CPI CARD GROUP INC., 10-K filed on 3/6/2019
Annual Report
v3.10.0.1
Document and Entity Information - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Feb. 22, 2019
Jun. 30, 2018
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, 2018    
Amendment Flag false    
Current Fiscal Year End Date --12-31    
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   11,160,537  
Entity Public Float     $ 8.1
Entity Small Business true    
Entity Emerging Growth Company true    
Entity Ex Transition Period true    
Entity Shell Company false    
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
v3.10.0.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Current assets:    
Cash and cash equivalents $ 20,291 $ 23,205
Accounts receivable, net of allowances of $211 and $48, respectively 43,794 32,531
Inventories 9,827 13,799
Prepaid expenses and other current assets 4,997 3,681
Income taxes receivable 5,564 8,208
Assets of discontinued operation   20,651
Total current assets 84,473 102,075
Plant, equipment and leasehold improvements, net 39,110 44,436
Intangible assets, net 35,437 40,093
Goodwill 47,150 47,150
Other assets 1,034 251
Total assets 207,204 234,005
Current liabilities:    
Accounts payable 16,511 13,239
Accrued expenses 23,853 12,789
Deferred revenue and customer deposits 912 3,342
Liabilities of discontinued operation   5,669
Total current liabilities 41,276 35,039
Long-term debt 305,818 303,869
Deferred income taxes 5,749 12,168
Other long-term liabilities 3,937 2,503
Total liabilities 356,780 353,579
Commitments and contingencies (Note 13)
Stockholders' deficit:    
Common Stock; $0.001 par value—100,000,000 shares authorized; 11,160,377 shares issued and outstanding and 11,134,714 shares issued and outstanding at December 31, 2018 and 2017, respectively 11 11
Capital deficiency (112,223) (113,081)
Accumulated loss (36,004) (1,366)
Accumulated other comprehensive loss (1,360) (5,138)
Total stockholders' deficit (149,576) (119,574)
Total liabilities and stockholders' deficit $ 207,204 $ 234,005
v3.10.0.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Consolidated Balance Sheets    
Allowance on accounts receivable $ 211 $ 48
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) 11,160,377 11,134,714
Common shares, outstanding shares (in shares) 11,160,377 11,134,714
v3.10.0.1
Consolidated Statements of Operations and Comprehensive Loss - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Net sales:    
Total net sales $ 255,814 $ 223,744
Cost of sales:    
Depreciation and amortization 12,417 10,697
Total cost of sales 177,224 155,539
Gross profit 78,590 68,205
Operating expenses:    
Selling, general and administrative (exclusive of depreciation and amortization shown below) 68,014 62,206
Impairments   19,074
Depreciation and amortization 5,988 6,225
Total operating expenses 74,002 87,505
Income (loss) from operations 4,588 (19,300)
Other expense, net:    
Interest, net (23,431) (20,850)
Foreign currency (loss) gain (311) 517
Other income, net 16 12
Total other expense, net (23,726) (20,321)
Loss before income taxes (19,138) (39,621)
Income tax benefit 4,339 16,536
Net loss from continuing operations (14,799) (23,085)
Net (loss) income from discontinued operation, net of taxes (22,663) 1,075
Net loss $ (37,462) $ (22,010)
Basic and diluted (loss) earnings per share:    
Continuing operations (in dollars per share) $ (1.33) $ (2.08)
Discontinued operation (in dollars per share) (2.03) 0.10
Net (loss) earnings per share (in dollars per share) $ (3.36) $ (1.98)
Basic and dilutive weighted-average shares outstanding (in shares) 11,149,554 11,117,454
Dividends declared per common share   $ 0.45
Comprehensive loss    
Net loss $ (37,462) $ (22,010)
Reclassification adjustment from discontinued operations 3,983  
Currency translation adjustment (205) 1,277
Total comprehensive loss (33,684) (20,733)
Products    
Net sales:    
Total net sales 125,069 104,459
Cost of sales:    
Products (exclusive of depreciation and amortization shown below) 82,110 70,527
Services    
Net sales:    
Total net sales 130,745 119,285
Cost of sales:    
Services (exclusive of depreciation and amortization shown below) $ 82,697 $ 74,315
v3.10.0.1
Consolidated Statements of Stockholders' Deficit - USD ($)
$ in Thousands
ASU 2014-09
Accumulated earnings (loss)
ASU 2014-09
ASU 2016-09
Capital deficiency
ASU 2016-09
Accumulated earnings (loss)
Common Stock
Capital deficiency
Accumulated earnings (loss)
Accumulated other comprehensive loss
Total
Beginning balance at Dec. 31, 2016         $ 11 [1] $ (114,837) $ 25,968 $ (6,415) $ (95,273)
Beginning balance (in shares) at Dec. 31, 2016 [1]         11,071,813        
Adoption of ASU     $ (38) $ 38          
Common stock dividends             (5,021)   (5,021)
Shares issued under stock-based compensation plans             (341)   (341)
Shares issued under stock-based compensation plans (in shares) [1]         62,901        
Stock-based compensation           1,794     1,794
Components of comprehensive (loss) income:                  
Net loss             (22,010)   (22,010)
Currency translation adjustment               1,277 1,277
Ending balance at Dec. 31, 2017         $ 11 [1] (113,081) (1,366) (5,138) $ (119,574)
Ending balance (in shares) at Dec. 31, 2017         11,134,714 [1]       11,134,714
Adoption of ASU $ 2,824 $ 2,824              
Shares issued under stock-based compensation plans (in shares) [1]         25,663        
Stock-based compensation           858     $ 858
Components of comprehensive (loss) income:                  
Net loss             (37,462)   (37,462)
Other comprehensive loss from discontinued operations               3,983 3,983
Currency translation adjustment               (205) (205)
Ending balance at Dec. 31, 2018         $ 11 [1] $ (112,223) $ (36,004) $ (1,360) $ (149,576)
Ending balance (in shares) at Dec. 31, 2018         11,160,377 [1]       11,160,377
[1] Common share and par value amounts have been adjusted to give retroactive effect to the 1-for-5 reverse stock split effected on December 20, 2017.
v3.10.0.1
Consolidated Statements of Stockholders' Deficit (Parenthetical)
Dec. 20, 2017
Consolidated Statements of Stockholders' Deficit  
Reverse stock split 0.20
v3.10.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Operating activities    
Net loss $ (37,462) $ (22,010)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Loss (income) from discontinued operations 22,663 (1,075)
Impairments   19,074
Depreciation and amortization expense 18,405 16,922
Stock-based compensation expense 961 1,989
Amortization of debt issuance costs and debt discount 1,949 1,947
Deferred income tax (6,897) (9,167)
Other, net 302 (165)
Changes in operating assets and liabilities:    
Accounts receivable (5,523) (6,396)
Inventories (1,998) 2,826
Prepaid expenses and other assets (2,108) 619
Income taxes 2,644 (8,581)
Accounts payable 2,411 5,655
Accrued expenses 10,436 (456)
Deferred revenue and customer deposits 632 599
Other liabilities 655 1,671
Cash provided by operating activities - continuing operations 7,070 3,452
Cash used in operating activities -discontinued operations (3,550) (1,025)
Investing activities    
Acquisitions of plant, equipment and leasehold improvements (5,634) (7,263)
Cash used in investing activities - continuing operations (5,634) (7,263)
Cash used in investing activities - discontinued operations (220) (1,527)
Financing activities    
Dividends paid on common stock   (7,540)
Payments on capital leases (519)  
Taxes withheld and paid on stock-based compensation awards   (341)
Cash used in financing activities (519) (7,881)
Effect of exchange rates on cash (61) 494
Net decrease in cash and cash equivalents: (2,914) (13,750)
Cash and cash equivalents, beginning of period 23,205 36,955
Cash and cash equivalents, end of period 20,291 23,205
Supplemental disclosures of cash flow information    
Cash paid (refunded) during the period for: Interest 20,703 18,466
Cash paid (refunded) during the period for: Income tax (refunds) payments, net (657) 30
Capital lease obligations incurred for certain machinery and equipment 1,812  
Accounts payable for acquisition of plant, equipment and leasehold improvements $ 1,339 $ 400
v3.10.0.1
Business
12 Months Ended
Dec. 31, 2018
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, Discover and Interac (in Canada)) in the United States and 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 certified by one or more of the Payment Card Brands and is therefore subject to specific requirements and conditions. Noncompliance with these requirements would prohibit the individual facilities of the Company from producing Financial Payment Cards for these entities’ payment card issuers.

In 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.

On August 3, 2018, the Company completed the sale of its three facilities in the United Kingdom that produce retail cards, such as gift and loyalty cards, for customers in the United Kingdom and continental Europe, and provide personalization, packaging and fulfillment services. The facilities sold included Colchester, Liverpool and Derby locations. The transaction was structured as a sale of all of the outstanding shares of CPI Card Group – UK Limited, for total consideration of approximately $4,500. During the third quarter 2018, the Company received net cash proceeds of $315 after the repayment of liabilities associated with the United Kingdom facilities, excluding tax benefits related to the structure of the sale.

During the first quarter of 2018, the Company reorganized its United States business operations and realigned its United States reporting segments to correspond with the manner with which the Company’s chief operating decision maker evaluates operating performance and makes decisions as to the allocation of resources. As a result of this realignment, the Company’s CPI on Demand business operations moved from the U.S. Prepaid Debit segment into the U.S. Debit and Credit reporting segment, consistent with the other related personalization operations. Segment information for previous periods has been restated to conform with this realignment and the current period presentation. The restatement of the segment information was not material. 

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 credit cards, debit cards and Prepaid Debit Cards issued on the networks of the Payment Card Brands, and Private Label Credit Cards that are not issued on the networks of the Payment Cards Brands (including general purpose reloadable, gift, payroll and employee benefit, government disbursement, incentive, and transit cards).  The Company’s sales of instant card issuance systems are recorded in this segment.  CPI On-Demand services, where the Company is able to produce all images, personalized payment cards and related collateral on a one-by-one, on demand basis for its customers, enabling individualized offerings and reducing waste. 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 certified by multiple global Payment Card Brands and, where required by our customers, certified to be in compliance 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 and fulfillment. 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 certified by multiple global Payment Card Brands, and is certified to be in compliance with the standards of the PCI Security Standards Council.

Other

The Other category includes corporate headquarters and a less significant operating segment that derives revenue from the production of Financial Payment Cards and retail gift cards, and card personalization and fulfillment services in Canada.

 

v3.10.0.1
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2018
Summary of Significant Accounting Policies  
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.

 

 

 

 

 

 

 

 

    

December 31, 2018

    

December 31, 2017

Trade accounts receivable

 

$

36,428

 

$

32,579

Unbilled accounts receivable

 

 

7,577

 

 

 —

 

 

 

44,005

 

 

32,579

Less allowance for doubtful accounts

 

 

(211)

 

 

(48)

 

 

$

43,794

 

$

32,531

 

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 and credit activity for the years ended December 31, 2018 and 2017 is summarized as follows:

 

 

 

 

 

 

Balance as of December 31, 2016

    

$

124

 

Bad debt expense

 

 

 4

 

Write-off of uncollectible accounts

 

 

(82)

 

Currency translation adjustments

 

 

 2

 

Balance as of December 31, 2017

 

$

48

 

Bad debt expense

 

 

169

 

Write-off of uncollectible accounts

 

 

(6)

 

Balance as of December 31, 2018

 

$

211

 

 

For the year ended December 31, 2018 one customer represented 19% of the Company’s consolidated net sales. For the year ended December 31, 2017 one customer represented 15% 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.

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 both goodwill and other indefinite-lived intangibles. 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.

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 comparable 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, net of forfeitures, over the requisite service period. 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 15 “Stock Based Compensation” for additional discussion regarding details of the Company's stock-based compensation plans.

Accrued Expenses

Accrued liabilities include accrued payroll expense of $2,371, and $2,526, as of December 31, 2018, and 2017, respectively.  Accrued liabilities as of December 31, 2018, also includes accrued employee performance bonus of $7,137. 

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, valuation allowances for inventories and deferred taxes, debt, uncertain tax positions and stock-based compensation expense. 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.

Foreign currency transaction gains and losses resulting from the process of re-measurement are recorded in “Foreign currency gain (loss)” in the accompanying Consolidated Statements of Operations and Comprehensive (Loss) Income. For the years ended December 31, 2018 and 2017 there were $(311) and $517 of such foreign currency (losses) gains, respectively.

Recently Accounting Pronouncements

Recently Adopted Accounting Pronouncements

As of January 1, 2018, the Company adopted Accounting Standards Codification ASC 606, Revenue from Contracts with Customers, (“ASC 606”), 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 adopted ASC 606 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. In addition, as a result of adopting the new guidance, the Company has recorded decreases to deferred revenue, and work in process and finished goods inventories, and an increase to accounts receivable. These changes are reflected in the adoption adjustments table below. The comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods.

See Note 3 “Net sales” for revenue recognition timing and methodology under ASC 606.

The cumulative effects of the adjustments made to the Company’s January 1, 2018 Consolidated Balance Sheet upon adoption of ASC 606 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

    

Adoption

    

January 1,

 

 

2017

 

Adjustments

 

2018

Assets:

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

32,531

 

$

5,991

 

$

38,522

Inventories

 

 

13,799

 

 

(5,929)

 

 

7,870

Assets of discontinued operation

 

 

20,651

 

 

(357)

 

 

20,294

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Deferred revenue and customer deposits

 

 

3,342

 

 

(3,063)

 

 

279

Liabilities of discontinued operation

 

 

5,669

 

 

(535)

 

 

5,134

Deferred income taxes

 

 

12,168

 

 

479

 

 

12,647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

 

Accumulated (loss) earnings

 

 

(1,366)

 

 

2,824

 

 

1,458

 

In accordance with ASC 606, the impact on the Company’s Consolidated Balance Sheet and Statement of Operations and Comprehensive Loss was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances

 

 

As Reported

 

 

 

Without

 

 

December 31,

    

 

    

Adoption of

Balance Sheet

 

2018

 

Adjustments

 

ASC 606

Assets:

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

43,794

 

$

(7,508)

 

$

36,286

Inventories

 

 

9,827

 

 

7,350

 

 

17,177

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Deferred revenue and customer deposits

 

 

912

 

 

1,893

 

 

2,805

Deferred income taxes

 

 

5,749

 

 

(567)

 

 

5,182

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

 

Accumulated loss

 

 

(36,004)

 

 

(1,484)

 

 

(37,488)

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2018

 

 

 

 

 

 

 

Balances

 

 

As Reported

 

 

 

Without

Statement of Operations and

 

December 31,

    

 

    

Adoption of

Comprehensive Loss

 

2018

 

Adjustments

 

ASC 606

Net sales:

 

 

 

 

 

 

 

 

 

Products

 

$

125,069

 

$

(1,803)

 

$

123,266

Services

 

 

130,745

 

 

387

 

 

131,132

Cost of sales:

 

 

 

 

 

 

 

 

 

Products (exclusive of depreciation and amortization)

 

 

82,110

 

 

(1,738)

 

 

80,372

Services (exclusive of depreciation and amortization)

 

 

82,697

 

 

510

 

 

83,207

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

78,590

 

 

(188)

 

 

78,402

 

 

 

 

 

 

 

 

 

 

Income tax benefit (expense)

 

 

4,339

 

 

39

 

 

4,378

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations

 

 

(14,799)

 

 

(149)

 

 

(14,948)

Net loss from discontinued operation, net of tax

 

 

(22,663)

 

 

157

 

 

(22,506)

 

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.

