CPI CARD GROUP INC., 10-K filed on 3/24/2016
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2015
Mar. 4, 2016
Jun. 30, 2015
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, 2015 
 
 
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
 
56,542,116 
 
Entity Public Float
 
 
$ 0 
Document Fiscal Year Focus
2015 
 
 
Document Fiscal Period Focus
FY 
 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Current assets:
 
 
Cash and cash equivalents
$ 13,606 
$ 12,941 
Accounts receivable, net of allowances of $212 and $272, respectively
52,538 
43,548 
Inventories
25,640 
21,605 
Prepaid expenses and other current assets
4,260 
4,129 
Income taxes receivable
4,975 
 
Deferred income taxes
 
634 
Current assets of a discontinued operation
 
5,862 
Total current assets
101,019 
88,719 
Plant, equipment and leasehold improvements, net
52,113 
44,772 
Intangible assets, net
53,988 
58,703 
Goodwill
73,123 
73,801 
Other assets
110 
15 
Total assets
280,353 
266,010 
Current liabilities:
 
 
Accounts payable
17,832 
16,289 
Accrued expenses
11,315 
10,591 
Deferred revenue and customer deposits
3,874 
3,382 
Current maturities of long-term debt
9,000 
6,326 
Total current liabilities
42,021 
36,588 
Long-term debt, net of current maturities
300,000 
163,484 
Sellers Note
 
9,000 
Deferred income taxes
24,073 
13,810 
Other long-term liabilities
869 
6,572 
Total liabilities
366,963 
229,454 
Commitments and contingencies
   
   
Series A Preferred Stock; $0.001 par value—100,000 shares authorized; 86,407 shares issued and no shares outstanding and 86,407 shares issued and 64,809 shares outstanding; liquidation preference of $0 and $256,017 at December 31, 2015 and 2014, respectively
 
58,250 
Stockholders' deficit:
 
 
Common Stock; $0.001 par value—100,000,000 shares authorized; 56,542,116 shares issued and outstanding and 44,840,576 shares issued and 41,371,220 shares outstanding at December 31, 2015 and 2014, respectively
56 
41 
Capital deficiency
(119,028)
(24,841)
Accumulated earnings (deficit)
36,661 
5,798 
Accumulated other comprehensive loss
(4,299)
(2,584)
Employee notes receivable
(108)
Total stockholders' deficit
(86,610)
(21,694)
Total liabilities and stockholders' deficit
$ 280,353 
$ 266,010 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Statement of Financial Position [Abstract]
 
 
Allowance on accounts receivable
$ 212 
$ 272 
Preferred shares, par value (in dollars per share)
$ 0.001 
$ 0.001 
Preferred shares, authorized shares (in shares)
100,000 
100,000 
Preferred shares, issued shares (in shares)
86,407 
86,407 
Preferred shares, outstanding shares (in shares)
64,809 
Preferred shares liquidation preference
$ 0 
$ 256,017 
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)
56,542,116 
44,840,576 
Common shares, outstanding shares (in shares)
56,542,116 
41,371,220 
Consolidated Statements of Operations and Comprehensive Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Net sales:
 
 
 
Products
$ 241,609 
$ 159,220 
$ 101,360 
Services
132,501 
101,786 
95,010 
Total net sales
374,110 
261,006 
196,370 
Cost of sales:
 
 
 
Products (exclusive of depreciation and amortization shown below)
155,516 
113,399 
66,154 
Services (exclusive of depreciation and amortization shown below)
73,111 
57,233 
63,054 
Depreciation and amortization
9,662 
8,647 
7,666 
Total cost of sales
238,289 
179,279 
136,874 
Gross Profit
135,821 
81,727 
59,496 
Operating expenses:
 
 
 
Selling, general and administrative (exclusive of depreciation and amortization shown below)
61,116 
42,650 
29,418 
Depreciation and amortization
6,304 
4,605 
3,929 
Restructuring charges
681 
 
 
Total operating expenses
68,101 
47,255 
33,347 
Income from operations
67,720 
34,472 
26,149 
Other income (expense):
 
 
 
Interest, net
(18,328)
(7,508)
(7,838)
Foreign currency gain (loss)
59 
(124)
(142)
Loss on debt modification and early extinguishment
(703)
(476)
 
Other income (expense), net
359 
(101)
18 
Total other expense
(18,613)
(8,209)
(7,962)
Income before income taxes
49,107 
26,263 
18,187 
Provision for income taxes
(17,846)
(10,291)
(6,988)
Net income from continuing operations
31,261 
15,972 
11,199 
Discontinued operations:
 
 
 
Loss from a discontinued operation, net of taxes (Note 4)
(606)
(2,670)
(2,612)
Gain on sale of a discontinued operation, net of taxes
208 
 
 
Net Income
30,863 
13,302 
8,587 
Preferred stock dividends
(32,548)
(44,477)
(35,268)
Net income (loss) attributable to common stockholders
(1,685)
(31,175)
(26,681)
Basic and diluted loss per share:
 
 
 
Continuing operations
$ (0.03)
$ (0.69)
$ (0.59)
Discontinued operation
$ (0.01)
$ (0.07)
$ (0.06)
Total basic and diluted loss per share
$ (0.04)
$ (0.76)
$ (0.65)
Comprehensive Income
 
 
 
Net income
30,863 
13,302 
8,587 
Currency translation adjustment
(1,715)
(1,064)
(261)
Total comprehensive income
$ 29,148 
$ 12,238 
$ 8,326 
Consolidated Statements of Stockholders' Deficit (USD $)
In Thousands, except Share data, unless otherwise specified
Common Stock
Capital deficiency
Accumulated earnings (deficit)
Accumulated other comprehensive loss
Employee notes receivable
Total
Beginning balance at Dec. 31, 2012
$ 41 
$ (27,786)
$ (16,091)
$ (1,259)
$ (137)
$ (45,232)
Beginning balance (in shares) at Dec. 31, 2012
41,268,898 
 
 
 
 
 
Issuance of common stock, net of issuance costs (in shares)
123,112 
 
 
 
 
 
Redemption of common stock (in shares)
(278,058)
 
 
 
 
 
Repayment of employee note
 
 
 
 
10 
10 
Components of comprehensive income:
 
 
 
 
 
 
Net income
 
 
8,587 
 
 
8,587 
Currency translation adjustment
 
 
 
(261)
 
(261)
Ending balance at Dec. 31, 2013
41 
(27,786)
(7,504)
(1,520)
(127)
(36,896)
Ending balance (in shares) at Dec. 31, 2013
41,113,952 
 
 
 
 
 
Issuance of common stock, net of issuance costs
 
2,945 
 
 
 
2,945 
Issuance of common stock, net of issuance costs (in shares)
257,268 
 
 
 
 
 
Repayment of employee note
 
 
 
 
19 
19 
Components of comprehensive income:
 
 
 
 
 
 
Net income
 
 
13,302 
 
 
13,302 
Currency translation adjustment
 
 
 
(1,064)
 
(1,064)
Ending balance at Dec. 31, 2014
41 
(24,841)
5,798 
(2,584)
(108)
(21,694)
Ending balance (in shares) at Dec. 31, 2014
41,371,220 
 
 
 
 
41,371,220 
Issuance of common stock, net of issuance costs
15 
135,289 
 
 
 
135,304 
Issuance of common stock, net of issuance costs (in shares)
15,000,000 
 
 
 
 
 
Shares issued under stock-based compensation plans (in shares)
257,664 
 
 
 
 
 
Stock-based compensation
 
885 
 
 
 
885 
Redemption of common stock
 
(46)
 
 
 
(46)
Redemption of common stock (in shares)
(86,768)
 
 
 
 
 
Dividend distribution on Series A Preferred Stock
 
(230,315)
 
 
 
(230,315)
Repayment of employee note
 
 
 
 
108 
108 
Components of comprehensive income:
 
 
 
 
 
 
Net income
 
 
30,863 
 
 
30,863 
Currency translation adjustment
 
 
 
(1,715)
 
(1,715)
Ending balance at Dec. 31, 2015
$ 56 
$ (119,028)
$ 36,661 
$ (4,299)
 
$ (86,610)
Ending balance (in shares) at Dec. 31, 2015
56,542,116 
 
 
 
 
56,542,116 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Operating activities
 
 
 
Net income
$ 30,863 
$ 13,302 
$ 8,587 
Adjustments to reconcile net income to net cash provided by operating activities, net of effects of acquisitions
 
 
 
Depreciation and amortization expense
15,995 
14,198 
14,295 
Stock-based compensation expense
9,633 
4,534 
610 
Amortization of debt issuance costs and debt discount
5,648 
591 
 
Loss on debt modification and extinguishment
703 
476 
 
Loss on sale of a discontinued operation
1,039 
 
 
Deferred income tax
10,914 
(1,433)
1,960 
Other, net
(45)
(124)
(67)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(9,556)
(7,003)
4,368 
Inventories
(4,416)
(5,763)
5,705 
Prepaid expenses and other current assets
(714)
(8,473)
572 
Income taxes
(4,975)
3,061 
(1,013)
Accounts payable
1,663 
1,466 
(9,006)
Accrued expenses
915 
12,665 
(2,192)
Deferred revenue and customer deposits
699 
(772)
(197)
Other liabilities
(14,444)
(98)
 
Cash provided by operating activities
43,922 
26,627 
23,622 
Investing activities
 
 
 
Proceeds from sale of a discontinued operation
5,000 
 
 
Acquisition of EFT Source, Inc, net of cash
 
(54,859)
 
Acquisitions of plant, equipment and leasehold improvements
(18,670)
(16,956)
(9,240)
Cash used in investing activities
(13,670)
(71,815)
(9,240)
Financing activities
 
 
 
Proceeds from sale of Company stock, net of issuance costs
135,304 
 
50 
Proceeds from Senior Term Loan
 
60,000 
 
Payment on Senior Term Loan
(170,929)
(11,045)
(7,122)
Proceeds from First Lien Term Loan
435,000 
 
 
Payment on First Lien Term Loan
(122,500)
 
 
Proceeds from line of credit
 
19,300 
9,750 
Payment on line of credit
 
(19,300)
(14,750)
Loan issuance costs
(17,773)
(440)
 
Proceeds from employee note receivable
108 
19 
10 
Dividend distribution on Series A Preferred Stock
(230,315)
 
 
Redemption of preferred and common stock
(58,296)
 
(48)
Cash (used in) provided by financing activities
(29,401)
48,534 
(12,110)
Effect of exchange rates on cash
(186)
(107)
37 
Net increase in cash and cash equivalents:
665 
3,239 
2,309 
Cash and cash equivalents, beginning of period
12,941 
9,702 
7,393 
Cash and cash equivalents, end of period
13,606 
12,941 
9,702 
Supplemental disclosures of cash flow information
 
 
 
Interest
11,986 
6,793 
7,248 
Income taxes
$ 10,136 
$ 3,219 
$ 4,680 
Business
Business

1. Business

 

CPI Card Group Inc., formerly known as CPI Holdings I, 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, Europe and Canada. The Company also is engaged in the design, production, data personalization, packaging and fulfillment of retail gift and loyalty cards (primarily in Europe and Canada).

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.

The Company’s business consists of the following reportable segments: U.S. Debit and Credit, U.S. Prepaid Debit and U.K. Limited.

 

·

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, Private Label Credit Cards, defined as credit cards that an individual merchant issues for exclusive use in its own stores, and that are not issued on the networks of the Payment Cards Brands, and instant issuance systems. 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 includes the Company’s operations in Colorado, Indiana and Tennessee, which are each certified by multiple global Payment Card Brands, and where required by the Company’s 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 issuers in the United States. Services provided include tamper-evident security packaging services and card personalization and fulfillment services. 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 mentioned above. The U.S. Prepaid Debit segment includes the Companys operation in Minnesota which is certified by multiple global Payment Card Brands, and is certified to be in compliance with the standards of the PCI Security Standards Council.

 

·

U.K. Limited Segment.  The U.K. Limited segment primarily produces retail cards, such as gift and loyalty cards for customers in the United Kingdom and continental Europe. This segment also provides card personalization, packaging and fulfillment services. The U.K. Limited segment includes the Company’s operations in Colchester, United Kingdom and Liverpool, United Kingdom. Neither of the Company’s operations in this segment is certified by any of the Payment Card Brands or to be in compliance with the standards of the PCI Security Standards Council.

 

The Company also has an operation in Ontario, Canada that provides EMV and Prepaid Debit Cards and card services in Canada, which is reflected in “Other”.  See Note 19 “Segment Reporting”.

 

The Company applied acquisition accounting for the acquisition of EFT Source, Inc. (the “EFT Acquisition”) in accordance with Accounting Standards Codification (ASC) 805, Business Combinations. As such, the acquired assets and assumed liabilities were recorded at fair value as of the acquisition date. See Note 3 “EFT Source Acquisition”.

 

The Company sold its non-secure operation located in Nevada on January 12, 2015 (the Nevada Sale) under an asset purchase agreement for $5,000 in cash.  The Nevada operation primarily produced retail gift cards that are not issued on the networks of the Payment Card Brands. Accordingly, the Company’s Consolidated Balance Sheets and Statements of Operations and Comprehensive Income have been reclassified to present the Nevada operation as a discontinued operation for the years ended December 31, 2015, 2014 and 2013. See Note 4 “Discontinued Operation and Disposition”.

 

In August 2015, the Company completed the shut down and closure of its operation in Petersfield, United Kingdom.  Petersfield primarily produced retail gift cards that are not issued on networks of the Payment Card Brands.  In connection with the shut down and closure of the Petersfield, United Kingdom operation, the Company accrued facility contract termination costs of $681 during the year ended December 31, 2015. 

 

On August 17, 2015, the Company entered into a first lien credit agreement ("First Lien Credit Facility") with a syndicate of lenders providing for a $435,000 first lien term loan facility ("First Lien Term Loan") and a $40,000 revolving credit facility ("Revolving Credit Facility"). The Company used proceeds from the First Lien Credit Facility to pay off the outstanding balance on our previous credit facility of $158,420, and to redeem 62,140 shares of Series A Preferred Stock for an aggregate price of $276,688.  See Note 10 “Long-Term Debt and Credit Facility” and Note 12 “Series A Preferred Stock”.

 

On October 15, 2015, the Company completed its initial public offering (“IPO”) issuing 15,000,000 shares of common stock at a price of $10.00 per share. The net proceeds from the IPO, after issuance costs, were utilized to (i) redeem all of our remaining Series A Preferred Stock for a total redemption price of $11,877, (ii) repay $112,500 of the amount outstanding under the First Lien Term Loan (as defined herein), and (iii) terminate and settle all outstanding obligations due under the Phantom Stock Plan (as defined herein) of $13,268. The proceeds of the IPO were net of deferred offering expenses of $7,196 and are reflected in “Capital deficiency” in the Company’s Consolidated Balance Sheet and Consolidated Statement of Stockholders’ Deficit.

        

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.

 

Subsequent to the issuance of the Company’s Consolidated Financial Statements as of and for the year ended December 31, 2014, the Company identified an immaterial error in the classification of Cost of Sales between services and products. To align the Company’s presentation of Cost of Sales from services and products with the associated Net Sales from services and products, the classification has been corrected in the Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2014 to decrease Cost of Sales for services by $7,819 and increase Cost of Sales for products by $7,819.

 

Certain other prior year amounts were reclassified to conform to the current year presentation.

 

Revenue Recognition

 

Generally, the Company recognizes revenue related to sales of its products upon shipment, when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee is fixed or determinable and collectability is reasonably assured.

 

In certain cases, at the customer’s request, the Company enters into bill-and-hold transactions whereby title transfers to the customer, but the product does not ship until a specified later date. The Company recognizes revenue associated with bill-and-hold arrangements when the product is complete and ready to ship, hold criteria have been met, the amount due from the customer is fixed and collectability of the related receivable is reasonably assured.

 

Freight revenue totaling $3,882,  $4,249,  $4,278 is included in net sales during the years ended December 31, 2015, 2014, and 2013, respectively. The related freight costs are included in cost of sales.

 

Multiple-Element Arrangements

 

The Company enters into warehouse, fulfillment and distribution service agreements where customers engage the Company to store and handle completed cards and packages on their behalf. For the sales arrangements that contain multiple deliverables, the arrangement is split into separate units of accounting, and individually delivered elements have value to the customer on a standalone basis. When separate units of accounting exist, revenue is allocated to each element based on the Company’s best estimate of competitive market prices. At the point in which completed cards and packages are shipped to the Company’s warehouse, the product is billed and the revenue is recognized in accordance with the Company’s revenue recognition policy. Warehousing services revenue is recognized monthly based on volume and handling requirements; fulfillment services revenue is recognized when the product is handled in the manner specified by the customer for a unit or handling fee.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents and they are stated at cost, which approximates fair value.

 

Trade Accounts Receivable and Concentration of Credit Risk

 

Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company performs ongoing credit evaluations of its customers and generally requires no collateral to secure accounts receivable. The Company maintains an allowance for potentially uncollectible accounts receivable based upon its assessment of the collectability of accounts receivable. Accounts are written off against the allowance when it becomes probable collection will not occur. The allowance for bad debt and credit activity for the years ended December 31, 2015 and 2014 is summarized as follows:

 

 

 

 

 

 

Balance as of December 31, 2013

    

$

1,365

 

Bad debt expense

 

 

(100)

 

Write-off of uncollectible accounts

 

 

(986)

 

Currency translation adjustments

 

 

(7)

 

Balance as of December 31, 2014

 

$

272

 

Bad debt expense

 

 

28

 

Write-off of uncollectible accounts

 

 

(81)

 

Currency translation adjustments

 

 

(7)

 

Balance as of December 31, 2015

 

$

212

 

 

For the year ended December 31, 2015, the Company did not have sales to a single customer that exceeded 10% of consolidated net sales. For the year ended December 31, 2014, the Company had sales to a single customer of $29,523 (11.3% of consolidated net sales), and the Company had sales to a different customer for the year ended December 31, 2013 of $31,924 (16.3% of consolidated net sales).

 

Inventories

 

Inventories consist of raw materials, work-in-process and finished goods and are valued at the lower-of-cost (determined on the first-in, first-out or specific identification basis) or market.

 

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 equipment, furniture 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. For the Company’s continuing operations, amounts charged to expense for the depreciation of plant, equipment and leasehold improvements were $11,389,  $10,359, and $9,560 for the years ended December 31, 2015, 2014 and 2013, respectively.

 

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. Based upon the Companys analysis, it concluded that there was no impairment of its long-lived assets for the years ended December 31, 2015, 2014, and 2013.

