18. 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 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, 2016, 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 operations 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 operation is certified by multiple global Payment Card Brands, and is certified to be in compliance with the standards of the PCI Security Standards Council.

The 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 operations are not certified by the Payment Card Brands, nor are they PCI certified, but are certified to be in compliance with ISO 27001 standards.

The “Other” category includes the Company’s corporate activities 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, 2016, 2015 and 2014 were as follows:


	Revenue						EBITDA
	December 31,						December 31,
	2016		2015		2014		2016		2015		2014
U.S. Debit and Credit(a)	$	208,795	$	263,668	$	153,015	$	52,090	$	78,981	$	37,547
U.S. Prepaid Debit		60,065		65,878		59,271		18,646		22,993		18,654
U.K Limited		29,689		34,361		35,163		2,839		3,572		2,943
Other		13,110		17,420		23,908		(28,063)		(22,145)		(12,121)
Intersegment eliminations(b)		(2,959)		(7,217)		(10,351)		—		—		—
Total:	$	308,700	$	374,110	$	261,006	$	45,512	$	83,401	$	47,023

^(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 segments 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, 2016, 2015 and 2014:


	December 31,
	2016		2015		2014
Total segment EBITDA from continuing operations	$	45,512	$	83,401	$	47,023
Interest, net		(20,044)		(18,328)		(7,508)
Income tax expense		(3,142)		(17,846)		(10,291)
Depreciation and amortization		(16,927)		(15,966)		(13,252)
Net Income from continuing operations	$	5,399	$	31,261	$	15,972

Balance Sheet Data of Reportable Segments

Total assets of the Company’s reportable segments as of December 31, 2016 and 2015 were as follows:


	December 31,
	2016		2015
U.S. Debit and Credit	$	205,417	$	221,274
U.S. Prepaid Debit		23,509		20,960
U.K. Limited		26,060		25,897
Other		9,434		12,222
Total assets:	$	264,420	$	280,353

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, 2016, 2015 and 2014 were as follows:


	December 31,
	2016		2015		2014
U.S.	$	13,169	$	19,129	$	15,082
Canada		263		275		32
Total North America		13,432		19,404		15,114
U.K.		1,447		659		454
Total plant, equipment and leasehold improvement additions	$	14,879	$	20,063	$	15,568

Net Sales of Geographic Locations

Net sales of the Company’s geographic locations for the years ended December 31, 2016, 2015 and 2014 were as follows:


	December 31,
	2016		2015		2014
U.S.(a)	$	262,544	$	316,111	$	196,418
Canada		11,998		12,541		16,133
Total North America		274,542		328,652		212,551
U.K.		25,705		36,954		36,682
Other(b)		8,453		8,504		11,773
Total revenue	$	308,700	$	374,110	$	261,006

^(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 Company’s geographic segments as of December 31, 2016 and 2015 were as follows:


	December 31,
	2016		2015
U.S.	$	157,773	$	164,377
Canada		2,899		2,254
Total North America:		160,672		166,631
U.K.		11,091		12,593
Total long-lived assets	$	171,763	$	179,224

Net Sales by Product and Services

Net sales from products and services sold by the Company for the years ended December 31, 2016, 2015 and 2014 were as follows:


	December 31,
	2016		2015		2014
Product net sales(a)	$	168,510	$	241,609	$	159,220
Services net sales(b)		140,190		132,501		101,786
Total net sales:	$	308,700	$	374,110	$	261,006

^(a)

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

^(b)

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