all of the Company's assets and affiliate transactions. The First Lien Credit Facility also contained a requirement that, as of the last day of any fiscal quarter, if the amount the Company has drawn under the Revolving Credit Facility was greater than 50% of the aggregate principal amount of all commitments of the lenders thereunder, then the Company must maintain a first lien net leverage not in excess of 7.0 times adjusted EBITDA, as defined in the agreement. As of December 31, 2019, the Company was in compliance with all covenants under the First Lien Credit Facility. The Revolving Credit Facility required, and the First Lien Term Loan also requires a prepayment in advance of the maturity date upon the occurrence of certain customary events, including based on an annual excess cash flow calculation, pursuant to the terms of the agreement, with any required payments to be made after the issuance of the Company’s annual financial statements. The Company did not have a required excess cash flow payment related to 2019. In accordance with the terms of the First Lien Credit Facility, the Company repaid $112,500 of the First Lien Term Loan on October 15, 2015 in conjunction with the completion of its initial public offering, and an additional $10,000 during the fourth quarter of 2015. As of December 31, 2019, the Company did not have any outstanding amounts under the Revolving Credit Facility, and had $19,950 available for borrowing. The interest rate on the Revolving Credit Facility was the Federal base rate plus 3.5%. The Company had one outstanding letter of credit for $50 relating to the security deposit on a real property lease agreement under the terms of the Revolving Credit Facility. The Company paid a fee on outstanding letters of credit at the applicable margin, which was 4.5% as of December 31, 2019, in addition to a fronting fee of 0.125% per annum. In addition, the Company was required to pay an unused commitment fee ranging from 0.375% per annum to 0.50% per annum of the average unused portion of the revolving commitments. The Company accrued interest of $4,951 and $5,058 recorded within “Accrued expenses” on the Consolidated Balance Sheets as of December 31, 2019, and 2018, respectively. Deferred Financing Costs and Discount Certain costs and discounts incurred with borrowings or the establishment or modification of credit facilities are reflected as a reduction to the long-term debt balance. These costs are amortized as an adjustment to interest expense over the life of the borrowing using the effective-interest rate method. |
Income Taxes |
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Income Taxes | 11. Income Taxes
Income tax (benefit) expense from continuing operations and effective income tax rates consist of the following:
The effective income tax rate differs from the U.S. federal statutory income tax rate as follows:
The components of the deferred tax assets and liabilities are as follows:
The net change in the valuation allowance during the year ended December 31, 2019 was a decrease of $1,185. The overall decrease is comprised primarily of a decrease related to the sale of certain foreign subsidiaries and changes in facts and circumstances related to state research and development credits carried forward, partially offset by an increase due to the interest deduction limitation related to section 163(j) that is not expected to be fully realized. For 2019, the effective tax rate differs from the federal U.S. statutory rate primarily due to the impact of tax expense recorded related to a partial valuation allowance on certain U.S. deferred tax assets. The partial valuation allowance is due to the limitation on the deductibility of interest expense which is a provision of U.S. government tax reform legislation enacted in December 2017. In addition, the Company recorded tax benefits relating to certain elections in connection with the U.K. segment disposition. Other items impacting the effective tax rate in 2019 include other permanent non-deductible items, and state and foreign income taxes. The Company no longer has any substantial potential tax benefits associated with gross foreign operating loss carryforwards due to the sale of its Canadian subsidiary. The Company has potential tax benefits associated with $3,668 of gross domestic operating loss carryforwards as of December 31, 2019, which do not expire. The Company also has various state and local operating loss carryforwards which will expire at various dates from 2033 to 2038. The Company does expect to be able to utilize these losses prior to expiration. The Company’s income tax receivable on the consolidated balance sheet as of December 31, 2019, and December 31, 2018, is primarily comprised of a U.S. federal income tax receivable relating to a prior tax year. The Company has potential tax benefits associated with state research and development tax credit carryforwards as of December 31, 2019 of $108, which will expire in 2032. The Company expects to be able to recognize these credit carryforwards, and accordingly has not provided a valuation allowance for the tax benefit. Additionally, the Company does not have any potential tax benefits associated with federal research and development tax credit carryforwards as of December 31, 2019. At December 31, 2019, no provision has been made for U.S. federal and state taxes on cumulative foreign earnings as there are no current or cumulative earnings of foreign operations. The Company recorded no current tax benefit in 2019 related to the sale of the Canadian operations. Unrecognized Tax Benefits Unrecognized tax benefits represent the aggregate tax effect of differences between the tax return positions and the amounts otherwise recognized in the Company’s consolidated financial statements, and are reflected in “Other long term liabilities” and “Deferred income taxes” in the Company’s consolidated balance sheets. The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax provision only when based upon the technical merits, it is “more-likely-than-not” that the tax position will be sustained upon examination.