 

Goodwill and Intangible Assets

 

Goodwill and other indefinite-lived intangible assets are not amortized, but instead are tested for impairment at least annually on October 1. Testing is done in accordance with ASC 350, Intangibles—Goodwill and Other and ASC 820, Fair Value Measurements and Disclosures. For impairment evaluations, the Company or a third-party firm first makes a qualitative assessment with respect to both goodwill and other indefinite-lived intangibles. In the case of goodwill, if it is more likely than not that a reporting unit’s fair value is less than its carrying value, the fair value of the reporting unit is compared to its respective carrying amount. If the carrying value of a reporting unit were to exceed its fair value, any excess of the carrying amount over the fair value would be charged to operations as an impairment loss. With respect to indefinite-lived intangible assets, if it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying value, any excess of the carrying value over the fair value of the indefinite-lived intangible asset is also charged to operations as an impairment loss.

 

For the years ended December 31, 2015, 2014 and 2013 the Company determined goodwill and other indefinite-lived intangibles were not impaired. As of December 31, 2015 and 2014, $6,352 and $24,377 of goodwill was tax-deductible, respectively.

 

Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets.  Acquired indefinite-lived intangible assets related to trademarks are capitalized and subject to impairment.

 

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 provision for income taxes 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 provision for income taxes.

 

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 17 “Stock Option Plans” for additional discussion regarding details of the Company's stock-based compensation plans.

 

Advertising Costs

 

Advertising costs are expensed as incurred. Advertising costs during the years ended December 31, 2015, 2014 and 2013 were $764,  $392, and $144, respectively.

 

Use of Estimates

 

Management uses estimates and assumptions 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, inventories, deferred taxes, and valuation of stock-based awards. 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 revenues, expenses, gains and losses. Translation adjustments are recorded as a component of Other Comprehensive Income in the accompanying 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 Income. For the years ended December 31, 2015, 2014 and 2013 there were $59,  $(124), and $(142) of such foreign currency gains (losses), respectively.

 

Recently Issued Accounting Pronouncements

 

The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, in May 2014. ASU 2014-09 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. An entity should also 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. In July 2015, the FASB deferred the effective date to annual reporting periods beginning after December 15, 2017, and interim reporting periods within those periods.  The Company plans to implement the provisions of ASU 2014-09 as of January 1, 2018. The Company is in the process of determining the method of adoption and assessing the impact of ASU 2014-09 on its results of operations, financial position and consolidated financial statements.

The FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, in April 2015. ASU 2015-03 requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. The new standard is effective for public entities annual reporting periods beginning after December 15, 2015.  Early adoption of the amendments in ASU 2015-03 is permitted for financial statements that have not been previously issued.  The Company adopted this standard in 2015.  Accordingly, the Company recorded a reduction of $8,041 to “Long-term debt” in the Company’s Consolidated Balance Sheet as of December 31, 2015, and reclassified $614 from “Capitalized loan fees” to “Long-term debt” in the Company’s Consolidated Balance Sheet as of December 31, 2014.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes.  ASU 2015-17 requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The new standard is effective for public entities’ annual reporting periods beginning after December 15, 2016, with early adoption permitted, and the guidance may be applied either prospectively or retrospectively. The Company has elected to early adopt this standard in 2015 prospectively.  The impact to the Company’s Consolidated Balance Sheet was immaterial.

The FASB issued ASU 2015-11, Inventory—Simplifying the Measurement of Inventory, in July 2015.  ASU 2015-11 requires that inventory be measured at the lower of cost or net realizable value.  Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  The new standard is effective for public entities’ annual reporting periods beginning after December 15, 2016.  The Company plans to implement the provisions of ASU 2015-11 as of January 1, 2017. The Company is in the process of assessing the impact of ASU 2015-11 on its results of operations, financial position and consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases, 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.  ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018 (the Company’s fiscal year 2019) with early adoption permitted. The new standard is required to be adopted using a modified retrospective approach. The Company is in the process of assessing the impact of ASU 2016-02 on its results of operations, financial position and consolidated financial statements. 

EFT Source Acquisition
EFT Source Acquisition

3. EFT Source Acquisition

 

On September 2, 2014, CPI Card Group Inc., through its wholly-owned subsidiary, CPI Acquisition, Inc., purchased EFT Source, Inc. (“EFT Source”) headquartered in Nashville, Tennessee. EFT Source is a provider of Financial Payment Card services such as data personalization and fulfillment in the U.S. market. The primary reasons for the acquisition were to extend the Company’s existing product lines, expand its markets and increase revenue.

 

Purchase Price

 

Total consideration for the EFT Acquisition of $68,859 was paid in cash of $54,859, a note payable to the previous owners of EFT Source, payable on September 2, 2016 (“Sellers Note”) of $9,000 and the issuance of $5,000 of CPI Card Group Inc. preferred and common stock.

 

Allocation of Purchase Price

 

The EFT Acquisition was accounted for in accordance with ASC 805, Business Combinations. As such, the acquired assets and assumed liabilities have been recorded at their estimated acquisition date fair values.

 

The allocation of purchase price to the assets acquired and liabilities assumed at the EFT Acquisition date is presented below:

 

 

 

 

 

 

Cash and cash equivalents

    

$

381

 

Accounts receivable

 

 

5,837

 

Inventory

 

 

1,724

 

Prepaid expenses

 

 

1,426

 

Other current assets

 

 

645

 

Property, equipment and leasehold improvements

 

 

6,460

 

Goodwill

 

 

33,619

 

Intangible assets subject to amortization(a)

 

 

31,100

 

Trademarks (indefinite-lived)

 

 

4,400

 

Other assets

 

 

13

 

Deferred tax liability

 

 

(14,751)

 

Other current liabilities

 

 

(1,995)

 

Total purchase price

 

$

68,859

 

 


(a)

Amounts primarily include intangible assets related to customer relationships. At September 2, 2014, the weighted average useful life of EFT Source customer relationships was 15 years.

 

The fair value of the intangible assets acquired was primarily determined based upon the present value of expected future cash flows, utilizing a risk-adjusted discount rate. The customer relationships were valued based on a multi-period excess earnings approach. The multi-period excess earnings approach measures an asset’s value as the present value of cash flows generated by the asset adjusted for contributory charges for other assets which contribute to the cash flows. The non-compete agreements were valued based on a with and without approach. The with and without method measures an asset value by estimating the difference in cash flows generated by the business with the asset in-use versus without the asset. The difference in cash flows is attributable to incremental earnings or cost savings associated with the asset. The trademark and trade names were valued based on a “relief from royalty” approach. The “relief from royalty” method is based on the premise that a third party would be willing to pay a royalty to use the trade name or trademark asset owned by the subject company. The projected royalties are converted into their present value equivalents through the application of a risk adjusted discount rate.

 

The Company recorded the excess of the aggregate purchase price over the estimated fair values of the identifiable assets acquired as goodwill, which is not deductible for tax purposes. The goodwill of $33,619 related to the EFT Acquisition, is attributable to current and future market share and assembled workforce,

 

The assets and liabilities assumed in the acquisition and the results of EFT Source operations were included in the Company’s Consolidated Financial Statements as of September 2, 2014.

 

Pro Forma Information

 

The following unaudited pro forma consolidated operating results give effect to the EFT Acquisition as if it had been completed on January 1, 2013. These pro forma amounts are not necessarily indicative of the operating results that would have occurred if these transactions had occurred on such date. The pro forma adjustments are based on certain assumptions that the Company considers to be reasonable.

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2014

    

2013

 

Revenue—Continuing Operations

 

$

291,302

 

$

233,360

 

Net Income—Continuing Operations

 

 

16,916

 

 

10,186

 

Basic and Diluted Loss Per Share from Continuing Operations

 

$

(0.67)

 

$

(0.60)

 

 

The Company’s Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2014 includes revenue and net income from operations of $21,999 and $4,446 respectively, attributable to EFT Source.

 

Discontinued Operation and Disposition
Discontinued Operation and Disposition

4. Discontinued Operation and Disposition

 

On January 12, 2015, the Company sold its Nevada non-secure operation under an asset purchase agreement for $5,000 in cash. The Nevada operation was primarily engaged in the design, production, data personalization, packaging and daily fulfillment of retail gift and loyalty cards for customers in the United States and was not certified by any of the Payment Card Brands.  The net carrying values of the assets classified as a discontinued operation include inventory and plant, equipment and leasehold improvements of $3,129 and $2,910 respectively.  The Company recognized a gain on the sale of discontinued operations of $208, which is included in “Gain on sale of a discontinued operation”, net of an income tax benefit of $1,247 in the Company’s Consolidated Statement of Operations and Comprehensive Income. 

 

During the years ended December 31, 2015, 2014 and 2013, the Nevada operation recognized losses of $606,  $2,670 and $2,612, respectively, included in “Loss from a discontinued operation”, net of income tax benefits of $404,  $1,421 and $1,398 in the Company’s Consolidated Statements of Operations and Comprehensive Income.

 

After the Nevada Sale, CPI retained no continuing involvement in the Nevada operations other than a 180 day transition of services agreement, which expired on July 11, 2015.  As a result of the Nevada Sale, the Company expects to take a tax deduction of $32,128 related to the tax deductible goodwill and intangible assets of the Nevada operations, of which $4,190 of the tax deductible goodwill resulted in the recognition of an income tax benefit of $1,510 during the year ended December 31, 2015.

 

Inventories
Inventories

5. Inventories

 

Inventories are summarized below:

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

 

Raw materials

 

$

10,549

 

$

10,217

 

Work-in-process

 

 

11,460

 

 

8,222

 

Finished goods

 

 

3,631

 

 

3,166

 

 

 

$

25,640 

 

$

21,605

 

 

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,

 

 

    

2015

    

2014

 

Buildings

 

$

2,565

 

$

2,486

 

Machinery and equipment

 

 

57,482

 

 

47,792

 

Furniture and fixtures

 

 

4,440

 

 

4,203

 

Leasehold improvements

 

 

15,856

 

 

12,593

 

Construction in progress

 

 

2,373

 

 

3,448

 

 

 

 

82,716

 

 

70,522

 

Less accumulated depreciation and amortization

 

 

(30,603)

 

 

(25,750)

 

 

 

$

52,113

 

$

44,772

 

 

Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets

 

7. Goodwill and Other Intangible Assets

 

The Company’s goodwill at December 31, 2015 and 2014 relates to the U.S. Debit and Credit and U.K. Limited reporting segments.

 

Goodwill activity is summarized as follows:

 

 

 

 

 

 

Balance as of January 1, 2014

    

$

40,818

 

EFT Acquisition

 

 

33,619

 

Currency translation

 

 

(636)

 

Balance as of December 31, 2014

 

$

73,801

 

Currency translation

 

 

(678)

 

Balance as of December 31, 2015

 

$

73,123

 

 

The Company completed its evaluation of the carrying value of goodwill as of October 1, 2015 and 2014 and determined there was no impairment to the recorded value of goodwill. In order to identify potential impairments, CPI compared the fair value of its reporting units with their carrying amounts, including goodwill. As the fair value of the reporting units exceeded their carrying amounts, the Company was not required to complete the second step of the process which would measure the amount of any impairment.

 

CPI’s intangible assets consist of customer relationships, technology and software, non-compete agreements, favorable leases and trademarks. Total intangible assets are being amortized over a weighted-average useful life of 16 years. Intangible amortization expense totaled $4,577,  $2,893 and $2,035, for the years ended December 31, 2015, 2014 and 2013, respectively.

 

Intangible assets consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

 

December 31, 2014

 

 

    

Average

    

 

    

Accumulated

    

Net Book

    

 

    

Accumulated

    

Net Book

 

 

 

Life (Years)

 

Cost

 

Amortization

 

Value

 

Cost

 

Amortization

 

Value

 

Customer relationships

 

12 to 20

 

$

59,612

 

$

(17,747)

 

$

41,865

 

$

59,871

 

$

(14,304)

 

$

45,567

 

Technology and software

 

7 to 10

 

 

7,101

 

 

(1,238)

 

 

5,863

 

 

7,101

 

 

(310)

 

 

6,791

 

Noncompete agreements

 

5 to 8

 

 

491

 

 

(270)

 

 

221

 

 

491

 

 

(198)

 

 

293

 

Favorable leases

 

 9.5

 

 

111

 

 

(101)

 

 

10

 

 

111

 

 

(88)

 

 

23

 

Intangible assets subject to amortization

 

 

 

 

67,315

 

 

(19,356)

 

 

47,959

 

 

67,574

 

 

(14,900)

 

 

52,674

 

Trademarks (indefinite-lived)

 

 

 

 

6,029

 

 

 

 

6,029

 

 

6,029

 

 

 

 

6,029

 

 

 

 

 

$

73,344

 

$

(19,356)

 

$

53,988

 

$

73,603

 

$

(14,900)

 

$

58,703

 

 

The estimated future aggregate amortization expense for the identified amortizable intangibles noted above as of December 31, 2015 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

2016

 

$

4,572

2017

    

 

4,561

2018

 

 

4,548

2019

 

 

4,548

2020

 

 

4,548

Thereafter

 

 

25,182

 

 

$

47,959

 

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 subject to fair value measurements and the necessary disclosures are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at

 

 

 

Fair Value as of

 

December 31, 2015

 

 

 

December 31,

 

(Using Fair Value Hierarchy)

 

 

    

2015

    

Level 1

    

Level 2

    

Level 3

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Term Loan

 

$

309,375

 

$

 

$

309,375

 

$

 

Sellers Note

 

$

9,000

 

$

 

$

 

$

9,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at

 

 

 

Fair Value as of

 

December 31, 2014

 

 

 

December 31,

 

(Using Fair Value Hierarchy)

 

 

    

2014

    

Level 1

    

Level 2

    

Level 3

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Term Loan dated September 2, 2014

 

$

170,866

 

$

 

$

170,866

 

$

 

Sellers Note

 

$

9,000

 

$

 

$

 

$

9,000

 

 

 

The fair value measurements associated with the EFT Acquisition are based on significant unobservable Level 3 inputs, which require significant management judgment and estimation (see Note 3 “EFT Source Acquisition” for additional information). A discount rate of 11.9% was utilized in determining the fair value of acquired customer relationship intangible assets related to the EFT Acquisition.

 

The carrying amounts for cash and cash equivalents approximate fair value due to their short maturities. The aggregate fair value of the Company's First Lien Term Loan was based on bank quotes. The fair value of the Sellers’ Note approximates its carrying value as market interest rates have not changed significantly from its date of issuance.

 

The carrying value of the Senior Term Loan dated September 2, 2014 on December 31, 2014, approximates the fair value based on the Company’s floating rate note which did not change significantly from the amended and restated Credit Agreement of September 2, 2014.

Related-Party Transactions
Related-Party Transactions

9. Related-Party Transactions

 

The Company leases its operating facility in Indiana from an entity that is owned by a stockholder, who was a member of the Company’s Board of Directors until August 7, 2015. The lease expires in January 2018 and requires the Company to pay property taxes, insurance and normal maintenance costs. The Company paid rent of $108 from January 1, 2015 through August 7, 2015, the date on which the former member of the Company’s Board of Directors resigned, and was therefore no longer considered a related party.  During each of the years ended December 31, 2014 and 2013, the Company paid rent of $175.

 

In conjunction with certain officer and non-officer Company employees acquiring Series A Preferred and Common Stock during 2013 and 2012, the Company obtained notes receivable from the employees that were paid in full on August 17, 2015 and are no longer outstanding as of December 31, 2015.  See Note 13 “Stockholders’ Equity” for further discussion.

 

Long-Term Debt and Credit Facility
Long-Term Debt and Credit Facility

 

10. Long-Term Debt and Credit Facility

 

Long-term debt consists of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Interest

 

December 31,

 

December 31,

 

 

 

Rate

    

2015

    

2014

    

First Lien Term Loan (a)

 

 

5.50%

 

$

312,500

 

$

 —

 

Senior term loan dated September 2, 2014 (b)

 

 

3.91%

 

 

 —

 

 

170,866

 

Sellers Note (a)

 

 

5.00%

 

 

9,000

 

 

9,000

 

Unamortized discount

 

 

 

 

 

(4,459)

 

 

(442)

 

Unamortized deferred financing costs

 

 

 

 

 

(8,041)

 

 

(614)

 

Total long-term debt

 

 

 

 

 

309,000

 

 

178,810

 

Less current maturities

 

 

 

 

 

(9,000)

 

 

(6,326)

 

Long-term debt, net of current maturities

 

 

 

 

$

300,000

 

$

172,484

 

(a)

Interest rate on December 31, 2015

(b)

Interest rate on December 31, 2014

 

 

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%. Letters of credit are subject to a 0.125% fronting fee payable to the issuing bank and a fee payable to the revolving lenders equal to the margin applicable to Eurodollar revolving loans. 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 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 requires prepayment in advance of the maturity date upon the occurrence of certain customary events, including the completion of a qualified initial public offering, and based on an annual Excess Cash Flow calculation, pursuant to the terms of the agreement, beginning as of the year ended December 31, 2016, with any payments due after the issuance of the Company’s annual financial statements in 2017. 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.

 

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 ("IPO"), and an additional $10,000 during the fourth quarter of 2015. See Note 1 “Business”.  The Company recognized additional interest expense of $4,687 during the year ended December 31, 2015 related to accelerated amortization of deferred financing costs and discount in connection with these repayments.

 

As of December 31, 2015, the Company did not have any outstanding amounts under the Revolving Credit Facility.

 

Senior Term Loan dated September 2, 2014

 

At December 31, 2015, there were no amounts outstanding on the Senior Term Loan dated November 8, 2012, and amended September 2, 2014, and the related revolver with a maturity of September 30, 2016. The outstanding balance of $158,420 on the Senior Term Loan was repaid in full on August 17, 2015 using a portion of the proceeds from the new $435,000 First Lien Term Loan. In conjunction with the repayment of the Senior Term Loan, the Company recognized a $703 loss on early extinguishment related to the unamortized deferred financing costs and discount on the Senior Term Loan in “Loss on debt modification and early extinguishment” in the Consolidated Statement of Operations and Comprehensive Income. The Company accounted for the debt refinancing in accordance with ASC 470-50-40-6, Modifications and Exchanges. 

 

In conjunction with the Company’s initial refinancing of Senior Term Loan on September 2, 2014, the Company recognized a $476 loss on extinguishment reflected in “Loss on debt modification and early extinguishment” in the Consolidated Statement of Operations and Comprehensive Income. The primary purpose of this refinancing was to finance the cash portion of the acquisition consideration of EFT Source.  Refer to Note 3 “EFT Source Acquisition” for additional information.

 

Sellers Note

 

The Company entered into a subordinated, unsecured promissory note for $9,000 with certain sellers of EFT Source as part of the EFT Source acquisition. Interest on the Sellers Note accrues at 5.0% per annum and is paid quarterly. The Sellers Note principal and unpaid interest is due at the earlier of September 2, 2016 or with the occurrence of certain specific events as outlined in the Sellers Note. The Sellers Note is included in “Current maturities of long-term debt” at December 31, 2015, as the maturity date of the loan is within twelve months from December 31, 2015.

