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Supplemental balance sheet and cash flow information | 9 Months Ended
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Sep. 30, 2023
Balance Sheet Related Disclosures [Abstract] |
Supplemental balance sheet and cash flow information | Trade accounts receivable – Net trade accounts receivable was comprised of the following:
(in thousands) |  | September 30, 2023 |  | December 31, 2022
Trade accounts receivable – gross |  | $ | 210,570 |  |  | $ | 210,799 |
Allowance for credit losses |  | (6,599) |  |  | (4,182) |
Trade accounts receivable – net(1) |  | $ | 203,971 |  |  | $ | 206,617 |
(1) Includes unbilled receivables of $57,134 as of September 30, 2023 and $43,902 as of December 31, 2022. Changes in the allowance for credit losses for the nine months ended September 30, 2023 and 2022 were as follows:
|  | Nine Months Ended September 30,
(in thousands) |  | 2023 |  | 2022
Balance, beginning of year |  | $ | 4,182 |  |  | $ | 4,130 |
Bad debt expense |  | 5,191 |  |  | 2,410 |
Write-offs and other |  | (2,774) |  |  | (3,006) |
Balance, end of period |  | $ | 6,599 |  |  | $ | 3,534 |
Inventories and supplies – Inventories and supplies were comprised of the following:
(in thousands) |  | September 30, 2023 |  | December 31, 2022
Finished and semi-finished goods |  | $ | 40,453 |  |  | $ | 40,715 |
Raw materials and supplies |  | 18,508 |  |  | 17,952 |
Reserve for excess and obsolete items |  | (9,702) |  |  | (6,400) |
Inventories and supplies, net of reserve |  | $ | 49,259 |  |  | $ | 52,267 |
Changes in the reserve for excess and obsolete items were as follows for the nine months ended September 30, 2023 and 2022:
|  | Nine Months Ended September 30,
(in thousands) |  | 2023 |  | 2022
Balance, beginning of year |  | $ | 6,400 |  |  | $ | 5,132 |
Amounts charged to expense |  | 3,859 |  |  | 2,552 |
Write-offs and other |  | (557) |  |  | (2,161) |
Balance, end of period |  | $ | 9,702 |  |  | $ | 5,523 |
Available-for-sale debt securities – Available-for-sale debt securities were comprised of the following:
|  | September 30, 2023
(in thousands) |  | Cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value
Funds held for customers:(1) |  |  |  |  |  |  |  |
Canadian and provincial government securities |  | $ | 9,380 |  |  | $ | — |  |  | $ | (1,312) |  |  | $ | 8,068 |
Available-for-sale debt securities |  | $ | 9,380 |  |  | $ | — |  |  | $ | (1,312) |  |  | $ | 8,068 |
(1) Funds held for customers, as reported on the consolidated balance sheet as of September 30, 2023, also included cash of $143,893.
|  | December 31, 2022
(in thousands) |  | Cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value
Cash equivalents: |  |  |  |  |  |  |  |
Domestic money market fund |  | $ | 5,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,000 |
Funds held for customers:(1) |  |  |  |  |  |  |  |
Canadian and provincial government securities |  | 9,190 |  |  | — |  |  | (1,064) |  |  | 8,126 |
Available-for-sale debt securities |  | $ | 14,190 |  |  | $ | — |  |  | $ | (1,064) |  |  | $ | 13,126 |
(1) Funds held for customers, as reported on the consolidated balance sheet as of December 31, 2022, also included cash of $294,165. Expected maturities of available-for-sale debt securities as of September 30, 2023 were as follows:
(in thousands) |  | Fair value
Due in one year or less |  | $ | 3,364 |
Due in two to five years |  | 1,670 |
Due in six to ten years |  | 3,034 |
Available-for-sale debt securities |  | $ | 8,068 |
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) |  | September 30, 2023 |  | December 31, 2022
Conditional right to receive consideration |  | $ | 26,482 |  |  | $ | 26,520 |
Unconditional right to receive consideration(1) |  | 10,211 |  |  | 12,241 |
Revenue in excess of billings |  | $ | 36,693 |  |  | $ | 38,761 |