Recently Issued 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 new guidance requires the recognition and measurement of leases at the beginning of the earliest comparative period presented in the financial statements. 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 will adopt the new guidance on the effective date of January 1, 2019 and use the adoption date as the date of initial application as allowed under ASC 842. Consequently, financial information will not be updated and the disclosures required under the new standard will 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 expects to elect the ‘package of practical expedients’, which permits the Company not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The Company does not expect to elect the use-of-hindsight transition practical expedient.

The Company’s adoption process of ASC 842 is ongoing, including evaluating and quantifying the impact on the financial statements, identifying the population of leases, calculating its incremental borrowing rate and collecting and validating lease data. While the Company continues to assess all of the effects of adoption, the Company currently believes the most significant effects relate to the recognition of new right-of-use assets and lease liabilities on the balance sheet for real estate operating leases, and providing significant new disclosures about the Company’s leasing activities.

The new standard also provides practical expedients for the Company’s ongoing accounting. The Company expects to elect 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 that qualify. The Company also expects to elect the practical expedient to not separate lease and non-lease components for all of its leases.

 

v3.10.0.1
Net Sales
12 Months Ended
Dec. 31, 2018
Net Sales.  
Net Sales

3. Net Sales

 

The Company disaggregates its net sales by major source as follows:

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended December 31, 2018

 

 

Products

 

Services

 

Total

U.S. Debit and Credit

 

$

122,119

 

$

56,478

 

$

178,597

U.S. Prepaid Debit

 

 

 —

 

 

69,199

 

 

69,199

Other

 

 

4,398

 

 

5,493

 

 

9,891

Intersegment eliminations

 

 

(1,448)

 

 

(425)

 

 

(1,873)

Total

 

$

125,069

 

$

130,745

 

$

255,814

 

For periods after January 1, 2018, the Company accounts for its net sales 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, 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 and cost in net sales and cost of sales respectively.

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.

v3.10.0.1
Discontinued Operation
12 Months Ended
Dec. 31, 2018
Discontinued Operation  
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.

As of December 31, 2017, the carrying amounts of the major classes of assets and liabilities of the discontinued operation were as follows:

 

 

 

 

 

    

December 31, 2017

 

 

    

 

Assets:

 

 

 

Accounts receivable

 

$

5,006

Inventories

 

 

2,438

Other assets

 

 

506

Plant, equipment and leasehold improvements

 

 

4,864

Intangible assets

 

 

1,379

Goodwill

 

 

6,458

Total assets of discontinued operation

 

 

20,651

 

 

 

 

Liabilities:

 

 

 

Accounts payable

 

 

3,307

Other current liabilities

 

 

1,866

Other long-term liabilities

 

 

496

Total liabilities of discontinued operation

 

$

5,669

 

The major line items constituting the (loss) income of the discontinued operation for the year ended December 31, 2018 and 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

For the year ended

 

 

December 31, 

 

 

2018

 

2017

Total net sales

 

$

10,741

 

$

31,119

Total cost of sales

 

 

10,222

 

 

24,331

Selling, general and administrative

 

 

4,336

 

 

5,591

Impairments

 

 

7,615

 

 

 —

Other expense (income), net

 

 

4,006

 

 

(43)

Pretax (loss) income from discontinued operation

 

 

(15,438)

 

 

1,240

  Pretax loss on sale of discontinued operation

 

 

(7,248)

 

 

 —

Total pretax (loss) income on discontinued operation

 

 

(22,686)

 

 

1,240

Income tax benefit (expense)

 

 

23

 

 

(165)

Net income (loss) from discontinued operation

 

$

(22,663)

 

$

1,075

 

v3.10.0.1
Inventories
12 Months Ended
Dec. 31, 2018
Inventories  
Inventories

5. Inventories

 

Inventories are summarized below:

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2018

    

2017

 

Raw materials

 

$

8,235

 

$

7,411

 

Work-in-process

 

 

 —

 

 

5,107

 

Finished goods

 

 

2,991

 

 

2,974

 

Inventory reserve

 

 

(1,399)

 

 

(1,693)

 

 

 

$

9,827

 

$

13,799

 

 

v3.10.0.1
Plant, Equipment and Leasehold Improvements
12 Months Ended
Dec. 31, 2018
Plant, Equipment and Leasehold Improvements  
Plant, Equipment and Leasehold Improvements

 

6. Plant, Equipment and Leasehold Improvements

 

Plant, equipment and leasehold improvements consist of the following:

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2018

    

2017

 

Machinery and equipment

 

$

62,067

 

$

58,595

 

Machinery and equipment under capital leases

 

 

1,812

 

 

 —

 

Furniture, fixtures and computer equipment

 

 

7,730

 

 

6,288

 

Leasehold improvements

 

 

19,651

 

 

19,601

 

Construction in progress

 

 

1,596

 

 

1,512

 

 

 

 

92,856

 

 

85,996

 

Less accumulated depreciation and amortization

 

 

(53,746)

 

 

(41,560)

 

 

 

$

39,110

 

$

44,436

 

 

Amounts recorded for the depreciation of plant, equipment and leasehold improvements were $13,749 and $12,235 for the years ended December 31, 2018 and 2017, 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, 2018 and 2017.

v3.10.0.1
Goodwill and Other Intangible Assets
12 Months Ended
Dec. 31, 2018
Goodwill and Other Intangible Assets  
Goodwill and Other Intangible Assets

7. Goodwill and Other Intangible Assets

 

The Company’s goodwill by reportable segment at December 31, 2018 and 2017 is as follows:

 

 

 

 

 

 

 

 

 

 

December 31,

 

    

2018

    

2017

U.S. Debit and Credit

 

$

47,150

 

$

47,150

 

Goodwill activity is summarized as follows:

 

 

 

 

 

 

Balance as of December 31, 2016

    

$

66,088

 

Currency translation

 

 

136

 

Impairments

 

 

(19,074)

 

Balance as of December 31, 2017

 

$

47,150

 

Currency translation

 

 

 —

 

Impairments

 

 

 —

 

Balance as of December 31, 2018

 

$

47,150

 

 

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, 2018, and no other impairments were recognized as a result of this analysis.

The Company completed its goodwill impairment testing as of October 1, 2017, and recorded impairment charges of $19,074, of which $17,181 related to U.S. Debit and Credit resulting from continued market softness in demand for EMV cards, including price erosion and loss of market share in the United States.  The other impairment for $1,893 related to Other which resulted from declines in net sales and operating losses incurred in our Canadian business.    The Company determined the fair value of the reporting units primarily based on an income approach, using the present value of future discounted cash flows of the reporting unit.  This approach includes significant estimates of the reporting unit’s weighted average cost of capital, financial forecasts developed by management, and long-term rate of growth and profitability. The market approach was also considered, with fair value determined by applying pricing multiplies derived from publicly-traded companies that are comparable to the reporting unit. 

CPI’s amortizable intangible assets consist of customer relationships, technology and software, trademarks and non-compete agreements. Total intangible assets are being amortized over a weighted-average useful life of 15.7 years. Intangible amortization expense totaled $4,656 and $4,687 for the years ended December 31, 2018 and 2017, respectively.  During the years ended December 31, 2018 and 2017, there were no material impairments of the Company’s amortizable intangible assets from continuing operations.  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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

December 31, 2017

 

 

    

Average

    

 

    

Accumulated

    

Net Book

    

 

    

Accumulated

    

Net Book

 

 

 

Life (Years)

 

Cost

 

Amortization

 

Value

 

Cost

 

Amortization

 

Value

 

Customer relationships

 

12 to 20

 

$

55,454

 

 

(25,587)

 

$

29,867

 

$

55,454

 

$

(22,311)

 

$

33,143

 

Technology and software

 

7 to 10

 

 

7,101

 

 

(4,024)

 

 

3,077

 

 

7,101

 

 

(3,095)

 

 

4,006

 

Trademarks

 

7.5 to 10

 

 

3,330

 

 

(877)

 

 

2,453

 

 

3,330

 

 

(487)

 

 

2,843

 

Noncompete agreements

 

5 to 8

 

 

491

 

 

(451)

 

 

40

 

 

491

 

 

(390)

 

 

101

 

Intangible assets subject to amortization

 

 

 

$

66,376

 

$

(30,939)

 

$

35,437

 

$

66,376

 

$

(26,283)

 

$

40,093

 

 

The estimated future aggregate amortization expense for the identified amortizable intangibles noted above as of December 31, 2018 is as follows:

 

 

 

 

 

2019

 

$

4,635

2020

    

 

4,595

2021

 

 

4,352

2022

 

 

3,867

2023

 

 

3,867

Thereafter

 

 

14,121

 

 

$

35,437

 

v3.10.0.1
Fair Value of Financial Instruments
12 Months Ended
Dec. 31, 2018
Fair Value of Financial Instruments  
Fair Value of Financial Instruments

 

8. Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). In determining fair value, the Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

·

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

·

Level 2—Inputs, other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

·

Level 3—Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The Company’s financial assets and liabilities that are not required to be remeasured at fair value in the Consolidated Balance Sheets are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying

 

 

 

Fair Value Measurement at

 

 

 

Value as of

 

Fair Value as of

 

December 31, 2018

 

 

 

December 31,

 

December 31,

 

(Using Fair Value Hierarchy)

 

 

    

2018

    

2018

    

Level 1

    

Level 2

    

Level 3

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Term Loan

 

$

312,500

 

$

203,125

 

$

 

$

203,125

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying

 

 

 

Fair Value Measurement at

 

 

 

Value as of

 

Fair Value as of

 

December 31, 2017

 

 

 

December 31,

 

December 31,

 

(Using Fair Value Hierarchy)

 

 

    

2017

    

2017

    

Level 1

    

Level 2

    

Level 3

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Term Loan

 

$

312,500

 

$

228,125

 

$

 

$

228,125

 

$

 

 

The aggregate fair value of the Company’s First Lien Term Loan, as defined in Note 9, “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 and 2017, as determined based on unobservable Level 3 inputs.  Refer to Note 7, “Goodwill and Other Intangible Assets”, and Note 4, “Discontinued Operations”.

v3.10.0.1
Long-Term Debt and Credit Facility
12 Months Ended
Dec. 31, 2018
Long-Term Debt and Credit Facility  
Long-Term Debt and Credit Facility

9. Long-Term Debt and Credit Facility

 

Long-term debt consists of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Interest

 

December 31,

 

December 31,

 

 

 

Rate

    

2018

    

2017

 

First Lien Term Loan (a)

 

 

7.02%

 

$

312,500

 

$

312,500

 

Unamortized discount

 

 

 

 

 

(2,448)

 

 

(3,122)

 

Unamortized deferred financing costs

 

 

 

 

 

(4,234)

 

 

(5,509)

 

Total long-term debt

 

 

 

 

 

305,818

 

 

303,869

 

Less current maturities

 

 

 

 

 

 -

 

 

 -

 

Long-term debt, net of current maturities

 

 

 

 

$

305,818

 

$

303,869

 

(a)

Interest rate on December 31, 2018

 

First Lien Credit Facility

On August 17, 2015, the Company entered into the First Lien Credit Facility with a syndicate of lenders providing for the $435,000 First Lien Term Loan and the $40,000 Revolving Credit Facility. The First Lien Term Loan and the Revolving Credit Facility have maturity dates of August 17, 2022 and August 17, 2020, respectively.

The First Lien Credit Facility is secured by a first-priority security interest in substantially all of the Company's assets constituting equipment, inventory, receivables, cash and other tangible and intangible property.

Interest rates under the First Lien Credit Facility are based, at the Company's election, on a Eurodollar rate, subject to an interest rate floor of 1.0%, plus a margin of 4.50% or a base rate plus a margin of 3.50%. 

The First Lien Credit Facility contains customary nonfinancial covenants, including among other things, 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 contains a requirement that, as of the last day of any fiscal quarter, if the amount the Company has drawn under the Revolving Credit Facility is greater than 50% of the aggregate principal amount of all commitments of the lenders thereunder, the Company maintain a first lien net leverage not in excess of 7.0 times Adjusted EBITDA, as defined in the agreement.  As of December 31, 2018, the Company was in compliance with all covenants under the First Lien Credit Facility.

The First Lien Credit Facility also requires prepayment in advance of the maturity date upon the occurrence of certain customary events, including based on an annual excess cash flow calculation, pursuant to the terms of the agreement, with any required payments to be made after the issuance of the Company’s annual financial statements. The Company does not have a required excess cash flow payment related to 2018.  

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, 2018, the Company did not have any outstanding amounts under the Revolving Credit Facility, and has $19,950 available for borrowing. Additional amounts may be available for borrowing under the term of the Revolving Credit Facility, up to the full $40,000, to the extent the Company’s net leverage ratio does not exceed 7.0 times Adjusted EBITDA, as defined in the agreement. The Company has one outstanding letter of credit for $50 relating to the security deposit on a real property lease agreement. The Company pays a fee on outstanding letters of credit at the applicable margin, which was 4.5% as of December 31, 2018, in addition to a fronting fee of 0.125% per annum. In addition, the Company is required to pay an unused commitment fee ranging from 0.375% per annum to 0.50% per annum of the average unused portion of the revolving commitments. The unused commitment fee is determined on the basis of a grid that results in a lower unused commitment fee as the Company’s total net leverage ratio declines.  The Company has accrued interest of $5,058 and $4,296 recorded within “Accrued expenses” on the Consolidated Balance Sheets as of December 31, 2018, and 2017, respectively.

Deferred Financing Costs

Certain costs incurred with borrowings or the establishment or modification of credit facilities are reflected as a reduction to the long-term debt balance. These costs are amortized as an adjustment to interest expense over the life of the borrowing using the effective-interest rate method.

v3.10.0.1
Income Taxes
12 Months Ended
Dec. 31, 2018
Income Taxes  
Income Taxes

10. Income Taxes

 

Income tax benefit from continuing operations and effective income tax rates consist of the following:

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

    

2018

    

2017

    

Current taxes:

 

 

 

 

 

 

 

Domestic

 

$

2,558

 

$

(7,369)

 

Foreign

 

 

 —

 

 

 —

 

 

 

 

2,558

 

 

(7,369)

 

Deferred taxes:

 

 

 

 

 

 

 

Domestic

 

 

(6,897)

 

 

(9,167)

 

Foreign

 

 

 —

 

 

 —

 

 

 

 

(6,897)

 

 

(9,167)

 

Income tax benefit

 

$

(4,339)

 

$

(16,536)

 

Loss before income taxes

 

 

 

 

 

 

 

Domestic

 

$

(18,383)

 

$

(36,985)

 

Foreign

 

 

(755)

 

 

(2,636)

 

Total

 

$

(19,138)

 

$

(39,621)

 

Effective income tax rate

 

 

22.7

%

 

41.7

%

 

The effective income tax rate differs from the U.S. federal statutory income tax rate as follows:

 

 

 

 

 

 

 

 

 

December 31,

 

 

2018

    

2017

    

Tax at federal statutory rate

 

21.0

%

35.0

%

State income taxes

 

4.0

 

0.5

 

Foreign taxes

 

(0.1)

 

(0.1)

 

Tax benefit for U.K. sale

 

17.5

 

 —

 

Valuation allowance

 

(13.5)

 

(1.5)

 

Unrecognized tax benefits

 

(4.8)

 

(3.2)

 

Tax credits

 

2.5

 

10.8

 

Deferred tax impact of enacted tax rate and law changes

 

(0.7)

 

18.4

 

Goodwill impairments

 

 —

 

(17.4)

 

Other

 

(3.2)

 

(0.8)

 

Effective income tax rate

 

22.7

%

41.7

%

 

The components of the deferred tax assets and liabilities are as follows:

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2018

 

2017

 

Deferred tax assets:

 

 

 

 

 

 

 

Accrued expense

 

$

2,553

 

$

744

 

Unrealized foreign exchange loss

 

 

 —

 

 

647

 

Net operating loss carryforward

 

 

5,589

 

 

2,156

 

Deferred financing costs

 

 

553

 

 

707

 

Stock compensation

 

 

861

 

 

679

 

Tax credit carryforward

 

 

1,118

 

 

420

 

Interest limitation

 

 

4,412

 

 

 —

 

Other

 

 

927

 

 

753

 

Total gross deferred tax assets

 

 

16,013

 

 

6,106

 

Valuation allowance

 

 

(6,823)

 

 

(4,617)

 

Net deferred tax assets

 

 

9,190

 

 

1,489

 

Deferred tax liabilities:

 

 

 

 

 

 

 

Plant, equipment and leasehold improvements

 

 

(3,851)

 

 

(2,819)

 

Intangible assets

 

 

(9,311)

 

 

(9,912)

 

Prepaid expenses and other

 

 

(1,777)

 

 

(926)

 

Total gross deferred tax liabilities

 

 

(14,939)

 

 

(13,657)

 

Net deferred tax liabilities

 

$

(5,749)

 

$

(12,168)

 

 

The net change in the valuation allowance during the year ended December 31, 2018 was an increase of $2,206 and related to the limitation on the deductibility of interest expense, changes in net operating losses of foreign locations, the interest limitation related to section 163(j) of tax reform legislation that is not expected to be realized, and state research and development credits carried forward. 