 

Letters of Credit

 

As of December 31, 2015, the Company has two outstanding letters of credit for the security deposits on two real property lease agreements. These letters of credit are for a total of $100, reducing the borrowing capacity under the Revolving Credit Facility to $39,900. The Company pays a fee on the outstanding letters of credit at the applicable margin, which was 4.50% as of December 31, 2015, in addition to a fronting fee of 0.125% per annum.

 

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.

 

Maturities of long-term debt as of December 31, 2015 consist of the following:

 

 

 

 

 

Year ending December 31:

    

 

 

2016

 

$

9,000

2017

 

 

 —

2018

 

 

2019

 

 

2020

 

 

Thereafter

 

 

312,500

 

 

$

321,500

 

Income Taxes
Income Taxes

11. Income Taxes

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

    

2013

 

Current taxes:

 

 

 

 

 

 

 

 

 

 

Domestic

 

$

16,036

 

$

8,424

 

$

4,982

 

Foreign

 

 

254

 

 

 

 

6

 

 

 

 

16,290

 

 

8,424

 

 

4,988

 

Deferred taxes:

 

 

 

 

 

 

 

 

 

 

Domestic

 

 

1,656

 

 

2,238

 

 

2,347

 

Foreign

 

 

(100)

 

 

(371)

 

 

(347)

 

 

 

 

1,556

 

 

1,867

 

 

2,000

 

Provision for income taxes

 

$

17,846

 

$

10,291

 

$

6,988

 

Income before income taxes

 

 

 

 

 

 

 

 

 

 

Domestic

 

$

50,692

 

$

27,984

 

$

19,954

 

Foreign

 

 

(1,585)

 

 

(1,721)

 

 

(1,767)

 

Total

 

$

49,107

 

$

26,263

 

$

18,187

 

Effective income tax rate

 

 

36.3

%

 

39.1

%

 

38.4

%

 

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

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

2015

    

2014

    

2013

 

Tax at federal statutory rate

 

35.0

%

35.0

%

34.0

%

Permanent differences

 

(1.6)

 

(2.9)

 

(1.7)

 

State income taxes

 

2.0

 

3.1

 

4.8

 

Foreign taxes

 

0.3

 

2.5

 

(1.6)

 

Other

 

0.6

 

1.4

 

2.9

 

Effective income tax rate

 

36.3

%

39.1

%

38.4

%

 

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

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

 

2014

 

Deferred tax assets:

 

 

 

 

 

 

 

Allowance for doubtful accounts

 

$

28

 

$

65

 

Inventory valuation

 

 

279

 

 

607

 

Accrued expense

 

 

927

 

 

372

 

Unrealized foreign exchange loss

 

 

652

 

 

634

 

Net operating loss carryforward

 

 

1,999

 

 

2,148

 

Goodwill

 

 

 —

 

 

2,159

 

Deferred financing costs

 

 

1,564

 

 

 

Asset retirement obligation

 

 

179

 

 

292

 

Stock compensation

 

 

322

 

 

1,853

 

Total gross deferred tax assets

 

 

5,950

 

 

8,130

 

Valuation allowance

 

 

(3,717)

 

 

(4,120)

 

Net deferred tax assets

 

 

2,233

 

 

4,010

 

Deferred tax liabilities:

 

 

 

 

 

 

 

Plant, property and leasehold improvements

 

 

(5,881)

 

 

(4,238)

 

Intangibles

 

 

(18,962)

 

 

(11,903)

 

Prepaid expense

 

 

(1,463)

 

 

(1,045)

 

Total gross deferred tax liabilities

 

 

(26,306)

 

 

(17,186)

 

Net deferred tax liabilities

 

$

(24,073)

 

$

(13,176)

 

 

The net deferred tax assets and liabilities are reflected in the consolidated balance sheets as follows:

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

 

Current deferred tax assets

 

$

 —

 

$

634

 

Long-term deferred tax liabilities

 

 

(24,073)

 

 

(13,810)

 

Net deferred tax (liabilities)

 

$

(24,073)

 

$

(13,176)

 

 

The net change in the valuation allowance was a decrease of $403 and an increase $678 for the years ended December 31, 2015 and 2014, respectively.  The change in the year ended December 31, 2015 related to foreign currency exchange rate fluctuations, partially offset by a change in net operating losses of foreign locations,.  The change in the year ended December 31, 2014 related to net operating losses of a foreign location.

 

The Company has potential tax benefits associated with $1,999 of foreign operating loss carryforwards, which expire at various dates from 2024 through 2033. 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.

 

At December 31, 2015, no provision has been made for U.S. federal and state taxes on cumulative foreign earnings from CPI Card Group-Europe Limited operations of approximately $2,707, which are expected to be indefinitely reinvested outside of the U.S.  The U.S. deferred tax liability associated with indefinitely reinvested earnings and profits is not material.  

 

The Company has analyzed its filing positions in all of the jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions, and based upon its review, determined there are no uncertain tax positions as of December 31, 2015 and 2014.

 

The Company is generally subject to potential federal and state examinations for the tax years after December 31, 2010 for federal purposes and December 31, 2009 for state purposes.

 

Series A Preferred Stock
Series A Preferred Stock

12. Series A Preferred Stock

 

Series A Preferred Stock has a par value of $0.001 per share. The original Series A Preferred Stock has an initial liquidation preference equal to $1,000 per outstanding share. In addition, the Series A Preferred Stock liquidation preference earns a dividend of 20% per share per annum, payable when declared by the Board of Directors. Such dividends accrue on each share from the date of original issuance and accrue on a daily basis, whether or not declared. Such dividends are cumulative so that if such dividend in respect of any previous or current annual dividend period, at the annual 20% rate, has not been paid, the deficiency shall first be fully paid before any dividend or other distribution shall be paid or declared and set apart for the Common Stock. In the event of any liquidation, dissolution, or winding up of the Company, the Series A Preferred Stock holders shall be entitled to receive, prior and in preference to any distributions of any of the Company’s assets to the Common Stock holders, the value of the liquidation preference. If the distribution of such assets is insufficient to permit the payment to such holders, the distribution shall be distributed ratably among the holders of the Series A Preferred Stock in proportion to the amount of such stock owned by each holder. The Series A Preferred Stock had no voting rights. 

During the year ended December 31, 2015, the Company redeemed a total of 64,809 shares of Series A Preferred Stock at prices ranging between $3,950.33 and $4,610.68 per share, including the redemption of 62,140 shares of the Series A Preferred Stock for $276,688, or $4,446.70 per share, on August 17, 2015 with proceeds from the Company’s First Lien Credit Facility (see Note 10 “Long-Term Debt and Credit Facility”), and the redemption of 2,576 shares of the Series A Preferred Stock for $11,877, or $4,610.68 per share, using proceeds from the Company’s IPO (see Note 1 “Business”). Of the $288,565 redemption amount during the year ended December 31, 2015, $58,250 was treated as a return of capital and $230,315 was treated as a dividend. There were no outstanding shares of Series A Preferred Stock as of December 31, 2015.    

        During the year ended December 31, 2014, the Company issued 549 shares of Series A Preferred Stock at an estimated value of $3,733.88 per share as part of the payment consideration for the EFT Acquisition. The Company did not redeem any shares of Series A Preferred Stock during the year ended December 31, 2014.

Stockholders’ Equity
Stockholders’ Equity

 

13. 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.

On September 3, 2015, the Company's Board of Directors approved a 22-for-1 stock split of our common stock and increased the number of authorized shares of common stock to 100,000,000. Upon the effective date of the stock split, each outstanding share of common stock and restricted common stock was divided into 22 shares of common stock or restricted common stock, as applicable. Shares of common stock available for issuance under the 2007 Stock Option Plan were increased accordingly. All of the share numbers, share prices and exercise prices have been retroactively adjusted to reflect the stock split in the Consolidated Financial Statements and these notes.

On October 15, 2015, the Company completed its IPO issuing 15,000,000 shares of common stock at a price of $10.00 per share. The net proceeds from the IPO, after issuance costs, were utilized to (i) redeem all of our remaining Series A Preferred Stock for a total redemption price of $11,877 (see Note 12 “Series A Preferred Stock”), (ii) repay $112,500 of the amount outstanding under the First Lien Term Loan (see Note 10 “Long-Term Debt”), and (iii) terminate and settle all outstanding obligations due under the Phantom Stock Plan of $13,268 (see Note 18 “Phantom Stock Plan”). The proceeds of the IPO were net of deferred offering expenses of $7,196 and are reflected in “Capital deficiency” in the Company’s Consolidated Balance Sheets.

 

Employee Notes Receivable

Included in “Stockholders’ Deficit” in the Consolidated Balance Sheets are promissory notes received in connection with equity issuances of Series A Preferred Stock and Common Stock to certain employees made during 2011 and earlier years. The notes receivable accrued interest at 5% per annum and were paid in bimonthly installments. The principal balances of the notes were due upon the employee’s termination, the sale of the Company, upon any distributions, or at such time that the employee failed to own the underlying shares. 

 

During the years ended December 31, 2015, 2014 and 2013, the Company did not issue any new Employee notes, and $108, $19 and $10 of employee notes were repaid, respectively. As of December 31, 2015 there were no outstanding employee notes receivable, as they were all repaid during the year.  As of December 31, 2014, $108 of employee notes receivable were outstanding.

 

Earnings per Share
Earnings per Share

14. Earnings per Share

 

Basic or diluted earnings (loss) per share is computed by dividing net earnings or loss by the weighted-average number of ordinary shares outstanding during the period.

 

The following table sets forth the computation of basic and diluted EPS attributable to continuing and discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

    

2013

 

Numerator:

 

 

 

 

 

 

 

 

 

 

Net income from continuing operations

 

$

31,261

 

$

15,972

 

$

11,199

 

Preferred stock dividends

 

 

(32,548)

 

 

(44,477)

 

 

(35,268)

 

Loss from continuing operations attributable to common stockholders

 

 

(1,287)

 

 

(28,505)

 

 

(24,069)

 

Loss from a discontinued operation, net of taxes

 

 

(398)

 

 

(2,670)

 

 

(2,612)

 

Net loss attributable to common stockholders

 

$

(1,685)

 

$

(31,175)

 

$

(26,681)

 

Denominator:

 

 

 

 

 

 

 

 

 

 

Basic EPS—weighted average common shares outstanding

 

 

44,816,263

 

 

41,199,246

 

 

41,072,350

 

Diluted EPS—weighted average common shares outstanding

 

 

44,816,263

 

 

41,199,246

 

 

41,072,350

 

Basic and Diluted EPS:

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(0.03)

 

$

(0.69)

 

$

(0.59)

 

Loss from a discontinued operation, net of taxes

 

 

(0.01)

 

 

(0.07)

 

 

(0.06)

 

Net loss

 

$

(0.04)

 

$

(0.76)

 

$

(0.65)

 

 

The potentially dilutive effect of the outstanding stock options of 1,257,450,  627,000 and 649,000 shares as of December 31, 2015, 2014 and 2013, respectively, have been excluded from the weighted average number of shares of common stock outstanding as their inclusion would be antidilutive. As further described in Note 1 “Business”, the cumulative dividends in arrears related to Series A Preferred Stock were paid in conjunction with the Company’s IPO. As of December 31, 2014, cumulative dividends in arrears related to the Series A Preferred Stock in aggregate was $191,208.

 

Commitments and Contingencies
Commitments and Contingencies

15. Commitments and Contingencies

 

Commitments

 

The Company leases real property for its facilities under noncancelable operating lease agreements. Land and facility leases expire at various dates between 2016 and 2023 and contain various provisions for rental adjustments and renewals. All of these leases 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.

 

Future cash payments with respect to operating leases and purchase obligations as of December 31, 2015 are as follows:

 

 

 

 

 

 

 

 

 

 

    

Operating

    

Purchase

  

 

 

Leases

 

Obligations

 

2016

 

$

4,309

 

$

3,047

 

2017

 

 

3,745

 

 

 

2018

 

 

2,426

 

 

 

2019

 

 

1,327

 

 

 

2020

 

 

948

 

 

 

Thereafter

 

 

1,021

 

 

 

Total

 

$

13,776

 

$

3,047

 

 

The Company incurred rent expense under non-cancellable operating leases during the years ended December 31, 2015, 2014 and 2013, totaling $3,518,  $3,320 and $3,096, respectively.

 

Asset retirement obligations relate to legal obligations associated with the removal of all leasehold improvements at the end of the lease term. The Company records all asset retirement obligations, which primarily relate to “make-good clauses in operating leases, for its leased property containing leasehold improvements. The liability, reported within other long-term liabilities, is accreted through charges to operating expenses. If the asset retirement obligation is settled for an amount other than the carrying amount of the liability, the Company recognizes a gain or loss on settlement. The Company incurred accretion expense during the years ended December 31, 2015, 2014 and 2013 totaling $29,  $53 and $55, respectively. As of December 31, 2015 and 2014, the Company’s asset retirement obligations included in “Other long-term liabilities” in the Consolidated Balance Sheets were $613 and $911, respectively.

 

Contingencies

 

In October 2015, Gemalto S.A. filed a suit alleging that the Company infringes on a Gemalto patent by incorporating microchips into the Company’s products.  Gemalto’s patent will expire in 2017. Discovery and motion practice is ongoing. The Company believes Gemalto’s claims are without merit and it has strong legal and equitable defenses, plus meritorious counterclaims and indemnity rights. The Company intends to defend the suit vigorously. Due to the current stage of the matter, the Company has concluded the risk of loss is not reasonably possible or estimable and no accrual has been recognized as of December 31, 2015.

 

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

 

Employee Benefit Plan
Employee Benefit Plan

16. 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 accounts. The Company matches 100% of the participant’s first 3% of deferrals and 50% of the next 2% deferral percentage. The Company’s portion is 100% vested at the time of the match.

 

The aggregate amounts charged to expense in connection with the plan were $1,049,  $824 and $908 for the years ended December 31, 2015, 2014 and 2013, respectively.

 

 

Stock Option Plan
Stock Option Plan

17. Stock Option Plans

 

CPI Card Group Inc. Omnibus Plan

 In conjunction with the completion of the IPO, the Company adopted the Omnibus Plan pursuant to which cash and equity based incentives may be granted to participating employees, advisors and directors. The Company has reserved 4,000,000 shares of common stock for issuance under the Omnibus Plan. During the year ended December 31, 2015, the Company granted awards of stock options for 795,450 shares of common stock at an exercise price of $10 per share, including 770,450 options granted in connection with the IPO. The options will generally vest 33.4%,  33.3%, and 33.3% on the second, third and fourth anniversary dates following the grant date.  

Outstanding and exercisable stock options under the Omnibus Plan are as follows:  

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

Weighted-

  

 

 

 

 

Weighted-

 

Average

 

 

 

 

 

Average

 

Remaining

 

 

 

 

 

Exercise

 

Contractual Term

 

 

 

Options

 

Price

 

(in Years)

 

Outstanding as of December 31, 2014

 

 —

 

$

 —

 

 —

 

Granted

 

795,450

 

 

10.00

 

10.00

 

Forfeited

 

 —

 

 

 —

 

 —

 

Outstanding as of December 31, 2015

 

795,450

 

$

10.00

 

9.80

 

Unvested options as of December 31, 2015, vest as follows:

 

 

 

 

2016

    

 —

 

2017

 

265,150

 

2018

 

265,150

 

2019

 

265,150

 

Total unvested options as of December 31, 2015

 

795,450

 

 

Compensation expense for the Omnibus Plan for the year ended December 31, 2015 was $239.  As of December 31, 2015, the total unrecognized compensation expense related to unvested options was $2,470, which the Company expects to recognize over an estimated weighted average period of 2.8 years.  The aggregate intrinsic value of stock option awards outstanding under the Omnibus Plan as of December 31, 2015 was $525.

The fair value of the stock options granted under the Omnibus Plan was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions:

 

 

 

 

 

 

Year

 

 

 

ended

 

 

 

December

 

 

 

31, 2015

 

Expected term in years

 

6.5

 

Volatility

 

36.7

%

Risk-free interest rate

 

1.8

%

Dividend yield

 

1.3

%

 

Expected term – The Company estimated the expected term based on the average of the weighted-average vesting period and the contractual term of the stock option awards by utilizing the “simplified method”, as the Company does not have sufficient available historical data to estimate the expected term of these stock option awards.

Volatility – The expected volatility percentage of 36.7% was based on a peer group average historical volatility over the expected option term.  The peer group was based on financial technology companies that completed an initial public offering of common stock from 2007 through 2014.

Risk-free interest rate – The risk-free interest rate of 1.8% was determined by using the United States Treasury rate for the period that coincided with the expected option term described above.

Dividend yield – The Company’s expected annual dividend yield in the current year was determined based on an estimated annual dividend divided by the expected share price for the Company’s common stock on the initial public offering date. 

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 and restricted stock awards may be granted to employees, directors, and consultants at an exercise price greater than or equal to 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 in conjunction with its IPO, as further described above, no further awards will be made under the Option Plan.  The outstanding stock options have a 10-year life and vest, as noted, in each respective grant letter. All stock options are nonqualified.

Outstanding and exercisable stock options under the Option Plan are as follows:

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

Weighted-

  

 

 

 

 

Weighted-

 

Average

 

 

 

 

 

Average

 

Remaining

 

 

 

 

 

Exercise

 

Contractual Term

 

 

 

Options

 

Price

 

(in Years)

 

Outstanding as of January 1, 2013

 

528,000

 

$

0.0004

 

7.48

 

Granted

 

165,000

 

 

0.0005

 

 

 

Forfeited

 

(44,000)

 

 

0.0005

 

 

 

Outstanding as of December 31, 2013

 

649,000

 

$

0.0004

 

7.35

 

Forfeited

 

(22,000)

 

 

0.0001

 

 

 

Outstanding as of December 31, 2014

 

627,000

 

$

0.0004

 

6.44

 

Exercised

 

(66,000)

 

 

0.0005

 

 

 

Forfeited

 

(99,000)

 

 

0.0003

 

 

 

Outstanding as of December 31, 2015

 

462,000

 

$

0.0003

 

5.57

 

 

 

 

 

 

 

 

 

 

Exercisable as of December 31, 2015

 

421,667

 

$

0.0004

 

5.48

 

 

Unvested options as of December 31, 2015 vest as follows:

 

 

 

 

 

2016

    

40,333

 

Total

 

40,333

 

 

Compensation expense and unrecorded compensation expense related to options previously granted under the Option Plan, for the years ended December 31, 2015, 2014 and 2013, were de minimis.  The aggregate intrinsic value of stock option awards outstanding and exercisable under the Option Plan as of December 31, 2015 was $4,925 and $4,495, respectively.

