What changed in this filing

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Item 1. Financial Statements

2024-11-05 compared with 2024-08-05 · 118 added, 113 removed, 366 unchanged (39% 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, 2024 and December 31, 2023

0 shares issued and outstanding at September 30, 2024 and December 31, 2023

Stockholders’ deficit:

1 unchanged sentence

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

11,186,596 and 11,446,155 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

11,159,418 and 11,446,155 shares issued and outstanding at September 30, 2024 and December 31, 2023, 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

11 unchanged sentences

Interest, net

Loss on debt extinguishment

Other expense, net

1 unchanged sentence

Income before income taxes

Income tax expense

Income tax benefit (expense)

Basic and diluted earnings per share:

10 unchanged sentences

(in thousands, except per share amounts)

March 31, 2024

June 30, 2024

Shares issued under stock-based compensation plans

2 unchanged sentences

Components of comprehensive income:

June 30, 2024

September 30, 2024

December 31, 2023

3 unchanged sentences

Components of comprehensive income:

September 30, 2024

June 30, 2023

March 31, 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:

June 30, 2023

September 30, 2023

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

3 unchanged sentences

Stock-based compensation expense

Amortization of debt issuance costs and debt discount

Loss on debt extinguishment

Deferred income taxes

Amortization of debt issuance costs

Loss on early extinguishment of debt

Deferred income taxes and other, net

Changes in operating assets and liabilities:

11 unchanged sentences

Principal payments on 2026 Senior Notes

Proceeds from 2026 ABL Revolver

Proceeds from 2029 Senior Notes

Net proceeds from ABL Revolver

Payments on finance lease obligations

Common stock repurchased

Debt issuance costs

Payment for debt early redemption premium

Taxes withheld and paid on stock-based compensation awards

Cash used in financing activities

Effect of exchange rates on cash

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

8 unchanged sentences

Accounts payable and accrued expenses for capital expenditures for plant, equipment and leasehold improvements

Unsettled share repurchases included in accrued expenses

See accompanying notes to condensed consolidated financial statements

31 unchanged sentences

Adoption of this accounting standard is effective for the Company for fiscal years beginning after December 15, 2023.

The Company is evaluating the impact of adoption of this standard and does not anticipate that the application of ASU 2023-07 will have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

The application of ASU 2023-07 is not expected to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows .

In December 2023, the Financial Accounting Standards Board issued ASU 2023-09, Income Taxes (Topic 740):

3 unchanged sentences

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

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

Debit and Credit

1 unchanged sentence

Intersegment eliminations

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Debit and Credit

1 unchanged sentence

Intersegment eliminations

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Debit and Credit

1 unchanged sentence

Intersegment eliminations

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Debit and Credit

30 unchanged sentences

Accounts receivable consisted of the following:

September 30,

Trade accounts receivable

2 unchanged sentences

Inventories consisted of the following:

September 30,

Raw materials

3 unchanged sentences

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

September 30,

Machinery and equipment

14 unchanged sentences

Fair Value as of

Fair Value Measurement at June 30, 2024

Fair Value Measurement at September 30, 2024

September 30,

(Using Fair Value Hierarchy)

2029 Senior Notes

2026 ABL Revolver

Fair Value as of

2 unchanged sentences

2026 Senior Notes

2026 ABL Revolver

The aggregate fair value of the Company’s 2026 Senior Notes (as defined in Note 8, “Long-Term Debt”) was based on bank quotes.

The fair value measurement associated with the 2026 ABL Revolver (as defined in Note 8, “Long-Term Debt”) approximates its carrying value as of June 30, 2024, given the applicable variable interest rates.

The aggregate fair value of the Company’s 2029 Senior Notes and 2026 Senior Notes (each defined in Note 8, “Long-Term Debt”) was based on quoted prices for identical or similar liabilities in markets that are not active and, as a result, they are classified as Level 2 inputs.

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,

Accrued payroll and related employee expenses

Accrued employee performance bonuses

Accrued employee performance-based incentive compensation

Employer payroll taxes

5 unchanged sentences

Total accrued expenses

Other accrued expenses as of June 30, 2024, and December 31, 2023, consisted primarily of miscellaneous accruals for invoices not yet received, executive retention and severance, and self-insurance claims that have yet to be reported.