The Company recognizes interest and penalties with respect to unrecognized tax benefits as a component of income tax expense. The amount of accrued interest and penalties related to unrecognized tax benefits for the year ended December 31, 2019 was $238, and was $221 for the year ended December 31, 2018. The Company is generally subject to potential federal and state examinations for the tax years on and after December 31, 2014 for federal purposes and December 31, 2015 for state purposes. The Company is subject to examinations for its U.K. subsidiaries for tax years ended on and after December 31, 2018. The Company's Canadian subsidiary which was sold April 1, 2019, is subject to examination for tax years ended on and after December 31, 2016. |
Stockholders' Deficit |
12 Months Ended |
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Dec. 31, 2019 | |
Stockholders’ Deficit | |
Stockholders’ Deficit | 12. Stockholders’ Deficit Common Stock Common Stock has a par value of $0.001 per share. Holders of common stock are entitled to receive dividends and distributions subject to the participation rights of holders of all classes of stock at the time outstanding, as such holders have prior rights as to dividends pursuant to the rights of any series of Preferred Stock. Upon any liquidation, dissolution, or winding up of the Company, after required payments are made to holders of any series of Preferred Stock, any remaining assets of the Company will be distributed ratably to the holders of Common Stock. Holders of Common Stock are entitled to one vote per share. |
Loss per Share |
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Loss per Share | 13. Loss per Share Basic or diluted loss per share is computed by dividing net earnings or loss by the weighted-average number of ordinary shares outstanding during the period. The following table sets forth the computation of basic and diluted loss per share:
The potentially dilutive effect of 800,431 and 985,876 stock options and restricted stock units as of December 31, 2019 and 2018, respectively, has been excluded from the computation of diluted earnings per share as their inclusion would be anti-dilutive. |
Commitments and Contingencies: Litigation Settlement |
12 Months Ended |
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Dec. 31, 2019 | |
Commitments and Contingencies: Litigation Settlement. | |
Commitments and Contingencies: Litigation Settlement | 14. Commitments and Contingencies; Litigation Settlement Commitments Please see Note 2 Summary of Significant Accounting Polices for details on our future cash payments with respect to financing and operating leases The Company has recorded the current portion of financing lease obligations in “Accrued expenses” and the long-term financing lease obligations in “Other long-term liabilities”, within the consolidated balance sheet as of December 31, 2019, and December 31, 2018. The Company incurred rent expense under non-cancellable operating leases during the years ended December 31, 2019 and 2018, totaling $3,344 and $3,767, respectively. During the normal course of business, the Company enters into non-cancellable agreements to purchase goods and services, including production equipment and information technology systems. The Company leases real property for its facilities under non-cancellable operating lease agreements. Land and facility leases expire at various dates between 2021 and 2024 and contain various provisions for rental adjustments and renewals. The leases typically require the Company to pay property taxes, insurance and normal maintenance costs. Contingencies In accordance with applicable accounting guidance, the Company establishes an accrued liability when loss contingencies are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. As a matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. Once the loss contingency is deemed to be both probable and estimable, the Company will establish an accrued liability and record a corresponding amount of litigation-related expense. The Company expenses professional fees associated with litigation claims and assessments as incurred. Heckermann v. Montross et al., Case No. 1:17-CV-01673 (D. Del.) (the “Derivative Suit”) On November 20, 2017, a purported Company stockholder filed a stockholder derivative complaint in the United States District Court for the District of Delaware (the “Court”) against certain of the Company’s former officers and current and former directors, along with the sponsors of the Company’s October 2015 initial public offering (“IPO”). The Company was also named as a nominal defendant. The derivative complaint asserted claims under §§10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 and sought, among other things, injunctive relief, damages and costs. It alleged false or misleading statements and omissions in the Registration Statement filed by the Company in connection with its IPO and subsequent public filings and statements. The derivative complaint also asserted claims for purported breaches of fiduciary duties, unjust enrichment, mismanagement and waste of corporate assets. On December 18, 2019, the parties filed a Stipulation and Agreement of Settlement to resolve and dismiss the Derivative Suit, and on January 2, 2020, the Court granted preliminary approval of the settlement set forth therein. Under the settlement, (i) all claims that were or could have been asserted in the Derivative Suit will be resolved and discharged, (ii) the Company will implement certain corporate governance reforms, and (iii) the Company’s insurer will pay fees and expenses awarded to the plaintiff’s counsel in the amount of $343 and a service award to the plaintiff of a nominal amount. The Court will hold a hearing on April 1, 2020 to, among other things, approve the settlement. No liability has been recorded by the Company as of December 31, 2019, and December 31, 2018. In addition to the matter described above, the Company is subject to routine legal proceedings in the ordinary course of business. The Company believes that the ultimate resolution of these matters will not have a material adverse effect on our business, financial condition or results of operations. Litigation Settlement CPI Card Group Inc. v. Multi Packaging Solutions, Inc., et al. Second Case During the summer of 2017, the Company and its subsidiary, CPI Card Group – Minnesota, Inc. (together, the “Company Plaintiffs”), commenced a lawsuit in the United States District Court for the District of Minnesota against a former employee, Multi Packaging Solutions, Inc. (“MPS”), and two MPS employees as individuals (collectively, the Defendants). On June 12, 2019, the Company Plaintiffs and the Defendants reached a settlement pursuant to which the case was resolved and dismissed by mutual agreement on terms that provided for, among other things, a cash payment to the Company. The Company received a $6,000 cash settlement payment during the second quarter of 2019, and recorded the gain within income from operations, in the Other segment. The case was dismissed in its entirety, with prejudice, by court order on July 12, 2019. |
Employee Benefit Plan |
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Dec. 31, 2019 | |
Employee Benefit Plan | |
Employee Benefit Plan | 15. Employee Benefit Plan The Company maintains a qualified defined-contribution plan under the provisions of the Internal Revenue Code Section 401(k), which covers substantially all employees in the United States who meet certain eligibility requirements. Under the plan, participants may defer their salary subject to statutory limitations and may direct the contributions among various investment options. The Company matches 100% of the participant’s first 3% of deferrals and 50% matching on each of the 4th and 5th percent contributed by the participant. As the Company operates the plan as a safe harbor 401(k) plan, the Company’s match is 100% vested at the time of the match. The aggregate amounts charged to expense in connection with the plan were $1,359 and $1,235 for the years ended December 31, 2019 and 2018, respectively. |
Stock Based Compensation |
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Stock Based Compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Based Compensation | 16. Stock Based Compensation CPI Card Group Inc. Omnibus Incentive Plan During October 2015, the Company adopted the CPI Card Group Inc. Omnibus Incentive Plan (the “Omnibus Plan”) pursuant to which cash and equity based incentives may be granted to participating employees, advisors and directors. The Company had reserved 1,200,000 shares of common stock for issuance under the Omnibus Plan. As of December 31, 2019, there were 278,199 shares available for grant under the Omnibus Plan. The Company did not grant any awards of non-qualified stock options for the year ended December 31, 2019. During the year ended December 31, 2018, the Company granted awards of non-qualified stock options for 159,755 shares of common stock. All stock option grants have a 10-year term, and will generally vest ratably over a three-year period beginning on the first anniversary of the grant date. The following is a summary of the activity in outstanding stock options under the Omnibus Plan:
The following is a summary of the activity in non-vested stock options under the Omnibus Plan:
Unvested options as of December 31, 2019 vest as follows:
The fair value of stock option awards was determined at the date of grant using a Black-Scholes option-pricing model, with the following weighted-average assumptions:
Expected term –For option grants valued using a Black-Scholes option-pricing model, the Company estimated the expected term based on the average of the weighted-average vesting period and the contractual term of the stock option awards by utilizing the “simplified method”, as the Company does not have sufficient available historical data to estimate the expected term of these stock option awards. Volatility – The Company considered the volatility of its own common stock in determining the fair value of stock option awards, in addition to a peer group average historical volatility over the expected option term. This is due to the limited amount of trading history of the Company’s common stock. The peer group was based on financial technology companies that completed an initial public offering of common stock within the last 10 years. Risk-free interest rate – The risk-free interest rate was determined by using the United States Treasury rate for the period that coincided with the expected option term. Dividend yield – The estimated dividend yield is based on the Company’s recent historical dividend practice and the market value of its common stock. The weighted average grant-date fair value of options granted is as follows:
The following table summarizes the changes in the number of outstanding restricted stock units for the year ended December 31, 2019 under the Omnibus Plan:
The Company did not grant awards of restricted stock units for the year ended December 31, 2019. During the year ended December 31, 2018, the Company granted awards of restricted stock units for 75,188 shares of common stock. The restricted stock unit awards contain conditions associated with continued employment or service, and generally vest one year from the date of grant. On the vesting dates, shares of common stock are issued to the award recipients. Unvested restricted stock units of 7,347 as of December 31, 2019 will vest entirely in 2020.
