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Supplemental balance sheet and cash flow information | 3 Months Ended
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Mar. 31, 2021
Balance Sheet Related Disclosures [Abstract] |
Supplemental balance sheet and cash flow information | Trade accounts receivable – Changes in the allowances for uncollectible accounts included within trade accounts receivable were as follows for the quarters ended March 31, 2021 and 2020:
|  | Quarter Ended March 31,
(in thousands) |  | 2021 |  | 2020
Balance, beginning of year |  | $ | 6,428 |  |  | $ | 4,985 |
Bad debt (benefit) expense |  | (649) |  |  | 1,059 |
Write-offs and other |  | (900) |  |  | (2,098) |
Balance, end of period |  | $ | 4,879 |  |  | $ | 3,946 |
Inventories and supplies – Inventories and supplies were comprised of the following:
(in thousands) |  | March 31, 2021 |  | December 31, 2020
Raw materials |  | $ | 5,415 |  |  | $ | 5,412 |
Semi-finished goods |  | 7,916 |  |  | 7,943 |
Finished goods |  | 31,464 |  |  | 33,513 |
Supplies |  | 5,263 |  |  | 5,010 |
Reserve for excess and obsolete items |  | (12,939) |  |  | (11,748) |
Inventories and supplies |  | $ | 37,119 |  |  | $ | 40,130 |
Changes in the reserve for excess and obsolete items were as follows for the quarters ended March 31, 2021 and 2020:
|  | Quarter Ended March 31,
(in thousands) |  | 2021 |  | 2020
Balance, beginning of year |  | $ | 11,748 |  |  | $ | 6,600 |
Amounts charged to expense |  | 2,013 |  |  | 88 |
Write-offs |  | (822) |  |  | (335) |
Balance, end of period |  | $ | 12,939 |  |  | $ | 6,353 |
Available-for-sale debt securities – Available-for-sale debt securities included within funds held for customers were comprised of the following:
|  | March 31, 2021
(in thousands) |  | Cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value
Funds held for customers:(1) |  |  |  |  |  |  |  |
Domestic money market fund |  | $ | 12,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 12,000 |
Canadian and provincial government securities |  | 9,722 |  |  | — |  |  | (311) |  |  | 9,411 |
Canadian guaranteed investment certificate |  | 3,980 |  |  | — |  |  | — |  |  | 3,980 |
Available-for-sale debt securities |  | $ | 25,702 |  |  | $ | — |  |  | $ | (311) |  |  | $ | 25,391 |
(1) Funds held for customers, as reported on the consolidated balance sheet as of March 31, 2021, also included cash of $97,075.
|  | December 31, 2020
(in thousands) |  | Cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value
Funds held for customers:(1) |  |  |  |  |  |  |  |
Domestic money market fund |  | $ | 15,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 15,000 |
Canadian and provincial government securities |  | 9,566 |  |  | — |  |  | (33) |  |  | 9,533 |
Canadian guaranteed investment certificate |  | 3,929 |  |  | — |  |  | — |  |  | 3,929 |
Available-for-sale debt securities |  | $ | 28,495 |  |  | $ | — |  |  | $ | (33) |  |  | $ | 28,462 |
(1) Funds held for customers, as reported on the consolidated balance sheet as of December 31, 2020, also included cash of $91,287. Expected maturities of available-for-sale debt securities as of March 31, 2021 were as follows:
(in thousands) |  | Fair value
Due in one year or less |  | $ | 14,550 |
Due in two to five years |  | 7,971 |
Due in six to ten years |  | 2,870 |
Available-for-sale debt securities |  | $ | 25,391 |
Further information regarding the fair value of available-for-sale debt securities can be found in Note 7. Revenue in excess of billings – Revenue in excess of billings was comprised of the following:
(in thousands) |  | March 31, 2021 |  | December 31, 2020
Conditional right to receive consideration |  | $ | 20,072 |  |  | $ | 13,950 |
Unconditional right to receive consideration(1) |  | 7,583 |  |  | 3,667 |
Revenue in excess of billings |  | $ | 27,655 |  |  | $ | 17,617 |
(1) Represents revenues that are earned but not currently billable under the related contract terms. Trade accounts receivable on the consolidated balance sheets included unbilled receivables of $19,295 as of March 31, 2021 and $21,319 as of December 31, 2020. Intangibles – Intangibles were comprised of the following:
|  | March 31, 2021 |  | December 31, 2020
(in thousands) |  | Gross carrying amount |  | Accumulated amortization |  | Net carrying amount |  | Gross carrying amount |  | Accumulated amortization |  | Net carrying amount
Amortizable intangibles: |  |  |  |  |  |  |  |  |  |  |  |
Internal-use software |  | $ | 397,675 |  |  | $ | (314,125) |  |  | $ | 83,550 |  |  | $ | 380,144 |  |  | $ | (303,422) |  |  | $ | 76,722 |
Customer lists/relationships |  | 366,241 |  |  | (212,425) |  |  | 153,816 |  |  | 352,895 |  |  | (202,428) |  |  | 150,467 |
Software to be sold |  | 36,900 |  |  | (24,941) |  |  | 11,959 |  |  | 36,900 |  |  | (23,884) |  |  | 13,016 |
Technology-based intangibles |  | 33,813 |  |  | (29,163) |  |  | 4,650 |  |  | 33,813 |  |  | (27,613) |  |  | 6,200 |
Trade names |  | 30,230 |  |  | (30,053) |  |  | 177 |  |  | 30,281 |  |  | (29,926) |  |  | 355 |
Intangibles |  | $ | 864,859 |  |  | $ | (610,707) |  |  | $ | 254,152 |  |  | $ | 834,033 |  |  | $ | (587,273) |  |  | $ | 246,760 |
Amortization of intangibles was $23,264 for the quarter ended March 31, 2021 and $23,511 for the quarter ended March 31, 2020. Based on the intangibles in service as of March 31, 2021, estimated future amortization expense is as follows:
(in thousands) |  | Estimated amortization expense
Remainder of 2021 |  | $ | 65,583 |
2022 |  | 68,285 |
2023 |  | 48,720 |
2024 |  | 23,206 |
2025 |  | 17,327 |
The following intangibles were acquired during the quarter ended March 31, 2021:
(in thousands) |  | Amount |  | Weighted-average amortization period (in years)
Internal-use software |  | $ | 17,321 |  |  | 3
Customer lists/relationships |  | 13,302 |  |  | 8
Acquired intangibles |  | $ | 30,623 |  |  | 5
Goodwill – Changes in goodwill by reportable segment and in total for the quarter ended March 31, 2021 were as follows:
(in thousands) |  | Payments |  | Cloud Solutions |  | Promotional Solutions |  | Checks |  | Total
Balance, December 31, 2020: |  |  |  |  |  |  |  |  |  |
Goodwill, gross |  | $ | 168,165 |  |  | $ | 432,984 |  |  | $ | 252,864 |  |  | $ | 434,812 |  |  | $ | 1,288,825 |
Accumulated impairment charges |  | — |  |  | (362,058) |  |  | (189,923) |  |  | — |  |  | (551,981) |
Goodwill, net of accumulated impairment charges |  | 168,165 |  |  | 70,926 |  |  | 62,941 |  |  | 434,812 |  |  | 736,844 |
Currency translation adjustment |  | — |  |  | — |  |  | 18 |  |  | — |  |  | 18 |
Balance, March 31, 2021 |  | $ | 168,165 |  |  | $ | 70,926 |  |  | $ | 62,959 |  |  | $ | 434,812 |  |  | $ | 736,862 |
Balance, March 31, 2021: |  |  |  |  |  |  |  |  |  |
Goodwill, gross |  | $ | 168,165 |  |  | $ | 432,984 |  |  | $ | 252,882 |  |  | $ | 434,812 |  |  | $ | 1,288,843 |
Accumulated impairment charges |  | — |  |  | (362,058) |  |  | (189,923) |  |  | — |  |  | (551,981) |
Goodwill, net of accumulated impairment charges |  | $ | 168,165 |  |  | $ | 70,926 |  |  | $ | 62,959 |  |  | $ | 434,812 |  |  | $ | 736,862 |
Other non-current assets – Other non-current assets were comprised of the following:
(in thousands) |  | March 31, 2021 |  | December 31, 2020
Postretirement benefit plan asset |  | $ | 72,775 |  |  | $ | 71,208 |
Prepaid product discounts |  | 51,044 |  |  | 50,602 |
Cloud computing arrangements |  | 38,249 |  |  | 29,242 |
Loans and notes receivable from distributors, net of allowances for doubtful accounts(1) |  | 27,182 |  |  | 35,068 |
Deferred sales commissions(2) |  | 15,461 |  |  | 9,199 |
Other |  | 13,124 |  |  | 13,360 |
Other non-current assets |  | $ | 217,835 |  |  | $ | 208,679 |
(1) Amount Includes the non-current portion of loans and notes receivable. The current portion of these receivables is included in other current assets on the consolidated balance sheets and was $1,704 as of March 31, 2021 and $2,008 as of December 31, 2020. (2) Amortization of deferred sales commissions was $972 for the quarter ended March 31, 2021 and $882 for the quarter ended March 31, 2020. Changes in the allowances for uncollectible accounts related to loans and notes receivable from distributors were as follows for the quarters ended March 31, 2021 and 2020:
|  | Quarter Ended March 31,
(in thousands) |  | 2021 |  | 2020
Balance, beginning of year |  | $ | 3,995 |  |  | $ | 284 |
Adoption of ASU No. 2016-13 |  | — |  |  | 4,749 |
Bad debt (benefit) expense |  | (634) |  |  | 5,382 |
Balance, end of period |  | $ | 3,361 |  |  | $ | 10,415 |
During the quarter ended March 31, 2020, we recorded a loan-specific allowance related to a distributor that was underperforming. In calculating this reserve, we utilized various valuation techniques to determine the value of the underlying collateral, resulting in an allowance of $6,128 as of March 31, 2020. Other past due receivables and those on non-accrual status were not significant as of March 31, 2021 or December 31, 2020. We categorize loans and notes receivable into risk categories based on information about the ability of borrowers to service their debt, including current financial information, historical payment experience, current economic trends and other factors. The highest quality receivables are assigned a 1-2 internal grade. Those that have a potential weakness requiring management's attention are assigned a 3-4 internal grade. The following table presents loans and notes receivable from distributors, including the current portion, by credit quality indicator and by year of origination, as of March 31, 2021. There were no write-offs or recoveries recorded during the quarter ended March 31, 2021.
|  | Loans and notes receivable from distributors amortized cost basis by origination year |  |
(in thousands) |  | 2020 |  | 2019 |  | 2018 |  | 2017 |  | Prior |  | Total
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |
1-2 internal grade |  | $ | 1,310 |  |  | $ | 587 |  |  | $ | 14,546 |  |  | $ | 11,744 |  |  | $ | 1,481 |  |  | $ | 29,668 |
3-4 internal grade |  | — |  |  | 2,579 |  |  | — |  |  | — |  |  | — |  |  | 2,579 |
Loans and notes receivable |  | $ | 1,310 |  |  | $ | 3,166 |  |  | $ | 14,546 |  |  | $ | 11,744 |  |  | $ | 1,481 |  |  | $ | 32,247 |
Changes in prepaid product discounts during the quarters ended March 31, 2021 and 2020 were as follows:
|  | Quarter Ended March 31,
(in thousands) |  | 2021 |  | 2020
Balance, beginning of year |  | $ | 50,602 |  |  | $ | 51,145 |
Additions(1) |  | 7,890 |  |  | 2,470 |
Amortization |  | (7,440) |  |  | (7,077) |
Other |  | (8) |  |  | (544) |
Balance, end of period |  | $ | 51,044 |  |  | $ | 45,994 |
(1) Prepaid product discounts are generally accrued upon contract execution. Cash payments for prepaid product discounts were $9,590 for the quarter ended March 31, 2021 and $7,321 for the quarter ended March 31, 2020. Accrued liabilities – Accrued liabilities were comprised of the following:
(in thousands) |  | March 31, 2021 |  | December 31, 2020
Deferred revenue(1) |  | $ | 49,469 |  |  | $ | 42,104 |
Employee cash bonuses, including sales incentives |  | 17,005 |  |  | 21,090 |
Prepaid product discounts due within one year |  | 12,640 |  |  | 14,365 |
Operating lease liabilities |  | 10,914 |  |  | 11,589 |
Customer rebates |  | 7,046 |  |  | 8,179 |
Other |  | 77,849 |  |  | 79,856 |
Accrued liabilities |  | $ | 174,923 |  |  | $ | 177,183 |
(1) $16,121 of the December 31, 2020 amount was recognized as revenue during the quarter ended March 31, 2021. Supplemental cash flow information – The reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents to the consolidated balance sheets was as follows:
(in thousands) |  | March 31, 2021 |  | March 31, 2020
Cash and cash equivalents |  | $ | 125,440 |  |  | $ | 310,146 |
Restricted cash and restricted cash equivalents included in funds held for customers |  | 109,075 |  |  | 75,657 |
Total cash, cash equivalents, restricted cash and restricted cash equivalents |  | $ | 234,515 |  |  | $ | 385,803 |

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