(1) Represents revenues that are earned but not currently billable under the related contract terms. Intangibles – Intangibles were comprised of the following:
|  | September 30, 2023 |  | December 31, 2022
(in thousands) |  | Gross carrying amount |  | Accumulated amortization |  | Net carrying amount |  | Gross carrying amount |  | Accumulated amortization |  | Net carrying amount
Internal-use software |  | $ | 539,892 |  |  | $ | (395,304) |  |  | $ | 144,588 |  |  | $ | 529,306 |  |  | $ | (395,514) |  |  | $ | 133,792 |
Customer lists/relationships |  | 479,240 |  |  | (339,481) |  |  | 139,759 |  |  | 497,882 |  |  | (312,986) |  |  | 184,896 |
Technology-based intangibles |  | 97,633 |  |  | (51,591) |  |  | 46,042 |  |  | 99,613 |  |  | (47,478) |  |  | 52,135 |
Partner relationships |  | 74,429 |  |  | (12,292) |  |  | 62,137 |  |  | 74,682 |  |  | (9,094) |  |  | 65,588 |
Trade names |  | 39,367 |  |  | (23,267) |  |  | 16,100 |  |  | 44,185 |  |  | (26,510) |  |  | 17,675 |
Software to be sold |  | 36,900 |  |  | (34,847) |  |  | 2,053 |  |  | 36,900 |  |  | (32,007) |  |  | 4,893 |
Intangibles |  | $ | 1,267,461 |  |  | $ | (856,782) |  |  | $ | 410,679 |  |  | $ | 1,282,568 |  |  | $ | (823,589) |  |  | $ | 458,979 |
Amortization of intangibles was $34,941 for the quarter ended September 30, 2023, $35,855 for the quarter ended September 30, 2022, $110,017 for the nine months ended September 30, 2023 and $110,353 for the nine months ended September 30, 2022. Based on the intangibles in service as of September 30, 2023, estimated future amortization expense is as follows:
(in thousands) |  | Estimated amortization expense
Remainder of 2023 |  | $ | 40,786 |
2024 |  | 101,903 |
2025 |  | 73,407 |
2026 |  | 46,238 |
2027 |  | 34,394 |
In the normal course of business, we acquire and develop internal-use software. We also, at times, purchase customer list and partner relationship assets. The following intangibles were capitalized during the nine months ended September 30, 2023:
(in thousands) |  | Amount |  | Weighted-average amortization period (in years)
Internal-use software |  | $ | 66,734 |  |  | 3
Partner relationships |  | 773 |  |  | 1
Acquired intangibles |  | $ | 67,507 |  |  | 3
Goodwill – Changes in goodwill by reportable segment and in total were as follows for the nine months ended September 30, 2023:
(in thousands) |  | Payments |  | Data Solutions |  | Promotional Solutions |  | Checks |  | Total
Balance, December 31, 2022: |  |  |  |  |  |  |  |  |  |
Goodwill, gross |  | $ | 896,681 |  |  | $ | 432,984 |  |  | $ | 252,775 |  |  | $ | 434,812 |  |  | $ | 2,017,252 |
Accumulated impairment charges |  | — |  |  | (392,168) |  |  | (193,699) |  |  | — |  |  | (585,867) |
Goodwill, net of accumulated impairment charges |  | 896,681 |  |  | 40,816 |  |  | 59,076 |  |  | 434,812 |  |  | 1,431,385 |
Currency translation adjustment and other |  | (828) |  |  | — |  |  | 7 |  |  | — |  |  | (821) |
Balance, September 30, 2023 |  | $ | 895,853 |  |  | $ | 40,816 |  |  | $ | 59,083 |  |  | $ | 434,812 |  |  | $ | 1,430,564 |
Balance, September 30, 2023: |  |  |  |  |  |  |  |  |  |
Goodwill, gross |  | $ | 895,853 |  |  | $ | 432,984 |  |  | $ | 252,782 |  |  | $ | 434,812 |  |  | $ | 2,016,431 |
Accumulated impairment charges |  | — |  |  | (392,168) |  |  | (193,699) |  |  | — |  |  | (585,867) |
Goodwill, net of accumulated impairment charges |  | $ | 895,853 |  |  | $ | 40,816 |  |  | $ | 59,083 |  |  | $ | 434,812 |  |  | $ | 1,430,564 |
Other non-current assets – Other non-current assets were comprised of the following:
(in thousands) |  | September 30, 2023 |  | December 31, 2022
Postretirement benefit plan asset |  | $ | 84,508 |  |  | $ | 79,343 |
Cloud computing arrangement implementation costs |  | 63,112 |  |  | 71,547 |
Prepaid product discounts |  | 41,365 |  |  | 44,824 |