Other accrued expenses as of September 30, 2024, and December 31, 2023, consisted primarily of executive retention and severance, miscellaneous accruals for invoices not yet received, and self-insurance claims incurred but yet to be recorded.

Long-Term Debt

As of June 30, 2024, and December 31, 2023, long-term debt consisted of the following:

As of September 30, 2024, and December 31, 2023, long-term debt consisted of the following:

September 30,

2029 Senior Notes

2026 ABL Revolver (2)

2026 Senior Notes

Unamortized deferred financing costs

2 unchanged sentences

Long-term debt, net of current maturities

(1) The 2026 Senior Notes bear interest at a fixed rate of 8.625 % .

(2) The 2026 ABL Revolver bears interest at a variable rate of 6.679 % as of June 30, 2024.

2029 Senior Notes

On March 15, 2021, the Company completed an offering by its wholly-owned subsidiary, CPI CG Inc., of $ 310.0 million aggregate principal amount of 8.625 % Senior Secured Notes due 2026 (the “2026 Senior Notes”) and

related guarantees.

The 2026 Senior Notes bear interest at a rate of 8.625 % per annum and mature on March 15, 2026.

Interest is payable on the 2026 Senior Notes on March 15 and September 15 of each year.

The Company had obligations to make an offer to repay the 2026 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 that certain Indenture, dated as of March 15, 2021, by and among CPI CG Inc., the Company, the subsidiary guarantors and U.S.

Bank National Association, as trustee, with any required prepayments to be made after the issuance of the Company’s annual financial statements.

No such payment is required to be made in 2024 and was not required to be made in 2023 based on the Company’s operating results for the years ended December 31, 2023 and 2022, respectively.

Refer to Note 15, “Subsequent Events” for information on the refinancing of the 2026 Senior Notes that occurred in July 2024.

On July 11, 2024 (the “Closing Date”), the Company completed a private offering by its wholly-owned subsidiary, CPI CG Inc.

(the “Issuer”), of $ 285.0 million aggregate principal amount of 10.000 % Senior Secured Notes due 2029 (the “2029 Senior Notes”) and related guarantees at an issue price of 100 %.

The notes and related guarantees were offered and sold in a private transaction exempt from the registration requirements of the Securities Act of 1933, as amended, to persons reasonably believed to be qualified institutional buyers in accordance with Rule 144A under the Securities Act and outside the United States to certain non-U.S.

persons in compliance with Regulation S under the Securities Act.

Net proceeds from the 2029 Senior Notes, together with cash on hand, were used to redeem the entire principal balance of $ 267.9 million of 8.625 % Senior Secured Notes due 2026 (the “2026 Senior Notes”) as of the Closing Date, and to pay related fees, an early redemption premium of 2.156 %, and other expenses.

The early redemption premium paid is recorded in “Interest, net” on the condensed consolidated statement of operations and comprehensive income for the three and nine months ended September 30, 2024.

The 2029 Senior Notes mature on July 15, 2029.

Interest is payable on the 2029 Senior Notes on January 15 and July 15 of each year, beginning on January 15, 2025.

The 2029 Senior Notes are guaranteed by the Company and its domestic subsidiaries (other than the Issuer), and are secured by substantially all of the assets of the Issuer and the guarantors, subject to customary exceptions.

The Company may be required to make an offer to repurchase the 2029 Senior Notes, upon the occurrence of certain events including a change of control or certain asset sales.

The 2029 Senior Notes also require the Company to comply with certain covenants limiting the ability of the Company and the Company’s restricted subsidiaries to, among other things, incur or guarantee additional debt or issue disqualified stock or certain preferred stock;

create or incur liens;

pay dividends, redeem stock or make other distributions;

make certain investments;

create restrictions on the ability of our restricted subsidiaries to pay dividends to the Company or make other intercompany transfers;

transfer or sell assets;

merge or consolidate;

and enter into certain transactions with affiliates.

2029 ABL Revolver

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 (the “2026 ABL Revolver”).

The 2026 ABL Revolver matures on the earliest to occur of March 15, 2026 and the date that is 90 days prior to the maturity of the 2026 Senior Notes.

On March 3, 2022, the Company and CPI CG Inc.

entered into Amendment No.

1 to the Credit Agreement (the “Amendment”), which amended the 2026 ABL Revolver.