The Company has potential tax benefits associated with $10,791 of gross foreign operating loss carryforwards, which expire at various dates from 2024 through 2038.  Due to the uncertainty of being able to recognize these loss carryforwards, the Company has provided a valuation allowance of 100% of the tax benefit. Additionally, the Company has potential tax benefits associated with $9,156 of gross domestic operating loss carryforwards, 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 has potential tax benefits associated with state research and development tax credit carryforwards as of December 31, 2018 of $778, which will expire at various dates between 2029 and 2033. Due to the uncertainty of being able to recognize these credit carryforwards, the Company has provided a valuation allowance of 100% of the tax benefit. Additionally, the Company has potential tax benefits associated with federal research and development tax credit carryforwards as of December 31, 2018 of $340, which will expire in 2038.  Due to the uncertainty of the research and development credit the Company has provided a 100% valuation allowance.

At December 31, 2018, 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 a current tax benefit in 2018 related to the sale of the U.K. Limited segment of $3,332.

2017 Tax Reform

On December 22, 2017, the U.S. government enacted comprehensive tax reform legislation that includes significant changes to taxation of business entities. These changes include, among others, (i) a permanent reduction to the corporate income tax rate, (ii) a partial limitation on the deductibility of business interest expense, (iii) elimination of deduction for income attributable to domestic production activities and (iv) a partial shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a territorial system (along with a transitional rule that taxes certain historic foreign accumulated earnings and certain rules that aim to prevent erosion of U.S. income tax base). In conjunction with tax reform and the reduction of the U.S. federal tax rate from 35.0% to 21.0%, the Company accrued a $7,057 tax benefit during the year ended December 31, 2017 related to the net change in deferred tax liabilities.

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.

 

 

 

 

 

 

 

 

Balance as of December 31, 2017

 

$

1,212

Increase related to current year tax position

 

 

506

Increase related to prior year tax position

 

 

871

Decrease related to settlements with tax authorities, net of federal benefit

 

 

(545)

Lapse of statute of limitations

 

 

 —

Balance as of December 31, 2018

 

$

2,044

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 as of and for the year ended December 31, 2018 was $221 and not material for the year ended December 31, 2017.

The Company is generally subject to potential federal and state examinations for the tax years on and after December 31, 2015 for federal purposes and December 31, 2013 for state purposes. The Company’s locations in the United Kingdom and Canada are subject to examinations for tax years on and after December 31, 2018 and December 31, 2014, respectively. The Company’s U.K. Limited segment which was sold on August 3, 2018, is subject to examinations for tax years on and after December 31, 2017.

v3.10.0.1
Stockholders' Equity
12 Months Ended
Dec. 31, 2018
Stockholders’ Equity  
Stockholders’ Equity

11. Stockholders’ Equity

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.

During the year ended December 31, 2017, the Company paid dividends of $7,540, representing $0.675 per share.  During August 2017, the Company discontinued its quarterly dividend of $0.225 per share.  

 

v3.10.0.1
(Loss) Earnings per Share
12 Months Ended
Dec. 31, 2018
(Loss) Earnings per Share  
(Loss) Earnings per Share

12. (Loss) Earnings per Share

Basic or diluted (loss) earnings 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) earnings per share, giving retroactive effect for the one-for-five reverse stock split effective December 20, 2017, attributable to continuing and discontinued operations:

 

 

 

 

 

 

 

 

 

 

December 31,

 

    

2018

    

2017

    

Numerator:

 

 

 

 

 

 

 

Net loss from continuing operations

 

$

(14,799)

 

$

(23,085)

 

Net (loss) income from a discontinued operation, net of taxes

 

 

(22,663)

 

 

1,075

 

Net loss

 

$

(37,462)

 

$

(22,010)

 

Denominator:

 

 

 

 

 

 

 

Basic and dilutive EPS—weighted average common shares outstanding

 

 

11,149,554

 

 

11,117,454

 

Basic and Diluted EPS:

 

 

 

 

 

 

 

(Loss) per share from continuing operations

 

$

(1.33)

 

$

(2.08)

 

(Loss) income per share from discontinued operations, net of taxes

 

 

(2.03)

 

 

0.10

 

(Loss) per share

 

$

(3.36)

 

$

(1.98)

 

The potentially dilutive effect of 985,876 and 993,587, stock options and restricted stock units as of December 31, 2018 and 2017, respectively, has been excluded from the computation of diluted earnings per share as their inclusion would be anti-dilutive.

v3.10.0.1
Commitments and Contingencies
12 Months Ended
Dec. 31, 2018
Commitments and Contingencies.  
Commitments and Contingencies

13. Commitments and Contingencies

Commitments

The Company leased certain machinery and equipment under capital lease obligations, which consisted of the following at December 31, 2018:

 

 

 

 

December 31, 

 

2018

Machinery and equipment

$

1,565

Less current portion of capital lease obligations

 

(521)

Total long-term capital lease obligations

$

1,044

The Company has recorded the current portion of capital lease obligations in “Accrued expenses” and the long-term capital lease obligations in “Other long-term liabilities”, within the consolidated balance sheet as of December 31, 2018. 

The Company leases real property for its facilities under non-cancellable operating lease agreements. Land and facility leases expire at various dates between 2019 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.

During the normal course of business, the Company also enters into non-cancellable agreements to purchase goods and services, including production equipment and information technology systems. The 2019 purchase obligations in the table below relates primarily to purchases of capital expenditures.

Future cash payments with respect to leases and purchase obligations as of December 31, 2018 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

    

Operating

    

Capital

    

Purchase

  

 

 

Leases

 

Leases

 

Obligations

 

2019

 

$

2,927

 

$

521

 

$

3,848

 

2020

 

 

2,771

 

 

474

 

 

 —

 

2021

 

 

2,512

 

 

243

 

 

 —

 

2022

 

 

1,243

 

 

256

 

 

 —

 

2023

 

 

971

 

 

71

 

 

 —

 

Thereafter

 

 

652

 

 

 —

 

 

 —

 

Total

 

$

11,076

 

$

1,565

 

$

3,848

 

 

The Company incurred rent expense under non-cancellable operating leases during the years ended December 31, 2018 and 2017, totaling $3,767 and $3,528, respectively.

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.

In Re CPI Card Group Inc. Securities Litigation, Case No. 1:16-CV-04531 (S.D.N.Y.) (the “Class Action”)

On June 15, 2016, two purported CPI stockholders filed putative class action lawsuits captioned Vance, et al. v. CPI Card Group Inc., et al. and Chipman, et al. v. CPI Card Group Inc. in the United States District Court for the Southern District of New York (the “Court”) against CPI, certain of its former officers and current and former directors, along with the sponsors of and the financial institutions who served as underwriters for CPI’s October 2015 initial public offering (“IPO”). The complaints, purportedly brought on behalf of all purchasers of CPI common stock pursuant to the October 8, 2015 Registration Statement filed in connection with the IPO, asserted claims under §§11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”) and sought, among other things, damages and costs. In particular, the complaints alleged that the Registration Statement contained false or misleading statements or omissions regarding CPI’s customers’ (i) purchases of Europay, MasterCard and VISA chip cards (collectively, “EMV® cards”) during the first half of fiscal year 2015 and resulting EMV® card inventory levels; and (ii) capacity to purchase additional EMV® cards in the fourth quarter of fiscal year 2015, and the remainder of the fiscal year ended December 31, 2015. The complaints alleged that these actions artificially inflated the price of CPI common stock issued pursuant to the IPO.

On August 30, 2016, the Court consolidated the Vance and Chipman actions and appointed lead plaintiff and lead counsel pursuant to the Private Securities Litigation Reform Act. On October 17, 2016, lead plaintiff filed a consolidated amended complaint, asserting the same claims for violations of §§11 and 15 of the Securities Act. The amended complaint was based principally on the same theories as the original complaints, but added allegations that the Registration Statement contained inadequate risk disclosures and failed to disclose (i) small and mid-size issuers’ slower-than-anticipated conversion to EMV® technology and (ii) increased pricing pressure and competition CPI faced in the EMV® market.

On September 21, 2018, the parties executed a stipulation and agreement of settlement (“Stipulation”) to resolve the claims asserted in the amended complaint.  On October 22, 2018, the Court granted lead plaintiff’s motion for authorization to notify the settlement class of the proposed settlement.  After distribution of the notice to the class and a final settlement hearing on February 5, 2019, the Court entered orders on February 6, 2019: (i) approving the proposed settlement; and (ii) granting in part lead plaintiff’s motion for attorneys’ fees and expenses.  On February 25, 2019, the Court entered an order and final judgment dismissing the case, in its entirety, with prejudice.

The Company paid an insignificant amount during the fourth quarter of 2018 in relation to an allocation of the total agreed settlement amount.  As of December 31, 2018, the Company did not have any liability recorded for an estimate of additional probable loss relating to this matter. There was no liability recorded as of December 31, 2017.

Heckermann v. Montross et al., Case No. 1:17-CV-01673 (D. Del.) (the “Derivative Suit”)

On November 20, 2017, a purported CPI stockholder filed a stockholder derivative complaint in the United States District Court for the District of Delaware (the “Court”) against certain of CPI’s former officers and current and former directors, along with the sponsors of the IPO. CPI is also named as a nominal defendant. The derivative complaint asserts claims under §§10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 and seeks, among other things, injunctive relief, damages and costs. It alleges false or misleading statements and omissions in the Registration Statement filed by CPI in connection with its IPO and subsequent public filings and statements. The derivative complaint also asserts claims for purported breaches of fiduciary duties, unjust enrichment, mismanagement and waste of corporate assets.

On March 28, 2018, the Court entered the parties’ stipulated order staying the Derivative Suit pending final determination of the Class Action.  Under its terms, the stay of the Derivative Suit will be lifted 30 days after the entry of final judgment in the Class Action which was entered on February 25, 2019.

The Company believes these claims are without merit and is defending the Derivative Suit vigorously. Given the current stage of these matters, the range of any potential loss is not probable or estimable and no liability has been recorded as of December 31, 2018 and 2017.

In addition to the matters described above, the Company is subject to routine legal proceedings in the ordinary course of business. The Company believes that the ultimate resolution of these matters will not have a material adverse effect on its business, financial condition or results of operations.

v3.10.0.1
Employee Benefit Plan
12 Months Ended
Dec. 31, 2018
Employee Benefit Plan  
Employee Benefit Plan

14. 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 $1,235 and $1,236 for the years ended December 31, 2018 and 2017, respectively.

v3.10.0.1
Stock Based Compensation
12 Months Ended
Dec. 31, 2018
Stock Based Compensation  
Stock Based Compensation

15. Stock Based Compensation

CPI Card Group Inc. Omnibus Incentive Plan

During October 2015, the Company adopted the CPI Card Group Inc. Omnibus Incentive Plan (the “Omnibus Plan”) pursuant to which cash and equity based incentives may be granted to participating employees, advisors and directors. The Company had reserved 800,000 shares of common stock for issuance under the Omnibus Plan.  Effective September 25, 2017, the Omnibus Plan was amended and restated, providing for an increase in the number of shares of common stock authorized for issuance thereunder by 400,000.  The increase was made effective in the fourth quarter of 2017 by stockholder approval in accordance with applicable law, after which the Company had reserved 1,200,000 shares of common stock for issuance.  As of December 31, 2018, there were 156,917 shares available for grant under the Omnibus Plan.

During the year ended December 31, 2018, the Company granted awards of non-qualified stock options for 159,755 shares of common stock.  During the year ended December 31, 2017, the Company granted awards of non-qualified stock options for 713,075 shares of common stock.  During the third quarter of 2017, the Company granted stock option awards in lieu of the regular cycle of Omnibus Plan awards that the Company would have otherwise made in the first quarter of 2018, and also in conjunction with the appointment of the Company’s President and Chief Executive Officer. 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:  

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

 

 

Weighted-

    

 

 

 

 

Weighted-

 

 

Average

 

 

 

 

 

Average

 

 

Remaining

 

 

 

 

 

Exercise

 

 

Contractual Term

 

 

 

Options

 

Price

 

 

(in Years)

 

 

 

 

 

 

 

 

 

 

 

Outstanding as of December 31, 2017

 

937,310

 

$

17.11

 

 

 

 

Granted

 

159,755

 

 

2.74

 

 

 

 

Forfeited

 

(186,438)

 

 

15.17

 

 

 

 

Outstanding as of December 31, 2018

 

910,627

 

$

14.99

 

 

8.38

 

Options vested and exercisable as of December 31, 2018

 

305,275

 

 

23.04

 

 

7.93

 

Options vested and expected to vest as of December 31, 2018

 

910,627

 

 

14.99

 

 

8.38

 

 

The following is a summary of the activity in non-vested stock options under the Omnibus Plan:    

 

 

 

 

 

 

 

    

 

    

 

 

 

 

 

 

Weighted-

 

 

 

 

Average

 

 

 

 

Grant-Date

 

 

Number

 

Fair Value

Non-vested as of December 31, 2017

 

876,903

 

$

4.08

Granted

 

159,755

 

 

1.21

Forfeited

 

(152,242)

 

 

3.45

Vested

 

(279,064)

 

 

4.81

Non-vested as of December 31, 2018

 

605,352

 

$

3.14

 

 

 

 

 

 

Unvested options as of December 31, 2018 vest as follows:

 

 

 

2019

 

301,267

2020

 

250,228

2021

 

53,857

2022

 

 -

Total unvested options as of December 31, 2018

 

605,352

 

Stock options were granted under the Omnibus Plan at various times during the years ended December 31, 2018 and 2017.  The fair value of stock option awards was determined at the date of grant using either a Black-Scholes option-pricing model, or a Monte Carlo simulation, with the following weighted-average assumptions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

2018

 

2017

Expected term in years

 

6.0

 

 

6.0

 

Volatility

 

48.0

%

 

31.9

%

Risk-free interest rate

 

2.7

%

 

2.0

%

Dividend yield(1)

 

 -

%

 

0.9

%

(1)

Represents the weighted-average dividend yield for grants made during the year ended December 31, 2017.  The Company discontinued its quarterly dividend program during August 2017. 

