17. Segment Reporting

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

EBITDA is the primary measure used by the Company’s chief operating decision maker to evaluate segment operating performance. As the Company uses the term, EBITDA is defined as income before interest expense, income taxes, depreciation and amortization. The Company’s chief operating decision maker believes EBITDA is a meaningful measure and is superior to available GAAP measures as it represents a transparent view of the Company’s operating performance that is unaffected by fluctuations in property, equipment and leasehold improvement additions. The Company’s chief operating decision maker uses EBITDA to perform periodic reviews and comparison of operating trends and identify strategies to improve the allocation of resources amongst segments.

On August 3, 2018, the Company completed the sale of the U.K. Limited segment. See Note 4 “Discontinued Operation” for further information. The Company has restated all historical periods presented within these financial statements and has not included U.K. Limited as a reportable segment.

As of December 31, 2019, the Company’s reportable segments were as follows:

U.S. Debit and Credit,

U.S. Prepaid Debit, and

Other.

U.S. Debit and Credit Segment

The U.S. Debit and Credit segment primarily produces Financial Payment Cards and provides integrated card services to card-issuing banks in the United States. Products manufactured by this segment primarily include EMV and non-EMV Financial Payment Cards, including contact, contactless, and dual-interface cards, CPI MetalsTM, a premium metal card and Second WaveTM payment cards featuring a core made with recovered ocean-bound plastic. The Company also sells instant card issuance solutions, and Private Label Credit Cards that are not issued on the networks of the Payment Cards Brands. The Company provides CPI On-Demand services, where images, personalized payment cards, and related collateral are produced on a one-by-one, on demand basis for customers. This segment also provides a variety of integrated card services, including card personalization and fulfillment services and instant issuance services. The U.S. Debit and Credit segment operations are each audited for compliance by multiple Payment Card Brands. Many of the Company’s customers require CPI to comply with the standards of the PCI Security Standards Council.

U.S. Prepaid Debit Segment

The U.S. Prepaid Debit segment primarily provides integrated card services to Prepaid Debit Card providers in the United States, including tamper-evident security packaging. This segment also produces Financial Payment Cards issued on the networks of the Payment Card Brands that are included in the tamper-evident security packages. The U.S. Prepaid Debit segment operation is audited for compliance by multiple Payment Card Brands. Many of the Company’s customers require CPI to comply with the standards of the PCI Security Standards Council.

Other

The Other segment includes corporate expenses and a less significant operation that generated sales from the production of Financial Payment Cards and retail gift cards, and card personalization and fulfillment services in Canada, prior to its sale. The sale agreement did not include the portions of the business relating to Financial Payment Cards, as those business customers of the Canadian subsidiary migrated to the Company’s operations in the U.S. or to other service providers in 2019.

Performance Measures of Reportable Segments

Net sales and EBITDA from continuing operations of the Company’s reportable segments for the years ended December 31, 2019 and 2018 were as follows:


	Net Sales				EBITDA
	December 31,				December 31,
	2019		2018		2019		2018
U.S. Debit and Credit	$	213,141	$	178,597	$	46,227	$	34,213
U.S. Prepaid Debit		64,330		69,199		22,456		23,782
Other		1,679		9,891		(27,468)		(35,297)
Intersegment eliminations(a)		(1,077)		(1,873)		—		—
Total:	$	278,073	$	255,814	$	41,215	$	22,698

^(a)

Amounts include the elimination of sales between segments for consolidation.

The following table provides a reconciliation of total segment EBITDA from continuing operations to “Net loss from continuing operations” for the years ended December 31, 2019 and 2018:


	December 31,
	2019		2018
Total segment EBITDA from continuing operations	$	41,215	$	22,698
Interest, net		(24,891)		(23,431)
Income tax benefit (expense)		(3,652)		4,339
Depreciation and amortization		(17,002)		(18,405)
Net loss from continuing operations	$	(4,330)	$	(14,799)

Balance Sheet Data of Reportable Segments

Total assets of the Company’s reportable segments as of December 31, 2019 and 2018 were as follows:


	December 31,
	2019		2018
U.S. Debit and Credit	$	176,496	$	169,567
U.S. Prepaid Debit		25,259		25,117
Other		11,732		12,520
Total assets	$	213,487	$	207,204

Net Sales to Geographic Location; Property, Equipment and Leasehold Improvements and Long-Lived assets by Geographic Segments

Subsequent to the sale of the Company’s U.K. Limited segment and reclassification to discontinued operations, and the sale of the Company’s Canada operations on April 1, 2019, the Company’s Net Sales, Property, Equipment and Leasehold Improvements, and Long-Lived assets relating to geographic locations outside of the United States is insignificant.

Net Sales by Product and Services

Net sales from products and services sold by the Company for the years ended December 31, 2019 and 2018 were as follows:


	December 31,
	2019		2018
Product net sales(a)	$	143,941	$	125,069
Services net sales(b)		134,132		130,745
Total net sales:	$	278,073	$	255,814

^(a)

“Products” net sales include the design and production of Financial Payment Cards in contact-EMV, Dual-Interface EMV, metal, contactless and magnetic stripe card formats. The Company also generates “Products” revenue from the sale of Card@Once printers and consumables, 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 “Services” revenue from usage 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. “Services” revenue is also generated from personalizing retail gift cards, historically generated in Canada prior to the disposition.