The Amendment, among other things, increased the available borrowing capacity under the 2026 ABL Revolver to $ 75.0 million, increased the uncommitted accordion feature to $ 25.0 million from $ 15.0 million, and revised the interest rate provisions to replace the prior LIBOR benchmark with updated benchmark provisions using the secured overnight financing rate (“SOFR”) as administered by the Federal Reserve Bank of New York.

On October 11, 2022, the Company and CPI CG Inc.

entered into Amendment No.

2 to the Credit Agreement, which amended the 2026 ABL Revolver to adjust certain monthly document delivery terms and to clarify the treatment of certain inventory.

Borrowings under the amended 2026 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.

The Company 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.

Through March 31, 2023, the applicable interest rate margin ranged 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 2026 ABL Revolver commitment accrued a monthly unused line fee, 0.50 % per annum through March 31, 2023, multiplied by 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 changed , effective April 1, 2023, to between 1.25 % and 1.75 % (interest rate margin) and 0.375 % and 0.50 % (unused line fee).

Refer to Note 15, “Subsequent Events” for information on the refinancing of the 2026 ABL Revolver that occurred in July 2024.

Deferred Financing Costs and Discount

Certain costs and discounts incurred with borrowings are reflected as a reduction to the long-term debt balance.

On the Closing Date, the Company and CPI CG Inc.

as borrower (the “Borrower”), entered into a credit agreement (the “ABL Credit Agreement”) with JPMorgan Chase Bank, N.A., as lender, administrative agent and collateral agent, providing for an asset-based, senior secured revolving credit facility (the “2029 ABL Revolver”) of up to $ 75.0 million (the “Maximum Revolver Amount”).

The 2029 ABL Revolver is guaranteed by the Company and its subsidiaries (other than certain excluded subsidiaries), and is secured by substantially all of the assets of the Company, the Borrower and the subsidiary guarantors, subject to customary exceptions.

The 2029 ABL Revolver consists of revolving loans, letters of credit and swing line loans provided by lenders, with a sublimit on letters of credit outstanding at any time of $ 10.0 million.

The 2029 ABL Revolver also includes an uncommitted accordion feature whereby the Borrower may increase the 2029 ABL Revolver commitment by an aggregate amount not to exceed $ 25.0 million, subject to certain conditions.

The 2029 ABL Revolver matures on the earliest to occur of July 11, 2029 and the date that is 91 days prior to the maturity of the 2029 Senior Notes.

As of the Closing Date, the Borrower had $ 4.0 million of outstanding borrowings under a prior Credit Agreement with Wells Fargo Bank, N.A.

entered into in March 2021 (the “2026 ABL Revolver”).

The Company used

initial borrowings under the 2029 ABL Revolver, together with cash on hand and proceeds under the notes, to repay in full and terminate the 2026 ABL Revolver and to pay related fees and expenses, and will use future borrowings for general corporate purposes.

Borrowings under the 2029 ABL Revolver bear interest at a rate per annum that ranges based on the applicable term secured overnight financing rate (“SOFR”) as administered by the Federal Reserve Bank of New York plus 1.50 % to 1.75 %, (subject, in each case, to a credit spread adjustment of 0.10 %) based on the average daily borrowing capacity under the 2029 ABL Revolver over the most recently completed month.

The unused portion of the 2029 ABL Revolver commitment accrues a commitment fee, which ranges from 0.375 % to 0.50 % per annum, based on the average daily excess availability under the 2029 ABL Revolver over the immediately preceding month.

The 2029 ABL Revolver includes limitations on the Borrower’s ability to borrow in certain situations, including limitations based on the calculation of borrowing capacity and further limitations that are triggered if the amount available to borrow under the ABL Revolver is less than the greater of $ 7.5 million and 10 % of the Maximum Revolver Amount.

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 (the “Borrowing Base”) and b) the Maximum Revolver Amount.

The Borrowing Base is further reduced by credit line reserves and 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 the greater of $ 7.5 million and 10 % of the Maximum Revolver Amount and until such time that borrowing capacity equals or exceeds the greater of $ 7.5 million and 10 % of the Maximum Revolver Amount for 30 consecutive days, the Company must maintain a fixed charge coverage ratio (as defined in the Credit Agreement for the ABL Revolver) of at least 1.00 to 1.00, calculated for the trailing 12 months, in order to borrow under the ABL Revolver.

