Segment Reporting

3 Months Ended

Mar. 31, 2017

Segment Reporting

Segment Reporting

12. 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 when the Company believes information about the segment would be useful to the readers of the financial statements. The Company’s chief operating decision maker is its Chief Executive Officer who is charged with management of the Company and is responsible for the evaluation of operating performance and decision making about the allocation of resources to operating segments based on measures such as 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 before interest expense, income taxes, depreciation and amortization. The Company’s chief operating decision maker believes EBITDA is a meaningful measure and is superior to available GAAP measures as it represents a transparent view of the Company’s operating performance that is unaffected by fluctuations in property, equipment and leasehold improvement additions. The Company’s chief operating decision maker uses EBITDA to perform periodic reviews and comparison of operating trends and identify strategies to improve the allocation of resources amongst segments.

As of March 31, 2017, the Company’s reportable segments are as follows:

· U.S. Debit and Credit;

· U.S. Prepaid Debit; and

· U.K. Limited.

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.

Performance Measures of Reportable Segments

Revenue and EBITDA of the Company’s reportable segments for the three months ended March 31, 2017 and 2016 were as follows:

	Revenue
	Three Months Ended March 31,
	2017		2016
U.S. Debit and Credit	$	39,508	$	65,091
U.S. Prepaid Debit		9,784		12,341
U.K. Limited		5,587		6,232
Other		2,503		3,142
Intersegment eliminations		(1,374)		(413)
Total:	$	56,008	$	86,393

	EBITDA
	Three Months Ended March 31,
	2017		2016
U.S. Debit and Credit	$	7,630	$	18,922
U.S. Prepaid Debit		1,785		3,267
U.K. Limited		325		219
Other		(6,942)		(4,734)
Total:	$	2,798	$	17,674

The following table provides a reconciliation of total segment EBITDA to net (loss) income for the three months ended March 31, 2017 and 2016:

	Three Months Ended
	March 31,
	2017		2016
Total segment EBITDA from continuing operations	$	2,798	$	17,674
Interest, net		(5,062)		(5,033)
Income tax benefit (expense)		2,291		(2,814)
Depreciation and amortization		(4,533)		(4,113)
Net (loss) income	$	(4,506)	$	5,714

Balance Sheet Data of Reportable Segments

Total assets of the Company’s reportable segments as of March 31, 2017 and December 31, 2016 were as follows:

	March 31, 2017		December 31, 2016
U.S. Debit and Credit	$	197,756	$	205,417
U.S. Prepaid Debit		24,638		23,509
U.K. Limited		28,431		26,060
Other		10,979		9,434
Total assets:	$	261,804	$	264,420

Plant, Equipment and Leasehold Improvement Additions of Geographic Locations

Plant, equipment and leasehold improvement additions of the Company’s geographical locations for the three months ended March 31, 2017 and 2016 were as follows:

	Three Months Ended
	March 31,
	2017		2016
U.S.	$	2,275	$	2,402
Canada		72		114
Total North America		2,347		2,516
U.K.		961		624
Total plant, equipment and leasehold improvement additions	$	3,308	$	3,140

Net Sales to Geographic Locations

Net sales to the Company’s geographic locations for the three months ended March 31, 2017 and 2016 were as follows:

	Three Months Ended
	March 31,
	2017		2016
U.S.	$	47,811	$	74,436
Canada		2,028		3,999
Total North America		49,839		78,435
U.K.		3,955		6,605
Other (a)		2,214		1,353
Total net sales	$	56,008	$	86,393

(a) 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 March 31, 2017 and December 31, 2016 were as follows:

	March 31, 2017		December 31, 2016
U.S.	$	155,798	$	157,773
Canada		2,903		2,899
Total North America:		158,701		160,672
U.K.		11,995		11,091
Total long-lived assets	$	170,696	$	171,763

Net Sales by Product and Services

Net sales from products and services sold by the Company for the three months ended March 31, 2017 and 2016 were as follows:

	Three Months Ended
	March 31,
	2017		2016
Product net sales (a)	$	29,764	$	54,958
Services net sales (b)		26,244		31,435
Total net sales:	$	56,008	$	86,393

(a) Product net sales include the design and production of Financial Payment Cards in contact-EMV, Dual-Interface EMV, contactless and magnetic stripe card 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, providing tamper-evident security packaging and fulfillment services to Prepaid Debit Card program managers, and software as a service personalization of instant issuance debit cards.  The Company also generates 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.