You should read the following discussion in conjunction with the consolidated financial statements and the notes to those statements included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, some of which are not within our control. See "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements."
Unternehmensprofil
Wir sind ein Zahlungstechnologieunternehmen und ein führender Anbieter von umfassenden finanziellen Zahlungskartenlösungen in Indien
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We define "Prepaid Debit Cards" as debit cards issued on the networks of the
Payment Card Brands, but not linked to a traditional bank account. We also offer
an instant card issuance solution, which provides customers the ability to issue
a personalized debit or credit card within the bank branch to individual
cardholders. We have established a leading position in the Financial Payment
Card solutions market through more than 20 years of experience.
We serve a diverse set of several thousand customers which includes direct
customers and indirect customer relationships whereby CPI provides Financial
Payment Card solutions to a customer through a Group Service Provider (as
defined below). Our customers include some of the largest issuers of debit and
credit cards in the United States , the largest Prepaid Debit Card program
managers in the United States , numerous financial technology companies
("fintechs"), as well as independent community banks, credit unions and Group
Service Providers. We define "Group Service Providers" as reseller or card
processor organizations that assist small card issuers, such as credit unions,
with managing their credit and debit card programs, including managing the
Financial Payment Card issuance process, core banking operations and other
financial services.
We serve our customers through a network of high-security production and card
services facilities in the United States , each of which is audited for
compliance with the standards of the Payment Card Industry Security Standards
Council (the "PCI Security Standards Council ") by one or more of the Payment
Card Brands. Many of our customers require us to comply with PCI Security
Standards Council requirements that relate to the provision of our products and
services. Our network of high-security production facilities allows us to
optimize our solutions offerings and to serve the needs of our diverse customer
base.
Angetrieben von der Kombination unserer starken Beziehungen, Qualität, Technologie und Innovation glauben wir, dass wir eine starke Position in den folgenden Märkten haben:
? Die
Programmmanager;
? Die
unabhängige Privatbanken und Kreditgenossenschaften;
? Die
Kartenherausgeber u
? Die
Karten für Finanztechnologieunternehmen.
Wichtige Trends und Faktoren, die unsere finanzielle Leistung beeinflussen
Wir glauben, dass die folgenden Schlüsselfaktoren einen wesentlichen Einfluss auf unsere Geschäftsleistung haben und unsere Finanz- und Betriebsergebnisse negativ beeinflussen können:
Wir haben die Verfügbarkeit von Arbeitskräften getestet und werden dies voraussichtlich auch weiterhin tun
Probleme, insbesondere in den Produktionsstätten des Unternehmens. im abgelaufenen Jahr
Personalkosten in Umsatzkosten und Betriebskosten, die wir erwarten würden
Es wird während des gesamten Jahres 2023 und darüber hinaus fortgesetzt, während das Unternehmen seinen Betrieb fortsetzt
Stellt zusätzliches Personal ein und ist von Inflationsdruck betroffen. Auch
? Aufgrund von Arbeitskräftemangel und Lieferkettenbeschränkungen, wie unten erläutert,
Das Unternehmen hatte in einigen Regionen verlängerte Produktionszeiten
Arbeit und Schwierigkeiten, einige der Liefererwartungen des Kunden zu erfüllen. Wir
Weiterhin überwachen, bewerten und proaktiv Maßnahmen ergreifen, um Störungen zu minimieren
Verzögerungen in der Produktion und wir sehen Verbesserungen; Allerdings sind die Störungen u
delays that have previously caused the Company to lose or delay customer opportunities could reoccur again or worsen in 2023 and beyond.
Wir haben und leiden weiterhin unter dem Inflationsdruck in unserer Region
Lieferkette sowie Verzögerungen und Schwierigkeiten bei der Beschaffung von Schlüsselmaterialien und
Komponenten für unsere Produkte. Obwohl wir Verbesserungen in sehen
Bestimmte Bereiche, wie Probleme sowie andere Faktoren wie Beschäftigung
? Herausforderungen, die das globale Lieferkettennetzwerk weiterhin belasten
Führte zu einem Anstieg der Kosten einiger Rohstoffe und Komponenten und erhöhte sich
Frachtkosten, Verzögerungen bei Versand und Logistik, längere Lieferzeiten und Engpässe
raw materials we use in our products, such as the on-going global microchip
shortage, and
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Unberechenbarkeit. Einige unserer Lieferanten haben uns auch gebeten, Bestellungen aufzugeben
die uns verpflichten, die Ware mindestens ein Jahr früher als erwartet zu kaufen
Produktionsbedarf, was eine erhebliche Änderung gegenüber der historischen Praxis darstellt
Bestellungen für die Lieferung innerhalb von Wochen nach der erwarteten Produktion aufgeben
Brauchen. Während wir Maßnahmen ergreifen, um die Auswirkungen der beschriebenen Dynamik zu verringern