The 2029 ABL Revolver contains covenants limiting the ability of the Company, the Borrower and the Company’s restricted subsidiaries to, among other things, incur or guarantee additional debt or issue disqualified stock or certain preferred stock;

create or incur liens;

pay dividends, redeem stock or make other distributions;

make certain investments;

create restrictions on the ability of the Borrower and its restricted subsidiaries to pay dividends to the Company or make other intercompany transfers;

transfer or sell assets;

merge or consolidate;

and enter into certain transactions with affiliates, subject to a number of important exceptions and qualifications as set forth in the respective agreements.

Deferred Financing Costs

Certain costs incurred with borrowings are reflected as a reduction to the long-term debt balance.

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 2026 Senior Notes were $ 2.2 million and are reported as a reduction to the long-term debt balance as of June 30, 2024.

The remaining unamortized net discount and debt issuance costs on the 2026 ABL Revolver and related Amendment were $ 0.8 million and are recorded as other assets (current and long-term) on the consolidated balance sheet as of June 30, 2024.

The Company’s effective tax rates on pre-tax income were 27.7 % and 38.9 % for the three months ended June 30, 2024 and 2023, respectively, and 28.2 % and 28.6 % for the six months ended June 30, 2024 and 2023, respectively.

The decrease in the effective tax rate for the three months ended June 30, 2024, compared to the corresponding period in the prior year was primarily due to limitation of executive compensation deductibility related to the former CEO’s retention agreement recognized in the second quarter of 2023.

The effective tax rate for the six months

ended June 30, 2024 was consistent with the rate in the comparable period in the prior year as the limitation of executive compensation deductibility recognized in the second quarter of 2023 was offset by a reduction in a valuation allowance related to interest deductibility due to a state tax law change recognized in the first quarter of 2023.

For the six months ended June 30, 2024 and 2023, the effective tax rate differs from the U.S.

As of September 30, 2024, the remaining unamortized debt issuance costs recorded on the 2029 Senior Notes were $ 4.8 million and are reported as a reduction to the long-term debt balance.

The remaining unamortized debt issuance costs on the 2029 ABL Revolver were $ 1.5 million and are recorded as other assets (current and long-term) on the consolidated balance sheet as of September 30, 2024.

During the three months ended September 30, 2024, the Company recorded a $ 3.0 million loss on debt extinguishment relating to the unamortized deferred financing costs in connection with the redemption of the 2026 Senior Notes and the termination of the 2026 ABL Revolver.

The Company’s effective tax rates on pre-tax income were ( 57.9 )% and 37.7 % for the three months ended September 30, 2024 and 2023, respectively, and 24.0 % and 30.5 % for the nine months ended September 30, 2024 and 2023, respectively.

The benefit recognized for the three months ended September 30, 2024 and the decrease in the effective tax rate for the nine months ended September 30, 2024 related to increased deductibility of stock compensation realized upon certain stock option exercises and restricted stock unit vesting.

The effective tax rate for the three and nine months ended September 30, 2023 was impacted by the limitation of executive compensation deductibility related to the former CEO’s retention agreement.

For the nine months ended September 30, 2024 and 2023, the effective tax rate differs from the U.S.

federal statutory income tax rate as follows:

September 30,

Tax at federal statutory rate

4 unchanged sentences

(1) Includes the deductibility limitations on excess compensation.

(2) The 2024 amount primarily relates to increased deductibility of stock compensation realized upon certain stock option exercises and restricted stock unit vesting.

Stockholders’ Deficit

2 unchanged sentences

This authorization expires on December 31, 2024.

During the six months ended June 30, 2024, the Company repurchased 352,750 shares of its common stock at an average price of $ 18.14 per share, excluding commissions, or $ 6.4 million in aggregate, on a trade date basis.

This amount includes 244,314 shares purchased from a stockholder that is part of our majority stockholder group at an average price of $ 18.03 per share, in accordance with the Stock Repurchase Agreements entered into with Tricor Pacific Capital Partners (Fund IV) US, LP (“Parallel49”).

As of June 30, 2024, the Company is obligated to repurchase an additional 120,534 shares at an average price of $ 18.23 per share from Parallel49.

This obligation is based on a multiple of the number of shares the Company purchased in the open market between April 1, 2024 and June 30, 2024, payment for which is due in the third quarter of 2024.

As of June 30, 2024, the Company had an authorized amount of $ 11.2 million remaining under the share repurchase plan.