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.  Certain stock option awards granted in 2016 with an exercise price of $50 per share were valued using a Monte Carlo simulation.  The Monte Carlo model simulates many future stock price paths, and assumes the exercise of vested options will occur uniformly once the options are projected to be in-the money.  

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:

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

2018

 

 

2017

 

Weighted Average Grant-Date Fair Value of Options Granted

$

1.21

 

$

2.43

 

 

 

 

 

 

 

 

The following table summarizes the changes in the number of outstanding restricted stock units for the year ended December 31, 2018 under the Omnibus Plan:

 

 

 

 

 

 

 

    

 

    

  Weighted-

 

 

 

 

Average

 

 

 

 

Grant-Date

 

 

Shares 

 

Fair Value

Outstanding as of December 31, 2017

 

49,677

 

$

16.20

Granted

 

75,188

 

 

2.66

Vested

 

(25,928)

 

 

10.63

Forfeited

 

(30,288)

 

 

9.91

Outstanding as of December 31, 2018

 

68,649

 

$

6.25

 

During the year ended December 31, 2018, the Company granted awards of restricted stock units for 75,188 shares of common stock. During the year ended December 31, 2017, the Company granted awards of restricted stock units for 47,870 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 will be issued to the award recipients.    

Unvested restricted stock units as of December 31, 2018 will vest as follows:

 

 

 

2019

 

57,563

2020

 

10,843

2021

 

243

 Total unvested restricted stock units as December 31, 2018

 

68,649

 

The following table summarizes the changes in the number of outstanding cash performance awards for the year ended December 31, 2018:

 

 

 

 

 

 

    

 

    

 

 

 

 

 

 

 

 

 

 

Shares 

 

Outstanding as of December 31, 2017

 

822,915

 

Granted

 

 —

 

Vested

 

(274,854)

 

Forfeited

 

(123,049)

 

Outstanding as of December 31, 2018

 

425,012

 

 

 

 

 

 

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 were valued using a Monte Carlo simulation.  The Monte Carlo model used the following valuation assumptions based on the 3-year term of the awards: leverage adjusted peer volatility of 48%, risk free rate of 1.5%, and a dividend yield of 4.0%, which was based on the Company’s dividend practice in March 2017 when the awards were granted.  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, 2018, the Company recognized a liability of $96 in “Accrued expenses” and $64 in “Other long-term liabilities” in the Consolidated Balance Sheet for unsettled cash performance units.

Compensation expense for the Omnibus Plan for the years ended December 31, 2018 and 2017 was $961 and $2,360, respectively.  As of December 31, 2018, the total unrecognized compensation expense related to unvested options, restricted stock units, and cash performance unit awards under the Omnibus Plan was $840, which the Company expects to recognize over an estimated weighted average period of 1.2 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.  The outstanding stock options under the Option Plan are non-qualified, have a 10-year life and are fully vested as of December 31, 2018.

During the year ended December 31, 2018, there was no activity under the Option Plan. As such, total shares outstanding and exercisable were 6,600 shares with a weighted-average exercise price of $0.002 per share and a weighted-average remaining contract term of 4.4 years at December 31, 2018.

Compensation expense and unrecorded compensation expense related to options previously granted under the Option Plan, for years ended December 31, 2018 and 2017 were de minimis.

Other Stock-Based Compensation Awards

During the year ended December 31, 2017, of the remaining 18,972 of unvested restricted stock awards that were outstanding, 9,486 shares vested, and the remaining 9,486 shares were forfeited.  The executive who held the remaining 18,972 unvested restricted shares changed employment status to a consultant during the first quarter of 2017, and accordingly, the Company remeasured the awards on the date of the change in employment status and reduced stock-based compensation expense by $143. Compensation expense related to these awards for the year ended December 31, 2017, was $(371).      

v3.10.0.1
Segment Reporting
12 Months Ended
Dec. 31, 2018
Segment Reporting  
Segment Reporting

16. Segment Reporting

The Company has identified reportable segments as those consolidated subsidiaries that represent 10% or more of its net sales, EBITDA (as defined below) or total assets, or when the Company believes information about the segment would be useful to the readers of the financial statements. The Company’s chief operating decision maker is its Chief Executive Officer who is charged with management of the Company and is responsible for the evaluation of operating performance and decision making about the allocation of resources to operating segments based on measures, such as net sales and EBITDA.

EBITDA is the primary measure used by the Company’s chief operating decision maker to evaluate segment operating performance. As the Company uses the term, EBITDA is defined as income before interest expense, income taxes, depreciation and amortization. The Company’s chief operating decision maker believes EBITDA is a meaningful measure and is 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. 

During the first quarter of 2018, the Company reorganized its United States business operations and realigned its United States reporting segments to correspond with the manner with which the Company’s chief operating decision maker evaluates operating performance and makes decisions as to the allocation of resources. As a result of this realignment, the Company’s CPI on Demand business operations have been moved from the U.S. Prepaid Debit segment into the U.S. Debit and Credit reporting segment, consistent with the other related personalization operations. Segment information for previous periods has been restated to conform with this realignment and current period presentation. The restatement of the segment information for the year ended December 31, 2017 was not material. 

As of December 31, 2018, the Company’s reportable segments were as follows:

·

U.S. Debit and Credit,

·

U.S. Prepaid Debit, and

·

Other.

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, and CPI Metals TM, a premium product capability. This segment also sells instant card issuance systems, and Private Label Credit Cards that are not issued on the networks of the Payment Cards Brands (including general purpose reloadable, gift, payroll and employee benefit, government disbursement, incentive, and transit cards). The Company provides CPI On-Demand services, where we produce images, personalized payment cards, and related collateral on a one-by-one, on demand basis for our 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 certified by multiple global Payment Card Brands and, where required by our customers, certified to be in compliance with the standards of the PCI Security Standards Council.

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 certified by multiple global Payment Card Brands, and is certified to be in compliance with the standards of the PCI Security Standards Council.

The Other category includes the Company’s corporate headquarters and a less significant operating segment that derives its net sales from the production of Financial Payment Cards and retail gift cards in Canada.

Performance Measures of Reportable Segments

Net sales and EBITDA from continuing operations of the Company’s reportable segments for the years ended December 31, 2018 and 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

EBITDA

 

 

December 31,

 

December 31,

 

    

2018

    

2017

    

2018

    

2017

U.S. Debit and Credit

 

$

178,597

 

$

162,216

 

$

34,213

 

$

11,618

U.S. Prepaid Debit

 

 

69,199

 

 

57,005

 

 

23,782

 

 

18,847

Other

 

 

9,891

 

 

11,049

 

 

(35,297)

 

 

(32,314)

Intersegment eliminations(a)

 

 

(1,873)

 

 

(6,526)

 

 

 —

 

 

 —

Total:

 

$

255,814

 

$

223,744

 

$

22,698

 

$

(1,849)


(a)

Amounts include the elimination of sales between segments for consolidation.

 

The following table provides a reconciliation of total segment EBITDA from continuing operations to “Net (loss) income from continuing operations” for the years ended December 31, 2018 and 2017:

 

 

 

 

 

 

 

 

 

December 31,

 

    

2018

    

2017

Total segment EBITDA from continuing operations

 

$

22,698

 

$

(1,849)

Interest, net

 

 

(23,431)

 

 

(20,850)

Income tax benefit

 

 

4,339

 

 

16,536

Depreciation and amortization

 

 

(18,405)

 

 

(16,922)

Net loss from continuing operations

 

$

(14,799)

 

$

(23,085)

 

Balance Sheet Data of Reportable Segments

 

Total assets of the Company’s reportable segments as of December 31, 2018 and 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2018

    

2017

 

U.S. Debit and Credit

 

$

169,567

 

$

174,717

 

U.S. Prepaid Debit

 

 

25,117

 

 

22,810

 

Other

 

 

12,520

 

 

15,827

 

Total assets - reportable segments

 

$

207,204

 

$

213,354

 

Assets of discontinued operation

 

 

 —

 

 

20,651

 

Total assets:

 

$

207,204

 

$

234,005

 

 

 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, 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, 2018 and 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

    

2018

    

2017

    

Product net sales(a)

 

$

125,069

 

$

104,459

 

Services net sales(b)

 

 

130,745

 

 

119,285

 

Total net sales:

 

$

255,814

 

$

223,744

 


(a)

Product net sales include the design and production of Financial Payment Cards, in contact EMV, dual-interface EMV, contactless and magnetic stripe formats. The Company also generates product revenue from the sale of Card@Once® instant issuance systems, Private Label Credit Cards, and retail gift cards. It is impracticable to split the products described into dollar amounts in the table above.

 

(b)

Services net sales include revenue from the personalization and fulfillment of Financial Payment Cards, the provision of tamper-evident security packaging, providing fulfillment services to Prepaid Debit Card program managers, CPI on Demand and software as a service personalization of instant issuance debit cards. The Company also generates services revenue from personalizing retail gift cards (primarily in Canada). It is impracticable to split the services described into dollar amounts in the table above.

v3.10.0.1
Quarterly Financial Information (Unaudited)
12 Months Ended
Dec. 31, 2018
Quarterly Financial Information (Unaudited)  
Quarterly Financial Information (Unaudited)

17. Quarterly Financial Information (Unaudited)

 

Summarized quarterly results for the years ended December 31, 2018 and 2017 on a continuing operations basis, were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

Year Ended

 

 

 

 

 

 

 

 

 

 

 

 December 31, 

 

2018 by Quarter:

    

Q1

    

Q2

    

Q3

    

Q4

    

2018

 

Net sales

 

$

54,857

 

 

61,454

 

 

70,987

 

 

68,516

 

 

255,814

 

Gross profit

 

 

14,428

 

 

19,875

 

 

23,308

 

 

20,979

 

 

78,590

 

Net loss from continuing operations

 

 

(5,677)

 

 

(802)

 

 

(1,085)

 

 

(7,235)

 

 

(14,799)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share from continuing operations

 

$

(0.51)

 

 

(0.07)

 

 

(0.10)

 

 

(0.65)

 

 

(1.33)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

2017 by Quarter:

    

Q1

    

Q2

    

Q3

    

Q4

    

2017

 

Net sales

 

$

50,422

 

 

54,836

 

 

60,997

 

$

57,489

 

$

223,744

 

Gross profit

 

 

14,648

 

 

16,666

 

 

19,444

 

 

17,447

 

 

68,205

 

Net loss from continuing operations

 

 

(4,598)

 

 

(3,273)

 

 

(798)

 

 

(14,416)

 

 

(23,085)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share from continuing operations

 

$

(0.42)

 

$

(0.30)

 

$

(0.07)

 

$

(1.29)

 

$

(2.08)

 

 

v3.10.0.1
Summary of Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2018
Summary of Significant Accounting Policies  
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.

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.

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.

 

 

 

 

 

 

 

 

    

December 31, 2018

    

December 31, 2017

Trade accounts receivable

 

$

36,428

 

$

32,579

Unbilled accounts receivable

 

 

7,577

 

 

 —

 

 

 

44,005

 

 

32,579

Less allowance for doubtful accounts

 

 

(211)

 

 

(48)

 

 

$

43,794

 

$

32,531

 

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 and credit activity for the years ended December 31, 2018 and 2017 is summarized as follows:

 

 

 

 

 

 

Balance as of December 31, 2016

    

$

124

 

Bad debt expense

 

 

 4

 

Write-off of uncollectible accounts

 

 

(82)

 

Currency translation adjustments

 

 

 2

 

Balance as of December 31, 2017

 

$

48

 

Bad debt expense

 

 

169

 

Write-off of uncollectible accounts

 

 

(6)

 

Balance as of December 31, 2018

 

$

211

 

 

For the year ended December 31, 2018 one customer represented 19% of the Company’s consolidated net sales. For the year ended December 31, 2017 one customer represented 15% of the Company’s consolidated net sales.

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.

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. 

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 both goodwill and other indefinite-lived intangibles. 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.

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 comparable 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

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

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, net of forfeitures, over the requisite service period. 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 15 “Stock Based Compensation” for additional discussion regarding details of the Company's stock-based compensation plans.

Accrued Expenses

Accrued Expenses

Accrued liabilities include accrued payroll expense of $2,371, and $2,526, as of December 31, 2018, and 2017, respectively.  Accrued liabilities as of December 31, 2018, also includes accrued employee performance bonus of $7,137.    

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, valuation allowances for inventories and deferred taxes, debt, uncertain tax positions and stock-based compensation expense. Actual results could differ from those estimates.

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.

Foreign currency transaction gains and losses resulting from the process of re-measurement are recorded in “Foreign currency gain (loss)” in the accompanying Consolidated Statements of Operations and Comprehensive (Loss) Income. For the years ended December 31, 2018 and 2017 there were $(311) and $517 of such foreign currency (losses) gains, respectively.

Recently Accounting Pronouncements

Recently Accounting Pronouncements

Recently Adopted Accounting Pronouncements

As of January 1, 2018, the Company adopted Accounting Standards Codification ASC 606, Revenue from Contracts with Customers, (“ASC 606”), 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 adopted ASC 606 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. In addition, as a result of adopting the new guidance, the Company has recorded decreases to deferred revenue, and work in process and finished goods inventories, and an increase to accounts receivable. These changes are reflected in the adoption adjustments table below. The comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods.

See Note 3 “Net sales” for revenue recognition timing and methodology under ASC 606.

The cumulative effects of the adjustments made to the Company’s January 1, 2018 Consolidated Balance Sheet upon adoption of ASC 606 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

    

Adoption

    

January 1,

 

 

2017

 

Adjustments

 

2018

Assets:

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

32,531

 

$

5,991

 

$

38,522

Inventories

 

 

13,799

 

 

(5,929)

 

 

7,870

Assets of discontinued operation

 

 

20,651

 

 

(357)

 

 

20,294

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Deferred revenue and customer deposits

 

 

3,342

 

 

(3,063)

 

 

279

Liabilities of discontinued operation

 

 

5,669

 

 

(535)

 

 

5,134

Deferred income taxes

 

 

12,168

 

 

479

 

 

12,647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

 

Accumulated (loss) earnings

 

 

(1,366)

 

 

2,824

 

 

1,458

 

In accordance with ASC 606, the impact on the Company’s Consolidated Balance Sheet and Statement of Operations and Comprehensive Loss was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances

 

 

As Reported

 

 

 

Without

 

 

December 31,

    

 

    

Adoption of

Balance Sheet

 

2018

 

Adjustments

 

ASC 606

Assets:

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

43,794

 

$

(7,508)

 

$

36,286

Inventories

 

 

9,827

 

 

7,350

 

 

17,177

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Deferred revenue and customer deposits

 

 

912

 

 

1,893

 

 

2,805

Deferred income taxes

 

 

5,749

 

 

(567)

 

 

5,182

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

 

Accumulated loss

 

 

(36,004)

 

 

(1,484)

 

 

(37,488)

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2018

 

 

 

 

 

 

 

Balances

 

 

As Reported

 

 

 

Without

Statement of Operations and

 

December 31,

    

 

    

Adoption of

Comprehensive Loss

 

2018

 

Adjustments

 

ASC 606

Net sales:

 

 

 

 

 

 

 

 

 

Products

 

$

125,069

 

$

(1,803)

 

$

123,266

Services

 

 

130,745

 

 

387

 

 

131,132

Cost of sales:

 

 

 

 

 

 

 

 

 

Products (exclusive of depreciation and amortization)

 

 

82,110

 

 

(1,738)

 

 

80,372

Services (exclusive of depreciation and amortization)

 

 

82,697

 

 

510

 

 

83,207

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

78,590

 

 

(188)

 

 

78,402

 

 

 

 

 

 

 

 

 

 

Income tax benefit (expense)

 

 

4,339

 

 

39

 

 

4,378

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations

 

 

(14,799)

 

 

(149)

 

 

(14,948)

Net loss from discontinued operation, net of tax

 

 

(22,663)

 

 

157

 

 

(22,506)

 

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.