Oben, einschließlich Reservelagermontage, erwarten wir Erfahrung in der Lieferkette
Auswirkungen auf unser Geschäft, die unsere Fähigkeit beeinträchtigen können, die Kundennachfrage zu erfüllen
zukünftige Perioden. Wir glauben auch, dass einige unserer Kunden damit gerechnet haben, bzw
In Zukunft können Sie mit Verzögerungen im Zusammenhang mit der Lieferkette und daher rechnen
ihren eigenen Bestand an den Beständen des Unternehmens erhöht haben oder dies versuchen könnten
Vorhandene Produkte, die zu einer geringeren Nachfrage nach unseren Produkten geführt haben und führen können
Produkte in der Zukunft. Auch die damit verbundenen geopolitischen Unsicherheiten
wird bearbeitet
Auf makroökonomischer Ebene führte dies zu zusätzlichen Störungen in der Lieferkette. Das ist großartig
Ereignisse können die Herausforderungen in der Lieferkette eines Unternehmens weiter erschweren. Außerdem,
Einige Hersteller von Mikrochips haben die Arten von Mikrochips, die sie verwenden, eingeschränkt
Produktion, was unsere Fähigkeit beeinträchtigen wird, weiterhin kostengünstige Konnektivität bereitzustellen
Mikrochips für einige unserer Kunden. Dies kann uns verursachen und betroffen sein
Kunden sollten auf teurere Mikrochip-Optionen oder kontaktlose Karten umsteigen
schneller als erwartet, was zu Störungen im Unternehmen führen könnte und
betroffene Kunden. Während wir vielleicht in der Lage sein werden, einen Teil unserer wachsenden Arbeit zu übertragen
Und die Materialkosten für unsere Kunden haben die Kosteninflation schneller erhöht
Schneller als erwartet, und wir gehen davon aus, dass sich diese Faktoren auf die Rentabilität auswirken werden
Das ganze Jahr 2023 und darüber hinaus. Darüber hinaus ist der Vorrat an Rohstoffen gegeben
Wir rechnen nach dem First-in-first-out-Prinzip mit den Auswirkungen der Erhöhung
Rohstoffkosten, die ständig in unserer Gewinn- und Verlustrechnung zu realisieren sind
2023 und vielleicht später.
Unsere Second Wave®-Zahlungskarten verfügen über einen Kern aus Meeresrückgewinnung
Kunststoff (“ROBP”), aus dem wir in der Vergangenheit importiert haben
Nutzung von zwei Lieferanten aus einer Hand. Aufgrund politischer Instabilität und anderer Faktoren
Zusätzlich zu den oben beschriebenen Einschränkungen der Lieferkette, auf die wir gestoßen sind
Herausforderungen bei der Beschaffung einer stetigen Versorgung mit ROBP
Holen Sie sich ROBP von
Single-Source-Lieferanten, ähnlich den Materialien, von denen sie bezogen werden
Ich habe diese Materialien getestet und glaube, dass die Karten, die die Materialien enthalten, übereinstimmen
oder etablierte Qualitätsstandards übertreffen, und wir glauben, dass wir dazu in der Lage sein werden
Kaufen Sie ausreichend Vorräte aus diesem neuen Herkunftsland. Wenn wir jedoch
? Sie haben Produktionsschwierigkeiten mit diesem Material oder können es nicht beschaffen
Eine ausreichende oder konstante Versorgung aus dem Herkunftsland haben wir möglicherweise nicht
Genügend Angebot an ROBP, um die Kundennachfrage nach unseren Karten der zweiten Welle zu befriedigen.
Das Unternehmen überwacht und verwaltet weiterhin seine Lieferkette,
Einschließlich der Zusammenstellung von Materialbeständen und der Bewertung von Alternativen
ROBP-Lieferanten und -Quellen, aber es ist ungewiss, wie die Probleme entstehen
Andere Faktoren in der ROBP-Lieferkette werden unsere Fähigkeit beeinträchtigen, fortzufahren
Holen Sie sich genug ROBP. Darüber hinaus alternative Anbieter von ROBP in anderen Ländern
Herkunftsländer können durch lokale oder globale geopolitische Herausforderungen eingeschränkt werden,
Instabilität und Unvorhersehbarkeit, und es kann zu einer Überladung kommen
und Materialkosten, die wir eventuell nicht an unsere Kunden weitergeben können.
Das Unternehmen ist seit 2021 als beschleunigte Akte eingestuft
Zu
Es muss die Wirksamkeit unserer internen Kontrolle über die Finanzberichterstattung sein
Geprüft durch unsere externe Revisionsstelle gemäß den Bestimmungen des Fachbereichs
? 404 des Sarbanes-Oxley-Gesetzes von 2002 („Sarbanes-Oxley-Gesetz“). ich fuhr fort
Die Erfüllung dieser Anforderung erhöhte unsere Vergütung erheblich
Auslagen, Honorare und andere Verwaltungskosten im Laufe der Jahre
Enden
Bis 2023 und darüber hinaus, während wir die Einhaltung weiterhin aufrechterhalten.
COVID-19 Update
The COVID-19 pandemic and associated counteracting measures implemented by
governments and businesses around the world have impacted, and continue to
impact, economies and societies globally, including the locations where we, our
customers and our suppliers conduct business. We believe the global impacts from
COVID-19, along with other macro-economic factors, have contributed to, among
other things certain adverse effects on our supply chain, production lead times,
labor availability, employee absenteeism and other costs. Though we have
implemented measures to attempt to mitigate the impacts of the challenges
described above, we believe that such impacts, and the associated costs, may
continue throughout 2023 and beyond. The long-term implications of COVID-19 on
our results of operations and overall financial performance remain uncertain. We
continue to monitor global developments concerning COVID-19 to anticipate issues
that may impact our business and take any necessary action.
