What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-08-08 · 66 added, 58 removed, 401 unchanged (24% of the section changed)

4 unchanged sentences

(in thousands, except share and per share amounts)

September 30,

Current assets:

19 unchanged sentences

$ 0.001 par value— 100,000 shares authorized;

0 shares issued and outstanding at June 30, 2023 and December 31, 2022

0 shares issued and outstanding at September 30, 2023 and December 31, 2022

Stockholders’ deficit:

1 unchanged sentence

$ 0.001 par value— 100,000,000 shares authorized;

11,430,245 and 11,390,355 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

11,453,549 and 11,390,355 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Capital deficiency

7 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Total net sales

27 unchanged sentences

(in thousands, except per share amounts)

March 31, 2023

June 30, 2023

Shares issued under stock-based compensation plans

1 unchanged sentence

Components of comprehensive income:

June 30, 2023

September 30, 2023

December 31, 2022

2 unchanged sentences

Components of comprehensive income:

September 30, 2023

June 30, 2022

earnings (loss)

March 31, 2022

Shares issued under stock-based compensation plans

1 unchanged sentence

Components of comprehensive income:

June 30, 2022

September 30, 2022

earnings (loss)

3 unchanged sentences

Components of comprehensive income:

June 30, 2022

September 30, 2022

See accompanying notes to condensed consolidated financial statements

3 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation expense

11 unchanged sentences

Deferred revenue and customer deposits

Cash provided by (used in) operating activities

Cash provided by operating activities

Investing activities

Capital expenditures for plant, equipment and leasehold improvements

Capital expenditures for plant, equipment and leasehold improvements, net

Cash used in investing activities

8 unchanged sentences

Effect of exchange rates on cash

Net increase (decrease) in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

43 unchanged sentences

The Company disaggregates its net sales by major source as follows:

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

(dollars in thousands)

2 unchanged sentences

Intersegment eliminations

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

(dollars in thousands)

2 unchanged sentences

Intersegment eliminations

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

(dollars in thousands)

2 unchanged sentences

Intersegment eliminations

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

(dollars in thousands)

23 unchanged sentences

Accounts receivable consisted of the following:

September 30,

(dollars in thousands)

3 unchanged sentences

Inventories consisted of the following:

September 30,

(dollars in thousands)

4 unchanged sentences

Plant, equipment, leasehold improvements and operating lease right-of-use assets consisted of the following:

September 30,

(dollars in thousands)

15 unchanged sentences

Fair Value as of

Fair Value Measurement at June 30, 2023

Fair Value Measurement at September 30, 2023

September 30,

(Using Fair Value Hierarchy)

5 unchanged sentences

The aggregate fair value of the Company’s Senior Notes (as defined in Note 8, “Long-Term Debt”) was based on bank quotes.

The fair value measurement associated with the ABL Revolver (as defined in Note 8, “Long-Term Debt”) approximates its carrying value as of June 30, 2023, given the applicable variable interest rates and nature of the security interest in Company assets.

The fair value measurement associated with the ABL Revolver (as defined in Note 8, “Long-Term Debt”) approximates its carrying value as of September 30, 2023, given the applicable variable interest rates and nature of the security interest in Company assets.

The carrying amounts for cash and cash equivalents, accounts receivable and accounts payable each approximate fair value due to their short-term nature.

1 unchanged sentence

Accrued expenses consisted of the following:

September 30,

(dollars in thousands)

7 unchanged sentences

Total accrued expenses

Other accrued expenses as of June 30, 2023, and December 31, 2022, consisted primarily of miscellaneous accruals for invoices not yet received, self-insurance claims that have yet to be reported, and accrued royalties.

Other accrued expenses as of September 30, 2023, and December 31, 2022, consisted primarily of miscellaneous accruals for invoices not yet received, self-insurance claims that have yet to be reported, and accrued property taxes.

Long-Term Debt

As of June 30, 2023, and December 31, 2022, long-term debt consisted of the following:

As of September 30, 2023, and December 31, 2022, long-term debt consisted of the following:

September 30,

(dollars in thousands)

11 unchanged sentences

No such payment is required to be made in 2023 based on the Company’s operating results for the year ended December 31, 2022.

During the six months ended June 30, 2023, the Company used cash on hand and available borrowing capacity under the ABL Revolver (defined below) to retire a portion of the Senior Notes totaling $ 15.0 million of the principal amount thereof plus accrued and unpaid interest thereon to the retirement dates.

During the nine months ended September 30, 2023, the Company used cash on hand and available borrowing capacity under the ABL Revolver (defined below) to retire a portion of the Senior Notes totaling $ 17.1 million of the principal amount thereof plus accrued and unpaid interest thereon to the retirement dates.

On March 15, 2021, the Company and CPI CG Inc., as borrower, entered into a Credit Agreement with Wells Fargo Bank, National Association, as lender, administrative agent and collateral agent, providing for an asset-based, senior secured revolving credit facility of up to $ 50.0 million (the “ABL Revolver”).