The following table summarizes the changes in the number of outstanding cash performance awards for the year ended December 31, 2019:
During the year ended December 31, 2017, the Company granted awards of 932,837 cash performance units with a grant-date fair value of $663. These awards will settle in cash in three annual payments on the first, second and third anniversaries of the date of grant. The cash performance units are based on the performance of the Company’s stock, measured based on the Company’s stock price at each of the first, second, and third anniversaries of the grant date compared to the Company’s stock price on the date of grant. The cash performance units originally in 2017 were valued using a Monte Carlo simulation. The Company recognizes compensation expense on a straight-line basis for each annual performance period. The cash performance units are accounted for as a liability and remeasured to fair value at the end of each reporting period. As of December 31, 2019, the Company recognized a liability of $65 in “Accrued expenses” in the Consolidated Balance Sheet for unsettled cash performance units, which are expected to vest in March 2020. Compensation expense for the Omnibus Plan for the years ended December 31, 2019 and 2018 was $250 and $961, respectively. As of December 31, 2019, the total unrecognized compensation expense related to unvested options, restricted stock units, and cash performance unit awards under the Omnibus Plan was $126, which the Company expects to recognize over an estimated weighted average period of 0.8 years. CPI Holdings I, Inc. Amended and Restated 2007 Stock Option Plan In 2007, the Company’s Board of Directors adopted the CPI Holdings I, Inc. Amended and Restated 2007 Stock Option Plan (the “Option Plan”). Under the provisions of the Option Plan, stock options may be granted to employees, directors, and consultants at an exercise price greater than or equal to (and not less than) the fair market value of a share on the date the option is granted. As a result of the Company’s adoption of its Omnibus Plan, as further described above, no further awards will be made under the Option Plan. During the year ended December 31, 2019, the remaining 6,600 outstanding shares in the Option Plan were exercised. As such, there were no outstanding shares remaining as of December 31, 2019 There was no compensation expense related to options previously granted under the Option Plan, for years ended December 31, 2019 and 2018. |
Segment Reporting |
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Segment Reporting | 17. Segment Reporting The Company has identified reportable segments as those consolidated subsidiaries that represent 10% or more of its net sales, EBITDA (as defined below) or total assets, or when the Company believes information about the segment would be useful to the readers of the financial statements. The Company’s chief operating decision maker is its Chief Executive Officer who is charged with management of the Company and is responsible for the evaluation of operating performance and decision making about the allocation of resources to operating segments based on measures, such as net sales and EBITDA. EBITDA is the primary measure used by the Company’s chief operating decision maker to evaluate segment operating performance. As the Company uses the term, EBITDA is defined as income before interest expense, income taxes, depreciation and amortization. The Company’s chief operating decision maker believes EBITDA is a meaningful measure and is superior to available GAAP measures as it represents a transparent view of the Company’s operating performance that is unaffected by fluctuations in property, equipment and leasehold improvement additions. The Company’s chief operating decision maker uses EBITDA to perform periodic reviews and comparison of operating trends and identify strategies to improve the allocation of resources amongst segments. On August 3, 2018, the Company completed the sale of the U.K. Limited segment. See Note 4 “Discontinued Operation” for further information. The Company has restated all historical periods presented within these financial statements and has not included U.K. Limited as a reportable segment. As of December 31, 2019, the Company’s reportable segments were as follows:
U.S. Debit and Credit Segment The U.S. Debit and Credit segment primarily produces Financial Payment Cards and provides integrated card services to card-issuing banks in the United States. Products manufactured by this segment primarily include EMV and non-EMV Financial Payment Cards, including contact, contactless, and dual-interface cards, CPI MetalsTM, a premium metal card and Second WaveTM payment cards featuring a core made with recovered ocean-bound plastic. The Company also sells instant card issuance solutions, and Private Label Credit Cards that are not issued on the networks of the Payment Cards Brands. The Company provides CPI On-Demand services, where images, personalized payment cards, and related collateral are produced on a one-by-one, on demand basis for customers. This segment also provides a variety of integrated card services, including card personalization and fulfillment services and instant issuance services. The U.S. Debit and Credit segment operations are each audited for compliance by multiple Payment Card Brands. Many of the Company’s customers require CPI to comply with the standards of the PCI Security Standards Council. U.S. Prepaid Debit Segment The U.S. Prepaid Debit segment primarily provides integrated card services to Prepaid Debit Card providers in the United States, including tamper-evident security packaging. This segment also produces Financial Payment Cards issued on the networks of the Payment Card Brands that are included in the tamper-evident security packages. The U.S. Prepaid Debit segment operation is audited for compliance by multiple Payment Card Brands. Many of the Company’s customers require CPI to comply with the standards of the PCI Security Standards Council. Other The Other segment includes corporate expenses and a less significant operation that generated sales from the production of Financial Payment Cards and retail gift cards, and card personalization and fulfillment services in Canada, prior to its sale. The sale agreement did not include the portions of the business relating to Financial Payment Cards, as those business customers of the Canadian subsidiary migrated to the Company’s operations in the U.S. or to other service providers in 2019.
Performance Measures of Reportable Segments Net sales and EBITDA from continuing operations of the Company’s reportable segments for the years ended December 31, 2019 and 2018 were as follows:
The following table provides a reconciliation of total segment EBITDA from continuing operations to “Net loss from continuing operations” for the years ended December 31, 2019 and 2018:
Balance Sheet Data of Reportable Segments
Total assets of the Company’s reportable segments as of December 31, 2019 and 2018 were as follows:
Net Sales to Geographic Location; Property, Equipment and Leasehold Improvements and Long-Lived assets by Geographic Segments
Subsequent to the sale of the Company’s U.K. Limited segment and reclassification to discontinued operations, and the sale of the Company’s Canada operations on April 1, 2019, the Company’s Net Sales, Property, Equipment and Leasehold Improvements, and Long-Lived assets relating to geographic locations outside of the United States is insignificant.