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OnMarch 27, 2020 , the Coronavirus Aid, Relief, and Economic Security ("CARES") Act was signed into law. The CARES Act, among other things, included provisions relating to refundable payroll tax credits, deferment of employer social security payments, changes in net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitation and technical corrections to tax depreciation methods for qualified improvement property. We deferred employer social security payments in 2020 in accordance with the CARES Act, and the first installment repayment was made in the fourth quarter of 2021 and the second and final installment repayment was made in the fourth quarter of 2022.
Branchenübersicht
Unser Geschäft besteht aus folgenden Bereichen:
? Debit and Credit; ? Prepaid Debit; and ? Other. Debit and Credit Segment
Our Debit and Credit segment primarily produces Financial Payment Cards and provides integrated card services for card-issuing financial institutions and fintechs primarily inthe United States . Products produced by this segment primarily include EMV® and non-EMV Financial Payment Cards, including contact and contactless (dual-interface) cards and plastic and encased metal cards, and Second Wave payment cards featuring a core made with ROBP, and other private label credit cards that are not issued on the networks of the Payment Cards Brands. We also sell Card@Once® printers and related supplies as part of our proprietary and patented instant card issuance system. Services provided include a variety of integrated card services, including card personalization and fulfillment services. We also provide print-on-demand services, where we produce images, personalized payment cards and related collateral on a one-by-one, on-demand basis for our customers, as well as our Card@Once software-as-a-service (SaaS) solution. The Debit and Credit segment operations are each audited for compliance by one or more of the Payment Card Brands. Many of our customers require us to comply with the standards of thePCI Security Standards Council .
Prepaid-Rabattchip
Our Prepaid Debit segment primarily provides integrated prepaid card services to Prepaid Debit Card providers inthe United States , including tamper-evident security packaging. This segment also produces Financial Payment Cards issued on the networks of the Payment Card Brands that are included in the tamper-evident security packages. The Prepaid Debit segment operation is audited for compliance by one or more of the Payment Card Brands. Many of our customers require us to comply with the standards of thePCI Security Standards Council .
zuletzt
Unser sonstiges Segment umfasst die allgemeinen und Verwaltungskosten des Unternehmens.
Die Hauptbestandteile der Ertragslage
Nachfolgend finden Sie eine kurze Beschreibung der wichtigsten Posten der konsolidierten Betriebs- und Gesamtergebnisrechnung.
Net sales reflect our revenue generated from the sale of products and services.
Product net sales include the design and production of Financial Payment Cards,
including contact and contactless cards, which includes our eco-focused cards.
Contactless EMV cards have additional technology to process contactless
transactions and generally have a higher selling price than contact-only EMV
cards. We also generate product revenue from the sale of our Card@Once
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Inhaltsverzeichnis
instant issuance system and consumables, private label credit cards and retail gift cards. Services net sales include revenue from the personalization and fulfillment of Financial Payment Cards, including print-on-demand services, tamper-evident security packaging, fulfillment services and SaaS personalization of instant issuance Financial Payment cards. See Part II, Item 8, Financial Statements and Supplementary Data, Note 2 "Summary of Significant Accounting Policies" and Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, "Critical Accounting Policies and Estimates-Revenue Recognition" in this Annual Report on Form 10-K for further information and timing of revenue recognition for net sales. We include gross shipping and handling revenue in net sales.
Verkaufskosten
Cost of sales includes the direct and indirect costs of the products we sell and the services that we provide. Product costs include the cost of raw materials, including microchips and antennas for contactless EMV cards, labor costs, equipment and facilities costs, operation overhead, depreciation and amortization, leases and rental charges and transport costs. Product costs also include Card@Once instant issuance printer costs. Services costs include the cost of labor, raw materials in the case of tamper-evident security packaging, equipment and facilities costs, operation overhead, depreciation and amortization, leases and rental charges and transport costs. Cost of sales can be impacted by many factors, including volume, operational efficiencies, procurement costs, promotional activity, and employee relations. We include the costs of shipping and handling related to customer sales in cost of sales.
Bruttogewinn und Bruttomarge
Der Bruttogewinn setzt sich aus unserem Nettoumsatz abzüglich unserer Umsatzkosten zusammen. Die Bruttomarge ist der Bruttogewinn als Prozentsatz des Nettoumsatzes.
Betriebsaufwand
Operating expenses are primarily comprised of selling, general and
administrative expenses ("SG&A") which generally consist of expenses for
executive, finance, sales, marketing, legal, information technology, customer
service, human resources, research and development and administrative personnel,
including payroll, benefits and stock-based compensation expense, bad debt
expense and outside legal and other advisory fees, including consulting,
accounting, and software related fees. Operating expense also includes
depreciation and amortization expense and may include impairment charges on
tangible and intangible assets, when necessary.
Betriebsergebnis und operative Marge
Das Betriebsergebnis besteht aus unserem Bruttogewinn abzüglich unserer Nettobetriebsausgaben. Die Betriebsmarge ist das Betriebsergebnis als Prozentsatz des Nettoumsatzes.
Sonstige Ausgaben, netto
Die sonstigen Nettoaufwendungen bestehen hauptsächlich aus Zinsaufwendungen und anderen nicht betrieblichen Posten.
Ertragssteueraufwand
Income tax expense consists of our federal and state income taxes at statutory rates, including the impact of other items such as valuation allowances, tax credits, permanent items, and foreign taxes.
Nettoergebnis
Net income consists of our income from operations, less other expense, net, and
income taxes.
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Results of Operations
Das Jahr ist vorbei
The table below presents our results of operations for the years endedDecember 31, 2022 and 2021: Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) Net sales: Products$ 281,190 $ 199,586 $ 81,604 40.9 % Services 194,555 175,533 19,022 10.8 % Total net sales 475,745 375,119 100,626 26.8 % Cost of sales 299,978 233,693 66,285 28.4 % Gross profit 175,767 141,426 34,341 24.3 % Operating expenses 96,637 81,962 14,675 17.9 % Income from operations 79,130 59,464 19,666 33.1 % Other expense, net: Interest, net (29,616) (30,608) 992 (3.2) % Other (expense) income, net 107 14 93 * Loss on debt extinguishment (474) (5,048) 4,574 * Income before taxes 49,147 23,822 25,325 * Income tax expense (12,607) (7,881) (4,726) * Net income$ 36,540 $ 15,941 $ 20,599 129.2 % * Not meaningful Net Sales: Year Ended December 31, 2022 2021 $ Change % Change (dollars in thousands) Net sales by segment: Debit and Credit$ 390,559 $ 296,204 $ 94,355 31.9 % Prepaid Debit 86,136 79,213 6,923 8.7 % Eliminations (950) (298) (652) * Total$ 475,745 $ 375,119 $ 100,626 26.8 % Debit and Credit: Net sales for Debit and Credit increased$94.4 million , or 31.9%, for the year endedDecember 31, 2022 compared to the prior year. Products net sales increased primarily due to increased volumes from existing customers, including the acquisition of new portfolios by an existing customer and the transition to eco-focused and other contactless cards, and higher Card@Once instant issuance sales. Contactless cards have additional technology to process contactless transactions and generally have a higher selling price than contact-only EMV cards. Services net sales increased due to growth from our print-on-demand solution and card personalization services, as well as higher Card@Once services.
Prepaid-Rabatt:
Net sales for Prepaid Debit increased$6.9 million , or 8.7%, for the year endedDecember 31, 2022 compared to the prior year, due to new customer acquisitions, overall higher volumes from our existing customer base, and the benefit from price increases. 40 Table of Contents
Bruttogewinn und Bruttomarge:
Year Ended December 31,
% of % of
2022 net sales 2021 net sales $ Change % Change
(dollars in thousands)
Gross profit by segment:
Debit and Credit $ 144,214 36.9 % $ 110,006 37.1 % $ 34,208 31.1 %
Prepaid Debit 31,553 36.6 % 31,420 39.7 % 133 0.4 %
Total $ 175,767 36.9 % $ 141,426 37.7 % $ 34,341 24.3 %
Debit and Credit:
Gross profit for Debit and Credit increased $34.2 million , or 31.1%, for the
year ended December 31, 2022 compared to the prior year, primarily due to the
net sales increase described above, partially offset by the inflationary impact
on production costs. Gross profit margin decreased to 36.9% during the year
ended December 31, 2022 , compared to 37.1% in the prior year, primarily due to
higher production costs, primarily materials, partially offset by operating
leverage from higher sales, including the benefit of price increases.
Prepaid-Rabatt:
Gross profit for Prepaid Debit increased$0.1 million , or 0.4%, for the year endedDecember 31, 2022 compared to the prior year, primarily due to the net sales increase described above, partially offset by the inflationary impact on production costs. Gross profit margin for Prepaid Debit decreased to 36.6% for the year endedDecember 31, 2022 compared to 39.7% in the prior year, primarily due to higher production costs, primarily materials, partially offset by operating leverage from higher sales, including the benefit of price increases. Operating Expenses: Year Ended December 31, % of % of 2022 net sales 2021 net sales $ Change % Change (dollars in thousands) Operating expenses by segment: Debit and Credit$ 34,169 8.7 %$ 30,537 10.3 %$ 3,632 11.9 % Prepaid Debit 5,976 6.9 % 4,510 5.7 % 1,466 32.5 % Other 56,492 * 46,915 * 9,577 20.4 % Total$ 96,637 20.3 %$ 81,962 21.8 %$ 14,675 17.9 % Debit and Credit: Debit and Credit operating expenses increased$3.6 million , or 11.9%, for the year endedDecember 31, 2022 compared to the prior year, primarily due to a$1.3 million increase in selling and compensation expenses and a$1.0 million increase in professional services fees.