Recently Issued 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 new guidance requires the recognition and measurement of leases at the beginning of the earliest comparative period presented in the financial statements. 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 will adopt the new guidance on the effective date of January 1, 2019 and use the adoption date as the date of initial application as allowed under ASC 842. Consequently, financial information will not be updated and the disclosures required under the new standard will 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 expects to elect the ‘package of practical expedients’, which permits the Company not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The Company does not expect to elect the use-of-hindsight transition practical expedient.

The Company’s adoption process of ASC 842 is ongoing, including evaluating and quantifying the impact on the financial statements, identifying the population of leases, calculating its incremental borrowing rate and collecting and validating lease data. While the Company continues to assess all of the effects of adoption, the Company currently believes the most significant effects relate to the recognition of new right-of-use assets and lease liabilities on the balance sheet for real estate operating leases, and providing significant new disclosures about the Company’s leasing activities.

The new standard also provides practical expedients for the Company’s ongoing accounting. The Company expects to elect 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 that qualify. The Company also expects to elect the practical expedient to not separate lease and non-lease components for all of its leases.

v3.10.0.1
Summary of Significant Accounting Policies (Tables)
12 Months Ended
Dec. 31, 2018
Adoption of New Accounting Standards  
Schedule of trade accounts receivable

 

 

 

 

 

 

 

 

    

December 31, 2018

    

December 31, 2017

Trade accounts receivable

 

$

36,428

 

$

32,579

Unbilled accounts receivable

 

 

7,577

 

 

 —

 

 

 

44,005

 

 

32,579

Less allowance for doubtful accounts

 

 

(211)

 

 

(48)

 

 

$

43,794

 

$

32,531

 

Schedule of allowance for bad debt and credit activity

 

 

 

 

 

 

Balance as of December 31, 2016

    

$

124

 

Bad debt expense

 

 

 4

 

Write-off of uncollectible accounts

 

 

(82)

 

Currency translation adjustments

 

 

 2

 

Balance as of December 31, 2017

 

$

48

 

Bad debt expense

 

 

169

 

Write-off of uncollectible accounts

 

 

(6)

 

Balance as of December 31, 2018

 

$

211

 

 

ASU 2014-09  
Adoption of New Accounting Standards  
Schedule of adoption of new accounting standards

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

    

Adoption

    

January 1,

 

 

2017

 

Adjustments

 

2018

Assets:

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

32,531

 

$

5,991

 

$

38,522

Inventories

 

 

13,799

 

 

(5,929)

 

 

7,870

Assets of discontinued operation

 

 

20,651

 

 

(357)

 

 

20,294

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Deferred revenue and customer deposits

 

 

3,342

 

 

(3,063)

 

 

279

Liabilities of discontinued operation

 

 

5,669

 

 

(535)

 

 

5,134

Deferred income taxes

 

 

12,168

 

 

479

 

 

12,647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

 

Accumulated (loss) earnings

 

 

(1,366)

 

 

2,824

 

 

1,458

 

In accordance with ASC 606, the impact on the Company’s Consolidated Balance Sheet and Statement of Operations and Comprehensive Loss was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances

 

 

As Reported

 

 

 

Without

 

 

December 31,

    

 

    

Adoption of

Balance Sheet

 

2018

 

Adjustments

 

ASC 606

Assets:

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

43,794

 

$

(7,508)

 

$

36,286

Inventories

 

 

9,827

 

 

7,350

 

 

17,177

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Deferred revenue and customer deposits

 

 

912

 

 

1,893

 

 

2,805

Deferred income taxes

 

 

5,749

 

 

(567)

 

 

5,182

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

 

Accumulated loss

 

 

(36,004)

 

 

(1,484)

 

 

(37,488)

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2018

 

 

 

 

 

 

 

Balances

 

 

As Reported

 

 

 

Without

Statement of Operations and

 

December 31,

    

 

    

Adoption of

Comprehensive Loss

 

2018

 

Adjustments

 

ASC 606

Net sales:

 

 

 

 

 

 

 

 

 

Products

 

$

125,069

 

$

(1,803)

 

$

123,266

Services

 

 

130,745

 

 

387

 

 

131,132

Cost of sales:

 

 

 

 

 

 

 

 

 

Products (exclusive of depreciation and amortization)

 

 

82,110

 

 

(1,738)

 

 

80,372

Services (exclusive of depreciation and amortization)

 

 

82,697

 

 

510

 

 

83,207

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

78,590

 

 

(188)

 

 

78,402

 

 

 

 

 

 

 

 

 

 

Income tax benefit (expense)

 

 

4,339

 

 

39

 

 

4,378

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations

 

 

(14,799)

 

 

(149)

 

 

(14,948)

Net loss from discontinued operation, net of tax

 

 

(22,663)

 

 

157

 

 

(22,506)

 

v3.10.0.1
Net Sales (Tables)
12 Months Ended
Dec. 31, 2018
Net Sales.  
Schedule of disaggregation of net sales by major source

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended December 31, 2018

 

 

Products

 

Services

 

Total

U.S. Debit and Credit

 

$

122,119

 

$

56,478

 

$

178,597

U.S. Prepaid Debit

 

 

 —

 

 

69,199

 

 

69,199

Other

 

 

4,398

 

 

5,493

 

 

9,891

Intersegment eliminations

 

 

(1,448)

 

 

(425)

 

 

(1,873)

Total

 

$

125,069

 

$

130,745

 

$

255,814

 

v3.10.0.1
Discontinued Operation (Tables)
12 Months Ended
Dec. 31, 2018
Discontinued Operation  
Schedule of assets, liabilities and operations of discontinued operations

 

 

 

 

 

    

December 31, 2017

 

 

    

 

Assets:

 

 

 

Accounts receivable

 

$

5,006

Inventories

 

 

2,438

Other assets

 

 

506

Plant, equipment and leasehold improvements

 

 

4,864

Intangible assets

 

 

1,379

Goodwill

 

 

6,458

Total assets of discontinued operation

 

 

20,651

 

 

 

 

Liabilities:

 

 

 

Accounts payable

 

 

3,307

Other current liabilities

 

 

1,866

Other long-term liabilities

 

 

496

Total liabilities of discontinued operation

 

$

5,669

 

The major line items constituting the (loss) income of the discontinued operation for the year ended December 31, 2018 and 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

For the year ended

 

 

December 31, 

 

 

2018

 

2017

Total net sales

 

$

10,741

 

$

31,119

Total cost of sales

 

 

10,222

 

 

24,331

Selling, general and administrative

 

 

4,336

 

 

5,591

Impairments

 

 

7,615

 

 

 —

Other expense (income), net

 

 

4,006

 

 

(43)

Pretax (loss) income from discontinued operation

 

 

(15,438)

 

 

1,240

  Pretax loss on sale of discontinued operation

 

 

(7,248)

 

 

 —

Total pretax (loss) income on discontinued operation

 

 

(22,686)

 

 

1,240

Income tax benefit (expense)

 

 

23

 

 

(165)

Net income (loss) from discontinued operation

 

$

(22,663)

 

$

1,075

 

v3.10.0.1
Inventories (Tables)
12 Months Ended
Dec. 31, 2018
Inventories  
Schedule of inventories

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2018

    

2017

 

Raw materials

 

$

8,235

 

$

7,411

 

Work-in-process

 

 

 —

 

 

5,107

 

Finished goods

 

 

2,991

 

 

2,974

 

Inventory reserve

 

 

(1,399)

 

 

(1,693)

 

 

 

$

9,827

 

$

13,799

 

 

v3.10.0.1
Plant, Equipment and Leasehold Improvements (Tables)
12 Months Ended
Dec. 31, 2018
Plant, Equipment and Leasehold Improvements  
Schedule of plant, equipment and leasehold improvements

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2018

    

2017

 

Machinery and equipment

 

$

62,067

 

$

58,595

 

Machinery and equipment under capital leases

 

 

1,812

 

 

 —

 

Furniture, fixtures and computer equipment

 

 

7,730

 

 

6,288

 

Leasehold improvements

 

 

19,651

 

 

19,601

 

Construction in progress

 

 

1,596

 

 

1,512

 

 

 

 

92,856

 

 

85,996

 

Less accumulated depreciation and amortization

 

 

(53,746)

 

 

(41,560)

 

 

 

$

39,110

 

$

44,436

 

 

v3.10.0.1
Goodwill and Other Intangible Assets (Tables)
12 Months Ended
Dec. 31, 2018
Goodwill and Other Intangible Assets  
Schedule of goodwill by reportable segment

 

 

 

 

 

 

 

 

 

December 31,

 

    

2018

    

2017

U.S. Debit and Credit

 

$

47,150

 

$

47,150

 

Goodwill activity is summarized as follows:

 

 

 

 

 

 

Balance as of December 31, 2016

    

$

66,088

 

Currency translation

 

 

136

 

Impairments

 

 

(19,074)

 

Balance as of December 31, 2017

 

$

47,150

 

Currency translation

 

 

 —

 

Impairments

 

 

 —

 

Balance as of December 31, 2018

 

$

47,150

 

 

Schedule of intangible assets excluding goodwill

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

December 31, 2017

 

 

    

Average

    

 

    

Accumulated

    

Net Book

    

 

    

Accumulated

    

Net Book

 

 

 

Life (Years)

 

Cost

 

Amortization

 

Value

 

Cost

 

Amortization

 

Value

 

Customer relationships

 

12 to 20

 

$

55,454

 

 

(25,587)

 

$

29,867

 

$

55,454

 

$

(22,311)

 

$

33,143

 

Technology and software

 

7 to 10

 

 

7,101

 

 

(4,024)

 

 

3,077

 

 

7,101

 

 

(3,095)

 

 

4,006

 

Trademarks

 

7.5 to 10

 

 

3,330

 

 

(877)

 

 

2,453

 

 

3,330

 

 

(487)

 

 

2,843

 

Noncompete agreements

 

5 to 8

 

 

491

 

 

(451)

 

 

40

 

 

491

 

 

(390)

 

 

101

 

Intangible assets subject to amortization

 

 

 

$

66,376

 

$

(30,939)

 

$

35,437

 

$

66,376

 

$

(26,283)

 

$

40,093

 

 

Schedule of future aggregate amortization expense for identified amortizable intangibles

 

 

 

 

2019

 

$

4,635

2020

    

 

4,595

2021

 

 

4,352

2022

 

 

3,867

2023

 

 

3,867

Thereafter

 

 

14,121

 

 

$

35,437

 

v3.10.0.1
Fair Value of Financial Instruments (Tables)
12 Months Ended
Dec. 31, 2018
Fair Value of Financial Instruments  
Schedule of financial assets and liabilities subject to fair value measurements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying

 

 

 

Fair Value Measurement at

 

 

 

Value as of

 

Fair Value as of

 

December 31, 2018

 

 

 

December 31,

 

December 31,

 

(Using Fair Value Hierarchy)

 

 

    

2018

    

2018

    

Level 1

    

Level 2

    

Level 3

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Term Loan

 

$

312,500

 

$

203,125

 

$

 

$

203,125

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying

 

 

 

Fair Value Measurement at

 

 

 

Value as of

 

Fair Value as of

 

December 31, 2017

 

 

 

December 31,

 

December 31,

 

(Using Fair Value Hierarchy)

 

 

    

2017

    

2017

    

Level 1

    

Level 2

    

Level 3

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Term Loan

 

$

312,500

 

$

228,125

 

$

 

$

228,125

 

$

 

 

v3.10.0.1
Long-Term Debt and Credit Facility (Tables)
12 Months Ended
Dec. 31, 2018
Long-Term Debt and Credit Facility  
Schedule of long-term debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Interest

 

December 31,

 

December 31,

 

 

 

Rate

    

2018

    

2017

 

First Lien Term Loan (a)

 

 

7.02%

 

$

312,500

 

$

312,500

 

Unamortized discount

 

 

 

 

 

(2,448)

 

 

(3,122)

 

Unamortized deferred financing costs

 

 

 

 

 

(4,234)

 

 

(5,509)

 

Total long-term debt

 

 

 

 

 

305,818

 

 

303,869

 

Less current maturities

 

 

 

 

 

 -

 

 

 -

 

Long-term debt, net of current maturities

 

 

 

 

$

305,818

 

$

303,869

 

(a)

Interest rate on December 31, 2018

 

v3.10.0.1
Income Taxes (Tables)
12 Months Ended
Dec. 31, 2018
Income Taxes  
Schedule of income tax (benefit) expense from continuing operations and effective income tax rates

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

    

2018

    

2017

    

Current taxes:

 

 

 

 

 

 

 

Domestic

 

$

2,558

 

$

(7,369)

 

Foreign

 

 

 —

 

 

 —

 

 

 

 

2,558

 

 

(7,369)

 

Deferred taxes:

 

 

 

 

 

 

 

Domestic

 

 

(6,897)

 

 

(9,167)

 

Foreign

 

 

 —

 

 

 —

 

 

 

 

(6,897)

 

 

(9,167)

 

Income tax benefit

 

$

(4,339)

 

$

(16,536)

 

Loss before income taxes

 

 

 

 

 

 

 

Domestic

 

$

(18,383)

 

$

(36,985)

 

Foreign

 

 

(755)

 

 

(2,636)

 

Total

 

$

(19,138)

 

$

(39,621)

 

Effective income tax rate

 

 

22.7

%

 

41.7

%

 

Schedule of effective income tax rate reconciliation

 

 

 

 

 

 

 

 

 

December 31,

 

 

2018

    

2017

    

Tax at federal statutory rate

 

21.0

%

35.0

%

State income taxes

 

4.0

 

0.5

 

Foreign taxes

 

(0.1)

 

(0.1)

 

Tax benefit for U.K. sale

 

17.5

 

 —

 

Valuation allowance

 

(13.5)

 

(1.5)

 

Unrecognized tax benefits

 

(4.8)

 

(3.2)

 

Tax credits

 

2.5

 

10.8

 

Deferred tax impact of enacted tax rate and law changes

 

(0.7)

 

18.4

 

Goodwill impairments

 

 —

 

(17.4)

 

Other

 

(3.2)

 

(0.8)

 

Effective income tax rate

 

22.7

%

41.7

%

 

Schedule of components of deferred tax assets and liabilities

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2018

 

2017

 

Deferred tax assets:

 

 

 

 

 

 

 

Accrued expense

 

$

2,553

 

$

744

 

Unrealized foreign exchange loss

 

 

 —

 

 

647

 

Net operating loss carryforward

 

 

5,589

 

 

2,156

 

Deferred financing costs

 

 

553

 

 

707

 

Stock compensation

 

 

861

 

 

679

 

Tax credit carryforward

 

 

1,118

 

 

420

 

Interest limitation

 

 

4,412

 

 

 —

 

Other

 

 

927

 

 

753

 

Total gross deferred tax assets

 

 

16,013

 

 

6,106

 

Valuation allowance

 

 

(6,823)

 

 

(4,617)

 

Net deferred tax assets

 

 

9,190

 

 

1,489

 

Deferred tax liabilities:

 