Net Sales by Product and Services
Net sales from products and services sold by the Company for the years ended December 31, 2019 and 2018 were as follows:
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Quarterly Financial Information (Unaudited) | 18. Quarterly Financial Information (Unaudited)
Summarized quarterly results for the years ended December 31, 2019 and 2018 on a continuing operations basis, were as follows:
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Subsequent Event |
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Subsequent Event | 19. Subsequent Event
On March 6, 2020, the Company entered into a new $30,000 floating rate senior credit facility (the “Senior Credit Facility”) with two of its First Lien Term Loan lenders. The Senior Credit Facility, which is senior in priority to the Company’s $312,500 First Lien Term Loan, matures on May 17, 2022, and is collateralized by substantially all of the Company’s assets. The Company plans to use the proceeds towards execution of its strategic plan. Concurrently with the closing of the new Senior Credit Facility, the Company’s Revolving Credit Facility was terminated, and CPI and CPI Acquisition, Inc. entered into a second amendment to the First Lien Term Loan. The Revolving Credit Facility had no outstanding borrowings as of December 31, 2019, or on its termination date of March 6, 2020.
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Summary of Significant Accounting Policies (Policies) |
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Basis of Presentation | Basis of Presentation The accompanying Consolidated Financial Statements include the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. |
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Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents and they are stated at cost, which approximates fair value. |
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Trade Accounts Receivable and Concentration of Credit Risk | Trade Accounts Receivable and Concentration of Credit Risk Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company performs ongoing credit evaluations of its customers and generally requires no collateral to secure accounts receivable.
The Company maintains an allowance for potentially uncollectible accounts receivable based upon its assessment of the collectability of accounts receivable. Accounts are written off against the allowance when it is determined collection will not occur. The allowance for bad debt activity for the years ended December 31, 2019 and 2018 is summarized as follows:
The increase in bad debt expense during 2019 primarily relates to reserves established for outstanding receivables from the Company’s Canadian operations that were disposed on April 1, 2019. For the year ended December 31, 2019 one customer represented 18% of the Company’s consolidated net sales. For the year ended December 31, 2018 one customer represented 19% of the Company’s consolidated net sales. |
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Inventories | Inventories Inventories consist of raw materials, and finished goods and are measured at the lower of cost or net realizable value (determined on the first-in, first-out, specific identification or weighted-average method basis). Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Finished goods inventory represents primarily stock cards and Card@Once printers. The stock cards are ready to be personalized as customer orders are received. |
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Plant, Equipment and Leasehold Improvements | Plant, Equipment and Leasehold Improvements Plant, equipment and leasehold improvements are recorded at cost. Accumulated depreciation is computed using the straight-line method over the lesser of the estimated useful life of the related assets (generally 3 to 10 years for machinery and equipment, furniture, computer equipment, and leasehold improvements) or, when applicable, the lease term. Maintenance and repairs that do not extend the useful life of the respective assets are charged to expense as incurred. Long-lived assets with finite lives are reviewed for impairment whenever events indicate that the carrying amount of the asset or the carrying amounts of the asset group containing the asset may not be recoverable. In such reviews, estimated undiscounted future cash flows associated with these assets or asset groups are compared with their carrying value to determine if a write-down to fair value is required. |
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Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill is not amortized, but instead is tested for impairment at least annually on October 1 or more frequently when an event occurs or circumstances change that indicates the carrying value may not be recoverable. For impairment evaluations, the Company first makes a qualitative assessment with respect to goodwill. During 2017, the Company early adopted ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”) in conjunction with its annual impairment testing effective October 1, 2017. In accordance with ASU 2017-04, an entity should perform its goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount, and recognize an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value. During the year-ended December 31, 2019, the Company’s reporting units for goodwill impairment testing changed, based on the Company’s chief operating decision maker’s review of financial information and allocation of resources. As a result of this change in reporting units for goodwill impairment testing, the Company allocated goodwill, on a relative fair value, to the new reporting units. All of the Company’s goodwill is included in the U.S. Debit and Credit segment. The Company generally bases its measurement of the fair value of a reporting unit on a blended analysis of the present value of future discounted cash flows and the market valuation approach. The discounted cash flows model indicates the fair value of the reporting unit based on the present value of the cash flows that the Company expects the reporting unit to generate in the future. The Company's significant estimates in the discounted cash flows model include: its weighted average cost of capital; discrete and long-term rate of growth and profitability of the reporting unit's business; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison of the reporting unit to publicly traded companies in similar lines of business. Significant estimates in the market valuation approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment, and assessing comparable revenue and operating income multiples in estimating the fair value of the reporting unit. Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets, and are reviewed for impairment whenever events indicate that the carrying amount of the asset may not be recoverable. In such reviews, estimated undiscounted future cash flows associated with these assets are compared with their carrying value to determine if a write-down to fair value is required. |
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Income Taxes | Income Taxes The Company accounts for income taxes using an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. The Company has deferred tax assets and liabilities and maintains valuation allowances where it is more likely than not that all or a portion of deferred tax assets will not be realized. To the extent the Company determines that it will not realize the benefit of some or all of its deferred tax assets, then these deferred tax assets will be adjusted through the Company’s income tax expense in the period in which this determination is made. The Company recognizes the tax benefits from uncertain tax positions only when it is more likely than not, based on the technical merits of the position, that the tax position will be sustained upon examination, including the resolution of any related appeals or litigation. The tax benefits recognized in the consolidated financial statements from such a position are measured as the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. |
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Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based compensation pursuant to ASC 718, Share-Based Payments. All stock-based compensation to employees is required to be measured at fair value and expensed over the requisite service period. The Company accounts for forfeitures as they occur and reverses previously recognized expense for the unvested portion of the forfeited shares. The Company recognizes compensation expense on awards on a straight-line basis over the vesting period for each tranche of an award. Refer to Note 16 “Stock Based Compensation” for additional discussion regarding details of the Company's stock-based compensation plans. |
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Net Sales | Net Sales Products Net Sales “Products” net sales are recognized when obligations under the terms of a contract with a customer are satisfied. In most instances, this occurs over time as cards are manufactured for specific customers, have no alternative use, and the Company has an enforceable right to payment for work performed. For work performed but not completed and unbilled, the Company estimates revenue by taking actual costs incurred and applying historical margins for similar types of contracts. Items included in “Products” revenue are the design and production of Financial Payment Cards, including contact-EMV, Dual-Interface EMV®, metal, contactless and magnetic stripe cards, private label credit cards and retail gift cards. Card@Once® printers and consumables are also included in “Products” net sales, and their associated revenues are recognized at the time of shipping. The Company includes gross shipping and handling revenue in net sales, and shipping and handling costs in cost of sales.