During the nine months ended September 30, 2024, the Company repurchased 473,284 shares of its common stock at an average price of $ 18.16 per share, excluding commissions, or $ 8.6 million in aggregate, on a trade date basis.

This amount includes 364,848 shares purchased from a stockholder that was part of our majority stockholder group at an average price of $ 18.09 per share, in accordance with the Stock Repurchase Agreements entered into with Tricor Pacific Capital Partners (Fund IV) US, LP (“Parallel49”).

As of September 30, 2024, the Company had an authorized amount of $ 11.2 million remaining under the share repurchase plan.

Secondary Offering

On September 30, 2024, the majority stockholder group members Tricor Pacific Capital Partners (Fund IV), LP and Tricor Pacific Capital Partners (Fund IV) US, LP entered into an underwriting agreement for the sale of an aggregate of 1,380,000 shares of CPI common stock in a public offering.

In conjunction with the Company’s initial public offering in October 2015, the Company entered into a registration rights agreement with its majority stockholder group whereby the Company is required to pay expenses incurred in an offering of shares of CPI common stock by the Company’s majority stockholder group other than underwriters’ fees, discounts, commissions, and certain transfer taxes.

The offering contemplated in the underwriting agreement closed on October 2, 2024, and total expenses to be paid by the Company on behalf of the majority stockholder group pursuant to the registration rights agreement for the offering were approximately $ 0.5 million.

The Company did not sell any securities in the offering and did not receive any proceeds from the sale of the shares offered by the majority stockholder group.

Earnings per Share

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

The Company's calculation of weighted-average shares outstanding has been reduced by 120,534 shares that the Company repurchased from Parallel49 in July 2024.

Shares excluded from the calculation of diluted earnings per share because their inclusion would be anti-dilutive were 15,185 and 105,884 for the three months ended June 30, 2024 and 2023, respectively, and 24,298 and 132,594 for the six months ended June 30, 2024 and 2023, respectively.

Shares excluded from the calculation of diluted earnings per share because their inclusion would be anti-dilutive were 5,728 and 160,384 for the three months ended September 30, 2024 and 2023, respectively, and 24,298 and 210,457 for the nine months ended September 30, 2024 and 2023, 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,

Basic weighted-average common shares outstanding

10 unchanged sentences

The Company expenses professional fees associated with litigation claims and assessments as incurred.

Smart Packaging Solutions SA v.

CPI Card Group Inc.

On April 20, 2021, Smart Packaging Solutions, SA (“SPS”) filed a patent infringement lawsuit against the Company in the United States District Court for the District of Delaware seeking an unspecified amount of damages and equitable relief.

In the complaint, SPS alleged that the Company infringed four patents that SPS has exclusively licensed from Feinics AmaTech Teoranta.

The patents all relate to antenna technology.

SPS alleged that the Company incorporates the patented technology into its products that use contactless communication.

On June 3, 2024 the Delaware District Court entered an order dismissing the litigation against the Company.

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

The Company is subject to routine legal proceedings in the ordinary course of business.

The Company believes that the ultimate resolution of any such matters will not have a material adverse effect on its business, financial condition or results of operations.

10 unchanged sentences

Effective January 30, 2024, the Company’s stockholders approved an amendment to the Omnibus Plan to increase the total number of shares of the Company’s Common Stock reserved and available for issuance thereunder by 1,000,000 shares, resulting in a total of 3,200,000 shares issuable under the Omnibus Plan.

As of June 30, 2024, there were 957,803 shares of Common Stock available for grant under the Omnibus Plan.

As of September 30, 2024, there were 935,337 shares of Common Stock available for grant under the Omnibus Plan.

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

4 unchanged sentences

The number of shares awarded will be determined based on a value tied to the monthly average closing price of the Company’s common stock.

As of June 30, 2024, there were 858,855 options outstanding at a weighted average exercise price of $ 19.54 .

No options were granted during the six months ended June 30, 2024.

As of September 30, 2024, there were 795,128 options outstanding at a weighted average exercise price of $ 20.62 .

No options were granted during the nine months ended September 30, 2024.

Options have 7-year terms and are issued with exercise prices equal to the fair market value of the Company’s common stock on the grant date.