Prepaid-Rabatt:
Prepaid Debit operating expenses increased$1.5 million , or 32.5%, for the year endedDecember 31, 2022 compared to the prior year, primarily due to increased selling expenses. Other: Other operating expenses increased$9.6 million , or 20.4%, for the year endedDecember 31, 2022 compared to the prior year, primarily due to a$7.2 million increase in compensation expenses as a result of increased employee 41
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Die Anzahl der Mitarbeiter und höhere Gehälter und
Betriebsergebnis und operative Marge:
Year Ended December 31,
% of % of
2022 net sales 2021 net sales $ Change % Change
(dollars in thousands)
Income from operations by
segment:
Debit and Credit $ 110,045 28.2 % $ 79,469 26.8 % $ 30,576 38.5 %
Prepaid Debit 25,577 29.7 % 26,910 34.0 % (1,333) (5.0) %
Other (56,492) * (46,915) * (9,577) (20.4) %
Total $ 79,130 16.6 % $ 59,464 15.9 % $ 19,666 33.1 %
Debit and Credit:
Income from operations for Debit and Credit increased $30.6 million , or 38.5%,
for the year ended December 31, 2022 compared to the prior year, primarily due
to higher net sales, partially offset by increased production costs and
operating expenses. Operating margins increased to 28.2% for the year ended
December 31, 2022 compared to 26.8% in the prior year, primarily due to
operating leverage from higher net sales, partially offset by higher production
costs, primarily materials.
Prepaid Debit:
Income from operations for Prepaid Debit decreased $1.3 million , or 5.0%, for
the year ended December 31, 2022 compared to the prior year, primarily due to
increased production costs and operating expenses, partially offset by higher
sales. Operating margin decreased to 29.7% for the year ended December 31, 2022
compared to 34.0% in the prior year, primarily due to the factors discussed
above.
zuletzt:
The loss from operations in Other increased$9.6 million , or 20.4%, for the year endedDecember 31, 2022 compared to the prior year due to the factors described above under "Operating Expenses."
Zinsen, netto:
Interest expense decreased to$29.6 million for the year endedDecember 31, 2022 from$30.6 million in the prior year. Interest expense was higher in 2021 primarily due to$2.6 million of "make-whole" interest premium paid in connection with the termination of our$30.0 million senior credit agreement (the "Senior Credit Facility") onMarch 15, 2021 . The decrease in interest expense due to the "make-whole" interest premium was partially offset by higher average interest rates on our borrowings during the year endedDecember 31, 2022 , net premium paid of$0.5 million relating to the early retirement of the 8.625% Senior Secured Notes due 2026 (the "Senior Notes"), and interest income received of approximately$0.4 million in 2021 related to income tax refunds.
Verlust bei Schuldenzahlung:
im abgelaufenen Jahr
During the year endedDecember 31, 2021 , we recorded a$5.0 million loss on debt extinguishment relating to the termination of both our previous Senior Credit Facility and First Lien Term Loan as we expensed the unamortized deferred financing costs and debt discount. This was completed in connection with the issuance of the Senior Notes and entry into our new asset-based, senior secured revolving credit facility (the "ABL Revolver") onMarch 15, 2021 . 42 Table of Contents Income Tax Expense:
Our effective tax rate on pre-tax income was 25.7% and 33.1% for the years endedDecember 31, 2022 and 2021, respectively. The decrease in our effective tax rate for the year endedDecember 31, 2022 compared to the prior year was primarily due to a decrease in unrecognized tax benefits due to the lapse of statute of limitations and favorable settlements with state tax authorities.
Nettoergebnis:
Net income for the year endedDecember 31, 2022 was$36.5 million , compared to net income of$15.9 million in the prior year. The increase was primarily due to higher gross profit and a decrease in other expenses due to the impact of debt refinancing costs incurred in the 2021 first quarter, partially offset by increased operating expenses and income tax expense.