During the year ended December 31, 2015, the Company issued 191,664 restricted shares of common stock to executives of the Company.  The awards contain conditions associated with continued employment or service.  The terms of the non-vested restricted shares of common stock provide voting and regular dividend rights to the holders of the restricted shares of common stock, and accordingly are included in weighted-average shares outstanding in the Company’s basic earnings per share calculation.  See Note 14 “Earnings per Share”.  Upon vesting, the restrictions lapse and the shares are considered issued and outstanding.  The restricted shares vest over one to three year periods.

The following table summarizes the changes in the number of outstanding restricted shares of common stock for the year ended December 31, 2015:

 

 

 

 

 

 

 

 

    

 

    

  Weighted-

  

 

 

 

 

Average

 

 

 

 

 

Grant Date

 

 

 

Shares 

 

Fair Value

 

Outstanding as of December 31, 2014

 

 

$

 

Granted

 

191,664

 

 

9.48

 

Vested

 

 

 

 

Forfeited

 

 

 

 

Outstanding as of December 31, 2015

 

191,664

 

$

9.48

 

 

Total compensation expense related to the unvested restricted shares of common stock awards was $646 for the year ended December 31, 2015.  As of December 31, 2015, there was $1,171 of total remaining unrecognized compensation expense related to non-vested restricted shares of common stock that will be recognized over a weighted average period of 1.24 years.

Phantom Stock Plan
Phantom Stock Plan

18. Phantom Stock Plan

 

Effective January 1, 2012, the Company’s Board of Directors adopted the CPI Acquisition, Inc. Phantom Stock Plan (“Phantom Stock Plan”) to provide incentive compensation to certain key employees.  In conjunction with the Company’s IPO, the Phantom Stock Plan was terminated and all outstanding liabilities were settled under the plan. . During the year ended December 31, 2015, payments of $13,892 were made under the plan, and no liability existed as of December 31, 2015.  As of December 31, 2014, the liability reported in “Other long-term liabilities” in the Consolidated Balance Sheet was $5,144.

 

Under the terms of the Phantom Stock Plan, holders of an award were entitled to a cash payment equal to the difference between the fair market value of the award, as defined in the agreement, at the time of exercise and the award’s exercise price. The Company measured the liability at intrinsic value, with changes in the intrinsic value of the liability recognized as expense each year in the Consolidated Statements of Operations and Comprehensive Income.

 

During the years ended December 31, 2015, 2014 and 2013, the Company recognized compensation expense of $8,748,  $4,534 and $610, respectively, related to this plan. 

 

Segment Reporting
Segment Reporting

19. Segment Reporting

 

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

 

EBITDA is the primary measure used by the Company’s chief operating decision maker to evaluate segment operating performance. As the Company uses the term, EBITDA is defined as income from continuing operations 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 U.S. 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.

 

As of December 31, 2015, the Company’s reportable segments are as follows:

 

·

U.S. Debit and Credit

 

·

U.S. Prepaid Debit

 

·

U.K. Limited

 

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, 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), and instant issuance systems. 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 includes the Company’s operations in Colorado, Indiana and Tennessee, which are each certified by multiple global Payment Card Brands and, where required by the Company’s customers, certified to be in compliance with the standards of the PCI Security Standards Council. These operating segments have been aggregated into a single reportable segment due to similarities in the nature of the products and services sold by these subsidiaries, a common customer base, the substantial degree of integration and redundancy across the segments, and utilization of centrally shared sales, marketing, quality and planning departments. Separate information about these segments would not be useful to the readers of the financial statements.

 

The U.S. Prepaid Debit segment primarily provides integrated card services to prepaid debit card issuers in the United States. Services provided include tamper-evident security packaging services and card personalization and fulfillment services. 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 mentioned above. The U.S. Prepaid Debit segment includes the Company’s operation in Minnesota which 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 U.K. Limited segment primarily produces retail cards, such as gift and loyalty cards for customers in the United Kingdom and continental Europe. This segment also provides card personalization, packaging and fulfillment services. The U.K. Limited segment includes the Company’s operations in Colchester, United Kingdom and Liverpool, United Kingdom. Neither of the Company’s operations in this segment is certified by any of the Payment Card Brands, nor are they PCI certified.

 

The “Other” category includes the Company’s corporate headquarters and less significant operating segments that derive their revenue from the production of Financial Payment Cards and retail gift cards in Canada (CPI—Canada) and the U.K. (CPI—Petersfield). For additional information regarding the Company’s decision to shut down the CPI—Petersfield facility during the third quarter of 2015, see Note 1 “Business”.

 

Performance Measures of Reportable Segments

 

Revenue and EBITDA of the Company’s reportable segments for the years ended December 31, 2015, 2014 and 2013 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

EBITDA

 

 

 

December 31,

 

December 31,

 

 

    

2015

    

2014

    

2013

    

2015

    

2014

    

2013

 

U.S. Debit and Credit(a)

 

$

263,668

 

$

153,015

 

$

91,626

 

$

78,981

 

$

37,547

 

$

18,871

 

U.S. Prepaid Debit

 

 

65,878

 

 

59,271

 

 

65,895

 

 

22,993

 

 

18,654

 

 

20,438

 

U.K Limited

 

 

34,361

 

 

35,163

 

 

33,242

 

 

3,572

 

 

2,943

 

 

2,801

 

Other

 

 

17,420

 

 

23,908

 

 

24,678

 

 

(22,145)

 

 

(12,121)

 

 

(4,491)

 

Intersegment eliminations(b)

 

 

(7,217)

 

 

(10,351)

 

 

(19,071)

 

 

 

 

 

 

 

Total:

 

$

374,110

 

$

261,006

 

$

196,370

 

$

83,401

 

$

47,023

 

$

37,620

 

 


(a)

Amounts for 2014 include the post-acquisition revenue and EBITDA of EFT Source from September 2, 2014 through December 31, 2014.

 

(b)

Amounts include the revenue from sales between the U.S. Debit and Credit segment, U.K. Limited segment, and “Other” category and are eliminated upon consolidation.

 

The following table provides a reconciliation of total segment EBITDA to “Net income from continuing operations” for the years ended December 31, 2015, 2014 and 2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

    

2013

 

Total segment EBITDA from continuing operations

 

$

83,401

 

$

47,023

 

$

37,620

 

Interest, net

 

 

(18,328)

 

 

(7,508)

 

 

(7,838)

 

Provision for income taxes

 

 

(17,846)

 

 

(10,291)

 

 

(6,988)

 

Depreciation and amortization

 

 

(15,966)

 

 

(13,252)

 

 

(11,595)

 

Net Income from continuing operations

 

$

31,261

 

$

15,972

 

$

11,199

 

 

Balance Sheet Data of Reportable Segments

 

Total assets of the Company’s reportable segments as of December 31, 2013 and 2014 were as follows:

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

 

U.S. Debit and Credit

 

$

221,274

 

$

199,968

 

U.S. Prepaid Debit

 

 

20,960

 

 

19,395

 

U.K. Limited

 

 

25,897

 

 

29,167

 

Other

 

 

12,222

 

 

11,618

 

Total continuing operations:

 

 

280,353

 

 

260,148

 

Discontinued operation(a):

 

 

 

 

5,862

 

Total assets:

 

$

280,353

 

$

266,010

 

 


(a)

As of December 31, 2014, certain assets of the Nevada operation sold on January 12, 2015, see Note 4 “Discontinued Operation and Disposition”, are presented in “Current assets of a discontinued operation” in the Company’s Consolidated Balance Sheet.

 

Plant, Equipment and Leasehold Improvement Additions of Geographic Locations

 

Plant, equipment and leasehold improvement additions of the Company’s geographical locations for the years ended December 31, 2015, 2014 and 2013 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

    

2013

 

U.S.

 

$

19,129

 

$

15,082

 

$

9,679

 

Canada

 

 

275

 

 

32

 

 

125

 

Total North America

 

 

19,404

 

 

15,114

 

 

9,804

 

U.K.

 

 

659

 

 

454

 

 

824

 

Total plant, equipment and leasehold improvement additions

 

$

20,063

 

$

15,568

 

$

10,628

 

Net Sales of Geographic Locations

 

Net sales of the Company’s geographic locations for the years ended December 31, 2015, 2014 and 2013 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

    

2013

 

U.S.(a)

 

$

316,111

 

$

196,418

 

$

135,525

 

Canada

 

 

12,541

 

 

16,133

 

 

17,661

 

Total North America

 

 

328,652

 

 

212,551

 

 

153,186

 

U.K.

 

 

36,954

 

 

36,682

 

 

32,448

 

Other(b)

 

 

8,504

 

 

11,773

 

 

10,736

 

Total revenue

 

$

374,110

 

$

261,006

 

$

196,370

 

 


(a)

Amounts for 2014 include the post-acquisition net sales of EFT Source from September 2, 2014 through December 31, 2014.

 

(b)

Amounts in other include sales to various countries that individually are not material.

 

Long-Lived Assets of Geographic Segments

 

Long-lived assets of the Companys geographic segments as of December 31, 2015 and 2014 were as follows:

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

 

U.S.

 

$

164,377

 

$

160,144

 

Canada

 

 

2,254

 

 

2,525

 

Total North America:

 

 

166,631

 

 

162,669

 

U.K.

 

 

12,593

 

 

14,607

 

Total long-lived assets

 

$

179,224

 

$

177,276

 

 

Net Sales by Product and Services

 

Net sales from products and services sold by the Company for the years ended December 31, 2015, 2014 and 2013 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

    

2013

 

Product net sales(a)

 

$

241,609

 

$

159,220

 

$

101,360

 

Services net sales(b)

 

 

132,501

 

 

101,786

 

 

95,010

 

Total net sales:

 

$

374,110

 

$

261,006

 

$

196,370

 

 


(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.

 

(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 and software as a service personalization of instant issuance debit cards. The Company also generates service revenue from personalizing retail gift cards (primarily in Canada and the United Kingdom) and from click-fees generated from the Company’s patented card design software, known as MYCA, which provides customers and cardholders the ability to design cards on the internet and customize cards with individualized digital images.

 

Quarterly Financial Information (Unaudited)
Quarterly Financial Information (Unaudited)

20. Quarterly Financial Information (Unaudited)

 

Summarized quarterly results for the years ended December 31, 2015 and 2014 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

Year Ended

 

 

 

 

 

 

 

 

 

 

 

 December 31, 

 

2015 by Quarter:

    

Q1

    

Q2

    

Q3

    

Q4

    

2015

 

Net sales

 

$

77,310

 

$

95,536

 

$

107,697

 

$

93,567

 

$

374,110

 

Gross profit

 

 

25,508

 

 

35,835

 

 

43,049

 

 

31,429

 

 

135,821

 

Income (loss) from continuing operations

 

 

5,960

 

 

12,155

 

 

14,760

 

 

(1,615)

 

 

31,261

 

Income (loss) from discontinued operation, net of taxes

 

 

281

 

 

 -

 

 

 -

 

 

(679)

 

 

(398)

 

Net income (loss)

 

 

6,242

 

 

12,155

 

 

14,760

 

 

(2,294)

 

 

30,863

 

Preferred stock dividends

 

 

(12,611)

 

 

(12,747)

 

 

(7,096)

 

 

(94)

 

 

(32,548)

 

Net (loss) income attributable to common shareholders

 

$

(6,369)

 

$

(592)

 

$

7,664

 

$

(2,388)

 

$

(1,685)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (loss) earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.16)

 

$

(0.02)

 

$

0.19

 

$

(0.03)

 

$

(0.03)

 

Discontinued operation

 

 

0.01

 

 

 -

 

 

 -

 

 

(0.01)

 

 

(0.01)

 

 

 

$

(0.15)

 

$

(0.02)

 

$

0.19

 

$

(0.04)

 

$

(0.04)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

2014 by Quarter:

    

Q1

    

Q2

    

Q3

    

Q4

    

 2014 

 

Net sales

 

$

42,531

 

$

53,236

 

$

77,374

 

$

87,865

 

$

261,006

 

Gross profit

 

 

10,244

 

 

15,554

 

 

26,663

 

 

29,266

 

 

81,727

 

Income from continuing operations

 

 

496

 

 

3,070

 

 

6,768

 

 

5,638

 

 

15,972

 

(Loss) income  from discontinued operation, net of taxes

 

 

(1,596)

 

 

(1,167)

 

 

699

 

 

(606)

 

 

(2,670)

 

Net (loss) income

 

 

(1,100)

 

 

1,903

 

 

7,467

 

 

5,032

 

 

13,302

 

Preferred stock dividends

 

 

(10,432)

 

 

(10,548)

 

 

(10,692)

 

 

(12,805)

 

 

(44,477)

 

Net loss attributable to common shareholders

 

$

(11,532)

 

$

(8,645)

 

$

(3,225)

 

$

(7,773)

 

$

(31,175)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (loss) earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.24)

 

$

(0.18)

 

$

(0.10)

 

$

(0.17)

 

$

(0.69)

 

Discontinued operation

 

 

(0.04)

 

 

(0.03)

 

 

0.02

 

 

(0.01)

 

 

(0.07)

 

 

 

$

(0.28)

 

$

(0.21)

 

$

(0.08)

 

$

(0.18)

 

$

(0.76)

 

 

 

The immaterial errors further described in Note 2 “Summary of Significant Accounting Policies” resulted in an increase (decrease) to our previously reported Cost of Sales from products and an associated (increase) decrease to our previously reported Cost of Sales from services of $4,349,  $(1,146), and $(508) for the quarter-to-date periods ended September 30, June 30, and March 31, respectively, and $2,695,  $(1,654), and $(508) for the year-to-date periods ended September 30, June 30, and March 31, 2015, respectively, and an increase (decrease) to our previously reported Cost of Sales from products and an associated (increase) decrease to our previously reported Cost of Sales from services of $1,124,  ($806),  ($1,400) for the quarter-to-date periods ended September 30, June 30, and March 31, 2014, respectively, and ($1,082),  ($2,206), and ($1,400) for the year-to-date periods ended September 30, June 30, and March 31, 2014, respectively.

 

Subsequent Event
Subsequent Event

21. Subsequent Events

 

On February 24, 2016, the Board of Directors approved a dividend of $0.045 per share. This dividend is payable on April 7, 2016, to stockholders of record as of the close of business on March 17, 2016.

 

On March 2, 2016, the Company granted awards of stock options and restricted stock units under the Omnibus Plan for 400,000 and 232,912 shares of common stock, respectively.  The stock option awards have an exercise price of $10 per share and vest 33.4% on October 9, 2017, 33.3% on October 9, 2018 and 33.3% on October 9, 2019.  The restricted stock unit awards contain conditions associated with continued employment or service.  The restrictions lapse on the vesting date, at which time shares of common stock will be issued to the award recipients.  The restricted stock unit awards have a grant date fair value of $7.91 per share and vest on March 2, 2017.

 

Summary of Significant Accounting Policies (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.

 

Subsequent to the issuance of the Company’s Consolidated Financial Statements as of and for the year ended December 31, 2014, the Company identified an immaterial error in the classification of Cost of Sales between services and products. To align the Company’s presentation of Cost of Sales from services and products with the associated Net Sales from services and products, the classification has been corrected in the Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2014 to decrease Cost of Sales for services by $7,819 and increase Cost of Sales for products by $7,819.

 

Certain other prior year amounts were reclassified to conform to the current year presentation.

Revenue Recognition

 

Generally, the Company recognizes revenue related to sales of its products upon shipment, when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee is fixed or determinable and collectability is reasonably assured.

 

In certain cases, at the customer’s request, the Company enters into bill-and-hold transactions whereby title transfers to the customer, but the product does not ship until a specified later date. The Company recognizes revenue associated with bill-and-hold arrangements when the product is complete and ready to ship, hold criteria have been met, the amount due from the customer is fixed and collectability of the related receivable is reasonably assured.

 

Freight revenue totaling $3,882,  $4,249,  $4,278 is included in net sales during the years ended December 31, 2015, 2014, and 2013, respectively. The related freight costs are included in cost of sales.

 

Multiple-Element Arrangements

 

The Company enters into warehouse, fulfillment and distribution service agreements where customers engage the Company to store and handle completed cards and packages on their behalf. For the sales arrangements that contain multiple deliverables, the arrangement is split into separate units of accounting, and individually delivered elements have value to the customer on a standalone basis. When separate units of accounting exist, revenue is allocated to each element based on the Company’s best estimate of competitive market prices. At the point in which completed cards and packages are shipped to the Company’s warehouse, the product is billed and the revenue is recognized in accordance with the Company’s revenue recognition policy. Warehousing services revenue is recognized monthly based on volume and handling requirements; fulfillment services revenue is recognized when the product is handled in the manner specified by the customer for a unit or handling fee.

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents and they are stated at cost, which approximates fair value.

Trade Accounts Receivable and Concentration of Credit Risk

 

Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company performs ongoing credit evaluations of its customers and generally requires no collateral to secure accounts receivable. The Company maintains an allowance for potentially uncollectible accounts receivable based upon its assessment of the collectability of accounts receivable. Accounts are written off against the allowance when it becomes probable collection will not occur. The allowance for bad debt and credit activity for the years ended December 31, 2015 and 2014 is summarized as follows:

 

 

 

 

 

 

Balance as of December 31, 2013

    

$

1,365

 

Bad debt expense

 

 

(100)

 

Write-off of uncollectible accounts

 

 

(986)

 

Currency translation adjustments

 

 

(7)

 

Balance as of December 31, 2014

 

$

272

 

Bad debt expense

 

 

28

 

Write-off of uncollectible accounts

 

 

(81)

 

Currency translation adjustments

 

 

(7)

 

Balance as of December 31, 2015

 

$

212

 

 

For the year ended December 31, 2015, the Company did not have sales to a single customer that exceeded 10% of consolidated net sales. For the year ended December 31, 2014, the Company had sales to a single customer of $29,523 (11.3% of consolidated net sales), and the Company had sales to a different customer for the year ended December 31, 2013 of $31,924 (16.3% of consolidated net sales).

Inventories

 

Inventories consist of raw materials, work-in-process and finished goods and are valued at the lower-of-cost (determined on the first-in, first-out or specific identification basis) or market.

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 equipment, furniture 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. For the Company’s continuing operations, amounts charged to expense for the depreciation of plant, equipment and leasehold improvements were $11,389,  $10,359, and $9,560 for the years ended December 31, 2015, 2014 and 2013, respectively.

 

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. Based upon the Companys analysis, it concluded that there was no impairment of its long-lived assets for the years ended December 31, 2015, 2014, and 2013.

Goodwill and Intangible Assets

 

Goodwill and other indefinite-lived intangible assets are not amortized, but instead are tested for impairment at least annually on October 1. Testing is done in accordance with ASC 350, Intangibles—Goodwill and Other and ASC 820, Fair Value Measurements and Disclosures. For impairment evaluations, the Company or a third-party firm first makes a qualitative assessment with respect to both goodwill and other indefinite-lived intangibles. In the case of goodwill, if it is more likely than not that a reporting unit’s fair value is less than its carrying value, the fair value of the reporting unit is compared to its respective carrying amount. If the carrying value of a reporting unit were to exceed its fair value, any excess of the carrying amount over the fair value would be charged to operations as an impairment loss. With respect to indefinite-lived intangible assets, if it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying value, any excess of the carrying value over the fair value of the indefinite-lived intangible asset is also charged to operations as an impairment loss.

 

For the years ended December 31, 2015, 2014 and 2013 the Company determined goodwill and other indefinite-lived intangibles were not impaired. As of December 31, 2015 and 2014, $6,352 and $24,377 of goodwill was tax-deductible, respectively.

 

Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets.  Acquired indefinite-lived intangible assets related to trademarks are capitalized and subject to impairment.

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 provision for income taxes 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 provision for income taxes.

 

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 17 “Stock Option Plans” for additional discussion regarding details of the Company's stock-based compensation plans.

Advertising Costs

 

Advertising costs are expensed as incurred. Advertising costs during the years ended December 31, 2015, 2014 and 2013 were $764,  $392, and $144, respectively.

Use of Estimates

 

Management uses estimates and assumptions 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, inventories, deferred taxes, and valuation of stock-based awards. 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 revenues, expenses, gains and losses. Translation adjustments are recorded as a component of Other Comprehensive Income in the accompanying 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 Income. For the years ended December 31, 2015, 2014 and 2013 there were $59,  $(124), and $(142) of such foreign currency gains (losses), respectively.

Recently Issued Accounting Pronouncements

 

The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, in May 2014. ASU 2014-09 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. An entity should also 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. In July 2015, the FASB deferred the effective date to annual reporting periods beginning after December 15, 2017, and interim reporting periods within those periods.  The Company plans to implement the provisions of ASU 2014-09 as of January 1, 2018. The Company is in the process of determining the method of adoption and assessing the impact of ASU 2014-09 on its results of operations, financial position and consolidated financial statements.

The FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, in April 2015. ASU 2015-03 requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. The new standard is effective for public entities annual reporting periods beginning after December 15, 2015.  Early adoption of the amendments in ASU 2015-03 is permitted for financial statements that have not been previously issued.  The Company adopted this standard in 2015.  Accordingly, the Company recorded a reduction of $8,041 to “Long-term debt” in the Company’s Consolidated Balance Sheet as of December 31, 2015, and reclassified $614 from “Capitalized loan fees” to “Long-term debt” in the Company’s Consolidated Balance Sheet as of December 31, 2014.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes.  ASU 2015-17 requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The new standard is effective for public entities’ annual reporting periods beginning after December 15, 2016, with early adoption permitted, and the guidance may be applied either prospectively or retrospectively. The Company has elected to early adopt this standard in 2015 prospectively.  The impact to the Company’s Consolidated Balance Sheet was immaterial.

The FASB issued ASU 2015-11, Inventory—Simplifying the Measurement of Inventory, in July 2015.  ASU 2015-11 requires that inventory be measured at the lower of cost or net realizable value.  Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  The new standard is effective for public entities’ annual reporting periods beginning after December 15, 2016.  The Company plans to implement the provisions of ASU 2015-11 as of January 1, 2017. The Company is in the process of assessing the impact of ASU 2015-11 on its results of operations, financial position and consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases, 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.  ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018 (the Company’s fiscal year 2019) with early adoption permitted. The new standard is required to be adopted using a modified retrospective approach. The Company is in the process of assessing the impact of ASU 2016-02 on its results of operations, financial position and consolidated financial statements.

Summary of Significant Accounting Policies (Tables)
Schedule of allowance for bad debt and credit activity

 

 

 

 

 

 

Balance as of December 31, 2013

    

$

1,365

 

Bad debt expense

 

 

(100)

 

Write-off of uncollectible accounts

 

 

(986)

 

Currency translation adjustments

 

 

(7)

 

Balance as of December 31, 2014

 

$

272

 

Bad debt expense

 

 

28

 

Write-off of uncollectible accounts

 

 

(81)

 

Currency translation adjustments

 

 

(7)

 

Balance as of December 31, 2015

 

$

212

 

 

EFT Source Acquisition (Tables)

 

 

 

 

 

 

Cash and cash equivalents

    

$

381

 

Accounts receivable

 

 

5,837

 

Inventory

 

 

1,724

 

Prepaid expenses

 

 

1,426

 

Other current assets

 

 

645

 

Property, equipment and leasehold improvements

 

 

6,460

 

Goodwill

 

 

33,619

 

Intangible assets subject to amortization(a)

 

 

31,100

 

Trademarks (indefinite-lived)

 

 

4,400

 

Other assets

 

 

13

 

Deferred tax liability

 

 

(14,751)

 

Other current liabilities

 

 

(1,995)

 

Total purchase price

 

$

68,859

 

 


(a)

Amounts primarily include intangible assets related to customer relationships. At September 2, 2014, the weighted average useful life of EFT Source customer relationships was 15 years.

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2014

    

2013

 

Revenue—Continuing Operations

 

$

291,302

 

$

233,360

 

Net Income—Continuing Operations

 

 

16,916

 

 

10,186

 

Basic and Diluted Loss Per Share from Continuing Operations

 

$

(0.67)

 

$

(0.60)

 

 

Inventories (Tables)
Schedule of inventories

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

 

Raw materials

 

$

10,549

 

$

10,217

 

Work-in-process

 

 

11,460

 

 

8,222

 

Finished goods

 

 

3,631

 

 

3,166

 

 

 

$

25,640 

 

$

21,605

 

 

Plant, Equipment and Leasehold Improvements (Tables)
Schedule of plant, equipment and leasehold improvements

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

 

Buildings

 

$

2,565

 

$

2,486

 

Machinery and equipment

 

 

57,482

 

 

47,792

 

Furniture and fixtures

 

 

4,440

 

 

4,203

 

Leasehold improvements

 

 

15,856

 

 

12,593

 

Construction in progress

 

 

2,373

 

 

3,448

 

 

 

 

82,716

 

 

70,522

 

Less accumulated depreciation and amortization

 

 

(30,603)

 

 

(25,750)

 

 

 

$

52,113

 

$

44,772

 

 

Goodwill and Other Intangible Assets (Tables)

 

 

 

 

 

 

Balance as of January 1, 2014

    

$

40,818

 

EFT Acquisition

 

 

33,619

 

Currency translation

 

 

(636)

 

Balance as of December 31, 2014

 

$

73,801

 

Currency translation

 

 

(678)

 

Balance as of December 31, 2015

 

$

73,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

 

December 31, 2014

 

 

    

Average

    

 

    

Accumulated

    

Net Book

    

 

    

Accumulated

    

Net Book

 

 

 

Life (Years)

 

Cost

 

Amortization

 

Value

 

Cost

 

Amortization

 

Value

 

Customer relationships

 

12 to 20

 

$

59,612

 

$

(17,747)

 

$

41,865

 

$

59,871

 

$

(14,304)

 

$

45,567

 

Technology and software

 

7 to 10

 

 

7,101

 

 

(1,238)

 

 

5,863

 

 

7,101

 

 

(310)

 

 

6,791

 

Noncompete agreements

 

5 to 8

 

 

491

 

 

(270)

 

 

221

 

 

491

 

 

(198)

 

 

293

 

Favorable leases

 

 9.5

 

 

111

 

 

(101)

 

 

10

 

 

111

 

 

(88)

 

 

23

 

Intangible assets subject to amortization

 

 

 

 

67,315

 

 

(19,356)

 

 

47,959

 

 

67,574

 

 

(14,900)

 

 

52,674

 

Trademarks (indefinite-lived)

 

 

 

 

6,029

 

 

 

 

6,029

 

 

6,029

 

 

 

 

6,029

 

 

 

 

 

$

73,344

 

$

(19,356)

 

$

53,988

 

$

73,603

 

$

(14,900)

 

$

58,703

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016

 

$

4,572

2017

    

 

4,561

2018

 

 

4,548

2019

 

 

4,548

2020

 

 

4,548

Thereafter

 

 

25,182

 

 

$

47,959

 

Fair Value of Financial Instruments (Tables)
Schedule of financial assets and liabilities subject to fair value measurements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at

 

 

 

Fair Value as of

 

December 31, 2015

 

 

 

December 31,

 

(Using Fair Value Hierarchy)

 

 

    

2015

    

Level 1

    

Level 2

    

Level 3

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Term Loan

 

$

309,375

 

$

 

$

309,375

 

$

 

Sellers Note

 

$

9,000

 

$

 

$

 

$

9,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at

 

 

 

Fair Value as of

 

December 31, 2014

 

 

 

December 31,

 

(Using Fair Value Hierarchy)

 

 

    

2014

    

Level 1

    

Level 2

    

Level 3

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Term Loan dated September 2, 2014

 

$

170,866

 

$

 

$

170,866

 

$

 

Sellers Note

 

$

9,000

 

$

 

$

 

$

9,000

 

 

Long-Term Debt and Credit Facility (Tables)

 

 

 

 

 

    

Interest

 

December 31,

 

December 31,

 

 

 

Rate

    

2015

    

2014

    

First Lien Term Loan (a)

 

 

5.50%

 

$

312,500

 

$

 —

 

Senior term loan dated September 2, 2014 (b)

 

 

3.91%

 

 

 —

 

 

170,866

 

Sellers Note (a)

 

 

5.00%

 

 

9,000

 

 

9,000

 

Unamortized discount

 

 

 

 

 

(4,459)

 

 

(442)

 

Unamortized deferred financing costs

 

 

 

 

 

(8,041)

 

 

(614)

 

Total long-term debt

 

 

 

 

 

309,000

 

 

178,810

 

Less current maturities

 

 

 

 

 

(9,000)

 

 

(6,326)

 

Long-term debt, net of current maturities

 

 

 

 

$

300,000

 

$

172,484

 

(a)

Interest rate on December 31, 2015

(b)

Interest rate on December 31, 2014

 

 

 

 

 

 

Year ending December 31:

    

 

 

2016

 

$

9,000

2017

 

 

 —

2018

 

 

2019

 

 

2020

 

 

Thereafter

 

 

312,500

 

 

$

321,500

 

Income Taxes (Tables)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

    

2013

 

Current taxes:

 

 

 

 

 

 

 

 

 

 

Domestic

 

$

16,036

 

$

8,424

 

$

4,982

 

Foreign

 

 

254

 

 

 

 

6

 

 

 

 

16,290

 

 

8,424

 

 

4,988

 

Deferred taxes:

 

 

 

 

 

 

 

 

 

 

Domestic

 

 

1,656

 

 

2,238

 

 

2,347

 

Foreign

 

 

(100)

 

 

(371)

 

 

(347)

 

 

 

 

1,556

 

 

1,867

 

 

2,000

 

Provision for income taxes

 

$

17,846

 

$

10,291

 

$

6,988

 

Income before income taxes

 

 

 

 

 

 

 

 

 

 

Domestic

 

$

50,692

 

$

27,984

 

$

19,954

 

Foreign

 

 

(1,585)

 

 

(1,721)

 

 

(1,767)

 

Total

 

$

49,107

 

$

26,263

 

$

18,187

 

Effective income tax rate

 

 

36.3

%

 

39.1

%

 

38.4

%

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

2015

    

2014

    

2013

 

Tax at federal statutory rate

 

35.0

%

35.0

%

34.0

%

Permanent differences

 

(1.6)

 

(2.9)

 

(1.7)

 

State income taxes

 

2.0

 

3.1

 

4.8

 

Foreign taxes

 

0.3

 

2.5

 

(1.6)

 

Other

 

0.6

 

1.4

 

2.9

 

Effective income tax rate

 

36.3

%

39.1

%

38.4

%

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

 

2014

 

Deferred tax assets:

 

 

 

 

 

 

 

Allowance for doubtful accounts

 

$

28

 

$

65

 

Inventory valuation

 

 

279

 

 

607

 

Accrued expense

 

 

927

 

 

372

 

Unrealized foreign exchange loss

 

 

652

 

 

634

 

Net operating loss carryforward

 

 

1,999

 

 

2,148

 

Goodwill

 

 

 —

 

 

2,159

 

Deferred financing costs

 

 

1,564

 

 

 

Asset retirement obligation

 

 

179

 

 

292

 

Stock compensation

 

 

322

 

 

1,853

 

Total gross deferred tax assets

 

 

5,950

 

 

8,130

 

Valuation allowance

 

 

(3,717)

 

 

(4,120)

 

Net deferred tax assets

 

 

2,233

 

 

4,010

 

Deferred tax liabilities:

 

 

 

 

 

 

 

Plant, property and leasehold improvements

 

 

(5,881)

 

 

(4,238)

 

Intangibles

 

 

(18,962)

 

 

(11,903)

 

Prepaid expense

 

 

(1,463)

 

 

(1,045)

 

Total gross deferred tax liabilities

 

 

(26,306)

 

 

(17,186)

 

Net deferred tax liabilities

 

$

(24,073)

 

$

(13,176)

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

 

Current deferred tax assets

 

$

 —

 

$

634

 

Long-term deferred tax liabilities

 

 

(24,073)

 

 

(13,810)

 

Net deferred tax (liabilities)

 

$

(24,073)

 

$

(13,176)

 

 

Earnings per Share (Tables)
Computation of basic and diluted EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

    

2013

 

Numerator:

 

 

 

 

 

 

 

 

 

 

Net income from continuing operations

 

$

31,261

 

$

15,972

 

$

11,199

 

Preferred stock dividends

 

 

(32,548)

 

 

(44,477)

 

 

(35,268)

 

Loss from continuing operations attributable to common stockholders

 

 

(1,287)

 

 

(28,505)

 

 

(24,069)

 

Loss from a discontinued operation, net of taxes

 

 

(398)

 

 

(2,670)

 

 

(2,612)

 

Net loss attributable to common stockholders

 

$

(1,685)

 

$

(31,175)

 

$

(26,681)

 

Denominator:

 

 

 

 

 

 

 

 

 

 

Basic EPS—weighted average common shares outstanding

 

 

44,816,263

 

 

41,199,246

 

 

41,072,350

 

Diluted EPS—weighted average common shares outstanding

 

 

44,816,263

 

 

41,199,246

 

 

41,072,350

 

Basic and Diluted EPS:

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(0.03)

 

$

(0.69)

 

$

(0.59)

 

Loss from a discontinued operation, net of taxes

 

 

(0.01)

 

 

(0.07)

 

 

(0.06)

 

Net loss

 

$

(0.04)

 

$

(0.76)

 

$

(0.65)

 

 

Commitments and Contingencies (Tables)
Schedule of future cash payments for non-cancellable capital leases, operating leases and purchase obligations

 

 

 

 

 

 

 

 

 

 

    

Operating

    

Purchase

  

 

 

Leases

 

Obligations

 

2016

 

$

4,309

 

$

3,047

 

2017

 

 

3,745

 

 

 

2018

 

 

2,426

 

 

 

2019

 

 

1,327

 

 

 

2020

 

 

948

 

 

 

Thereafter

 

 

1,021

 

 

 

Total

 

$

13,776

 

$

3,047

 

 

Stock Option Plan (Tables)

 

 

 

 

 

 

 

 

    

 

    

  Weighted-

  

 

 

 

 

Average

 

 

 

 

 

Grant Date

 

 

 

Shares 

 

Fair Value

 

Outstanding as of December 31, 2014

 

 

$

 

Granted

 

191,664

 

 

9.48

 

Vested

 

 

 

 

Forfeited

 

 

 

 

Outstanding as of December 31, 2015

 

191,664

 

$

9.48

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

Weighted-

  

 

 

 

 

Weighted-

 

Average

 

 

 

 

 

Average

 

Remaining

 

 

 

 

 

Exercise

 

Contractual Term

 

 

 

Options

 

Price

 

(in Years)

 

Outstanding as of December 31, 2014

 

 —

 

$

 —

 

 —

 

Granted

 

795,450

 

 

10.00

 

10.00

 

Forfeited

 

 —

 

 

 —

 

 —

 

Outstanding as of December 31, 2015

 

795,450

 

$

10.00

 

9.80

 

 

 

 

 

 

2016

    

 —

 

2017

 

265,150

 

2018

 

265,150

 

2019

 

265,150

 

Total unvested options as of December 31, 2015

 

795,450

 

 

 

 

 

 

 

 

Year

 

 

 

ended

 

 

 

December

 

 

 

31, 2015

 

Expected term in years

 

6.5

 

Volatility

 

36.7

%

Risk-free interest rate

 

1.8

%

Dividend yield

 

1.3

%

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

Weighted-

  

 

 

 

 

Weighted-

 

Average

 

 

 

 

 

Average

 

Remaining

 

 

 

 

 

Exercise

 

Contractual Term

 

 

 

Options

 

Price

 

(in Years)

 

Outstanding as of January 1, 2013

 

528,000

 

$

0.0004

 

7.48

 

Granted

 

165,000

 

 

0.0005

 

 

 

Forfeited

 

(44,000)

 

 

0.0005

 

 

 

Outstanding as of December 31, 2013

 

649,000

 

$

0.0004

 

7.35

 

Forfeited

 

(22,000)

 

 

0.0001

 

 

 

Outstanding as of December 31, 2014

 

627,000

 

$

0.0004

 

6.44

 

Exercised

 

(66,000)

 

 

0.0005

 

 

 

Forfeited

 

(99,000)

 

 

0.0003

 

 

 

Outstanding as of December 31, 2015

 

462,000

 

$

0.0003

 

5.57

 

 

 

 

 

 

 

 

 

 

Exercisable as of December 31, 2015

 

421,667

 

$

0.0004

 

5.48

 

 

 

 

 

 

 

2016

    

40,333

 

Total

 

40,333

 

 

Segment Reporting (Tables)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

EBITDA

 

 

 

December 31,

 

December 31,

 

 

    

2015

    

2014

    

2013

    

2015

    

2014

    

2013

 

U.S. Debit and Credit(a)

 

$

263,668

 

$

153,015

 

$

91,626

 

$

78,981

 

$

37,547

 

$

18,871

 

U.S. Prepaid Debit

 

 

65,878

 

 

59,271

 

 

65,895

 

 

22,993

 

 

18,654

 

 

20,438

 

U.K Limited

 

 

34,361

 

 

35,163

 

 

33,242

 

 

3,572

 

 

2,943

 

 

2,801

 

Other

 

 

17,420

 

 

23,908

 

 

24,678

 

 

(22,145)

 

 

(12,121)

 

 

(4,491)

 

Intersegment eliminations(b)

 

 

(7,217)

 

 

(10,351)

 

 

(19,071)

 

 

 

 

 

 

 

Total:

 

$

374,110

 

$

261,006

 

$

196,370

 

$

83,401

 

$

47,023

 

$

37,620

 

 


(a)

Amounts for 2014 include the post-acquisition revenue and EBITDA of EFT Source from September 2, 2014 through December 31, 2014.

 

(b)

Amounts include the revenue from sales between the U.S. Debit and Credit segment, U.K. Limited segment, and “Other” category and are eliminated upon consolidation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

    

2013

 

Total segment EBITDA from continuing operations

 

$

83,401

 

$

47,023

 

$

37,620

 

Interest, net

 

 

(18,328)

 

 

(7,508)

 

 

(7,838)

 

Provision for income taxes

 

 

(17,846)

 

 

(10,291)

 

 

(6,988)

 

Depreciation and amortization

 

 

(15,966)

 

 

(13,252)

 

 

(11,595)

 

Net Income from continuing operations

 

$

31,261

 

$

15,972

 

$

11,199

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

 

U.S. Debit and Credit

 

$

221,274

 

$

199,968

 

U.S. Prepaid Debit

 

 

20,960

 

 

19,395

 

U.K. Limited

 

 

25,897

 

 

29,167

 

Other

 

 

12,222

 

 

11,618

 

Total continuing operations:

 

 

280,353

 

 

260,148

 

Discontinued operation(a):

 

 

 

 

5,862

 

Total assets:

 

$

280,353

 

$

266,010

 

 


(a)

As of December 31, 2014, certain assets of the Nevada operation sold on January 12, 2015, see Note 4 “Discontinued Operation and Disposition”, are presented in “Current assets of a discontinued operation” in the Company’s Consolidated Balance Sheet.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

    

2013

 

U.S.

 

$

19,129

 

$

15,082

 

$

9,679

 

Canada

 

 

275

 

 

32

 

 

125

 

Total North America

 

 

19,404

 

 

15,114

 

 

9,804

 

U.K.

 

 

659

 

 

454

 

 

824

 

Total plant, equipment and leasehold improvement additions

 

$

20,063

 

$

15,568

 

$

10,628

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

    

2013

 

U.S.(a)

 

$

316,111

 

$

196,418

 

$

135,525

 

Canada

 

 

12,541

 

 

16,133

 

 

17,661

 

Total North America

 

 

328,652

 

 

212,551

 

 

153,186

 

U.K.

 

 

36,954

 

 

36,682

 

 

32,448

 

Other(b)

 

 

8,504

 

 

11,773

 

 

10,736

 

Total revenue

 

$

374,110

 

$

261,006

 

$

196,370

 

 


(a)

Amounts for 2014 include the post-acquisition net sales of EFT Source from September 2, 2014 through December 31, 2014.

 

(b)

Amounts in other include sales to various countries that individually are not material.

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2015

    

2014

 

U.S.

 

$

164,377

 

$

160,144

 

Canada

 

 

2,254

 

 

2,525

 

Total North America:

 

 

166,631

 

 

162,669

 

U.K.

 

 

12,593

 

 

14,607

 

Total long-lived assets

 

$

179,224

 

$

177,276

 

 

 

 

December 31,

 

 

    

2015

    

2014

    

2013

 

Product net sales(a)

 

$

241,609

 

$

159,220

 

$

101,360

 

Services net sales(b)

 

 

132,501

 

 

101,786

 

 

95,010

 

Total net sales:

 

$

374,110

 

$

261,006

 

$

196,370

 

 


(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.

 

(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 and software as a service personalization of instant issuance debit cards. The Company also generates service revenue from personalizing retail gift cards (primarily in Canada and the United Kingdom) and from click-fees generated from the Company’s patented card design software, known as MYCA, which provides customers and cardholders the ability to design cards on the internet and customize cards with individualized digital images.

Quarterly Financial Information (Unaudited) (Tables)
Schedule of summarized quarterly results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

Year Ended

 

 

 

 

 

 

 

 

 

 

 

 December 31, 

 

2015 by Quarter:

    

Q1

    

Q2

    

Q3

    

Q4

    

2015

 

Net sales

 

$

77,310

 

$

95,536

 

$

107,697

 

$

93,567

 

$

374,110

 

Gross profit

 

 

25,508

 

 

35,835

 

 

43,049

 

 

31,429

 

 

135,821

 

Income (loss) from continuing operations

 

 

5,960

 

 

12,155

 

 

14,760

 

 

(1,615)

 

 

31,261

 

Income (loss) from discontinued operation, net of taxes

 

 

281

 

 

 -

 

 

 -

 

 

(679)

 

 

(398)

 

Net income (loss)

 

 

6,242

 

 

12,155

 

 

14,760

 

 

(2,294)

 

 

30,863

 

Preferred stock dividends

 

 

(12,611)

 

 

(12,747)

 

 

(7,096)

 

 

(94)

 

 

(32,548)

 

Net (loss) income attributable to common shareholders

 

$

(6,369)

 

$

(592)

 

$

7,664

 

$

(2,388)

 

$

(1,685)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (loss) earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.16)

 

$

(0.02)

 

$

0.19

 

$

(0.03)

 

$

(0.03)

 

Discontinued operation

 

 

0.01

 

 

 -

 

 

 -

 

 

(0.01)

 

 

(0.01)

 

 

 

$

(0.15)

 

$

(0.02)

 

$

0.19

 

$

(0.04)

 

$

(0.04)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

2014 by Quarter:

    

Q1

    

Q2

    

Q3

    

Q4

    

 2014 

 

Net sales

 

$

42,531

 

$

53,236

 

$

77,374

 

$

87,865

 

$

261,006

 

Gross profit

 

 

10,244

 

 

15,554

 

 

26,663

 

 

29,266

 

 

81,727

 

Income from continuing operations

 

 

496

 

 

3,070

 

 

6,768

 

 

5,638

 

 

15,972

 

(Loss) income  from discontinued operation, net of taxes

 

 

(1,596)

 

 

(1,167)

 

 

699

 

 

(606)

 

 

(2,670)

 

Net (loss) income

 

 

(1,100)

 

 

1,903

 

 

7,467

 

 

5,032

 

 

13,302

 

Preferred stock dividends

 

 

(10,432)

 

 

(10,548)

 

 

(10,692)

 

 

(12,805)

 

 

(44,477)

 

Net loss attributable to common shareholders

 

$

(11,532)

 

$

(8,645)

 

$

(3,225)

 

$

(7,773)

 

$

(31,175)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (loss) earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.24)

 

$

(0.18)

 

$

(0.10)

 

$

(0.17)

 

$

(0.69)

 

Discontinued operation

 

 

(0.04)

 

 

(0.03)

 

 

0.02

 

 

(0.01)

 

 

(0.07)

 

 

 

$

(0.28)

 

$

(0.21)

 

$

(0.08)

 

$

(0.18)

 

$

(0.76)

 

 

Business (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended 12 Months Ended 0 Months Ended 3 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 0 Months Ended 12 Months Ended
Dec. 31, 2015
item
Oct. 15, 2015
Dec. 31, 2014
Dec. 31, 2015
Phantom Stock Plan
Oct. 15, 2015
First Lien Credit Facility
Term Loan
Dec. 31, 2015
First Lien Credit Facility
Term Loan
Aug. 17, 2015
First Lien Credit Facility
Term Loan
Aug. 17, 2015
First Lien Credit Facility
Revolving Credit Facility
Aug. 17, 2015
Senior Term Loan
Oct. 15, 2015
Series A Preferred Stock
Aug. 17, 2015
Series A Preferred Stock
Dec. 31, 2015
Series A Preferred Stock
Oct. 15, 2015
IPO
Oct. 15, 2015
IPO
Oct. 15, 2015
IPO
Phantom Stock Plan
Oct. 15, 2015
IPO
First Lien Credit Facility
Term Loan
Oct. 15, 2015
IPO
Series A Preferred Stock
Jan. 12, 2015
Nevada
Sold
Dec. 31, 2015
Petersfield, United Kingdom
Proceeds from sale of asset
$ 5,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 5,000 
 
Facility contract termination costs
681 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
681 
Maximum borrowing capacity
 
 
 
 
 
 
435,000 
40,000 
 
 
 
 
 
 
 
 
 
 
 
Repayment of outstanding term loan
 
 
 
 
112,500 
10,000 
 
 
158,420 
 
 
 
 
 
 
112,500 
 
 
 
Shares redeemed
 
 
 
 
 
 
 
 
 
2,576 
62,140 
64,809 
 
 
 
 
 
 
 
Total redemption value
 
 
 
 
 
 
 
 
 
11,877 
276,688 
288,565 
 
 
 
 
11,877 
 
 
Shares issued (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
15,000,000 
 
 
 
 
 
 
IPO price per share
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 10.00 
 
 
 
 
 
Liability settled for outstanding obligation under Phantom Stock Plan
 
 
 
13,892 
 
 
 
 
 
 
 
 
 
 
13,268 
 
 
 
 
Deferred Offering expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 7,196 
 
 
 
 
 
Common stock authorized
100,000,000 
100,000,000 
100,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum Number of Payment Card Brands Providing Certification
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summary of Significant Accounting Policies - Revenue Recognition, Trade Accounts Receivable and Concentration of Credit Risk (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended 3 Months Ended 6 Months Ended 9 Months Ended 12 Months Ended
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Sep. 30, 2015
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Jun. 30, 2015
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Mar. 31, 2015
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Sep. 30, 2014
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Jun. 30, 2014
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Mar. 31, 2014
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Jun. 30, 2015
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Jun. 30, 2014
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Sep. 30, 2015
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Sep. 30, 2014
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Dec. 31, 2014
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Dec. 31, 2015
Net sales
Dec. 31, 2014
Net sales
Dec. 31, 2013
Net sales
Dec. 31, 2014
Customer Concentration Risk
Dec. 31, 2013
Customer Concentration Risk
Dec. 31, 2015
Customer Concentration Risk
Net sales
Dec. 31, 2014
Customer Concentration Risk
Net sales
Dec. 31, 2013
Customer Concentration Risk
Net sales
Cost of Sales from services
 
 
 
 
 
 
 
 
$ 73,111 
$ 57,233 
$ 63,054 
$ (4,349)
$ 1,146 
$ 508 
$ (1,124)
$ 806 
$ 1,400 
$ 1,654 
$ 2,206 
$ (2,695)
$ 1,082 
$ (7,819)
 
 
 
 
 
 
 
 
Cost of Sales from products
 
 
 
 
 
 
 
 
155,516 
113,399 
66,154 
4,349 
(1,146)
(508)
1,124 
(806)
(1,400)
(1,654)
(2,206)
2,695 
(1,082)
7,819 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Freight revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,882 
4,249 
4,278 
 
 
 
 
 
Allowance for bad debt and credit activity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
 
 
272 
 
 
 
1,365 
272 
1,365 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bad debt expense
 
 
 
 
 
 
 
 
28 
(100)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Write-off of uncollectible accounts
 
 
 
 
 
 
 
 
(81)
(986)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Currency translation adjustment
 
 
 
 
 
 
 
 
(7)
(7)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
212 
 
 
 
272 
 
 
 
212 
272 
1,365 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
$ 93,567 
$ 107,697 
$ 95,536 
$ 77,310 
$ 87,865 
$ 77,374 
$ 53,236 
$ 42,531 
$ 374,110 
$ 261,006 
$ 196,370 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 29,523 
$ 31,924 
$ 0 
 
 
Concetration risk (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11.30% 
16.30% 
Summary of Significant Accounting Policies - Plant, Equipment and Leasehold Improvements (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Plant, Equipment and Leasehold Improvements
 
 
 
Depreciation
$ 11,389 
$ 10,359 
$ 9,560 
Impairment of long-lived assets
$ 0 
$ 0 
$ 0 
Minimum
 
 
 
Plant, Equipment and Leasehold Improvements
 
 
 
Useful life (in years)
3 years 
 
 
Maximum
 
 
 
Plant, Equipment and Leasehold Improvements
 
 
 
Useful life (in years)
10 years 
 
 
Summary of Significant Accounting Policies - Goodwill and Intangible Assets, Income Taxes, and Stock-Based Compensation (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Goodwill and Intangible Asset Impairment [Abstract]
 
 
 
Impairment of goodwill and other indefinite-lived intangibles
$ 0 
$ 0 
$ 0 
Tax-deductible goodwill
6,352 
24,377 
 
Income Taxes
 
 
 
Unrecognized tax liabilities
$ 0 
$ 0 
 
Summary of Significant Accounting Policies - Advertising Costs and Foreign Currency Translation (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Advertising Costs
 
 
 
Advertising costs
$ 764 
$ 392 
$ 144 
Foreign Currency Translation
 
 
 
Foreign currency gains (losses)
$ 59 
$ (124)
$ (142)
Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
 
 
Long-term debt
$ 300,000 
$ 163,484 
Capitalized loan fees
8,041 
614 
Accounting Standards Update 2015-03 [Member] |
Adjustments for New Accounting Principle, Early Adoption [Member]
 
 
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
 
 
Long-term debt
(8,041)
(614)
Capitalized loan fees
 
$ (614)
EFT Source Acquisition (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Sep. 2, 2014
EFT Source
Dec. 31, 2014
EFT Source
Dec. 31, 2013
EFT Source
Sep. 2, 2014
EFT Source
Sep. 2, 2014
Customer relationships
EFT Source
Acquisition
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total consideration
 
 
 
 
 
 
 
 
 
 
 
$ 68,859 
 
 
 
 
Consideration paid in cash
 
 
 
 
 
 
 
 
 
 
 
54,859 
 
 
 
 
Non-cash consideration, Sellers Note
 
 
 
 
 
 
 
 
 
 
 
9,000 
 
 
 
 
Non-cash consideration, issuance of preferred and common stock
 
 
 
 
 
 
 
 
 
 
 
5,000 
 
 
 
 
Purchase Price Allocation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
381 
 
Accounts receivable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,837 
 
Inventory
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,724 
 
Prepaid expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,426 
 
Other current assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
645 
 
Property, equipment and leasehold improvements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6,460 
 
Goodwill
73,123 
 
 
 
73,801 
 
 
 
73,123 
73,801 
40,818 
 
 
 
33,619 
 
Intangible assets subject to amortization(
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31,100 
 
Trademarks (indefinite-lived)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,400 
 
Other assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13 
 
Deferred tax liability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(14,751)
 
Other current liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1,995)
 
Total purchase price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
68,859 
 
Weighted-average useful life
 
 
 
 
 
 
 
 
16 years 
 
 
 
 
 
 
15 years 
Pro Forma Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue - Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
291,302 
233,360 
 
 
Net Income - Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
16,916 
10,186 
 
 
Basic loss per share from Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
$ (0.67)
$ (0.60)
 
 
Diluted loss per share from Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
$ (0.67)
$ (0.60)
 
 
Included in consolidated statement of operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
93,567 
107,697 
95,536 
77,310 
87,865 
77,374 
53,236 
42,531 
374,110 
261,006 
196,370 
 
21,999 
 
 
 
Net income from operations
 
 
 
 
 
 
 
 
$ 67,720 
$ 34,472 
$ 26,149 
 
$ 4,446 
 
 
 
Discontinued Operation and Disposition (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 0 Months Ended 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Jan. 12, 2015
Nevada
Sold
Dec. 31, 2015
Nevada
Sold
Dec. 31, 2014
Nevada
Held-for-sale
Dec. 31, 2013
Nevada
Held-for-sale
Discontinued Operation and Disposition
 
 
 
 
 
 
 
Proceeds from sale of asset
$ 5,000 
 
 
$ 5,000 
 
 
 
Carrying value of inventory
 
 
 
 
 
3,129 
 
Carrying value of plant, equipment and leasehold improvements
 
 
 
 
 
2,910 
 
Gain on sale of a discontinued operation
208 
 
 
 
208 
 
 
Income tax benefit from gain on discontinued operation
 
 
 
 
1,247 
 
 
Loss from a discontinued operation, net of taxes
606 
2,670 
2,612 
 
606 
2,670 
2,612 
Income tax benefit from discontinued operations
 
 
 
 
404 
1,421 
1,398 
Term of transition service agreement
 
 
 
180 days 
 
 
 
Tax deductible goodwill and intangible assets
 
 
 
 
32,128 
 
 
Tax deductible goodwill resulting in income tax benefit during the period
 
 
 
 
4,190 
 
 
Income tax benefit recognized on tax deductible goodwill
 
 
 
 
$ 1,510 
 
 
Inventories (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Inventories
 
 
Raw materials
$ 10,549 
$ 10,217 
Work-in-process
11,460 
8,222 
Finished goods
3,631 
3,166 
Inventory
$ 25,640 
$ 21,605 
Plant, Equipment and Leasehold Improvements (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Plant, Equipment and Leasehold Improvements
 
 
Plant, equipment and leasehold improvements, gross
$ 82,716 
$ 70,522 
Less accumulated depreciation and amortization
(30,603)
(25,750)
Plant, equipment and leasehold improvements, net
52,113 
44,772 
Buildings
 
 
Plant, Equipment and Leasehold Improvements
 
 
Plant, equipment and leasehold improvements, gross
2,565 
2,486 
Machinery and equipment
 
 
Plant, Equipment and Leasehold Improvements
 
 
Plant, equipment and leasehold improvements, gross
57,482 
47,792 
Furniture and fixtures
 
 
Plant, Equipment and Leasehold Improvements
 
 
Plant, equipment and leasehold improvements, gross
4,440 
4,203 
Leasehold improvements
 
 
Plant, Equipment and Leasehold Improvements
 
 
Plant, equipment and leasehold improvements, gross
15,856 
12,593 
Construction in progress
 
 
Plant, Equipment and Leasehold Improvements
 
 
Plant, equipment and leasehold improvements, gross
$ 2,373 
$ 3,448 
Goodwill and Other Intangible Assets - Goodwill (Details) (USD $)
In Thousands, unless otherwise specified
0 Months Ended 12 Months Ended
Oct. 1, 2015
Oct. 1, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2014
EFT Source
Sep. 2, 2014
EFT Source
Goodwill Activity
 
 
 
 
 
 
Beginning balance
 
 
$ 73,801 
$ 40,818 
 
$ 33,619 
Acquisition
 
 
 
 
33,619 
 
Currency translation
 
 
(678)
(636)
 
 
Ending balance
 
 
73,123 
73,801 
 
33,619 
Impairment of goodwill
$ 0 
$ 0 
 
 
 
 
Goodwill and Other Intangible Assets - Intangible Assets (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Intangible Assets [Line Items]
 
 
 
Weighted-average useful life
16 years 
 
 
Intangible amortization expense
$ 4,577 
$ 2,893 
$ 2,035 
Intangible assets subject to amortization, Cost
67,315 
67,574 
 
Intangible assets subject to amortization, Accumulated Amortization
(19,356)
(14,900)
 
Intangible assets subject to amortization, Net Book Value
47,959 
52,674 
 
Intangible assets, Cost
73,344 
73,603 
 
Intangible assets, Net Book Value
53,988 
58,703 
 
Trademarks
 
 
 
Intangible Assets [Line Items]
 
 
 
Indefinite-lived intangible assets
6,029 
6,029 
 
Customer relationships
 
 
 