 

 

 

 

 

 

Plant, equipment and leasehold improvements

 

 

(3,851)

 

 

(2,819)

 

Intangible assets

 

 

(9,311)

 

 

(9,912)

 

Prepaid expenses and other

 

 

(1,777)

 

 

(926)

 

Total gross deferred tax liabilities

 

 

(14,939)

 

 

(13,657)

 

Net deferred tax liabilities

 

$

(5,749)

 

$

(12,168)

 

 

Unrecognized Tax Benefits

 

 

 

 

 

 

 

 

Balance as of December 31, 2017

 

$

1,212

Increase related to current year tax position

 

 

506

Increase related to prior year tax position

 

 

871

Decrease related to settlements with tax authorities, net of federal benefit

 

 

(545)

Lapse of statute of limitations

 

 

 —

Balance as of December 31, 2018

 

$

2,044

 

v3.10.0.1
(Loss) Earnings per Share (Tables)
12 Months Ended
Dec. 31, 2018
(Loss) Earnings per Share  
Computation of basic and diluted (loss) EPS

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

    

2018

    

2017

    

Numerator:

 

 

 

 

 

 

 

Net loss from continuing operations

 

$

(14,799)

 

$

(23,085)

 

Net (loss) income from a discontinued operation, net of taxes

 

 

(22,663)

 

 

1,075

 

Net loss

 

$

(37,462)

 

$

(22,010)

 

Denominator:

 

 

 

 

 

 

 

Basic and dilutive EPS—weighted average common shares outstanding

 

 

11,149,554

 

 

11,117,454

 

Basic and Diluted EPS:

 

 

 

 

 

 

 

(Loss) per share from continuing operations

 

$

(1.33)

 

$

(2.08)

 

(Loss) income per share from discontinued operations, net of taxes

 

 

(2.03)

 

 

0.10

 

(Loss) per share

 

$

(3.36)

 

$

(1.98)

 

 

v3.10.0.1
Commitments and Contingencies (Tables)
12 Months Ended
Dec. 31, 2018
Commitments and Contingencies.  
Schedule of equipment under capital leases

 

 

 

 

December 31, 

 

2018

Machinery and equipment

$

1,565

Less current portion of capital lease obligations

 

(521)

Total long-term capital lease obligations

$

1,044

 

Schedule of future cash payments with respect to operating leases and purchase obligations

 

 

 

 

 

 

 

 

 

 

 

 

    

Operating

    

Capital

    

Purchase

  

 

 

Leases

 

Leases

 

Obligations

 

2019

 

$

2,927

 

$

521

 

$

3,848

 

2020

 

 

2,771

 

 

474

 

 

 —

 

2021

 

 

2,512

 

 

243

 

 

 —

 

2022

 

 

1,243

 

 

256

 

 

 —

 

2023

 

 

971

 

 

71

 

 

 —

 

Thereafter

 

 

652

 

 

 —

 

 

 —

 

Total

 

$

11,076

 

$

1,565

 

$

3,848

 

 

v3.10.0.1
Stock Based Compensation (Tables)
12 Months Ended
Dec. 31, 2018
Summary of changes in outstanding restricted stock units

 

 

 

 

 

 

 

    

 

    

  Weighted-

 

 

 

 

Average

 

 

 

 

Grant-Date

 

 

Shares 

 

Fair Value

Outstanding as of December 31, 2017

 

49,677

 

$

16.20

Granted

 

75,188

 

 

2.66

Vested

 

(25,928)

 

 

10.63

Forfeited

 

(30,288)

 

 

9.91

Outstanding as of December 31, 2018

 

68,649

 

$

6.25

 

Schedule of vesting for unvested restricted stock units

 

 

 

2019

 

57,563

2020

 

10,843

2021

 

243

 Total unvested restricted stock units as December 31, 2018

 

68,649

 

Summary of changes in number of outstanding cash performance units

 

 

 

 

 

    

 

    

 

 

 

 

 

 

 

 

 

 

Shares 

 

Outstanding as of December 31, 2017

 

822,915

 

Granted

 

 —

 

Vested

 

(274,854)

 

Forfeited

 

(123,049)

 

Outstanding as of December 31, 2018

 

425,012

 

 

 

 

 

 

Omnibus Plan  
Summary of outstanding and exercisable stock options

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

 

 

Weighted-

    

 

 

 

 

Weighted-

 

 

Average

 

 

 

 

 

Average

 

 

Remaining

 

 

 

 

 

Exercise

 

 

Contractual Term

 

 

 

Options

 

Price

 

 

(in Years)

 

 

 

 

 

 

 

 

 

 

 

Outstanding as of December 31, 2017

 

937,310

 

$

17.11

 

 

 

 

Granted

 

159,755

 

 

2.74

 

 

 

 

Forfeited

 

(186,438)

 

 

15.17

 

 

 

 

Outstanding as of December 31, 2018

 

910,627

 

$

14.99

 

 

8.38

 

Options vested and exercisable as of December 31, 2018

 

305,275

 

 

23.04

 

 

7.93

 

Options vested and expected to vest as of December 31, 2018

 

910,627

 

 

14.99

 

 

8.38

 

 

Summary of activity in non-vested stock options

 

 

 

 

 

 

 

    

 

    

 

 

 

 

 

 

Weighted-

 

 

 

 

Average

 

 

 

 

Grant-Date

 

 

Number

 

Fair Value

Non-vested as of December 31, 2017

 

876,903

 

$

4.08

Granted

 

159,755

 

 

1.21

Forfeited

 

(152,242)

 

 

3.45

Vested

 

(279,064)

 

 

4.81

Non-vested as of December 31, 2018

 

605,352

 

$

3.14

 

 

 

 

 

 

 

Schedule of vesting for unvested options

 

 

 

2019

 

301,267

2020

 

250,228

2021

 

53,857

2022

 

 -

Total unvested options as of December 31, 2018

 

605,352

 

Schedule of valuation assumptions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

2018

 

2017

Expected term in years

 

6.0

 

 

6.0

 

Volatility

 

48.0

%

 

31.9

%

Risk-free interest rate

 

2.7

%

 

2.0

%

Dividend yield(1)

 

 -

%

 

0.9

%

(1)

Represents the weighted-average dividend yield for grants made during the year ended December 31, 2017.  The Company discontinued its quarterly dividend program during August 2017. 

Weighted average grant date fair value of options granted

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

2018

 

 

2017

 

Weighted Average Grant-Date Fair Value of Options Granted

$

1.21

 

$

2.43

 

 

 

 

 

 

 

 

 

v3.10.0.1
Segment Reporting (Tables)
12 Months Ended
Dec. 31, 2018
Segment Reporting  
Schedule of revenue and EBITDA of the company's reportable segments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

EBITDA

 

 

December 31,

 

December 31,

 

    

2018

    

2017

    

2018

    

2017

U.S. Debit and Credit

 

$

178,597

 

$

162,216

 

$

34,213

 

$

11,618

U.S. Prepaid Debit

 

 

69,199

 

 

57,005

 

 

23,782

 

 

18,847

Other

 

 

9,891

 

 

11,049

 

 

(35,297)

 

 

(32,314)

Intersegment eliminations(a)

 

 

(1,873)

 

 

(6,526)

 

 

 —

 

 

 —

Total:

 

$

255,814

 

$

223,744

 

$

22,698

 

$

(1,849)


(a)

Amounts include the elimination of sales between segments for consolidation.

Schedule of reconciliation of total segment EBITDA to income before taxes

 

 

 

 

 

 

 

 

 

December 31,

 

    

2018

    

2017

Total segment EBITDA from continuing operations

 

$

22,698

 

$

(1,849)

Interest, net

 

 

(23,431)

 

 

(20,850)

Income tax benefit

 

 

4,339

 

 

16,536

Depreciation and amortization

 

 

(18,405)

 

 

(16,922)

Net loss from continuing operations

 

$

(14,799)

 

$

(23,085)

 

Schedule of total assets of the company's reportable segments

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2018

    

2017

 

U.S. Debit and Credit

 

$

169,567

 

$

174,717

 

U.S. Prepaid Debit

 

 

25,117

 

 

22,810

 

Other

 

 

12,520

 

 

15,827

 

Total assets - reportable segments

 

$

207,204

 

$

213,354

 

Assets of discontinued operation

 

 

 —

 

 

20,651

 

Total assets:

 

$

207,204

 

$

234,005

 

 

Schedule of net sales from product and services sold by the company

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

    

2018

    

2017

    

Product net sales(a)

 

$

125,069

 

$

104,459

 

Services net sales(b)

 

 

130,745

 

 

119,285

 

Total net sales:

 

$

255,814

 

$

223,744

 


(a)

Product net sales include the design and production of Financial Payment Cards, in contact EMV, dual-interface EMV, contactless and magnetic stripe formats. The Company also generates product revenue from the sale of Card@Once® instant issuance systems, Private Label Credit Cards, and retail gift cards. It is impracticable to split the products described into dollar amounts in the table above.

 

Services net sales include revenue from the personalization and fulfillment of Financial Payment Cards, the provision of tamper-evident security packaging, providing fulfillment services to Prepaid Debit Card program managers, CPI on Demand and software as a service personalization of instant issuance debit cards. The Company also generates services revenue from personalizing retail gift cards (primarily in Canada). It is impracticable to split the services described into dollar amounts in the table above.

v3.10.0.1
Quarterly Financial Information (Unaudited) (Tables)
12 Months Ended
Dec. 31, 2018
Quarterly Financial Information (Unaudited)  
Schedule of summarized quarterly results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

Year Ended

 

 

 

 

 

 

 

 

 

 

 

 December 31, 

 

2018 by Quarter:

    

Q1

    

Q2

    

Q3

    

Q4

    

2018

 

Net sales

 

$

54,857

 

 

61,454

 

 

70,987

 

 

68,516

 

 

255,814

 

Gross profit

 

 

14,428

 

 

19,875

 

 

23,308

 

 

20,979

 

 

78,590

 

Net loss from continuing operations

 

 

(5,677)

 

 

(802)

 

 

(1,085)

 

 

(7,235)

 

 

(14,799)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share from continuing operations

 

$

(0.51)

 

 

(0.07)

 

 

(0.10)

 

 

(0.65)

 

 

(1.33)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

2017 by Quarter:

    

Q1

    

Q2

    

Q3

    

Q4

    

2017

 

Net sales

 

$

50,422

 

 

54,836

 

 

60,997

 

$

57,489

 

$

223,744

 

Gross profit

 

 

14,648

 

 

16,666

 

 

19,444

 

 

17,447

 

 

68,205

 

Net loss from continuing operations

 

 

(4,598)

 

 

(3,273)

 

 

(798)

 

 

(14,416)

 

 

(23,085)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share from continuing operations

 

$

(0.42)

 

$

(0.30)

 

$

(0.07)

 

$

(1.29)

 

$

(2.08)

 

 

v3.10.0.1
Business (Details)
$ in Thousands
3 Months Ended 12 Months Ended
Sep. 30, 2018
USD ($)
Dec. 31, 2018
USD ($)
item
Aug. 03, 2018
USD ($)
facility
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  
U.K. Limited | Sold      
Number of facilities sold | facility     3
Total consideration for sale     $ 4,500
Proceeds from sale of asset $ 315    
v3.10.0.1
Summary of Significant Accounting Policies - Trade Accounts Receivable (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Jan. 02, 2018
Dec. 31, 2017
Dec. 31, 2016
Trade Accounts Receivable        
Trade accounts receivable $ 36,428   $ 32,579  
Unbilled accounts receivable 7,577      
Trade and unbilled accounts receivable 44,005   32,579  
Less allowance for doubtful accounts (211)   (48) $ (124)
Accounts receivable, net $ 43,794 $ 38,522 $ 32,531  
v3.10.0.1
Summary of Significant Accounting Policies - Bad debts and Concentration of Credit Risk (Details)
$ in Thousands
12 Months Ended
Dec. 20, 2017
Dec. 31, 2018
USD ($)
Dec. 31, 2017
USD ($)
Allowance for bad debt and credit activity      
Beginning balance   $ 48 $ 124
Bad debt expense   169 4
Write-off of uncollectible accounts   (6) (82)
Currency translation adjustment     2
Ending balance   $ 211 $ 48
Reverse stock split 0.20    
Customer Concentration Risk | Net sales      
Allowance for bad debt and credit activity      
Concentration risk (as a percent)   19.00% 15.00%
v3.10.0.1
Summary of Significant Accounting Policies - Plant, Equipment and Leasehold Improvements (Details)
12 Months Ended
Dec. 31, 2018
Minimum  
Plant, Equipment and Leasehold Improvements  
Useful life (in years) 3 years
Maximum  
Plant, Equipment and Leasehold Improvements  
Useful life (in years) 10 years
v3.10.0.1
Summary of Significant Accounting Policies - Advertising Costs and Foreign Currency Translation (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Accrued Expenses    
Accrued payroll expenses current $ 2,371 $ 2,526
Accrued employee performance bonus 7,137  
Foreign Currency Translation    
Foreign currency (losses) gains $ (311) $ 517
v3.10.0.1
Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Jan. 02, 2018
Assets                      
Accounts receivable, net $ 43,794       $ 32,531       $ 43,794 $ 32,531 $ 38,522
Inventories 9,827       13,799       9,827 13,799 7,870
Assets of discontinued operation         20,651         20,651 20,294
Liabilities                      
Deferred revenue and customer deposits 912       3,342       912 3,342 279
Liabilities of discontinued operation         5,669         5,669 5,134
Deferred income taxes 5,749       12,168       5,749 12,168 12,647
Stockholders' deficit:                      
Accumulated (loss) earnings (36,004)       (1,366)       (36,004) (1,366) 1,458
Net sales:                      
Net sales 68,516 $ 70,987 $ 61,454 $ 54,857 57,489 $ 60,997 $ 54,836 $ 50,422 255,814 223,744  
Cost of sales:                      
Gross profit 20,979 23,308 19,875 14,428 17,447 19,444 16,666 14,648 78,590 68,205  
Income tax benefit                 4,339 16,536  
Net loss from continuing operations (7,235) $ (1,085) $ (802) $ (5,677) (14,416) $ (798) $ (3,273) $ (4,598) (14,799) (23,085)  
Net (loss) income from discontinued operation, net of taxes                 (22,663) 1,075  
Balance without adoption of ASU 2014-09 | ASU 2014-09                      
Assets                      
Accounts receivable, net 36,286       32,531       36,286 32,531  
Inventories 17,177       13,799       17,177 13,799  
Assets of discontinued operation         20,651         20,651  
Liabilities                      
Deferred revenue and customer deposits 2,805       3,342       2,805 3,342  
Liabilities of discontinued operation         5,669         5,669  
Deferred income taxes 5,182       12,168       5,182 12,168  
Stockholders' deficit:                      
Accumulated (loss) earnings (37,488)       $ (1,366)       (37,488) (1,366)  
Cost of sales:                      
Gross profit                 78,402    
Income tax benefit                 4,378    
Net loss from continuing operations                 (14,948)    
Net (loss) income from discontinued operation, net of taxes                 (22,506)    
Adjustment | ASU 2014-09                      
Assets                      
Accounts receivable, net 7,508               7,508   5,991
Inventories (7,350)               (7,350)   (5,929)
Assets of discontinued operation                     (357)
Liabilities                      
Deferred revenue and customer deposits (1,893)               (1,893)   (3,063)
Liabilities of discontinued operation                     (535)
Deferred income taxes 567               567   479
Stockholders' deficit:                      
Accumulated (loss) earnings $ 1,484               1,484   $ 2,824
Cost of sales:                      
Gross profit                 188    
Income tax benefit                 (39)    
Net loss from continuing operations                 149    
Net (loss) income from discontinued operation, net of taxes                 (157)    
Products                      
Net sales:                      
Net sales                 125,069 104,459  
Cost of sales:                      
Products (exclusive of depreciation and amortization shown below)                 82,110 70,527  
Products | Balance without adoption of ASU 2014-09 | ASU 2014-09                      
Net sales:                      
Net sales                 123,266    
Cost of sales:                      
Products (exclusive of depreciation and amortization shown below)                 80,372    
Products | Adjustment | ASU 2014-09                      
Net sales:                      
Net sales                 1,803    
Cost of sales:                      
Products (exclusive of depreciation and amortization shown below)                 1,738    
Services                      
Net sales:                      
Net sales                 130,745 119,285  
Cost of sales:                      
Services (exclusive of depreciation and amortization shown below)                 82,697 $ 74,315  
Services | Balance without adoption of ASU 2014-09 | ASU 2014-09                      
Net sales:                      
Net sales                 131,132    
Cost of sales:                      
Services (exclusive of depreciation and amortization shown below)                 83,207    
Services | Adjustment | ASU 2014-09                      
Net sales:                      
Net sales                 (387)    
Cost of sales:                      
Services (exclusive of depreciation and amortization shown below)                 $ (510)    
v3.10.0.1
Net Sales (Details)
$ in Thousands
12 Months Ended
Dec. 31, 2018
USD ($)
Disaggregation of Revenue  
Net Sales $ 255,814
Operating Segments | U.S. Debit and Credit  
Disaggregation of Revenue  
Net Sales 178,597
Operating Segments | U.S. Prepaid Debit  
Disaggregation of Revenue  
Net Sales 69,199
Operating Segments | Other  
Disaggregation of Revenue  
Net Sales 9,891
Intersegment eliminations  
Disaggregation of Revenue  
Net Sales (1,873)
Products  
Disaggregation of Revenue  
Net Sales 125,069
Products | Operating Segments | U.S. Debit and Credit  
Disaggregation of Revenue  
Net Sales 122,119
Products | Operating Segments | Other  
Disaggregation of Revenue  
Net Sales 4,398
Products | Intersegment eliminations  
Disaggregation of Revenue  
Net Sales (1,448)
Services  
Disaggregation of Revenue  
Net Sales 130,745
Services | Operating Segments | U.S. Debit and Credit  
Disaggregation of Revenue  
Net Sales 56,478
Services | Operating Segments | U.S. Prepaid Debit  
Disaggregation of Revenue  
Net Sales 69,199
Services | Operating Segments | Other  
Disaggregation of Revenue  
Net Sales 5,493
Services | Intersegment eliminations  
Disaggregation of Revenue  
Net Sales $ (425)
v3.10.0.1
Discontinued Operation (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Oct. 01, 2017
Sep. 30, 2018
Jun. 30, 2018
Dec. 31, 2018
Dec. 31, 2017
Jan. 02, 2018
Discontinued Operation and Disposition            
Impairment of goodwill $ 19,074     $ 6,366 $ 19,074  
Other comprehensive loss from discontinued operations       3,983    
Assets            
Total assets of discontinued operation         20,651 $ 20,294
Liabilities            
Total liabilities of discontinued operation         5,669 $ 5,134
Major line items constituting the (loss) income of the discontinued operation            
Net income (loss) from discontinued operation       (22,663) 1,075  
U.K. Limited | Sold            
Discontinued Operation and Disposition            
Impairment of goodwill     $ 6,366      
Impairment of intangible assets     $ 1,249      
Proceeds from sale of asset   $ 315        
Loss from a discontinued operation, net of taxes       7,248    
Other comprehensive loss from discontinued operations       3,983    
Assets            
Accounts receivable         5,006  
Inventories         2,438  
Other assets         506  
Plant, equipment and leasehold improvements         4,864  
Intangible assets         1,379  
Goodwill         6,458  
Total assets of discontinued operation         20,651  
Liabilities            
Accounts payable         3,307  
Other current liabilities         1,866  
Other long-term liabilities         496  
Total liabilities of discontinued operation         5,669  
Major line items constituting the (loss) income of the discontinued operation            
Total net sales       10,741 31,119  
Total cost of sales       10,222 24,331  
Selling general and administrative       4,336 5,591  
Impairment       7,615    
Other expense (income), net       4,006 (43)  
Pretax (loss) income from discontinued operation       (15,438) 1,240  
Pre-tax loss on sale of discontinued operation       (7,248)    
Total pretax (loss) income on discontinued operation       (22,686) 1,240  
Income tax benefit (expense)       23 (165)  
Net income (loss) from discontinued operation       $ (22,663) $ 1,075  
v3.10.0.1
Inventories (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Jan. 02, 2018
Dec. 31, 2017
Inventories      
Raw materials $ 8,235   $ 7,411
Work-in-process     5,107
Finished goods 2,991   2,974
Inventory reserve (1,399)   (1,693)
Inventory $ 9,827 $ 7,870 $ 13,799
v3.10.0.1
Plant, Equipment and Leasehold Improvements (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Plant, Equipment and Leasehold Improvements    
Plant, equipment and leasehold improvements, gross $ 92,856 $ 85,996
Less accumulated depreciation and amortization (53,746) (41,560)
Plant, equipment and leasehold improvements, net 39,110 44,436
Depreciation 13,749 12,235
Impairments of the Company's plant, equipment, and leasehold improvement assets 0 0
Machinery and equipment    
Plant, Equipment and Leasehold Improvements    
Plant, equipment and leasehold improvements, gross 62,067 58,595
Machinery and equipment under capital leases    
Plant, Equipment and Leasehold Improvements    
Plant, equipment and leasehold improvements, gross 1,812  
Furniture, fixtures and computer equipment    
Plant, Equipment and Leasehold Improvements    
Plant, equipment and leasehold improvements, gross 7,730 6,288
Leasehold improvements    
Plant, Equipment and Leasehold Improvements    
Plant, equipment and leasehold improvements, gross 19,651 19,601
Construction in progress    
Plant, Equipment and Leasehold Improvements    
Plant, equipment and leasehold improvements, gross $ 1,596 $ 1,512
v3.10.0.1
Goodwill and Other Intangible Assets - Goodwill by Reporting Segment (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Goodwill $ 47,150 $ 47,150 $ 66,088
Operating Segments | U.S. Debit and Credit      
Goodwill $ 47,150 $ 47,150  
v3.10.0.1
Goodwill and Other Intangible Assets - Goodwill Activity (Details) - USD ($)
$ in Thousands
12 Months Ended
Oct. 01, 2017
Dec. 31, 2018
Dec. 31, 2017
Goodwill Activity      
Beginning balance   $ 47,150 $ 66,088
Currency translation     136
Impairments $ (19,074) (6,366) (19,074)
Ending balance   $ 47,150 47,150
Other      
Goodwill Activity      
Impairments (1,893)   (1,893)
U.S. Debit and Credit      
Goodwill Activity      
Impairments $ (17,181)   $ (17,181)
v3.10.0.1
Goodwill and Other Intangible Assets - Intangible Assets (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Jun. 30, 2018
Dec. 31, 2018
Dec. 31, 2017
Intangible Assets [Line Items]      
Average Life (Years)   15 years 8 months 12 days  
Intangible amortization expense   $ 4,656 $ 4,687
Intangible assets subject to amortization, Cost   66,376 66,376
Intangible assets subject to amortization, Accumulated Amortization   (30,939) (26,283)
Intangible assets subject to amortization, Net Book Value   35,437 40,093
Customer relationships      
Intangible Assets [Line Items]      
Intangible asset impairment charge $ 1,249    
Intangible assets subject to amortization, Cost   55,454 55,454
Intangible assets subject to amortization, Accumulated Amortization   (25,587) (22,311)
Intangible assets subject to amortization, Net Book Value   $ 29,867 33,143
Customer relationships | Minimum      
Intangible Assets [Line Items]      
Average Life (Years)   12 years  
Customer relationships | Maximum      
Intangible Assets [Line Items]      
Average Life (Years)   20 years  
Technology and software      
Intangible Assets [Line Items]      
Intangible assets subject to amortization, Cost   $ 7,101 7,101
Intangible assets subject to amortization, Accumulated Amortization   (4,024) (3,095)
Intangible assets subject to amortization, Net Book Value   $ 3,077 4,006
Technology and software | Minimum      
Intangible Assets [Line Items]      
Average Life (Years)   7 years  
Technology and software | Maximum      
Intangible Assets [Line Items]      
Average Life (Years)   10 years  
Trademarks      
Intangible Assets [Line Items]      
Intangible assets subject to amortization, Cost   $ 3,330 3,330
Intangible assets subject to amortization, Accumulated Amortization   (877) (487)
Intangible assets subject to amortization, Net Book Value   $ 2,453 2,843
Trademarks | Minimum      
Intangible Assets [Line Items]      
Average Life (Years)   7 years 6 months  
Trademarks | Maximum      
Intangible Assets [Line Items]      
Average Life (Years)   10 years  
Non-compete agreements      
Intangible Assets [Line Items]      
Intangible assets subject to amortization, Cost   $ 491 491
Intangible assets subject to amortization, Accumulated Amortization   (451) (390)
Intangible assets subject to amortization, Net Book Value   $ 40 $ 101
Non-compete agreements | Minimum      
Intangible Assets [Line Items]      
Average Life (Years)   5 years  
Non-compete agreements | Maximum      
Intangible Assets [Line Items]      
Average Life (Years)   8 years  
v3.10.0.1
Goodwill and Other Intangible Assets - Future Aggregate Amortization Expense (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Estimated future aggregate amortization expense    
2019 $ 4,635  
2020 4,595  
2021 4,352  
2022 3,867  
2023 3,867  
Thereafter 14,121  
Intangible assets subject to amortization, Net Book Value $ 35,437 $ 40,093
v3.10.0.1
Fair Value of Financial Instruments (Details) - First Lien Credit Facility - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Liabilities:    
Carrying amount $ 312,500 $ 312,500
Term Loan    
Liabilities:    
Carrying amount 312,500 312,500
Long-term debt 203,125 228,125
Level 2 | Term Loan    
Liabilities:    
Long-term debt $ 203,125 $ 228,125
v3.10.0.1
Long-Term Debt and Credit Facility - Long-Term Debt (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Long-term Debt    
Unamortized discount $ (2,448) $ (3,122)
Unamortized deferred financing costs (4,234) (5,509)
Total long-term debt 305,818 303,869
Long-term debt, net of current maturities $ 305,818 303,869
First Lien Credit Facility    
Long-term Debt    
Interest rate (as a percent) 7.02%  
Long-term debt $ 312,500 $ 312,500
v3.10.0.1
Long-Term Debt and Credit Facility - First Lien Credit Facility (Details)
$ in Thousands
3 Months Ended 12 Months Ended
Oct. 15, 2015
USD ($)
Aug. 17, 2015
USD ($)
Dec. 31, 2015
USD ($)
Dec. 31, 2018
USD ($)
letter
Dec. 31, 2017
USD ($)
Long-term Debt          
Fee on outstanding letters of credit (as a percent)       4.50% 4.50%
Fronting fee for letters of credit (as a percent)       0.125% 0.125%
Number of outstanding letters of credit | letter       1  
Letters of credit outstanding       $ 50  
Interest expense related to amortization of deferred financing costs and discount       1,949 $ 1,947
Accrued interest       $ 5,058 $ 4,296
First Lien Credit Facility          
Long-term Debt          
Maximum net leverage ratio   7.00      
Eurodollar rate | First Lien Credit Facility          
Long-term Debt          
Applicable margin over reference rate (as a percent)       4.50%  
Eurodollar rate | First Lien Credit Facility | Minimum          
Long-term Debt          
Interest rate (as a percent)       1.00%  
Base rate | First Lien Credit Facility          
Long-term Debt          
Applicable margin over reference rate (as a percent)       3.50%  
Term Loan | First Lien Credit Facility          
Long-term Debt          
Maximum borrowing capacity   $ 435,000      
Amount repaid $ 112,500   $ 10,000    
Revolving Credit Facility          
Long-term Debt          
Amount outstanding       $ 0  
Available for borrowing       $ 19,950  
Revolving Credit Facility | Minimum          
Long-term Debt          
Unused commitment fee (as a percent)       0.50% 0.50%
Revolving Credit Facility | Maximum          
Long-term Debt          
Unused commitment fee (as a percent)       0.375% 0.375%
Revolving Credit Facility | First Lien Credit Facility          
Long-term Debt          
Maximum borrowing capacity   $ 40,000      
Amount drawn to trigger net leverage requirement (as a percent)       50.00%  
v3.10.0.1
Income Taxes - Continuing Operations (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Current taxes:    
Domestic $ 2,558 $ (7,369)
Current income tax (benefit) expense 2,558 (7,369)