Services Net Sales
Revenue is recognized for “Services” as the services are performed. Items included in “Services” net sales include the personalization and fulfillment of Financial Payment Cards, providing tamper-evident secure packaging and fulfillment services to Prepaid Debit Card program managers, and software as a service personalization of instant issuance debit cards. The Company also generates “Service” revenue usage-fees from the Company’s patented card design software, known as MYCA, which provides customers and cardholders the ability to design cards on the internet and customize cards with individualized digital images. “Services” revenue is also generated from personalizing retail gift cards historically in Canada prior to disposition. As applicable, for work performed but not completed and unbilled, the Company estimates revenue by taking actual costs incurred and applying historical margins for similar types of contracts.
Customer Contracts The Company often enters into Master Services Agreements (“MSAs”) with its customers. Generally, enforceable rights and obligations for goods and services occur only when a customer places a purchase order or statement of work to obtain goods or services under an MSA. The contract term as defined by ASU 2014-09 is the length of time it takes to deliver the goods or services promised under the purchase order or statement of work. As such, the Company's contracts are generally short term in nature.
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Use of Estimates | Use of Estimates The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These accounting principles require management to make assumptions and estimates relating to the reporting of assets and liabilities in its preparation of the Consolidated Financial Statements. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, goodwill and intangible assets, leases, valuation allowances for inventories and deferred taxes, revenue recognized for work performed but not completed, and uncertain tax positions. Actual results could differ from those estimates. |
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Foreign Currency Translation | Foreign Currency Translation Financial statements of foreign subsidiaries that use local currencies as their functional currency are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and the weighted-average exchange rate for each reporting period for net sales, expenses, gains and losses. Translation adjustments are recorded as a component of Accumulated Other Comprehensive Loss in the accompanying consolidated financial statements. Subsequent to the sale of the UK Ltd. Segment and Canada, the Company has no significant foreign subsidiaries. Foreign currency transaction gains and losses resulting from the process of re-measurement are recorded in “Foreign currency loss” in the accompanying Consolidated Statements of Operations and Comprehensive Loss. For the years ended December 31, 2019 and 2018 there were ($1,327) and ($311) of such foreign currency losses, respectively. During the year ended December 31, 2019, in connection with the sale of the Company’s Canada subsidiary, the Company released the related cumulative translation adjustment of $1,329 from “Accumulated Other Comprehensive Loss” on the Balance Sheet into net loss from continuing operations. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASC Topic 842, Leases (“ASC 842”), which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets. ASC 842 is effective for annual and interim periods beginning after December 15, 2018 (the Company’s fiscal year 2019) with early adoption permitted. The guidance required a modified retrospective approach, with an option to apply the transition provisions of the new guidance at the adoption date without adjusting the comparative periods presented. In July 2018, the FASB issued additional accounting standard updates clarifying certain provisions, as well as providing for a second transition method allowing entities to initially apply the standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. The Company adopted the new guidance on the effective date of January 1, 2019 and used the adoption date as the date of initial application as allowed under ASC 842. Consequently, historical financial information has not been updated and the disclosures required under the new standard have not be provided for dates and periods before January 1, 2019. The new standard provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight transition practical expedient. The new standard also provides practical expedients for the Company’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify, meaning the Company will not recognize right-of-use assets or lease liabilities for existing and new lease agreements as applicable. The Company also elected the practical expedient to not separate lease and non-lease components for all of its leases. Right-of-use (“ROU’) represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. If applicable, the Company used the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. A lease is deemed to exist when the Company has the right to control the use of identified property, plant or equipment, as conveyed through a contract, for a certain period of time and consideration paid. The right to control is deemed to occur when the Company has the right to obtain substantially all of the economic benefits of the identified assets and the right to direct the use of such assets. As a result of the adoption of ASC 842 the Company recorded $8,025 of operating ROU assets, and corresponding operating lease liabilities of $8,813 on January 1, 2019, relating to existing real estate operating leases. The components of operating and finance lease costs for the year ended December 31, 2019 were as follows:
The following table reflects balances for operating leases and financing leases:
Finance and operating lease right-of-use assets are recorded in “Plant, equipment and leasehold improvements, net”. Financing and operating lease liabilities are recorded in “Accrued expenses” and “Other long-term liabilities”. Components of lease expense were as follows:
Future cash payments with respect to lease obligations as of December 31, 2019 were as follows:
Future cash payments with respect to lease obligations as of December 31, 2018 were as follows:
Cash paid on operating leases was $1,973 during the year ended December 31, 2019.
As of January 1, 2018, the Company adopted Accounting Standards Update Codification ASC 606, Revenue from Contracts with Customers, which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 also requires an entity to disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company applied ASC 606 as of January 1, 2018 to all its contracts using the modified retrospective method and recognized the cumulative effect of adoption as an adjustment to the opening balance of “Accumulated loss” on the Consolidated Balance Sheet. Under the new guidance, the Company recognizes certain performance obligations over time as the goods are produced, since those products provide value to only a specified customer, have no alternative use and the Company has the right to payment for work completed on such items. This accelerates the timing of revenue recognition for these arrangements, as revenue is recognized as goods are produced rather than upon shipment or delivery of goods. See Note 3 “Net Sales” for revenue recognition timing and methodology under ASC 606.
Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This ASU changes the model for the recognition of credit losses from an incurred loss model, which recognized credit losses only if it was probable that a loss had been incurred, to an expected loss model, which requires the Company to estimate the total credit losses expected on the portfolio of financial instruments. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not anticipate the adoption of this standard will have a material impact on the Company’s consolidated financial position, results of operations, and cash flows. |
Summary of Significant Accounting Policies (Tables) |
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Summary of Significant Accounting Policies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of trade accounts receivable |
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Schedule of allowance for bad debt and credit activity |
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Schedule of operating and finance lease costs |
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Schedule of balance sheet information for operating leases and financing leases |
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Schedule of Components of lease expense |
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Lease maturity schedule |
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Schedule of future cash payments with respect to operating leases and purchase obligations | Future cash payments with respect to lease obligations as of December 31, 2018 were as follows:
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Net Sales (Tables) |
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Schedule of disaggregation of net sales by major source |
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Discontinued Operation (Tables) |
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Schedule of assets, liabilities and operations of discontinued operations | The major line items constituting the loss of the discontinued operation for the year ended December 31, 2019 and 2018 were as follows:
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Inventories (Tables) |
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Schedule of inventories |
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Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-use Assets (Tables) |
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Schedule of plant, equipment, leasehold improvements and operating lease right-to-use assets |
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Goodwill and Other Intangible Assets (Tables) |
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Schedule of intangible assets excluding goodwill |
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Schedule of future aggregate amortization expense for identified amortizable intangibles |
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Fair Value of Financial Instruments (Tables) |
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Schedule of financial assets and liabilities subject to fair value measurements |
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Accrued Liabilities (Tables) |
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Schedule of Accrued Liabilities |
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Long-Term Debt and Credit Facility (Tables) |
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Schedule of long-term debt |
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Income Taxes (Tables) |
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Schedule of income tax (benefit) expense from continuing operations and effective income tax rates |
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Schedule of effective income tax rate reconciliation |
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Schedule of components of deferred tax assets and liabilities |
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Unrecognized Tax Benefits |
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Loss per Share (Tables) |
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss per Share | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of basic and diluted loss per share |
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Stock Based Compensation (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of changes in outstanding restricted stock units |
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Summary of changes in number of outstanding cash performance units |
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Omnibus Plan | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of outstanding and exercisable stock options |
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Summary of activity in non-vested stock options |
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Schedule of vesting for unvested options |
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Schedule of valuation assumptions |
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Weighted average grant date fair value of options granted |
|
Segment Reporting (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of revenue and EBITDA of the company's reportable segments |
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Schedule of reconciliation of total segment EBITDA to income before taxes |
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Schedule of total assets of the company's reportable segments |
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Schedule of net sales from product and services sold by the company |
“Services” net sales include revenue from the personalization and fulfillment of Financial Payment Cards, providing tamper-evident security packaging and fulfillment services to Prepaid Debit Card program managers and software as a service personalization of instant issuance debit cards. The Company also generates “Services” revenue from usage fees generated from the Company’s patented card design software, known as MYCA, which provides customers and cardholders the ability to design cards on the internet and customize cards with individualized digital images. “Services” revenue is also generated from personalizing retail gift cards, historically generated in Canada prior to the disposition. |
Quarterly Financial Information (Unaudited) (Tables) |
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Dec. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of summarized quarterly results |
|
Business (Details) $ in Thousands |
1 Months Ended | 12 Months Ended | |
---|---|---|---|
Feb. 28, 2018
item
|
Dec. 31, 2019
USD ($)
item
|
Dec. 31, 2018
USD ($)
|
|
Business | |||
Minimum number of payment card brands which certify card services | item | 1 | ||
Number of personalization operations consolidated | item | 3 | ||
Number of facilities personalization operations were consolidated into | item | 2 | ||
Accelerated depreciation | $ 2,398 | ||
Severance charge | 552 | ||
Termination charge | $ 476 | ||
Proceeds from Divestiture of Interest in Subsidiaries and Affiliates | $ 1,451 | ||
Reclassification of cumulative translation adjustment from accumulated other comprehensive income | $ 1,329 |
Summary of Significant Accounting Policies - Trade Accounts Receivable (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Trade Accounts Receivable | |||
Trade accounts receivable | $ 39,004 | $ 36,428 | |
Unbilled accounts receivable | 4,223 | 7,577 | |
Trade and unbilled accounts receivable | 43,227 | 44,005 | |
Less allowance for doubtful accounts | (395) | (211) | $ (48) |
Accounts receivable, net | $ 42,832 | $ 43,794 |
Summary of Significant Accounting Policies - Bad debts and Concentration of Credit Risk (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Allowance for bad debt and credit activity | ||