Deferred contract acquisition costs(1) |  | 22,490 |  |  | 21,300 |
Loans and notes receivable from distributors, net of allowance for credit losses(2) |  | 12,442 |  |  | 13,259 |
Other |  | 38,779 |  |  | 30,081 |
Other non-current assets |  | $ | 262,696 |  |  | $ | 260,354 |
(1) Amortization of deferred contract acquisition costs was $8,088 for the nine months ended September 30, 2023 and $5,872 for the nine months ended September 30, 2022. (2) 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 $979 as of September 30, 2023 and $961 as of December 31, 2022. Changes in the allowance for credit losses related to loans and notes receivable from distributors were as follows for the nine months ended September 30, 2023 and 2022:
|  | Nine Months Ended September 30,
(in thousands) |  | 2023 |  | 2022
Balance, beginning of year |  | $ | 1,024 |  |  | $ | 2,830 |
Bad debt (benefit) expense |  | (46) |  |  | 1,221 |
Other |  | — |  |  | (402) |
Balance, end of period |  | $ | 978 |  |  | $ | 3,649 |
Past due receivables and those on non-accrual status were not material as of September 30, 2023 or December 31, 2022. 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 September 30, 2023. There were no write-offs or recoveries recorded during the nine months ended September 30, 2023.
|  | Loans and notes receivable from distributors amortized cost basis by origination year |  |
(in thousands) |  | 2020 |  | 2019 |  | 2018 |  | Prior |  | Total
Risk rating: |  |  |  |  |  |  |  |  |  |
1-2 internal grade |  | $ | 1,040 |  |  | $ | 385 |  |  | $ | 3,761 |  |  | $ | 9,213 |  |  | $ | 14,399 |
3-4 internal grade |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Loans and notes receivable |  | $ | 1,040 |  |  | $ | 385 |  |  | $ | 3,761 |  |  | $ | 9,213 |  |  | $ | 14,399 |
Changes in prepaid product discounts during the nine months ended September 30, 2023 and 2022 were as follows:
|  | Nine Months Ended September 30,
(in thousands) |  | 2023 |  | 2022
Balance, beginning of year |  | $ | 44,824 |  |  | $ | 56,527 |
Additions(1) |  | 21,809 |  |  | 18,721 |
Amortization |  | (25,291) |  |  | (26,258) |
Other |  | 23 |  |  | (399) |
Balance, end of period |  | $ | 41,365 |  |  | $ | 48,591 |
(1) Prepaid product discounts are generally accrued upon contract execution. Payments for prepaid product discounts were $21,798 for the nine months ended September 30, 2023 and $23,920 for the nine months ended September 30, 2022. Accrued liabilities – Accrued liabilities were comprised of the following:
(in thousands) |  | September 30, 2023 |  | December 31, 2022
Employee bonuses, including sales incentives |  | $ | 39,991 |  |  | $ | 57,398 |
Deferred revenue(1) |  | 25,905 |  |  | 47,012 |
Interest |  | 15,557 |  |  | 7,314 |
Restructuring |  | 14,606 |  |  | 8,528 |
Customer rebates |  | 14,453 |  |  | 12,153 |
Operating lease liabilities |  | 13,882 |  |  | 12,780 |
Wages and payroll liabilities, including vacation |  | 7,953 |  |  | 20,264 |
Prepaid product discounts |  | 4,191 |  |  | 4,179 |
Other |  | 50,481 |  |  | 48,776 |
Accrued liabilities |  | $ | 187,019 |  |  | $ | 218,404 |
(1) Revenue recognized for amounts included in deferred revenue at the beginning of the period was $37,972 for the nine months ended September 30, 2023 and $41,222 for the nine months ended September 30, 2022. 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) |  | September 30, 2023 |  | September 30, 2022
Cash and cash equivalents |  | $ | 42,189 |  |  | $ | 45,535 |
Restricted cash and restricted cash equivalents included in funds held for customers |  | 143,893 |  |  | 147,614 |
Non-current restricted cash included in other non-current assets |  | 2,907 |  |  | 2,742 |
Total cash, cash equivalents, restricted cash and restricted cash equivalents |  | $ | 188,989 |  |  | $ | 195,891 |

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