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Supplemental balance sheet and cash flow information | 6 Months Ended
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Jun. 30, 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 six months ended June 30, 2021 and 2020:
|  | Six Months Ended June 30,
(in thousands) |  | 2021 |  | 2020
Balance, beginning of year |  | $ | 6,428 |  |  | $ | 4,985 |
Bad debt (benefit) expense |  | (1,696) |  |  | 3,374 |
Write-offs and other |  | (1,704) |  |  | (1,633) |
Balance, end of period |  | $ | 3,028 |  |  | $ | 6,726 |
Inventories and supplies – Inventories and supplies were comprised of the following:
(in thousands) |  | June 30, 2021 |  | December 31, 2020
Raw materials |  | $ | 5,189 |  |  | $ | 5,412 |
Semi-finished goods |  | 7,522 |  |  | 7,943 |
Finished goods |  | 20,481 |  |  | 33,513 |
Supplies |  | 5,531 |  |  | 5,010 |
Reserve for excess and obsolete items |  | (5,456) |  |  | (11,748) |
Inventories and supplies |  | $ | 33,267 |  |  | $ | 40,130 |
Changes in the reserve for excess and obsolete items were as follows for the six months ended June 30, 2021 and 2020:
|  | Six Months Ended June 30,
(in thousands) |  | 2021 |  | 2020
Balance, beginning of year |  | $ | 11,748 |  |  | $ | 6,600 |
Amounts charged to expense |  | 2,151 |  |  | 861 |
Write-offs and sales |  | (8,443) |  |  | (343) |
Balance, end of period |  | $ | 5,456 |  |  | $ | 7,118 |
Available-for-sale debt securities – Available-for-sale debt securities included within funds held for customers were comprised of the following:
|  | June 30, 2021
(in thousands) |  | Cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value
Funds held for customers:(1) |  |  |  |  |  |  |  |
Domestic money market fund |  | $ | 11,500 |  |  | $ | — |  |  | $ | — |  |  | $ | 11,500 |
Canadian and provincial government securities |  | 9,874 |  |  | — |  |  | (295) |  |  | 9,579 |
Canadian guaranteed investment certificate |  | 4,033 |  |  | — |  |  | — |  |  | 4,033 |
Available-for-sale debt securities |  | $ | 25,407 |  |  | $ | — |  |  | $ | (295) |  |  | $ | 25,112 |
(1) Funds held for customers, as reported on the consolidated balance sheet as of June 30, 2021, also included cash of $110,492.
|  | 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 June 30, 2021 were as follows:
(in thousands) |  | Fair value
Due in one year or less |  | $ | 18,282 |
Due in two to five years |  | 3,956 |
Due in six to ten years |  | 2,874 |
Available-for-sale debt securities |  | $ | 25,112 |
Further information regarding the fair value of available-for-sale debt securities can be found in Note 8. Revenue in excess of billings – Revenue in excess of billings was comprised of the following:
(in thousands) |  | June 30, 2021 |  | December 31, 2020
Conditional right to receive consideration |  | $ | 23,364 |  |  | $ | 13,950 |
Unconditional right to receive consideration(1) |  | 8,693 |  |  | 3,667 |
Revenue in excess of billings |  | $ | 32,057 |  |  | $ | 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 $31,350 as of June 30, 2021 and $21,319 as of December 31, 2020. Intangibles – Intangibles were comprised of the following:
|  | June 30, 2021 |  | December 31, 2020
(in thousands) |  | Gross carrying amount |  | Accumulated amortization |  | Net carrying amount |  | Gross carrying amount |  | Accumulated amortization |  | Net carrying amount
Amortizable intangibles: |  |  |  |  |  |  |  |  |  |  |  |
Customer lists/relationships |  | $ | 487,974 |  |  | $ | (225,342) |  |  | $ | 262,632 |  |  | $ | 352,895 |  |  | $ | (202,428) |  |  | $ | 150,467 |