Deferred taxes:    
Domestic (6,897) (9,167)
Deferred income tax (benefit) expense (6,897) (9,167)
Income tax benefit (4,339) (16,536)
Loss before income taxes    
Domestic (18,383) (36,985)
Foreign (755) (2,636)
Loss before income taxes $ 19,138 $ 39,621
Effective income tax rate (as a percent) 22.70% 41.70%
Impact of tax benefit of disposal $ 3,332  
v3.10.0.1
Income Taxes - Effective Income Tax Rate Reconciliation (Details)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Effective Income Tax Rate Reconciliation    
Tax at federal statutory rate (as a percent) 21.00% 35.00%
State income taxes (as a percent) 4.00% 0.50%
Foreign taxes (as a percent) (0.10%) (0.10%)
Deferred tax impact of enacted tax rate and law changes (as a percent) (0.70%) 18.40%
Goodwill impairments (as a percent)   (17.40%)
Tax benefit for U.K. sale 0.175  
Valuation allowance (as a percent) (13.50%) (1.50%)
Unrecognized tax benefits (as a percent) (4.80%) (3.20%)
Tax credits (as a percent) 2.50% 10.80%
Other (as a percent) (3.20%) (0.80%)
Effective income tax rate (as a percent) 22.70% 41.70%
v3.10.0.1
Income Taxes - Components of Deferred Tax Assets and Liabilities (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Deferred tax assets:    
Accrued expense $ 2,553 $ 744
Unrealized foreign exchange loss   647
Net operating loss carryforward 5,589 2,156
Deferred financing costs 553 707
Stock compensation 861 679
Tax credit carryforward 1,118 420
Interest limitation 4,412  
Other 927 753
Total gross deferred tax asset 16,013 6,106
Valuation allowance (6,823) (4,617)
Net deferred tax assets 9,190 1,489
Deferred tax liabilities:    
Plant, property and leasehold improvements (3,851) (2,819)
Intangibles (9,311) (9,912)
Prepaid expense (1,777) (926)
Total gross deferred tax liabilities (14,939) (13,657)
Net deferred tax liabilities $ (5,749) $ (12,168)
v3.10.0.1
Income Taxes - Foreign Currency Exchange Rate Fluctuations, Changes in Net Operating Losses and Credit Carryforwards (Details)
$ in Thousands
12 Months Ended
Dec. 31, 2018
USD ($)
Valuation allowance  
Net increase in valuation allowance $ 2,206
Valuation allowance (as a percent) 100.00%
Deferred Tax Liability Not Recognized, Undistributed Earnings of Foreign Subsidiaries [Abstract]  
Provision for U.S. federal and state taxes on cumulative foreign earnings $ 0
Foreign earnings intended to be reinvested outside of the U.S. $ 0
State  
Operating Loss Carryforwards [Line Items]  
Valuation allowance (as a percent) 100.00%
Research and development tax credit carryforwards $ 778
Foreign  
Operating Loss Carryforwards [Line Items]  
Operating Loss Carryforwards $ 10,791
Valuation allowance (as a percent) 100.00%
Federal  
Operating Loss Carryforwards [Line Items]  
Operating Loss Carryforwards $ 9,156
Research and development tax credit carryforwards $ 340
v3.10.0.1
Income Taxes - 2017 Tax Reform (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Income Taxes    
Tax at federal statutory rate (as a percent) 21.00% 35.00%
Tax expense related to the net change in deferred tax liabilities   $ 7,057
v3.10.0.1
Income Taxes - Unrecognized Tax Benefits (Details)
$ in Thousands
12 Months Ended
Dec. 31, 2018
USD ($)
Unrecognized Tax Benefits  
Unrecognized Tax Benefits, Beginning Balance $ 1,212
Increase related to current year tax position 506
Increase related to prior year tax position 871
Decrease related to settlements with tax authorities, net of federal benefit (545)
Unrecognized Tax Benefits, Ending Balance 2,044
Unrecognized tax benefits, accrued interest and penalties $ 221
v3.10.0.1
Stockholders' Equity (Details)
$ / shares in Units, $ in Thousands
1 Months Ended 12 Months Ended
Aug. 31, 2017
$ / shares
Dec. 31, 2017
USD ($)
$ / shares
Dec. 31, 2018
Vote / shares
$ / shares
Dividends, Common Stock [Abstract]      
Common shares, par value (in dollars per share)   $ 0.001 $ 0.001
Dividends paid on common stock | $   $ 7,540  
Cash dividend paid per common share   $ 0.675  
Amount of discontinued quarterly dividends $ 0.225    
Common Stock      
Class of Stock [Line Items]      
Voting rights per share | Vote / shares     1
v3.10.0.1
(Loss) Earnings per Share (Details)
$ / shares in Units, $ in Thousands
3 Months Ended 12 Months Ended
Dec. 20, 2017
Dec. 31, 2018
USD ($)
$ / shares
Sep. 30, 2018
USD ($)
$ / shares
Jun. 30, 2018
USD ($)
$ / shares
Mar. 31, 2018
USD ($)
$ / shares
Dec. 31, 2017
USD ($)
$ / shares
Sep. 30, 2017
USD ($)
$ / shares
Jun. 30, 2017
USD ($)
$ / shares
Mar. 31, 2017
USD ($)
$ / shares
Dec. 31, 2018
USD ($)
$ / shares
shares
Dec. 31, 2017
USD ($)
$ / shares
shares
Reverse stock split 0.20                    
Numerator:                      
Net loss from continuing operations | $   $ (7,235) $ (1,085) $ (802) $ (5,677) $ (14,416) $ (798) $ (3,273) $ (4,598) $ (14,799) $ (23,085)
Net (loss) income from a discontinued operation, net of taxes | $                   (22,663) 1,075
Net loss attributable to common stockholders | $                   $ (37,462) $ (22,010)
Denominator:                      
Basic and dilutive EPS-weighted average common shares outstanding (in shares) | shares                   11,149,554 11,117,454
Basic and diluted EPS:                      
(Loss) per share from continuing operations (in dollars per share) | $ / shares   $ (0.65) $ (0.10) $ (0.07) $ (0.51) $ (1.29) $ (0.07) $ (0.30) $ (0.42) $ (1.33) $ (2.08)
(Loss) income per share from discontinued operations, net of taxes (in dollars per share) | $ / shares                   (2.03) 0.10
(Loss) earnings per share (in dollars per share) | $ / shares                   $ (3.36) $ (1.98)
Stock Options                      
Outstanding stock based awards                      
Potential dilutive effect of share-based compensation excluded (in shares) | shares                   985,876  
Restricted stock units                      
Outstanding stock based awards                      
Potential dilutive effect of share-based compensation excluded (in shares) | shares                     993,587
v3.10.0.1
Commitments and Contingencies - Capital Lease (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Commitments and Contingencies.    
Machinery and equipment capital lease obligations $ 1,565  
Less current portion of capital lease obligations (521)  
Total long-term capital lease obligations 1,044  
Future Cash Payments, Operating Leases:    
2019 2,927  
2020 2,771  
2021 2,512  
2022 1,243  
2023 971  
Thereafter 652  
Total 11,076  
Future Cash Payments, Capital Lease:    
2019 521  
2020 474  
2021 243  
2022 256  
2023 71  
Total 1,565  
Future Cash Payments, Purchase Obligations:    
2019 3,848  
Total 3,848  
Operating leases, rent expense $ 3,767 $ 3,528
v3.10.0.1
Commitments and Contingencies - Contingencies (Details) - Pending Litigation - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Securities Litigation Case    
Commitments and Contingencies    
Loss contingency accrual   $ 0
Heckermann Montross Suit    
Commitments and Contingencies    
Loss contingency accrual $ 0 $ 0
v3.10.0.1
Employee Benefit Plan (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Employee Benefits    
Employee benefit plan, Company's portion vested at time of match (as a percent) 100.00%  
Employee benefit plan expense $ 1,235 $ 1,236
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%  
v3.10.0.1
Stock Based Compensation - Omnibus Incentive Plan (Details) - USD ($)
$ / shares in Units, $ in Thousands
12 Months Ended
Sep. 25, 2017
Dec. 31, 2018
Dec. 31, 2017
Oct. 31, 2015
Omnibus Plan        
Valuation Assumptions:        
Unrecognized compensation expense   $ 840    
Period over which compensation expense expected to recognize   1 year 2 months 12 days    
Omnibus Plan | Stock Options        
Stock based compensation        
Number of shares authorized 1,200,000     800,000
Number of additional shares authorized 400,000      
Number of shares available for grant   156,917    
Stock options granted (in shares)   159,755 713,075  
Stock option life (in years)   10 years    
Number of shares        
Balance at beginning of year (in shares)   937,310    
Granted (in shares)   159,755 713,075  
Forfeited (in shares)   (186,438)    
Balance at end of year (in shares)   910,627 937,310  
Options: Options vested and exercisable   305,275    
Options: Options vested and expected to vest   910,627    
Weighted-Average Exercise Price        
Balance at beginning of year (in dollars per share)   $ 17.11    
Granted (in dollars per share)   2.74    
Forfeited (in dollars per share)   15.17    
Balance at end of year (in dollars per share)   14.99 $ 17.11  
Weighted-Average Exercise Price: Options vested and exercisable   23.04    
Weighted-Average Exercise Price: Options vested and expected to vest   $ 14.99    
Weighted- Average Remaining Contractual Term (in Years)        
Balance (in years)   8 years 4 months 17 days    
Weighted-Average Remaining Contractual Term (in Years): Options vested and exercisable   7 years 11 months 5 days    
Weighted-Average Remaining Contractual Term (in Years): Options vested and expected to vest   8 years 4 months 17 days    
Number of unvested options scheduled to vest        
Non-Vested Options as of beginning of period   876,903    
Granted (in shares)   159,755 713,075  
Forfeited (in shares)   (152,242)    
Vested (in shares)   (279,064)    
Non-Vested Options as of end of period   605,352 876,903  
Weighted-Average Grant Date Fair Value        
Non-Vested, beginning balance   $ 4.08    
Granted: Weighted-Average Grant Date Fair Value   1.21 $ 2.43  
Forfeited: Weighted-Average Grant Date Fair Value   3.45    
Vested: Weighted-Average Grant Date Fair Value   4.81    
Non-Vested, ending balance   $ 3.14 $ 4.08  
Valuation Assumptions:        
Expected term in years   6 years 6 years  
Volatility (as a percent)   48.00% 31.90%  
Risk-free interest rate   2.70% 2.00%  
Dividend yield (as a percent)     0.90%  
Price per share for certain stock option awards granted     $ 50  
Omnibus Plan | Stock Options | Maximum        
Valuation Assumptions:        
Volatility rate, peer group determined by tech companies that completed IPO within the state year range (in years)   10 years    
Awards vesting beginning the first anniversary of the grant date | Stock Options        
Stock based compensation        
Vesting period   3 years    
2019 | Omnibus Plan | Stock Options        
Number of unvested options scheduled to vest        
Non-Vested Options as of end of period   301,267    
2020 | Omnibus Plan | Stock Options        
Number of unvested options scheduled to vest        
Non-Vested Options as of end of period   250,228    
2021 | Omnibus Plan | Stock Options        
Number of unvested options scheduled to vest        
Non-Vested Options as of end of period   53,857    
v3.10.0.1
Stock Based Compensation - Restricted Stock Units (Details) - Omnibus Plan - USD ($)
$ / shares in Units, $ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2018
Weighted Average Grant Date Fair Value      
Unrecognized compensation expense     $ 840
Period over which compensation expense expected to recognize 1 year 2 months 12 days    
Restricted stock units      
Number of Restricted Stock Units      
Units outstanding at the beginning of the period (in shares) 49,677    
Granted (in shares) 75,188 47,870  
Vested (in shares) (25,928)    
Forfeited (in shares) (30,288)    
Units outstanding at the end of the period (in shares) 68,649 49,677  
Weighted Average Grant Date Fair Value      
Units outstanding at the beginning of the period (in dollars per shares) $ 16.20    
Granted (in dollars per share) 2.66    
Vested (in dollars per share) 10.63    
Forfeited (in dollars per share) 9.91    
Units outstanding at the end of the period (in dollars per shares) $ 6.25 $ 16.20  
Vesting period 1 year    
Compensation expense $ 961 $ 2,360  
Unvested restricted stock (in units) 49,677 49,677 68,649
Restricted stock units | 2019      
Number of Restricted Stock Units      
Units outstanding at the end of the period (in shares) 57,563    
Weighted Average Grant Date Fair Value      
Unvested restricted stock (in units) 57,563   57,563
Restricted stock units | 2020      
Number of Restricted Stock Units      
Units outstanding at the end of the period (in shares) 10,843    
Weighted Average Grant Date Fair Value      
Unvested restricted stock (in units) 10,843   10,843
Restricted stock units | 2021      
Number of Restricted Stock Units      
Units outstanding at the end of the period (in shares) 243    
Weighted Average Grant Date Fair Value      
Unvested restricted stock (in units) 243   243
v3.10.0.1
Stock Based Compensation - Cash Performance Units (Details) - Cash Performance - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Stock based compensation    
Grant date fair value $ 663  
Valuation Assumptions:    
Expected term in years 3 years  
Volatility (as a percent) 48.00%  
Risk-free interest rate 1.50%  
Dividend yield (as a percent) 4.00%  
Number of Cash Performance Units    
Units outstanding at the beginning of the period (in shares) 822,915  
Granted (in shares)   932,837
Vested (in shares) (274,854)  
Forfeited (in shares) (123,049)  
Units outstanding at the end of the period (in shares) 425,012 822,915
Accrued expenses    
Stock based compensation    
Cash performance liability $ 96  
Other Long Term Liabilities    
Stock based compensation    
Cash performance liability $ 64  
v3.10.0.1
Stock Based Compensation - Option Plan (Details) - Stock Options - Option Plan
12 Months Ended
Dec. 31, 2018
$ / shares
shares
Stock based compensation  
Stock option life (in years) 10 years
Number of shares  
Balance at end of year (in shares) | shares 6,600
Weighted-Average Exercise Price  
Exercisable at end of year (in dollars per share) | $ / shares $ 0.002
Weighted- Average Remaining Contractual Term (in Years)  
Balance (in years) 4 years 4 months 24 days
v3.10.0.1
Stock Based Compensation - Restricted Shares (Details) - Restricted shares - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2017
Number of Restricted Stock Units    
Units outstanding at the beginning of the period (in shares)    
Vested (in shares)   9,486
Forfeited (in shares)   9,486
Units outstanding at the end of the period (in shares)   18,972
Weighted Average Grant Date Fair Value    
Compensation expense $ 143 $ (371)
v3.10.0.1
Segment Reporting - Revenue and EBITDA from Continuing Operations (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Segment Reporting                    
Net sales $ 68,516 $ 70,987 $ 61,454 $ 54,857 $ 57,489 $ 60,997 $ 54,836 $ 50,422 $ 255,814 $ 223,744
EBITDA                 22,698 (1,849)
U.S. Debit and Credit                    
Segment Reporting                    
EBITDA                 34,213 11,618
U.S. Prepaid Debit                    
Segment Reporting                    
EBITDA                 23,782 18,847
Other                    
Segment Reporting                    
EBITDA                 (35,297) (32,314)
Operating Segments | U.S. Debit and Credit                    
Segment Reporting                    
Net sales                 178,597 162,216
Operating Segments | U.S. Prepaid Debit                    
Segment Reporting                    
Net sales                 69,199 57,005
Operating Segments | Other                    
Segment Reporting                    
Net sales                 9,891 11,049
Intersegment eliminations                    
Segment Reporting                    
Net sales                 $ (1,873) $ (6,526)
v3.10.0.1
Segment Reporting - Reconciliation of EBITDA from Continuing Operations to "Net (Loss) Income from Continuing Operations" (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Reconciliation of total segment EBITDA to income before taxes                    
Total segment EBITDA from continuing operations                 $ 22,698 $ (1,849)
Interest, net                 (23,431) (20,850)
Income tax benefit                 4,339 16,536
Depreciation and amortization                 (18,405) (16,922)
Net loss from continuing operations $ (7,235) $ (1,085) $ (802) $ (5,677) $ (14,416) $ (798) $ (3,273) $ (4,598) $ (14,799) $ (23,085)
v3.10.0.1
Segment Reporting - Balance Sheet Data (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Jan. 02, 2018
Dec. 31, 2017
Segment Reporting      
Assets of discontinued operation   $ 20,294 $ 20,651
Total assets $ 207,204   234,005
Operating Segments      
Segment Reporting      
Total assets 207,204   213,354
Operating Segments | U.S. Debit and Credit      
Segment Reporting      
Total assets 169,567   174,717
Operating Segments | U.S. Prepaid Debit      
Segment Reporting      
Total assets 25,117   22,810
Operating Segments | Other      
Segment Reporting      
Total assets $ 12,520   $ 15,827
v3.10.0.1
Segment Reporting - Net Sales by Product and Services (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Segment Reporting                    
Total net sales $ 68,516 $ 70,987 $ 61,454 $ 54,857 $ 57,489 $ 60,997 $ 54,836 $ 50,422 $ 255,814 $ 223,744
Products                    
Segment Reporting                    
Total net sales                 125,069 104,459
Services                    
Segment Reporting                    
Total net sales                 $ 130,745 $ 119,285
v3.10.0.1
Quarterly Financial Information (Unaudited) (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Quarterly Financial Information (Unaudited)                    
Total net sales $ 68,516 $ 70,987 $ 61,454 $ 54,857 $ 57,489 $ 60,997 $ 54,836 $ 50,422 $ 255,814 $ 223,744
Gross profit 20,979 23,308 19,875 14,428 17,447 19,444 16,666 14,648 78,590 68,205
Net loss from continuing operations $ (7,235) $ (1,085) $ (802) $ (5,677) $ (14,416) $ (798) $ (3,273) $ (4,598) $ (14,799) $ (23,085)
Basic and diluted (loss) earnings per share:                    
(Loss) earnings per share from continuing operations (in dollars per share) $ (0.65) $ (0.10) $ (0.07) $ (0.51) $ (1.29) $ (0.07) $ (0.30) $ (0.42) $ (1.33) $ (2.08)