Beginning balance | $ 211 | $ 48 |
Bad debt expense | 228 | 169 |
Write-off of uncollectible accounts | (37) | (6) |
Currency translation adjustment | (7) | |
Ending balance | $ 395 | $ 211 |
Customer Concentration Risk | Net sales | ||
Allowance for bad debt and credit activity | ||
Concentration risk (as a percent) | 18.00% | 19.00% |
Summary of Significant Accounting Policies - Plant, Equipment and Leasehold Improvements (Details) |
12 Months Ended |
---|---|
Dec. 31, 2019 | |
Minimum | |
Plant, Equipment and Leasehold Improvements | |
Useful life (in years) | 3 years |
Maximum | |
Plant, Equipment and Leasehold Improvements | |
Useful life (in years) | 10 years |
Summary of Significant Accounting Policies - Foreign Currency Translation (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Foreign Currency Translation | ||
Foreign currency (losses) gains | $ (1,327) | $ (311) |
Reclassification adjustment to foreign currency loss | $ (1,329) |
Summary of Significant Accounting Policies - Other (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Jan. 01, 2019 |
|
Recently Issued Accounting Pronouncements | ||
Lease, Practical Expedient, Use of Hindsight | false | |
Lease, Practical Expedients, Package | true | |
Operating lease liabilities | $ 7,350 | |
Accounting Standards Update 2016-02 | ||
Recently Issued Accounting Pronouncements | ||
Right-to-use assets | $ 8,025 | |
Operating lease liabilities | $ 8,813 |
Summary of Significant Accounting Policies - Components of Operating and Finance Lease Expense (Details) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2019
USD ($)
| |
Operating lease cost: | |
Total operating lease costs | $ 2,625 |
Finance lease cost: | |
Amortization of right-of-use assets | 886 |
Interest on lease liabilities | 290 |
Total financing lease cost | $ 1,176 |
Summary of Significant Accounting Policies - Components of Lease Expense (Details) |
Dec. 31, 2019 |
---|---|
Weighted Average Remaining Lease Term | |
Weighted Average Remaining Lease Term - Operating Leases | 3 years 4 months 24 days |
Weighted Average Remaining Lease Term - Financing Leases | 2 years 10 months 10 days |
Weighted Average Discount Rate | |
Weighted Average Discount Rate - Operating Leases | 8.94% |
Weighted Average Discount Rate - Financing Leases | 9.28% |
Summary of Significant Accounting Policies - Lease Maturity (Details) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2019
USD ($)
| |
Operating Leases | |
2020 | $ 2,854 |
2021 | 2,646 |
2022 | 1,371 |
2023 | 1,097 |
2024 | 602 |
Total operating lease payment | 8,570 |
Less imputed interest | (1,220) |
Total operating lease liabilities | 7,350 |
Cash paid for amounts included in the measurement of lease liabilities | 1,973 |
Financing Leases | |
2020 | 2,659 |
2021 | 2,043 |
2022 | 1,565 |
2023 | 676 |
Total financing lease payment | 6,943 |
Less imputed interest | (846) |
Total financing lease liabilities | $ 6,097 |
Summary of Significant Accounting Policies - Operating and Capital Leases (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Future Cash Payments, Capital Lease: | |
2019 | $ 521 |
2020 | 474 |
2021 | 243 |
2022 | 256 |
2023 | 71 |
Total | 1,565 |
Future Cash Payments, Operating Leases: | |
2019 | 2,927 |
2020 | 2,771 |
2021 | 2,512 |
2022 | 1,243 |
2023 | 971 |
Thereafter | 652 |
Total | $ 11,076 |
Inventories (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Inventories | ||
Raw materials | $ 16,492 | $ 8,235 |
Finished goods | 5,047 | 2,991 |
Inventory reserve | (1,347) | (1,399) |
Inventory | $ 20,192 | $ 9,827 |
Goodwill and Other Intangible Assets - Goodwill by Reporting Segment (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2019 |
|
Goodwill | $ 47,150 | $ 47,150 |
Impairment of goodwill | 6,366 | |
Operating Segments | U.S. Debit and Credit | ||
Goodwill | $ 47,150 | $ 47,150 |
Goodwill and Other Intangible Assets - Future Aggregate Amortization Expense (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Estimated future aggregate amortization expense | ||
2020 | $ 4,595 | |
2021 | 4,352 | |
2022 | 3,867 | |
2023 | 3,867 | |
2024 | 3,530 | |
Thereafter | 10,591 | |
Intangible assets subject to amortization, Net Book Value | $ 30,802 | $ 35,437 |
Fair Value of Financial Instruments (Details) - First Lien Credit Facility - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Liabilities: | ||
Carrying amount | $ 312,500 | $ 312,500 |
Term Loan | ||
Liabilities: | ||
Carrying amount | 312,500 | 312,500 |
Long-term debt | 234,375 | 203,125 |
Level 2 | Term Loan | ||
Liabilities: | ||
Long-term debt | $ 234,375 | $ 203,125 |
Accrued Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Accrued Liabilities | ||
Accrued payroll and related employee expenses | $ 3,954 | $ 4,040 |
Accrued employee performance bonus | 3,920 | 7,137 |
Accrued Interest | 4,951 | 5,058 |
Operating and financing lease liability (current portion) | 4,494 | 521 |
Other | 5,501 | 7,097 |
Total accrued expenses | $ 22,820 | $ 23,853 |
Long-Term Debt and Credit Facility - Long-Term Debt (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Long-term Debt | ||
Unamortized discount | $ (1,770) | $ (2,448) |
Unamortized deferred financing costs | (2,952) | (4,234) |
Total long-term debt | 307,778 | 305,818 |
Long-term debt, net of current maturities | $ 307,778 | 305,818 |
First Lien Credit Facility | ||
Long-term Debt | ||
Interest rate (as a percent) | 6.71% | |
Long-term debt | $ 312,500 | $ 312,500 |
Income Taxes - Continuing Operations (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Current taxes: | ||
Domestic | $ 2,490 | $ 2,558 |
Foreign | 15 | |
Current income tax (benefit) expense | 2,505 | 2,558 |
Deferred taxes: | ||
Domestic | 1,147 | (6,897) |
Deferred income tax (benefit) expense | 1,147 | (6,897) |
Income tax expense (benefit) | 3,652 | (4,339) |
Loss before income taxes | ||
Domestic income (loss) | 801 | (18,383) |
Foreign | (1,479) | (755) |
Income (loss) before income taxes | $ (678) | $ (19,138) |
Effective income tax rate (as a percent) | (538.60%) | 22.70% |
Tax expense recorded related to valuation allowance | $ 1,185 |
Income Taxes – Continuing Operations - Effective Income Tax Rate Reconciliation (Details) |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Effective Income Tax Rate Reconciliation | ||
Tax at federal statutory rate (as a percent) | 21.00% | 21.00% |
State income taxes (as a percent) | (114.80%) | 4.00% |
Foreign taxes (as a percent) | (51.90%) | (0.10%) |
Tax benefit for U.K. sale | 345.20% | 17.50% |
Valuation allowance (as a percent) | (474.70%) | (13.50%) |
Unrecognized tax benefits (as a percent) | (34.50%) | (4.80%) |
Tax credits (as a percent) | (108.40%) | 2.50% |
Deferred tax impact of enacted tax rate and law changes (as a percent) | (0.70%) | |
Permanent items (as a percent) | (120.60%) | (1.80%) |
Other (as a percent) | 0.10% | (1.40%) |
Effective income tax rate (as a percent) | (538.60%) | 22.70% |
Income Taxes - Components of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Deferred tax assets: | ||
Accrued expense | $ 2,426 | $ 2,553 |
Net operating loss carryforward | 1,216 | 5,589 |
Deferred financing costs | 400 | 553 |
Stock compensation | 892 | 861 |
Tax credit carryforward | 17 | 1,118 |
Interest limitation | 8,773 | 4,412 |
Lease liability | 1,728 | |
Other | 669 | 927 |
Total gross deferred tax asset | 16,121 | 16,013 |
Valuation allowance | (5,638) | (6,823) |
Net deferred tax assets | 10,483 | 9,190 |
Deferred tax liabilities: | ||
Plant, property and leasehold improvements | (5,505) | (3,851) |
Intangible assets | (8,877) | (9,311) |
Right-to-use assets | (1,486) | |
Prepaid expense and other | (1,511) | (1,777) |