Internal-use software |  | 416,904 |  |  | (325,844) |  |  | 91,060 |  |  | 380,144 |  |  | (303,422) |  |  | 76,722 |
Technology-based intangibles |  | 99,813 |  |  | (31,401) |  |  | 68,412 |  |  | 33,813 |  |  | (27,613) |  |  | 6,200 |
Partner relationships |  | 67,000 |  |  | (372) |  |  | 66,628 |  |  | — |  |  | — |  |  | — |
Trade names |  | 52,177 |  |  | (30,360) |  |  | 21,817 |  |  | 30,281 |  |  | (29,926) |  |  | 355 |
Software to be sold |  | 36,900 |  |  | (25,997) |  |  | 10,903 |  |  | 36,900 |  |  | (23,884) |  |  | 13,016 |
Intangibles |  | $ | 1,160,768 |  |  | $ | (639,316) |  |  | $ | 521,452 |  |  | $ | 834,033 |  |  | $ | (587,273) |  |  | $ | 246,760 |
During the second quarter of 2021, we acquired amortizable intangible assets in conjunction with the acquisition of First American Payment Systems, L.P. (First American). Further information can be found in Note 6. Amortization of intangibles was $28,559 for the quarter ended June 30, 2021, $21,529 for the quarter ended June 30, 2020, $51,823 for the six months ended June 30, 2021 and $45,040 for the six months ended June 30, 2020. Based on the intangibles in service as of June 30, 2021, estimated future amortization expense is as follows:
(in thousands) |  | Estimated amortization expense
Remainder of 2021 |  | $ | 69,227 |
2022 |  | 114,718 |
2023 |  | 84,510 |
2024 |  | 56,265 |
2025 |  | 44,747 |
The following intangibles were acquired during the six months ended June 30, 2021, including assets acquired in conjunction with the acquisition of First American (Note 6):
(in thousands) |  | Amount |  | Weighted-average amortization period (in years)
Customer lists/relationships(1) |  | $ | 134,992 |  |  | 8
Partner relationships |  | 67,000 |  |  | 15
Technology-based intangibles |  | 66,000 |  |  | 8
Internal-use software |  | 36,413 |  |  | 4
Trade names |  | 22,000 |  |  | 10
Acquired intangibles |  | $ | 326,405 |  |  | 9
(1) Included $118,000 acquired via the First American acquisition (Note 6) with a weighted-average useful life of 8 years. Goodwill – Changes in goodwill by reportable segment and in total for the six months ended June 30, 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 |  | — |  |  | (392,168) |  |  | (193,699) |  |  | — |  |  | (585,867) |
Goodwill, net of accumulated impairment charges |  | 168,165 |  |  | 40,816 |  |  | 59,165 |  |  | 434,812 |  |  | 702,958 |
Goodwill resulting from acquisition (Note 6) |  | 736,308 |  |  | — |  |  | — |  |  | — |  |  | 736,308 |
Currency translation adjustment |  | — |  |  | — |  |  | 37 |  |  | — |  |  | 37 |
Balance, June 30, 2021 |  | $ | 904,473 |  |  | $ | 40,816 |  |  | $ | 59,202 |  |  | $ | 434,812 |  |  | $ | 1,439,303 |
Balance, June 30, 2021: |  |  |  |  |  |  |  |  |  |
Goodwill, gross |  | $ | 904,473 |  |  | $ | 432,984 |  |  | $ | 252,901 |  |  | $ | 434,812 |  |  | $ | 2,025,170 |
Accumulated impairment charges |  | — |  |  | (392,168) |  |  | (193,699) |  |  | — |  |  | (585,867) |
Goodwill, net of accumulated impairment charges |  | $ | 904,473 |  |  | $ | 40,816 |  |  | $ | 59,202 |  |  | $ | 434,812 |  |  | $ | 1,439,303 |
Other non-current assets – Other non-current assets were comprised of the following:
(in thousands) |  | June 30, 2021 |  | December 31, 2020
Postretirement benefit plan asset |  | $ | 74,727 |  |  | $ | 71,208 |
Prepaid product discounts |  | 54,109 |  |  | 50,602 |
Cloud computing arrangements |  | 47,508 |  |  | 29,242 |
Loans and notes receivable from distributors, net of allowances for uncollectible accounts(1) |  | 26,858 |  |  | 35,068 |