15 unchanged sentences

These costs are amortized as an adjustment to interest expense over the life of the borrowing using the effective-interest rate method.

The remaining unamortized debt issuance costs recorded on the Senior Notes were $ 3.6 million and are reported as a reduction to the long-term debt balance as of June 30, 2023.

The remaining unamortized net discount and debt issuance costs on the ABL Revolver and related Amendment were $ 1.3 million and are recorded as other assets (current and long-term) on the condensed consolidated balance sheet as of June 30, 2023.

The Company’s effective tax rate on pre-tax income was 38.9 % and 22.1 % for the three months ended June 30, 2023, and 2022, respectively, and 28.6 % and 31.0 % for the six months ended June 30, 2023, and 2022, respectively.

The increase in the effective tax rate for the three months ended June 30, 2023, was primarily due to tax deduction limitations on executive compensation.

The decrease in the effective tax rate for the six months ended June 30, 2023, was a result of increased deductibility of interest costs due to a tax election made by the Company in the third quarter of 2022 and the reduction of a valuation allowance in the first quarter of 2023 related to a state tax law change.

For the six months ended June 30, 2023, and 2022, the effective tax rate differs from the U.S.

The remaining unamortized debt issuance costs recorded on the Senior Notes were $ 3.2 million and are reported as a reduction to the long-term debt balance as of September 30, 2023.

The remaining unamortized net discount and debt issuance costs on the ABL Revolver and related Amendment were $ 1.1 million and are recorded as other assets (current and long-term) on the condensed consolidated balance sheet as of September 30, 2023.

The Company’s effective tax rate on pre-tax income was 37.7 % and 25.8 % for the three months ended September 30, 2023, and 2022, respectively, and 30.5 % and 28.5 % for the nine months ended September 30, 2023, and 2022, respectively.

The increase in the effective tax rate for the three and nine months ended September 30, 2023, was due to tax deduction limitations on executive compensation.

The effective tax rate for the three months ended September 30, 2023, also increased due to the reduction of the federal valuation allowance recorded in the third quarter of 2022 as a result of increased deductibility of interest costs due to a tax election made by the Company in the third quarter of 2022.

For the nine months ended September 30, 2023, and 2022, the effective tax rate differs from the U.S.

federal statutory income tax rate as follows:

September 30,

Tax at federal statutory rate

6 unchanged sentences

Basic and diluted earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period.

Shares excluded from the calculation of diluted earnings per share because their inclusion would be anti-dilutive were 105,884 and 14,732 for the three months ended June 30, 2023, and 2022, respectively, and 132,594 and 40,874 for the six months ended June 30, 2023, and 2022, respectively.

Shares excluded from the calculation of diluted earnings per share because their inclusion would be anti-dilutive were 160,384 and 5,425 for the three months ended September 30, 2023, and 2022, respectively, and 210,457 and 12,841 for the nine months ended September 30, 2023, and 2022, respectively.

The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

27 unchanged sentences

As a result, the Delaware District Court stayed the case pending resolution of the requests for review.

The United States Patent Office has instituted proceedings with respect to all of the IPR requests and two of the patents have been invalidated in the IPR proceedings and two remain under review.

The remaining proceedings in the patent office are scheduled to run through September 2023.

Should any of the patents survive review by the United States Patent Office, the Company intends to defend the suit vigorously.

The United States Patent Office has instituted proceedings with respect to all of the IPR requests and three of the patents have been invalidated in the IPR proceedings and one remains under review.

The remaining proceedings in the patent office are scheduled to run through November 2023.

Should the remaining patent survive review by the United States Patent Office, the Company intends to defend the suit

However, no assurance can be given that this matter will be resolved favorably.

Due to the stage of this

matter, the Company is unable to predict the outcome or the possible loss or range of loss, if any, associated with this matter, and no liability has been recorded as of June 30, 2023.

Due to the stage of this matter, the Company is unable to predict the outcome or the possible loss or range of loss, if any, associated with this matter, and no liability has been recorded as of September 30, 2023.

In addition to the matter described above, the Company may be subject to routine legal proceedings in the ordinary course of business.

10 unchanged sentences

Omnibus Incentive Plan (the “Omnibus Plan”) pursuant to which cash and equity-based incentives may be granted to participating employees, consultants, and directors.

On May 27, 2021, the Company’s stockholders approved an amendment and restate of the Omnibus Plan, to among other things, increase the total number of shares of the Company’s Common Stock reserved and available for issuance, resulting in a total of 2,200,000 shares of Common Stock issuable under the Omnibus Plan.

On May 27, 2021, the Company’s stockholders approved an amendment and restatement of the Omnibus Plan, to among other things, increase the total number of shares of the Company’s Common Stock reserved and available for issuance, resulting in a total of 2,200,000 shares of Common Stock issuable under the Omnibus Plan.