Total gross deferred tax liabilities | (17,379) | (14,939) |
Net deferred tax liabilities | $ (6,896) | $ (5,749) |
Income Taxes - Foreign Currency Exchange Rate Fluctuations, Changes in Net Operating Losses and Credit Carryforwards (Details) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2019
USD ($)
| |
Valuation allowance | |
Net increase in valuation allowance | $ 1,185 |
State | |
Operating Loss Carryforwards | |
Research and development tax credit carryforwards | 108 |
Foreign | |
Operating Loss Carryforwards | |
Operating Loss Carryforwards | $ 3,668 |
Income Taxes - Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Unrecognized Tax Benefits | ||
Unrecognized Tax Benefits, Beginning Balance | $ 2,044 | |
Increase related to current year tax position | 349 | |
Decrease related to prior year tax position | (97) | |
Decrease related to settlements with tax authorities, net of federal benefit | (124) | |
Unrecognized Tax Benefits, Ending Balance | 2,172 | |
Unrecognized tax benefits, accrued interest and penalties | $ 238 | $ 221 |
Stockholders' Deficit (Details) |
Dec. 31, 2019
Vote / shares
$ / shares
|
Dec. 31, 2018
$ / shares
|
---|---|---|
Dividends, Common Stock [Abstract] | ||
Common shares, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 |
Common Stock | ||
Class of Stock | ||
Voting rights per share | Vote / shares | 1 |
Commitments and Contingencies: Litigation Settlement - Commitments (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Commitments and Contingencies: Litigation Settlement. | ||
Operating leases, rent expense | $ 3,344 | $ 3,767 |
Commitments and Contingencies: Litigation Settlement - Contingencies (Details) |
12 Months Ended | |||
---|---|---|---|---|
Dec. 18, 2019
USD ($)
|
Jun. 30, 2015
plaintiff
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2018
USD ($)
|
|
Heckermann Montross Suit | Pending Litigation | ||||
Commitments and Contingencies | ||||
Loss contingency accrual | $ 0 | $ 0 | ||
Heckermann Montross Suit | Settled Litigation | ||||
Commitments and Contingencies | ||||
Settlement expense | $ 343,000 | |||
CPI Card Group Inc. v. Multi Packaging Solutions, Inc., et al. Second Case | Settled Litigation | ||||
Commitments and Contingencies | ||||
Number of purported shareholders that have filed lawsuits | plaintiff | 2 | |||
Proceeds from settlements | $ 6,000,000 |
Employee Benefit Plan (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Employee Benefits | ||
Employee benefit plan, Company's portion vested at time of match (as a percent) | 100.00% | |
Employee benefit plan expense | $ 1,359 | $ 1,235 |
Participant's first 3% of deferrals | ||
Employee Benefits | ||
Employee benefit plan, Company match (as a percent) | 100.00% | |
Participant's second 2% of deferrals | ||
Employee Benefits | ||
Employee benefit plan, Company match (as a percent) | 50.00% |
Stock Based Compensation - Cash Performance Units (Details) - Cash Performance - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2017 |
|
Number of Cash Performance Units | ||
Units outstanding at the beginning of the period (in shares) | 425,012 | |
Granted (in shares) | 932,837 | |
Vested (in shares) | (212,505) | |
Forfeited (in shares) | (71,435) | |
Units outstanding at the end of the period (in shares) | 141,072 | |
Vesting period | 3 years | |
Accrued expenses | ||
Number of Cash Performance Units | ||
Cash performance liability | $ 65 |
Stock Based Compensation - Option Plan (Details) - Stock Options - Option Plan - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Stock based compensation | ||
Compensation expense | $ 0 | $ 0 |
Number of shares | ||
Exercised (in shares) | 6,600 | |
Exercisable (in shares) | 0 |
Segment Reporting - Revenue and EBITDA from Continuing Operations (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Segment Reporting | ||
Revenue | $ 278,073 | $ 255,814 |
EBITDA | 41,215 | 22,698 |
U.S. Debit and Credit | ||
Segment Reporting | ||
EBITDA | 46,227 | 34,213 |
U.S. Prepaid Debit | ||
Segment Reporting | ||
EBITDA | 22,456 | 23,782 |
Other | ||
Segment Reporting | ||
EBITDA | (27,468) | (35,297) |
Operating Segments | U.S. Debit and Credit | ||
Segment Reporting | ||
Revenue | 213,141 | 178,597 |
Operating Segments | U.S. Prepaid Debit | ||
Segment Reporting | ||
Revenue | 64,330 | 69,199 |
Operating Segments | Other | ||
Segment Reporting | ||
Revenue | 1,679 | 9,891 |
Intersegment eliminations | ||
Segment Reporting | ||
Revenue | $ (1,077) | $ (1,873) |
Segment Reporting - Reconciliation of EBITDA from Continuing Operations to "Net income (loss) from continuing operations" (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Reconciliation of total segment EBITDA to income before taxes | ||||||||||
Total segment EBITDA from continuing operations | $ 41,215 | $ 22,698 | ||||||||
Interest, net | (24,891) | (23,431) | ||||||||
Income tax (expense) benefit | (3,652) | 4,339 | ||||||||
Depreciation and amortization | (17,002) | (18,405) | ||||||||
Net loss from continuing operations | $ (2,129) | $ (656) | $ 1,552 | $ (3,097) | $ (7,235) | $ (1,085) | $ (802) | $ (5,677) | $ (4,330) | $ (14,799) |
Segment Reporting - Balance Sheet Data (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Segment Reporting | ||
Total assets | $ 213,487 | $ 207,204 |
Operating Segments | ||
Segment Reporting | ||
Total assets | 213,487 | 207,204 |
Operating Segments | U.S. Debit and Credit | ||
Segment Reporting | ||
Total assets | 176,496 | 169,567 |
Operating Segments | U.S. Prepaid Debit | ||
Segment Reporting | ||
Total assets | 25,259 | 25,117 |
Operating Segments | Other | ||
Segment Reporting | ||
Total assets | $ 11,732 | $ 12,520 |
Segment Reporting - Net Sales by Product and Services (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Segment Reporting | ||
Total net sales | $ 278,073 | $ 255,814 |
Products | ||
Segment Reporting | ||
Total net sales | 143,941 | 125,069 |
Services | ||
Segment Reporting | ||
Total net sales | $ 134,132 | $ 130,745 |
Quarterly Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Quarterly Financial Information (Unaudited) | ||||||||||
Total net sales | $ 72,625 | $ 71,681 | $ 66,901 | $ 66,866 | $ 68,516 | $ 70,987 | $ 61,454 | $ 54,857 | $ 278,073 | $ 255,814 |
Gross profit | 21,998 | 25,419 | 22,381 | 21,521 | 20,979 | 23,308 | 19,875 | 14,428 | 91,319 | 78,590 |
Net income (loss) from continuing operations | $ (2,129) | $ (656) | $ 1,552 | $ (3,097) | $ (7,235) | $ (1,085) | $ (802) | $ (5,677) | $ (4,330) | $ (14,799) |
Basic and diluted loss per share: | ||||||||||
earnings (loss) per share from continuing operations (in dollars per share) | $ (0.19) | $ (0.06) | $ 0.14 | $ (0.28) | $ (0.65) | $ (0.10) | $ (0.07) | $ (0.51) | $ (0.39) | $ (1.33) |
Subsequent Event (Details) |
Mar. 05, 2020
USD ($)
item
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2018
USD ($)
|
Aug. 17, 2015
USD ($)
|
---|---|---|---|---|
Revolving Credit Facility | ||||
Subsequent events | ||||
Amount outstanding | $ 0 | |||
First Lien Credit Facility | ||||
Subsequent events | ||||
Long-term debt | 312,500,000 | $ 312,500,000 | ||
First Lien Credit Facility | Term Loan | ||||
Subsequent events | ||||
Maximum borrowing capacity | $ 435,000,000 | |||
Long-term debt | 312,500,000 | $ 312,500,000 | ||
First Lien Credit Facility | Revolving Credit Facility | ||||
Subsequent events | ||||
Maximum borrowing capacity | $ 40,000,000 | |||
Amount outstanding | $ 0 | $ 0 | ||
Senior Credit Facility | Revolving Credit Facility | ||||
Subsequent events | ||||
Maximum borrowing capacity | 30,000,000 | |||
Subsequent Events | Senior Credit Facility | Revolving Credit Facility | ||||
Subsequent events | ||||
Maximum borrowing capacity | $ 30,000,000 | |||
Number of first lien term loan lenders | item | 2 |