During the six months ended June 30, 2024, the Company granted 125,879 restricted stock units at a weighted average grant date fair value of $ 20.55 , and as of June 30, 2024, there were 701,264 outstanding restricted stock units at a weighted average grant date fair value of $ 20.43 .

During the nine months ended September 30, 2024, the Company granted 157,966 restricted stock units at a weighted average grant date fair value of $ 22.17 , and as of September 30, 2024, there were 635,312 outstanding restricted stock units at a weighted average grant date fair value of $ 20.82 .

In January 2024, the Company granted 60,000 performance stock units (PSU) in connection with the appointment of its CEO, with a grant date fair value of $ 0.9 million using a Monte Carlo simulation model.

11 unchanged sentences

The Company’s chief operating decision maker believes EBITDA is a meaningful measure and is useful as a supplement to 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.

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, 2024, the Company’s reportable segments were as follows:

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 September 30, 2024, 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, 2024 and 2023, were as follows:

Three Months Ended June 30, 2024

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, 2024 and 2023, were as follows:

Three Months Ended September 30, 2024

Debit and Credit

8 unchanged sentences

Other income (expense)

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Debit and Credit

8 unchanged sentences

Other income (expense)

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Debit and Credit

8 unchanged sentences

Other income (expense)

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Debit and Credit

8 unchanged sentences

Other income (expense)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Interest, net

1 unchanged sentence

Depreciation and amortization

Subsequent Events

On July 11, 2024 (the “Closing Date”), the Company completed a private offering by its wholly-owned subsidiary, CPI CG Inc., of $ 285.0 million aggregate principal amount of 10.000 % senior secured notes due 2029 (the “2029 Senior Notes”) and related guarantees at an issue price of 100 %.

Net proceeds from the 2029 Senior Notes, together with cash on hand, were used to redeem the entire principal balance of $ 267.9 million of 2026 Senior Notes as of the Closing Date, and to pay related fees, the early redemption premium of 102.156 % , and expenses.

As part of the redemption, the Company expensed the remaining unamortized debt issuance costs related to the 2026 Senior Notes of $ 2.2 M as of the Closing Date.

The 2029 Senior Notes bear interest at a rate of 10.000 % per annum and mature on July 15, 2029.

Interest is payable on the 2029 Senior Notes on January 15 and July 15 of each year, beginning on January 15, 2025.

In addition, on the Closing Date, the Company and CPI CG Inc.

as borrower, entered into a credit agreement (the “2029 ABL Revolver”) with JPMorgan Chase Bank, N.A., as lender, administrative agent and collateral agent, providing for an asset-based, senior secured revolving credit facility of up to $ 75.0 million, consisting of revolving loans, letters of credit and swing line loans provided by lenders, with a sublimit on letters of credit outstanding at any time of $ 10.0 million.

The 2029 ABL Revolver also includes an uncommitted accordion feature whereby the borrower may increase the 2029 ABL Revolver commitment by an aggregate amount not to exceed $ 25.0 million, subject to certain conditions.

The 2029 ABL Revolver matures on the earliest to occur of July 11, 2029 and the date that is 91 days prior to the maturity of the 2029 Senior Notes.

As of the Closing Date, the Company had $ 4.0 million of outstanding borrowings under the 2026 ABL Revolver.

The Company used initial borrowings under the 2029 ABL Revolver, together with cash on hand and proceeds under the notes, to repay in full and terminate the existing credit facilities evidenced by the 2026 ABL Revolver.

Borrowings under the 2029 ABL Revolver bear interest at a rate per annum that ranges from Adjusted Term SOFR plus 1.50 % to 1.75 %, based on the average daily borrowing capacity under the 2029 ABL Revolver over the most recently completed month.

The unused portion of the 2029 Revolver commitment accrues a commitment fee, which ranges from 0.375 % to 0.50 % per annum, based on the average daily borrowing capacity under the 2029 ABL Revolver over the immediately preceding month.

The 2029 Senior Notes and 2029 ABL Revolver are guaranteed by the Company and essentially secured by substantially all of the assets of the Company and its subsidiaries.

In connection with both the 2029 Senior Notes and the 2029 ABL Revolver, as of June 30, 2024, the Company recorded $ 1.3 million of accrued debt issuance costs included in “Prepaid expenses and other assets”, “Accounts payable” and “Accrued expenses and other liabilities” in the Condensed Consolidated Statements of Cash Flows which will be paid in the third quarter of 2024.

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