Liquidität und Kapitalausstattung
In
Our ability to make investments in and grow our business, service our debt and improve our debt leverage ratios, while maintaining strong liquidity, will depend upon our ability to generate excess operating cash flows through our operating subsidiaries. Although we can provide no assurances, we believe that our cash flows from operations, combined with our current cash levels, will be adequate to fund debt service requirements and provide cash, as required, to support our ongoing operations, capital expenditures, lease obligations and working capital needs. OnMarch 15, 2021 , we entered into a credit agreement withWells Fargo Bank, National Association providing for an ABL Revolver of up to$50.0 million . OnMarch 3, 2022 , we entered into Amendment No. 1 to Credit Agreement, which amended the ABL Revolver, to among other things, increased the available borrowing capacity to$75.0 million , increased the uncommitted accordion feature to$25.0 million and revised the interest rate provisions to replace the LIBOR benchmark with updated benchmark provisions using the secured overnight financing rate ("SOFR") as administered by theFederal Reserve Bank of New York . OnOctober 11, 2022 , we entered into Amendment No. 2 to the Credit Agreement, which amended the ABL Revolver to adjust certain monthly document delivery terms and to clarify the treatment of certain inventory. Borrowings under the amended ABL Revolver bear interest at a rate per annum equal to the applicable term SOFR adjusted for a credit spread, plus an applicable interest rate margin. We may select a one, three or six month term SOFR, which is adjusted for a credit spread of 0.10% to 0.30% depending on the term selected. ThroughMarch 31, 2023 , the applicable interest rate margin ranges from 1.50% to 1.75% depending on the average excess availability of the facility for the most recently completed quarter. The unused portion of the ABL Revolver commitment accrues a monthly unused line fee, 0.50% per annum throughMarch 31, 2023 , times the aggregate amount of Revolver commitments less the average Revolver usage during the immediately preceding month. The interest rate margin and unused line fee percentage changes, effectiveApril 1, 2023 , to between 1.25% and 1.75% (interest rate margin) and 0.375% and 0.50% (unused commitment fee). Amounts borrowed and outstanding under the ABL Revolver are required to be repaid in full, together with any accrued and unpaid interest, on the earliest to occur ofMarch 15, 2026 and the date that is 90 days prior to the maturity of the Senior Notes (and may be subject to earlier mandatory prepayment upon certain events). The ABL Revolver includes limitations on our ability to borrow in certain situations, including limitations based on the calculation of a borrowing capacity and further limitations that are triggered if the amount available to borrow under the ABL Revolver is less than$7.5 million . The borrowing capacity represents the net availability under the ABL Revolver and is calculated as the lesser of a) the total of certain eligible assets, including cash, accounts receivable and inventories, further reduced by stated contribution percentages and adjustments or b) the$75.0 million of available borrowing capacity under the ABL Revolver ("Borrowing Base"). The Borrowing Base is further reduced by credit line reserves, letters of credit, as well as the loan ledger balance outstanding on the ABL Revolver. Additionally, commencing with the month immediately following a date on which borrowing capacity is below$7.5 million and until such time that borrowing capacity equals or exceeds$7.5 million for 30 consecutive days, we must maintain a fixed charge coverage ratio (as defined in the Credit Agreement for the ABL Revolver) greater than 1.00, calculated for the trailing 12 months in order to borrow under the ABL Revolver. 43
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OnMarch 15, 2021 , we completed a private offering of$310.0 million aggregate principal amount of the Senior Notes and related guarantees at an issue price of 100%. The Senior Notes bear interest at a rate of 8.625% per annum and mature onMarch 15, 2026 . Interest is payable on the Senior Notes onMarch 15 andSeptember 15 of each year. As permitted by the indenture governing the Senior Notes, the Company may from time to time repurchase some or all of the Senior Notes in open market transactions, in privately negotiated transactions or otherwise. Prior toMarch 15, 2023 , the Company may also redeem some or all of the Senior Notes at a "make-whole" redemption price, and on or afterMarch 15, 2023 , the Company may redeem some or all of the Senior Notes at a redemption price initially set at 104.313% of the principal amount of the notes to be redeemed, and reducing over time to 100%, in each case plus accrued and unpaid interest. Additionally, prior toMarch 15, 2023 , the Company may redeem, on one or more occasions, up to 40% of the aggregate principal amount of the Senior Notes with the proceeds of certain equity offerings, at a redemption price equal to 108.625% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. Furthermore, prior toMarch 15, 2023 , but not more than once during each consecutive twelve-month period, the Company may also redeem up to 10% of the aggregate principal amount of the Senior Notes at a redemption price equal to 103% of the principal amount of the notes being redeemed, plus accrued and unpaid interest. The timing and amount of any such redemptions or repurchases will depend upon market conditions, contractual commitments, the Company's capital needs and other factors. The Company has obligations to make an offer to repay the Senior Notes, requiring prepayment in advance of the maturity date, upon the occurrence of certain events including a change of control, certain asset sales and based on an annual excess cash flow calculation. The annual excess cash flow calculation is determined pursuant to the terms of the related indenture, with any required payments to be made after the issuance of the Company's annual financial statements. No such payment was required based on the Company's 2022 operating results. OnMarch 11, 2022 , we used the available borrowing capacity under the ABL Revolver to fund the redemption of$20.0 million aggregate principal amount of the Senior Notes at a redemption price equal to 103% of the principal amount thereof plus accrued and unpaid interest thereon to the redemption date. OnDecember 28, 2022 the Company used cash on hand to fund the purchase of$5.0 million aggregate principal amount of the Senior Notes at a purchase price equal to 98.75% of the principal amount thereof plus accrued and unpaid interest thereon to the purchase date.
Aus
In connection with the issuance of the Senior Notes and entry into the ABL Revolver, we terminated our previous Senior Credit Facility and previous First Lien Term Loan. Net proceeds from the Senior Notes, together with cash on hand and initial borrowings of$15.0 million under the ABL Revolver, were used to pay in full and terminate the Senior Credit Facility and First Lien Term Loan onMarch 15, 2021 , and to pay related fees and expenses. During the three months endedMarch 31, 2021 , prior to the termination of the First Lien Term Loan, we paid an excess free cash flow balance of$7.8 million pursuant to the terms of the Senior Credit Facility and the First Lien Term Loan.