Deferred contract acquisition costs(2) |  | 16,171 |  |  | 9,199 |
Other |  | 25,394 |  |  | 13,360 |
Other non-current assets |  | $ | 244,767 |  |  | $ | 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 $1,723 as of June 30, 2021 and $2,008 as of December 31, 2020. (2) Amortization of deferred contract acquisition costs was $2,276 for the six months ended June 30, 2021 and $1,817 for the six months ended June 30, 2020. Changes in the allowances for uncollectible accounts related to loans and notes receivable from distributors were as follows for the six months ended June 30, 2021 and 2020:
|  | Six Months Ended June 30,
(in thousands) |  | 2021 |  | 2020
Balance, beginning of year |  | $ | 3,995 |  |  | $ | 284 |
Adoption of ASU No. 2016-13 |  | — |  |  | 4,749 |
Bad debt (benefit) expense |  | (658) |  |  | 6,623 |
Balance, end of period |  | $ | 3,337 |  |  | $ | 11,656 |
Bad debt expense for the six months ended June 30, 2020 included loan-specific allowances primarily related to Promotional Solutions distributors that were underperforming. In calculating these reserves, we utilized various valuation techniques to determine the value of the underlying collateral. Past due receivables and those on non-accrual status were not significant as of June 30, 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 June 30, 2021. There were no write-offs or recoveries recorded during the six months ended June 30, 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 |  | $ | 1,283 |  |  | $ | 569 |  |  | $ | 14,359 |  |  | $ | 11,708 |  |  | $ | 1,400 |  |  | $ | 29,319 |
3-4 internal grade |  | — |  |  | 2,599 |  |  | — |  |  | — |  |  | — |  |  | 2,599 |
Loans and notes receivable |  | $ | 1,283 |  |  | $ | 3,168 |  |  | $ | 14,359 |  |  | $ | 11,708 |  |  | $ | 1,400 |  |  | $ | 31,918 |
Changes in prepaid product discounts during the six months ended June 30, 2021 and 2020 were as follows:
|  | Six Months Ended June 30,
(in thousands) |  | 2021 |  | 2020
Balance, beginning of year |  | $ | 50,602 |  |  | $ | 51,145 |
Additions(1) |  | 18,689 |  |  | 7,195 |
Amortization |  | (15,137) |  |  | (14,174) |
Other |  | (45) |  |  | (625) |
Balance, end of period |  | $ | 54,109 |  |  | $ | 43,541 |
(1) Prepaid product discounts are generally accrued upon contract execution. Cash payments for prepaid product discounts were $19,077 for the six months ended June 30, 2021 and $15,806 for the six months ended June 30, 2020. Accrued liabilities – Accrued liabilities were comprised of the following:
(in thousands) |  | June 30, 2021 |  | December 31, 2020
Deferred revenue(1) |  | $ | 46,424 |  |  | $ | 42,104 |
Employee cash bonuses, including sales incentives |  | 29,688 |  |  | 21,090 |
Prepaid product discounts due within one year |  | 14,199 |  |  | 14,365 |
Operating lease liabilities |  | 12,859 |  |  | 11,589 |
Customer rebates |  | 7,442 |  |  | 8,179 |
Other |  | 87,279 |  |  | 79,856 |
Accrued liabilities |  | $ | 197,891 |  |  | $ | 177,183 |
(1) $25,010 of the December 31, 2020 amount was recognized as revenue during the six months ended June 30, 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) |  | June 30, 2021 |  | June 30, 2020
Cash and cash equivalents |  | $ | 163,338 |  |  | $ | 371,951 |
Restricted cash and restricted cash equivalents included in funds held for customers |  | 121,992 |  |  | 66,381 |
Non-current restricted cash included in other non-current assets |  | 2,744 |  |  | — |
Total cash, cash equivalents, restricted cash and restricted cash equivalents |  | $ | 288,074 |  |  | $ | 438,332 |

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