Intangible Assets [Line Items]
 
 
 
Intangible assets subject to amortization, Cost
59,612 
59,871 
 
Intangible assets subject to amortization, Accumulated Amortization
(17,747)
(14,304)
 
Intangible assets subject to amortization, Net Book Value
41,865 
45,567 
 
Customer relationships |
Minimum
 
 
 
Intangible Assets [Line Items]
 
 
 
Weighted-average useful life
12 years 
 
 
Customer relationships |
Maximum
 
 
 
Intangible Assets [Line Items]
 
 
 
Weighted-average useful life
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
(1,238)
(310)
 
Intangible assets subject to amortization, Net Book Value
5,863 
6,791 
 
Technology and software |
Minimum
 
 
 
Intangible Assets [Line Items]
 
 
 
Weighted-average useful life
7 years 
 
 
Technology and software |
Maximum
 
 
 
Intangible Assets [Line Items]
 
 
 
Weighted-average useful life
10 years 
 
 
Non-compete agreements
 
 
 
Intangible Assets [Line Items]
 
 
 
Intangible assets subject to amortization, Cost
491 
491 
 
Intangible assets subject to amortization, Accumulated Amortization
(270)
(198)
 
Intangible assets subject to amortization, Net Book Value
221 
293 
 
Non-compete agreements |
Minimum
 
 
 
Intangible Assets [Line Items]
 
 
 
Weighted-average useful life
5 years 
 
 
Non-compete agreements |
Maximum
 
 
 
Intangible Assets [Line Items]
 
 
 
Weighted-average useful life
8 years 
 
 
Favorable leases
 
 
 
Intangible Assets [Line Items]
 
 
 
Weighted-average useful life
9 years 6 months 
 
 
Intangible assets subject to amortization, Cost
111 
111 
 
Intangible assets subject to amortization, Accumulated Amortization
(101)
(88)
 
Intangible assets subject to amortization, Net Book Value
$ 10 
$ 23 
 
Goodwill and Other Intangible Assets - Future Aggregate Amortization Expense (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Estimated future aggregate amortization expense
 
 
2016
$ 4,572 
 
2017
4,561 
 
2018
4,548 
 
2019
4,548 
 
2020
4,548 
 
Thereafter
25,182 
 
Total
$ 47,959 
$ 52,674 
Fair Value of Financial Instruments (Details) (USD $)
In Thousands, unless otherwise specified
0 Months Ended
Dec. 31, 2015
Sellers Note
Dec. 31, 2015
Level 3
Sellers Note
Dec. 31, 2015
First Lien Credit Facility
Term Loan
Dec. 31, 2015
First Lien Credit Facility
Level 2
Term Loan
Dec. 31, 2014
Senior Term Loan
Term Loan
Dec. 31, 2014
Senior Term Loan
Sellers Note
Dec. 31, 2014
Senior Term Loan
Level 2
Term Loan
Dec. 31, 2014
Senior Term Loan
Level 3
Sellers Note
Sep. 2, 2014
EFT Source
Customer relationships
Liabilities:
 
 
 
 
 
 
 
 
 
Long-term debt
$ 9,000 
$ 9,000 
$ 309,375 
$ 309,375 
$ 170,866 
$ 9,000 
$ 170,866 
$ 9,000 
 
Fair Value Inputs
 
 
 
 
 
 
 
 
 
Fair value discount rate (as a percent)
 
 
 
 
 
 
 
 
11.90% 
Related-Party Transactions (Details) (USD $)
In Thousands, unless otherwise specified
7 Months Ended 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Aug. 7, 2015
Company owned by former member of Board of Directors
Lease of Indiana operating facility
Dec. 31, 2014
Company owned by former member of Board of Directors
Lease of Indiana operating facility
Dec. 31, 2013
Company owned by former member of Board of Directors
Lease of Indiana operating facility
Related Party Transaction [Line Items]
 
 
 
 
 
Rent paid
 
 
$ 108 
$ 175 
$ 175 
Notes receivable from employees
$ 0 
$ 108 
 
 
 
Long-Term Debt and Credit Facility - Long-Term Debt (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Sep. 2, 2014
Debt Instrument [Line Items]
 
 
 
Long-term debt
$ 321,500 
 
 
Unamortized discount
(4,459)
(442)
 
Unamortized deferred financing costs
(8,041)
(614)
 
Total long-term debt
309,000 
178,810 
 
Less current maturities of long-term debt
(9,000)
(6,326)
 
Long-term debt, excluding current maturities
300,000 
172,484 
 
Sellers Note
 
 
 
Debt Instrument [Line Items]
 
 
 
Interest rate (as a percent)
5.00% 
 
5.00% 
Long-term debt
9,000 
9,000 
 
First Lien Credit Facility
 
 
 
Debt Instrument [Line Items]
 
 
 
Interest rate (as a percent)
5.50% 
 
 
Long-term debt
312,500 
 
 
Senior Term Loan
 
 
 
Debt Instrument [Line Items]
 
 
 
Interest rate (as a percent)
 
3.91% 
 
Long-term debt
 
$ 170,866 
 
Long-Term Debt and Credit Facility - First Lien Credit Facility (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 0 Months Ended 3 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Aug. 17, 2015
First Lien Credit Facility
Aug. 17, 2015
Eurodollar rate
First Lien Credit Facility
Aug. 17, 2015
Base rate
First Lien Credit Facility
Oct. 15, 2015
Term Loan
First Lien Credit Facility
Dec. 31, 2015
Term Loan
First Lien Credit Facility
Dec. 31, 2015
Term Loan
First Lien Credit Facility
Aug. 17, 2015
Term Loan
First Lien Credit Facility
Aug. 17, 2015
Revolving Credit Facility
First Lien Credit Facility
Dec. 31, 2015
Revolving Credit Facility
First Lien Credit Facility
Aug. 17, 2015
Revolving Credit Facility
First Lien Credit Facility
Aug. 17, 2015
Revolving Credit Facility
First Lien Credit Facility
Minimum
Aug. 17, 2015
Revolving Credit Facility
First Lien Credit Facility
Maximum
Long-term Debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity
 
 
 
 
 
 
 
 
$ 435,000 
 
 
$ 40,000 
 
 
Interest rate floor (as a percent)
 
 
 
1.00% 
 
 
 
 
 
 
 
 
 
 
Applicable margin over reference rate (as a percent)
 
 
 
4.50% 
3.50% 
 
 
 
 
 
 
 
 
 
Fronting fee for letters of credit (as a percent)
 
 
0.125% 
 
 
 
 
 
 
 
0.125% 
 
 
 
Unused commitment fee (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
0.375% 
0.50% 
Amount drawn to trigger net leverage requirement (as a percent)
 
 
 
 
 
 
 
 
 
50.00% 
 
 
 
 
Maximum net leverage ratio
 
 
7.00 
 
 
 
 
 
 
 
 
 
 
 
Amount repaid
 
 
 
 
 
112,500 
10,000 
 
 
 
 
 
 
 
Letters of credit outstanding
 
 
 
 
 
 
 
 
 
 
100 
 
 
 
Interest expense related to amortization of deferred financing costs and discount
5,648 
591 
 
 
 
 
 
4,687 
 
 
 
 
 
 
Amount outstanding
 
 
 
 
 
 
 
 
 
 
$ 0 
 
 
 
Long-Term Debt and Credit Facility - Senior Term Loan and Sellers Note (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 0 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Aug. 17, 2015
Senior Term Loan
Sep. 2, 2014
Senior Term Loan
Dec. 31, 2015
Senior Term Loan
Dec. 31, 2015
Sellers Note
Sep. 2, 2014
Sellers Note
Long-term Debt
 
 
 
 
 
 
 
Amount outstanding
 
 
 
 
$ 0 
 
 
Amount repaid
 
 
158,420 
 
 
 
 
Loss on early extinguishment of debt
(703)
(476)
(703)
(476)
 
 
 
Promissory note
 
 
 
 
 
 
$ 9,000 
Interest rate (as a percent)
 
 
 
 
 
5.00% 
5.00% 
Long-Term Debt and Credit Facility - Letters of Credit (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 0 Months Ended 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Aug. 17, 2015
First Lien Credit Facility
Aug. 17, 2015
Senior Term Loan
Sep. 2, 2014
Senior Term Loan
Aug. 17, 2015
Term Loan
First Lien Credit Facility
Dec. 31, 2015
Revolving Credit Facility
First Lien Credit Facility
item
Aug. 17, 2015
Revolving Credit Facility
First Lien Credit Facility
Long-term Debt
 
 
 
 
 
 
 
 
Number of outstanding letters of credit
 
 
 
 
 
 
 
Number of real property lease agreements secured by letters of credit
 
 
 
 
 
 
 
Letters of credit outstanding
 
 
 
 
 
 
$ 100 
 
Remaining borrowing capacity
 
 
 
 
 
 
39,900 
 
Fee on outstanding letters of credit (as a percent)
 
 
 
 
 
 
4.50% 
 
Fronting fee for letters of credit (as a percent)
 
 
0.125% 
 
 
 
0.125% 
 
Maximum borrowing capacity
 
 
 
 
 
435,000 
 
40,000 
Loss on early extinguishment of debt
$ (703)
$ (476)
 
$ (703)
$ (476)
 
 
 
Long-Term Debt and Credit Facility - Maturities of Long-Term Debt (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2015
Maturities of long-term debt:
 
2016
$ 9,000 
Thereafter
312,500 
Total
$ 321,500 
Income Taxes - Income Tax Expense (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Current taxes:
 
 
 
Domestic
$ 16,036 
$ 8,424 
$ 4,982 
Foreign
254 
 
Current income tax expense
16,290 
8,424 
4,988 
Deferred taxes:
 
 
 
Domestic
1,656 
2,238 
2,347 
Foreign
(100)
(371)
(347)
Deferred income tax expense
1,556 
1,867 
2,000 
Provision for income taxes
17,846 
10,291 
6,988 
Income before income taxes
 
 
 
Domestic
50,692 
27,984 
19,954 
Foreign
(1,585)
(1,721)
(1,767)
Income before income taxes
$ 49,107 
$ 26,263 
$ 18,187 
Effective income tax rate (as a percent)
36.30% 
39.10% 
38.40% 
Income Taxes - Effective Income Tax Rate Reconciliation (Details)
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Effective Income Tax Rate Reconciliation
 
 
 
Tax at federal statutory rate (as a percent)
35.00% 
35.00% 
34.00% 
Permanent differences (as a percent)
(1.60%)
(2.90%)
(1.70%)
State income taxes (as a percent)
2.00% 
3.10% 
4.80% 
Foreign taxes (as a percent)
0.30% 
2.50% 
(1.60%)
Other (as a percent)
0.60% 
1.40% 
2.90% 
Effective income tax rate (as a percent)
36.30% 
39.10% 
38.40% 
Income Taxes - Components of Deferred Tax Assets and Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Deferred tax assets:
 
 
Allowance for doubtful accounts
$ 28 
$ 65 
Inventory valuation
279 
607 
Accrued expense
927 
372 
Unrealized foreign exchange loss
652 
634 
Net operating loss carryforward
1,999 
2,148 
Goodwill
 
2,159 
Deferred financing costs
1,564 
 
Asset retirement obligation
179 
292 
Stock compensation
322 
1,853 
Total gross deferred tax asset
5,950 
8,130 
Valuation allowance
(3,717)
(4,120)
Net deferred tax assets
2,233 
4,010 
Deferred tax liabilities:
 
 
Plant, property and leasehold improvements
(5,881)
(4,238)
Intangibles
(18,962)
(11,903)
Prepaid expense
(1,463)
(1,045)
Total gross deferred tax liabilities
(26,306)
(17,186)
Net deferred tax liabilities
$ (24,073)
$ (13,176)
Income Taxes - Balance Sheet Information (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Income Tax Disclosure [Abstract]
 
 
Current deferred tax assets
 
$ 634 
Long-term deferred tax liabilities
(24,073)
(13,810)
Net deferred tax liabilities
$ (24,073)
$ (13,176)
Income Taxes - Additional Information (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Valuation allowance
 
 
Valuation allowance (decrease) increase
$ (403)
$ 678 
Deferred Tax Liability Not Recognized, Undistributed Earnings of Foreign Subsidiaries [Abstract]
 
 
Provision for U.S. federal and state taxes on cumulative foreign earnings
 
Foreign earnings intended to be reinvested outside of the U.S.
2,707 
 
Foreign
 
 
Operating Loss Carryforwards [Line Items]
 
 
Operating Loss Carryforwards
$ 1,999 
 
Valuation allowance (as a percent)
100.00% 
 
Series A Preferred Stock - Liquidation Preference and Share Activity (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Temporary Equity [Line Items]
 
 
Preferred shares, par value (in dollars per share)
$ 0.001 
$ 0.001 
Preferred shares liquidation preference
$ 0 
$ 256,017 
Series A Preferred Stock
 
 
Temporary Equity [Line Items]
 
 
Preferred shares, par value (in dollars per share)
$ 0.001 
$ 0.001 
Preferred shares, initial liquidation preference per share
$ 1,000 
$ 1,000 
Temporary Equity liquidation preference dividend, percent
20.00% 
20.00% 
Series A Preferred Stock - Additional Share Activity (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended 0 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Oct. 15, 2015
Series A Preferred Stock
Aug. 17, 2015
Series A Preferred Stock
Dec. 31, 2015
Series A Preferred Stock
Oct. 15, 2015
Series A Preferred Stock
Aug. 17, 2015
Series A Preferred Stock
Dec. 31, 2015
Series A Preferred Stock
Minimum
Dec. 31, 2015
Series A Preferred Stock
Maximum
Dec. 31, 2014
EFT Source
Series A Preferred Stock
Temporary Equity [Line Items]
 
 
 
 
 
 
 
 
 
 
Shares issued for acquisition (in shares)
 
 
 
 
 
 
 
 
 
549 
Shares issued, value per share
 
 
 
 
 
 
 
 
 
$ 3,733.88 
Shares redeemed
 
 
2,576 
62,140 
64,809 
 
 
 
 
 
Redemption Price (per share)
 
 
 
 
 
$ 4,610.68 
$ 4,446.70 
$ 3,950.33 
$ 4,610.68 
 
Total redemption value
 
 
$ 11,877 
$ 276,688 
$ 288,565 
 
 
 
 
 
Redemption value treated as return of capital
46 
 
 
 
58,250 
 
 
 
 
 
Shares outstanding
64,809 
 
 
 
 
 
 
 
Series A Preferred Stock Redemption
 
 
 
 
 
 
 
 
 
 
Redemption value treated as dividend
$ 230,315 
 
 
 
$ 230,315 
 
 
 
 
 
Stockholders’ Equity - Common Stock (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 0 Months Ended 3 Months Ended 0 Months Ended
Dec. 31, 2015
Oct. 15, 2015
Dec. 31, 2014
Dec. 31, 2015
Phantom Stock Plan
Oct. 15, 2015
Series A Preferred Stock
Aug. 17, 2015
Series A Preferred Stock
Dec. 31, 2015
Series A Preferred Stock
Dec. 31, 2015
Common Stock
Dec. 31, 2014
Common Stock
Dec. 31, 2013
Common Stock
Dec. 31, 2012
Common Stock
Oct. 15, 2015
IPO
Oct. 15, 2015
IPO
Oct. 15, 2015
IPO
Phantom Stock Plan
Oct. 15, 2015
IPO
Series A Preferred Stock
Oct. 15, 2015
Term Loan
First Lien Credit Facility
Dec. 31, 2015
Term Loan
First Lien Credit Facility
Oct. 15, 2015
Term Loan
First Lien Credit Facility
IPO
Oct. 15, 2015
Capital deficiency
IPO
Class of Stock [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares issued (in shares)
 
 
 
 
 
 
 
15,000,000 
257,268 
123,112 
 
15,000,000 
 
 
 
 
 
 
 
Shares issued, value per share
 
 
 
 
 
 
 
 
 
 
 
 
$ 10.00 
 
 
 
 
 
 
Total redemption value
 
 
 
 
$ 11,877 
$ 276,688 
$ 288,565 
 
 
 
 
 
 
 
$ 11,877 
 
 
 
 
Repayment of outstanding term loan
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
112,500 
10,000 
112,500 
 
Liability settled for outstanding obligation under Phantom Stock Plan
 
 
 
13,892 
 
 
 
 
 
 
 
 
 
13,268 
 
 
 
 
 
Deferred Offering expenses
 
 
 
 
 
 
 
 
 
 
 
 
$ 7,196 
 
 
 
 
 
$ 7,196 
Common shares, outstanding shares (in shares)
56,542,116 
 
41,371,220 
 
 
 
 
56,542,116 
41,371,220 
41,113,952 
41,268,898 
 
 
 
 
 
 
 
 
Common shares, authorized shares (in shares)
100,000,000 
100,000,000 
100,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common shares, par value (in dollars per share)
$ 0.001 
 
$ 0.001 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Voting rights per share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares redeemed
 
 
 
 
2,576 
62,140 
64,809 
86,768 
 
278,058 
 
 
 
 
 
 
 
 
 
Stockholders’ Equity - Stock Split and Employee Notes Receivable (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended 0 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Oct. 15, 2015
Oct. 15, 2015
Common Stock
Class of Stock [Line Items]
 
 
 
 
 
Stock split
 
 
 
 
0.0455 
Common shares, authorized shares (in shares)
100,000,000 
100,000,000 
 
100,000,000 
 
Employee Notes Receivable
 
 
 
 
 
Notes receivable interest rate (as a percent)
5.00% 
 
 
 
 
Proceeds from employee note receivable
$ 108 
$ 19 
$ 10 
 
 
Notes receivable from employees
$ 0 
$ 108 
 
 
 
Earnings per Share (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Numerator:
 
 
 
 
 
 
 
 
 
 
 
Net income from continuing operations
$ (1,615)
$ 14,760 
$ 12,155 
$ 5,960 
$ 5,638 
$ 6,768 
$ 3,070 
$ 496 
$ 31,261 
$ 15,972 
$ 11,199 
Preferred stock dividends
(94)
(7,096)
(12,747)
(12,611)
(12,805)
(10,692)
(10,548)
(10,432)
(32,548)
(44,477)
(35,268)
Income (loss) from continuing operations attributable to common stockholders
 
 
 
 
 
 
 
 
(1,287)
(28,505)
(24,069)
Income (loss) income from a discontinued operation, net of taxes
(679)
 
 
281 
(606)
699 
(1,167)
(1,596)
(398)
(2,670)
(2,612)
Net income (loss) attributable to common stockholders
(2,388)
7,664 
(592)
(6,369)
(7,773)
(3,225)
(8,645)
(11,532)
(1,685)
(31,175)
(26,681)
Denominator:
 
 
 
 
 
 
 
 
 
 
 
Basic EPS - weighted average common shares outstanding
 
 
 
 
 
 
 
 
44,816,263 
41,199,246 
41,072,350 
Dilutive EPS - weighted average common shares outstanding
 
 
 
 
 
 
 
 
44,816,263 
41,199,246 
41,072,350 
Basic and Diluted EPS:
 
 
 
 
 
 
 
 
 
 
 
Loss from continuing operations
$ (0.03)
$ 0.19 
$ (0.02)
$ (0.16)
$ (0.17)
$ (0.10)
$ (0.18)
$ (0.24)
$ (0.03)
$ (0.69)
$ (0.59)
Loss from a discontinued operation, net of taxes
$ (0.01)
 
 
$ 0.01 
$ (0.01)
$ 0.02 
$ (0.03)
$ (0.04)
$ (0.01)
$ (0.07)
$ (0.06)
Total basic and diluted loss per share
$ (0.04)
$ 0.19 
$ (0.02)
$ (0.15)
$ (0.18)
$ (0.08)
$ (0.21)
$ (0.28)
$ (0.04)
$ (0.76)
$ (0.65)
Potentially dilutive effect of outstanding stock options
 
 
 
 
 
 
 
 
 
 
 
Potential dilutive effect of stock options excluded (in shares)
 
 
 
 
 
 
 
 
1,257,450 
627,000 
649,000 
Series A Preferred Stock
 
 
 
 
 
 
 
 
 
 
 
Potentially dilutive effect of outstanding stock options
 
 
 
 
 
 
 
 
 
 
 
Cumulative dividend in arrears
 
 
 
 
 
 
 
 
 
$ 191,208 
 
Commitments and Contingencies - Future Cash Payments (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Future Cash Payments, Operating Leases:
 
 
 
2016
$ 4,309 
 
 
2017
3,745 
 
 
2018
2,426 
 
 
2019
1,327 
 
 
2020
948 
 
 
Thereafter
1,021 
 
 
Total
13,776 
 
 
Future Cash Payments, Purchase Obligations:
 
 
 
2016
3,047 
 
 
Total
3,047 
 
 
Operating leases, rent expense
$ 3,518 
$ 3,320 
$ 3,096 
Commitments and Contingencies - Asset Retirement Obligations (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Loss Contingencies [Line Items]
 
 
 
Asset retirement obligation accretion expense
$ 29 
$ 53 
$ 55 
Other Long Term Liabilities
 
 
 
Loss Contingencies [Line Items]
 
 
 
Asset retirement obligation
$ 613 
$ 911 
 
Employee Benefit Plan (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Defined Contribution Plan Disclosure [Line Items]
 
 
 
Employee benefit plan, Company's portion vested at time of match (as a percent)
100.00% 
 
 
Employee benefit plan expense
$ 1,049 
$ 824 
$ 908 
Participant's first 3% of deferrals
 
 
 
Defined Contribution Plan Disclosure [Line Items]
 
 
 
Employee benefit plan, Company match (as a percent)
100.00% 
 
 
Participant's second 2% of deferrals
 
 
 
Defined Contribution Plan Disclosure [Line Items]
 
 
 
Employee benefit plan, Company match (as a percent)
50.00% 
 
 
Stock Option Plan - Omnibus Plan (Details) (Omnibus Plan, USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended 0 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2015
Oct. 9, 2015
IPO
Dec. 31, 2015
Stock Options
Oct. 9, 2015
Stock Options
Dec. 31, 2015
Awards Vesting on October 9, 2017
Stock Options
Dec. 31, 2015
Awards Vesting on October 9, 2018
Stock Options
Dec. 31, 2015
Awards Vesting on October 9, 2019
Stock Options
Dec. 31, 2015
2017
Dec. 31, 2015
2018
Dec. 31, 2015
2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
Number of shares authorized
 
 
 
4,000,000 
 
 
 
 
 
 
Stock options granted (in shares)
795,450 
770,450 
795,450 
 
 
 
 
 
 
 
Exercise price of options granted (in dollars per share)
$ 10 
 
$ 10.00 
 
 
 
 
 
 
 
Stock options vesting percent
 
 
 
 
33.40% 
33.30% 
33.30% 
 
 
 
Number of shares
 
 
 
 
 
 
 
 
 
 
Granted (in shares)
795,450 
770,450 
795,450 
 
 
 
 
 
 
 
Balance at end of year (in shares)
 
 
795,450 
 
 
 
 
 
 
 
Weighted-Average Exercise Price
 
 
 
 
 
 
 
 
 
 
Granted (in dollars per share)
$ 10 
 
$ 10.00 
 
 
 
 
 
 
 
Balance at end of year (in dollars per share)
 
 
$ 10.00 
 
 
 
 
 
 
 
Weighted- Average Remaining Contractual Term (in Years)
 
 
 
 
 
 
 
 
 
 
Granted (in years)
 
 
10 years 
 
 
 
 
 
 
 
Balance at end of year (in years)
 
 
9 years 9 months 18 days 
 
 
 
 
 
 
 
Number of unvested options scheduled to vest
 
 
 
 
 
 
 
 
 
 
Unvested options (in shares)
795,450 
 
 
 
 
 
 
265,150 
265,150 
265,150 
Compensation expense
 
 
$ 239 
 
 
 
 
 
 
 
Unrecognized compensation expense
 
 
2,470 
 
 
 
 
 
 
 
Period over which compensation expense expected to recognize
 
 
2 years 9 months 18 days 
 
 
 
 
 
 
 
Aggregate intrinsic value of stock option awards outstanding
 
 
$ 525 
 
 
 
 
 
 
 
Valuation Assumptions:
 
 
 
 
 
 
 
 
 
 
Expected term in years
 
 
6 years 6 months 
 
 
 
 
 
 
 
Volatility
 
 
36.70% 
 
 
 
 
 
 
 
Risk-free interest rate
 
 
1.80% 
 
 
 
 
 
 
 
Dividend yield
 
 
1.30% 
 
 
 
 
 
 
 
Stock Option Plan - Option Plan (Details) (Option Plan, USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Number of shares
 
 
 
 
Balance at beginning of year (in shares)
627,000 
649,000 
528,000 
 
Granted (in shares)
 
 
165,000 
 
Exercised (in shares)
(66,000)
 
 
 
Forfeited (in shares)
(99,000)
(22,000)
(44,000)
 
Balance at end of year (in shares)
462,000 
627,000 
649,000 
528,000 
Exercisable (in shares)
421,667 
 
 
 
Weighted-Average Exercise Price
 
 
 
 
Balance at beginning of year (in dollars per share)
$ 0.0004 
$ 0.0004 
$ 0.0004 
 
Granted (in dollars per share)
 
 
$ 0.0005 
 
Exercised (in dollars per share)
$ 0.0005 
 
 
 
Forfeited (in dollars per share)
$ 0.0003 
$ 0.0001 
$ 0.0005 
 
Balance at end of year (in dollars per share)
$ 0.0003 
$ 0.0004 
$ 0.0004 
$ 0.0004 
Exercisable at end of year (in dollars per share)
$ 0.0004 
 
 
 
Weighted- Average Remaining Contractual Term (in Years)
 
 
 
 
Weighted-Average Remaining Contractual Term (in years)
5 years 6 months 26 days 
6 years 5 months 9 days 
7 years 4 months 6 days 
7 years 5 months 23 days 
Exercisable
5 years 5 months 23 days 
 
 
 
Number of unvested options scheduled to vest
 
 
 
 
Unvested options (in shares)
40,333 
 
 
 
2016
 
 
 
 
Number of unvested options scheduled to vest
 
 
 
 
Unvested options (in shares)
40,333 
 
 
 
Stock Options
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Stock option life (in years)
10 years 
 
 
 
Weighted- Average Remaining Contractual Term (in Years)
 
 
 
 
Aggregate intrinsic value of stock option awards outstanding
$ 4,925 
 
 
 
Aggregate intrinsic value of stock option awards exercisable
$ 4,495 
 
 
 
Stock Option Plan - Restricted Shares (Details) (Restricted shares, USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Number of Restricted Stock Units
 
Granted (in shares)
191,664 
Restricted stock units outstanding at the end of the period (in shares)
191,664 
Weighted Average Grant Date Fair Value
 
Granted (in dollars per share)
$ 9.48 
Restricted stock units outstanding at the end of the period (in dollars per shares)
$ 9.48 
Compensation expense
$ 646 
Unrecognized compensation expense
$ 1,171 
Period over which compensation expense expected to recognize
1 year 2 months 27 days 
Minimum
 
Weighted Average Grant Date Fair Value
 
Vesting period
1 year 
Maximum
 
Weighted Average Grant Date Fair Value
 
Vesting period
3 years 
Phantom Stock Plan (Details) (Phantom Stock Plan, USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Liability settled
$ 13,892 
 
 
Stock based compensation liability
 
 
Stock based compensation expense
8,748 
4,534 
610 
Other Long Term Liabilities
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Stock based compensation liability
 
$ 5,144 
 
Segment Reporting - Revenue and EBITDA (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Segment Reporting
 
 
 
 
 
 
 
 
 
 
 
Revenues
$ 93,567 
$ 107,697 
$ 95,536 
$ 77,310 
$ 87,865 
$ 77,374 
$ 53,236 
$ 42,531 
$ 374,110 
$ 261,006 
$ 196,370 
EBITDA
 
 
 
 
 
 
 
 
83,401 
47,023 
37,620 
Operating Segments |
U.S. Debit and Credit
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
263,668 
153,015 
91,626 
EBITDA
 
 
 
 
 
 
 
 
78,981 
37,547 
18,871 
Operating Segments |
U.S. Prepaid Debit
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
65,878 
59,271 
65,895 
EBITDA
 
 
 
 
 
 
 
 
22,993 
18,654 
20,438 
Operating Segments |
U.K. Limited
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
34,361 
35,163 
33,242 
EBITDA
 
 
 
 
 
 
 
 
3,572 
2,943 
2,801 
Operating Segments |
Other
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
17,420 
23,908 
24,678 
EBITDA
 
 
 
 
 
 
 
 
(22,145)
(12,121)
(4,491)
Intersegment eliminations
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
$ (7,217)
$ (10,351)
$ (19,071)
Segment Reporting - Reconciliation of EBITDA to Income Before Taxes (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Reconciliation of total segment EBITDA to income before taxes
 
 
 
 
 
 
 
 
 
 
 
Total segment EBITDA from continuing operations
 
 
 
 
 
 
 
 
$ 83,401 
$ 47,023 
$ 37,620 
Interest, net
 
 
 
 
 
 
 
 
(18,328)
(7,508)
(7,838)
Provision for income taxes
 
 
 
 
 
 
 
 
(17,846)
(10,291)
(6,988)
Depreciation and amortization
 
 
 
 
 
 
 
 
(15,966)
(13,252)
(11,595)
Net income from continuing operations
$ (1,615)
$ 14,760 
$ 12,155 
$ 5,960 
$ 5,638 
$ 6,768 
$ 3,070 
$ 496 
$ 31,261 
$ 15,972 
$ 11,199 
Segment Reporting - Balance Sheet Data (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Discontinued operation
 
$ 5,862 
Total assets
280,353 
266,010 
Operating Segments
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Total assets
280,353 
260,148 
Operating Segments |
U.S. Debit and Credit
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Total assets
221,274 
199,968 
Operating Segments |
U.S. Prepaid Debit
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Total assets
20,960 
19,395 
Operating Segments |
U.K. Limited
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Total assets
25,897 
29,167 
Operating Segments |
Other
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Total assets
$ 12,222 
$ 11,618 
Segment Reporting - Geographic Information (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Total plant, equipment and leasehold improvement additions
 
 
 
 
 
 
 
 
$ 20,063 
$ 15,568 
$ 10,628 
Revenues
93,567 
107,697 
95,536 
77,310 
87,865 
77,374 
53,236 
42,531 
374,110 
261,006 
196,370 
Total long-lived assets
179,224 
 
 
 
177,276 
 
 
 
179,224 
177,276 
 
Total North America
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Total plant, equipment and leasehold improvement additions
 
 
 
 
 
 
 
 
19,404 
15,114 
9,804 
Revenues
 
 
 
 
 
 
 
 
328,652 
212,551 
153,186 
Total long-lived assets
166,631 
 
 
 
162,669 
 
 
 
166,631 
162,669 
 
U.S.
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Total plant, equipment and leasehold improvement additions
 
 
 
 
 
 
 
 
19,129 
15,082 
9,679 
Revenues
 
 
 
 
 
 
 
 
316,111 
196,418 
135,525 
Total long-lived assets
164,377 
 
 
 
160,144 
 
 
 
164,377 
160,144 
 
Canada
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Total plant, equipment and leasehold improvement additions
 
 
 
 
 
 
 
 
275 
32 
125 
Revenues
 
 
 
 
 
 
 
 
12,541 
16,133 
17,661 
Total long-lived assets
2,254 
 
 
 
2,525 
 
 
 
2,254 
2,525 
 
U.K.
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Total plant, equipment and leasehold improvement additions
 
 
 
 
 
 
 
 
659 
454 
824 
Revenues
 
 
 
 
 
 
 
 
36,954 
36,682 
32,448 
Total long-lived assets
12,593 
 
 
 
14,607 
 
 
 
12,593 
14,607 
 
Other
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
$ 8,504 
$ 11,773 
$ 10,736 
Segment Reporting - Net Sales by Product and Services (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Segment Reporting
 
 
 
 
 
 
 
 
 
 
 
Product net sales
 
 
 
 
 
 
 
 
$ 241,609 
$ 159,220 
$ 101,360 
Services net sales
 
 
 
 
 
 
 
 
132,501 
101,786 
95,010 
Total net sales
$ 93,567 
$ 107,697 
$ 95,536 
$ 77,310 
$ 87,865 
$ 77,374 
$ 53,236 
$ 42,531 
$ 374,110 
$ 261,006 
$ 196,370 
Quarterly Financial Information (Unaudited) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Quarterly Financial Information (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Net sales
$ 93,567 
$ 107,697 
$ 95,536 
$ 77,310 
$ 87,865 
$ 77,374 
$ 53,236 
$ 42,531 
$ 374,110 
$ 261,006 
$ 196,370 
Gross profit
31,429 
43,049 
35,835 
25,508 
29,266 
26,663 
15,554 
10,244 
135,821 
81,727 
59,496 
Income (loss) from continuing operations
(1,615)
14,760 
12,155 
5,960 
5,638 
6,768 
3,070 
496 
31,261 
15,972 
11,199 
Income (loss) income from a discontinued operation, net of taxes
(679)
 
 
281 
(606)
699 
(1,167)
(1,596)
(398)
(2,670)
(2,612)
Net income (loss)
(2,294)
14,760 
12,155 
6,242 
5,032 
7,467 
1,903 
(1,100)
30,863 
13,302 
8,587 
Preferred stock dividends
(94)
(7,096)
(12,747)
(12,611)
(12,805)
(10,692)
(10,548)
(10,432)
(32,548)
(44,477)
(35,268)
Net (loss) income attributable to common stockholders
$ (2,388)
$ 7,664 
$ (592)
$ (6,369)
$ (7,773)
$ (3,225)
$ (8,645)
$ (11,532)
$ (1,685)
$ (31,175)
$ (26,681)
Basic and diluted loss per share:
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
$ (0.03)
$ 0.19 
$ (0.02)
$ (0.16)
$ (0.17)
$ (0.10)
$ (0.18)
$ (0.24)
$ (0.03)
$ (0.69)
$ (0.59)
Discontinued operation
$ (0.01)
 
 
$ 0.01 
$ (0.01)
$ 0.02 
$ (0.03)
$ (0.04)
$ (0.01)
$ (0.07)
$ (0.06)
Total basic and diluted loss per share
$ (0.04)
$ 0.19 
$ (0.02)
$ (0.15)
$ (0.18)
$ (0.08)
$ (0.21)
$ (0.28)
$ (0.04)
$ (0.76)
$ (0.65)
Quarterly Financial Information - Cost of Sales Reclassification (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 3 Months Ended 6 Months Ended 9 Months Ended 12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Sep. 30, 2015
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Jun. 30, 2015
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Mar. 31, 2015
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Sep. 30, 2014
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Jun. 30, 2014
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Mar. 31, 2014
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Jun. 30, 2015
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Jun. 30, 2014
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Sep. 30, 2015
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Sep. 30, 2014
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Dec. 31, 2014
Adjustment for Immaterial Error in Classification of Cost of Sales Between Services And Products [Member]
Cost of Sales from products
$ 155,516 
$ 113,399 
$ 66,154 
$ 4,349 
$ (1,146)
$ (508)
$ 1,124 
$ (806)
$ (1,400)
$ (1,654)
$ (2,206)
$ 2,695 
$ (1,082)
$ 7,819 
Cost of Sales from services
$ 73,111 
$ 57,233 
$ 63,054 
$ (4,349)
$ 1,146 
$ 508 
$ (1,124)
$ 806 
$ 1,400 
$ 1,654 
$ 2,206 
$ (2,695)
$ 1,082 
$ (7,819)
Subsequent Event (Details) (USD $)
12 Months Ended 0 Months Ended
Dec. 31, 2015
Omnibus Plan
Dec. 31, 2015
Stock Options
Omnibus Plan
Dec. 31, 2015
Stock Options
Omnibus Plan
Awards Vesting on October 9, 2017
Dec. 31, 2015
Stock Options
Omnibus Plan
Awards Vesting on October 9, 2018
Dec. 31, 2015
Stock Options
Omnibus Plan
Awards Vesting on October 9, 2019
Dec. 31, 2015
Restricted shares
Feb. 24, 2016
Subsequent Event [Member]
Mar. 2, 2016
Subsequent Event [Member]
Stock Options
Omnibus Plan
Mar. 2, 2016
Subsequent Event [Member]
Stock Options
Omnibus Plan
Awards Vesting on October 9, 2017
Mar. 2, 2016
Subsequent Event [Member]
Stock Options
Omnibus Plan
Awards Vesting on October 9, 2018
Mar. 2, 2016
Subsequent Event [Member]
Stock Options
Omnibus Plan
Awards Vesting on October 9, 2019
Mar. 2, 2016
Subsequent Event [Member]
Restricted shares
Omnibus Plan
Subsequent Event [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
Cash dividends declared per common share
 
 
 
 
 
 
$ 0.045 
 
 
 
 
 
Granted (in shares)
795,450 
795,450 
 
 
 
 
 
400,000 
 
 
 
 
Granted (in shares)
 
 
 
 
 
191,664 
 
 
 
 
 
232,912 
Granted (in dollars per share)
$ 10 
$ 10.00 
 
 
 
 
 
$ 10 
 
 
 
 
Stock options vesting percent
 
 
33.40% 
33.30% 
33.30% 
 
 
 
33.40% 
33.30% 
33.30% 
 
Granted (in dollars per share)
 
 
 
 
 
$ 9.48 
 
 
 
 
 
$ 7.91