operative Tätigkeiten
Cash provided by operating activities for the year endedDecember 31, 2022 was$31.3 million compared to cash provided by operating activities of$20.2 million for the year endedDecember 31, 2021 . Cash generated from earnings for the year endedDecember 31, 2022 was partially offset by working capital increases, including an increase in accounts receivable of$19.7 million due to higher net sales and an increase in inventories of$10.7 million to help mitigate supply-chain constraints. Cash provided by operating activities during the year endedDecember 31, 2021 benefited from the collection of$9.8 million of income tax refunds. Investing Activities
Cash used in investing activities for the year endedDecember 31, 2022 was$17.8 million , compared to$9.9 million during the year endedDecember 31, 2021 . Cash used in investing activities was related primarily to capital expenditures, including investments to support the business, such as machinery and information technology equipment. 44 Table of Contents
As presented in our supplemental disclosures of non-cash information on the statement of cash flows, finance leases were executed for the acquisition of right-of-use machinery and equipment assets totaling$9.1 million during the year endedDecember 31, 2022 , compared to$1.9 million during the year endedDecember 31, 2021 . Financing Activities
During the year endedDecember 31, 2022 , cash used in financing activities was$23.2 million . We retired$24.9 million aggregate principal amount of Senior Notes in 2022, net of discount, paid$3.4 million of principal on financing leases, and received$2.1 million under financing leases during the year endedDecember 31, 2022 . Net proceeds from the ABL Revolver were$5.0 million . We also paid$0.9 million in debt related costs. During the year endedDecember 31, 2021 , cash used in financing activities was$47.2 million . Proceeds from the Senior Notes and ABL Revolver, net of discount, were$310.0 million and$14.8 million , respectively. We paid$9.5 million of debt issuance costs and$2.7 million of debt extinguishment costs, which included an early termination "make-whole" interest premium of$2.6 million on the Senior Credit Facility. We used proceeds from the Senior Notes and initial borrowings under the ABL Revolver, plus cash on hand, to pay in full and terminate the Senior Credit Facility balance of$30.0 million and the First Lien Term Loan balance of$304.7 million onMarch 15, 2021 . Prior to the termination of the First Lien Term Loan, we paid an excess free cash flow balance of$7.8 million pursuant to the terms of the Senior Credit Facility and First Lien Term Loan. We paid$2.2 million of principal on financing leases during the year endedDecember 31, 2021 . During the second quarter of 2021, we used$15.0 million of cash on hand to pay down the ABL Revolver to zero and had no borrowings outstanding thereunder
as ofDecember 31, 2021 . Working Capital
Our working capital as ofDecember 31, 2022 was$99.6 million , compared to$80.9 million as ofDecember 31, 2021 . The increase in our working capital during the year endedDecember 31, 2022 was primarily due to an increase in accounts receivable of$19.6 million and increased inventories of$10.4 million , partially offset by a decrease in cash of$9.6 million as described above. Our working capital needs are typically highest in the first and third quarters due to the timing of payments for employee incentives and interest on outstanding borrowings. The majority of our interest payments are due in the first and
third quarters. Material Cash Requirements Our material cash requirements include interest payments on our long-term debt, operating and finance lease payments, and purchase obligations to support our operations. Debt Service Requirements As ofDecember 31, 2022 , the total projected principal and interest payments on our borrowings were$377.4 million , primarily related to the Senior Notes, of which$25.2 million of interest is expected to be paid in the next 12 months. The remaining interest payments are expected to be paid over the remaining term of the Senior Notes, which mature in 2026, and the principal is due upon maturity. We have estimated our future interest payments assuming no additional borrowings under the ABL Revolver, no early redemptions of principal on the Senior Notes, no early voluntary or required repayment of the borrowings under the ABL Revolver within the next twelve months, and no debt issuances or renewals upon the maturity dates of our notes. However, we may borrow additional amounts under the ABL Revolver, redeem principal on the Senior Notes early or refinance all or a portion of our borrowings in future periods.
Mieten
We lease real property for production and services, in addition to equipment.
Refer to Part II, Item 8, Financial Statements and Supplemental Data, Note 9,
"Financing and Operating Leases" for details on our leasing arrangements,
including future maturities of our operating lease liabilities.
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Purchase Obligations
A purchase obligation is an agreement to purchase goods or services that is enforceable, legally binding, and specifies all significant terms. As ofDecember 31, 2022 , we had approximately$221.7 million of outstanding purchase obligations, of which approximately$94.9 million is expected to be paid in the next 12 months. Included in the above amounts, during 2022, the Company entered into a capacity reservation agreement with one of the Company's chip suppliers to reserve production supply capacity due to the current global supply shortage environment. Under the agreement, we agreed to pay certain fees in exchange for the supplier's commitment to reserve capacity to produce a set quantity of chips from 2023 through 2025, subject to certain conditions, and the Company has committed to purchase those chips. The total value of the minimum non-cancellable commitment is$194.9 million over the term of the agreement,$69.6 million of which is expected to be paid in the next 12 months. In the event that the supplier is unable to deliver the specified quantity of chips, it will be subject to liquidated damages of 10% of the price of any non-delivered products.
Die zyklische und saisonale Natur des Geschäfts
Financial Payment Cards are generally influenced by broader cyclical changes in the economy, with economic downturns potentially resulting in decreases in the demand for our products and services and economic upturns potentially resulting in increases in demand. In particular, prolonged economic downturns typically have resulted in significant reductions in the demand for general purpose credit cards due to tightening credit conditions. Our net sales are also influenced by changes in customer behavior such as altering inventory management practices, Financial Payment Card renewal cycles and demand for new products, such as contactless cards. Additionally, we historically have generated higher net sales in the third and fourth quarters of the year, as our sales of Prepaid Debit Card solutions are more heavily weighted toward the second half of the year when consumers tend to purchase more of these products and services in anticipation of the holiday season inthe United States and timing related to the production of health insurance and health savings account cards.
wesentliche Bilanzierungsgrundsätze und Schätzungen
Our management's discussion and analysis of financial condition and results of operations is based on our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted inthe United States of America . In preparing our financial statements, we make estimates, assumptions and judgments that can have a significant impact on our reported net sales, results of operations and net income, as well as on the value of certain assets and liabilities on our balance sheet during and as of the reporting periods. These estimates, assumptions and judgments are necessary because future events and their effects on our results and the value of our assets cannot be determined with certainty and are made based on our historical experience and on other assumptions that we believe to be reasonable under the circumstances. These estimates may change as new events occur or additional information is obtained, and we may periodically be faced with uncertainties, the outcomes of which are not within our control and may not be known for a prolonged period of time. Because the use of estimates is inherent in the financial reporting process, actual results could differ from those estimates.
Einnahmen prüfen
ProductsNet Sales : "Products" net sales are recognized when obligations under the terms of a contract with a customer are satisfied. In most instances, this occurs over time as cards are produced for specific customers and have no alternative use and the Company has an enforceable right to payment for work performed. For work performed but not completed and unbilled, we estimate net sales by taking actual costs incurred and applying historical margins for similar types of contracts. Margins across each business with similar contracts have been relatively consistent and we have not made changes to our methods and assumptions during 2022. Items included in "Products" net sales are produced Financial Payment Cards, including contact-EMV, contactless EMV, Second Wave, contactless and magnetic stripe cards, private label credit cards and retail gift cards. Card@Once printers and consumables are also included in "Products" net sales, and their associated revenues are recognized at the time of shipping. ServicesNet Sales : Net sales are recognized for "Services" as the services are performed. Items included in "Services" net sales include the personalization and fulfillment of Financial Payment Cards, providing tamper-evident secure packaging and fulfillment services to Prepaid Debit Card program managers, and SaaS personalization of instant 46
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Ausgabe von Debit- und Kreditkarten. Für abgeschlossene, aber unvollständige und angeforderte Arbeiten schätzen wir die Einnahmen, indem wir die tatsächlich angefallenen Kosten nehmen und historische Margen für ähnliche Arten von Verträgen anwenden. Die Margen aller Unternehmen mit vergleichbaren Verträgen waren relativ konstant und wir haben bis 2022 keine Änderungen an unseren Methoden und Annahmen vorgenommen.
Customer Contracts: The Company often enters into Master Services Agreements
("MSAs") with its customers. Generally, enforceable rights and obligations for
goods and services occur only when a customer places a purchase order or
statement of work to obtain goods or services under an MSA. Usually our
contractual arrangements include neither exclusivity clauses nor commitments
from our customers to order any given quantities of products on a medium or
long-term basis. The contract term as defined by ASC 606, Revenue from Contracts
with Customers, is the length of time it takes to deliver the goods or services
promised under the purchase order or statement of work. As such, the Company's
contracts are generally considered short term in nature.
Einkommenssteuer
We are subject to income taxes inthe United States and certain foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision 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. Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. The determination of the amount of valuation allowance to be provided on recorded deferred tax assets involves consideration of estimates regarding the timing and amount of the reversal of taxable temporary differences, expected future taxable income, and the impact of tax planning strategies. Changes in the relevant facts can significantly impact the judgment or need for valuation allowances. In the event we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. The company is required to make estimates regarding future compensation for covered individuals to determine the value of its deferred tax asset related to the future deductibility of executive stock compensation which also requires significant judgment. We also establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. The reserves are established when we believe that certain positions are likely to be challenged and may not be fully sustained on review by tax authorities. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or refinement of an estimate. Although we believe our reserves are reasonable, no assurance can be given that the final outcome of these matters will be consistent with what is reflected in our historical income tax provisions and accruals. To the extent that the final tax outcome of these matters is different from the amounts recorded, such differences will impact the current provision for income taxes. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. The Company's valuation allowance recorded as ofDecember 31, 2022 relates primarily to a capital loss realized on the sale of a foreign subsidiary whereby the Company does not anticipate a capital gain in the foreseeable future that would allow for the recognition of the capital loss carryover. In addition, the Company has a partial valuation allowance on certain state interest deduction limitations, which the Company estimates may not be fully utilized. Additionally, other changes to the federal and state tax regulations can lead to variability in allowable deductions, which can impact the Company's valuation allowance.
Moderne Bilanzen
Siehe Teil II, Punkt 8, Jahresabschluss und ergänzende Aufstellungen, Anmerkung 2, „Zusammenfassung der wesentlichen Bilanzierungsgrundsätze“ für eine Erörterung der jüngsten Rechnungslegungsverlautbarungen.
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