Beginning in the first quarter of 2023, the Company’s employees that participate in the Company’s long-term incentive program will receive a quarterly grant comprising one-fourth of the annual equity-based incentive component of their total compensation.

Executive awards will be awarded as a mix of restricted stock units and nonqualified stock options, and other employee awards will be comprised solely of restricted stock units.

Executive awards will consist of a mix of restricted stock units and nonqualified stock options, and other employee awards will be comprised solely of restricted stock units.

The number of shares awarded will be determined based on the grant-date fair value for nonqualified stock options and on a value tied to the monthly average closing price of the Company’s common stock for restricted stock units.

In June 2023, the Company implemented an additional long-term incentive program under the Omnibus Plan, independent of the quarterly awards described above, designed to retain and incentivize executive officers and certain key employees, excluding the Company’s President and Chief Executive Officer (“CEO”), comprised of restricted stock units.

The first tranche was awarded in June 2023 and additional tranches will be awarded in August 2023 and November 2023, subject to continued employment on those dates.

The first tranche was awarded in June 2023 and the second tranche was awarded in August 2023.

The third and final tranche will be awarded in November 2023, subject to continued employment at that date.

The awards vest ratably over a three-year period, subject to continued employment.

In June 2023, the Company also announced an award comprised of 25 % nonqualified stock options and 75 % restricted stock units to its CEO as an incentive to remain employed by the Company through February 28, 2024.

The first one-third of the awards was granted in June 2023 with another one-third to be granted in August 2023 and the remainder in November 2023.

The first one-third of the awards was granted in June 2023, the second one-third was granted in August 2023, and the remainder will be granted in November 2023.

All of these awards will vest ratably over a two-year period irrespective of employment status with expense related to these awards to be recognized by the Company through February 28, 2024.

As part of the CEO’s incentive package, the requisite service and exercise periods for all of his outstanding awards granted prior to June 2023 were also modified with expense related to the modification being recognized in June 2023 through February 2024.

As part of the CEO’s incentive package, the requisite service and exercise periods for his awards granted in 2023 prior to June 2023 were also modified with expense related to the modification being recognized in June 2023 through February 2024.

All equity awards are contingent and issued only upon approval by the compensation committee of the Company’s board of directors, or as otherwise permitted under the Omnibus Plan.

1 unchanged sentence

All stock-based compensation is measured at fair value and expensed on a straight-line basis over the requisite service period for each tranche of the award.

During the six months ended June 30, 2023, the Company granted 49,929 options at a weighted average exercise price of $ 27.73 .

As of June 30, 2023, there were 823,108 options outstanding at a weighted average exercise price of $ 18.73 .

During the six months ended June 30, 2023, the Company granted 219,381 restricted stock units at a weighted average grant date fair value of $ 26.50 , and as of June 30, 2023, there were 274,641 outstanding restricted stock units at a weighted average grant date fair value of $ 26.07 .

During the nine months ended September 30, 2023, the Company granted 92,655 options at a weighted average exercise price of $ 24.48 .

As of September 30, 2023, there were 865,834 options outstanding at a weighted average exercise price of $ 18.82 .

During the nine months ended September 30, 2023, the Company granted 429,655 restricted stock units at a weighted average grant date fair value of $ 23.65 , and as of September 30, 2023, there were 450,747 outstanding restricted stock units at a weighted average grant date fair value of $ 23.39 .

Segment Reporting

5 unchanged sentences

The Company’s chief operating decision maker uses EBITDA to perform periodic reviews and comparison of operating trends and to identify strategies to improve the allocation of resources amongst segments.

As of June 30, 2023, the Company’s reportable segments were as follows:

As of September 30, 2023, the Company’s reportable segments were as follows:

● Debit and Credit

13 unchanged sentences

Performance Measures of Reportable Segments

Net sales and EBITDA of the Company’s reportable segments, as well as a reconciliation of total segment EBITDA to income from operations and net income for the three and six months ended June 30, 2023 and 2022, were as follows:

Three Months Ended June 30, 2023

Net sales and EBITDA of the Company’s reportable segments, as well as a reconciliation of total segment EBITDA to income from operations and net income for the three and nine months ended September 30, 2023 and 2022, were as follows:

Three Months Ended September 30, 2023

Debit and Credit

8 unchanged sentences

Depreciation and amortization

Other income (expenses)

Six Months Ended June 30, 2023

Other expense, net

Nine Months Ended September 30, 2023

Debit and Credit

8 unchanged sentences

Depreciation and amortization

Other income (expenses)

Three Months Ended June 30, 2022

Other expense, net

Three Months Ended September 30, 2022

Debit and Credit

8 unchanged sentences

Depreciation and amortization

Other income (expenses)

Six Months Ended June 30, 2022

Other expense, net

Nine Months Ended September 30, 2022

Debit and Credit

8 unchanged sentences

Depreciation and amortization

Other income (expenses)

Three Months Ended June 30,

Six Months Ended June 30,

Other expense, net

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements